Tuesday, April 07, 2009

NY Fed Model Suggests Economic Recovery Has Started, and Recession Will End This Year

According to the New York Fed, "Research beginning in the late 1980s documents the empirical regularity that the slope of the yield curve is a reliable predictor of future real economic activity."

This afternoon, the New York Fed released its latest "Probability of U.S. Recession Predicted by Treasury Spread," with data through March 2009, and the Fed's recession probability forecast through March 2010 (see chart above, click to enlarge). The NY Fed's model uses the spread between 10-year and 3-month Treasury rates (currently at 2.61%) to calculate the probability of a recession in the United States twelve months ahead (see chart below of the Treasury spread).

The Fed's data show that the recession probability peaked during the October 2007 to April 2008 period at around 35-40%, and has been declining since then to less than 10% for December 2008 and January 2009. Looking forward through 2009, the Fed's model shows a recession probability of only about 1% on average through the next 12 months, and below 1% by the end of the year (0.82% in December 2009). By March of 2010, the recession probability will be only 0.53%, close to the lowest level since mid-2005.

Further, the Treasury spread has been above 2% for the last 12 months, a pattern consistent with the economic recoveries following the last six recessions (see chart above).

Bottom Line: My reading of the New York Fed's Treasury spread model suggests that an economic recovery is probably already underway, and the Fed's model predicts the end of the recession in 2009.

Convenient, Affordable Retail Health Care Clinics

ABC-TV Eyewitness News in Los Angeles reports on how more and more retail health clinics are turning up, offering quick, affordable health care. Some clinics are open 12 hours a day, seven days a week, with no appointment necessary.

"Paitents love the convenience of being able to come in, to walk in at any time and be treated instead of having to go to the emergency room and having to wait long hours," said Dr. Maggie Bertisch.

Brazil Stock Market Reaches 6-Month High

SAO PAULO, April 7 (Reuters) - Brazil's stocks edged higher today led by real estate companies and ethanol producers, while the national currency weakened as a sell-off in U.S. markets and in Europe weighed on demand for riskier emerging market assets.

The Bovespa Index (.BVSP) of the Sao Paulo stock exchange firmed 0.6% to 44,432.11, clawing back to positive territory after dropping 1.3% in early trading.

MP: Brazil's Bovespa Index is now at a 6-month high, the highest level since early October.

Cartoon of the Day: Fiscal Child Abuse

IBD's Michael Ramirez.

Auto Bailout: Russian Style

NY TIMES -- If there is a country that truly needs a car czar, it is Russia, home of the czars — and Lada. The factory here has been stamping out the same version of the Lada, the typical boxy people’s car of the former Eastern Bloc, for four decades (see picture above).

Avtovaz is one of the least efficient automobile factories anywhere in the world — each worker produces, on average, eight cars a year, compared with 36 cars a year at GM’s assembly line in Bowling Green, Ky., for example.

Yet the government is giving Avtovaz billions of dollars in aid, no strings attached. No chief executive firings. No renegotiation of workers’ contracts. No demands to turn out better-quality cars, much less fuel-efficient hybrid cars.

But the auto bailout, Russian style, is intended more to ensure peace in the streets than restructure a business, much to the lament of some critics who think tough love might be better.

The Housing Market Has Bottomed

According to Scott Grannis, the two charts above make the case that the housing market has seen the worst of its decline, which started over three years ago. Read why here.

Used Vehicle Index Rises for 3rd Straight Month

MANHEIM CONSULTING -- In March, wholesale used vehicle prices increased 0.6% from the previous month. The Manheim Used Vehicle Value Index now stands at 106.1, which represents a year-over-year decline of 1.5%. With March representing the third consecutive monthly increase, seasonally adjusted wholesale values have risen 8.3% in 2009 (see charts above).

The strength in auction pricing has been the result of the reduced supply that is normally generated by trade-ins on new vehicle sales, the substitution effect from new to used vehicle purchases, a strong tax refund season, and some easing in the availability of retail financing. The supply reduction caused by the unprecedented steepness at which new vehicle sales have fallen will have long-term effects as well as the immediate impacts being noticed today.

From last month's report:

Some analysts have suggested that the rapid rise in wholesale used vehicle pricing is a precursor to an improvement in new vehicle sales and may even point to a recovery in the overall economy. It’s more likely, however, that the turnaround in wholesale used vehicle values is a necessary, but not a sufficient, condition for a better new vehicle market. That’s especially true given that the recent rise in auction pricing has been driven in large part by supply dynamics that were created by the unprecedented slowdown in new vehicle sales.

CME Introduces Futures and Options on Hurricanes

From the press release:

CME's hurricane futures and options will be settled to the CME Hurricane Index (CHI), which provides a numerical measure of the destructive potential of a hurricane. The CHI is based on a calculation of the maximum wind velocity and size (radius) of each official storm to calculate the potential for physical and financial damage. The higher the CHI number, the more potentially damaging the hurricane.

In addition to its hurricane products, CME Group offers weather contracts based on aggregate temperatures for 45 cities, including 24 throughout the U.S., 10 in Europe, six in Canada, three in Australia and two in Japan. CME Group also lists products used to hedge risk associated with snowfall and frost.

More information here: Hurricane futures and options are financial tools designed to offset hurricane-related risk by offering a means of transferring risk to the capital markets.

Bear Market Hits Fine Art, Prices Plunge -35%

FT.com -- Art prices plunged during the first quarter of the year as cash-strapped collectors looked to unload works by postwar masters that had earlier boomed in price along with the stock market. The Mei Moses index, set for release today, shows art prices fell 35% in the first quarter, having held up during earlier months of the financial crisis. The overall index fell 4.8% last year (see chart above of the Mei Moses Index vs. the S&P500 Index).

The decline accelerated as people who lost money in the financial crisis, including victims of the Madoff fraud, put up works for sale, often at a loss, several art world insiders said.

Monday, April 06, 2009

Emerging-Market Stocks Reach 6-Month High

Emerging-market stocks climbed to the highest in almost six months as commodity prices advanced on speculation stimulus packages are beginning to thaw global credit markets and revive economic growth. The MSCI Emerging Markets Index added 1.6% to 626.92, the highest since October 14 (see chart above). The index, which lost 54% of its value last year, has gained 11% in 2009 as governments take steps to increase liquidity and boost financial aid for developing nations hardest hit by the global credit crunch.

10.25% Emerging Markets March Gain: 8-Year High

The 10.25% March increase for the MSCIBarra Emerging Markets Stock Index is the highest monthly return for the emerging markets stock index since January 2001 (see chart above).

World Stock Market Rebounding

The Morgan Stanley Capital International-Barra World Stock Index has increased by more than 24% since its most recent March 9 bottom (see chart above).

On a monthly return basis, the 7.24% March 2009 return for the MSCIBarra World Stock Index is the highest monthly return in almost six years, since the 8.64% return for April 2003 (see chart below).

Obama Makes Some Tough Business Decisions

SNL skit of President Obama's new industrial policy of having the government pick all of the winners and losers for companies, products, magazines, clothing, universities and even football teams.

House Price Indexes: USA vs. Europe

The Financial Times just launched the FT Eurozone (16 countries) and FT European house price indices (Eurozone plus UK, Iceland, Norway, Sweden, Switzerland and Denmark), which track prices of new and second hand houses and apartments across Europe. The chart above shows the quarterly house price indexes for the U.S. using OFHEO data and for the Eurozone using FT.com data (with free registration).

Notice the strikingly similar pattern of house prices in the U.S. and Europe between 2000 and 2008. U.S. house prices peaked several quarters ahead of Europe and also started declining a few quarters ahead of Europe, but otherwise the home price patterns are very similar. Notice also that the quarterly index for the U.S. flattened out in the last two quarters of 2008. On a monthly basis, the OFHEO index increased in January by 1.7%, the largest monthly increase in the OFHEO index on record (back to 1991).

Nuisance Consumers With Insufferable Preferences

The stunning shift in consumer preferences that should make the White House's freshly minted auto experts feel vulnerable has been reported under headlines such as "Like a Rock: Hybrid Car Sales Plummet" (Wall Street Journal, Dec. 9) and "Hybrid Car Sales Go from 60 to 0 at Breakneck Speed" (Los Angeles Times, March 17). Absent $4 gasoline, customers, those nuisances with their insufferable preferences, do not want the vehicles the politicians want them to want, even with manufacturers now offering large rebates and other incentives.

The two best-selling vehicles in America this year are large pickup trucks (Ford F-Series and Chevy Silverado). In February, Toyota sold 13,600 Tundra and Tacoma pickups and 7,232 Priuses (see chart above). It sells the Prius at a loss, which it can afford to do because it makes pots of money selling pickups. Has the Car Designer in Chief, aka the president, considered the possibility that what he calls "the cars of tomorrow" will forever be that?

~George Will's column today

Sunday, April 05, 2009

A 1-Man Toxic-Asset Eater:The Banker Who Said No

While the nation's lenders ran amok during the boom, Andy Beal hoarded his money. Now he's cleaning up--with scant help from Uncle Sam.

Andy Beal, a 56-year-old, poker-playing college dropout, is a one-man toxic-asset eater--without a shred of government assistance. Beal plays his cards patiently.

For three long years, from 2004 to 2007, he virtually stopped making or buying loans. While the credit markets were roaring and lenders were raking in billions, Beal shrank his bank's assets (Beal Bank) because he thought the loans were going to blow up. He cut his staff in half and killed time playing backgammon or racing cars. He took long lunches with friends, carping to them about "stupid loans." His odd behavior puzzled regulators, credit agencies and even his own board. They wondered why he was seemingly shutting the bank down, resisting the huge profits the nation's big banks were making.

Now, while many of those banks struggle to dig out from under a mountain of bad debt, Beal is acquiring assets. He is buying bonds backed by commercial planes, IOUs to power plants in the South, a mortgage on an office building in Ohio, debt backed by a Houston refinery and home loans from Alaska to Florida. In the last 15 months Beal has put $5 billion to work, tripling Beal Bank's assets to $7 billion, while such banks as Citigroup and Morgan Stanley shrink and gobble up billions in taxpayer bailouts.

Beal has barely got a dime from the feds. A self-described "libertarian kind of guy," Beal believes the government helped create the credit crisis. Now he finds it "crazy" that bankers who acted irresponsibly are getting money and he's not. But he wants to exploit their recklessness to amass his own fortune.

"This is the opportunity of my lifetime," says Beal. "We are going to be a $30 billion bank without any help from the government." Not much next to the trillion-dollar balance sheets of the nation's troubled banks, but the lesson here might be revealed in the fact that this billionaire is not playing with other people's money--he owns 100% of the bank and is acting accordingly.



Median CEO total compensation in 2008: $8.4 million (Source: NY Times).

Larry Summers' total compensation in 2008: $8.5 million (Source:
Washington Post), see some details above (via Infectious Greed), click to enlarge.

Why Business Failure Is A Cause For Celebration

The profit-and-loss system works because successful producers reap rewards when they combine resources effectively and unsuccessful producers incur costs when they don't. The prospect of profits from making good decisions and losses from making bad ones encourages producers to make choices that improve our lives.

But if government shields ineffective producers from the consequences of their bad decisions, producers' incentives become skewed. For instance, when policy permits producers to enjoy the benefits of successful risk-taking but subsidizes the losses of unsuccessful gambles, producers have an incentive to take on more risk than they should. Since they're no longer responsible to consumers when they make poor choices, the link connecting producers' and consumers' interests is weakened and, with it, the economy's ability to advance.

At a time when failure is the new dirty word and government seems willing to prop up floundering firms at any cost, we would do well to remember the benefits of letting failing businesses go belly up.

~George Mason economist Pete Leeson in the Washington Times (via Cafe Hayek).

Saturday, April 04, 2009

Economics: The "Goldilocks" College Major

Like many liberal-arts institutions, Middlebury College, where I teach, has a problem: Too many students want to be economics majors. Economics enrollments keep growing, and adding more faculty members to the department seems to only increase the demand. The rumor on the campus is that if the college actually provided enough professors to meet the demand for economics courses, it would have to change its name to the Middlebury School of Economics.

Professors at other liberal-arts colleges confirm that the phenomenon is widespread and has been for some time. But what makes the economics major so appealing? As an economist I like to think that economics has become so popular because of its intellectual rigor, broad appeal, and importance to understanding the world. And those are clearly part of the answer, especially given the recent financial crisis. Modern economics is an exciting and dynamic field of study that has changed considerably in recent years; specifically, it has become more quantitative and scientific. Today’s economists bring technical expertise to interesting and novel questions. They have also expanded their previous narrow vision of human behavior. Homo economus is now considered purposeful, not ultrarational, and pursues enlightened self-interest, not greed.

Psychological insights and traditional economics are blended together in today’s behavioral economics; because modern economists do not see the market as the answer to everything, they are able to be involved in all types of real-world policies, from changing default options for people’s savings decisions to helping design search algorithms for Google. But as much as I’d like to think so, I suspect that those strengths and improvements are not the main reasons for the economics major’s appeal.

If the economics major’s popularity is not due to its intellectual dynamism or connection to business, to what is it due? I suspect a mundane explanation: It is the “just right” major. By “just right” I mean that the economics major provides the appropriate middle ground of skill preparation, analytic rigor, and intellectual excitement that students look for in a major, and that employers look for when hiring students.

~“Economics: The 'Just Right' Liberal-Arts Major?” by David Colander, Economics Department Chair at Middlebury College

HT: Captain Capitalism

Paired Houses, But One Is Abandoned

In Camden, N.J., Camilo Jose Vergara photographs what he calls paired houses: two dwellings, side by side, one occupied, the other empty. Pictured above in 2004 is 908 N. 24th Street.

Wal-Mart Facts

According to Forbes, Wal-Mart was the most generous corporation in America in 2007 (probably the world too), giving away $301 million in cash gifts to the Children's Miracle Network, Feeding America, The Salvation Army, the American Red Cross, the United Way of America, National Fish and Wildlife Foundation.

This week,
Wal-Mart announced that it: Stepped up charitable giving globally from February 1, 2008 through January 31, 2009 with more than $423 million in cash and in-kind gifts, an $85.6 million increase over its global giving in the previous year. Last year, Wal-Mart and the Wal-Mart Foundation gave millions of dollars to numerous national and local charities including the Institute for Higher Education Policy ($4.1 million), YouthBuild ($5 million), Children’s Miracle Network ($4.7 million), The Salvation Army ($3 million), Special Olympics ($3.6 million), the National Urban League ($1 million) and the National Fish and Wildlife Foundation ($3.4 million).

Other Wal-Mart Facts:

1. Wal-Mart directly employs more than 2 million associates worldwide, including more than 1.4 million in the United States. Through its relationships with 56,000 U.S. suppliers, Wal-Mart spent $200 billion on merchandise in 2007 and indirectly supported more than 3 million American jobs. The 4.4 million Wal-Mart-related jobs represented 3.2% of total U.S. payroll employment in 2007.

2. Wal-Mart is a diverse employer, employing more than 165,000 Hispanics, 251,000 African Americans, 39,000 Asian Americans, 5,000 Pacific Islanders, 16,000 Native Americans, 355,000 associates age 50 or older, and 856,000 women (61% of Wal-Mart's workforce).

3. Wal-Mart insures more than 1.1 million associates and family members making it among the nation’s largest providers of private sector health insurance. 93% of Wal-Mart associates reported having some form of health coverage – either through Wal-Mart or another source.

4. Wal-Mart offers the opportunity for a career: More than 75% of Wal-Mart's store managers started as hourly associates.

5. In 2007, independent research from Global Insight shows that the reduction in the price level due to the presence of Wal-Mart translates directly into savings for consumers amounting to $287 billion in 2006. This corresponds to savings of $957 per person and $2,500 per household, regardless of where consumers choose to shop. That is, even consumers who shop at Target, Best Buy or Office Depot save money from the presence of Wal-Mart, due to the competitive pressure of Wal-Mart's "Everyday Low Prices."

Here's a case that Wal-Mart deserves the Nobel Peace Prize.

Friday, April 03, 2009

Government Car Warranties

People Voting With Their Feet: Atlanta Ranks #1

PHOENIX (March 31, 2009)U-Haul International today released the results of the annual 2008 U-Haul National Migration Trend Report, titled "The 2008 Top 50 U.S. Destination Cities." The report was compiled from more than 1 million U-Haul truck transactions occurring between Jan. 1 and Dec. 31, 2008.

According to moving data reflective of nationwide statistics for calendar year 2008, Atlanta takes the No. 1 spot for the second year in a row, while Houston takes second place, moving up from the No. 8 rank last year. Los Angeles climbed to No. 3 from No. 13 last year, while Las Vegas maintained at No. 4 for the second year in a row, and Denver, Colo. moved up to fifth place from the No. 9 rank last year. Portland, Ore.; Chicago, San Antonio, Austin, Texas and Orlando, Fla. rounded out the top 10 (see top 15 above).

Adjusted for the Labor Force, Initial and Continuing Jobless Claims are Far Below the 1970s and 1980s

With March employment data now available, the graph above of Initial Jobless Claims as a Percent of the Labor Force (1970-2009) has been updated to reflect the March labor force of 154,048,000, and the March average for initial unemployment claims (650,937 for the 4-week moving weekly average). That measure of initial jobless claims adjusted for the size of the labor force shows that we are currently above the levels of the last two recessions (1990-1991 and 2001), but still far below the levels of the previous three recessions in the mid-1970s and early 1980s.

For current initial jobless claims to reach the peaks of the 1970s and 1980s of about .60% (see chart above), we would have to have initial jobs claims today of about 925,000, or 42% above current levels. By this measure of the employment situation, it seems unlikely we'll get anywhere close to the recessionary levels of the 1970s and 1980s.

A similar chart (via Charles Brady of the Fox Business Channel) and analysis was featured in today's The Gartman Letter (subscription required) of the "Continuing Claims as a Percentage of the U.S. Labor Force" (see chart below):

By that measure of the labor market conditions, we are still far below the 1973-1975 recession and the 1981-1982 recession.

MP: The labor force has grown by more than 72 million from 81.98 million workers in 1970 to 154 million today, an increase of 88%. To compare unadjusted jobless claims (either initial or continuing) today to past periods is largely meaningless, without adjusting for the increasing size of the labor force over time (thanks to friend Dennis Gartman for initially making me aware of this deficiency). It's amazing how much attention gets paid to the unadjusted jobless claims, and how little attention gets paid to how meaningless these data are without adjusting for the size of the labor force.

First-time Housing Affordability in CA Surges

The California Association of Realtors' (CAR) First-time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. CAR also reports first-time buyer indexes for regions and select counties within the state. The Index is the most fundamental measure of housing well-being for first-time buyers in the state.

MP: The chart above (data
here, methodology here) shows the quarterly FTB-HAI from the first quarter of 2003 through the fourth quarter of 2008 for California (entire state), and two selected markets (Santa Barbara and San Francisco). In just a little more than a year, the percentage of households who could afford an entry-level home in California went from 24% in the third quarter of 2007 to 59% in the fourth quarter of 2008. For Santa Barbara during the same period, the percentage went from 11% (only 1 in 9) to 55% (more than one in two), and for San Francisco it went from 18% to 47%.

Thomas Sowell: The political meaning of "affordable housing" is housing that is made more affordable by politicians intervening to create government subsidies, rent control or other gimmicks for which politicians can take credit. Affordable housing produced by market forces provides no benefit to politicians and has no attraction for them.

The "Man-Cession" Worsens; Male (9.5%) - Female (7.5%) Jobless Rate Gap of 2% is Highest in History

According to today's BLS report (Table A-1, Household Data), the U.S. economy has lost 5.76 million jobs since Dec. 2007. Further analysis shows that 79% of the job losses (4.551 million) were jobs held by males, compared to female jobs losses of 1,209,000, or 21% of the total (see top chart above). Of the 860,000 March jobs decline (household data), 84% of the job losses were male jobs (724,000), compared to a 136,000 job loss for females (16% of total).

Further, the March unemployment rate for men was 9.5% vs. 7.5% for women, and the 2% male-female jobless rate gap is at an all-time historical high, exceeding the previous record difference of 1.6% in January 2009.

See today's Chicago Tribune story "
Men Take Lead at the Unemployment Line."

Vote for the Rupee Symbol

Just as the Dollar is universally denoted by $‚ the Indian government thinks the Rupee should also have its own unique symbol that captures a sense of India’s history and culture. At this link are 19 suggestions from the Economic Times (ET) of India's team of designers (two appear above). You can vote for the one you find best. ET will present all these symbols‚ along with the ET viewers’ preference‚ to the Ministry of Finance.

HT: Deepali Chandra

Thursday, April 02, 2009

Taking Apart T. Boone Pickens' Transfer Nonsense

According to T. Boone Pickens:

At current oil prices, we will send $700 billion dollars out of the country this year alone. Projected over the next 10 years the cost will be $10 trillion — it will be the greatest transfer of wealth in the history of mankind.

E. Frank Stephenson responds in the April issue of The Freeman:

The $700 billion that Americans spend annually to purchase oil from other countries is a price not a transfer. A true transfer— unemployment benefits or a taxpayer subsidy to a failing company—is a payment made to someone who pro­vides no good or service in exchange. By nature transfers are zero-sum. One person “gives” through coercive taxation; the other person receives.

By contrast, when one makes a purchase, the money one pays is the price of the good, one side of a mutually beneficial voluntary exchange. Each party to the transaction trades away something in return for some­thing else he or she values more highly. If I spend $2 for a cup of coffee, I’ve made a purchase not a transfer. I get the coffee, which I value more than anything else I could have bought for the $2, and the coffee shop gets the $2, which it values more than the coffee.

For the $700 billion we send to oil exporters, we get something in return—oil. Our receipt of millions of barrels of oil in exchange for that money is hardly a transfer. We receive a versatile commodity that can be used for everything from making plastics to fueling family vacations. The exporters receive the $700 billion that they can then use to purchase other goods and services.

MP: Last summer I wrote:

Foreign oil producers like Canada, Saudi Arabia, Mexico (top three countries for U.S. imports) send us their oil, and we send them "green pieces of paper with dead presidents' pictures," aka as USDs. That imported oil helps to fuel our economy, cars and factories, raising our standard of living.

Oil producers in Canada, Saudi Arabia and Mexico now have US dollars, which must be spent back in the U.S. on American goods and services, or invested in the U.S. financial markets, either by the oil producers, or by those who buy the USDs from them.

Importing oil certainly involves a transfer, but it's not a transfer of wealth, it's a market transaction involving the exchange of oil for currency. If it IS a transfer of wealth, it seems like we got the better end of the deal: Their valuable natural resources get transferred to the U.S., in exchange for paper currency, which gets spent back here eventually.

In T. Boone Pickens' version, it seems like wealth gets transferred overseas without any benefit to the U.S. But oil imports, like all trade, involves mutually beneficial exchange. Remember trade is win-win, not win-lose (like T. Boone Pickens suggests).

One dictionary definition of "wealth" is "an abundance of valuable resources." In that case, wouldn't T. Boone Pickens' "greatest transfer of wealth in the history of mankind" actually be a transfer of wealth in the form of valuable natural resources (oil) TO the United States, and not a transfer of wealth FROM the United States in the form of paper currency?

Button of the Day

HT: Economix

Google Trends: News Reference Volume

"Great Depression," click to enlarge

MP: Google Trends shows a decline in News Reference volume for all three of the terms "Great Depression," "credit crisis," and "layoffs." Does this suggest that the worst is behind us, and we can expect a pending economic recovery?

Should President Obama Allow An Unlicensed Interior Designer To Decorate the White House?

Should moving a throw pillow get you fined or jailed?

Natasha Lima-Younts can't see how she's putting anyone's life at risk. She's been an interior designer for more than 20 years. She started her own business, and hired dozens of employees. She has an extensive portfolio and magazine features about her work. What she doesn't have is a state license. That doesn't bother Yount's client Angie Stoeker, who loves what Younts has done with her home, but it does bother those who push for licensing laws.

Do licensing laws protect consumers from death and destruction or, as the Interior Design Protection Council argues, do they protect licensed designers from competition? Should Younts be stripped of the career it took her decades to build? Should President Obama be worried about his interior designer, the unlicensed Michael Smith? Jump into the throw-pillow fight and decide for yourself.

Watch the latest episode of Reason.tv here.

Markets in Everything: Raccoon Meat in Detroit

DETROIT NEWS -- Glemie Dean Beasley (picture above), a 69-year-old retired truck driver who modestly refers to himself as the Coon Man, supplements his Social Security check with the sale of raccoon carcasses that go for as much $12 and can serve up to four. The pelts, too, are good for coats and hats and fetch up to $10 a hide.

A licensed hunter and furrier, Beasley says he hunts coons and rabbit and squirrel for a clientele who hail mainly from the South, where the wild critters are considered something of a delicacy.

Hunting is prohibited within Detroit city limits and Beasley insists he does not do so. Still, he says that life in the city has gone so retrograde that he could easily feed himself with the wildlife in his backyard, which abuts an old cement factory.

He procures the coons with the help of the hound dogs who chase the animal up a tree, where Beasley harvests them with a .22 caliber rifle. A true outdoorsman, Beasley refuses to disclose his hunting grounds.

MP: Be sure to watch the 8-minute video about Glemie.
Thanks to an Anonymous tip.

Chart of the Day: Record Nuclear Output in 2008

Energy Information Administration -- It was anticipated that nuclear generation would decline in 2008. Preliminary data for much of the year seemed to confirm a decline, although the decline was not as great as initially projected. Cumulative monthly data released in the Electric Power Monthly shows nuclear generation for 2008 was actually a fraction of a percent higher than in the record year of 2007 (see chart above).

Cartoon of the Day

Car Stereo Theft: A Dying Crime

National Public Radio -- With all the bad news about property crime and the economy, many people are ready to lock down their possessions and bolt the doors. But here's one problem you don't need to worry too much about: car stereo theft.

It's a crime that plagued car owners throughout the 1990s. But according to the FBI's latest crime report, car stereo thefts have fallen by more than half over the past 15 years, from more than a million in 1994 to just over 400,000, even as car theft rates have remained high.

Washington, D.C., police officer Mark Lakomec has seen a dramatic difference on the street. For 10 years, his job has been to spot stolen cars, which he does two to three times a night. In the 1990s, he said, every stolen car was missing the stereo. These days, he says thieves will take just about anything — umbrellas, sunglasses, even motor oil — but they leave the radio.

Criminologists and industry experts say the biggest reason stereo theft has declined is that car manufacturers started installing good stereos. In the late 1990s, companies realized that they could charge more for their cars if they installed a high-quality factory sound system. And that, it turns out, made them theftproof.

"People don't steal factory radios," explained David Brown, owner of Savvy Mobile Electronics, one of the oldest — and last — stereo installation shops in D.C. "There's no market for factory radios because they normally don't fit in any other cars," he said.

MP: The chart above shows the dramatic change over time in the car options that car buyers consider "essential." In 1985, fewer than 9% of car buyers considered an AM/FM cassette tape player an essential car option, partially at least because of the active secondary market for car stereos that allowed car buyers to customize their cars' sound systems. Now that almost everybody considers a car stereo system an essential car option, the stereo systems are installed at the factory, which makes them theftproof, which has pretty much ended car stereo theft.

The chart shows many other vehicle options that are now considered "essential," when in 1985 they were considered expensive "non-essential" features.

Wednesday, April 01, 2009

Online Sales Make Hot Tickets Harder to Get

Two years after the repeal of New York State’s decades-old anti-scalping laws, the ticket marketplace has become a fiercely competitive game in which major corporations compete over resale prices with the fan next door, scalpers have a Washington lobbyist and thousands of tickets disappear in a fraction of a second.

After lobbying by ticket brokers to decriminalize reselling in the Craigslist era, many states in addition to New York have lifted restrictions on scalping, and large corporations have embraced what is called the secondary market for tickets, like eBay, which owns StubHub. New York’s scalping laws were softened in 2005 and have been suspended since 2007, allowing tickets for most large events to be resold at any price.

Once bought by telephone or at box office windows, tickets for concerts are now mostly bought online, pitting ordinary consumers against a network of professional scalpers who use ever more sophisticated technology to scoop up large numbers of tickets in a flash. “Presales” deplete the supply by offering early tickets to fan-club members. To see the hottest shows, fans must keep track of presale schedules and authorization codes (which are sometimes even auctioned on eBay), and coordinate friends and family members in multicomputer strategies for shows in danger of a quick sellout.

NY Times

Zimbabwe:World's First Trillion Dollar Ad Campaign

To protest the hyperinflation that has rendered the Zimbabwe currency worthless and to raise awareness of the dire economic situation there, the Zimbabwean Newspaper created an ad campaign featuring huge posters, wall murals, flyers, and even billboards all made out of trillions of Zimbabwean dollars. Check out the photos from the newspaper’s Flickr photostream.

The Mugabe regime has destroyed Zimbabwe. It has presided over the brutal oppression of the opposition, a cholera crises, massive food shortages and the total collapse of their economy. Furthermore anyone brave enough to report this has been bullied, beaten and driven into exile. One such group is ‘the Zimbabwean Newspaper’. However, not content with having hounded these journalists out, the regime has slapped an import ‘luxury’ duty of over 55% on them which makes the paper unaffordable for the average Zimbabwean. In order to subsidize the paper they need to sell it in England and South Africa, to raise the foreign currency.

A unique campaign was devised to promote the paper to raise awareness and increase readership. One of the most eloquent symbols of Zimbabwe’s collapse is the Z$100 trillion dollar note, a symptom of their world record inflation. This note cannot buy anything, not even a loaf of bread and certainly not any advertising, but it can become the advertising, it can be a powerful reminder about Zimbabwe’s plight and the need to hold someone accountable.

Markets/Licenses in Everything: Tarot Card Readers

From the Tarot Certification Board of America, you can become a Certified Apprentice Tarot Reader (CATR), Certified Tarot Reader (CTR), Certified Professional Tarot Reader (CPTR), Certified Tarot Consultant (CTC), Certified Tarot Master (CTM), Certified Tarot Instructor (CTI) and Certified Tarot Grandmaster (CTGM).

HT: Nicholas Bretagna II

Free Health Care: But Not From The Government

NEW YORK Drugstore operator Walgreens will offer free clinic visits to the unemployed and uninsured for the rest of the year, providing tests and routine treatment for minor ailments through its walk-in clinics — though patients will still pay for precriptions.

Walgreens said patients who lose their job and health insurance after March 31 will be able to get free treatment at its in-store Take Care clinics for respiratory problems, allergies, infections and skin conditions, among other ailments. Typically those treatments cost $59 or more for patients with no insurance.

Walgreens runs 341 Take Care clinics (pictured above) in 35 markets around the country, including Chicago, Atlanta, Miami and Cleveland.

Thanks to Kevin Sewell for the pointer to

Tuesday, March 31, 2009

The Fatal Conceit

According to the government, GM's Rick Wagoner was forced to resign because of poor performance. That’s embarrassing. You run an organization that loses billions of dollars and then get fired by a guy who heads up an organization that loses trillions of dollars.

~Jay Leno

March: Best Monthly Stock Gain Since Oct. 2002

The S&P 500 Index rose 8.5% in March, the best monthly gain since October 2002 (see chart above).

Consumers Gain from Taxi Deregulation in Ireland: More Taxis, Lower Prices, Shorter Wait Times

From the article "Regulatory Capture, Property Rights and Taxi Deregulation: A Case Study," by Sean D. Barrett in the Institute of Economic Affairs:

Pressure from incumbent taxi license holders, including brought a government decision in 1978 to limit the number of licences by statutory instrument. This led to the licenses acquiring a scarcity, monopoly value. As the Irish economy grew rapidly after 1987, the value of taxi licences rose rapidly to a high level by international standards. Dublin taxi numbers remained unchanged at 1,800 between 1978 and 1991, when there was an increase of 150. In 1997 there were 1,974 licences and on the eve of deregulation in late 2000 there were 2,721 licenses (see top chart above).

Restricting entry to the Irish taxi business became policy in an era of rapid economic growth. Between 1978 and 2000 the number of persons employed in Ireland increased by 63% from 1.1 million to 1.8 million. Unemployment fell from almost 18% in 1986 to 3.7% in 2001. The number of overseas visitors increased from 2 million to over 6 million in 2000.

The failure to increase taxi numbers in the fastest growing economy in the OECD caused widespread dissatisfaction because of the shortage of taxis in Dublin and elsewhere. Research found that 75% of those interviewed in street surveys disagreed or strongly disagreed with the statement that taxis "can be hired easily at peak times." A total of 72.6% of businesses experienced difficulties in obtaining a taxi, in particular between 4 and 6 p.m. In Dublin city centre some 9% of hourly observations resulted in average waiting times in excess of 15 minutes. During the period 11 p.m. to 4.00 a.m. waiting times in excess of 90 minutes were "frequently observed."

The price of a taxi licence in Dublin rose from I£3,500 ($7,385) in 1980 to I£90,000 ($108,000) in 2000 (MP: This represents an annual increase of 17.6%). Taxi license prices in Dublin were far above those in other European cities before deregulation in Ireland.

Market entry had been restricted from 1978 to 2000. A ministerial proposal to increase the number of taxis by just adding vehicles to existing taxi licences was challenged in the High Court by hackney drivers of private hire vehicles. In Irish transport law taxis are public hire vehicles which may be hailed on the street or at taxi ranks while hackneys are private hire vehicles which have to be hired by phone. The legal challenge was successful. Entry to the taxi sector was deregulated by the High Court and not just restricted to those with existing taxi licences. The High Court judgement stated that the restriction affected the right of people to work in the industry for which they were qualified and the right of the public to the services of taxis. The judgement also referred to the EU dimension of the case. It suggested that the proposed reform may discriminate against non-Irish residents as the great majority of current licence holders would be Irish. Following the deregulation judgement there was a dramatic increase in taxi numbers (see top chart above).

Since deregulation the local authority administration fee for the issue of a taxi licence is I£5,000 ($5,650, see bottom chart above). Large reductions in passenger waiting times have made deregulation popular among the public. There has not been a reduction in either driver or vehicle standards. Taxi deregulation in Ireland followed a restriction of new entrants for 22 years, the second half of which was a period of rapid economic growth.

The implications of the Irish High Court judgements concerning the rights of new market entrants to work in an industry for which they may be qualified and the rights of the public to services are significant in an economy with many cases of regulatory capture. If extended to other sectors the judgements would revolutionise the economy. Current legal opinion is that the taxi deregulation decision is indeed a turning point in Irish law dealing with property rights and market access. However, it is clear that concentrated producer interests are trying to use other aspects of the legal and regulatory framework to try to recapture monopoly rents.

MP: Intense market competition is often the best regulator of all, and the most effective protection for consumers against potential anti-market, anti-consumer behavior of producers. As Adam Smith wrote in the Wealth of Nations:

People of the same trade (e.g. taxi license holders) seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

iPhone App: 5-Minute Clinical Consult for MDs

Unbound Medicine has released its 5 Minute Clinical Consult application for the iPhone platform. The application is designed to quickly help physicians find relevant information at the point of care regarding "diagnosis, treatment, medications, follow-up, ICD-9 coding and patient teaching."

The 5-Minute Clinical Consult delivers fast, to-the-point guidance on the diagnosis and treatment for more than 700 adult and 200 pediatric medical conditions seen in everyday practice. This best-selling clinical reference contains all of the information you need to provide premium care to your patients including diagnosis, treatment, medications, follow-up, ICD-9 coding and patient teaching. Organized in a proven rapid-access format, all topics are concise, consistent and action-oriented. The latest evidence-based practice is incorporated in succinct recommendations for patient care.

Cartoon of the Day: Detroit News' Henry Payne

Monday, March 30, 2009

The Real Price of New Cars Has Fallen

In all of the discussions on the U.S. auto industry, GM, Ford, and Chrysler, etc., we shouldn't forget about the biggest beneficiaries of the intense global competition in the car industry: American consumers. The top chart above shows the CPI for new cars, which increased annually between 1973 and 1996 at the compounded rate of about 4% before leveling off and falling at a rate of -.50% per year for the last 12 years.

The bottom chart shows the CPI for All Items (4.6% annual inflation rate) vs. the CPI for New Cars (2.6% annual inflation). Since 1973, the CPI has increased by 5 times, compared to only a 2.5 increase in the CPI for new cars. If new cars had increased at the same rate as the CPI for all goods and services, new cars would be twice as expensive today (adjusted for quality). American car consumers have never had it so good - new cars are better and cheaper than at any time in history.

Ph.D. Admissions Shrinking

If ever there was a year that colleges were anxious about enrolling new and continuing students, this is it. Whether dependent on tuition revenue or state appropriations formulas, colleges are doing everything they can think of in this economically challenging year to attract students -- and the dollars that follow them.

But there is a notable exception: Several colleges have recently announced that, regardless of application quality, they plan to admit fewer Ph.D. students for this coming fall than were admitted a year ago. The economics of doctoral education are different enough from those of other programs that some universities' doctoral classes will be taking a significant hit, with potential ramifications down the road for the academic job market, the availability of teaching assistants, and the education of new professors.

Emory University plans a 40% cut in the number of new Ph.D. students it will enroll this fall. Columbia University is planning a 10% cut. Brown University has called off a planned increase in Ph.D. enrollments. The University of South Carolina is considering a plan to have some departments that have admitted doctoral students every year shift to an every-other-year system. These cuts are exclusively for Ph.D. programs. Terminal master's programs and professional school programs are generally being encouraged to fill their classes; those programs are of course ones in which many universities assume students will pay most or all costs themselves, using loans as needed.

The economic difference between Ph.D. and non-Ph.D. students is that the former tend to be supported with tuition waivers and stipends, while many of the latter pay their own way or bring in federal or other aid, such that colleges (beyond the altruistic reasons for educating students) are bringing in money, too. Doctoral students at many universities receive full support from their universities, creating a very different dynamic -- especially coupled with the need to make large cuts in budgets.

Inside Higher Ed

Cartoon of the Day: IBD's Michael Ramirez

Dirt Poor in Cuba, The "Workers' Paradise"

In Cuba, ration coupons allow for only about half of the needed calories, and agriculture is so inefficient that Cubans spend about 50 to 70% of their gross income supplementing the food available through the state system (MP: Compared to about 6% for Americans).

More than a quarter of the Cuban work force is involved in agriculture (MP: It's less than 2% in the U.S. and hasn't been 25% here since the early 1900s).

A recent article in the Cuban press, noted in a study by the U.S. Department of Agriculture's Office of Global Analysis, quoted a high-level Cuban ministry of agriculture official who revealed that 84% of all food consumed in Cuba is imported.

From the Weekly Standard, via NCPA.

Markets in Everything: Spray Painting Lawns

PERRIS, Calif. (AP)A town is going green to combat foreclosure blight: A contractor has been hired to spray-paint lawn bald spots. Perris spokesman Joe Vargo said contractor Dave Milligan uses an environmentally friendly dye that lasts up to six months and is harmless to people and pets. The city hopes the foreclosed properties are purchased and occupied before the lawn needs a touchup.

It costs about $550 to spray-paint a lawn. The city, some 70 miles southeast of Los Angeles, has set aside $2 million in an effort to stabilize foreclosure-fraught neighborhoods.

Sunday, March 29, 2009

Cars in Cuba: Years of Paperwork, An Official Letter, Verification of Buyer's Ideological Purity

Buying a car in Cuba is like one of those Indiana Jones adventures: you can end up with a heart attack, or a ten-year wait. For a long time it was only possible to get a car as a part of the distribution based on merit. An outstanding worker, with thousands of volunteer hours or a mission as a soldier to Angola or Ethiopia, might consider himself lucky if he was allowed to acquire a Moskovich or a Lada. Professionals of the highest rank would compete in the universities and study centers for the small allocations of automobiles. Meanwhile, government officials could aspire to more modern models, which would be repaired in the State’s own workshops.

When the pipe that carried the subsidy from the Kremlin to here collapsed, the distribution of appliances and cars based on merit ended. It began to work in another way, with money as the medium of exchange to get a vehicle. However, a selective filter was maintained to get the right to buy one of the newcomers, such as a Citroen, Peugeot or Mitsubishi. The old cars acquired before 1959 can be sold, but transferring ownership of the cars obtained for labor or ideological qualities is prohibited. The regulations ended up stipulating that what was acquired in those years of “Real Socialism” is only half owned, non-transferable and easily confiscated.

To this day, although some shops display modern all-terrain air-conditioned minibuses, no Cuban can order and buy a car simply by having the money; they must have a letter of authorization in advance, which takes years of paperwork. The process includes an exhaustive investigation into the origins of the funds, along with verification of the ideological purity of the buyer. For almost a decade, the signature on this safe-conduct was that of Carlos Lage, vice president of the Council of Ministers, who was thrown out of office a few weeks ago. So, in the midst of the astonishment caused by his removal people are asking, “Now who’s going to sign the letters to get a car?”

From Cuban blogger Yoani Sánchez (CD post on her here).

Privilege of Cartel Membership:Above-Mkt. Returns

Market Watch -- Medallion Financial Corp. (NASDAQ: TAXI), a specialty finance company with a leading position servicing the taxicab industry announced that earnings, or net increase in net assets resulting from operations was $2,832,000 or $0.16 per diluted common share in the 2008 fourth quarter.

Andrew Murstein, President of Medallion Financial stated, "We are very pleased with the year's results, especially given what has been a challenging environment for financial institutions. Underlying our performance is the collateral value we have in our medallion loans. In over 70 years of involvement in the medallion industry, we have experienced zero losses on any taxi medallion loan we have originated in New York City.

Additionally, taxi medallions are one of the few assets that have appreciated in value in 2008, increasing in every one of our operating markets, and have continued that trend thus far in 2009. Prices in 2008 for corporate medallions in New York City increased over 24% and are currently at all-time highs of $750,000 per medallion in March 2009 (see chart above, data here).

The taxi industry is somewhat insulated in this type of economic environment for several reasons from increased fleet utilization due to the influx of manpower from job losses in other industries, to more people riding taxis as corporations cut back on limos and other car services. In addition, our loan to value ratio on our entire medallion portfolio is now under 50%."

MP: The NYC taxi industry is also insulated very well from competition, since it operates as a cartel with legal restrictions on entry. According to the NYC Taxi and Limousine Commission, the official name of the NYC Taxi Cartel:

In 1937, the number of taxicab medallions was limited to those that existed at that time. By the late 1940s, this number had settled at 11,787. Since 2003, State and local legislation has allowed the Taxi and Limousine Commission (TLC) to sell new medallions, bringing the current total to 13,150 yellow medallion taxicabs operating in New York City. A new medallion is a rare opportunity.

MP: Yes, a rare opportunity to join a cartel with significant barriers to entry. And cartel membership does have its privileges, including above-market rates of return (see chart below). Since January 2004, the price of NYC taxi medallions has increased 2.6 times, while the S&P500 has declined by 28%.