Droughtonomics – California Exodus II: 4-Million?

While the S&P is off into record setting territory and our Peoplenomics trading model is showing its stuff nicely, we need to consider the impacts of a left-field event that may lead to a California Exodus:  The quickly evolving Drought.

imageAs you can see in the latest report out this week, the map has a big ugly spot that’s located right over the Central Valley and that’s where a good chunk of the nation’s fresh (and frozen) veggies and fruits come from.

According to the data released with the report, and I don’t think there’s an issue sharing this because it is BIG news and of public concern:

“There seems to be no relief in sight as the calendar flips over to 2014. Persistent ridging has kept precipitation at bay for many, leading to record-setting dryness for many locations in California and Oregon; this has become more of an issue of late in Washington as well.

Even though California sees no changes on this week’s map, more deterioration could be coming soon given the weather pattern, or lack thereof, and concern for water supply, fire and other impacts grows each week the rains and snows don’t come. In fact, many locations in California reported the calendar year 2013 as being the driest on record, smashing previous record dry years (including 1976).

One such example is Shasta Dam, where only 16.89 inches was reported in 2013, more than 11 inches below the previous record low of 27.99 inches in 1976. Shasta’s calendar year average is 62.72 inches. Upper elevation Sierra station snowpack and snow water equivalent (SWE) values in California have been abysmal for the Water Year (since October 1) as well. The historic low precipitation totals haven’t just been confined to the upper elevations either as dozens of locations have shattered their previous record low calendar year totals.

In the Pacific Northwest, D1 has pushed northward across western Oregon and into western Washington up to the Canadian border this week. Both snow pack and snow water equivalent SWE levels are very low as we move deeper into the wet season. In Idaho, D0 now covers the entire Panhandle and has pushed into more of extreme northwestern Montana. The D3 pockets in southern Idaho have been combined and D3 now stretches across most of the southern part of the state.

The Southwest has also been dry for the Water Year as the monsoon season is now out of the rear view mirror as we head into the second half of the wet winter season. The resultant lack of precipitation means D0-D2 has expanded slightly in southern and central Arizona as well as in northwestern Arizona, where D2 has pressed southward out of extreme southern Nevada. Southern New Mexico also sees a slight expansion of D1 this week.”

Looking at the weather maps, we see there is a high pressure area which seems to have taken up semi-permanent residence off the central coast of California.  As a result of that, the high in San Francisco yesterday was 73, which smashed the old record of 69 which had been set in 1969.

Worse:  Year to date precip in the City by the Bay is a lousy one one-hundredth of an inch.  In a “normal” year, the lawns would be green and there’d be filling of reservoirs.   

The changing weather pattern covered in more details in last week’s Peoplenomics report, brings two very stark possibilities. 

First, starting in mid-summer, when new crops are usually coming in from the Central Valley, food prices are not likely to come down.  That will push inflation as prices for food go rippling forth.

Secondly, since this is the second super-dry January in a row, someone besides you and me is going to figure that it’s time to get the hell out of the overbuilt Southland while there is still a real estate market to sell into.

No, I’m not clear on where that threshold will be.  I haven’t been able to locate price records with sufficient detail of what happened in the Great Depression as farmers scattered in the blowing dust.

But one thing comes clear to the student of long wave economics:  Drought is often times one of the major drivers of massive depressions.  And while the stock market seems increasingly likely to “party like it’s 1929” across the summer, the possible desertification of California could have the same kind of knock-on impacts on the already damaged real estate markets that drought had on the Dust Bowl farmers of the last Depression.

In the Dirty Thirties displaced about 500,000 Americans.  That was at a time when the total population was about 127.5-million (1935).  In other words, about 4/10th’s of one percent of the population. 

Translating this to present day levels, that would be equaled with a population displacement of 1,268,000 people.

However, we need to really focus not on the national percentages; only the populations of Texas and Oklahoma in 1935.  6.12 million for Texas although it was less than 2-million in northern Texas. Oklahoma peaked at 2.4 million in the early 1930’s.

Thus a more reasoned look at the Dust Bowl population (pre-1930’s droughts) would likely be around 5-million.  

So when we match that up with the 500,000 displaced, we come up with a displacement on the order of 10% or so.

And now we get to the really sobering part (and thanks to Peoplenomics subscribers for providing the resource that enables us to do this kind of research) is that if the California drought goes on to develop to Dust Bowl proportions, a 10% displacement rate applied to California is what?

About 4-million migrants. 

Or to put it in more graphical terms:  What would happen if the populations of BOTH Chicago and San Antonio all moved?  If the water picture continues to deteriorate, that project could conceivably come to pass.  Ask the people West Virginia how long a population can get along without “blue gold.”

Sobering stuff, isn’t it?  But, for this morning, the market run continues and we plan to enjoy it while we can.  Not that we’re in denial; it’s just that we may be coming into the spring of ‘29.

The new CPI Report after this…

Is 3/10th’s Higher CPI Date Tame Inflation?

While we eye the weather forecasts for the Golden State, soon to be relabeled the Suffering State, it’s nice to read this morning’s report on consumer prices, which for the moment are well in check:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today.

Over the last 12 months, the all items index increased 1.5 percent before seasonal adjustment. Advances in energy and shelter indexes were major factors in the increase in the seasonally adjusted all items index. The gasoline index rose 3.1 percent, and the fuel oil and electricity indexes also increased, resulting in a 2.1 percent increase in the energy index.

The shelter index rose 0.2 percent in December. The indexes for apparel, tobacco, and personal care increased as well. These increases more than offset declines in the indexes for airline fares, for recreation, for household furnishings and operations, and for used cars and trucks, resulting in the index for all items less food and energy rising 0.1 percent.

The food index rose slightly in December, increasing 0.1 percent. The food at home index was unchanged for the third time in four months, as a sharp decline in the fruits and vegetables index offset other increases. The food index has not posted a monthly increase larger than 0.1 percent since June.

The all items index increased 1.5 percent over the last 12 months; this is an increase over the October and November 12-month changes of 1.0 percent and 1.2 percent, respectively. The index for all items less food and energy has risen 1.7 percent over the last 12 months, the same figure as for the 12-month changes ending September, October, and November.

These figures may, or may not, correspond to anything approaching reality is your shopping and spending experience.  It sure as hell doesn’t correspond to anything in ours.

The market, which was down 24 on the Dow earlier is now pointing….

Holding the Bag/Okinawa Watch

The headline could have been written almost any year in recent memory, but that doesn’t detract from it’s significance:  “China’s [US] Treasury holdings climb to record in government data” reports Gloomberg.

I don’t expect you to much give a damn, after all, you’re not a Vancouver real estate developer, right?  BUT pay close attention because China is likely to beat us up with out own [bad][ debt by neutering our response to their play for the Senkaku Islands which Japan claims to own.

The Runaway Presidency

As much as my liberal pals are going to hate me pointing this out, when the president says things like “I’ll act with or without Congress” it’s time to begin thinking that a populist dictator is in place in Washington.

Of course, the Boehner FB page when you take a look at it here, isn’t exactly the high point of subtle statesmanship.

Remind me to call the water department in DC today.  I want to ask them if there’s been a major testosterone spill into the water system back there.

Runaway Surveillance

Senator Franken is demanding answers to the CES remark by a Ford exec that the company could link to GPS data to see who’s speeding.  Of course, the exec back-tracked on it, but Franken seems quite concerned, as reported over here.

We note that while the report make “good copy” for the transfictional press, not a single person has really had their nuts roasted and been canned by NSA,,nor has there been serious review of the FISA Court. 

All show and no go” seem s to be the old-fartism that fits well about here.

Likewise, I am not expecting any significant change in the surveillance state when Fearless Leader makes his “new announcement” tomorrow about overhauling the security apparatchik.  They wouldn’t announce the overhaul unless the successor plan was already in place, signed, sealed, and delivered.

That how political economy works.

National Self Delusion Dept.

Does anyone really care about the Oscar nominations?  Besides an ego/hype-fest, what’s the effing point? 

A check of Google Trends shows a predictable annual “heartbeat” of the hype over here.

You don’t have to be a cardiologist to notice the missing QRS complex…but come to think of it, I guess it’s an annual story to keep the brain dead on media support.

Maybe America needs more self-medication to treat this condition, or have we overdosed already?  

It’s all about money, isn’t it?  Everywhere we look: Healthcare, Hollywood, and Washington…someone ought to make a movie about that.

Comments are closed.