Monday, October 12, 2009

7th Consecutive Monthly Gain in World Stock Value

As stock markets around the world gained ground in September (MSCI World Index increased by 3.8% for the month), the total world stock market capitalization increased by $1.94 trillion in September, according to preliminary data from the World Federation of Exchanges. The September gain follows increases of $1 trillion in March, $3.69 trillion in April, $4.12 trillion in May, $575 billion in June, $2.92 billion in July, and $1.12 trillion in August, and is the first time in more than two years of seven consecutive monthly advances in world stock market value.

The cumulative seven-month gain of $14.375 trillion in world stock market capitalization brings the value of world equities up to $44.77 trillion in September, the highest level since August 2008, and marks a 52.7% increase from the February bottom (see chart above).

Canadians Speak Out Against Socialized Medicine III

Canadians have to put up with long waits to see specialists or get diagnostics like MRIs or CT scans. Now, businesses offering insurance products to help them avoid waiting for a critical test are trying to offer options, but they are finding resistance from special interests within Canada. Part III of the video series from Michigan's Mackinac Center for Public Policy: "Canadians Speak Out Against Socialized Medicine."

Canadians Speak Out Against Socialized Medicine II

Canada's public health care system promises universal coverage, but it does not guarantee universal access on a universal schedule. Long wait times force some Canadians living in pain to go out of country rather than wait 6 months to a year and a half for surgery for non-life-threatening conditions. Watch Part II of the Mackinac Center for Public Policy's series on "Canadians Speak Out Against Socialized Medicine."

Canadians Speak Out Against Socialized Medicine I

With Canadians enduring pain for months and years while they wait for surgery, traveling to the U.S. for treatment, entering "lotteries" to get a doctor, and getting "wait list insurance," is Canada really a model for U.S. health reform? As America moves closer to a government-controlled health care system, anxious Canadians want to set the record straight about life under their country's “universal” system.

Join Michigan's Mackinac Center for Public Policy, as it journeys across Canada, documenting harrowing stories from real Canadians of long waits, physician shortages, doctor lotteries, special treatment for insiders and being forced to travel abroad for basic medical care. This is the first in a series, more videos to follow on CD.

Energy Crisis Postponed: New Gas To The Rescue; U.S. May Return to Near Energy Self-Sufficiency?

Engineers have performed their magic once again. The world is not going to run short of energy as soon as feared. Tony Hayward, BP's chief executive, said proven natural gas reserves around the world have risen to 1.2 trillion barrels of oil equivalent, enough for 60 years' supply – and rising fast.

"There has been a revolution in the gas fields of North America. Reserve estimates are rising sharply as technology unlocks unconventional resources," he said. This is almost unknown to the public.

As for the U.S., we may soon be looking at an era when gas, wind and solar power, combined with a smarter grid and a switch to electric cars returns the country to near energy self-sufficiency.

Ambrose Evans-Pritchard in the U.K. Telegraph

MP: The chart above shows monthly U.S. natural gas imports back to January 1985 and through July 2009 (EIA data here). Imports in May of this year (258,033 MMcfs) were at a level last seen almost 11 years ago, in November 1998 (see bottom red line in graph). On a 12-month moving average basis (to smooth out the monthly variations), natural gas imports have fallen this summer to the same level as January 2001, almost nine year ago (see top red line in graph).

HT: R. Adams

Update: See related NY Times article "
New Way to Tap Gas May Expand Global Supplies":

Gas analysts have made a wide array of estimates for how much shale gas could be tapped globally. Even the most conservative estimates are enormous, projecting at least a 20% increase in the world’s known reserves of natural gas.

One recent study by IHS Cambridge Energy Research Associates, a consulting group, calculated that the recoverable shale gas outside of North America could turn out to be equivalent to 211 years’ worth of natural gas consumption in the United States at the present level of demand, and maybe as much as 690 years. The low figure would represent a 50% increase in the world’s known gas reserves, and the high figure, a 160% increase.

The projections suggest that the new method of producing gas “is the biggest energy innovation of the decade,” said Daniel Yergin, chairman of the Cambridge consulting group. “And the amazing thing is there was no grand opening ceremony for it. It just snuck up.”

HT: Colin, who wrote in a comment on this post:

It's further evidence of the genius of the free market and should warrant increased skepticism of centrally planned efforts to move the US to alternative energy sources. Guided by the price mechanism, it is the market, not politicians, that should be charting our future direction in energy.

To the Pouting Pundits of Pessimism: V-Shaped Economic Recovery Is Well Underway

By nearly every measure, the economy is tracing out a V-shaped recovery. The pouting pundits of pessimism say that people aren't spending, but retail sales (excluding autos) are up at a 3.9% annual rate so far this year versus double-digit declines late last year. Manufacturing has turned the corner (the ISM Manufacturing Index has been above 50 for two straight months), imports and exports are bouncing back, commodity prices are up significantly, and real GDP is set for solid gains of 3%-4%.

Housing has turned the corner as well. After bottoming in January, new home sales are up 58% at an annual rate. Housing starts have also bottomed, housing inventories have plummeted, and home prices are on the rise. The S&P/Case Shiller 20-city index shows that home prices are up for two consecutive months and have risen in 15 out of 20 cities during the past three months.

Jobs are always a lagging indicator, but there are three other contributing factors to the current lackluster jobs numbers. First, CEOs are skeptical of the recovery and tentative about hiring. And productivity is allowing more production with fewer workers. But productivity can only hold off new hiring for so long. With inventories at rock-bottom levels, consumer spending on the rebound and profit-margins wide, job growth should expand sharply in the quarters ahead. Expect positive job growth in late 2009 or early 2010.

~Brian Wesbury writing in
today's Wall Street Journal

Perverse, Reverse Marxism: Capitalist Consumers Are Exploiting the Innovators and Producers?

From the WSJ article "Media Moguls and Creative Destruction: Competition Works to the Benefit of Consumers, Not Producers":

The consumer, not the producer, is the beneficiary of greater competition.

From the NBER paper "
Schumpeterian Profits in the American Economy: Theory and Measurement":

The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits and then estimate the value of these profits for the non-farm business economy.

We conclude that only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers. For the entire postwar period and for the nonfarm business sector, innovators are able to capture about 2.2% of the total surplus from innovation.

MP: It almost seems unfair that consumers engage in such blatant exploitation of producers and innovators, doesn't it? They do all of the entrepreneurial, innovative work, and we get all of the benefit in the form of lower prices, improved products and a higher standard of living. And then after we exploit the producers and innovators as consumers, we turn around and tax them on their minuscule profits with progressive income tax rates.... If only consumer and taxpayer greed wasn't so rampant.....

Sunday, October 11, 2009

Nobel Hope Prize: First Futures Prize in Diplomacy

The Nobel Peace Prize awarded to President Obama was greeted with astonishment as much as any other emotion, even among many of his admirers. Our own reaction is bemusement at the Norwegian decision to offer what amounts to the world's first futures prize in diplomacy, with the Nobel Committee anticipating the heroic concessions that it believes Mr. Obama will make to secure treaties that will produce a new era of global serenity.

~Wall Street Journal editorial

The U.S.A. Is Still the World's Largest Manufacturer

The chart above shows manufacturing output of selected countries and the BRIC countries, as a share of world manufacturing output in 2007, using United Nations data via the BLS (I haven't been able yet to find comparable data for 2008). It's interesting that U.S. factories produced almost twice as much output in 2007 as China, and the U.S. produced an amount equivalent to the total manufacturing output of the four BRIC countries combined (Brazil, Russia, India and China).

As a
Cato Study concluded in 2007, "Reports of the death of U.S. manufacturing have been greatly exaggerated."

And as David Brooks wrote in 2008, "Instead of fleeing to Asia, U.S. manufacturing output is up over recent decades. As Thomas Duesterberg of Manufacturers Alliance/MAPI, a research firm, has pointed out, the U.S.’s share of global manufacturing output has actually increased slightly since 1980."

According to the Federal Reserve data, the U.S. produced almost $3 trillion of industrial output in 2008, measured in 2000 dollars (or about $3.7 trillion in 2008 dollars). In other words, if the U.S. manufacturing sector had been counted as a separate country, it would have been tied with Germany as the world's fourth largest economy, behind the U.S. (non-manufacturing), Japan, and China, and ahead of the entire economies of France, U.K., Italy and Russia (data here).

Bottom Line: The U.S. is still the world's largest manufacturer.

Saturday, October 10, 2009

Emerging Markets Set 13-Mo. High, +67% YTD

LONDON, Oct 9 (Reuters) - Emerging stocks hit their highest level in over a year for a fourth straight day on Friday and sovereign debt spreads traded at their tightest since August 2008, boosted by growing optimism over the global economy and an ongoing search for yield.

MP: The chart above shows that the MSCI Emerging Markets Index reached 946.3 on Friday, the highest level since August 29, 2008. On a YTD basis, the Emerging Market Index is up by 67%, and from the early March low almost 100%.

V-Shaped Recovery: "Virtually Unstoppable"

Yahoo! Finance -- Good news for those worried about the economy: "We are in the early stages of the recovery and it looks to be a lot stronger" than the consensus for modest 2%-3% GDP growth, says Lakshman Achuthan, managing director of the Economic Cycle Research Institute (ECRI). Furthermore, the recovery will be "V-shaped" and is now "virtually unstoppable" - at least through the first half of 2010 -- Achuthan says, citing a "positive contagion" in the economy right now, based on leading economic indicators. Most notably, the ECRI's index of Weekly Economic Indicators just hit a new record high (see chart above).

NEW YORK, Oct 9 (Reuters) - As the U.S. economy rebounds from a long-running recession, a weekly leading index of future growth released on Friday showed the annualized growth rate hitting a record high. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to 128.3 in the week to Oct. 2 from 127.1 the prior week. The index's yearly growth rate rose to new all-time high of 26.1 percent in the latest reading, from a revised 25.0 percent the prior week (see chart above).

"With WLI (Weekly Leading Index) growth rocketing to a new record high, the economic recovery will prove to be far more resilient in coming months than most believe possible," said Lakshman Achuthan, ECRI's managing director. "The risk of a double dip (recession) is very low," Achuthan added.

Bloomberg U.S. Financial Conditions Index Reaches A 26-Month High, Highest Level Since Aug. 2007

The Bloomberg U.S. Financial Conditions Index provides a daily measure of the relative strength of the U.S. money, bond and equity markets, and is considered a useful gauge of the overall conditions in U.S. financial and credit markets. The Financial Conditions Index climbed to a level above -0.50 yesterday (Friday, closing at -0.46) for the first time since August 8, 2007, and is now at a 26-month high (see chart above). Another positive sign that an economic and financial recovery are underway.

Friday, October 09, 2009

Libertarian Party Suggests Announcements for Nobel Prize Should Be Moved to April Fool's Day

WASHINGTON - The Libertarian Party today suggested that, in the future, the announcement date every year for Nobel Prizes be moved to April 1.

"Unlike the gullible people who listened to The War of the Worlds radio broadcast in 1938 and thought Martians really were attacking the United States, when I heard this morning that Barack Obama won the Nobel Peace Prize, I changed the channel in disbelief. But, the same thing was being said in multiple places," Libertarian National Committee Chairman William Redpath said.

"The gravity of the Nobel awards has not been augmented by some of their recent selections, including today's announcement, last year's award of the Economics prize [
posthumously] to Paul Krugman, or the 2007 Peace Prize to Al Gore, whose global warming theories he will not defend in open debate. Maybe an early Springtime announcement date would be more appropriate."

Redpath continued, "I didn't know that it was the role of the Nobel Peace Prize Committee to be handicapping the future performance of individuals and organizations. Nonetheless, we congratulate President Obama on his award and hope that three-and-a-quarter or seven-and-a-quarter years from now the Nobel Peace Prize Committee will be seen as prescient." Reports on Obama's Prize(s)

Update: Greg Mankiw reports that a first-year graduate student has just won the Nobel Prize in Economics!

Cost of Health Care Legislation: $829B? Not Likely

According to the preliminary analysis just released by the Congressional Budget Office and the Joint Committee on Taxation, the Senate Finance Committee’s health bill will cost American taxpayers $829 billion over ten years.

How much confidence should we have in that forecast of $829 billion? Not too much, based on a July 2009 study from the Joint Economic Committee (JEC) “
Are Healthcare Reform Cost Estimates Reliable?” which provides historical evidence that:

Since the end of World War II, major healthcare reform proposals have generally always cost more—sometimes significantly more—than the highest cost estimates published while the legislation was pending (see table and chart above).

Read my full post at
The Enterprise Blog.

Trading Opens Today for Nobel Prize in Economics

Intrade link.

Protectionism Destroys Fraternity Between Nations

According to Alfred Nobel's will, the Peace Prize should be awarded "to the person who shall have done the most or the best work for fraternity between nations, for the abolition or reduction of standing armies and for the holding and promotion of peace congresses."

The complete abdication by the Obama administration on trade should disqualify him from the Nobel Peace Prize. Free trade has lifted hundred of millions out of poverty worldwide and promoted a closer global society. But the Obama White House has been as protectionist as any in memory. Free trade is that the core of foundation of the post-World War II economic order.

Jimmy Pethokoukis

Good point, since protectionist trade policies like the tire tariffs work to destroy the "fraternity between nations" not promote it.

Bloggers Offer Fresh Hope in Cuba: Cuba's Surprisingly Vibrant Blogosphere

BBC -- Cuba's dynamic emerging blogging community has recently been testing the limits of free expression with posts ranging from vivid accounts of everyday life to sometimes risky calls for political change in the Communist-run state. Bloggers - many of whom were born after the 1959 revolution - are trying to move debate away from the established official doctrine to exploring social and economic issues.

Most still avoid direct criticism of the government, for fear of provoking a crackdown on the country's growing internet. However, the government's present tolerance could change, as an increasing number of bloggers are beginning to condemn the harassment of independent writers and are demanding structural reforms.

From The Committee to Protect Journalists
"Special Report: Chronicling Cuba, Bloggers Offer Fresh Hope":

A vibrant, independent blogging culture is emerging in Cuba, of all places. Numerous journalistic blogs are exploring important social and economic issues. Will the regime crack down, or is a new era dawning?

Despite vast legal and technical obstacles, a growing number of Cuban bloggers have prevailed over the regime’s tight Internet restrictions to disseminate island news and views online. The bloggers, mainly young adults from a variety of professions, have opened a new space for free expression in Cuba, while offering a fresh glimmer of hope for the rebirth of independent ideas in Cuba’s closed system.

Thursday, October 08, 2009

The Invisible Man: Just Tryin' To Fit In

Liu Bolin just paints himself to fit into the background, there's no trick photography, see more photos here.

Hint: Look by the front tire for the Invisible Man, since he almost entirely disappears in the photo below.

Thanks to Joyce Howe.

Countrywide/BAC REOs Fall to Feb. 2007 Levels

The Countrywide Foreclosure Blog reports that there are currently 5,959 foreclosed homes being offered for sale on the Bank of America/Countrywide website, down from the peak of 21,500 in November 2008, and back to levels of February 2007 (see chart above, click to enlarge).

Below are charts for the individual states that had some of the worst foreclosure problems (AZ, CA, FL and NV), showing significantly reduced levels of lender-owned (REO) properties in October 2009. In all four states (AZ, CA, FL and NV), the REO levels are at two-year lows.

Comment: Although these foreclosure data are for just one mortgage company, Countrywide was (or still is) the largest mortgage company in the U.S. and it financed 20% of home mortgages in 2006, so this reduction of foreclosed homes for sale by Countrywide to early 2007 levels provides evidence that the real estate market has recovered significantly from the fall 2008 peak in REOs. Previous CD posts have presented evidence that the real estate markets in Florida, California and elsewhere have exhibited ongoing sales gains in recent months, increases in median home prices, and reductions in inventory levels. And with 30-year mortgage rates falling to 4.87%, all of the ingredients are in place for a continued real estate recovery, along with a general economic rebound.

America Then and Now

4-Block World.

The "Man-Cession" Denials

In the last week, there have been a number of news reports that could be classified as “man-cession denials.” Here are some examples:

St. Louis -- A new St. Louis Fed research report released today debunks the popular notion that the current recession is predominantly a “man-cession”—a recession hurting American males proportionately more than women and other demographic groups.

Reuters -- The novelty of the man-cession has been overstated. Delve deeper, and men have not been doing so badly by historic standards.

CNBC-- Recessions are almost always man-cessions.

The data, certainly at least the male and female unemployment rates, suggest otherwise—the current “man-cession” is a very real and historically unprecedented labor market phenomenon, see the charts above and see the full analysis here at The Enterprise Blog.

Jobless Claims (4Wk. Avg.) Fall to Lowest Level in 37 Weeks, Down 119,000 (-18%) From April Peak

WALL STREET JOURNAL -- In a positive sign for the labor market, the number of U.S. workers filing new claims for jobless benefits decreased more than economists expected last week. Initial claims for jobless benefits fell by 33,000 to 521,000 in the week ended Oct. 3, the U.S. Labor Department said in its weekly report. The last time initial claims were this low was on January 3.

The four-week moving average of new claims, which aims to smooth volatility in the data, also fell by 9,000 to 539,750 from the previous week's revised figure of 548,750. The last time the four-week moving average was this low was on January 17 (see top chart above).

Economists at JP Morgan Chase & Co. wrote in an economic analysis last week that claims generally appear to be on a downward trend, but the pace at which they are falling is a bit sluggish. "The drop has been somewhat slow relative to other large recessions," the economists wrote last week. "Initial jobless claims have fallen 18% in the 26 weeks since they peaked. In the same time span, jobless claims fell by 23% after the 1975 recession, 33% after the 1980 recession, and 29% after the 1982 recession. Claims are usually a good predictor of employment, and the slowness of their decline could indicate a sluggish recovery in the labor market."

MP: From the early April peak of 658,750, jobless claims (four-week average) have fallen by 119,000 (-18%), and that measure of jobless claims has fallen in 20 out of the last 26 weeks. It's also interesting that in the WSJ article above, the Chase economists didn't mention the two most recent recessions of 1990-1991 and 2001. During those two recessions, jobless claims fell by a comparable amount, by -15% from the March 1991 peak and by -19% from the October 2001 peak (see bottom chart above).

Wednesday, October 07, 2009

Searching Without Success for Detergent in Cuba, Where H1NI Has Fertile Ground to Reproduce

In his movie "Sicko" and elsewhere (see 20/20 interview here), Michael Moore has extolled the virtues of Cuba's universal health care system, including claiming that Cubans enjoy better health care than Americans, that there is a "clinic in every neighborhood in Cuba," and that according to the World Health Organization and others, "If there's one thing they do right in Cuba, it's health care, and there's very little debate about that."

Here's another version of the health care story in Cuba, told not by an obese, multi-millionaire filmmaker from America, but by a courageous woman who lives in Cuba, and writes about her daily struggles there on the
award-winning blog Generacion Y:

I search, without success, for a bottle of detergent to wash the glasses smeared with grease and fingerprints, which don't yield to water and the dishcloth. Looking for the soapy liquid, I have walked part of Havana today, as the television announcers call on us to strengthen our hygiene before the advance of H1N1. The alert occasioned by the epidemic, however, has not caused the shops to lower the price of cleaning products, not even the cost of simple soap which is the equivalent of the wages for a full day's work. Instead, the opposite has happened. The collapse in imports has been most notable in those that are used to bathe and disinfect.

The voice of the announcer calls on us to wash our hands often, use handkerchiefs when we sneeze and maintain good personal hygiene, but the reality forces us into filth. We lack face masks, running water in many houses, the simple possession of vitamin C to strengthen the organism, and cleanliness in public places. Thus, the so-called "swine flu" has fertile ground to reproduce. While it advances through our neighborhoods, the official media maintain their reserve and don't mention the closed schools, the quarantined sites and the full hospitals.

This illusion of paradise is killing us. This wanting it to appear that we live better and that our statistics put us at the world average, cannot manage to hide the fragility of our society in the face of an epidemic that requires material resources in the hands of citizens.

If soaping the body and having a bit of alcohol to sterilize the hands become luxuries, how can we stop the pandemic that is already upon us? If the September ration of soap never even reached the rationed market, how is it possible that on TV they call for hygiene without referring to the material resources to accomplish it. Is it that they haven't noticed before that we are sinking into the dirt?

They have to face the ravages of conjunctivitis, diarrhea, and the viruses to figure out that sanitation is not only a white coat and a stethoscope, but starts in the streets, with collecting the garbage, with showers in the houses and with a mother who should be able to wash the plate her child will eat off.

How Do We Keep Gov't. Honest? Medicare Denies More Insurance Claims Than the Private Sector

The purpose of the American Medical Association's "2008 National Health Insurer Report Card" is to provide physicians and the general public a reliable and defensible source of critical metrics concerning the timeliness, transparency and accuracy of claims processing by the health insurance companies that are responsible for paying these claims. Billions of dollars in administrative waste would be eliminated each year if third party-payers sent a timely, accurate and specific response to each physician claim.

An analysis of almost 10,000,000 insurance claims by the AMA to seven private insurance companies and Medicare between March 2007 and March 2008 reveals that more than half a million (574,591) claims were denied, and the chart above displays the percentage of claims denied by each insurer during that period. Medicare led the group with the greatest percentage of insurance claims denied (6.85%), more than double the denial rate for private insurers like UHC (2.7%), Coventry (2.9%), Humana (2.9%) and CIGNA (3.4%).

David Weinberger writes yesterday on the
The Heritage Foundation Blog that:

The Obama administration repeats ad nauseum that we need a government option to “keep insurance companies honest” and to make sure they don’t deny anyone coverage. Well what does one say about the fact that Medicare denies more claims than private insurers?

Update: Details on "Denial of Claim":

Description: What percentage of claim lines (i.e., records) submitted are denied by the payer for reasons other than a claim edit? A denial is defined as: allowed amount equal to the billed charge and the payment equals $0.

When Will The "Jobless Recovery" End and When Will the End of the Recession Be Official?

It’s almost certain now that the recession probably ended sometime this summer, and an expansion is now underway. The Wall Street Journal consensus of more than 50 professional economists is for 3% real GDP growth in the third quarter, and a 2.8% annual growth rate in 2010. With that kind of growth in real output, the recession might now be over, but a couple of important questions remain: 1) How long will the unemployment rate continue to rise, and 2) When will the National Bureau of Economic Research (NBER) officially declare that the recession has ended? History might help provide answers (see chart above).

Read my whole post here at
The Enterprise Blog.

9th Monthly Increase in Used Vehicle Price Index

Wholesale used vehicle prices (on a mix, mileage and seasonally-adjusted basis) rose 1.8% in September. This brought the Manheim Used Vehicle Value Index to a record high of 118.5, representing a 6.9% increase from a year ago. Adjusted wholesale prices have now risen for nine consecutive months (see chart above).

The supply/demand dynamic that has pushed used vehicle values higher is a multiple-year, not a multiple-month, trend. Nevertheless, wholesale prices appear to be reaching a plateau. In particular, the last week of September saw an easing in prices that was greater than the normal seasonal pattern.

From a previous Manheim Consulting 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.

MP: The 2.1 point September increase in the Manheim Used Vehicle Value Index marks the 9th consecutive monthly increase (every month this year), following decreases in 10 out of the previous 14 months (from October 2007 to December 2008). The year-to-year increases in May (1.5%), June (5.8%), July (5%), August (5.1%) and September (6.95%, highest increases since Dec. 2005) for the index follow 17 consecutive months of consecutive year-to-year decreases (Nov. 2007 to April 2009). Further, the September 2009 reading of 118.5 represents an all-time record high for the index (back to 1995), and is now higher than the pre-recession level.

Certainly, the Cash-for-Clunker factor might have created a temporary upward bias in the used vehicle index over the last couple months, but there was already a strong upward trend in place, and the 20.5 point 9-month increase from December-September could reflect the momentum of an economic recovery.

Quote of the Day

After political crusades for "affordable housing" ended up ruining the housing market and much of the economy with it, many of the same politicians are now carrying on a crusade for "affordable health care." But what you can afford has absolutely nothing to do with the cost of producing anything. Refusing to pay those costs means that you are just not going to continue getting the same quantity and quality-- regardless of what any politician says or how well he says it.

Thomas Sowell

Tuesday, October 06, 2009

Minnesota Proud

4-Block World.

Monday, October 05, 2009

Michael Moore, Closet Tax-Cutting Supply-Sider?

Michael Moore says he is sick and tired of special tax breaks for corporations. Unless of course they happen to benefit him personally. Then he likes them. A lot.

According to Peter Schweizer in Tuesday's
Investor's Business Daily:

Moore has found a tax break for corporations he actually likes. And his arguments in favor of it sound more like they're coming from a supply-sider than the populist he professes to be.

Michigan, where Moore lives, offers the most generous tax breaks and subsidies for film producers in the country. For every dollar you spend making a movie in Michigan, taxpayers will give you back 42 cents. Moore actually relocated his postproduction team from New York City to Michigan just to take advantage of these tax credits.

But Moore is not just a recipient of these tax credits. His hypocrisy goes deeper. As a member of the Michigan Film Office Advisory Council he has been a cheerleader for them. Appointed to the post by Gov. Jennifer Granholm in September 2008, Moore sees himself as an ambassador who will help bring the film business into the state.

And how does he profess to bring the film business to Michigan? By offering it tax breaks.

The Most Energy Efficient Economy in History

Bottom Line: The U.S. economy has never been more energy efficient than it is today and it just keeps getting more efficient every year as we find ways to produce more output with less energy (see top chart). Home appliances keep getting both cheaper to purchase and cheaper to operate over time (see charts above), which translates into a rising standard of living for the average American. Amid all of the gloom and doom we hear about the state of the economy, the increase in energy efficiency is something to celebrate.

See full post here at The Enterprise Blog.

ISM Service Sector Index Highest Since May 2008

NEW YORK ( -- The nation's service sector expanded in September for the first time in more than a year, according to a report from a purchasing managers' group released today. The Institute for Supply Management's non-manufacturing index rose to 50.9 last month from 48.4 in August. Economists surveyed by had expected a reading of 50, which is the point at which the index reflects expansion.

It was the second consecutive month of improvement in the index. The index last reflected expansion in August 2008. The services sector, which includes businesses such as banks, airlines and restaurants, makes up the bulk of economic activity in the United States (90%).

MP: The ISM Non-Manufacturing Index has increased in five out of the last six months, and reached a level in September last seen in May 2008.

Appearance on CNBC's "The Kudlow Report"

From last Thursday.

Capitalism Allows This: 97.3% Gross Profit Margin; Should There Be a Windfall Profits Tax on This?

Michael Moore: Capitalism did nothing for me.

According to
Box Office Mojo, Michael Moore's movie "Fahrenheit 9/11" had a worldwide gross of $222,446,882, with a production budget of only $6,000,000. That's a gross profit margin of 97.3%, and a gross return on investment of 3,607% (not all for Michael Moore, since there were obviously distribution costs and payments to theaters, etc.). Not sure if that sets any kind of profit record for a movie, but it's a pretty impressive, eye-popping profit margin and ROI, and the kind of capitalist return on a movie that a Cuban filmaker would only dream about.

HT: Argonaut

Update: As MJD suggests in the comments, perhaps Michael Moore should be investigated for making "windfall profits" on this movie.

Statistics of the Day: The Great Gender Divide

The gender gap in attending college reflects a long divide in overall academic achievement between boys and girls nationwide. Of particular concern are low high school graduation rates among boys.

In Boston, the four-year adjusted graduation rate for boys last year was about 58% compared with 73% for girls, according to state data. And boys are also less apt to win entry into one of the city’s three exam schools, where nearly all graduates go on to college.

The gender gap in Boston also crosses racial lines - adding a new dynamic in efforts to close achievement gaps. Black females, for instance, attend college at a rate about 5% points higher than white males.

Boston Globe

Sunday, October 04, 2009

America On Sale: Great Time To Be A Consumer

ABC NEWS -- There has never been a better time to be a consumer. America is on sale. The Great Recession has caused massive job losses and hardship for millions, but it has also fostered a shoppers' paradise. Anyone who still has the means to spend can find unheard of deals.

Prices on everything from clothes to coffee to cat food are dropping, some faster than they have in half a century. Items rarely discounted — like Tiffany engagements rings — are now. The two biggest purchases most people make — homes and new cars — are selling at steep price reductions.

What's happening now has been building for years. Wal-Mart Stores Inc. introduced "every-day low prices" many years ago. redefined the idea of bargain prices during the late 1990s when it helped introduce online shopping. After the 2001 recession, automakers introduced zero-percent financing to boost sales. McDonald's "Dollar Meals" made fast food even cheaper. But until the Great Recession came along, consumers hadn't seen anything yet.

Hotel rooms cost travelers nearly 20% less, on average, than last year, the biggest decline since Smith Travel Research began collecting data in 1987. Home prices have dropped 30%, on average, from the peak in 2006. In some markets, they're down more than 50%. Homes in parts of Detroit are cheaper than a new car.

Overall, prices are tumbling at the fastest rate in decades. The government's Consumer Price Index, which measures the average price of goods and services purchased by households, has fallen 1.5% over the last 12 months. The reading for July showed a 2.1% annual decline, the biggest since 1950 (see chart above).

U.S. Dollar: Spot Rates and Forward Rates

ISTANBUL -- Finance ministers from the Group of Seven rich countries face concerns over the future of the U.S. dollar as they meet Saturday in a forum whose role is increasingly in question. the finance ministers, who will be joined by their central bankers, have a number of issues to discuss as the world economy begins a slow recovery from the deepest recession since World War II.

Chief among these is likely to be the dollar, which has been falling in foreign exchange markets in recent weeks and months. In recent days, it sank to an eight month low against the yen, which nearly hit a year-high against the dollar, prompting concerns that a dollar crisis could bring the world recovery to a grinding halt.

MP: The chart above shows the current spot rates and one-year forward rates for the US dollar versus 16 major currencies (see full list of ex-rate quotes here). According to the one-year forward rates, the U.S. dollar is selling at a one-year forward premium versus all of the currencies listed except the Swedish krona and Swiss franc, and is even selling at a slight 0.10% premium against both the pound and euro.

Update: Thanks to Morganovich and HappyJuggler0 for pointing out that we can't necessarily use forward ex-rates to accurately infer anything about the future value of the dollar. I've re-titled the post and removed my comments about the stability of the U.S. dollar. Mea cupla.

Poisonous, Dangerous Cocktail: Expanding the CRA

As we try to shake off the financial crisis, here's a bright idea. Take a law that has led to the writing of an enormous amount of bad mortgages and expand it. Then take enforcement away from bank examiners and give it to housing activists. Sound like a poisonous cocktail? Well, it is what the Obama administration and Democrats are currently stirring up on Capitol Hill.

The White House and Congress want to expand a 30-year-old law--the Community Reinvestment Act (CRA)--that helped to fuel the mortgage meltdown (see chart above of the growth of CRA lending leading up to the financial crisis). What the CRA does, in effect, is compel banks to seek the permission of community activists to get regulatory approval for bank expansions and mergers. Often this means striking a deal with activist groups such as ACORN or unions like the Service Employees International Union and agreeing to allocate credit to poor and minority areas that are underserved.

In short, the CRA encourages banks to make trillions in loans they would not ordinarily make. What's more, these agreements often require that banks offer no-money-down mortgages and remove caps on how much debt a borrower can take on. All of this is done in the name of "financial democracy."

The CRA is not about community development; it is, essentially, affirmative action in lending. Trillions in loans are now to be made not on the basis of whether they can be paid back but to meet CRA goals. This is precisely what we need to get away from. Drinking this potent cocktail would be dangerous to our financial health.

~Peter Schweizer's excellent commentary in Forbes

Jobless Rate May Continue To Rise Through 2010

The chart above shows the monthly U.S. jobless rate back to January 1990 (BLS data here), highlighting (in grey) the 1990-1991 and 2001 recessions, and the two periods following the last two recessions that were referred to as the periods of "jobless recovery." Following the 1990-1991 recession, the unemployment continued to increase for 15 months until it peaked in June 1992 at 7.8%, and following the 2001 recession, the jobless rate increased for 19 months until June 2003 when it peaked at 6.3%.

Assuming that a) the most recent recession ended in June 2009 and b) we have another jobless recovery of at least 16 months, we can expect the unemployment to realistically continue to increase at least through the end of 2010 before it reaches its post-recession peak in the current "jobless recovery." Cracking the Education Monopoly

Los Angeles parents demand choice - and get it. Link

Capitalism: The Real Story

Michael Moore: Capitalism did nothing for me.

The data show that capitalism has actually done a lot for Michael Moore, and the millions of others living in countries with higher levels of economic freedom and capitalism. In fact, among many other benefits illustrated in the charts below, just being born in America added almost 20 years to Michael Moore's life expectancy compared to if he had been born in one of the countries in the bottom quartile of economic freedom (the 25% "least free" countries in the world), see the first chart below.

Source: The Cato Institutes's "Economic Freedom of the World: 2009 Annual Report."

MP: In other words, the evidence clearly demonstrates that along with capitalism and greater economic freedoms come: a) higher per-capita incomes, b) higher incomes for the poorest 10%, c) greater life expectancy, d) less corruption, e) cleaner environments, and f) greater political rights and civil liberties. Not a bad record for a system that Michael Moore portrays as evil, and says did "nothing for him."

Saturday, October 03, 2009

Adjusted Jobless Claims Suggest Recession Ended

The September employment report was released yesterday, and the graph above of Initial Jobless Claims as a Percent of the Labor Force (1974-2009) has been updated to reflect the September labor force of 154,006,000 and the September average for initial unemployment claims (559,625 for the 4-week moving weekly average). This measure of initial jobless claims, adjusted for the size of the U.S. labor force, shows that jobless claims peaked during this recession above the levels of the last two recessions (1990-1991 and 2001), but were never anywhere close to the levels of the previous three recessions in the mid-1970s and early 1980s (see chart above).

In other words, this recession was worse than the last two, but not nearly as severe as the previous three, using this adjusted measure of jobless claims. Additionally, the sharp .059% reduction in adjusted jobless claims from the March 2009 high of 0.4226% to 0.3634% in September follows the same pattern of 0.05%-0.06% reductions in adjusted claims at the end of the 2001 recession (a .052% reduction from .3318% in October 2001 to February 2002) and at the end of the 1990-1991 recession (a .058% reduction from .3915% in March 1991 to .3327% in July 1991).

Finally, the current level of 0.3634% for jobless claims as a share of the September labor force is above the level at the end of the 2001 recession, but is very close to the levels that marked the ends of the four previous recessions (see dashed blue line in graph above).

See a very
similar analysis here from Scott Grannis, who alternatively calculates jobless claims as a percent of payrolls with the exact same graphical pattern presented here using jobless claims as a percent of the labor force (slightly different denominator, but same numerator, and same story).

Friday, October 02, 2009

Quote of the Day: Blogs, Modern Day Public Square

Whatever the drawbacks and limitations of blogging, it serves, today, as our culture’s indispensable public square. Rather than one tidy ‘unifying narrative,’ it provides a noisy arena, open to everyone, for the collective working out of old conflicts and new ideas. As the profession of journalism tries to rescue itself from the wreckage of print and rethink its digital future, this is where its most knowledgeable practitioners and most creative students are doing their hardest thinking.

~Scott Rosenberg, from "
Say Everything: How Blogging Began, What It's Becoming, and Why It Matters"

Mancession Continues: Male-Female Jobless Rate Gap at Record Level, Higher Than Last 2 Recessions

According to Table A-1 of today's Employment Situation report, male unemployment increased in September from 10.9% to 11% and female unemployment increased from 8.2% to 8.4%, and the male-female jobless rate gap fell from 2.7% in September from the all-time record gap of 2.7% in August. The current male-female jobless rate gap of 2.6% is three times higher than the maximum gap during the last recession and more than two times higher than the peak gap of 1.1% following the 1990-1991 recession. These facts about the male-female jobless rate gap are not only incontrovertible, they are truly unprecedented and historic.

And yet a new
St. Louis Fed research report released today claims to: "debunk the popular notion that the current recession is predominantly a “man-cession”—a recession hurting American males proportionately more than women and other demographic groups.

The “man-cession” catchphrase is misleading and fails to reveal the full consequences of the recession across different demographic groups, according to author Howard J. Wall, a St. Louis Fed vice president and economist. “While it is true men are affected more than women during recessions, this recession is nothing out of the ordinary,” Wall said. “By some measures, the difference between men and women is smaller than in past recessions.”

A quick search of the
full report shows that the term "unemployment rate" appears only once, but only in reference to the overall rate and not in reference to either men or women, and the terms "male unemployment" and "female unemployment" never appear. I'll read through more carefully later and make some additional comments, but I'm skeptical on first impression.

The Good Old Days Are Right Now

The chart above shows the significant increases in the energy efficiency of home appliances over time, with the refrigerator registering the most dramatic improvement (data were purchased from the Association of Home Appliance Manufacturers website).

In 1980, the energy factor (EF, a standard measure of an appliance's overall energy efficiency) of a standard home refrigerator was 5.59, and by 2008 the EF increased almost three-fold to 15.50, for a 177.3% improvement in energy efficiency in only 28 years. The other standard home appliances in the chart also had significant improvements in energy efficiency, from a 41.5% increase for the room air-conditioner, to a 91.4% increase for the dishwasher (thanks to Dennis Gartman for alerting me to these data in a recent "The Gartman Letter").

If the energy efficiency of a refrigerator has almost tripled since 1980, what's happened to its price, measured by the cost of the time it takes an average American to earn enough income to purchase a standard refrigerator?

In 1979, the 17-cubic foot Kenmore refrigerator pictured below from a Sears catalog cost $469.95 (on sale at the "lowest price in 1979"), and the average
hourly wage then was $6.34 (Total: Private Industries), meaning that it would take 74.1 hours of work at the average hourly wage to earn enough income to purchase the refrigerator.

A 17.5 cubic-foot Whirlpool refrigerator (pictured below) is currently listed on the Sears website for sale at $524.99. At the current average hourly wage of $18.67, it would take the average American today only 28.1 hours of work to buy the refrigerator compared to 74.1 hours in 1979.

Bottom Line: A standard refrigerator today is not only almost 3 times more energy efficient than a comparable 1979-1980 model, its cost today is only about 1/3 the price of the 1979 model, measured in what is ultimately most important: our time. Put those two factors together, and the average American's refrigerator is almost nine times better than the refrigerator of 1980. Stated differently, if refrigerators hadn't fallen in price by almost a factor of 3 since 1980, and if they hadn't improved in energy efficiency by almost a factor of 3, Americans might be paying $1,500 today for a 17 cubic-foot refrigerator instead of $525, and it would be almost three times as costly to operate.

Despite our current economic problems and high unemployment, in many areas American consumers have never had it so good. Ever. The "good old days" are now.

Post Office Version of the Big Three "Jobs Bank"

Federal Times -- The U.S. Postal Service, struggling with a massive $7 billion deficit caused by plummeting mail volume, spends more than a million dollars each week to pay thousands of employees to sit in empty rooms and do nothing.

It’s a practice called “standby time,” and it has existed for years — but postal employees say it was rarely used until this year. Now, postal officials say, the agency is averaging about 45,000 hours of standby time every week — the equivalent of having 1,125 full-time employees sitting idle, at a cost of more than $50 million per year.

Mail volume is down 12.6 percent compared with last year, and many postal supervisors simply don’t have enough work to keep all employees busy. But a thicket of union rules prevents managers from laying off excess employees; a recent agreement with the unions, in fact, temporarily prevents the Postal Service from even reassigning them to other facilities that could use them. So they sit — some for a few hours, others for entire shifts. Postal union officials estimate some 15,000 employees have spent time on standby this year.

HT: Paul Ringstrom

Comments Now Back To Normal After Spam Attack

Last night about 8 p.m. Carpe Diem was hit with a major spam attack from China, where somebody posts comments with advertising on dozens, sometimes hundreds of posts. Luckily, I caught it while it was going on, and I was able to stop it by changing the settings and restricting comments temporarily. I just changed the setting back to normal, so you can post comments now as usual. Sorry for any inconvenience.

Thursday, October 01, 2009

Dying To Do a Man's Job

The chart above shows that men suffered much more from fatal occupational injuries (4,703) in 2008 than women (368), by a factor of almost 13 to 1 (BLS data here).

Given the huge male-female occupational death gap, which has persisted over many decades, it is surprising that it has received so little attention as one important factor that could explain some of the male-female pay gap. To achieve greater female-male pay equity there would most likely have to be an increase in the number of women in higher-paying but higher-risk occupations. That outcome will certainly reduce the gender pay gap, but it would come at a cost—significantly more fatal occupational deaths and injuries for women. Would closing the pay gap, if it also means closing the gender occupational death gap, really be worth it?

Read my full post here at
The Enterprise Blog.

Public Option = Massive Income Redistribution

From the Wall Street Journal article (9/29/2009) “Young Back Health Proposals Amid Potential Costs”:

Young adults remain some of the strongest supporters of a health-care overhaul, but many acknowledge they don't understand proposals that will likely saddle them with higher costs.

In the latest Wall Street Journal/NBC News poll, 18- to 34-year-olds showed some of the same apprehension as other age groups when asked whether President Barack Obama's health-care plan was a good idea. But half in that age group said they support a public insurance option, one of the most controversial elements of some of the proposals, with 43% opposed. It was the only age group in which more respondents supported than opposed a public option.

At the same time, the poll suggested many young adults didn't know what was in the legislation, with 48% saying they didn't understand or understood only somewhat what was being debated. That compared with 40% for respondents aged 65 and over.

MP: Before they throw their support so strongly behind a public insurance option, young adults might want to better understand the huge, inter-generational income redistribution that might be imposed on them if the public option passes, as outlined in these two recent reports:

From the Washington Post article (9/16/2009) “Young Adults Likely to Pay Big Share of Reform's Cost”:

As health-care legislation advances through Congress, the young adults who were so vital to President Obama's election are emerging as a significant beneficiary of his top domestic priority, but they are also likely to play a major role in funding any reform.

Drafting young adults into any health-care reform package is crucial to paying for it. As low-cost additions to insurance pools, young adults would help dilute the expense of covering older, sicker people. Depending on how Congress requires insurers to price their policies, this group could even wind up paying disproportionately hefty premiums -- effectively subsidizing coverage for their parents.

From the Wall Street Journal article (9/27/2009) “Health 'Reform' Is Income Redistribution”:

Like the homeowner who waits until his house is on fire to buy insurance, younger, poorer, healthier workers will rationally choose to avoid paying high premiums now to subsidize insurance for someone else. After all, they can always get a policy if they get sick.

To avoid this outcome, most congressional Democrats and some Republicans would combine guaranteed issue and community rating with the requirement that all workers buy health insurance—that is, an "individual mandate." This solves the incentive problem, and guarantees that both the healthy poor 25-year-old and the sick higher-income 55-year-old have heath insurance.

But the combination of a guaranteed issue, community rating and an individual mandate means that younger, healthier, lower-income earners would be forced to subsidize older, sicker, higher-income earners. And because these subsidies are buried within health-insurance premiums, the massive income redistribution is hidden from public view and not debated.

Record 7-Month Streak for Pending Home Sales

Pending home sales have increased for seven straight months, the longest in the series of the index which began in 2001, according to the National Association of Realtors.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in August, rose 6.4% to 103.8 from a reading of 97.6 in July, and is 12.4% above August 2008 when it was 92.4. The index is at the highest level since March 2007 when it was 104.5.

Lawrence Yun, NAR chief economist, said not all contracts are turning into closed sales within an expected timeframe. “The rise in pending home sales shows buyers are returning to the market and signing contracts, but deals are not necessarily closing because of long delays related to short sales, and issues regarding complex new appraisal rules,” he said. “No doubt many first-time buyers are rushing to beat the deadline for the $8,000 tax credit, which expires at the end of next month.”

Jobless Claims (4Wk. Avg.) Fall to Lowest Level in 36 Weeks, Down 110,750 From Early April Peak

WASHINGTON — First-time claims for jobless benefits increased more than expected last week, a sign employers are reluctant to hire and the job market remains weak. And while consumer spending jumped by the most in nearly eight years in August due partly to the government's Cash for Clunkers program, economists worry whether that rebound can be sustained with U.S. households facing rising unemployment, tight credit conditions and other obstacles.

The Labor Department said Thursday that initial claims for unemployment insurance rose to a seasonally adjusted 551,000 from 534,000 in the previous week. Wall Street economists expected an increase of 5,000, according to a survey by Thomson Reuters.

The increase comes after three weeks of declines. Weekly claims have been trending down since the spring, but the decline has been painfully slow. The four-week average, which smooths out fluctuations, dropped to 548,000, about 110,000 below its peak in early April (see chart above).

MP: From the peak in early April, the four-week average has fallen by 110,750, and that measure of jobless claims has fallen in 19 out of the last 25 weeks. A comparison of the recent 110,750 decline to the last two recessions in the chart above, suggests that claims have been falling pretty sharply, and not "painfully slow," especially compared to the 1990-1991 recession.