John Mackey: Food Fighter
Professor Mark J. Perry's Blog for Economics and Finance
Today the New York Federal Reserve released its updated "Probability of U.S. Recession Predicted by Treasury Spread" with data through December 2009, and the Fed's recession probability forecast through December 2010 (see top chart above). The NY Fed's model uses the spread between 10-year and 3-month Treasury rates (3.54% spread in December) to calculate the probability of a recession in the U.S. twelve months ahead.
The Great Panic of 2008 may have destroyed blind optimism. But if excessive optimism was the near-fatal pose in 2008, blind pessimism has emerged as the reflexive post-bust crouch. And it has led the economic establishment to miss yet another inflection point. While we were wringing our hands about America's financial and industrial crisis, we ignored a parallel narrative that was emerging: the repairing of balance sheets, an embrace of reality, a nascent recovery. The same folks who chased the recession down now are likely to chase the recovery up.
For all the advances of information technology, big economic turns always take us unawares. In 2007, all indicators flashed green—until the bottom suddenly fell out. In this environment, things can look awful, until a new order unexpectedly comes in or a few deals break in your firm's favor. All of a sudden, things seem much better. We're in a Missouri economy now, one in which recovery has to be shown, not told. Economic conditions may be improving, but it still may take more than a few quarters of growth before people fully commit to recovery, both financially and psychologically. If credit means belief, since the credit crisis began two years ago, belief has been in short supply. Maybe it's time for a little blind faith.
DAILY TECH -- Now another nail has been placed in the commercial biofuel industry' coffin -- the government $1/gallon federal tax credit will expire this Friday. And for many businesses in the industry, it may be the last; amid a frustrating market, many biodiesel makers across the U.S. say they will likely call it quits and cease production when the credit ends. Without the $1/gallon federal tax credit, the biodiesel industry no longer appears commercially viable.
WASHINGTON (Reuters) -- The United States imported $2.74 billion of "oil country tubular goods" from China in 2008, more than triple the previous year, as a surge in oil prices led to increased demand for the oil well tubing and casing.
From Tyler Cowen's NY Times article "Fruitful Decade for Many in the World":
WALL STREET JOURNAL -- The U.S. manufacturing sector finished 2009 on a high note, helped by improving production and ordering activity, according to data released Monday by the Institute for Supply Management.The ISM's manufacturing purchasing managers' index rose to 55.9 last month, from 53.6 in November. December's reading was above the 54.0 forecasted by economists surveyed by Dow Jones Newswires. Readings above 50 indicate expanding activity.
WASHINGTON POST (Reuters) - A U.S. trade panel gave final approval on Wednesday to
1. THE ECONOMIST -- The Rich World’s Quiet Revolution: Women are Gradually Taking over the Workplace
At a recent Avon-commissioned discussion on the rise of “lipstick entrepreneurs” (otherwise known as independent businesswomen), there was breathless talk of female boards and millionaires, of a rise in househusbands and of the end of the pay gap and the glass ceiling. Shiny new names addressed a brand-new vision: “femterprise”, “domestecutives” and, of course, the “lipstick entrepreneur”. According to the Future Laboratory’s accompanying report, we are right at the tipping point of “femterprise”.
And the catalyst for this progress? The “mancession”, obviously (so named because it was men who were bitten hardest). With a nothing-to-lose attitude, women have been rolling up their sleeves and jumping in to bail out the boys. “Women deliver on a call to action,” says the UK president of Avon, Anna Segatti.
WALL STREET JOURNAL -- The big idea behind [Greg Easterbrook's new book] "Sonic Boom: Globalization at Mach Speed" is that globalization—celebrated, reviled and analyzed for at least a decade now—has hardly begun. The world, Mr. Easterbrook believes, is on the verge of a period of pell-mell integration that will dwarf anything before now, and a good thing too: The coming age of global integration, he argues, will produce riches that none of us can imagine and scatter them more widely than ever before.
DAVID BROOKS -- People should be grateful for whatever assistance that government can provide and had better do what they can to be responsible for their own fates. That mature attitude seems to have largely vanished. Now we seem to expect perfection from government and then throw temper tantrums when it is not achieved. We seem to be in the position of young adolescents — who believe mommy and daddy can take care of everything, and then grow angry and cynical when it becomes clear they can’t.
It’s worth pointing out that it wasn’t the centralized system that stopped terrorism in this instance. As with the shoe bomber, as with the plane that went down in Shanksville, Pa., it was decentralized citizen action. The plot was foiled by nonexpert civilians who had the advantage of the concrete information right in front of them — and the spirit to take the initiative.
For better or worse, over the past 50 years we have concentrated authority in centralized agencies and reduced the role of decentralized citizen action. We’ve done this in many spheres of life. Maybe that’s wise, maybe it’s not. But we shouldn’t imagine that these centralized institutions are going to work perfectly or even well most of the time. It would be nice if we reacted to their inevitable failures not with rabid denunciation and cynicism, but with a little resiliency, an awareness that human systems fail and bad things will happen and we don’t have to lose our heads every time they do.
GLENN GREENWALD -- The citizenry has been trained to expect that our Powerful Daddies and Mommies in government will -- in that most cringe-inducing, child-like formulation -- Keep Us Safe. Whenever the Government fails to do so, the reaction -- just as we saw this week -- is an ugly combination of petulant, adolescent rage and increasingly unhinged cries that More Be Done to ensure that nothing bad in the world ever happens. Demands that genuinely inept government officials be held accountable are necessary and wise, but demands that political leaders ensure that we can live in womb-like Absolute Safety are delusional and destructive. Yet this is what the citizenry screams out every time something threatening happens: please, take more of our privacy away; monitor more of our communications; ban more of us from flying; engage in rituals to create the illusion of Strength; imprison more people without charges; take more and more control and power so you can Keep Us Safe.
What makes all of this most ironic is that the American Founding was predicated on exactly the opposite mindset. The Constitution is grounded in the premise that there are other values and priorities more important than mere Safety. Even though they knew that doing so would help murderers and other dangerous and vile criminals evade capture, the Framers banned the Government from searching homes without probable cause, prohibited compelled self-incrimination, double jeopardy and convictions based on hearsay, and outlawed cruel and unusual punishment. That's because certain values -- privacy, due process, limiting the potential for abuse of government power -- were more important than mere survival and safety.
HT: Suzanne Perry
WASHINGTON POST -- Kim's government in the past two years has closed some large markets, shifted Chinese-made goods to state-run shops and ordered that only middle-aged and older women can sell goods in open-air markets, to try to limit the number of North Koreans who abandon government jobs for the private sector. But capitalism seems to have already taken root. U.N. officials estimate that half the calories consumed in North Korea come from food bought in private markets, and that nearly 80 percent of household income derives from buying and selling in the markets, according to a study last year in the Seoul Journal of Economics.
Private markets are flooding the country with electronics from China and elsewhere. Cheap radios, televisions, MP3 devices, DVD players, video cameras and cellphones are seeping into a semi-feudal society, where a trusted elite lives in the capital Pyongyang. Surrounding the elite is a suspect peasantry that is poor, stunted by hunger and spied upon by layers of state security.
In the past year, the elites in Pyongyang have been granted authorized access to mobile phones -- the number is soon expected to reach 120,000. In the border regions with China, unauthorized mobile phone use has also increased among the trading classes. And unlike most of the mobile phones in Pyongyang, the illegal phones are set up to make international calls. Chinese telecom companies have built relay towers near the border, providing strong mobile signals in many nearby North Korean towns. Those phones have become a new source of real-time reporting to the outside world on events inside North Korea, as networks of informants call in news to Web sites such as the Seoul-based Daily NK and the Buddhist aid group Good Friends.
Affordable electronics are also cracking open the government's decades-old seal on incoming information. Imported radios -- and televisions in border areas -- are enabling a substantial proportion of the North Korean populations to tune in to Chinese and South Korean stations, as well as to Radio Free Asia and Voice of America, according to an unpublished survey of newly arrived defectors in South Korea. It found that two-thirds of them listened regularly to foreign broadcasts.
Thanks to Art Little.
DALLAS, Texas -- Kim Welch and Sally Bradley are two of the best at what they do. They are ... Injectors! And today, they are making a house call.
1. Wall Street Journal -- U.S. trade laws aren't about "fair trade" or "leveling the playing field," or the other cliches of protectionists. They have become tools of political income redistribution, protecting certain industries at the expense of others and the larger U.S. economy.
The chart above shows annual, inflation-adjusted real returns for the Dow Jones Industrial Average (DJIA) over the last sixty years from 1950 to 2009 (data here and here). Some highlights:
1. The real return on the DJIA for 2009 was 20.62%, ranking #12 for annual returns over the last sixty years.
2. The 2009 return was the highest in five years, and the second highest over the last ten years behind the 23.02% real return in 2003.
3. The DJIA return in 2009 was almost 16% above the average real return over the last sixty years of 4.77%.
What makes the 2009 bull market even more interesting is that it seems to somewhat contradict all of the ongoing reports during 2009 about how we were in the "worst economy since ______" (fill in the blank) and many reports suggested we were almost on the verge of slipping into Great Depression II, etc.
Interestingly, if you do a Google search over the past year in the U.S., you'll find far more results for the term "2009 bear market" (11,800) than for "2009 bull market" (only 355); that's a bear to bull ratio of 33.2 to 1, despite the fact that 2009 obviously now qualifies as a bull market.
Likewise, the Google Trends chart below for the last year shows that the search volume for "bear market" in the United States was higher than the search volume for "bull market."
The Morgan Stanley Capital International (MSCI) Emerging Markets Index closed out the year today at a new 17-month high, going above 989 points for the first time since August 11, 2008. From the early March low of 475.08, the Emerging Markets Index is up by 108.3%, and from the first of the year by 74.50%.
1. The number of people filing new claims for unemployment benefits in the U.S. unexpectedly fell in the latest week to its lowest level in 18 months, a sign the labor market may be turning a corner. Initial claims for unemployment benefits fell by 22,000 to a seasonally adjusted 432,000 in the week ended Dec. 26, the lowest level since July 19, 2008. Economists surveyed by Dow Jones Newswires had forecast claims would rise by 3,000.
WALL STREET JOURNAL --
Possibly the world's cheapest refrigerator, the $69 ChotuKool refrigerator above is being taken for field testing in rural India (it's scheduled for release in March 2010). The portable, top-opening unit weighs only 17 pounds, uses high-end insulation to stay cool for hours without power and consumes half the energy used by regular refrigerators. To achieve its efficiency the ChotuKool doesn't use a compressor, instead running on a cooling chip and a fan similar to those used in computers, so like computers it can run on batteries. It's engineering credentials are further boosted by the fact that it has only 20 parts, as opposed to more than 200 parts in a normal refrigerator. The ChotuKool was co-designed with village women (a "reverse engineering of sorts,” according a spokesman for the manufacturer) to assure its acceptability.
I've featured this before, but it's a classic and worth viewing again - comedian Louis C.K. on Conan O'Brien.
Nick Schulz at the Enterprise blog reports on the number of pages in various pieces of important U.S. legislation from the 1800s (Homestead Act with 9 pages) through the current heathcare bill (about 2,000 pages), see summary in the graph above.
ARLINGTON, VA — The American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 2.7% in November, following a 0.2% contraction in October. The latest gain boosted the SA index from 103.6 (2000=100) in October to 106.4, its highest level in a year. Compared with November 2008, SA tonnage fell 3.5%, which was the best year-over-year showing in twelve months. In October, the index was down 5.2% from a year earlier.
This seemingly paradoxical view is based on several overlapping strands of research in economics as it pertains to development, history, technology, business expansion, and new-firm formation. According to this view, entrepreneurs at work in the economy – in finance, high tech, manufacturing, services, and beyond – are constantly experimenting, creating new business models, techniques, and technologies that upend the established order of things.
The chart above shows why we have a health care cost problem. Patients have little direct connection in paying for their care, and their role has fallen significantly. Meanwhile, the government's involvement has grown, as has that of the insurance industry.
The MSCI World Stock Market Index reached 1,176.35 today, the highest closing index value since October 1, 2008, almost 15 months ago. From the March low of 688.64, the benchmark world stock index is up by almost 71%, and from the first of the year by almost 28%.
The CBOE Volatility Index (VIX) fell below 20 last week for the first time since August 28, 2008, almost sixteen months ago, and closed below 20 for three days in a row for the first time since late May 2008 (see chart above). See Forbes story below:
1. WALL STREET JOURNAL -- In the 40 years since U.S. President Richard Nixon declared a "war on drugs," the supply and use of drugs has not changed in any fundamental way. The only difference: a taxpayer bill of more than $1 trillion. A senior Mexican official who has spent more than two decades helping fight the government's war on drugs summed up recently what he's learned from his long career: "This war is not winnable."
Year-to-date returns for the MSCI Emerging Markets (data here).
Read an interesting WSJ editorial about an unbelievable new scheme in Michigan that forces compulsory union membership on self-employed child care providers to "essentially throw a cash lifeline to unions like the UAW, which are hemorrhaging members."