Jim Williams's Inference Blog

In Loving Memory

2010-05-21T20:24:00.000-07:00

James S. Williams passed peacefully on the morning of May 21, 2010.

Jim was a resident of Longmeadow, MA and a proud graduate of Deerfield Academy and Amherst College. In his college years, he was a member of the Psi Upsilon Fraternity, enjoyed playing varsity soccer and lacrosse, and was captain of the golf team for four years.

Jim was an English instructor and head football coach at Suffield Academy in Suffield CT from 1953-‘60. In 1958, he won the Golf Club Championship at Longmeadow Country Club. Jim founded the J.B. Williams Foundation with the purpose of putting discovery into education. In 1965, Jim founded the Williams Inference Service. Today, the organization has more than 70 clients in North America, Europe, Asia, and Australia. In 1990, Jim was featured in the Barron’s news publication as a “One-Man Think Tank”.

Jim was the Sherlock Holmes of his time, sharing his wisdom and knowledge with so many. Jim leaves a daughter, Lee Williams, and son, James B. Williams, daughter in law Judy Williams, along with three granddaughters, Emily and Rachel Williams and Krysta Voskowsky, as well as many beloved friends and colleagues. Special thanks to Bonnie Rockwell, a long time associate and loyal friend.

Memorial Services will be held at the Heritage Funeral Home in Suffield CT on Thursday May 27th at 11am with a reception immediately following at the Suffield Tavern up the street. Contributions, in lieu of flowers, may be sent to the Suffield Academy in memory of James S. Williams.

The Current Hamburger

2010-05-11T15:00:00.000-07:00

John and I were very impressed with the current hamburger. John said that JSW still has quality work. I think that this hamburger will be well accepted.

"All in the valley of Death/ Rode the six hundred..."

2010-05-05T04:49:00.000-07:00

I've spent the last the three weeks in the hospital. During that time I noticed that the hospital had a very strict regime. The substitute nurse got her rules from the head nurse. The head nurse got her rules from her supervisor. If somebody higher up changes the rules, the nurses sometimes do not comply.

It reminds me of the poem “The Charge of the Light Brigade” (Alfred Lord Tennyson). Bad leadership. Those soldiers took orders indiscriminately.

I think the hospital regime is quite dangerous.

Sherlock Holmes

2010-04-12T14:03:00.000-07:00

People often ask me, "What do you read to learn about anomalies?" I am writing a book on this subject, but it is not published yet. Therefore, the answer is Sherlock Holmes.

Holmes is the master at finding anomalies. In the story, "The Adventures of Silver Blaze" Holmes spots a series of anomalies. During the crime investigation, the police were looking for horse-thieves as suspects because a famous horse was missing and the trainer had been murdered. Holmes noticed right away that the police were wrong. The dog in the stable did not bark when the horse was removed, therefore he reasoned that the dog knew the thief. It was an inside job.

In addition, many of the sheep on this particular farm were lame. When the murdered trainer was discovered (which is the crime of the story), he had a knife in his pocket. This was no ordinary knife; it was a surgeon's scalpel. Holmes reasoned that the trainer was using this knife to make the sheep lame and was planning to do the same to this famous horse.

Holmes concluded that the horse killed his trainer in self-defense. Holmes added with a smile, that the horse would not go to jail.

We Need a Hero

2010-04-08T11:00:00.000-07:00

Forget gold, Chinese real estate, and Greek debt derivatives. A new champion in the asset bubble wars has emerged: Superman Comics.

A sale of the first action comic issue from 1938 drew a winning bid of $1 million according to an auction site called ComicConnect.com. That is three times what a copy of the premier comic cost just last year.

Captain Chesley Sullenberger, who landed his plane in the Hudson River on January 15, 2010 said in an interview that he was just doing his job, but America needs heroes. So, he has become a hero.

Hard times produce heroes like Franklin Roosevelt and Hitler. Today, America wants and gets heroes.

To See

2010-03-25T10:47:00.000-07:00

Pat Meredith worked at a Canadian bank and they were customers of the Williams Inference Service for many years. She left the bank to get a PHD which she now has. Her thesis is pictured above.

In the introduction she says, “Two people have had a huge impact on my life and on this dissertation. The first is Michael C. Jenson... The second is Jim Williams of Williams Inference Service.

"Jim Williams has taught me how to see. Over the past fifteen years, through his quarterly presentations, Jim has helped me to spot the red five of spades and the dog that did not bark during the crime. He has consistently made me aware of anomalies in my life, my investment portfolio and the industries and companies I consult with. His inferences continue to amaze me, for like Sherlock Holmes he constantly solves the crime by pondering and studying the surprises and inconsistencies."

Pat applied our material to the bank. We do not apply anything. We see change. If a company wants to apply the change that is seen, they need help in the application process. Pat Meredith is ideal for such help. Her phone number is (416) 813-2321.

They Are Not Here

2010-03-25T10:00:00.000-07:00

Several files have alluded to the time spent on the Internet by young people, specifically having long distance friends. This has led to a mental problem. Much of the younger generation cannot decipher body language. Us old guys are good at noticing body language. How a message is delivered is just as important as the message itself.

This online obsession is well illustrated by a South Korean couple who were addicted to the Internet. They let their three-month-old baby starve to death while raising a virtual daughter online. The police said, "They indulged themselves online to escape reality."

Body language and looking a friend in the eye are parts of reality. Unfortunately, many young people are concerned with what's happening somewhere else, instead of in their own back yard.

Sorry Willie

2010-03-18T12:24:00.001-07:00

Willie Sutton in yesteryear was a criminal that held up banks. When asked why, he said, "Because that's where the money is."

In 2009 there were 46 drug thefts that were valued at a total of $184 million, about triple the amount of the previous year.

On Tuesday March 16, 2010 thieves stole $75 million in prescription drugs from a warehouse in Enfield CT owned by Eli Lilly & Co. They restricted their thefts to Prozac, Zyprexa, and Cymbalta. To accomplish this feat, they scaled a wall, cut a hole in the roof, disabled the security system, then slowly took a large quantity of anti-psychotic and ant-depressant prescription drugs. It was a well planned, sophisticated crime.

A good criminal these days needs a lot of data, thought, and careful preparation, and often go after non-banks. Sorry Willie.

Tight Coupling

2010-03-11T11:23:00.000-08:00

I learned a new word, and therefore a new idea, from the book A Demon of Our Own Design by Richard Bookstaber. Tight coupling refers to the series of events that follow each other in rapid succession similar to the production line. The book states that most catastrophes involve complexity and tight coupling.

Of the many examples that the author gives, two of them I use for examples of complexity: the Three Mile Island atomic problem and the Challenger space ship explosion. To launch a missile, there are many events that follow each other in succession. With tight coupling there is no time to think about other problems, such as faulty o-rings.

The recent problems at Toyota are a good example of tight coupling and ignoring other problems.

Bookstaber wrote this book in 2007. The market problem hit us in 2008. He was correct. The problem now is that we still have complexity, like the usage of derivatives, and tight coupling, like the market players that buy and sell in less than a minute. This market tight coupling and complexity could produce another catastrophe.

Green Energy

2010-03-04T11:22:00.000-08:00

Bloom's Fuel Cells (Above)

Over the years we have written about solar, wind, and nuclear energy. Wind and solar energy only make up 7% of our electricity supply, but both are growing. Recently, the Williams Inference Service showed interest in improving the grid because all these forms of power require a grid to move it.

We were wrong. On February 24, 2010, the New York Times reported a start-up, Bloom Energy Servers, has created electricity bypassing the grid. Google has used this particular form of energy for 6 years, and Wal-Mart, Bank of America, and Home Depot are also using it. Foreign countries without a grid, basically wireless, must like this method.

Investing in new green electricity suppliers requires patience. The winner is yet unknown.

"The Jump Point"

2010-02-25T11:26:00.000-08:00

Our recent file on linkage explosion is based on a book called "The Jump Point" by Tom Hayes. I recommend this book.

According to "The Jump Point" about 75,000 new people are connecting every day. By the year 2011, Hayes believes that an additional 1 billion people will be linked. This is an amazing expected change from the amount of people that are now connected. It is a non-linear explosion.

Ford Motor Company seems to have gotten the message. A guy named Scott Monty is the appointed Chief of Social Networking for the company. It is important to note that the CEO has an office right next to Monty's. This neighboring office is not occupied by the Projection Chief or an Advertising Head, but by the Chief of Social Networking. I think Ford Motor Company has found the answer to the new world of social networking and reaching their customers.

If businesses do not accept the social networking concept, they could be in trouble. More and more people are obtaining direction as consumers from acquaintances and friends, rather than direct advertising. Utilizing social networking websites is the most efficient way for companies to reach their target markets.

Complexity Explosion

2010-02-18T11:15:00.000-08:00

A long time ago, I first wrote about complexity with the Three Mile Island disaster. Later, the Williams Inference Service mentioned a complexity connected with the missile blow-up due to o-ring failure.

Recently there was an article in Barrons about portfolio insurance complexity. The article goes on to say that the same complexity involves derivatives. The Williams Inference Service saw the financial collapse coming. But we failed to mention complexity.

The financial blow-up was similar to the missile blow-up due to too much information. It's not so easy to deal with the derivative complexity. Derivatives are constantly growing, and are still complex and should be feared.

Historical Look at Debt

2010-01-28T11:17:00.000-08:00

Reinhart and Rogoff wrote a book called "This Time Is Different". They have cataloged in this book over 250 natural crises in 66 countries over a period of 800 years. A common denominator in all of these crises is the presence of too much debt.

They suggest that the longer we put off the pain, the worse the total pain will be. And of course, the key for us is the process of deleveraging.

Debt runs in all aspects of our society. However, gevernment debt is unusually large.

-Jim

Defense

2010-01-14T11:47:00.000-08:00

"I have stated that it is defense more than anything else that wins championships."
-Vince Lombardi

Malcomb Gladwell wrote an article entitled "The Sure Thing" in a recent New Yorker issue. (January 18, 2010) In the article, two French scholars Michel Vilette and Catherine Vuillermot set out to discover what exactly successful entrepreneurs have in common. In their findings, they discovered that entrepreneurs hedged their bets and minimized their chances of failure. The truly successful businessmen in Vilette's and Vuillermot's town are anything but risk takers.

Gladwell goes on to illustrate this by referring to Ted Turner. He says, "Once you get past the more flamboyant aspects of Turner's personal life, there is little evidence that he had any real appetite for risk at all."

Being an ex-football coach, I agree with the article and Lombardi when he says that one wins championships with good defense.

-Jim

Text Messaging and Your Eyes

2010-01-06T11:15:00.000-08:00

Two years ago we had a file on text messaging, where the people of London were texting and running into lampposts while walking, so the city of London had to put padding around them.

One parent got a surprise bill of $17,000 in a month due to her daughter’s text messaging. At the time we suggested phone companies begin capitalizing on the sales of text messaging packages.

But in our observation, we missed a very important item: the rate of near sightedness in the U.S. increased 66% since the 1970’s. The prevalence of myopia rose 41% in a survey from 1999 to 2004. If untreated, myopia can lead to blindness. According to the National Eye Institute, the alleged cause is less outdoor time and more close-up viewing, such as text messaging.

Johnson and Johnson generated 2.5 billion in 2009 from vision products, more than double the sales of 2002.

(This bit of intelligence was sent to us by Greg Price on December 20^th 2009. We have a large group of people who send us anomalies or follow-ups to our files and that is great help. Thanks, Greg.)

I hope you take care of your myopia. And don’t walk into any lampposts.

-Jim

An untrustworthy friend is an oxymoron.

2009-12-23T11:47:00.000-08:00

Recently I received an e-mail from a stranger that wanted to be my friend. He probably didn't know I'm an old guy, and I don't have strangers as friends.

Last year, we had a file on Generation Y in which we mentioned the people of this generation have 100 friends, many of which are not trustworthy. Our inference was that this group generally has trouble with trust.

Friendship has recently taken on a new meaning. The face-to-face friendship experience now competes with a new definition of a "friend"who is technically just a casual internet acquaintance; one that is simply another name on a long internet-contacts list.

The New Oxford American Dictionary selected "unfriend" as the word of the year. The word reflects the impact of social networking on modern vocabulary. Young people now know how to attack the problem of an untrustworthy friend: use the delete key.

-Jim

Brazil's Sugar

2009-12-09T11:43:00.000-08:00

Earlier this year, there was a clipping in our work of Hershey's booming chocolate sales. This was good news for Hershey, but also for sugar and cocoa. We particularly like cocoa because it takes many years to grow a cocoa plant. Thus an increase in demand is not met by an increased supply.

One of our readers, Angella Arguelles, recently sent me an article about the latest entrepreneurial fantasy: cupcakes. Stand-alone cupcake shops have been spreading. According to Adam Borden, of a Baltimore based capital firm, "cupcake stores are taking the place of ice cream stores."

Since the start of the year, the price of sugar futures has almost doubled. Chocolate bars and cupcakes were not alone in the spectacular price rise of sugar. India's sugar production fell by almost half, turning the country from the second biggest producer to the largest importer of sugar.

Not only is sugar in demand, but so it ethanol, which uses Brazilian sugar. Ethanol has been growing at 17% a year. All of this has been a bonanza for for Brazil's sugar companies and this double barreled demand for sugar has helped Brazil.

-Jim

(Photo above: Consolidating the crop: Brazilian Sugar from The Economist December 5, 2009)

Dubai in Debt. Bingo.

2009-12-02T10:16:00.001-08:00

Many years ago, I drove from Longmeadow to Springfield. Longmeadow is much higher in elevation than Springfield, and as you go down the highway towards Springfield, the whole city comes into view. At that time, I noticed a new building that towered above everything else. This build had been built and owned by Monarch Insurance.

I shorted the stock in the mid 40's but the price is unimportant. I covered with a 50% gain in the low 20's when a local broker told me that the directors of Monarch were buying heavily.

Wrong.

I should have shorted more. The company went bankrupt and some of its long-term employees had all their money in the stock. They also went out.

In the recent quarterly review, the Williams Inference Service had a picture of tall buildings and Dubai had the tallest. Last week, I read that Dubai has encountered trouble in paying its debt.

Bingo.

-Jim
Above Right: Chart from "The Property Report", Wall Street Journal August 19, 2009

Bottom Left: Dubai's Tallest Building

Web of Debt

2009-11-25T11:19:00.000-08:00

John Trudgian recently gave me the book The Web of Debt by Ellen Hodgson Brown, J.D. and it raises a question.

Is debt money?

The answer is yes. Banks create debt. They lend you money for a car or house and you spend it. They put the loan in their books as an asset.
In other words, they created money.

On your books, it is a liability. If you go bankrupt, the bank must write off that asset. With many people going bankrupt many banks lost their assets and in turn, were insolvent.

The government does not create money; the Federal Reserve does. (The same way banks do by issue loans.)
In fact, the Federal Reserve is not federal, it is a private corporation owned by a few big banks.

As banks (including the Federal Reserve) create debt, they create lots more money.

-Jim

Brazil

2009-11-18T11:56:00.000-08:00

Over a year ago the Williams Inference service had a file about food. In that file China's shortage of food was mentioned and one of the inferences was Brazil. Brazil came to China's aid and sent food.

This quarter, the news on Brazil kept coming in a positive fashion and I made a new file aptly called "Brazil".

Yesterday, I received "The Economist" in the mail. This week's issue features Brazil which means we are probably late. Buying into Brazil a year ago made sense. Usually we are early but not in this case.

-Jim