Punchinello’s Chronicles

September 14, 2009

Pyramid of Fundamentals, Causes, Effects and Analysis

What’s the difference between reality and a hallucination? If you were living an illusion that was almost exactly the same as reality, what determines the “almost?” How do you ultimately know what’s real and what’s not real? The basic answer is consistency! Reality is entirely consistent from event to event. When we discover or notice an inconsistency, we use science to figure out whether it’s an exception or whether we need to change our fundamental ideas about reality.

Consistency means that something is of the same class, nature or characteristics as that which came prior. When we talk about cause and effect, we mean that given the same cause, we should see pretty much the same effects. Those effects are consistent with our observations of what results from previous and similar causes.

Suppose someone tells you they know how to play the piano very well. They claim they’re skilled and can play very well. You ask them to play Mary Had a Little Lamb and they can’t play it. What does that demonstrate? It shows you that they likely are making a false claim. Anyone who can play the piano, ought to also know the fundamentals. And with that knowledge of fundamentals, they should be able to play a simple nursery rhyme.

Now suppose someone tells you they’re making a fortune in the water business. They’re selling water like crazy, making millions of dollars. You might ask to see a bank account, but they might tell you they’re re-investing their profits to grow the business. However; you could ask them to show you how they deliver that water. If there isn’t any delivery system, then how can there be a business?

The fundamentals of reality are the foundation upon which our everyday lives rest. When you get up in the morning to go to work, you rely on the fundamental ideas of the sun producing light. You rely on roads, and you assume that the address of your place of work is consistent with what it was yesterday and previously. You make analytic assumptions about traffic, knowing that today is very similar to yesterday. If there’s snow, then traffic will be consistent with days of snow in the past.

So too, businesses make analytic predictions based on fundamentals of reality. In Western civilization, the Christmas holiday brings with it increased shopping. To have shoppers, stores must have product. Without product, it doesn’t matter who wants to buy something. They can’t buy what isn’t in the stores. An aspect of that fundamental is that the money symbolizing business is just that — a symbol. The money itself is NOT the same thing as the product.

The Shipping and Transportation Industry Ghost Fleet

The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination – and is why your Christmas stocking may be on the light side this year.

(Full Story…)

‘So far the shipyards are continuing to work, but the problems will start to emerge next year and certainly in 2011, because that is when the current orders will have been delivered. There have hardly been any new orders in the past year. In 2011, the shipyards will simply run out of ships to build.’

Christopher Palsson, a senior consultant at London-based Lloyd’s Register-Fairplay Research, believes the situation will worsen before it gets better.

‘Some ships will be sold for demolition but the net balance will be even further pressure on the freight rates and the market itself. A lot of ship owners and operators are going to find themselves in a very difficult situation.’

The current downturn is the worst in living memory and more severe even than the slump of the early Eighties, Palsson believes.

‘Back then the majority of the crash was for tankers carrying crude oil. Today we have almost every aspect of shipping affected – bulk carriers, tankers, container carriers… the lot.

We can talk about “green shoots,” and headlines may tell us that the world-wide economic recession is “over,” but what are the underlying fundamentals? If the world is getting back to business, then wouldn’t we see ships sailing, docks crowded, airlines packed to capacity? Wouldn’t we see stores opening, people buying, and lots of happy faces?

How can there be such a massive collapse in the world’s shipping industry, while at the same time politicians tell us that the economy is doing brilliantly? Could Senator Joe Wilson be right, that someone is “lying?”

Business for bulk carriers has picked up slightly in recent months, largely because of China’s rediscovered appetite for raw materials such as iron ore, says Huxley. But this is a small part of international trade, and the prospects for the container ships remain bleak.

Some experts believe the ratio of container ships sitting idle could rise to 25 per cent within two years in an extraordinary downturn that shipping giant Maersk has called a ‘crisis of historic dimensions’. Last month the company reported its first half-year loss in its 105-year history. (Emphasis mine.)

Small businesses are failing by the thousands. They can’t get loans from anyone, regardless of some fantasy about “stimulus” money. Foreclosures are rising, cars aren’t selling, and we’re told that the recession is over. But look at the fundamental concept of transporting goods from one location to another. If nobody is moving anything, then it’s irrelevant what the newspapers tell us.

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