866. Capitalist Crisis: Cult Figures

The following "Investment Outlook" is by William H. Gross, the Co-Managing Director of PIMCO, an investment firm. Gross manages the highly regarded $200 billion plus PIMCO Bond Fund.  Although his analysis is limited to finance and investment, he does not shy away from the serious crisis capitalism is faced with worldwide.  I think Gross penetrate the crisis better than Keynesian economists who seem to think that they can do away with it through inflating the economy.  Marxist economists who typically do not address problems of finance and investment may find Gorss' analysis dovetailing their own theories and empirical research on the crisis of the "real" economy.

--KN

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By William H. Gross, PIMCO, August 2012

William H. Gross, Credit: Bloomberg News

The cult of equity is dying. Like a once bright green aspen turning to subtle shades of yellow then red in the Colorado fall, investors’ impressions of “stocks for the long run” or any run have mellowed as well. I “tweeted” last month that the souring attitude might be a generational thing: “Boomers can’t take risk. Gen X and Y believe in Facebook but not its stock. Gen Z has no money.” True enough, but my tweetering 95-character message still didn’t answer the question as to where the love or the aspen-like green went, and why it seemed to disappear so quickly. Several generations were weaned and in fact grew wealthier believing that pieces of paper representing “shares” of future profits were something more than a conditional IOU that came with risk. Hadn’t history confirmed it? Jeremy Siegel’s rather ill-timed book affirming the equity cult, published in the late 1990s, allowed for brief cyclical bear markets, but showered scorn on any heretic willing to question the inevitability of a decade-long period of upside stock market performance compared to the alternatives. Now in 2012, however, an investor can periodically compare the return of stocks for the past 10, 20 and 30 years, and find that long-term Treasury bonds have been the higher returning and obviously “safer” investment than a diversified portfolio of equities. In turn it would show that higher risk is usually, but not always, rewarded with excess return.



Got Stocks?


Chart 1 displays a rather different storyline, one which overwhelmingly favors stocks over a century’s time – truly the long run. This long-term history of inflation adjusted returns from stocks shows a persistent but recently fading 6.6% real return (known as the Siegel constant) since 1912 that Generations X and Y perhaps should study more closely. Had they been alive in 1912 and lived to the ripe old age of 100, they would have turned what on the graph appears to be a $1 investment into more than $500 (inflation adjusted) over the interim. No wonder today’s Boomers became Siegel disciples. Letting money do the hard work instead of working hard for the money was an historical inevitability it seemed.

 

Yet the 6.6% real return belied a commonsensical flaw much like that of a chain letter or yes – a Ponzi scheme. If wealth or real GDP was only being created at an annual rate of 3.5% over the same period of time, then somehow stockholders must be skimming 3% off the top each and every year. If an economy’s GDP could only provide 3.5% more goods and services per year, then how could one segment (stockholders) so consistently profit at the expense of the others (lenders, laborers and government)? The commonsensical “illogic” of such an arrangement when carried forward another century to 2112 seems obvious as well. If stocks continue to appreciate at a 3% higher rate than the economy itself, then stockholders will command not only a disproportionate share of wealth but nearly all of the money in the world! Owners of “shares” using the rather simple “rule of 72” would double their advantage every 24 years and in another century’s time would have 16 times as much as the sceptics who decided to skip class and play hooky from the stock market.

Cult followers, despite this logic, still have the argument of history on their side and it deserves an explanation. Has the past 100-year experience shown in Chart 1 really been comparable to a chain letter which eventually exhausts its momentum due to a lack of willing players? In part, but not entirely. Common sense would argue that appropriately priced stocks should return more than bonds. Their dividends are variable, their cash flows less certain and therefore an equity risk premium should exist which compensates stockholders for their junior position in the capital structure. Companies typically borrow money at less than their return on equity and therefore compound their return at the expense of lenders. If GDP and wealth grew at 3.5% per year then it seems only reasonable that the bondholder should have gotten a little bit less and the stockholder something more than that. Long-term historical returns for Treasury bill and government/corporate bondholders validate that logic, and it seems sensible to assume that same relationship for the next 100 years. “Stocks for the really long run” would have been a better Siegel book title.

 

Yet despite the past 30-year history of stock and bond returns that belie the really long term, it is not the future win/place perfecta order of finish that I quarrel with, but its 6.6% “constant” real return assumption and the huge historical advantage that stocks presumably command. Chart 2 points out one of the additional reasons why equities have done so well compared to GNP/wealth creation. Economists will confirm that not only the return differentials within capital itself (bonds versus stocks to keep it simple) but the division of GDP between capital, labor and government can significantly advantage one sector versus the other. Chart 2 confirms that real wage gains for labor have been declining as a percentage of GDP since the early 1970s, a 40-year stretch which has yielded the majority of the past century’s real return advantage to stocks. Labor gaveth, capital tooketh away in part due to the significant shift to globalization and the utilization of cheaper emerging market labor. In addition, government has conceded a piece of their GDP share via lower taxes over the same time period. Corporate tax rates are now at 30-year lows as a percentage of GDP and it is therefore not too surprising that those 6.6% historical real returns were 3% higher than actual wealth creation for such a long period.

The legitimate question that market analysts, government forecasters and pension consultants should answer is how that 6.6% real return can possibly be duplicated in the future given today’s initial conditions which historically have never been more favorable for corporate profits. If labor and indeed government must demand some recompense for the four decade’s long downward tilting teeter-totter of wealth creation, and if GDP growth itself is slowing significantly due to deleveraging in a New Normal economy, then how can stocks appreciate at 6.6% real? They cannot, absent a productivity miracle that resembles Apple’s wizardry.

Got Bonds?

My ultimate destination in this Investment Outlook lies a few paragraphs ahead so let me lay its foundation by dissing and dismissing the past 30 years’ experience of the bond market as well. With long Treasuries currently yielding 2.55%, it is even more of a stretch to assume that long-term bonds – and the bond market – will replicate the performance of decades past. The Barclay’s U.S. Aggregate Bond Index – a composite of investment grade bonds and mortgages – today yields only 1.8% with an average maturity of 6–7 years. Capital gains legitimately emanate from singular starting points of 14½%, as in 1981, not the current level in 2012. What you see is what you get more often than not in the bond market, so momentum-following investors are bound to be disappointed if they look to the bond market’s past 30-year history for future salvation, instead of mere survival at the current level of interest rates.

Together then, a presumed 2% return for bonds and an historically low percentage nominal return for stocks – call it 4%, when combined in a diversified portfolio produce a nominal return of 3% and an expected inflation adjusted return near zero. The Siegel constant of 6.6% real appreciation, therefore, is an historical freak, a mutation likely never to be seen again as far as we mortals are concerned. The simple point though whether approached in real or nominal space is that U.S. and global economies will undergo substantial change if they mistakenly expect asset price appreciation to do the heavy lifting over the next few decades. Private pension funds, government budgets and household savings balances have in many cases been predicated and justified on the basis of 7–8% minimum asset appreciation annually. One of the country’s largest state pension funds for instance recently assumed that its diversified portfolio would appreciate at a real rate of 4.75%. Assuming a goodly portion of that is in bonds yielding at 1–2% real, then stocks must do some very heavy lifting at 7–8% after adjusting for inflation. That is unlikely. If/when that does not happen, then the economy’s wheels start spinning like a two-wheel-drive sedan on a sandy beach. Instead of thrusting forward, spending patterns flatline or reverse; instead of thriving, a growing number of households and corporations experience a haircut of wealth and/or default; instead of returning to old norms, economies begin to resemble the lost decades of Japan.

Some of the adjustments are already occurring. Recent elections in San Jose and San Diego, California, have mandated haircuts to pensions for government employees. Wisconsin’s failed gubernational recall validated the same sentiment. Voided private pensions of auto and auto parts suppliers following Lehman 2008 may be a forerunner as well for private corporations. The commonsensical conclusion is clear: If financial assets no longer work for you at a rate far and above the rate of true wealth creation, then you must work longer for your money, suffer a haircut on your existing holdings and entitlements, or both. There are still tricks to be played and gimmicks to be employed. For example – the accounting legislation just passed into law by the Congress and signed by the President allows corporations to discount liabilities at an average yield for the past 25 years! But accounting acts of magic aside, this and other developed countries have for too long made promises they can’t keep, especially if asset markets fail to respond as they have historically.

Reflating to Prosperity

The primary magic potion that policymakers have always applied in such a predicament is to inflate their way out of the corner. The easiest way to produce 7–8% yields for bonds over the next 30 years is to inflate them as quickly as possible to 7–8%! Woe to the holder of long-term bonds in the process! Similarly for stocks because they fare poorly as well in inflationary periods. Yet if profits can be reflated to 5–10% annual growth rates, if the U.S. economy can grow nominally at 6–7% as it did in the 70s and 80s, then America’s and indeed the global economy’s liabilities can be “reflated” away. The problem with all of that of course is that inflation doesn’t create real wealth and it doesn’t fairly distribute its pain and benefits to labor/government/or corporate interests. Unfair though it may be, an investor should continue to expect an attempted inflationary solution in almost all developed economies over the next few years and even decades. Financial repression, QEs of all sorts and sizes, and even negative nominal interest rates now experienced in Switzerland and five other Euroland countries may dominate the timescape. The cult of equity may be dying, but the cult of inflation may only have just begun.

865. Audio: The Sound of a Damaged Habitat

The look of a damaged habitat

By Bernie Krause, The New York Times, July 28, 2012

(For audio clips, see bottom of article)

YEARS ago, when selective logging was first introduced, a community near an old-growth forest in the Sierra Nevada was assured that the removal of a few trees here and there would have no impact on the area’s wildlife. Based on the logging company’s guarantees, the local residents agreed to the operation. I was skeptical, however, and requested permission to record the sounds of the habitat before and after the logging.

On June 21, 1988, I recorded a rich dawn chorus in California’s pristine Lincoln Meadow. It was a biome replete with the voices of Lincoln’s sparrows, MacGillivray’s warblers, Williamson’s sapsuckers, pileated woodpeckers, golden-crowned kinglets, robins and grosbeaks, as well as squirrels, spring peepers and numerous insects. I captured them all.

When I returned a year later, nothing appeared to have changed at first glance. No stumps or debris — just conifers and lush understory. But to the ear — and to the recorder — the difference was shocking. I’ve returned 15 times since then, and even years later, the density and diversity of voices are still lost. There is a muted hush, broken only by the sound of an occasional sparrow, raptor, raven or sapsucker. The numinous richness of the original biophony is gone.

Lesson: While a picture may be worth a thousand words, a soundscape is worth a thousand pictures.

A soundscape contains three basic sources: the geophony, which includes all nonbiological natural sounds like wind or ocean waves; the biophony, which embraces the biological, wild, nonhuman sounds that emanate from environments; and the anthrophony — man-made sounds, commonly referred to as noise.

Soundscapes reveal many stories about the world’s habitats, illuminating the vital signs of life at one end of the spectrum and the effects of human noise at the other. In fit habitats, the biophony shows cohesion between all of its acoustic sources. In other words, the mating and territorial calls essential to each species’ survival don’t get masked or drowned out by competing sounds. Insects, reptiles, amphibians, birds and mammals establish their own “bandwidth niches,” which can be expressed as frequency (from the lowest to the highest sounds) and temporally (as when one creature vocalizes, followed by another, like exchanges between the chestnut-winged babbler and the Malaysian eared nightjar calling for mates in Borneo).

Graphic displays called spectrograms are used to illustrate the organization of those sounds, with each creature’s voice showing a distinctive place in the chorus — an arrangement so precise that it often resembles a musical score. To the trained ear, those expressions are experienced much like instruments in an orchestra.

What happens when this orchestra is disrupted by the anthrophony: chain saws, leaf blowers or highway traffic? If an indiscriminate sound like a loud motorcycle competes with the stridulation of an insect, the croak of a frog or the song of a bird, the affected animal may no longer be able to send its signal to mates or competitors. The voices of creatures in the choir may be drowned out. And mates and competitors will no longer be able to hear them. The integrity of the biophony is compromised.

(Some of those effects you can’t hear. A 2001 study of elk and wolves in national parks found that snowmobile noise raised the levels of stress hormones in their feces and that the levels returned to normal concentrations when the intrusive din was absent.)

Anything that destroys habitat — mining, pollution, deforestation and global warming — disrupts the biosphere. Mining reminds me of Aldo Leopold’s sage warning that if you’re going to tinker with nature, you’d better keep all the parts. In Northern California, where my wife and I live, spring occurs — according to my records — nearly two weeks earlier than it did 20 years ago. As the climate has warmed, we hear fewer Pacific tree frogs croaking in late winter and fewer birds in spring — likely because of shifts in food sources.

Too little research has been done in the field of biophonics, and my personal recordings are neither comprehensive nor the results of controlled experiments. But the differences between healthy and damaged soundscapes are clear to anyone who pays attention.

If you listen to a damaged soundscape — an expression of infirmity or extinction — the sense of desolation extends far beyond mere silence. The community has been altered, and organisms have been destroyed, lost their habitat or been left to re-establish their places in the spectrum. As a result, some voices are gone entirely, while others aggressively compete to establish a new place in the increasingly disjointed chorus. In the damaged forests of Washington State and California in the summer, I have heard white-crowned sparrows learning new syntax, adjusting their voices to accommodate for the acoustic shifts in the biophony.

Still, it is from the intact creature choruses that the story of our relationship to the natural world is revealed. We dismiss the loss of those narratives at our peril. Listen. The ear never lies.

The poet Robert Hass cautioned in his poem “After Goethe”: “The birds are silent in the woods./Just wait: Soon enough/You will be quiet too.”

Bernie Krause is a musician, naturalist and the author of “The Great Animal Orchestra.”

Multimedia

Click on each audio clip to read the author’s description of the habitat.

• Forest, Lincoln Meadow

• 0:23Morning, June 21, 1988
• 0:23Morning, June 21, 1989

• Rain Forest, Costa Rica

• 0:15Morning, April 11, 1989
• 0:15Morning, May 18, 1996

• Coral Reef, Fiji

• 0:10Eastern side
• 0:10Western side

864. The Conversion of a Climate-Change Skeptic

Richard A. Muller

By Richard A. Muller, The New York Times, July 30, 2012

CALL me a converted skeptic. Three years ago I identified problems in previous climate studies that, in my mind, threw doubt on the very existence of global warming. Last year, following an intensive research effort involving a dozen scientists, I concluded that global warming was real and that the prior estimates of the rate of warming were correct. I’m now going a step further: Humans are almost entirely the cause.

My total turnaround, in such a short time, is the result of careful and objective analysis by the Berkeley Earth Surface Temperature project, which I founded with my daughter Elizabeth. Our results show that the average temperature of the earth’s land has risen by two and a half degrees Fahrenheit over the past 250 years, including an increase of one and a half degrees over the most recent 50 years. Moreover, it appears likely that essentially all of this increase results from the human emission of greenhouse gases.

These findings are stronger than those of the Intergovernmental Panel on Climate Change, the United Nations group that defines the scientific and diplomatic consensus on global warming. In its 2007 report, the I.P.C.C. concluded only that most of the warming of the prior 50 years could be attributed to humans. It was possible, according to the I.P.C.C. consensus statement, that the warming before 1956 could be because of changes in solar activity, and that even a substantial part of the more recent warming could be natural.

Our Berkeley Earth approach used sophisticated statistical methods developed largely by our lead scientist, Robert Rohde, which allowed us to determine earth land temperature much further back in time. We carefully studied issues raised by skeptics: biases from urban heating (we duplicated our results using rural data alone), from data selection (prior groups selected fewer than 20 percent of the available temperature stations; we used virtually 100 percent), from poor station quality (we separately analyzed good stations and poor ones) and from human intervention and data adjustment (our work is completely automated and hands-off). In our papers we demonstrate that none of these potentially troublesome effects unduly biased our conclusions.

The historic temperature pattern we observed has abrupt dips that match the emissions of known explosive volcanic eruptions; the particulates from such events reflect sunlight, make for beautiful sunsets and cool the earth’s surface for a few years. There are small, rapid variations attributable to El Niño and other ocean currents such as the Gulf Stream; because of such oscillations, the “flattening” of the recent temperature rise that some people claim is not, in our view, statistically significant. What has caused the gradual but systematic rise of two and a half degrees? We tried fitting the shape to simple math functions (exponentials, polynomials), to solar activity and even to rising functions like world population. By far the best match was to the record of atmospheric carbon dioxide, measured from atmospheric samples and air trapped in polar ice.

Just as important, our record is long enough that we could search for the fingerprint of solar variability, based on the historical record of sunspots. That fingerprint is absent. Although the I.P.C.C. allowed for the possibility that variations in sunlight could have ended the “Little Ice Age,” a period of cooling from the 14th century to about 1850, our data argues strongly that the temperature rise of the past 250 years cannot be attributed to solar changes. This conclusion is, in retrospect, not too surprising; we’ve learned from satellite measurements that solar activity changes the brightness of the sun very little.

How definite is the attribution to humans? The carbon dioxide curve gives a better match than anything else we’ve tried. Its magnitude is consistent with the calculated greenhouse effect — extra warming from trapped heat radiation. These facts don’t prove causality and they shouldn’t end skepticism, but they raise the bar: to be considered seriously, an alternative explanation must match the data at least as well as carbon dioxide does. Adding methane, a second greenhouse gas, to our analysis doesn’t change the results. Moreover, our analysis does not depend on large, complex global climate models, the huge computer programs that are notorious for their hidden assumptions and adjustable parameters. Our result is based simply on the close agreement between the shape of the observed temperature rise and the known greenhouse gas increase.

It’s a scientist’s duty to be properly skeptical. I still find that much, if not most, of what is attributed to climate change is speculative, exaggerated or just plain wrong. I’ve analyzed some of the most alarmist claims, and my skepticism about them hasn’t changed.

Hurricane Katrina cannot be attributed to global warming. The number of hurricanes hitting the United States has been going down, not up; likewise for intense tornadoes. Polar bears aren’t dying from receding ice, and the Himalayan glaciers aren’t going to melt by 2035. And it’s possible that we are currently no warmer than we were a thousand years ago, during the “Medieval Warm Period” or “Medieval Optimum,” an interval of warm conditions known from historical records and indirect evidence like tree rings. And the recent warm spell in the United States happens to be more than offset by cooling elsewhere in the world, so its link to “global” warming is weaker than tenuous.

The careful analysis by our team is laid out in five scientific papers now online at BerkeleyEarth.org. That site also shows our chart of temperature from 1753 to the present, with its clear fingerprint of volcanoes and carbon dioxide, but containing no component that matches solar activity. Four of our papers have undergone extensive scrutiny by the scientific community, and the newest, a paper with the analysis of the human component, is now posted, along with the data and computer programs used. Such transparency is the heart of the scientific method; if you find our conclusions implausible, tell us of any errors of data or analysis.

What about the future? As carbon dioxide emissions increase, the temperature should continue to rise. I expect the rate of warming to proceed at a steady pace, about one and a half degrees over land in the next 50 years, less if the oceans are included. But if China continues its rapid economic growth (it has averaged 10 percent per year over the last 20 years) and its vast use of coal (it typically adds one new gigawatt per month), then that same warming could take place in less than 20 years.

Science is that narrow realm of knowledge that, in principle, is universally accepted. I embarked on this analysis to answer questions that, to my mind, had not been answered. I hope that the Berkeley Earth analysis will help settle the scientific debate regarding global warming and its human causes. Then comes the difficult part: agreeing across the political and diplomatic spectrum about what can and should be done.


Richard A. Muller, a professor of physics at the University of California, Berkeley, and a former MacArthur Foundation fellow, is the author, most recently, of “Energy for Future Presidents: The Science Behind the Headlines.”

863. Old Termites Blow Themselves Up to Protect the Nest

By Sarah C. P. Williams, Science Now, July 26, 2012

Beware the blue. Some termites, such as the one below 

in this photo, have blue dots behind their head containing 

a protein that can make them explode.

When trekking through a forest in French Guiana to study termites, a group of biologists noticed unique spots of blue on the backs of the insects in one nest. Curious, one scientist reached down to pick up one of these termites with a pair of forceps. It exploded. The blue spots, the team discovered, contain explosive crystals, and they're found only on the backs of the oldest termites in the colony. The aged termites carry out suicide missions on behalf of their nest mates.

After their initial observation, the team carried out field studies of Neocapritermes taracua termites and discovered that those with the blue spots also exploded during encounters with other species of termites or larger predators. The researchers report online today in Science that the secretions released during the explosion killed or paralyzed opponents from a competing termite species. However, if the scientists removed the blue crystal from the termites, their secretions were no longer toxic.

Back in their labs, scientists led by biochemist Robert Hanus of the Academy of Sciences of the Czech Republic in Prague went on to show that the blue termites always had shorter, worn-down mandibles than others from the same species, indicating that they were older. Then, the researchers removed the contents of the blue pouches and analyzed them. They contained a novel protein that is unusually rich with copper, suggesting that it's an oxygen binding-protein. Rather than being toxic itself, it likely is an enzyme that converts a nontoxic protein into something toxic.

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"What happens is when the termites explode, the contents of the back pouch actually interact with secretions from the salivary gland and the mixture is what is toxic," explains Hanus. It's the first time two interacting chemicals have been shown responsible for a defense mechanism in termites, he says.

Researchers already knew that many social insects change roles in their colony as they age. Moreover, it's well known that a number of species of termites explode, often oozing sticky or smelly fluid onto their opponent. But in previously observed cases, the explosive or noxious material is found in the termites' heads, and the suicide missions are the responsibility of a distinct caste of soldier termites, not aging workers. Since N. taracua have soldiers, it's especially surprising to see workers exploding, says Hanus.

"This is a quirky, funny natural history," says behavioral ecologist Rebeca Rosengaus of Northeastern University in Boston, who was not involved in the study. "What's new and interesting here is that this is found to be an aspect of colony-related age organization," says biologist James Traniello of Boston University. And the placement and chemistry of the blue crystals is unique, he says. The findings illustrate the vast diversity of social structures and defense mechanisms that the more than 3000 species of termites have evolved over time, Traniello says.

One question that remains is exactly how aging triggers the accumulation of the blue crystals. "We're still not 100% sure what the role of the blue protein is," says Hanus. "That's definitely something which we want to perform further research on."

862. Cuba: El Cabildo Cultural Center Is Closed Down

A performance at El Cabildo

By Cuba Central Newsblast, July 28, 2012

El Cabildo, a cultural center founded by Ulices Aquino, has been closed down, reports Penúltimos Días. The center was intended to provide a sort of Cuban-style Broadway or Cabaret, and was operating under the auspices of the Ministry of Culture. 

According to Penúltimos Días, Reuters reported that El Cabildo was able to pay its artists well, up to four times the average amount Cubans are paid. Subsequently, El Cabildo was shut down, with the Employment Director of the Municipality of Playa stating that the space is "subsidized by the government and the profits from the theater are kept for personal use, among other illegal acts." 

Espacio Laical published a statement on the issue, supporting the right to work and arguing that these cultural projects are important in creating new and dynamic spaces for public life. It goes on to say that those Cubans who have been involved in this issue are "good Cubans," who care about their country and even those who think differently than themselves, and who are not allied with the United States. El Cabildo was recently featured in a profile written by Reuters reporter Marc Frank. 

861. Cuba's National Assembly Adopts First New Tax Code Since 1959 and Approves Plan on Cooperatives

Meeting of Cuba's National Assembly

By Cuba Central Newsblast, July 28, 2012

The National Assembly adopted a new tax code, the first comprehensive tax code passed since 1959, during the first session of the biannual meeting of Cuba's parliament, reports Reuters. Under the new plan, all Cubans will eventually be required to pay income and property taxes for the first time in more than 50 years. The new tax code will also cut taxes for small business by 3-7% and provide benefits for start-ups, such as eliminating the labor tax for business with five employees or less.

Marino Murillo, Chairman of Cuba's Economic Policy Commission, said during his presentation that some state companies will have more autonomy, will be slightly deregulated, and will be able to sell extra production to an open market after fulfilling state contracts.

Murillo also announced during the parliamentary meeting that a pilot program of 222 non-state cooperatives in various sectors, including food services and transportation, will be implemented by the end of this year, reports the Associated Press.

The cooperatives will lease property and equipment from the state for 10-year increments, function on a market basis, pay taxes, and split profits among members, Reuters reports. Murillo promised that the pilot program will receive the full support of the government, pledging, "For these cooperatives and the non-state entities, in the coming year $100 million is being budgeted which is the financing necessary so they can be assured production, because if we create them and there is no financing, they won't work." He also emphasized the importance of improving state-run enterprises because they will continue to be the most important part of the economy.

860. Genetic Data and Fossil Evidence Tell Differing Tales of Human Origins

By Nicholas Wade, The New York Times, July 26, 2012

A group of Hadza men

After decades of digging, paleoanthropologists looking for fossilized human bones have established a reasonably clear picture: Modern humans arose in Africa some 200,000 years ago and all archaic species of humans then disappeared, surviving only outside Africa, as did the Neanderthals in Europe. Geneticists studying DNA now say that, to the contrary, a previously unknown archaic species of human, a cousin of the Neanderthals, may have lingered in Africa until perhaps 25,000 years ago, coexisting with the modern humans and on occasion interbreeding with them.

The geneticists reached this conclusion, reported on Thursday in the journal Cell, after decoding the entire genome of three isolated hunter-gatherer peoples in Africa, hoping to cast light on the origins of modern human evolution. But the finding is regarded skeptically by some paleoanthropologists because of the absence in the fossil record of anything that would support the geneticists’ statistical calculations.

Two of the hunter-gatherers in the study, the Hadza and Sandawe of Tanzania, speak click languages and carry ancient DNA lineages that trace to the earliest branchings of the human family tree. The third group is that of the forest-dwelling pygmies of Cameroon, who also have ancient lineages and unusual blood types.

The geneticists, led by Joseph Lachance and Sarah A. Tishkoff of the University of Pennsylvania, decoded the entire genomes of five men from each of these groups. The costs of whole-genome sequencing have fallen so much that the technique can now be applied to populations for the first time, said Dr. Tishkoff, who paid the company Complete Genomics around $10,000 for each of the 15 genomes.

Among the DNA sequences special to pygmies, Dr. Tishkoff and colleagues found a variant of the usual gene that controls development of the pituitary gland, the source of the hormones that control reproduction and growth. This could be the cause of the pygmies’ short stature and early age of reproduction, the researchers say.

The genomes of the pygmies and the Hadza and Sandawe click-speakers contained many short stretches of DNA with highly unusual sequences. Through mutation, the genomes of species that once had a common ancestor grow increasingly unlike one another. Dr. Tishkoff’s team interprets these divergent DNA sequences as genetic remnants of an interbreeding with an archaic species of human. Genetic calculations suggest the interbreeding took place between 20,000 and 80,000 years ago.

From calculations of the amount of divergence in the DNA, the geneticists estimate that the archaic species split from the ancestors of modern humans about 1.2 million years ago, about the same time as did the ancestors of the Neanderthals, who dominated Europe during the end of the last ice age.

But the archaic species has a different DNA sequence from that of Neanderthals, whose genome has been reconstructed from DNA surviving in ancient bones, and so may be a sister species, the geneticists say.

Inquiries into human origins are on strong ground when genetic data and fossil evidence point in the same direction, but at present geneticists and paleoanthropologists have somewhat different stories to tell. All human fossil remains in Africa for the last 100,000 years, and probably the last 200,000 years, are of modern humans, providing no support for a coexistent archaic species. Another team of geneticists reported in 2010 the finding that Neanderthals had interbred 100,000 years ago with Europeans and Asians, but not Africans. This, too, conflicted with the fossil evidence in implying that modern humans left Africa 100,000 years ago, some 55,000 years before the earliest known fossil evidence of this exodus.

In a report still under review, a third group of geneticists says there are signs of Neanderthals having interbred with Asians and East Africans. But Neanderthals were a cold-adapted species that never reached East Africa.

These three claims of interbreeding have opened up a serious discordance between geneticists and paleoanthropologists. For digesting the geneticists’ claims, “sup with a long spoon,” advised Bernard Wood, a paleoanthropologist at George Washington University.

Richard Klein, a paleoanthropologist at Stanford University, said the new claim of archaic and modern human interbreeding “is a further example of the tendency for geneticists to ignore fossil and archaeological evidence, perhaps because they think it can always be molded to fit the genetics after the fact.”

Dr. Klein said the claims of interbreeding could be “a methodological artifact” in the statistical assumptions on which the geneticists’ calculations are based. The flaw may come to light when enough inconsistent claims are published. “Meanwhile, I think it’s important to regard such claims skeptically when they are so clearly at odds with the fossil and archaeological records,” he said.

Dr. Tishkoff said that she agreed on the need for caution in making statistical inferences, and that there are other events besides interbreeding, like a piece of DNA getting flipped around the wrong way, that can make a single DNA sequence look ancient. “But when you see it at a genomewide level, it’s harder to explain away,” she said.

A co-author, Joshua M. Akey of the University of Washington in Seattle, said he was “reasonably confident that what we are seeing in Africa does represent archaic introgression.” The archaic sequences make up only 2.5 percent of the genomes of the living hunter-gatherers, and there is no evidence that they are being favored by natural selection. They may, therefore, have no effect on a person’s physical form, which could explain why the fossils show little sign of them, Dr. Akey said.

Although all known African fossils are of modern humans, a 13,000-year-old skull from the Iwo Eleru site in Nigeria has certain primitive features. “This might have indicated interbreeding with archaics,” said Chris Stringer, a paleoanthropologist at the Natural History Museum in London. “For half of Africa we really have no fossil record to speak of, so I think it’s quite likely there were surviving archaic forms living alongside modern humans.”

Paleoanthropologists like Dr. Klein consider it “irresponsible” of the geneticists to publish genetic findings about human origins without even trying to show how they may fit in with the existing fossil and archaeological evidence. Dr. Akey said he agreed that genetics can provide only part of the story. “But hopefully this is just a period when new discoveries are being made and there hasn’t been enough incubation time to synthesize all the disparities,” he said.