Diversión con blog de insomnio

La siguiente nota de Gary Shilling fue transmitida por John Mauldin de pensamientos para la primera línea. John incluye una breve nota al principio y al final. - Ed.

Estoy en un avión (otra vez) de Zurich a Mallorca, donde me reuniré con mis socios europeos y de América del Sur, pasar un buen rato y relajarse antes de ir a Dinamarca y Londres. Con la prisa de terminar mi libro (más sobre esto más adelante) y una apretada agenda de esta semana, no he tenido tiempo para escribir una carta. Pero no te preocupes, te dejo en las mejores manos. El Dr. Gary Shilling amablemente accedió a condensar su carta de septiembre, donde se analiza el riesgo de otra recesión en los EE.UU..

Espero que a principios de cada mes para tener la última carta de Gary. A menudo se imprima y se aleja de mi escritorio para pasar un buen rato leyendo sus pensamientos. Él es uno de mis "lectura obligada" analistas. Siempre aprendo algo muy útil y perspicaz. Estoy agradecido que me ha permitido compartir esto con ustedes.

Si usted está interesado en recibir su carta, su sitio web está siendo rediseñado abajo, pero usted puede escribir para más información en insight@agaryshilling.com . Si desea suscribirse (por $ 275), puede llamar al 888-346-7444. Dígales que usted lee sobre él en pensamientos de Primera Línea, y obtendrá un extra de un mes de su suscripción. Y ahora, a su vez a Gary.

- John Mauldin

Por Gary Shilling

las actitudes de los inversores han invertido bruscamente en los últimos meses. Tan tarde como en marzo pasado, la mayoría traducidos al robusto aumento un año de duración en acciones, divisas, materias primas y la debilidad en los bonos del Tesoro que había comenzado un año antes en un crecimiento económico robusto - la "V" de recuperación.

Como resultado, los inversores a principios de este año cree que la creación rápida de empleo y el restablecimiento de la confianza de los consumidores estimularía el gasto al por menor. También vieron la evidencia sector de la vivienda de estabilización para dar paso a la reactivación y el crecimiento fuerte de la exportación también impulsar la economía. El gasto de capital, dirigido por la alta tecnología, es otra esfera de la fuerza, muchos creyeron.

No tan rápido

Sin embargo, una web flash divertido, o no tan gracioso web flash, cosa que sucedió en el camino hacia el crecimiento súper cargado, el fomento de un esfuerzo. En abril, los inversores empezaron a darse cuenta de que la crisis financiera de la zona del euro, que había sido anunciada a principios de año por el descenso en el euro, era una grave amenaza para el crecimiento mundial. Las acciones retrocedieron (gráfico 1), los productos básicos cayó y se unieron los bonos del Tesoro subieron y el dólar. Es, después de todo, sólo un gran comercio entre estos cuatro mercados, por lo que sus acciones correlacionadas en el down, así como hacia arriba no son sorprendentes.

Además, los inversionistas comenzaron a preocuparse por la salud de la economía de EE.UU. y las perspectivas de una segunda caída en la Gran Recesión que se inició en diciembre de 2007. La gigantesca 2009 los estímulos fiscales de cerca de 1 billón de dólares se estaba acabando, amenazando con una recaída en una economía que se estaba ejecutando con el apoyo del gobierno vida. La rebaja fiscal de $ 8,000 para compradores de vivienda nueva que expira 30 de abril y podría ser seguido por una caída en las ventas de casa como tenía su predecesor, que expiró en noviembre de 2009 como el aumento en la actividad a principios de este año sólo tomados de las ventas futuras. Las perspectivas para las exportaciones se había vuelto negativa con el dólar fuerte, cede las economías europeas y la corriente de "parada" fase de "stop and go" de China, las políticas monetaria y fiscal. Con el desempleo sigue estando en la primavera pasada de alto, los inversionistas comenzaron a quejarse de que el gasto del consumidor podría tambalearse como estímulos fiscales se había agotado.

Desapalancamiento

Si bien las opiniones de los inversores de la economía han invertido en los últimos cinco meses, la realidad probablemente no tiene. La buena vida y el rápido crecimiento que comenzó en la década de 1980 fue impulsado por aprovechar financiera masiva y la deuda excesiva, por primera vez en el sector financiero mundial, a partir de la década de 1970 y en la década de 1980 entre los consumidores de EE.UU.. Que aprovechan impulsó a la burbuja punto com existencias a finales de 1990 y la burbuja inmobiliaria. Pero ahora esos dos sectores están siendo forzados a desapalancar y en el proceso son la transferencia de sus deudas a los gobiernos y bancos centrales.

Este proceso de desapalancamiento probablemente tomará una década o más - y esa es la buena noticia. El camino por recorrer es tan grande que si se tratara de recorrer en un año o dos economías más grandes depresiones experiencia peor que en la década de 1930. Este proceso de desapalancamiento y otras fuerzas se traducirá en un crecimiento económico lento y probablemente la deflación durante muchos años. Y como el Japón ha demostrado, se trata de condiciones difíciles de compensar con las políticas monetaria y fiscal.

El deleveragings del sector financiero mundial y la arena EE.UU. los consumidores son sustanciales y en curso. La deuda familiar se ha reducido 374 mil millones dólares desde el segundo trimestre de 2008. La tarjeta de crédito y otros componentes rotatorios, así como la pieza no gira que incluye préstamos para automóviles y el estudiante están en declive. de negocios total de la deuda se ha reducido, como lo demuestra por la caída de los préstamos comerciales e industriales.

Mientras tanto, la deuda federal se ha disparado desde 5800 mil millones dólares el 30 de septiembre de 2008 a 8800 mil millones dólares a finales de agosto. muchos se preocupan por las implicaciones inflacionarias de este aumento, pero la realidad es que la deuda pública ha sustituido simplemente la deuda privada. El déficit federal ha saltado como consumidores y las empresas despedidos, lo que redujo los ingresos de impuestos federales, mientras que los estímulos fiscales, destinadas a la sustitución de la debilidad del sector privado, se ha multiplicado.

Cuatro Cilindros

Como se discutió en nuestros 05 2010 Insight, en el típico recuperación después de la Segunda Guerra Mundial económica, cuatro cilindros de fuego para empujar el vehículo económico del barro de recesión y de vuelta a la carretera de crecimiento económico. En la actualidad, sólo uno - el final de la liquidación de inventarios - es la generación de energía significativos. Los otros tres - las ganancias de empleo, el crecimiento del gasto de los consumidores y la reactivación en la construcción de un residencial - farfulla son el mejor.

El Inventario del Ciclo de

Históricamente, la liquidación de las cuentas de inventarios en exceso para las acciones principales de la disminución de la actividad económica en las recesiones. Alrededor de los picos del ciclo económico, las ventas de los fabricantes, mayoristas y minoristas comienzan a debilitarse, pero sus administradores no pueden saber si ese es el comienzo de una caída importante en los negocios o simplemente darse un chapuzón en una menor tendencia al alza. Así que demora reducción de la producción y las órdenes hasta que la tendencia a la baja se ha establecido firmemente. Mientras tanto, el inventario-ventas salto proporciones como los numeradores, los inventarios, el aumento y denominadores, las ventas, caída. Eso hace que los recortes en la producción y el imperativo de las órdenes e impulsa la tendencia económica a la baja en el proceso.

Ese fue también el caso de la Gran Recesión. En nuestra opinión, realmente comenzó a principios de 2007 con el colapso de hipotecas de alto riesgo residencial, y luego se extendió a Wall Street que el verano con la implosión de los dos fondos de Bear Stearns en junio de cobertura. Sin embargo, estos descensos fueron financieras y las recesiones son medidos por la producción, el empleo y el gasto, que están dominados por los productos y segmentos de servicios no financieros de la economía. Así que la recesión no comienza oficialmente hasta diciembre de 2007.

Los consumidores van a la huelga

Por otra parte, no fue hasta finales de 2008 que el colapso en el capital de origen como precio de la vivienda cayeron en picada (gráfico 2), el aumento de los despidos (gráfico 3) y el crédito al consumo agotamiento de los condujo a los consumidores en reducción de personal. Pero de repente se inició una huelga de compradores en los últimos cuatro meses de 2008, y los resultados fueron saltos de los ratios de ventas de inventarios. En consecuencia, los recortes en los inventarios de deshacerse de existencias no deseadas fueron, de lejos el más grande de la era posterior a la Segunda Guerra Mundial.

La reducción de la liquidación de inventarios ha sido clave para el crecimiento económico a partir del segundo semestre de 2009. En el tercer trimestre del año pasado, que representa un 66% de la ganancia de 1,6% anual la tasa real del PIB y el 58% de 5.0% de anticipo del cuarto trimestre. El inventario de la capacidad en el primer trimestre de este año ha sido responsable de 67% del aumento de la tasa del 3,7% anual del PIB real y el 36% de la subida del 1,6% en el segundo trimestre. En total, en los últimos cuatro trimestres, el swing de inventario a 58% de la subida del 3,0% del PIB real.

Si los inventarios siguen bombo de la economía aún está por verse. A partir de junio, la relación inventarios-ventas para los minoristas habían regresado a su tendencia a la baja, pero sigue siendo superior a la tendencia de los mayoristas y, sobre todo, los fabricantes. Por otra parte, es una cosa para completar la liquidación de los inventarios no deseados, pero otro para reconstruir de manera significativa. Esta última probablemente requiere de fuerza de ventas procedentes de otras áreas de la economía, y los otros tres cilindros del motor de la economía no se proporciona de manera significativa. Todo lo contrario. Parece que las ventas minoristas decepcionantes recientemente se han pegado los comerciantes con los productos no deseados que pueden ser objeto de liquidación, si los consumidores siguen a replegarse.

Empleo Rezagos

En el post-Segunda Guerra Mundial las recesiones II antes de la disminución de 1990-1991, la parte inferior de nómina de empleo se produjo cerca del punto más bajo en la disminución general del negocio y fue seguido por una rápida rebotes (Gráfico 4). En el suave 1990-1991 y 2001 hasta menos profundas recesiones, sin embargo, el mercado laboral se mantuvo débil durante más de un año de recuperación económica. Lo mismo es cierto en esta ocasión, asumiendo que el declive económico finalizado en julio de 2009, como muchos creen. ¿Qué ha cambiado?

No es que los resultados de una recesión poco profunda en la recuperación de poco empleo porque a pesar de la crisis de 1990-1991 y 2001 fueron de carácter leve, la Gran Recesión ciertamente no fue en términos de puestos de trabajo (Gráfico 4). Una explicación más probable es que la globalización, a partir de la década de 1980, obligó a las empresas estadounidenses a reducir todos los costes con vigor, incluidos los costes de mano de obra, mediante la subcontratación a los proveedores nacionales y extranjeros, promover la productividad y reduciendo la contratación. Esto ha sido especialmente frecuente en la última década.

Puestos de trabajo perdidos para siempre

A pesar de las enormes pérdidas de empleo desde finales de 2007, muchos de los puestos de trabajo es poco probable volver. De los 7,7 millones de empleos no agrícolas netos eliminado entre diciembre de 2007 y julio de este año, 86% estaban en construcción, manufactura, venta al por mayor y comercio al por menor, las finanzas y el ocio y la hospitalidad. Estos seis sectores representaron el 44,5% de las nóminas no agrícolas en julio, sólo alrededor de la mitad que sus pérdidas. Por otra parte, las pérdidas de empleo en esas industrias generado pérdidas de empleo en el servicio y otros sectores que dependen de ellos. construcción de viviendas, por ejemplo, impulsa el empleo en la producción de electrodomésticos, muebles, artículos para el hogar y el seguro de dueño de casa y proporciona ingresos que el apoyo estatal y local de empleo.

Dada la proyección gigante de los inventarios de vivienda en exceso y como resultado la disminución de precios, pasarán años antes de la construcción residencial muestra cualquier reactivación significativa, como hemos explicado en Insights pasado y se actualizará el próximo mes. Del mismo modo, con problemas financieros y masivamente vacantes de bienes raíces comerciales inhiben la construcción de nuevos puestos de trabajo y durante muchos años.

El ciclo de inventario se estabilizó el empleo industrial en los últimos meses, pero que rebotan inventario-relacionado es una y los 2 millones de empleos en la manufactura perdido desde diciembre de 2007, en todo caso, probablemente se convertirá en un número aún mayor. La producción de bienes continúa moviéndose en alta mar. trabajo de reducción de las ganancias de productividad continúan en la fabricación, y reducción de consumo y la deflación seguirá para reducir el consumo de bienes de consumo duradero. Comercio al por mayor y al por menor, especialmente continuará bajo presión con el endeudamiento de los consumidores de 25 años y el exceso del gasto ha sido sustituido por una ola de ahorro (Gráfico 5). Esa reducción de personal, así como retención persistente de negocios que pasen seguirá para retrasar los trabajos en el ocio y la hospitalidad.

Las actividades financieras empleo estabilizado con el marzo 2009 a marzo 2010 renacimiento de Wall Street, pero la continuación probable de la debilidad más recientes en los mercados de valores muchas conducirá a más despidos y recortes de bonificación. El gobierno federal, la gente, naturalmente, ha añadido, 262.000 desde diciembre de 2007, medida que se expande en respuesta a la debilidad de la economía. Sin embargo, los gobiernos estatales corte 6000 en los municipios equilibrio y locales 128 mil, en gran medida en la educación.

Diligente de reducción de costos

las empresas estadounidenses ha sido diligentemente la reducción de costes ya que la recesión comenzó en diciembre de 2007, sobre todo los costes laborales. Una encuesta reciente muestra que más de la mitad de los adultos han sido afectados por una combinación de despidos, recortes salariales y de beneficios, permisos de salida involuntaria y los cambios involuntarios de empleos temporales. Many may never be restored to their earlier statuses. Those layoffs lucky enough to find new jobs often are paid less than earlier.

About 20% of major employers with over 1,000 workers cut or eliminated their 401(k) plan contributions during the downturn but half have failed to restore them so far. Of those with 500 or fewer employees that cut contributions, only 36% have reinstated them or plan to in the next 12 months, according to a Fidelity Investments survey. Furthermore, 10% of all employers plan to reduce or eliminate matching 401(k) contributions in the next year.

Consumer Spending

All the layoffs, involuntary furloughs, and temporary jobs and benefit and wage reductions have been instrumental in the rebound in corporate profits, but devastating to employee compensation. This spells weakness for consumer spending. Also, consumers are no longer saving less and borrowing more on credit card, home equity and other loans to bridge the gap between income and desired spending growth. Furthermore, home equity has evaporated (Chart 6 ) and tight lending standards on credit card and other loans prevail. So they're on a saving spree and debt reduction binge, further slashing the outlook for consumer spending, the third cylinder that normally fires to propel economic recovery from recessions.

De hecho, sin riesgos de estímulos fiscales, la compensación moderada y la recesión se han llevado a los gastos de consumo, descendió considerablemente. Nuestros cálculos muestran que los consumidores ahorraron un 80% de las devoluciones de impuestos que recibieron en el verano de 2008. Y se salvó inicialmente el 100% de los recortes de impuestos de 2009 y los pagos especiales de $ 250 por cada beneficiario del Seguro Social. Estas acciones resultaron en los puntos en la tasa de ahorro se muestra en el Gráfico 5. Esto es notable ya que los recortes de impuestos no fue a los ingresos altos, por lo general los ahorristas sólo grandes. Además, esas personas son relativamente pocos en número por lo que recibió algunos de los controles adicionales de la Seguridad Social. En consecuencia, los hogares de medianos y bajos ingresos que salió de carácter para guardar en gran medida.

Los hogares son el desapalancamiento sus balances con una venganza. Desde el final del cuarto trimestre de 2007, cuando las poblaciones comenzaron a derrumbarse, los bienes personales del sector han caído $ 3.0 billones de dólares. Algunos $ 1,800,000,000,000 fue en acciones y 277 mil millones dólares en fondos de inversión debido a las pérdidas en el balance y retiros de fondos de participación en el capital directo y de fondos de inversión. Los inversionistas ponen dinero en fondos de inversión en el balance en enero, marzo y abril, pero reducir sus explotaciones, especialmente en fondos de acciones, en mayo y junio. Además, las reservas privadas de pensiones cayó $ 754 000 000 000 desde el final de 2007 hasta finales de marzo de 2010 y las reservas de pensiones del Gobierno en las cuentas del hogar bajaron 290000000000 dólares. Los aumentos de tenencias de bonos del Tesoro de $ 533 sólo compensó parcialmente la disminución de la agencia del gobierno y los valores de $ 593 millones. Mientras tanto, los pasivos del sector de personal disminuyeron $ 500 mil millones, en gran parte debido a la disminución de la deuda hipotecaria y de consumo, algunas deudas fueron reembolsados, mientras que otros fueron dados de baja como sin esperanza.

Apoyo del gobierno

Desde que comenzó la recesión en diciembre de 2007 hasta junio de 2010, los ingresos personales de los sueldos y salarios, los ingresos de propietarios, alquileres, intereses, dividendos y transferencias, como las prestaciones de pensiones, los pagos del Seguro Social, Medicare y Medicaid y seguro de desempleo aumentó 285000000000 dólares. Hubiera descendido 247 mil millones dólares, sin un aumento de 532 mil millones dólares en pagos de transferencia del gobierno. Estos incrementos en las transferencias del gobierno también se volcarán en desechables Renta de las Personas (después de impuesto sobre la renta), que más se beneficiaron por la disminución de los impuestos personales que cayeron 382 mil millones dólares debido a los recortes de impuestos y los pasivos de menores ingresos derivados de los despidos, disminución de los salarios y los recortes de bonificación.

En total, el Departamento fue reforzada por 532 mil millones dólares por el aumento en las transferencias del gobierno y 382 mil millones dólares de los impuestos más bajos. Sin estas mejoras significativas, Departamento de Información Pública que han caído 247 mil millones dólar desde diciembre de 2007 en lugar del aumento de $ 667,000,000,000. Sin lugar a dudas, y mucho más que en ninguna anterior recesión posterior a la Segunda Guerra Mundial, el consumidor ha recibido el apoyo masivo de dinero del gobierno en forma de mayores transferencias y reducciones de impuestos. Y estas cifras no incluyen los salarios de puestos de trabajo creados por el gasto federal en infraestructura o guardada por las transferencias federales a los gobiernos estatales y locales para reducir los despidos de maestros y otras reducciones de empleo.

¿Dónde fue el dinero?

¿Qué pasó con ese aumento de 667 mil millones dólares en el Departamento de Información Pública y lo que nos dice acerca de la probabilidad de que un consumidor crónico de ahorro de juerga? Alrededor del 43% se pasó a 64% de ahorro, así que tal vez algunos de los recortes de impuestos anteriores se gastaron, pero con retrasos. Sin embargo, un 64% la tasa de ahorro marginal parece apoyar nuestra tesis crónica juerga de ahorro.

Además, en términos de gasto y ahorro, tenga en cuenta que todo lo que ha estado sucediendo en el ámbito de los consumidores ha sido apoyada por gran estímulos federales. Los estímulos pueden persistir en niveles cercanos a los actuales en los próximos años debido a la alta tasa de desempleo crónico, como se señala en Insights antes, pero parece poco probable un aumento en las tasas que hicieron desde que comenzó la recesión debido a sus efectos sobre el déficit federal ya gran escala. Republicanos e incluso algunos demócratas en el Congreso están tan preocupados por el déficit de proliferación que los estímulos actuales es poco probable que sea renovada al menos hasta que salta un mayor desempleo. En ese caso, la consiguiente retirada del apoyo a los gastos de los consumidores puede empujarlos hacia abajo. Así que el salto en el gasto de consumo como porcentaje del ingreso personal (gráfico 7), que ha sido impulsado por los recortes de impuestos que fueron sólo parcialmente compensados por el aumento de ahorro, es muy poco probable que persista.

La evidencia de reducción de gastos de consumo reciente es rampante. La confianza del consumidor se ha estabilizado como la gente se preocupa acerca de las perspectivas de empleo e ingresos, así como pérdidas en sus acciones y las casas. préstamos de tarjeta de crédito pendientes cayeron un 10% el año pasado y la promesa de que siga disminuyendo ya que los consumidores pagar la deuda, las normas de los créditos se endurecen y la nueva ley federal corta la rentabilidad de los préstamos de tarjetas de crédito. Mientras tanto, los bancos informan que la demanda de créditos de consumo sigue bajando, aunque a tasas decrecientes.

El aumento de ahorro no sólo se utiliza para pagar la deuda sino también para reconstruir 401 (k) s. Fidelity Investments encontró que en el segundo trimestre, el 5,3% de los participantes se refirieron a su contribución, mientras que un 2,9% los redujo. Que el exceso de los aumentos de más de disminución se ha mantenido durante cinco trimestres y sigue a tres cuartas partes de lo contrario. Sin embargo, los números que golpeó sus cuentas de préstamos o retiros dificultades también aumentaron.

Moderado del gasto

Por el lado del gasto, las ventas de vehículos en julio fueron a una tasa anual de 11,5 millones, frente a la sub-10000000 niveles de 2008-2009, pero muy por debajo de los niveles previos a la recesión. El gasto del consumidor en los televisores, computadoras, videos y equipos de telefonía subieron un 1,8% en el primer semestre de 2010 en comparación con el año anterior mientras que las compras aparato cayó 3,6% y los gastos de muebles cayó un 11%. las ventas de prendas de vestir también perdió frente a aparatos electrónicos. Este cambio refleja las dos fuerzas. En primer lugar, los consumidores están ahorrando más y gastando menos de equipamiento de sus casas que ya no se aprecia, pero ahora se deprecian los activos. En segundo lugar, todavía quieren la satisfacción de comprar iPads y otros pequeños lujos, un tema de inversión que hemos identificado hace años y explica plenamente en nuestra agosto Insight.

Vivienda sigue deprimida

El sector de la vivienda es un importante generador de la recuperación económica normal a pesar de que la construcción residencial representa el 4,7% del PIB en promedio en los años posteriores a la Segunda Guerra Mundial. Es la volatilidad que importa. La construcción de viviendas fue del 6,3% del PIB en su máximo reciente en el cuarto trimestre de 2005, pero bajó a 2,4% en su punto más bajo en el primer trimestre de 2010. Esta disminución porcentual de 3,9 puntos es muy significativo, teniendo en cuenta que un 3% superior a la disminución de la parte inferior del PIB real constituye una gran recesión.

Estado y de Gobierno Local del gasto

El gasto de los gobiernos estatales y locales no es una de las fuentes de la reactivación económica después del fin de las recesiones, ya que ha sido una constante del 12% al 13% de la cuota del PIB desde la década de 1970. En las primeras décadas posteriores a la Segunda Guerra Mundial II, que creció rápidamente para financiar la educación de los niños de la posguerra y el crecimiento de los suburbios de recogida de setas. Los municipios también han proporcionado una fuente constante de puestos de trabajo, ya que, hasta hace poco, muchos menos empleados fueron despedidos o despedidos que en el sector privado y dejar de fumar son relativamente pocos. Hace años, el "contrato social", sostuvo que los empleados recibieron salarios más bajos que los trabajadores del sector privado, los planes de jubilación anticipada y las pensiones para exuberantes les permitió ponerse al día en sus últimos años. Pero desde principios de 1980, el sector privado se ha globalizado con muy poco crecimiento en los ingresos reales. Mientras tanto, los empleados gubernamentales estatales y locales han seguido recibiendo aumentos de sueldo por encima de la inflación y ahora tienen salarios que son 34% más altos que para los empleados del sector privado (Gráfico 8).

Ayuda federal

Como parte de su programa de estímulo fiscal, el gobierno federal es la transferencia de 246 mil millones dólares a los gobiernos estatales para evitar más despidos de maestros de la escuela, ayudar a financiar los aumentos de costos de Medicaid y otros tapar agujeros en los presupuestos del Estado. El dinero federal se está llenando un 30% a 40% de las brechas en el presupuesto del estado, pero 46 estados proyectan un déficit colectiva de $ 121 millones para el año fiscal 2011 que comienza el próximo 01 de julio, lo que equivale al 19% de sus presupuestos. Y 39 estados de ver las lagunas que el total de 102 mil millones dólares para el año fiscal 2012. A menos que la asistencia federal continúa, este déficit será mucho mayor. Todos los estados de Vermont, pero son necesarias para equilibrar sus presupuestos de una forma u otra, pero la mayoría son honrados en la brecha como trucos fiscales y de contabilidad creativa ser realmente creativo.

prestidigitación presupuestaria sin duda está relacionado con el rápido crecimiento en el gasto estatal en los últimos años y el salto de la deuda. Los gobiernos estatales y locales ahora utilizar la deuda para financiar las inversiones que se hacía sobre la base del presupuesto actual, y algunos emitir deuda para cubrir los déficit presupuestarios habituales. estatal total y la deuda de bonos pendientes locales saltaron 93% entre 2000 y 2009, de $ 1.2 billones a $ 2,3 billones.

Es obvio que lleva mucho crujir de dientes en las tinieblas de afuera para el estado y el gobierno local para aplanar, cortar y mucho menos, su gasto después de una década de las tasas de 6% a 7% de crecimiento anual. Salto de empleo municipal es la razón principal de proliferación del gasto en años anteriores, y el corte a menudo la fuerza de trabajo sindicalizada estatales y locales es muy difícil. Desde la Gran Recesión empezó en diciembre de 2007 hasta abril, el empleo de nómina privada se ha reducido un 6,8%. Sin embargo, los trabajos estatales y locales han disminuido, pero por mucho menos, sólo el 1,4%. En julio, los gobiernos estatales y locales, que emplean a 9,5 millones, cortar 48.000 puestos de trabajo, 102.000 en los últimos tres meses y 169.000 lo que va del año.

Aumento de los Impuestos

En respuesta a sus problemas financieros, muchos gobiernos estatales y locales han tratado de aumentar los impuestos y tasas. Los sospechosos de siempre incluyen impuestos más altos sobre el pecado tabaco y las bebidas alcohólicas, así como los impuestos a empresas con sede fuera del estado, pero haciendo algunos negocios en el estado. Los intentos de aumentar los impuestos y recortar el gasto han demostrado ser totalmente inadecuada para resolver los problemas locales y estatales de financiamiento del gobierno. Y los problemas parecen crónicas, sobre todo si nuestro pronóstico de crecimiento económico lento y la deflación aún es válida. El aumento de los pasivos los ingresos personales y corporativos se silenciará. Las ventas minoristas y los impuestos sobre ellos será lenta ya que los consumidores persistir durante la próxima década en su festejo de ahorro, en sustitución de la orgía de endeudamiento y el gasto de la última década.

precios de la vivienda es probable que siga disminuyendo en el próximo año, bajo el peso de enormes inventarios en exceso. Aun cuando los inventarios se trabajan fuera, precios de la vivienda probablemente se elevará poco, en todo caso, en una baja inflación o el clima de deflación. Históricamente, han sido plana después de corregir por la inflación global y el creciente tamaño de las casas a través del tiempo. Y ahora que los precios de la vivienda han caído en todo el país por primera vez desde 1930, los compradores de casas ya no ven a sus moradas como también grandes inversiones apalancadas, y quieres más pequeños, casas más baratas. Esto también reducirá las cuotas de los impuestos a la propiedad.

Mientras tanto, las vacantes de bienes raíces comerciales de alta y graves problemas financieros tardar años en resolverse, manteniendo los bajos precios durante algún tiempo (Gráfico 9). Así que, considerando todas las cosas, los impuestos locales a la propiedad del gobierno tienden a reducirse para muchos años. Mientras tanto, los gastos municipales será difícil de cortar. El desempleo crónico alta se generan alta inscripción en Medicaid y los costos. Bienestar y los costos de prestaciones de desempleo, sin duda, aumentar.

El deterioro de las finanzas están criando a los riesgos de incumplimientos en las obligaciones estatales y locales, e incluso quiebras municipales. Harrisburg, capital de Pennsylvania, no hará un pago 3,3 millones dólares de bonos municipales en 51,5 millones dólares de deuda con vencimiento en dos semanas, y principios de este año, funcionarios de la ciudad discutió la bancarrota. Harrisburg también carece de los fondos para continuar los pagos de la deuda 288 millones dólares en un proyecto de la incineradora. Con anterioridad, el Condado de Jefferson, Alabama, sede de Birmingham, de pagar 227 millones dólares debido a sus mejoras de alcantarillado desastrosas.

Revuelta de los contribuyentes?

Las personas que trabajan en el sector privado al parecer estaban dispuestos a aceptar el pago más alto, más seguridad laboral y mejores prestaciones de jubilación para los empleados estatales y locales en los últimos años. alta intensidad de empleo en el sector privado y el crecimiento económico robusto, por lo menos mantuvo la esperanza de que sus lotes mejoraría mañana. Pero con el lento crecimiento económico, la expansión de ingresos limitados y el alto desempleo ahora se espera de ellos durante años, las actitudes de los votantes parecen estar cambiando.

Los estadounidenses todavía quieren los servicios municipales básicos, como la protección de policía y bomberos, buenas escuelas para sus hijos, calles limpias y recolección de basura. Pero al parecer, están decidiendo que está pagando demasiado por esos servicios, que los salarios un 34% superior para los empleados estatales y locales en comparación con los trabajadores del sector privado no se justifica como recortes salariales se multiplican en el sector privado y los despedidos ganan mucho menos si y cuando se puede encontrar otro trabajo, que el 66% más alto costos de los beneficios es en la parte superior, sobre todo porque los empleados del sector privado está pagando más de sus primas de salud y ver a sus planes de prestación definida sustituye por mucho más inciertos 401 (k) s.

La rebelión de los contribuyentes, hay un montón de cosas que se pueden hacer para reducir los costos del estado y del gobierno local de una manera ordenada. Siguiendo los pasos de la quiebra de GM, las estructuras salariales de dos niveles se están estableciendo con los empleados existentes continua en los niveles salariales actuales, pero los nuevos empleados pagados los salarios mucho más bajos adecuada para atraer a personas cualificadas. Y la gente nueva son inscritos en planes de contribución definida que requieren contribuciones de los empleados no, planes de beneficios definidos, mientras que su edad de jubilación se incrementan.

Comercio Exterior

Otro sector económico que normalmente no es un importante motor de la recuperación económica, pero es importante en la actualidad son las exportaciones desde que la Administración espera que se duplique en los próximos cinco años y el crecimiento económico significativo. El celo del Presidente para lograr ese objetivo aumenta a medida que se da cuenta de que los estímulos fiscales masivos no han reactivado la economía, y los déficit federales ya enorme impedir nuevas rondas de grandes gastos.

Sin embargo, dos problemas importantes es probable que retardan crecimiento de las exportaciones en los próximos años - un aumento del proteccionismo que claramente impide el comercio exterior, y la búsqueda de países extranjeros que van a comprar esta duplicación de las exportaciones estadounidenses. Es como la historia del corredor de bolsa que llama a su cliente durante Flash de mayo de Crash a decirle que las reservas se están colapsando. "Quiero vender mi cartera entera!" Grita el cliente en dificultades. -Claro-replica el agente, "pero a quién? No hay compradores ".

Los compradores extranjeros?

En cuanto a los compradores extranjeros de las exportaciones de EE.UU. se refiere, la realidad es que muchos de esos mercados que están mostrando un crecimiento robusto y por lo tanto podría ser capaz de absorber los productos americanos, las tierras como China y Alemania, son los principales exportadores en sí no, a los importadores en el equilibrio. En efecto, no es de extrañar que la UE medidas de la industria y la confianza de los hogares muestra que las exportaciones de Alemania tiene el más alto nivel, mientras que los económicamente débiles Club Med importadores netos en la parte inferior de la pila (gráfico 10).

cambios de divisas sólo efectos limitados sobre los precios de exportación o de importación. La volatilidad de los precios de importación de EE.UU. es de sólo un cuarto de dólar y un tercio en el caso de los precios de exportación estadounidenses. ¿Por qué? Muchos productos se venden bajo contratos a largo plazo e inmune a las fluctuaciones de la mayoría de la divisa. Además, los importadores y exportadores de resistir que refleja la magnitud de los cambios de tipo de cambio en sus precios. Si el yen está fuerte frente al dólar, los importadores de automóviles Lexus afeitar sus márgenes de ganancia para compensar algunos de los mayores precios en dólares para evitar la pérdida de cuota de mercado. Por el contrario, los exportadores de EE.UU. a Japón no pasan sobre los precios al yen menor la magnitud de la caída del dólar con el fin de aumentar sus beneficios.

El "tráfico de perfeccionamiento" en el que los componentes son importados, ensamblados y luego re-exportados constituye aproximadamente la mitad de las exportaciones chinas. Esto reduce la importancia de los tipos de cambio del yuan. Además, incluso los bienes con más contenido nacional no son completamente sensibles a los tipos de cambio en un mundo global. Alrededor del 50% de un fabricante chino de los costes de los niños ropa de tela y alrededor del 50% de los costes de la tela son el algodón, uno de los productos básicos a nivel mundial en bolsa cotiza en dólares. Así, el 25% del coste total no se ve afectada por las fluctuaciones de yuanes. Además, otro 25% podría estar en los beneficios conjuntos de la ropa y los productores de tejidos, y podría ser ajustada para compensar las fluctuaciones de la moneda - o la producción se trasladó a bajo costo de Vietnam o Bangladesh si el yuan saltó en valor.

Double Dip recesión?

Hemos hecho nuestro caso para el crecimiento de EE.UU. muy lento económica en los barrios, de hecho, el año, por delante. La recuperación económica debido al ciclo de inventario se ha terminado. Empleo y gasto de los consumidores siguen siendo débiles. La vivienda es demasiado sobrecargada con el exceso de inventario y la debilidad de los precios resultantes de revivir en el corto plazo. los gastos del Estado y del gobierno local y el empleo se están retirando. Y ganancias significativas a la exportación es poco probable que el crecimiento económico en el extranjero se desliza. Curiosamente, el pronóstico de consenso se está moviendo hacia nuestra posición como estimaciones de crecimiento se han reducido rápidamente en los últimos meses. En abril y junio, la encuesta del Wall Street Journal de los economistas (no incluidos nosotros) que se espera un crecimiento económico del 3% en el segundo semestre de este año. Nos preguntamos si todavía lo hacen.

Will slow growth deteriorate into another recession, the so-called double dip scenario? Before exploring that question, let's define a double dip. It seems to mean a second period of economic decline following the 2007-2009 nosedive. That could imply that the recession that the accepted authority, the Business Cycle Dating Committee of the nonprofit National Bureau of Economic Research, pinpointed as commencing in December 2007, is still underway. Sure, real GDP grew in the last four quarters, but it's common to have quarters of gain within recessions. In the 11 post-World War II recessions so far, seven, including the 2007- 2009 decline, had at least one quarter of rising real GDP within the recession. In fact, two – the 1960-1961 and the 2001 declines – didn't even have two quarters of consecutive decline. Even in the 1929-1933 economic collapse, GDP rose in six quarters.

Still, to have a four-quarter interlude between the declining phases of the same recession would be unprecedentedly long, assuming that real GDP declines in the current quarter. So another period of economic weakness could be classified as a second recession, much as the 1981-1982 decline, which started in July 1981, only 12 months after the 1980 recession ended.

Slow Growth to Recession

We're on record for a 50% or higher probability of a second dip or another recession, whatever it would be called. The composition of the ECRI Weekly Leading Index remains proprietary, but its growth rate has fallen to the level that in the past was always associated with recessions (Chart 11). Historically, however, recessions have been propelled by shocks. The post- World War II downturns prior to 2001 were caused by Fed tightening in response to threats of economic overheating and the resulting higher inflation. Since then, other shocks have been responsible. The 2001 recession resulted from the 2000 collapse of the dot com bubble augmented by the 9/11 shock. The 2007-2009 downturn resulted from the collapse in subprime residential mortgages that commenced early in 2007.

In the current economic and financial climate, it's highly unlikely that the Fed will tighten credit for years. In fact, the central bank has shifted from planning last spring to withdraw liquidity as the economy grew to renewing quantitative easing and worrying about deflation and subpar growth. It said after its August 10 policy meeting that household spending is being retarded by high unemployment, slow income growth, lower home equity and tight credit conditions while bank lending “has continued to contract.”

Pushing On A String

Conventional monetary ease is now impotent with the federal funds rate close to zero , the money multiplier collapsed and banks sitting on hoards of cash (Chart 12) and over $1 trillion in excess reserves. Sure, large banks report to the Fed that they are easing lending standards for small business, but after the intervening financial crisis, many fewer potential borrowers are deemed creditworthy than in the loose lending days. Furthermore, the small business trade group, the National Federation of Independent Business, reports that 91% of small business owners have had their credit needs met or business is so slow that they don't want to borrow. The Fed is pushing on the proverbial string.

The Fed also worries about deflation, which means that even zero interest rates are positive in real terms, as has been the case for years in deflationary Japan. Also, deflation encourages buyers to wait for still-lower prices in a self-feeding cycle, as is seen in Japan and as we have discussed often in conjunction with our forecast of 2% to 3% per year chronic deflation. In it s post- August 10 meeting statement, the Fed said that “measures of underlying inflation,” already low, “have trended lower” lately and are “likely to be subdued for some time.” James Bullard, President of the Federal Reserve Bank of St. Louis, recently warned of the risks of deflation.

Deflation is a scary phenomenon, but we can't resist noting that the Fed as well as many other forecasters are moving in the direction of our forecast. In contrast, an April 6 Wall Street Journal piece by Peter Eavis stated unequivocally, “No one in their right mind would bet on inflation remaining substantially below 4% for the next 10 years.” Maybe we better have our head examined.

A Baby Step

So, with conventional monetary ease exhausted and further fiscal stimulus on hold because of the already-huge federal deficit, the Fed at its August 10 meeting took a baby step toward more quantitative ease by deciding to buy Treasury bonds to replace the maturing and refinanced Treasury and mortgage-backed securities in the $1.7 trillion hoard it finished buying earlier this year. With low mortgage rates, refinancings were projected to raise the Fed's portfolio contraction from an earlier estimate of $200 billion by the end of 2011 to $340 billion, with another $55 billion coming from retirement of Fannie Mae and Freddie Mac debt held by the Fed.

Furthermore, the Fed is open to further steps if the economy continues to slip. It could buy even more Treasurys or mortgage debt. But would the resulting lower interest rates encourage prospective home buyers who now know that house prices can and do fall? Would another $1 trillion in excess reserves induce more bank lending than the first $1 trillion? The Fed could also promise to keep short-term interest rates low, but it's already said it would for an “extended period.”

It could cut out the 0.25% it pays the banks on their reserves, but would that induce reluctant banks to lend? Finally, the Fed could set an inflation target over its formal 1.5% to 2.0% range. That would be anathema for inflation-wary central bankers, and how could the Fed hit that target in a deflationary world where ample supply exceeds weak demand? Despite all the credit easing actions that Chairman Ben Bernanke, in his famous November 2002 speech, said the Fed could take if the federal funds target reached zero, the credit authorities are about out of ammo – except for dumping money out of helicopters. Remember the “Helicopter Ben” moniker?

Other Shocks

If the Fed is highly unlikely to shock slow growth into recession, what could? This brings us back to the series of seemingly isolated events that are occurring on the deleveraging road, such as further financial woes in Europe, a crisis in commercial real estate, a nosedive in the Chinese economy and a slow motion train wreck in Japan. They are all possibilities – as are other shocks here or abroad that we don't foresee. Maybe the exhausting of federal stimulus will be enough to trigger an economic downturn. Keep your eyes pealed, however, because it won't take much disruption to push the fragile global economy back into decline.

Gary Shilling

John Mauldin…

Houston, My Book, and New York

Tuesday was a very special day. My co-author, Jonathan Tepper of Variant Perception (based in London), and I spent the entire day reading the first complete rough draft of our forthcoming book, The End Game. We went cover to cover, making comments and notes. Of course, I had read the bits and pieces, but not in one sitting. I have to say that I am more than happy. It is a very good first draft, much better than I thought it would be. There is a lot of work ahead, of course, to try and make it a great book, but I can “feel” it. And I think we have managed to capture some very difficult topics and make them simple and maybe even a fun read. We are on target for a January 1 launch.

We make what I feel is an overwhelming case for a period of slow growth in the developed world, with more volatility as the base case. The research we review is very strong. But there are pockets of potential if you step back and take off your localized blinders.

I will be in Houston (along with Gary Shilling, David Rosenberg, Bill King, and Jon Sundt) at the one-day X-Factor Conference on October 1. Muy por el cartel. You can learn more by going to www.streettalklive.com . Then I will be in New York in late October, speaking at the BCA conference and a few media events.

It has been interesting talking with investment types in Europe. They are very curious about the US and what they perceive as our lack of seriousness about the deficit. It appears that Greece has focused their attention. And of course, I get off the plane from Malta yesterday and the headline in the Financial Times says, “Greece rules out possibility of default.” I know that made me feel better. And gave us all a laugh. If you have not, read the piece from Michael Lewis in Vanity Fair on Greece. And then share my amusement about the chances of no default.

It is time to hit the send button. I feel a nap coming on. Jet lag has been worse than normal this trip. And maybe another glass of Prosecco to ease me into slumberland.

Your excited about almost finishing this book analyst,

John Mauldin
John@FrontLineThoughts.com

Copyright 2010 John Mauldin. Todos los derechos reservados

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The following note from Gary Shilling was forwarded by John Mauldin of Thoughts For The Frontline. John includes a short note at the beginning and end. — Ed.

I am on a plane (yet again) from Zurich to Mallorca, where I will meet with my European and South American partners, have some fun, and relax before heading to Denmark and London. With the mad rush to finish my book (more on that later) and a hectic schedule this week, I have not had time to write a letter. But never fear, I leave you in the best of hands. Dr. Gary Shilling graciously agreed to condense his September letter, where he looks at the risk of another recession in the US.

I look forward at the beginning of each month to getting Gary's latest letter. I often print it out and walk away from my desk to spend some quality time reading his thoughts. He is one of my “must-read” analysts. I always learn something quite useful and insightful. I am grateful that he has let me share this with you.

If you are interested in getting his letter, his website is down being redesigned, but you can write for more information at insight@agaryshilling.com . If you want to subscribe (for $275), you can call 888-346-7444. Tell them that you read about it in Thoughts from the Frontline, and you will get an extra one month on your subscription. And now, let turn to Gary.

– John Mauldin

By Gary Shilling

Investor attitudes have reversed abruptly in recent months. As late as last March, most translated the year-long robust rise in stocks, foreign currencies, commodities and the weakness in Treasury bonds that had commenced a year earlier into robust economic growth – the “V” recovery.

As a result, investors early this year believed that rapid job creation and the restoration of consumer confidence would spur retail spending. They also saw the housing sector's evidence of stabilization giving way to revival, and strong export growth also propelling the economy. Capital spending, led by high tech, was another area of strength, many believed.

No tan rápido

But a funny flash websites, or not so funny flash websites, thing happened on the way to super-charged, capacity-straining growth. In April, investors began to realize that the eurozone financial crisis, which had been heralded at the beginning of the year by the decline in the euro, was a serious threat to global growth. Stocks retreated (Chart 1 ), commodities fell and Treasury bonds rallied and the dollar rose. It is, after all, just one big trade among these four markets, so their correlated actions on the down as well as the up side aren't surprising.

Furthermore, investors began to worry about the health of the US economy and the prospects for a second dip in the Great Recession that started in December 2007. The gigantic 2009 fiscal stimuli of close to $1 trillion was running out, threatening a relapse in an economy that was running on government life support. The $8,000 tax rebate for new home buyers was expiring April 30 and might be followed by a drop in house sales as had its predecessor that expired in November 2009 as the spike in activity early this year only borrowed from future sales. The outlook for exports had turned negative with the robust buck, sagging European economies and the current “stop” phase of China's “stop-go” monetary and fiscal policies. With unemployment remaining high last spring, investors began to fret that consumer spending would falter as fiscal stimuli was exhausted.

Deleveraging

Although investor views of the economy have reversed in the last five months, the reality probably hasn't. The good life and rapid growth that started in the early 1980s was fueled by massive financial leveraging and excessive debt, first in the global financial sector, starting in the 1970s and in the early 1980s among US consumers. That leverage propelled the dot com stock bubble in the late 1990s and then the housing bubble. But now those two sectors are being forced to delever and in the process are transferring their debts to governments and central banks.

This deleveraging will probably take a decade or more – and that's the good news. The ground to cover is so great that if it were traversed in a year or two, major economies would experience depressions worse than in the 1930s. This deleveraging and other forces will result in slow economic growth and probably deflation for many years. And as Japan has shown, these are difficult conditions to offset with monetary and fiscal policies.

The deleveragings of the global financial sector and US consumer arena are substantial and ongoing. Household debt is down $374 billion since the second quarter of 2008. The credit card and other revolving components as well as the non-revolving piece that includes auto and student loans are both declining. Total business debt is down, as witnessed by falling commercial and industrial loans.

Meanwhile, federal debt has exploded from $5.8 trillion on Sept. 30, 2008 to $8.8 trillion in late August. Many worry about the inflationary implications of this surge, but the reality is that public debt has simply replaced private debt. The federal deficit has leaped as consumers and business retrenched, which curtailed federal tax revenues, while fiscal stimulus, aimed at replacing private sector weakness, has mushroomed.

Four Cylinders

As discussed in our May 2010 Insight, in the typical post-World War II economic recovery, four cylinders fire to push the economic vehicle out of the recessionary mud and back out on to the highway of economic growth. At present, only one – the ending of inventory liquidation – is generating significant power. The other three – employment gains, consumer spending growth and a revival in residential construction – are sputtering at best.

The Inventory Cycle

Historically, the liquidation of excess inventories accounts for major shares of the decline in economic activity in recessions. Around business cycle peaks, the sales of manufacturers, wholesalers and retailers begin to weaken but their managers can't tell whether that's the beginning of a major drop in business or just a minor dip in an upward trend. So they delay cutting production and orders until the downward trend is firmly established. Meanwhile, inventory-sales ratios leap as the numerators, inventories, rise and the denominators, sales, fall. That makes cuts in production and orders imperative and propels the economic downward trend in the process.

That was also the case in the Great Recession. In our view, it really started in early 2007 with the collapse in subprime residential mortgages, and then spread to Wall Street that summer with the implosion of the two Bear Stearns hedge funds in June. But these were financial declines, and recessions are measured by production, employment and spending, which are dominated by the goods and nonfinancial services segments of the economy. So the recession didn't officially start until December 2007.

Consumers Go On Strike

Furthermore, it wasn't until late 2008 that the collapse in home equity as house prices nosedived (Chart 2), rising layoffs (Chart 3) and the drying up of consumer lending drove consumers into retrenchment. But they suddenly went on a buyers strike in the last four months of 2008, and the results were leaps in inventory-sales ratios. Consequently, the cuts in inventories to get rid of unwanted stocks were far and away the biggest in the post-World War II era.

The reduction in inventory liquidation has been key to economic growth starting in the second half of 2009. In the third quarter of last year, it accounted for 66% of the 1.6% annual rate real GDP gain and 58% of the fourth quarter's 5.0% advance. The inventory-building in the first quarter of this year was responsible for 67% of the 3.7% annual rate rise in real GDP and 36% of the rise of 1.6% in the second quarter. In total, in the last four quarters, the inventory swing provided 58% of the 3.0% rise in real GDP.

Whether inventories will continue to hype the economy remains to be seen. As of June, the inventory-sales ratio for retailers had returned to its downtrend, but was still above trend for wholesalers and, especially, manufacturers. Furthermore, it's one thing to complete the liquidation of unwanted inventories but another to rebuild them significantly. The latter probably requires sales strength originating in other areas of the economy, and the other three cylinders of the economic engine aren't providing it in meaningful ways. Todo lo contrario. It appears that recently disappointing retail sales have stuck merchants with unwanted goods that may be liquidated if consumers continue to retrench.

Employment Lags

In post-World War II recessions before the 1990-1991 decline, payroll employment's bottom came close to the low point in the overall business decline and was followed by rapid rebounds (Chart 4 ). In the mild 1990-1991 and even shallower 2001 recessions, however, the job market remained weak for over a year into economic recovery. The same is true this time, assuming the economic decline ended in July 2009, as many believe. ¿Qué ha cambiado?

It isn't that a shallow recession results in weak job recovery because even though the 1990-1991 and 2001 downturns were mild, the Great Recession certainly wasn't in terms of jobs (Chart 4). A more likely explanation is that globalization, starting in the 1980s, forced American business to cut all costs vigorously, including labor costs, by outsourcing to domestic and foreign suppliers, promoting productivity and curtailing hiring. This has been especially prevalent in the last decade.

Jobs Lost Forever

Despite the huge employment losses since the end of 2007, many of those jobs are unlikely to return. Of the 7.7 million net nonfarm jobs eliminated between December 2007 and July of this year, 86% were in construction, manufacturing, wholesale and retail trade, finance and leisure and hospitality. These six sectors accounted for 44.5% of nonfarm payrolls in July, only about half as much as their losses. Furthermore, job losses in those industries spawned employment losses in service and other sectors that depend on them. Home building, for example, spurs employment in the production of appliances, furniture, home furnishings and homeowner insurance and provides revenues that support state and local employment.

Given the gigantic overhang of excess house inventories and resulting further price declines, it will be years before residential construction shows any meaningful revival, as we've explained in past Insights and will update next month. Similarly, financially troubled and massively vacant commercial real estate will inhibit new construction and jobs for many years.

The inventory cycle did stabilize manufacturing employment in recent months, but that inventory-related bounce is over and the 2 million manufacturing jobs lost since December 2007, if anything, will probably become an even bigger number. Goods production continues to move offshore. job-reducing productivity gains continue in manufacturing, and consumer retrenchment and deflation will continue to curtail consumer durable goods consumption. Wholesale and especially retail trade will continue under pressure with the 25-year consumer borrowing and spending binge now replaced by a saving spree (Chart 5). That retrenchment as well as persistent business spending restraint will continue to retard jobs in leisure and hospitality.

Financial activities jobs stabilized with the March 2009-March 2010 revival of Wall Street, but the likely continuance of more recent weakness in many securities markets will lead to more layoffs and bonus cuts. The federal government, naturally, has added people, 262,000 since December 2007, as it expands in response to the weak economy. But state governments cut 6,000 on balance and local municipalities 128,000, largely in education.

Diligent Cost-Cutting

American business has been diligently cutting costs since the recession started in December 2007, especially labor costs. A recent survey shows that over half of adults have been affected by some combination of layoffs, wage and benefits cuts, involuntary furloughs and involuntary shifts to temporary jobs. Many may never be restored to their earlier statuses. Those layoffs lucky enough to find new jobs often are paid less than earlier.

About 20% of major employers with over 1,000 workers cut or eliminated their 401(k) plan contributions during the downturn but half have failed to restore them so far. Of those with 500 or fewer employees that cut contributions, only 36% have reinstated them or plan to in the next 12 months, according to a Fidelity Investments survey. Furthermore, 10% of all employers plan to reduce or eliminate matching 401(k) contributions in the next year.

El gasto del consumidor

All the layoffs, involuntary furloughs, and temporary jobs and benefit and wage reductions have been instrumental in the rebound in corporate profits, but devastating to employee compensation. This spells weakness for consumer spending. Also, consumers are no longer saving less and borrowing more on credit card, home equity and other loans to bridge the gap between income and desired spending growth. Furthermore, home equity has evaporated (Chart 6 ) and tight lending standards on credit card and other loans prevail. So they're on a saving spree and debt reduction binge, further slashing the outlook for consumer spending, the third cylinder that normally fires to propel economic recovery from recessions.

In fact, without massive fiscal stimuli, subdued compensation and the recession would have pushed consumer outlays down substantially. Our calculations show that consumers saved 80% of the tax rebates they received in the summer of 2008. And they initially saved 100% of 2009′s tax cuts and special payments of $250 for each Social Security beneficiary. Those actions resulted in the spikes in the saving rate shown in Chart 5. This is remarkable since the tax cuts did not go to highincome people, normally the only big savers. Also, those folks are relatively few in number so they received few of the extra Social Security checks. Consequently, middle- and lower-income households stepped out of character to save heavily.

Households are deleveraging their balance sheets with a vengeance. Since the end of the fourth quarter of 2007 when stocks began to collapse, personal sector assets have fallen $3.0 trillion. Some $1.8 trillion was in equities and $277 billion in mutual funds due to losses on balance and withdrawals from equity direct ownership and from mutual funds. Investors put money into mutual funds on balance in January, March and April, but cut their holdings, especially in stock funds, in May and June. Also, private pension reserves fell $754 billion from the end of 2007 to the end of March 2010 and government pension reserves in household accounts were down $290 billion. Increases of Treasury bond holdings of $533 only partially offset the decline in government agency and securities of $593 billion. Meanwhile, liabilities of the personal sector dropped $500 billion, largely due to the decline in mortgage and consumer debt as some debts were repaid while others were written off as hopeless.

Support By Government

Since the recession began in December 2007 through June 2010, personal income from wages and salaries, proprietors' income, rents, interest, dividends and transfers such as pension benefits, Social Security, Medicare and Medicaid payments and unemployment insurance increased $285 billion. It would have declined $247 billion without a $532 billion increase in government transfer payments. These increases in government transfers also flowed through to Disposable Personal Income (after-tax income), which further benefited by lower personal taxes that fell $382 billion due to tax cuts and the lower taxable income resulting from layoffs, wage declines and bonus cuts.

In total, DPI was enhanced by $532 billion from the increase in government transfers and $382 billion from the lower taxes. Without these significant boosts, DPI would have fallen $247 billion since December 2007 instead of rising $667 billion. Without question, and much more so than in any previous post-World War II recession, the consumer has been supported by massive government money in the form of increased transfers and tax cuts. And these numbers do not include wages from jobs created by federal spending on infrastructure or saved by federal transfers to state and local governments to curtail teacher layoffs and other employment reductions.

Where Did The Money Go?

What happened to that $667 billion increase in DPI and what does it tell us about the likelihood of a chronic consumer saving spree? About 43% of it was spent and 64% saved, so maybe some of the earlier tax cuts were spent, but with delays. Nevertheless, a 64% marginal saving rate does seem to support our chronic saving spree thesis.

Also, in terms of spending and saving, note that whatever has been going on in the consumer arena has been supported by massive federal stimuli. Those stimuli may persist at near current levels in future years due to chronic high unemployment, as noted in earlier Insights, but seems unlikely to rise at the rates they did since the recession began due to their effects on the already massive federal deficits. Republicans and even some Democrats in Congress are so worried about the mushrooming deficit that current stimuli is unlikely to be renewed at least until unemployment leaps further. In that case, the resulting withdrawal of support for consumer outlays may push them down. So the leap in consumer spending as a share of personal income (Chart 7 ), which has been propelled by tax cuts that were only partially offset by saving increases, is highly unlikely to persist.

Evidence of recent consumer retrenchment is rampant. Consumer confidence has flattened as people worry about employment and income prospects as well as losses on their stocks and houses. Credit card loans outstanding fell 10% last year and promise to fall further as consumers repay debt, lending standards tighten and the new federal law cuts the profitability of credit card lending. Meanwhile, banks report that demand for consumer loans continues to drop, although at declining rates.

Increased saving is not only being used to repay debt but also to rebuild 401(k)s. Fidelity Investments found that in the second quarter, 5.3% of participants raised their contribution while 2.9% reduced them. That excess of increases over decreased has persisted for five quarters and follows three quarters of the reverse. Still, the numbers that tapped their accounts for loans or hardship withdrawals also rose.

Subdued Spending

On the spending side, vehicle sales in July were at an 11.5 million annual rate, up from the sub-10 million levels of 2008-2009, but well below the pre-recession levels. Consumer spending on TVs, computers, videos and telephone equipment rose 1.8% in the first half of 2010 compared with a year earlier while appliance purchases fell 3.6% and furniture outlays dropped 11%. Apparel sales also lost out to electronic gadgets. This shift reflects two forces. First, consumers are saving more and spending less on equipping their houses that are no longer appreciating but now depreciating assets. Second, they still want the satisfaction of buying iPads and other Small Luxuries, an investment theme we identified years ago and explained fully in our August Insight.

Housing Remains Depressed

The housing sector is an important generator of the normal economic recovery even though residential construction only accounts for 4.7% of GDP on average in the post-World War II years. It's the volatility that matters. Residential construction was 6.3% of GDP at its recent peak in the fourth quarter of 2005, but fell to 2.4% at its low in the first quarter of 2010. This 3.9 percentage point decline is very significant, considering that a 3% top to bottom decline in real GDP constitutes a major recession.

State and Local Government Spending

Spending by state and local governments is not one of the sources of economic revival after recessions end because it has been such a steady 12% to 13% share of GDP since the early 1970s. In the early post-World War II decades, it grew rapidly to finance the education of the postwar babies and the growth of mushrooming suburbs. Municipalities have also provided a steady source of jobs since, until recently, many fewer employees were laid off or fired than in the private sector and relatively few quit. Years ago, the “social contract” held that those employees received lower wages than private sector workers, so early retirement provisions and lush pensions allowed them to catch up in their later years. But since the early 1980s, the private sector has been globalized with very little growth in real incomes. Meanwhile, state and local government employees have continued to receive pay raises in excess of inflation and now have wages that are 34% higher than for private sector employees (Chart 8).

Federal Help

As part of its fiscal stimulus program, the federal government is transferring $246 billion to state governments to prevent more school teacher layoffs, help fund Medicaid cost increases and plug other holes in state budgets. Federal money is filling 30% to 40% of state budget gaps, but 46 states are projecting a collective deficit of $121 billion for the 2011 fiscal year that begins next July 1, equivalent to 19% of their budgets. And 39 states see gaps that total $102 billion for fiscal 2012. Unless federal assistance continues, these deficits will be much larger. All the states but Vermont are required to balance their budgets in one form or another, but most are honored in the breach as fiscal gimmicks and creative accounting get really creative.

Budget legerdemain no doubt is related to the rapid growth in state spending in recent years and leap in debt. State and local governments now use debt to fund investments that used to be done on a current budget basis, and some issue debt to cover up routine budget shortfalls. Total state and local bond debt outstanding leaped 93% between 2000 and 2009, from $1.2 trillion to $2.3 trillion.

It obviously takes a lot of gnashing of teeth in the outer darkness for state and local government to flatten, much less cut, their spending after a decade of 6% to 7% annual growth rates. Jumping municipal employment is the main reason for mushrooming spending in earlier years, and cutting often unionized state and local workforces is very difficult. Since the Great Recession started in December 2007 through April, private payroll employment has dropped 6.8%. Still, state and local jobs have declined but by much less, only 1.4%. In July, state and local governments, which employ 9.5 million, cut 48,000 jobs, 102,000 in the past three months and 169,000 so far this year.

Raise Taxes

In reaction to their financial woes, many state and local governments have attempted to raise taxes and fees. The usual suspects include higher sin taxes on tobacco and alcoholic beverages as well as taxes on companies based out of state but doing some business in the state. Attempts to raise taxes and cut spending have proved wholly inadequate to solving state and local government funding problems. And those woes appear chronic, especially if our forecast of slow economic growth and even deflation is valid. Rises in taxable personal and corporate incomes will be muted. Retail sales and taxes on them will be sluggish as consumers persist for the next decade in their saving spree, replacing the borrowing and spending binge of the last decade.

House prices are likely to fall further in the next year or so, under the weight of gigantic excess inventories. Even when those inventories are worked off, house prices will probably rise little, if at all, in a low inflation or deflationary climate. Historically, they've been flat after correcting for overall inflation and the growing size of houses over time. And now that house prices have fallen nationwide for the first time since the 1930s, home buyers no longer see their abodes as also great, leveraged investments, and want smaller, cheaper houses. That will also reduce assessments on property taxes.

Meanwhile, commercial real estate high vacancies and severe financial problems will take years to resolve, keeping prices depressed for some time (Chart 9 ). So, all things considered, local government property taxes are likely to be curtailed for many years. Meanwhile, municipal expenses will be hard to cut. Chronic high unemployment will spawn high Medicaid enrollment and costs. Welfare and unemployment benefit costs will no doubt rise as well.

Deteriorating finances are raising the risks of defaults on state and local obligations and even municipal bankruptcies. Harrisburg, Pennsylvania's capital, will not make a $3.3 million municipal bond payment on $51.5 million debt that's due in two weeks, and earlier this year, city officials discussed bankruptcy. Harrisburg also lacks the funds to continue payments for the $288 million debt on an incinerator project. Earlier, Jefferson County, Ala., home of Birmingham, defaulted on $227 million due on its disastrous sewer upgrades.

Taxpayer Revolt?

People working in the private sector apparently were willing to accept the higher pay, more job security and better retirement benefits for state and local employees in past years. High employment in the private sector and robust economic growth at least held out the hope that their lots would improve tomorrow. But with slow economic growth, limited income expansion and high unemployment now expected by them for years, voter attitudes appear to be changing.

Americans still want basic municipal services like police and fire protection, good schools for their kids, clean streets and garbage collection. But they apparently are deciding they're paying too much for those services; that 34% higher wages for state and local employees compared to private sector workers isn't justified as pay cuts multiply in the private sector and those laid off earn much less if and when they can find another job; that 66% higher benefit costs is over the top, especially as private sector employees are paying more of their health care premiums and seeing their defined benefit pension plans replaced by much more uncertain 401(k)s.

As taxpayers revolt, there are plenty of things that can be done to reduce state and local government costs in an orderly way. Following in the footsteps of bankrupt GM, two-tier wage structures are being established with existing employees continuing at current salary levels, but new hires paid the much lower wages adequate to attract qualified people. And the new people are enrolled in defined contribution pension plans that require employee contributions, not defined benefit plans, while their retirement ages are increased.

Comercio Exterior

Another economic sector that normally isn'ta significant engine of economic recovery but is important at present is exports since the Administration hopes they will double in the next five years and provide meaningful economic growth. The President's zeal to achieve that goal rises as he realizes that massive fiscal stimuli have not revived the economy, and already-huge federal deficits impede further rounds of big spending.

But two significant problems are likely to retard export growth in future years – rising protectionism that clearly impedes foreign trade, and finding foreign countries that will buy this doubling of American exports. It's like the story of the stockbroker who calls his client during May's Flash Crash to tell him that stocks are collapsing. “Sell my entire portfolio!” yells the distressed client. “Sure,” retorts the broker, “but to whom? There are no buyers.”

Foreign Buyers?

As far as foreign buyers of US exports is concerned, the reality is that many of those markets that are showing robust growth and therefore might be able to absorb American products, lands like China and Germany, are major exporters themselves, not importers on balance. Indeed, it's no surprise that the EU's measures of both industry and household confidence shows that export-led Germany has the highest level while the economically weak Club Med net importers are at the bottom of the pile (Chart 10).

Currency changes have only limited effects on export or import prices. The volatility of US import prices is only about one-fourth that of the dollar and a third in the case of American export prices. ¿Por qué? Many products are sold under long-term contracts and immune from most currency fluctuations. Also, importers and exporters resist reflecting the full extent of exchange rate changes in their prices. If the yen is strong against the dollar, importers of Lexus cars shave their profit margins to offset some of the higher prices in dollars to avoid losing market share. Conversely, US exporters to Japan don't pass on in lower yen prices the full extent of the dollar's decline in order to increase their profits.

The “processing trade” in which components are imported, assembled and then re-exported makes up about half of Chinese exports. This reduces the importance of the yuan's exchange rates. Furthermore, even goods with more domestic content aren't completely sensitive to exchange rates in a global world. About 50% of a Chinese manufacturer of children's clothes costs are fabric and around 50% of the fabric's costs are cotton, a globally-traded commodity priced in dollars. So, 25% of the total cost is not affected by yuan fluctuations. Also, another 25% might be in the combined profits of the clothing and the fabric producers, and could be adjusted to offset currency fluctuations – or production moved to lower-cost Vietnam or Bangladesh if the yuan leaped in value.

Double Dip Recession?

We've made our case for very slow US economic growth in the quarters, indeed the years, ahead. The economic rebound due to the inventory cycle is over. Employment and consumer spending remain weak. Housing is too overburdened with excess inventory and the resulting price weakness to revive any time soon. State and local government spending and employment are retreating. And meaningful export gains are unlikely as economic growth abroad slips. Interestingly, the consensus forecast is moving toward our position as growth estimates have been reduced rapidly in recent months. In both April and June, the Wall Street Journal's poll of economists (not including us) expected 3% economic growth in the second half of this year. We wonder if they still do.

Will slow growth deteriorate into another recession, the so-called double dip scenario? Before exploring that question, let's define a double dip. It seems to mean a second period of economic decline following the 2007-2009 nosedive. That could imply that the recession that the accepted authority, the Business Cycle Dating Committee of the nonprofit National Bureau of Economic Research, pinpointed as commencing in December 2007, is still underway. Sure, real GDP grew in the last four quarters, but it's common to have quarters of gain within recessions. In the 11 post-World War II recessions so far, seven, including the 2007- 2009 decline, had at least one quarter of rising real GDP within the recession. In fact, two – the 1960-1961 and the 2001 declines – didn't even have two quarters of consecutive decline. Even in the 1929-1933 economic collapse, GDP rose in six quarters.

Still, to have a four-quarter interlude between the declining phases of the same recession would be unprecedentedly long, assuming that real GDP declines in the current quarter. So another period of economic weakness could be classified as a second recession, much as the 1981-1982 decline, which started in July 1981, only 12 months after the 1980 recession ended.

Slow Growth to Recession

We're on record for a 50% or higher probability of a second dip or another recession, whatever it would be called. The composition of the ECRI Weekly Leading Index remains proprietary, but its growth rate has fallen to the level that in the past was always associated with recessions (Chart 11). Historically, however, recessions have been propelled by shocks. The post- World War II downturns prior to 2001 were caused by Fed tightening in response to threats of economic overheating and the resulting higher inflation. Since then, other shocks have been responsible. The 2001 recession resulted from the 2000 collapse of the dot com bubble augmented by the 9/11 shock. The 2007-2009 downturn resulted from the collapse in subprime residential mortgages that commenced early in 2007.

In the current economic and financial climate, it's highly unlikely that the Fed will tighten credit for years. In fact, the central bank has shifted from planning last spring to withdraw liquidity as the economy grew to renewing quantitative easing and worrying about deflation and subpar growth. It said after its August 10 policy meeting that household spending is being retarded by high unemployment, slow income growth, lower home equity and tight credit conditions while bank lending “has continued to contract.”

Pushing On A String

Conventional monetary ease is now impotent with the federal funds rate close to zero , the money multiplier collapsed and banks sitting on hoards of cash (Chart 12) and over $1 trillion in excess reserves. Sure, large banks report to the Fed that they are easing lending standards for small business, but after the intervening financial crisis, many fewer potential borrowers are deemed creditworthy than in the loose lending days. Furthermore, the small business trade group, the National Federation of Independent Business, reports that 91% of small business owners have had their credit needs met or business is so slow that they don't want to borrow. The Fed is pushing on the proverbial string.

The Fed also worries about deflation, which means that even zero interest rates are positive in real terms, as has been the case for years in deflationary Japan. Also, deflation encourages buyers to wait for still-lower prices in a self-feeding cycle, as is seen in Japan and as we have discussed often in conjunction with our forecast of 2% to 3% per year chronic deflation. In it s post- August 10 meeting statement, the Fed said that “measures of underlying inflation,” already low, “have trended lower” lately and are “likely to be subdued for some time.” James Bullard, President of the Federal Reserve Bank of St. Louis, recently warned of the risks of deflation.

Deflation is a scary phenomenon, but we can't resist noting that the Fed as well as many other forecasters are moving in the direction of our forecast. In contrast, an April 6 Wall Street Journal piece by Peter Eavis stated unequivocally, “No one in their right mind would bet on inflation remaining substantially below 4% for the next 10 years.” Maybe we better have our head examined.

A Baby Step

So, with conventional monetary ease exhausted and further fiscal stimulus on hold because of the already-huge federal deficit, the Fed at its August 10 meeting took a baby step toward more quantitative ease by deciding to buy Treasury bonds to replace the maturing and refinanced Treasury and mortgage-backed securities in the $1.7 trillion hoard it finished buying earlier this year. With low mortgage rates, refinancings were projected to raise the Fed's portfolio contraction from an earlier estimate of $200 billion by the end of 2011 to $340 billion, with another $55 billion coming from retirement of Fannie Mae and Freddie Mac debt held by the Fed.

Furthermore, the Fed is open to further steps if the economy continues to slip. It could buy even more Treasurys or mortgage debt. But would the resulting lower interest rates encourage prospective home buyers who now know that house prices can and do fall? Would another $1 trillion in excess reserves induce more bank lending than the first $1 trillion? The Fed could also promise to keep short-term interest rates low, but it's already said it would for an “extended period.”

It could cut out the 0.25% it pays the banks on their reserves, but would that induce reluctant banks to lend? Finally, the Fed could set an inflation target over its formal 1.5% to 2.0% range. That would be anathema for inflation-wary central bankers, and how could the Fed hit that target in a deflationary world where ample supply exceeds weak demand? Despite all the credit easing actions that Chairman Ben Bernanke, in his famous November 2002 speech, said the Fed could take if the federal funds target reached zero, the credit authorities are about out of ammo – except for dumping money out of helicopters. Remember the “Helicopter Ben” moniker?

Other Shocks

If the Fed is highly unlikely to shock slow growth into recession, what could? This brings us back to the series of seemingly isolated events that are occurring on the deleveraging road, such as further financial woes in Europe, a crisis in commercial real estate, a nosedive in the Chinese economy and a slow motion train wreck in Japan. They are all possibilities – as are other shocks here or abroad that we don't foresee. Maybe the exhausting of federal stimulus will be enough to trigger an economic downturn. Keep your eyes pealed, however, because it won't take much disruption to push the fragile global economy back into decline.

Gary Shilling

John Mauldin…

Houston, My Book, and New York

Tuesday was a very special day. My co-author, Jonathan Tepper of Variant Perception (based in London), and I spent the entire day reading the first complete rough draft of our forthcoming book, The End Game. We went cover to cover, making comments and notes. Of course, I had read the bits and pieces, but not in one sitting. I have to say that I am more than happy. It is a very good first draft, much better than I thought it would be. There is a lot of work ahead, of course, to try and make it a great book, but I can “feel” it. And I think we have managed to capture some very difficult topics and make them simple and maybe even a fun read. We are on target for a January 1 launch.

We make what I feel is an overwhelming case for a period of slow growth in the developed world, with more volatility as the base case. The research we review is very strong. But there are pockets of potential if you step back and take off your localized blinders.

I will be in Houston (along with Gary Shilling, David Rosenberg, Bill King, and Jon Sundt) at the one-day X-Factor Conference on October 1. Muy por el cartel. You can learn more by going to www.streettalklive.com . Then I will be in New York in late October, speaking at the BCA conference and a few media events.

It has been interesting talking with investment types in Europe. They are very curious about the US and what they perceive as our lack of seriousness about the deficit. It appears that Greece has focused their attention. And of course, I get off the plane from Malta yesterday and the headline in the Financial Times says, “Greece rules out possibility of default.” I know that made me feel better. And gave us all a laugh. If you have not, read the piece from Michael Lewis in Vanity Fair on Greece. And then share my amusement about the chances of no default.

It is time to hit the send button. I feel a nap coming on. Jet lag has been worse than normal this trip. And maybe another glass of Prosecco to ease me into slumberland.

Your excited about almost finishing this book analyst,

John Mauldin
John@FrontLineThoughts.com

Copyright 2010 John Mauldin. Todos los derechos reservados

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We visited the Ojai, California high school set of the sassy new comedy Easy A last year and saw pretty actress Emma Stone doing a come hither song and dance in a high school gym wearing a hot, lacy bustier and some sexy black stockings. Now… after finally seeing the film, we get it!

Emma plays Olive, a good student/good girl who agrees to help out a male pal by pretending to hook up with him to build his rep with his buds. It works great but the word spreads that Olive is easy and more. How does she beat the rep and get the guy of her dreams? Check out the film opening Sept. 17th.

We're at the 4 Seasons Hotel in Beverly Hills for a sitdown with witty, funny flash websites fellow red-head Emma who is always friendly and ready to spill all! With her hair up and wearing a dark, flower-patterned dress by McQ and 6 inch (at least) beige platform stiletto s by Valentino, the star looks very Hollywood glam. We like her mauve nail polish and big, gold, filigree disc earrings.

As Emma comes in for our chat about her role and the classic '80′s films she loves, we notice that the petite girl is suddenly at least as tall as we are (5'7″). It's those shoes! She puts down her coffee and models them for us.

Emma: Tallest shoes I've ever worn in my life! Wanna know how tall I really am? This is messed up. Check this out [she takes off the shoes and sinks about a foot. We laugh].

TeenHollywood: Okay so super high heels are in with you. After doing the movie, are you a big fan of bustiers now?

Emma: [laughs] Oh yeah. I'ma real 'supporter' of bustiers. I'ma real supporter of that which supports me. Those were from my own personal collection.

TeenHollywood: You seem to be such a thorough preparer for your work. So, did you read Nathaniel Hawthorne's “The Scarlet Letter”?

Emma: No. It's embarrassing to say but I can not tell a lie. No lo hice. Here's how I'll justify it. Once I got the part, it was go time. We were starting about two weeks after I wrapped Zombieland so, to me, it was so important to have the script completely memorized before we started like you would a play or something so I was so obsessed with reading the script over and over and getting those words down that there were no other books I was reading at the time.

TeenHollywood: It's cool how the book ties in with the movie. Did books effect you a lot as a teen?

Emma: I feel like, when you're a teenager or when you're young, do you remember when you read books or watched movies or listened to music and you made it apply to your life no matter what it was? You're like 'Oh, this book really gets me.' Or 'The Beatles really understand me, specifically' [we laugh]. You made it your own.

TeenHollywood: When you were a teen, were you in the “Let's not and say we did” group of girls?

Emma: Well, I didn't have that traditional high school experience and I was kind of on my own. I was in LA and most of my friends from theater were a bit older than me and in college or whatever. When I was 16 I was friends with some of the people I'm friends with now, and it was a different thing. I talked to my mom more about stuff like that than I did my friends because I wasn't really hanging out with girls my age. So, that [doing it or not] was really more a conversation between my mom and I so you can probably tell where I fell in what category [laughter].

TeenHollywood: Did you do anything when you were a teen to get attention because Olive likes the attention she is getting for a while?

Emma: Only theater and what I do now [laughs]. I was such a ham.. such a ham [she rolls her eyes]. I was awful! Oh my God, always loud. I was _that _kid.

TeenHollywood: With friends or out in public? Would you be at the mall and suddenly just break into song?

Emma: Oh no, no, definitely not that. That would be embarrassing but it was with friends. I was pretty hammy. But, this hopefully, has curbed. When I was a kid I was also bossy and that's a bad combination; a hammy, bossy kid. So, my mom tried to get that out of me pretty quickly.

TeenHollywood: Are you the oldest child?

Emma: Yeah and my brother is just so sweet. He's great and quiet and I've always wanted to be more like him; only speak when you have something really important to say. I'm just like 'wa, wa, wa, wa, wa' and none of it matters.

TeenHollywood: We've talked before and I think you were home schooled. Did you ever have the chance to be the “cool girl”, the “drama girl” or anything?

Emma: Yes, I was home schooled so all of the above. I didn't really have a traditional high school experience. I did go to a high school for a semester of my Freshman year but it wasn't really long enough to be able to gage all that.

TeenHollywood: So then was it difficult to get into this character not having a high school experience?

Emma: Not really because I didn't feel it was a high school movie parse. We're not really dealing with any of the traditional things; graduation or prom or any of the rights of passage of high school. It was more a story about reputation and technology [fast rumor spreading] and judgment and it just happened to be through the eyes of a 17-year-old girl but you don't really see us doing too much 'school-ish' stuff even though we're in the hallways a lot.

TeenHollywood: That's true. But, as a young actor, you go through a similar thing; you're always being scrutinized by the media and your reputation is kind of out there for better or worse. Can you relate to it on that level?

Emma: Probably. There's definitely an element of that. I wouldn't say as much personally because my life is a pretty standard, livable life. There's a lot of other actresses my age that wouldn't be able to say that so I'm lucky but, seeing that and watching that happen, there's probably definitely an element of that.

TeenHollywood: This is really your film. Did you feel extra pressure or go about it like any acting role?

Emma: For me it was less about the size of the role and trying to bring Olive to life in the most accurate way I could to the script. That pressure was what I was thinking about. It wasn't how many lines there were or how many scenes I was in, it was more playing her accurately and making sure that she stayed how she was on the page because she was so fleshed out and fantastic in writing. I don't know if I did her justice but I tried. [we tell her she did].

TeenHollywood: Was the family dog in the film as lovable as he looked?

Emma: Yes. It had halitosis, so incredibly lovable….but smelly!

TeenHollywood: We understand that you went home after your audition for the part and made a webcam video? Was that just on your own?

Emma: No. [Director] Will [Gluck] asked me to do that.

TeenHollywood: It worked great. You're a computer person, right?

Emma: Bigtime, yeah. But I was horrified when he asked me, 'Can you go home after you've been working on this audition and memorizing these things, can you go home and send me a webcam of you?' I was like 'Oh God'. Because it's one thing in the audition room when you're like 'Oh, I wish I hadn't done that but they're making me leave'.

When you go home and you have to record yourself and have so many opportunities to watch it again and beat yourself up and delete it and do it again and again and again before you finally send it in, it feel like you put a stamp on it, 'This is what I think is the best thing I could do'. It was the first monologue of the movie. It was like a minute long.

TeenHollywood: Are you on Facebook and do you tweet?

Emma: No. I love it. I completely understand it. I was into websites when I was a kid, making them and I thought that was what I wanted to do but that was 1999 and 2000 and there weren't blogs yet. It was the age of e-zines; you would sign up and get them in your e-mail. It was just when Flash had come around and I was dabbling in Flash but it's such a complicated program so I kind of faded out.

TeenHollywood: So, you love computers and the internet but no Facebook or tweeting? I'm confused.

Emma: Social networking and blogs are so fascinating to me but I have an addictive personality and the second I get involved in something like that it will consume me. I didn't want to be consumed by Twitter. I didn't want to be a slave to Twitter so I've had to limit myself and have a little phone detox time and take a little hit of IM once in a while.

TeenHollywood: Makes total sense! Your co-star Penn said he hadn't seen most of the John Hughes '80′s movies this film references. Had you?

Emma: [She nods big "yes"]. ¿Hablas en serio? He hadn't seen them? Yo no lo sabía. Had he seen Say Anything ? [NOTE: This was actually a Cameron Crowe movie,.. written and directed by.. not John Hughes]

TeenHollywood: He said no but he knows the [famous] photo [of John Cusack holding up the boom box].

Emma: He'd seen it on a t-shirt? Oh my Lord, that's all I watched when I was a kid. My dad, when it comes to comedy, that was his favorite. The first movie I ever remember watching was The Jerk then Planes, Trains and Automobiles, Animal House, Ferris Bueller's Day Off and The Breakfast Club. Planes, Trains and Automobiles is a John Hughes movie, don't forget. The brilliance of John Hughes was so exciting.

I know Will feels the same way because he's his favorite director. It was so exciting to get to pay tribute and homage to John Hughes because he told his stories in the most empathetic way. That's why they still resonate [when you're] an adult. They might be set in high school but that's a universal truth. He was just absolutely phenomenal.

TeenHollywood: In Easy A , you had the musical number for no reason what-so-ever, like in “Ferris Bueller”. How hard was that to shoot for you?

Emma: It was a little interesting being dressed like that and singing and dancing in front of your peers but I must admit it was actually pretty fun because I grew up doing musical theater so, even though I'm not really a big singer or dancer anymore, it was fun to get to do that. My “hammy' side is coming back in. [She wiggles her shoulders in "sexy" mode] 'Oh yeah! I got a boa. I get to do this'. Oh Señor.

TeenHollywood: What interested you about the character of Olive?

Emma: Everything. I thought she was just layered and realistic and funny flash websites, clever and confused and, the story that she goes through was very interesting to me thematically and her relationship with her parents and her friends and how she takes the matter into her own hands [was great].

Usually a false rumor gets started about you and all you want to do is deny it and she decides to take it to the next level and see what it's like to go for it full-throttle because she knows the truth. And, I like that she was bold enough to know that if it's not hurting anybody, then why does it matter? When it starts to hurt people, that's when things start to spiral out of control but, when it's only her dealing with it, she just has fun with it and is a confident girl that knows herself well enough to know the truth and be comfortable with that.

TeenHollywood: How many takes for the bedroom scene to end all bedroom scenes? [She and her guy friend are jumping around on a bed pretending to be getting it on].

Emma: Oh my God. Demasiados. There were so many angles in that scene. It went on and on but it was one of my favorite scenes when I read the script. I thought it was so funny flash websites. You've got to be a pretty bold girl and guy to go to a party with all those people dressed like that acting like that. She doesn't even drink and she's so “drunk”.

TeenHollywood: Were you really out of breath doing that scene and needed oxygen. It was in the press kit…

Emma: I love that it was in the press kit. Will Gluck is an ass! Yes, I had an asthma attack without having asthma. I've been making an Olive pun about it, saying I have adult “on set” asthma [groans]. I've only had one asthma attack in my life and it was that day. They just showed me the behind-the-scenes thing from the DVD where Will is talking about my asthma attack and he goes 'I don't even think Em's ever even seen the inside of a gym so..' He's such an ass. Of course he's gonna tell that story [she laughs].

TeenHollywood: What's coming up for you?

Emma: There's a movie coming out in April called Crazy Stupid Love and I'm shooting a movie called The Help based on the book, in Mississippi. We're shooting right now. Es increíble. You've got to read the book. It's just fantastic.

TeenHollywood: So you did read that one.

Emma: Yes. I was talking to Viola Davis who plays one of the lead characters. She's so unbelievable saying the other day. 'when we're on the press tour for The Help I think we should say, 'and then halfway through shooting, someone said there's a book and we thought we should read that'. So, if we see you next year we won't be able to pull that fast one on you. But I might try to pull it a couple of times.

TeenHollywood: Do you have scenes with Bryce Dallas [Howard]?

Emma: Ah, sí. She's got flippy bright red hair in the movie but I wear a blonde wig. We're in these crinolines and we all have our Maidenform bras and girdles. it's fantastic. [Southern accent] We're all talkin' like that.

By Niall Kitson

The other day I came across a t-shirt in a shop on Grafton Street that gave me a chuckle. In nice bright writing across the chest it read “Don't Google it, just ask me”.

It's funny flash websites but it also sums up the current state of the internet, specifically the ways we find information and how reliable we consider it. Academics would call what's going on a 'paradigm shift' – a fundamental change in the way we understand something.

Publicidad

But, unlike the fields of science and literature the term was initially applied to, the web is an exponentially expanding phenomenon, equal parts process and discourse. It's the merging of these two occasionally opposed elements that consist of a new understanding of how to navigate the web for content that's relevant to the user but also immersive, engaging and trustworthy.

The main players in the game are also somewhat unlikely bedfellows: Google and its scientific, orderly methodology, and social networks with their subjective noise and narrow personal networks (note: the average number of friends per user on Facebook is 130).

From these apparently opposed perspectives we are expected to make sense of the world? Well…yes. But it's not as awful as it sounds.

To go back to my t-shirt at the start of this piece let's take the first half of the print: “Don't Google it”. Why wouldn't you Google something? Well aside from appearing completely uninterested in engaging another human being in conversation, using a search engine to find information comes with certain risks.

Google's mission statement is all about the organisation of all the information in the world across all media – print, audio, video and whatever comes over the horizon. Since its founding Google has been about process; the sorting and organisation of other people's content based on an algorithm that looks for value not solely on the proliferation of keywords in body text (although that does help) but the links between websites.

If this piece were to appear on a random blog in the ether you probably would not be able to find it. Put it in a highly organised and optimised environment as this website and you can find it in a flash. That's the way Google works at its most efficient – letting the hive mind of the internet (ie the users) decide what's interesting (if not accurate) and giving it prominence by a democratic process of linking.

The problem with this model, which has served the web for so long, is that raw information is not what the web thrives on anymore, it's discourse.

Shaping the conversation

This brings us to the second half of the print: “Just ask me”. When in doubt who better to ask that a trusted source like a friend or newspaper of record? If you have a problem why would you shout your question into a crowded room of faceless strangers when you could ask your friend – who you know is an expert – or read a newspaper whose level of reporting you rate.

If you would rather do that then welcome to the world of social media – where networks are small, exposure to information managed and the people you share it with less likely to be arbitrarily abusive.

Anyone who uses social networks like Twitter and Facebook knows that, as valuable as they are for keeping up with friends and fostering connections, they make excellent walled gardens for spreading news, asking advice and seeking recommendations for just about anything.

In fact it could be argued that the top thing people do online now is not search but engage in dialogue. The challenge for 'old fashioned' search engines like Google and Bing is how to integrate the wisdom of crowds in finding sources of information (process) with conversation from multiple social sources as quickly as questions can be asked or stories broken (conversation).

The development of such a 'real-time web' of instant reportage and analysis is a complex problem but it seems Google has an answer.

Launched this week, Google Instant has been touted as one way to speed up searches based on combinations of letters as they are input into the search bar. Consider it something like what happens when you type in an address and it completes itself based on your browsing history.

It's a simple move designed to cut down on search times. Another component to Google's real-time search formula is 'Trends'. Already familiar to Twitter users (who tag contributions to specific topics with a '#' symbol so developments can be easily followed) the idea here is that information from social networks can be integrated into regular search to give a sense not only of the raw material but its interpretation in real time.

For example if a political or financial story breaks and is reported on this site you can gauge the progress of the conversation around it and its popularity. Consider it the equivalent of posting a link to a story on your Facebook wall and having your friends comment on it…only on a global scale. Tweets, status updates, discussion forums, anything with open access can be aggregated and delivered as part of a concise package of results that changes as soon as new content is published making for a constantly evolving resource.

Such is the new model of search that analysis and bare fact will be treated as complementing instead of competing sources of information. “Don't Google, just ask me” won't be about choosing between processes, just scale.

Niall Kitson is editor of PC Live! and co-host of TechLife

For more on technology, listen to the podcast at www.pcliveradio.ie

Lately, I've been feeling very self-conscious when talking on the phone in public, and it's not because I'm worried about strangers listening in on my private conversations.

Rather, it's because the cellphone I'm using — the recently released Dell Streak — is actually a touch-screen tablet device that makes some of the clunkiest handsets from the late '90s look diminutive by comparison.

The Streak ($300 with a two-year AT&T contract) is a complicated gadget. For a tablet computer, it is fairly small and thin — a fraction the size of Apple's popular iPad. Its face is dominated by a touch screen that is 5 inches diagonally, compared with the iPad's 9.7-inch display.

Yet Dell insists it is also a phone and, as such, it is fairly enormous and uncomfortable to talk on. Beyond that, it comes with an older version of Google's Android software. Overall, it's just too awkward to bear.

The Streak's big size is inescapable. It's a little less than 6 inches long and 3 inches across, so it looked mammoth to me. I felt like a little kid holding her father's smartphone.

It was clear from the start that carrying around the black gadget would be a chore. It fit into the back pockets of my jeans, but protruded noticeably. I was afraid it would fall out or be filched by some tablet-phone-hungry thief. As a result, I had to carry it in a bag or hold it in my hand if I wanted to tote it around, and this latter option quickly got old.

Still, I figured the Streak's size would be great for at least one thing: watching videos. As expected, videos streamed well from such sites as YouTube and funny flash websites or Die, probably helped by the device's 1 GHz processor. Images looked sharp and bright on the screen. They didn't look quite as stellar as they do on Apple's latest iPhone or Samsung's new Galaxy S smartphones, though.

There is plenty of storage space on the Streak for the videos you want to watch (and for photos and songs, too), as it includes a 16-gigabyte microSD memory card. And the device's battery seemed to have no problem getting through a day filled with video and music streaming, Web surfing and chatting.

The screen was also a swell surface for checking out Google Maps and other websites. I liked having extra real estate to look up directions and see pages that contained both photos and text. But using it to instant message my friends was more difficult than on other touch-screen keyboards I've used; despite the Streak's size, I kept hitting the wrong keys.

Using the Streak to make phone calls was a new experience. I felt weird holding it up to my ear, imagining quizzical looks as I walked down the street. The Streak didn't sound bad, but it didn't sound great, either. Calls sounded fuzzy on my end, and in one frustrating exchange the screen kept changing orientation while I was on the phone, which also meant that the physical button that allowed me to turn the sound up and down kept reversing functions.

Beyond the Streak's basic awkwardness, its biggest flaw is that it relies on old software. Despite the inclusion of a swift processor, the Streak is saddled with an older version of the Android operating software — version 1.6 — which means it is missing some of latest features and can't run some applications that call for newer operating software. It also lacks Adobe's Flash Player 10.1 for watching Flash videos.

Dell says the Streak will get what is currently the latest Android software, version 2.2, later this year and will get Flash 10.1, too. I'm stymied by the decision to not even start out the Streak with version 2.1, which is available on a number of current smartphones.

Another odd handicap: Although the Streak has a low-resolution front-facing camera, which could be used for video chatting, it's only enabled for taking photos and videos. Video chat is expected to work when the device gets the Android software update, but for now it feels like quite a tease.

Fortunately, the Streak comes with a fully functional 5-megapixel digital camera on its back. The camera takes sharp images and has a bright flash, and the display functions as perhaps the biggest viewfinder you've ever used. There are plenty of options for adjusting your shots, and I was able to take a bunch of crisp shots. You'll need to hold it steady while snapping, though, because the Streak takes a long time to take a photo after you've pressed its shutter button.

And you'll probably want to use headphones with the Streak, as the quality of its built-in speaker is dismal. When watching a Ted Leo And The Pharmacists music video online, the sound was muddled, even at a low volume. Because the speaker is located on the Streak's back, it gets even harder to hear when you set the gadget down.

Fresher software will surely improve the Streak, but whether you're looking for a phone, a tablet computer or both, the Streak falls short. Performance-wise, that is; in reality, it's anything but.

Motorola has published another full-page ad for one of its Android devices, and takes a poke at the iPhone's inability to access Flash.

Por <- ->
Eric Zeman

InformationWeek
September 3, 2010 02:21 PM

By RACHEL METZ Associated Press
Published: 8/31/2010  2:20 AM
Last Modified: 8/31/2010  7:49 AM

Rather, it's because the cell phone I'm using – the just-released Dell Streak – is actually a touch-screen tablet device that makes some of the clunkiest handsets from the late '90s look diminutive by comparison.

The Streak – $300 with a two-year AT&T contract – is a complicated gadget. For a tablet computer, it's fairly small and thin – a fraction the size of Apple Inc.'s popular iPad. Its face is dominated by a touch screen that is 5 inches diagonally, compared with the iPad's 9.7-inch display.

Yet Dell insists it is also a phone, and as such it is fairly enormous and uncomfortable to talk on. Beyond that, it comes with an older version of Google Inc.'s Android software. Overall, it's just too awkward to bear.

The Streak's enormity is inescapable. It's a little less than 6 inches long and 3 inches across, so it looked mammoth in my petite hands. I felt like a little kid holding her father's smart phone.

It was clear from the start that carrying around the black gadget would be a chore. It fit into the back pockets of my jeans, but protruded noticeably. As a result, I had to carry it in a bag or hold it in my hand if I wanted to tote it around.

Still, I figured the Streak's size would be great for at least one thing: watching videos. As expected, they streamed well

from such sites as YouTube and funny flash websites or Die, probably helped by the device's 1 GHz processor. Images looked sharp and bright on the screen, but they didn't look quite as stellar as they do on Apple's latest iPhone or Samsung's new Galaxy S smart phones.

There is plenty of storage space on the Streak for the videos you want to watch (and for photos and songs, too), as it includes a 16-gigabyte microSD memory card. And the device's battery seemed to have no problem getting through a day filled with video and music streaming, Web surfing and chatting.

The screen was also a swell surface for checking out Google Maps and other websites.

Using the Streak to make phone calls was a new experience. I felt weird holding it up to my ear, imagining quizzical looks as I walked down the street. The Streak didn't sound bad, but it didn't sound great, either.

Beyond the Streak's basic awkwardness, its biggest flaw is that it relies on old software. Despite the inclusion of a swift processor, the Streak is saddled with an older version of the Android operating software – version 1.6 – which means it's missing some of latest features and can't run some applications that call for newer operating software. It also lacks Adobe's Flash Player 10.1 for watching videos.

Dell Inc. says the Streak will get what is currently the latest Android software, version 2.2, later this year and will get Flash 10.1, too.

Another odd handicap: Although the Streak has a low-resolution front-facing camera, which could be used for video chatting, it's only currently enabled for taking photos and videos. Video chat is expected to work when the device gets the Android software update.

Fortunately, the Streak comes with a fully functional 5-megapixel digital camera on its back. The camera takes sharp images and has a bright flash, and the display functions as perhaps the biggest viewfinder you've ever used.

And you'll probably want to use headphones with the Streak, as the quality of its built-in speaker is dismal. And because the speaker is located on the Streak's back, it gets even harder to hear when you set the gadget down. Fresher software will surely improve the Streak, but whether you're looking for a phone, a tablet computer or both, the Streak falls short.

Original Print Headline: Dell Streak is awkward phone, so-so tablet

Rather, it's because the cell phone I'm using — the just-released Dell Streak — is actually a touch-screen tablet device that makes some of the clunkiest handsets from the late '90s look diminutive by comparison.

The Streak ($300 with a two-year AT&T contract) is a complicated gadget. For a tablet computer, it is fairly small and thin — a fraction the size of Apple Inc.'s popular iPad. Its face is dominated by a touch screen that is 5 inches diagonally, compared with the iPad's 9.7-inch display. Yet Dell insists it is also a phone, and as such it is fairly enormous and uncomfortable to talk on. Beyond that, it comes with an older version of Google Inc.'s Android software. Overall, it's just too awkward to bear.

The Streak's enormity is inescapable. It's a little less than 6 inches long and 3 inches across, so it looked mammoth in my petite hands. I felt like a little kid holding her father's smart phone.

It was clear from the start that carrying around the black gadget would be a chore. It fit into the back pockets of my jeans, but protruded noticeably. I was afraid it would fall out or be filched by some tablet-phone-hungry thief. As a result, I had to carry it in a bag or hold it in my hand if I wanted to tote it around, and this latter option quickly got old.

Still, I figured the Streak's size would be great for at least one thing: watching videos. As expected, videos streamed well from such sites as YouTube and funny flash websites or Die, probably helped by the device's 1 GHz processor. Images looked sharp and bright on the screen. They didn't look quite as stellar as they do on Apple's latest iPhone or Samsung's new Galaxy S smart phones, though.

There is plenty of storage space on the Streak for the videos you want to watch (and for photos and songs, too), as it includes a 16-gigabyte microSD memory card. And the device's battery seemed to have no problem getting through a day filled with video and music streaming, Web surfing and chatting.

The screen was also a swell surface for checking out Google Maps and other websites. I liked having extra real estate to look up directions and see pages that contained both photos and text. But using it to instant message my friends was more difficult than on other touch-screen keyboards I've used; despite the Streak's size, I kept hitting the wrong keys.

Using the Streak to make phone calls was a new experience. I felt weird holding it up to my ear, imagining quizzical looks as I walked down the street. The Streak didn't sound bad, but it didn't sound great, either. Calls sounded kind of fuzzy on my end, and in one frustrating exchange the screen kept changing orientation while I was on the phone, which also meant that the physical button that allowed me to turn the sound up and down kept reversing functions.

Beyond the Streak's basic awkwardness, its biggest flaw is that it relies on old software. Despite the inclusion of a swift processor, the Streak is saddled with an older version of the Android operating software — version 1.6 — which means it is missing some of latest features and can't run some applications that call for newer operating software. It also lacks Adobe's Flash Player 10.1 for watching Flash videos.

Dell Inc. says the Streak will get the latest Android software, version 2.2, later this year and will get Flash 10.1, too. I'm stymied by the decision to not even start out the Streak with version 2.1, which is available now on a number of smart phones.

Another odd handicap: Although the Streak has a low-resolution front-facing camera, which could be used for video chatting, it's only enabled for taking photos and videos. Video chat is expected to work when the device gets the Android software update, but for now it feels like quite a tease.

Rather, it's because the cell phone I'm using — the just-released Dell Streak — is actually a touch-screen tablet device that makes some of the clunkiest handsets from the late '90s look diminutive by comparison.

The Streak ($300 with a two-year AT&T contract) is a complicated gadget. For a tablet computer, it is fairly small and thin — a fraction the size of Apple Inc.'s popular iPad. Its face is dominated by a touch screen that is 5 inches diagonally, compared with the iPad's 9.7-inch display. Yet Dell insists it is also a phone, and as such it is fairly enormous and uncomfortable to talk on. Beyond that, it comes with an older version of Google Inc.'s Android software. Overall, it's just too awkward to bear.

The Streak's enormity is inescapable. It's a little less than 6 inches long and 3 inches across, so it looked mammoth in my petite hands. I felt like a little kid holding her father's smart phone.

It was clear from the start that carrying around the black gadget would be a chore. It fit into the back pockets of my jeans, but protruded noticeably. I was afraid it would fall out or be filched by some tablet-phone-hungry thief. As a result, I had to carry it in a bag or hold it in my hand if I wanted to tote it around, and this latter option quickly got old.

Still, I figured the Streak's size would be great for at least one thing: watching videos. As expected, videos streamed well from such sites as YouTube and funny flash websites or Die, probably helped by the device's 1 GHz processor. Images looked sharp and bright on the screen. They didn't look quite as stellar as they do on Apple's latest iPhone or Samsung's new Galaxy S smart phones, though.

There is plenty of storage space on the Streak for the videos you want to watch (and for photos and songs, too), as it includes a 16-gigabyte microSD memory card. And the device's battery seemed to have no problem getting through a day filled with video and music streaming, Web surfing and chatting.

The screen was also a swell surface for checking out Google Maps and other websites. I liked having extra real estate to look up directions and see pages that contained both photos and text. But using it to instant message my friends was more difficult than on other touch-screen keyboards I've used; despite the Streak's size, I kept hitting the wrong keys.

Using the Streak to make phone calls was a new experience. I felt weird holding it up to my ear, imagining quizzical looks as I walked down the street. The Streak didn't sound bad, but it didn't sound great, either. Calls sounded kind of fuzzy on my end, and in one frustrating exchange the screen kept changing orientation while I was on the phone, which also meant that the physical button that allowed me to turn the sound up and down kept reversing functions.

Beyond the Streak's basic awkwardness, its biggest flaw is that it relies on old software. Despite the inclusion of a swift processor, the Streak is saddled with an older version of the Android operating software — version 1.6 — which means it is missing some of latest features and can't run some applications that call for newer operating software. It also lacks Adobe's Flash Player 10.1 for watching Flash videos.

Dell Inc. says the Streak will get the latest Android software, version 2.2, later this year and will get Flash 10.1, too. I'm stymied by the decision to not even start out the Streak with version 2.1, which is available now on a number of smart phones.

Another odd handicap: Although the Streak has a low-resolution front-facing camera, which could be used for video chatting, it's only enabled for taking photos and videos. Video chat is expected to work when the device gets the Android software update, but for now it feels like quite a tease.

By RACHEL METZ AP Technology Writer NEWLINE Lately I've been feeling very self-conscious when talking on the phone in public, and it's not because I'm worried about strangers listening in on my private conversations. NEWLINE Rather, it's because the cell phone I'm using – the just-released Dell Streak – is actually a touch-screen tablet device that makes some of the clunkiest handsets from the late '90s look diminutive by comparison. NEWLINE The Streak ($300 with a two-year AT&T contract) is a complicated gadget. For a tablet computer, it is fairly small and thin – a fraction the size of Apple Inc.'s popular iPad. Its face is dominated by a touch screen that is 5 inches diagonally, compared with the iPad's 9.7-inch display. Yet Dell insists it is also a phone, and as such it is fairly enormous and uncomfortable to talk on. Beyond that, it comes with an older version of Google Inc.'s Android software. Overall, it's just too awkward to bear. NEWLINE The Streak's enormity is inescapable. It's a little less than 6 inches long and 3 inches across, so it looked mammoth in my petite hands. I felt like a little kid holding her father's smart phone. NEWLINE It was clear from the start that carrying around the black gadget would be a chore. It fit into the back pockets of my jeans, but protruded noticeably. I was afraid it would fall out or be filched by some tablet-phone-hungry thief. As a result, I had to carry it in a bag or hold it in my hand if I wanted to tote it around, and this latter option quickly got old. NEWLINE Still, I figured the Streak's size would be great for at least one thing: watching videos. As expected, videos streamed well from such sites as YouTube and funny flash websites or Die, probably helped by the device's 1 GHz processor. Images looked sharp and bright on the screen. They didn't look quite as stellar as they do on Apple's latest iPhone or Samsung's new Galaxy S smart phones, though. NEWLINE There is plenty of storage space on the Streak for the videos you want to watch (and for photos and songs, too), as it includes a 16-gigabyte microSD memory card. And the device's battery seemed to have no problem getting through a day filled with video and music streaming, Web surfing and chatting. NEWLINE The screen was also a swell surface for checking out Google Maps and other websites. I liked having extra real estate to look up directions and see pages that contained both photos and text. But using it to instant message my friends was more difficult than on other touch-screen keyboards I've used; despite the Streak's size, I kept hitting the wrong keys. NEWLINE Using the Streak to make phone calls was a new experience. I felt weird holding it up to my ear, imagining quizzical looks as I walked down the street. The Streak didn't sound bad, but it didn't sound great, either. Calls sounded kind of fuzzy on my end, and in one frustrating exchange the screen kept changing orientation while I was on the phone, which also meant that the physical button that allowed me to turn the sound up and down kept reversing functions. NEWLINE Beyond the Streak's basic awkwardness, its biggest flaw is that it relies on old software. Despite the inclusion of a swift processor, the Streak is saddled with an older version of the Android operating software – version 1.6 – which means it is missing some of latest features and can't run some applications that call for newer operating software. It also lacks Adobe's Flash Player 10.1 for watching Flash videos. NEWLINE Dell Inc. says the Streak will get what is currently the latest Android software, version 2.2, later this year and will get Flash 10.1, too. I'm stymied by decision to not even start out the Streak with version 2.1, which is available on a number of current smart phones. NEWLINE Another odd handicap: Although the Streak has a low-resolution front-facing camera, which could be used for video chatting, it's only currently enabled for taking photos and videos. Video chat is expected to work when the device gets the Android software update, but for now it feels like quite a tease. NEWLINE Fortunately, the Streak comes with fully functional 5-megapixel digital camera on its back. The camera takes sharp images and has a bright flash, and the display functions as perhaps the biggest viewfinder you've ever used. There are plenty of options for adjusting your shots, and I was able to take a bunch of crisp shots. You'll need to hold it steady while snapping, though, because the Streak takes a long time to take a photo after you've pressed its shutter button. NEWLINE And you'll probably want to use headphones with the Streak, as the quality of its built-in speaker is dismal. When watching a Ted Leo And The Pharmacists music video online, the sound was muddled, even at a low volume. Because the speaker is located on the Streak's back, it gets even harder to hear when you set the gadget down. NEWLINE Fresher software will surely improve the Streak, but whether you're looking for a phone, a tablet computer or both, the Streak falls short. Performance-wise, that is; in reality, it's anything but. NEWLINE © 2010 The Associated Press. NEWLINE