McCain's Chances: From 42% to 31% in 38 Days
McCain's chances to become president are sinking on Intrade.com (last 38 days shown above).
Professor Mark J. Perry's Blog for Economics and Finance
McCain's chances to become president are sinking on Intrade.com (last 38 days shown above).
From "The Klein Doctrine: The Rise of Disaster Polemics," by Johan Norberg, Senior Fellow at the Cato Institute
Executive Summary: Naomi Klein’s The Shock Doctrine purports to be an exposé of the ruthless nature of free-market capitalism and its chief recent exponent, Milton Friedman (click arrow above to watch video). Klein argues that capitalism goes hand in hand with dictatorship and brutality and that dictators and other unscrupulous political figures take advantage of “shocks”—catastrophes real or manufactured—to consolidate their power and implement unpopular market reforms. Klein cites Chile under General Augusto Pinochet, Britain under Margaret Thatcher, China during the Tiananmen Square crisis, and the ongoing war in Iraq as examples of this process.
Klein’s analysis is hopelessly flawed at virtually every level. Friedman’s own words reveal him to be an advocate of peace, democracy, and individual rights. He argued that gradual economic reforms were often preferable to swift ones and that the public should be fully informed about them, the better to prepare themselves in advance. Further, Friedman condemned the Pinochet regime and opposed the war in Iraq.
Klein’s historical examples also fall apart under scrutiny. For example, Klein alleges that the Tiananmen Square crackdown was intended to crush opposition to pro-market reforms, when in fact it caused liberalization to stall for years. She also argues that Thatcher used the Falklands War as cover for her unpopular economic policies, when actually those economic policies and their results enjoyed strong public support.
Klein’s broader empirical claims fare no better. Surveys of political and economic freedom reveal that the less politically free regimes tend to resist market liberalization, while those states with greater political freedom tend to pursue economic freedom as well.
Watch another video segment here.
WASHINGTON POST -- Soaring fuel prices that are burning a hole in the wallets of consumers are not only benefiting oil companies and Middle Eastern producers. They are also lighting up the investment returns of pensions funds, which millions of ordinary Americans are counting on for their retirement (see chart above that compares the +40% return over the last year for the Dow Jones Commodity Index to the -20% annual return for the Dow Jones stocks).
California's public employees' pension fund, the world's largest, made its first investment of $1.1 billion into oil and other commodities early last year, and since then, Calpers has seen it soar 68%. Fairfax County pension managers have enjoyed a 61% return from a similar move over the past 12 months, far outpacing any other segment of the fund's portfolio.
Other pension funds are rushing to get in on the action as the prices of oil, precious metals, corn, uranium and other vital goods continue to reach record highs. Montgomery County officials are in the process of shifting 5% of their $2.7 billion pension fund away from stocks and into commodities.
These funds are part of a tidal wave of investment dollars that has flooded commodity markets in recent years and, critics say, contributed to the run-up in prices.
Investors, including pension funds and Wall Street speculators, have sharply increased their commodity allocations since 2003, from $13 billion to $260 billion, making financial actors an even larger force on these markets than farmers, airlines, trucking firms and companies that buy and sell the physical goods to run their businesses.
For decades, trading commodity contracts was considered taboo by most pension funds because the market is so volatile and risky. Most fund managers relied on their stock and bond investments to enlarge their pools of retirement money.
That changed after the stock market crashed in 2001. Fund managers realized they needed more diversified portfolios that would perform well regardless of whether stocks did. At the same time, new financial products simplified trading by allowing big funds to buy into commodity indexes, which work like mutual funds, that were run by Wall Street firms.
MP: Sure, you're paying higher prices at the pump today, but you might get it all back when you retire, since record-high commodity prices might significantly boost the return on your retirement portfolio?
Well maybe not, see this Boston Globe story "Investors' Anxiety Builds as Retirement Nest Eggs Show Cracks."
HT: Ben Cunningham
Fort Worth (TX) Star Telegram -- From Main Street to Wall Street, the economic news gets more depressing every day, but things could be worse: You could be living outside of Texas.
TAMPA, FL -- The temporary Wal-Mart Hiring Center had more than 2,000 jobseekers hoping to fill its 350 open positions in time for the new Supercenter's opening in August, according to one of the new Supercenter's co-managers.
The U.S. income tax system is highly progressive. The top 1% of income earners, by household, paid more than 39% of all federal income taxes in 2005, the top 10% paid more than 70%, and the top 50% paid almost 97%, whereas the bottom 50% paid a little over 3%. Further, 32% of all tax returns filed in 2005 were from people who paid no federal income tax at all.
If you look at the situation on paper, it looks like the world should have enough oil. But you can't burn oil or turn it into gasoline if it exists on paper.
Can the perfect recall of silicon memory be an enormous boon to thinking, or is Google making us stupid?
What would Thomas Jefferson say today about U.S. energy policy? Probably "Drill, drill, drill"?
Kentucky john paid prostitute with $100 fuel card.
Average starting salaries for new college graduates are up a surprisingly strong 7.1% over last year, according to the National Association of Colleges and Employers. Among the average salary offers, according to the association's summer survey:
July 1 (Bloomberg) -- Repsol, Spain's largest oil company, is using chips that IBM designed for video-game consoles to find oil in deep water as much as six times faster.
Energy: What do the Democratic-led Congress and OPEC have in common? Both sit on vast amounts of oil, and are content to leave it in the ground and let prices soar. Fortunately, Americans are catching on.
Wealth. The mainstream media played this up recently, but only because it fell by nearly $2 trillion in the first quarter. Stand back and a different picture is revealed. Americans' net worth — what they owned less what they owed — was $55.97 trillion. That's down from the peak of $58.196 trillion in the third quarter of 2007, but still $15.3 trillion above where it was seven years ago (see chart above).
Gas prices seem destined to keep rising, and many consumers feel powerless to do anything to protect themselves from what they perceive as the inevitable.
THE ECONOMIST -- So just how bad are things for the Big Three? This is hardly the first time that their survival has been questioned, of course. But two aspects of the current crisis are new. Carmakers’ finance arms used to bring in cash even during cyclical downswings in the vehicle market. That is not the case now. Not only have they been infected by the contagion from the home-mortgage market, but the value of SUVs and pick-ups has collapsed so catastrophically that they are losing big money on vehicles returned after lease.
According to the Business and Media Institute:
Given the media and government-directed hostility toward "speculators," many people will want proof that they are innocent. Well, for the scapegoat-seeking masses, there's the following inconvenient truth: If oil were being withheld from the market by speculators, said oil would physically have to be somewhere other than on the open market where it is being sold and bought. And yet crude inventories have remained roughly constant since 1998. If someone were hoarding oil, we would have seen a spike in crude inventories.
Why is it that mankind enjoys cell phones, computers and airplanes today but not when King Louis XIV was alive? The necessary physical resources to make cell phones, computers and airplanes have always been around, even when caveman walked the Earth. There is only one answer to why we enjoy these goodies today and not yesteryear.
For every trader betting on higher prices, another is betting on lower prices. These trades are matched. In the stock market, all investors (buyers and sellers) can profit in a rising market, and all can lose in a falling market. In futures markets, one trader's gain is another's loss.
Speculator-bashing is another exercise in scapegoating and grandstanding. Leading politicians either don't understand what's happening or don't want to acknowledge their own complicity.
When Tiger Woods collected his $1,350,000 check for winning the U.S. Open golf championship this month, his federal and California taxes approximated $586,000. So, Tiger got to keep about $764,000, or 57% of his winnings.
Yesterday's CD post of a graph of 1,000 gallons of gas as a percent of per-capita disposable income (top graph above) shows that we're still nowhere near record highs for gasoline, when measured as a share of income.
Warren Meyer at Coyote Blog thoughtfully suggested adjusting the analysis to account for the significant increases in fuel efficiency over time, see middle chart above, which shows the 64% increase in fuel efficiency from the early 1980s to 2005.
The bottom graph above shows the results of Warren's analysis (see his chart here), which calculates the percent of per-capita disposable income required to buy enough gasoline to drive 15,000 miles, at the average fuel efficiency in each month from 1980 to 2008. This adjustment for increased fuel efficiency makes the initial results even more dramatic.
After adjusting for: a) higher incomes and b) greater fuel efficiency since 1980, we are nowhere near record highs for gas. In fact, to match the 13.75% level in 1980 when average fuel efficiency was only 16 mpg (and gas was $1.26 per gallon and per-capita disposable income was $8,575), gasoline today would have to reach $7.53 per gallon, almost twice today's prices!
Bottom Line: Gas prices today are almost 50% below the record highs of 1980, after adjusting for higher incomes today and much greater fuel efficiency.
MOSCOW -- I almost cried when I arrived at Moscow's Sheremetyevo-2 International Airport the other day. Not because I was so sad – I was thrilled to be going on vacation – but because the previously tortured trip to the airport is now remarkably painless.
According to the American Petroleum Industry:
What about those who argue that speculative excess is the only way to explain the speed with which oil prices have risen? Well, I have two words for them: iron ore.
"I want you to think about this," Barack Obama said in Las Vegas last week. "The oil companies have already been given 68 million acres of federal land, both onshore and offshore, to drill. They're allowed to drill it, and yet they haven't touched it – 68 million acres that have the potential to nearly double America's total oil production."
Despite all of the reports about record-high gas and oil prices, we're still nowhere close to record high gas prices adjusted for the growth in per-capita, disposable income.
Fortune Magazine -- Before the government starts scrutinizing the role that speculators may have played in driving up fuel and food prices, investigators may want to take a look at price swings in a commodity not in today's news: onions.
The bulbous root is the only commodity for which futures trading is banned. Back in 1958, onion growers convinced themselves that futures traders were responsible for falling onion prices, so they lobbied an up-and-coming Michigan Congressman named Gerald Ford to push through a law banning all futures trading in onions. The law still stands.
And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics' belief that futures trading diminishes extreme price swings. Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April (see chart above, click to enlarge).
Update: The chart below shows monthly percent changes in the spot prices of onions and oil, from January 2000 to May 2008. The volatility of monthly onion price changes (measured by the standard deviation of price changes, 66%) was 7.5 times higher than the volatility of oil price changes (standard deviation of 8.8%) during this period.
Philadelphia -- As you might expect, scalping isn't a term used much anymore. The buzzword is "secondary ticket market," and all over the entertainment and sports industry, business is booming, turbo-charged by the technological advances of recent years.
WASHINGTON, D.C. – Now adjourned for its Independence Day recess, the U.S. Congress has convened at least 40 hearings on the issue of skyrocketing energy prices in the first six months of 2008. At least 160 witnesses have been sworn-in and questioned. But, even as consumers suffer, the Congress still has done nothing to increase American energy supplies. But, even as consumers suffer, the Congress still has done nothing to increase American energy supplies.
The chart above displays unemployment rates by education level from 1993 to 2005, and shows the averages over this period on the right side of the chart. It's interesting that there are big differences between a) no high school and high school (3.4% difference in averages), and b) some college and college grads (1.5% difference), and a pretty small difference between high school and some college (0.90%).
JIDDAH, Saudi Arabia - The U.S. energy secretary said Saturday that insufficient oil production, not financial speculation, was driving soaring crude prices.
By preventing production and through inflationary monetary policy, maybe the government should be blamed for high oil prices, not speculators?
Excerpts below from the Fortune Magazine article "Don't Blame the Oil Speculators: A Campaign in Congress to Punish Traders for Record Oil Prices Reveals a Fundamental Misunderstanding of How Futures Markets Work":
Russia Players Offered Two Girls For Every Goal. Link
I say, "Give Me A Break" to police officers who punish motorists for ignoring rules that the police themselves routinely ignore. In Warren, Michigan, one officer alone ticketed almost 4,000 people because he said they didn't come to a complete stop at stop signs. Reporter Heather Catallo of Detroit's ABC affiliate took her cameras out to see if the cops stopped at the stop signs. Most, it turned out, didn't. Tonight I'll ask Warren's police commissioner if this is just a moneymaking scam. To all those cops who would punish us for what they don't do, I say, give me a break!
CNBC: How do you think the tax code should be changed?
MP: Aren't these reports missing the following seemingly good news: After declining for 7 out of the last 8 months, median home prices have increased for 3 months in a row, and the median price of $208,600 in May was 6.65% above the $195,600 level in February (data here)?