Tuesday, January 12, 2010

Electric Vehicles: It Might Sound Like a Good Idea; But There's At Least a 15-Year Payback Period; What Were They Thinking?

From today's Detroit News:
As automakers aggressively pursue electric vehicles, a study released today shows the cost targets behind the plans are unlikely to be achieved, making it hard for consumers to recoup the extra cost of buying electric. The study by Boston Consulting Group, released at an Automotive Press Association event in Detroit today, concludes the cost of electric vehicles is unlikely to drop to the $250 per kilowatt/hour threshold that is cited by many carmakers for these vehicles to be competitive in price.

That benchmark is not possible without a major breakthrough in battery technology, and no such breakthrough is on the horizon, said Xavier Mosquet, the Detroit-based leader of BCG's automotive group. As a result, the payback time for an all-electric vehicle in the U.S. is about 15 years, and for an extended-range vehicle such as the Chevrolet Volt it would be 19 years, the study finds.

For consumers to break even on their electric car purchase, one of the following things must happen:

• There is a chemistry breakthrough that keeps material costs the same while creating a battery that can store twice as much energy, reducing the cost from $400 per kW/hr to $215.

• A new $7,700 government incentive is offered.

• Owners triple the number of miles they drive annually so the extra cost pays for itself.

• Oil prices increase from $100 a barrel to $375 a barrel.

• A 210 percent incremental gasoline tax is implemented.

While any of them are possible, or a combination of each could add up to enough, Mosquet said he sees it as unlikely. As a result, he expects electric vehicles will continue to play a minor role in most automakers' portfolios.
MP: Aren't they supposed to do a cost-benefit analysis ahead of time?

Thanks to R_Adams.

New Oil Discovery in the Gulf: 2 Trillion Cubic Feet, 165 Million Barrels, and They're Not Done Yet

CHRON.COM (January 11) -- McMoRan Exploration Co. today announced what it said could be one of the largest oil and natural gas discoveries in the shallow waters of the Gulf of Mexico in decades. The discovery was made at the Davy Jones ultra-deep prospect located on South Marsh Island Block 230 in about 20 feet of water and 10 miles off the Louisiana coast, the New Orleans company and Energy XXI, one of its Houston partners in the project, said in statements this morning.

The well was drilled to 28,263 feet and found a 135-foot column of hydrocarbon-filled sands in the Wilcox section of the Eocene and Paleocene geologic trends. That puts the estimated the size of the discovery close to 2 trillion cubic feet of resources, rivaling some oil and gas discoveries in the deep water Gulf.

FORBES.COM -- Shares of oil companies McMoran Exploration, Energy XXI and Plains Exploration & Production are jumping this morning amid news that the trio has made a nice oil discovery at its Davy Jones prospect in the Gulf of Mexico. Drilling logs on the 28,000-foot-deep well (that's 5 miles down!) show a likely prize of as much as 165 million barrels of oil and natural gas. The partners aren't done drilling either: the plan is to keep drilling down to 29,000 feet.

HT: Bloggin' Brewskie

EU vs. USA, Part II

Click to enlarge.
Source: The 2004 study "EU vs. USA" by the Swedish think tank Timbro (Table 2.2). Note that the data in the table above are from 1999, but would probably be comparable to more recent data.

Pharmaceutical Facts 2009

Time to develop and market a new drug: 10-15 years

Average Cost to develop a new drug (2006): $1.318 billion

Total R&D spending on drugs in 2008: $65.2 billion

Generic share of market in 2007: 72%

Percent of marketed drugs that cover R&D costs: Only 20%

Total number of drugs approved in 2008: 31

R&D as a percent of U.S. sales: 20.3%

Average effective patent life for major drugs: 11.5 years

Medicines currently in development: 2,900 compounds

For every 5,000-10,000 compounds tested, the number that make it to clinical trials: 5

For every 5 compounds that make it to clinical trials, the number that get FDA approval: 1

Probability that a compound tested eventually gets FDA approval: .01% (1/100th of 1%, or 1 out of 10,000) to .02% (1/50th of 1%, or 1 out of 5,000)

Pharmaceutical Industry Profile 2009

If European Countries Became U.S. States.....

Updated chart with 2008 data, click to enlarge.
Data Sources: GDP by state (BEA), state population (Census), European GDP-PPP per capita (World Bank via Wikipedia).

Click to enlarge.

Paul Krugman extols "Europe’s economic success" in a recent NY Times column "Learning from Europe," and writes that "...taking the longer view, the European economy works; it grows; it’s as dynamic, all in all, as our own."

Greg Mankiw adds this caveat about Europe's "economic success."

The chart above provides some additional perspective on Europe's "economic success," based on data available here that compares 2007 GDP per person on a purchasing power parity basis for U.S. states and European countries, and shows that if various European countries became part of the United States:

1. Portugal would rank #51 as a U.S. state, below Mississippi in per capita GDP.

2. Italy and Greece as U.S. states would rank between the two poorest U.S. states - West Virginia and Mississippi.

3. If France became a U.S. state it would rank #48 out of 51 by per capita GDP, just barely ahead of America's two poorest states - West Virginia and Mississippi.

4. Belgium, Finland, U.K. Germany and Spain would rank in the bottom 20% of U.S. states by per capita GDP, just barely ahead of Arkansas but below Kentucky.

5. Although Netherlands, Sweden and Denmark are among Europe's wealthiest countries, as U.S. states they would be between 14.5% and 18% below the U.S. average.

HT: Lee Coppock

Monday, January 11, 2010

Quote of the Day

Now, let me get this straight.....We are going to pass a health care plan written by a committee whose chairman says he doesn't understand it, passed by a Congress that hasn't read it but exempts themselves from it, to be signed by a president that also hasn't read it and who smokes, with funding administered by a treasury chief who didn't pay his taxes…all to be overseen by a surgeon general who is obese, and financed by a country that's nearly broke. What could possibly go wrong?


From today's "
The Gartman Letter" (subscription required)

Top 10 Monthly Job Losses As Share of Population

The chart above shows the top ten months since 1948 for monthly job losses (total nonfarm payroll) as a percent of the civilian non-institutional population (data here). The loss of 741,000 jobs in January 2009 was the second highest in BLS history back to 1948, second only to the loss of 834,000 jobs in October 1949. Adjusted for the size of population though the job loss in January 2009 ranks #8, and is the only month of job losses in 2008 or 2009 that was among the top ten months since WWII.

We hear a lot of news reports about jobless claims and job losses, but they are almost never adjusted for the size of the population, which has increased by 125% since the late 1940s. To put today's jobless claims or job losses in context, shouldn't we adjust for the size of the population?

Major Free Trade Deals in 2009: Asia = 8, USA = 0

According to Investor's Business Daily, the following trade deals were recently announced in December 2009 and early January:

China and Asia's Tigers — the Association of Southeast Asian Nations (ASEAN) — scrapped 7,000 different tariffs to form a $200 billion open market for about 2 billion consumers, one-third of the world's population.

2. ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Phillipines, Singapore, Thailand) signed a free-trade pact with mighty India, ending tariffs on 4,000 products staggered through 2016. This deal will expand a $50 billion market for 1.5 billion consumers into something even bigger.

ASEAN also signed off on free trade with Australia and New Zealand, tacking on another $50 billion market to expand for their 600 million consumers.

ASEAN signed an agreement with Japan on December 1, which created a $240 billion market for 670 million.

Thailand and South Korea completed the last step of 2007's ASEAN-Korea pact, finalizing expansion of the zone to a $72 billion market for 600 million.

ASEAN's six freest members — Thailand, Indonesia, Singapore, Philippines, Malaysia, Brunei — enacted a free-trade deal among themselves on Jan. 1, ending tariffs on goods sold to each other, freeing a $60 billion market for 500 million consumers.

India announced that three years of talks with South Korea were complete, uniting the third- and fourth-largest economies in the Far East.

India's leaders said a one-year deadline for negotiating a pact with the European Union was set.

In contrast, the number of major trade pacts signed by the U.S. in 2008 and 2009: NONE

More from the IBD:

While the Obama administration has put its energy into trade wars with China, enacting punitive tariffs on steel, tires, nylon, paper, and other goods and has signed no new pacts in 2009, free trade is marching on without the U.S.

It underlines the sorry state of affairs going on under the radar with the U.S. on trade. While the Obama administration stalled on three free-trade pacts with Colombia, Panama and South Korea, and enacted protectionist moves like "Buy American" provisos in state contracts, other countries moved on without us.

Unlike the Obama administration, Asian states don't see trade as some party favor to be doled out or withheld for special interest groups for political purposes. It's not without risk, but they see trade as a critical element to secure long-term economic growth.

With subpar growth forecast in the U.S. in the next decade, and unemployment at 10%, it's likely a closed economy that hasn't seen a new free trade pact since 2007 is a key reason. The Asian tiger example ought to be a major spur to get going. Nations that value free trade above politics aren't waiting around.

Emerging Market Index Above 1,000 for 6 Days

Update: The MSCI Emerging Markets Index closed above the benchmark level of 1,000 each day last week and today, marking the first time since July 2008 of six straight days above 1,000 (see chart above). Today's closing value of 1028.07 was the highest since August 1, 2008. By popular demand, the same chart in log version appears below.

Fraser Study Finds Huge Generosity Gap: Americans Are 2-3 Times More Generous Than Canadians

From the Fraser Institutes's study "Generosity in Canada and the United States: The 2009 Generosity Index":

The Generosity Index measures private monetary generosity using two indicators: the percentage of tax filers who donated to charities (i.e., the extent of generosity), and the percentage of aggregate personal income donated to charity (i.e., the depth of generosity). A higher percentage of tax filers donated to charity in the United States (26.6%) than in Canada (24.0%) during the 2007 tax year.

Similarly, in 2007, Americans gave 1.60% of their aggregate income to charity, with donations totalling US$190 billion (United States Internal Revenue Service, 2009a; Bureau of Economic Analysis, 2009), see chart above. This rate of giving is more than double that of Canadians, who gave 0.73% of aggregate income (CA$8.5 billion in total) to charity in 2007 (Canada Revenue Agency, 2009; Statistics Canada, 2009). If Canadians had given the same percent age of their aggregate income to charity as Americans had, Canada’s charities would have received an additional $10.1 billion in private donations.

Canada makes its poorest showing in the average value of charitable donations in local currency. The average US donation was US$4,623 (United States Internal Revenue Service, 2009) — three times more than the average Canadian donation of CA$1,504 (Canada Revenue Agency, 2009a). Wyoming, the top-ranked jurisdiction on this measure, recorded an average charitable donation of US$11,011 — almost five times more than the average donation of CA$2,298 in Alberta, Canada’s top-performing province on this measure. Even in Rhode Island, the lowest-ranked US state, the average donation (US$2,810) is over $500 more than the average donation in Alberta. The disparity is more pronounced when currency differences are accounted for.


Update: Vice-President Joe Biden gave an average of
$300 per year in charity between 1998-2006, on average annual income during those years of $236,000. In percentage terms, the Bidens gave about 1/8 of 1% of their income to charity, far below the 1.6% average for Americans, demonstrating his support of "Change You Can Believe In, As Long As You're Using Someone Else's Money, And Not Your Own."

"Buy American"? Then Why Not "Buy Virginia"?

It is certainly true that people’s jobs are affected by consumers’ choices. If customers stay away in droves from Chinese hose attachments, it might well mean more work for an American hose and belting manufacturer. But why stop there? In addition to boycotting goods and services made in other countries, let’s avoid spending money on products from other states. Those of us who live in Massachusetts should refuse to buy dryer sheets from California, Ohio lightbulbs, and hoses made in California. My Boston cabbie should be curling his lip at cars made not just by companies headquartered in Japan or Germany, but by those based in Michigan, too.

Crazy? Of course. Refusing to trade across state lines wouldn’t make us economically stronger. It would make us weaker, condemning us to higher prices, less variety, reduced purchasing power, and inferior quality. Granted, such protectionism might work to the advantage of a few local producers. But it would do so only by depriving everyone else of economic opportunity and improved quality of life. To turn state borders into trade barriers would be irrational and self-defeating.

~Jeff Jacoby's recent article "The Old Delusion of Protectionism"

MP: National/state/county/city/neighborhood borders are just imaginary lines on a map, and voluntarily restricting our choices to trade on only one side of an imaginary line called a national border ("Buy American") makes as much sense (none) as restricting our choices to trade on only one side of an imaginary line called a state border ("Buy Virginia"), or trade on only one side of a county border ("Buy Fairfax County"), or a city border ("Buy Falls Church"), or a neighborhood ("Buy Dupont Circle"), etc.

Bottom Line: Trade and voluntary exchange are win-win outcomes and it doesn't matter whether the buyer and seller are on the same side, or different sides, of imaginary lines. Enjoy your coffee, tea, hot chocolate and orange juice, your diamond jewelry, your iPod, and your ski vacation in Canada, or cruise in the Caribbean, etc.

Sunday, January 10, 2010

Why Peak Oil is Peak Idiocy: Endless Oil

BUSINESS WEEK -- Consumer demand, technology, and global politics are shifting in a way that could spell a future of oil abundance, not of catastrophic dearth. As Leonardo Maugeri, a senior executive at Italian oil major ENI, puts it: "There will be enough oil for at least 100 years."

Many analysts and industry executives have little doubt that there's plenty of oil in the ground. "Only about 32% of the oil [in reserves] is produced," says Val Brock, Shell's head of business development for enhanced oil recovery. Shell estimates 300 billion barrels and maybe more might be squeezed out of existing fields, much of it once thought beyond retrieval. Peter Jackson, IHS Cambridge Energy Research Associates' London-based senior director for oil industry activity, has reviewed data from the world's biggest fields. His conclusion: 60% of their reserves remain available.

The fact that there's still oil for the taking is driving Shell and other majors to come up with new technologies, which are expensive to develop but worth it when crude is riding high. While the price has fallen considerably from the peak of $147 per barrel in 2008, it is still far above what many oilmen expected a few years ago. "You will see companies going into the deep water, going into the arctic, using the best technology," says Maugeri, who sees the oil industry as a dynamic system that responds rapidly to changes in the economic and political environment.

HT: Paul Kedrosky

Interactive Map: Netflix Movie Rentals by Zipcode

This interactive map from the NYTimes allows you to examine Netflix movie rental patterns, neighborhood by neighborhood (by zipcode) in a dozen cities. Some titles with distinct patterns are Mad Men, Obsessed and Last Chance Harvey (see below for the DC area, the darker the shaded area, the higher the ranking).

Markets in Everything: Auction-style Shipping

(CNNMoney.com) -- In 2001, Matt Chasen's mother wanted to send an antique dresser from Ohio to Texas, but was staggered when she received a $1,000 shipping quote -- far more than the dresser was worth. Unable to find a cheaper option, she never sent it.

One year later, Chasen reserved a nine-foot truck to move from Seattle to Austin. When he arrived at the rental center, the only one left was a 20-footer, so he took it. Standing in the back of the cavernous vehicle, he thought of his mother.

"I thought, 'Wow I wish I could have gotten in touch with people with half-empty trucks to move my mom's dresser,'" he recalls.

The idea: Inspiration hit Chasen, 34, like a Mack truck. Why not create a sort of eBay for shipping, a Web site that would make the process cheaper and more efficient by taking advantage of all the empty trucks on the road?

So he started
uShip.com six years ago and has brokered $125 million in shipping fees.

Law of Unintended Consequences: Biomass Version

Just like all "pork".....

It sounded like a good idea: Provide a little government money to convert wood shavings and plant waste into renewable energy.

But as laudable as that goal sounds, it could end up causing more economic damage than good -- driving up the price of raw timber, undermining an industry that has long used sawdust and wood shavings to make affordable cabinetry, and highlighting the many challenges involved in decreasing the nation's dependence on oil by using organic materials to create biofuels.

In a matter of months, the Biomass Crop Assistance Program -- a small provision tucked into the 2008 farm bill -- has mushroomed into a half-a-billion dollar subsidy that is funneling taxpayer dollars to sawmills and lumber wholesalers, encouraging them to sell their waste to be converted into high-tech biofuels. In doing so, it is shutting off the supply of cheap timber byproducts to the nation's composite wood manufacturers, who make panels for home entertainment centers and kitchen cabinets.

The federal government can provide up to $45 a ton in matching payments to businesses that collect, harvest, store and transport biomass waste to an authorized energy facility. That means sawdust or wood shavings may be twice as valuable if a lumber mill sells them to a biomass energy company instead of to a traditional buyer.

This is bad news for the composite panel industry, which turns these materials into particleboard and medium-density fiberboard, and outranks the U.S. biomass industry in terms of employees and economic impact, with 21,000 employees and annual sales of $7.9 billion, according to 2006 U.S. Census data.

The biomass subsidy program could "wipe us out," said T.J. Rosengarth, the CEO of Flakeboard, the largest composite panel producer in North America. "You can say, 'I've made more alternative energy,' but at what expense?"

The Unintended Ripples from the Biomass Subsidy Program" in today's Washington Post, via Government Fiasco blog

MP: That's why it's called a "law."

Texas v. Unionocracy of California: Exhibits A to E

Exhibit A: California has lost more than one million jobs in the last several years, while employment levels in Texas have remained relatively stable.

Exhibit B: In early 2006, California's unemployment was actually slightly below Texas, but is now 4.3 percentage points higher than Texas (12.3% vs. 8%).

Exhibit C:

One-way rental rates for a 26-foot truck from U-Haul:

From Dallas to San Francisco: $734
From San Francisco to Dallas: $2,116

From Houston to Los Angeles: $706
From Los Angeles to Houston: $2,051

In other words, it’s almost three times more expensive to rent a truck to leave California (from San Francisco or Los Angeles) and move to Texas (Dallas or Houston) than it is to leave Texas and move into California, suggesting that there is a huge outmigration of trucks and people away from California to Texas.

Exhibit D (via Nick Schulz):

Both states have similar demographics (although California has many more Asians). But California has what should be significant advantages—it is much richer ($42,102 per capita GDP to $37,073) and it spends 12% more on educating each student than Texas. Despite this, Texas kids are one to two years of learning ahead of California kids of the same age. And blacks, whites, and Hispanics all do better in school in Texas than they do in California.

Exhibit E: George Will offers some insights into California's problems in his column today:

California, a laboratory of liberalism, is spiraling downward, driven by a huge budget deficit.

William Voegeli tartly says that "Rome wasn't sacked in a day, and California didn't become Argentina overnight." Indeed. It took years for liberalism's redistributive itch to create an income tax so steeply progressive that it prompts the flight from the state of wealth-creators: "Between 1990 and 2007," Voegeli writes, "some 3.4 million more Americans moved from California to one of the other 49 states than moved to California from another state." (U-Haul truck rental rates above demonstrate the high outbound demand for people and trucks leaving California.)

It took years for liberalism's mania for micromanaging life with entangling regulations to make California's once creative economy resemble Gulliver immobilized by the Lilliputians' many threads. It took years for compassionate liberalism to make California's welfare menu contribute to the state becoming an importer of Mexico's poverty. It took years for servile liberalism to turn the state into what Voegeli calls a "unionocracy," run by and for unionized public employees, such as public safety employees who can retire at 50 and receive 90 percent of the final year's pay for life.

George Will's Conclusion: California's economy is being suffocated by the weight of government.

Saturday, January 09, 2010

5 PowerPoint Search Engines To Seek Out Publicly Available Presentations (Click here for link)

The web is the sink for every sort of document and publicly available PowerPoint files are also not beyond the reach of search spiders. So how do we search them out…using search engines of course. If data of any kind or value can have a dedicated search engine of its own, then why not PowerPoint presentations or in brief, PPT files?

Some estimates put the number of PowerPoint presentations on the web close to 30 to 50 million. But we have to search them out. Using a general search engine with PPT as a filetype query is one way. But if you are work-shy about typing all that out then we have a few PowerPoint search engines to do the digging.




Powerpoint Search


What the U.S. Can Learn From Iran About Markets

From "Tackling the Organ Shortage," in today's WSJ by Alex Tabarrok:

Millions of people suffer from kidney disease, but in 2007 there were just 64,606 kidney-transplant operations in the entire world. In the U.S. alone, 83,000 people wait on the official kidney-transplant list. But just 16,500 people received a kidney transplant in 2008, while almost 5,000 died waiting for one.

Only one country, Iran, has eliminated the shortage of transplant organs—and only Iran has a working and legal payment system for organ donation. In this system, organs are not bought and sold at the bazaar. Patients who cannot be assigned a kidney from a deceased donor and who cannot find a related living donor may apply to the nonprofit, volunteer-run Dialysis and Transplant Patients Association (Datpa). Datpa identifies potential donors from a pool of applicants. Those donors are medically evaluated by transplant physicians, who have no connection to Datpa, in just the same way as are uncompensated donors. The government pays donors $1,200 and provides one year of limited health-insurance coverage. In addition, working through Datpa, kidney recipients pay donors between $2,300 and $4,500. Charitable organizations provide remuneration to donors for recipients who cannot afford to pay, thus demonstrating that Iran has something to teach the world about charity as well as about markets.

The Iranian system and the black market demonstrate one important fact: The organ shortage can be solved by paying living donors. The Iranian system began in 1988 and eliminated the shortage of kidneys by 1999. Writing in the Journal of Economic Perspectives in 2007, Nobel Laureate economist Gary Becker and Julio Elias estimated that a payment of $15,000 for living donors would alleviate the shortage of kidneys in the U.S. Payment could be made by the federal government to avoid any hint of inequality in kidney allocation. Moreover, this proposal would save the government money since even with a significant payment, transplant is cheaper than the dialysis that is now paid for by Medicare's End Stage Renal Disease program.

The world-wide shortage of organs is going to get worse before it gets better, but we do have options. Presumed consent, financial compensation for living and deceased donors and point systems would all increase the supply of transplant organs. Too many people have died already but pressure is mounting for innovation that will save lives.

MP: The chart above displays data from the United Network for Organ Sharing, and shows that the number of candidates on the waiting list for a kidney keeps increasing, and went above 83,000 in 2009 for the first time, while the number of kidney transplant operations has remained flat at between 16,000 and 17,000 for the last five years. As recently as 1992, there was about a 50% chance of receiving a kidney for those on the waiting list, but those chances keep dropping every year, patients on the waiting list now have only a one-in-five chance of receiving a kidney.

Given current trends, the future looks pretty grim for those on the kidney waiting list, and the current system that makes it illegal to pay or receive compensation for a kidney is clearly not working. Just ask the estimated 5,000 American families who lost a loved one on the waiting list in 2009 due to the critical kidney shortage.

Thomas Sowell on "Intellectuals and Society"

Chapter 1. Thomas Sowell introduces his new book, "Intellectuals and Society," and expounds on what he calls “the fatal misstep of intellectuals.”

Chapter 2. Thomas Sowell offers examples of why intellectuals are so often wrong about economics.

Chapter 3. What is the vision to which contemporary intellectuals subscribe? Thomas Sowell responds.

Chapter 4. Thomas Sowell reasons that intellectuals certainly can renounce war, “and that does not stop your neighbor from building up the biggest army in the world and coming in and killing you.”

Chapter 5. Thomas Sowell explains how the demand for public intellectuals is largely manufactured by the public intellectuals themselves.

Friday, January 08, 2010

Branded as Scholars: Faculty With Tattoos

From the Chronicle of Higher Education:

Given that he holds a named chair "for the study of capitalism" [BB&T Professor for the Study of Capitalism at George Mason University] it is perhaps not that surprising that Pete Leeson was a keen economist even as a teenager. When he was 17, he had supply-and-demand curves tattooed on his right biceps. "People think it's fun and that I'm an oddball for having it," says Mr. Leeson. "One of my favorite things about it is the chance it gives me to talk to total strangers about economics." That, he admits, might confirm his "dorkdom," but so be it.

Pete Leeson blogs at
Coordination Problem (formerly Austrian Economists).

The Great Mancession: Is It Gradually Ending?

The charts above are based on today's BLS Employment Situation Report and provide updates on some of the "mancession" trends I have been following now for over a year. Despite a gloomy Huffington Post story today "1 in 5 Men Don't Have a Job, the "mancession" has actually started improving gradually by some measures.

In December, the jobless rate for men (16 years and over) fell by 0.2% to 11% from 11.2% in November (see chart above), following a 0.20% drop from 11.4% in October, and marking the first back-to-back monthly decreases in the male unemployment rate since consecutive declines in December 2005 and January 2006. Further, the male jobless rate has declined or stayed the same in four out of the last six months, and the December rate is 0.40% below the peak 11.4% in October.

In contrast, the female jobless rate increased in December to 8.8% from 8.6% in November, matching the peak rate of 8.8% in October.

Those opposite moves in December (lower male jobless rate and higher female rate) lowered the male -female jobless rate gap to 2.2% (11% - 8.8%), a full one-half percentage point below the historical record of 2.7% in August, and the lowest since the 2% gap in March. The recent downward trend in the male-female jobless rate gap is consistent with the post-recession periods following the last two recessions (see second chart above).

The chart below displays the monthly household employment levels for males and females, from January 2007 to December 2009, showing that of the 8.42 million job losses since December 2007, 68% have been male jobs and 32% female jobs. But in the last 9 months since April, the monthly job losses have been fairly evenly distributed by gender, compared to the 7-month period between September 2008 to March 2009 when male job losses were more than 90% of the total job losses in two months, and more than 80% of the total in four months, and averaged 82%.

Bottom Line: One feature of the Great Recession was the unprecedented and disparate burden on men, in terms of job losses and jobless rates, i.e. the "mancession." A new record gender jobless rate gap was set in August 2009 when the male unemployment rate of 11% exceeded the female rate of 8.3% by 2.7%, the largest gender gap in history (in either direction). But as the economy now re-enters a period of economic expansion and recovery, both the Great Recession and the Great Mancession are hopefully subsiding and ending...

Jeremy Siegel, Another Inflation Skeptic

The evidence is building that the world economy is headed for a substantial recovery from the worst financial crisis since the Great Depression.

While pessimists see either another downturn or rapid inflation ahead, I believe neither will occur. The Federal Reserve has taken the proper measures to promote a stable economic recovery. Pessimists claim that the surge in Federal Reserve credit and government debt will cause economic misery by sparking the opposite problem: rapid inflation.

I don’t think so. I believe that the Fed has a plan to withdraw liquidity when the economy recovers and lending increases. This will require that the Fed raise interest rates, probably sooner than the market now anticipates. But just as Bernanke understands that the central bank can prevent a depression, he understands that the central bank is also the principal source of inflation and will act to prevent it. Barack Obama’s administration may not like it, but the Fed will raise interest rates, nudging the fiscal authorities to get their house in order and reduce the deficit.

The world is now inextricably bound by a global financial market and interlocking trade flows. All indications are that the world economy has successfully dodged the depression bullet, and I believe economic activity will surprise on the upside. This means stronger than expected stock returns and weaker than expected bond returns. In spite of the criticisms, our central bank has acted properly to deflect the panic and promote the recovery.

~Jeremy Siegel, professor of finance at The Wharton School

Temporary Jobs Rise for 5th Month, First Time Since 2005; Largest 5-Month Increase Since 1990

WALL STREET JOURNAL -- Even though the payroll number was worse than expected, the data reflects an improvement in the jobs market. Job losses have been moderating substantially during 2009 as the U.S. economy recovered from its worst recession in decades.

In the fourth quarter of 2009, employment losses averaged 69,000 per month, compared to job losses of 691,000 a month in the first quarter of last year. Employment in construction fell by 53,000 in December, while manufacturing jobs fell by 27,000. Temporary help services added 47,000 jobs in December and health care employment continued to increase, by 22,000.

Two positive signs from today's employment report are:

1) Manufacturing overtime hours for November were revised up to 3.4 hours, the highest level since October 2008, and December overtime remained steady at 3.4 hours. This marks the ninth month in a row that overtime hours have either increased or stayed the same as the previous month.

2) The number of temporary help workers increased by 46,500 to the highest level since January 2009 (see graph above), and temporary workers increased five consecutive months for the first time since 2005.

Update: The 166,400 increase in temporary jobs since August is the largest 5-month increase since at least 1990 (data series may only go back to 1990).

Both of those indicators signal a labor market that is slowly recovering, and strongly suggest that the worst is behind us.

U.S. Natural Gas Energy > Saudi Arabia's Oil

What's getting all of the attention recently is hydraulic fracturing, a process that involves injecting a mixture of water, sand and chemicals under high pressure to break through shale formations to reach enormous deposits of natural gas several miles underground. New advances in seismic imaging are used to find the shale gas, and horizontal drilling enables companies to reach the gas and bring it to the surface.

Largely through the use of these techniques, U.S. natural gas production has increased 40% in recent years, reversing what was once thought to be an irreversible decline in domestic drilling. Altogether there could be as much as 842 trillion cubic feet of natural gas in shales around the country, which is more energy than all of Saudi Arabia's oil.

There's no economic reason to stop making use of valuable shale gas, but that's exactly what congressional critics of hydraulic fracturing are trying to do. Democrats have introduced measures in the House and Senate that would place the drilling method under federal oversight by the Environmental Protection Agency.

We need to wake up and realize that one of the keys to our nation's economic future and increasing energy independence could soon be a wasting natural resource if Congress needlessly intervenes. Natural gas has provided heat and energy for millions of American homes, has helped fuel the expansion of our nation's factories and industries, and reduced our dependence on foreign energy; restricting this valuable domestic energy resource at such a critical time would be a sure way to raise energy prices, damage our economic recovery, and derail our progress toward greater energy independence.

From my article this week in the Detroit News.

Thursday, January 07, 2010

Carter vs. Obama in December of First Year

In December of their first year in office, according to Gallup:

Carter: 57%
Obama: 49%

Carter: 27%
Obama: 46%

Approve - Disapprove Spread:
Carter: +30%
Obama: +3%

Bypass the Doctor and Go Straight to the Lab

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NEWSCHIEF -- While Washington is deep in the throes of trying to overhaul the nation's health-care system, another development is fast gathering momentum that shows the lawmakers in many ways are pursuing a moving target.

A growing number of Americans are bypassing doctors and going directly to online and storefront labs for diagnostic testing. Most often they pay for these tests out of their own pocket. The results may persuade the consumer to pursue the matter further with a personal physician but, in any case, the consumer is in charge of who sees the results.

The name of one fast-growing chain of walk-in labs encapsulates the field's business model, Any Lab Test Now. The company says it can generally have testing results within 24 hours and at a cost that is as much as 80% less than going through a doctor. The lab franchises offer up to 1,500 tests, from a simple cholesterol check to more sophisticated packages of tests that address complex medical issues.

The medical profession views this development with some skepticism, fearing that consumers will order the wrong kinds of tests or misdiagnose the results. Major physicians organizations like the American Medical Association have cautioned against any kind of clinical or genetic testing done without a doctor's consultation. There is no federal oversight over medical testing, other than requiring that the labs that do the actual testing for the storefronts be properly certified. State regulations vary widely. As so often happens, the consumers seem to be far out in front of the lawmakers and regulators.

From the Any Lab Test Now website:

  • No Insurance Needed.
  • Doctor's Order Provided.
  • No Appointment Necessary.
  • Confidential and Anonymous.
  • Most Results in 24-48 Hours.

  • And here's the full, transparent price list for all of the procedures offered, and here's a list of the 22 tests available for $49 (cholesterol, drug test, hepatitis, herpes, pregnancy, etc.).

    MP: Another affordable, convenient market-based solution to rising health care costs and an alternative to a government overhaul of the health care system.

    HT: John Goodman

    M2 Growth Falls Below 3%, Lowest Rate Since 1995

    M2 growth (data here) fell to 2.65% (on an annual basis) in the week ending December 28, 2009 (updated at 9 p.m.), the first time since the summer of 1995 that annual M2 growth was below 3%, and the lowest growth rate since a 2.4% reading in late July 1995 (see chart above).

    The growth rate of the monetary base (
    data here) has also been falling, and is now below 20% for the first time since early October 2008 (see graph below):

    MP: For those worried about inflation, I think you better tell the money supply to start growing a little faster for your fears to be realized, because deflation looks more likely now than inflation, based on the monetary aggregates? Doesn't it?

    Fierce, Cutthroat Competition Is Best Regulator

    Click to enlarge.

    From an interesting article in today's Wall Street Journal "Rivals Explore Amazon's Territory" about the intense "cutthroat" competition among Amazon, Google and Apple (see stock return data above for the 3 companies vs. the S&P500 over the last six months):

    All three companies are butting heads after long inhabiting different markets.

    Google will launch a phone that it will sell online directly to consumers, and take direct aim at Apple's iPhone. Given that Amazon already sells cellphones online, that could hurt the retailer as well.

    Apple's expected unveiling of a tablet computer, likely to have an e-reading function, threatens Amazon's Kindle. Amazon said its e-reader was its biggest-selling product in 2009. The tablet also is expected to offer film and TV shows, strengthening Apple's iTunes as a video service. That could hurt Amazon's video-on-demand service.

    3. Google plans to start an e-book store this year, called Google Editions. Consumers will be able to buy digital books that can be read on a range of devices. More important, Google plans to let independent bookstores sell e-books through the service, buttressing their ability to compete with Amazon.

    MP: It's exactly the type of intense market competition described in the cases above (and the threat of potential competition from some kids in a basement or dorm room writing code right now to start the next challenger to Google or Apple), and not government bureaucrats at the Department of Justice or Federal Trade Commission, that is usually the best regulator of all, and the most effective protection for consumers against the potential anti-market, anti-consumer behavior of producers.

    It's a basic law of economics (Perry's Law) that "market competition breeds competence" (and lower-priced, higher-quality products), and government restrictions on competition and market forces breed incompetence (and higher-priced, lower-quality products), so the more the competition, and the more cutthroat the competition is, the better the outcome for consumers. It's also the case that the "smell of profits" attracts competition, and Amazon, Google and Apple all have stock returns double the 30% market return over the last six months measured by the S&P500, so that redolent attractive odor of profits might be churning up some potentially significant competition right now.

    Markets In Everything: San Francisco Goodwill Industries Sells 26,000 Used CDs on Amazon.com

    Click to enlarge.
    Note: 26,348 lifetime ratings.

    Bull Market Rally in Mexico Sets Record Highs

    Mexico's IPC Stock Market Index keeps soaring to new record highs, and the IPC has doubled since early 2008 (see chart above).

    Updated: Top chart is using log scale.

    Appealing to Consumer Greed: Target vs. Costco

    WALLETPOP -- The aisles of Target are rarely, if ever, criticized for their diminutive nature. But until recently, shoppers who prefer to buy in packages so large that they can't help but save money had to wander the even bigger aisles of warehouse stores like Costco and Sam's Club. Not anymore. For the next seven weeks, Target will offer big bulk items like extremely large packages of paper towels in its seasonal aisles (typically used for post-holiday merchandise markdowns in January and February). Target is calling it the Great Save Event, which will go through February 21 at all of the company's 1,740 stores.

    According to retail analyst Mike Duff, the move makes perfect sense, and is consistent with Target's "Expect More. Pay Less" strategy: "It all adds up to an attempt to create more reasons for consumers to visit the store more often, which is important at a time when shoppers remain reluctant to spend on things other than necessities unless they believe they're getting significant bargains," he says.

    It will also be great for Target's bottom line. The sort of savvy [MP: greedy and ruthless?] shopper who has been shopping at Costco will be easily convinced to switch those dollars to Target; especially given the chain's reputation for its trendy fashion offerings.

    MP: We hear a lot more about how corporations are disloyal to their communities and employees and about "
    corporate greed" (553,000 Google hits) than we hear about "consumer greed" (19,700 hits), but consumers can be pretty disloyal, ruthless and cost-conscious themselves, as this story demonstrates. In fact, there's a marketing aphorism that sums it up pretty well: "There's no brand loyalty that the offer of a "penny off" can't overcome it."

    HT: James Vanke

    Jobless Claims (Four-Week Moving Average) Fall for 18th Consecutive Week to a New 16-Month Low

    Updated chart.
    Jan. 7 (Bloomberg) -- The number of Americans filing first- time claims for unemployment benefits rose less than forecast last week from the lowest level in more than a year, indicating jobs cuts are waning as companies become more confident in the economy.

    Initial jobless applications increased by 1,000 to 434,000 in the week ended Jan. 2, fewer than the 439,000 claims economists anticipated,
    Labor Department figures showed today. The number of people receiving unemployment insurance dropped in the prior week to 4.8 million, and those receiving extended benefits increased. Improving sales and production gains are prompting companies to slow the pace of firings as the economy recovers from the worst recession since the 1930s.

    “This is clearly a strong number,” said Maxwell Clarke, chief U.S. economist at IDEAglobal in New York, who forecast claims at 435,000. “Looking forward, you should see slow and steady improvement and a return to positive payroll numbers.” The four-week moving average of initial claims, a less volatile measure, fell to 450,250 last week, the lowest since the Sept. 13, 2008, from 460,500 the prior one (see chart above). Claims have fallen 36% since reaching a 26-year high of 674,000 in the week ended March 27.

    Wednesday, January 06, 2010

    Phoenix Home Sales Increase for 11th Month

    DQNews -- Phoenix-area November home sales fell from October but jumped 62% above the unusually low levels of a year earlier, largely because of strong demand from first-time buyers and investors (see chart above). The median price paid edged above the prior month for the seventh consecutive month as foreclosure resales continued to play a large but fading role in the market, a real estate information service reported. November’s total sales were the highest for that month since November 2006, when 10,482 homes sold. Total home sales have increased on a year-over-year basis for 11 consecutive months, while total resales (no new homes) have risen on an annual basis for 17 consecutive months.

    Phoenix-area November home sales fell from October but jumped 62 percent above the unusually low levels of a year earlier, largely because of strong demand from first-time buyers and investors. The median price paid edged above the prior month for the seventh consecutive month as foreclosure resales continued to play a large but fading role in the market.

    The median price paid in November for all new and resale houses and condos combined was $142,700, up 3.4% from $138,000 in October but down 12.4% from $162,984 a year ago. It was the smallest year-over-year decline in the median sale price since January 2008, when the median fell 11.8% below the prior year to $225,000.

    Rationing: Is This Where US Health Care is Headed?

    The new [Cuban] ration book surprised us at the end of December, just when speculation was growing about the demise of this booklet with its grid-paper pages. It arrived, like every year, surrounded by anxiety and annoyance, submerging us in that avoidance-approximation conflict generated by the subsidized. In its little pages I notice the absence of many products that once made up the monthly quota, now reduced to just a monotonous repertoire with insufficient nutritional values and rising costs.

    For the first time in our house we are all in the same age bracket among the five defined by the Ministry of Internal Commerce. Exactly in the box for 14 to 64 years my son Teo appears, together with Reinaldo and me, but at least three generations of Cubans have seen the store clerks mark down what we can put in our mouths. Trapped in poverty, millions of compatriots depend on price assistance to survive. Rationing is a trampoline and falling is certain, a dependency we all wish would end, but that almost no one can let go.

    I see my name written next to my son Teo’s and I’m afraid that his children, too, will receive milk only until the age of 7, be allotted washing soap every 2 months or a tasteless toothpaste to clean their teeth. I shudder imagining that in 30 years we will still have to prove, with a doctor’s certificate, that we have an ulcer to have the right to a few ounces of meat or a container of soy yogurt.

    With its minimal quantities and doubtful quality, the ration market has also instilled in us an unhealthy gratitude and a guilt complex that cannot be our legacy to those yet to come. If another December arrives and we receive a new ration book, it will not be because we have avoided the economic cuts, but rather because we have fallen another step lower in our citizen autonomy.

    ~Cuban blogger Yoani Sanchez

    MP: As much as Americans might complain about greedy corporations, excessive CEO compensation, low non-union wages at Wal-Mart, high gas prices, income inequality, stagnant real wages, the disappearing middle class, etc. or whatever the current whining du jour is, just imagine what it would be like to live in a country like Cuba where your daily purchases of food were restricted and controlled by bureaucrat-determined quotas, and you actually had to present a rationing book to a civil servant (an inaccurate description, since they're rarely civil or servile in reality) clerk at a government-operated grocery store as a pre-requisite to buy food for you and your family.

    I'll glady live with excessive CEO pay for Oprah, Bill Gates and Warren Buffet in a market economy any day over having to present a rationing book to a government bureaucrat to buy food like the citizens of Cuba are required to do daily.

    How Chile Got Amazingly Rich: Free Trade

    INVESTOR'S BUSINESS DAILY -- Chile was formally invited to OECD's club of developed countries on Dec. 15 — a great affirmation for a once-poor nation that pulled itself up by trusting markets. One thing that stands out here is free trade.

    Chile is the first country in South America to win the honor, and in a symbolic way its OECD membership card seals its exit from the ranks of the Third World to the First. For the rest of us, it's a stunning example of how embracing free markets and free trade brings prosperity.

    It's not like Chile was born lucky. Only 30 years ago, it was an impoverished country with per capita GDP of $1,300. Its distant geography, irresponsible neighbors and tiny population were significant obstacles to investment and growth. And its economy, dominated by labor unions, wasn't just closed, but sealed tight. In the Cato Institute's 1975 Economic Freedom of the World Report it ranked a wretched 71 out of 72 countries evaluated.

    Today it's a different country altogether. Embracing markets has made it one of the most open economies in the world, ranking third on Cato's index, just behind Hong Kong and Singapore. Per capita GDP has soared to $15,000. Besides its embrace of free trade, other reforms — including pension privatization, tax cuts, respect for property rights and cutting of red tape helped the country grow not only richer but more democratic, says Cato Institute trade expert Daniel Griswold. "Chile's economy is set apart from its neighbors, because they have pursued market policies consistently over a long period," he said. "Free trade has been a central part of Chile's success."

    Chile has signed no fewer than 20 trade pacts with 56 countries, giving its 19 million citizens access to more than 3 billion customers worldwide. When no pact was in force, Chile unilaterally dropped tariffs. This paid off handsomely.

    You've heard of flat taxes? Chile has a flat tariff — only 5% on any item not exempted by a free-trade treaty. But almost nobody has signed off on free-trade treaties like Chile. "What free trade has done is it's allowed Chile to specialize," Griswold says. "Copper, salmon and fresh fruit are some of its strengths that have drawn foreign investment. Free trade has allowed resources to shift to where they have the highest return. The result has been a more disciplined private sector that has made itself efficient enough to compete globally."

    The success belies claims, made mostly by protectionist unions, that free trade is a job killer and source of misery. It's also a reminder of how the U.S. has lagged on trade agreements, signing just 11 with 17 countries since 1993 — one reason why its ranks just 17th on Cato's 2009 Index of Economic Freedom.

    Despite the recession, American trade pacts with Colombia, Panama and Korea are languishing into a fourth year. By contrast, Chile got to where it is by embracing trade. Its example is a shining lesson of how prosperity can be achieved no matter what the challenges — a lesson the U.S. would do well to relearn as our recovery tries to get traction.

    MP: The charts above document Chile's stunning economic success. Following four decades of economic stagnation and flat real GDP per capita from 1950 to 1990, output per capita has more than doubled since 1990. And Chile's economic growth has been accompanied by a roaring bull market rally that has lifted the MSCI Chile Stock Market Index by an amazing 400% since 2002, from less than 400 points in September of 2002 to currently above 2,000 points. That translates into an average return of 24% per year for the last seven years, despite an 800 point drop in 2008.

    HT: The Plaidpundit, Matt B.

    Young Adults Are Key to Health Care Reform; But There Are Strong Incentives to Not Buy Insurance

    FOX NEWS -- Young adults are in for a wake-up call if health care reform passes.

    For the first time ever, the federal government is going to require that everybody obtain health insurance coverage. For those who have insurance through their employers, the so-called individual mandate may have very little impact. But for young adults, many of whom are not currently covered, the health care bill will add a new and costly expense to their budgets.

    "The Census Bureau tells us there are 18 million people between the ages of 18 and 35 who are uninsured -- roughly half of the uninsured population are younger people in that age group," said Anne Kim, with the non-profit think tank Third Way.

    MP: Actually for the age group below 35 years, there are 26.3 million uninsured Americans and that represents 57% of the 46.3 million uninsured (
    data here), see chart above. For the 18-34 year age group, there are almost 19 million uninsured, which is 41% of the total number of uninsured.

    The federal government wants to require young, healthy people to buy insurance because if they don't, premiums for everyone else will go up. Insurance companies need low-maintenance, young customers on their rolls so they can raise money to cover benefits for less-healthy people the health care bill will require them to insure.

    "If you don't have a mandate that gets in the young people who are cheaper, you're going to see average premiums rise," said Jim Kessler, vice president for policy with Third Way. "There's no way around that." But both houses passed two other reforms that create an incentive not to buy insurance.

    1. The bills allow patients to basically purchase insurance whenever they want.

    "You can literally buy an insurance policy in the ambulance on the way to the hospital," said Douglas Holtz-Eakin, former director of the Congressional Budget Office. "You could imagine a situation in which you would pay the fines, stay out of the insurance pool, and at the moment when you need it, you go out and buy it."

    2. The other disincentive is that both houses change how much older customers can be charged relative to younger customers. Analysts agree this will drive up the cost for young people, though it's not clear by how much.

    "If you charge people a fair price, then a 50-to-60-year-old should pay about six times as much as a 20-year-old," said John Goodman, president of the National Center for Policy Analysis. But he noted that the Senate bill says older people can be charged only three times as much; the House bill says they can be charged two times as much. "So we're going to penalize low-income young people in order to lower the premiums for older wealthier people."

    "Young people are going to bear a disproportionate cost in this reform," Holtz-Eakin said. The Senate tries to make it easier on the young by offering them a bare-bones insurance plan that would be less expensive than all the others. This is perhaps the keystone for the entire reform effort, because if young healthy people don't get into the insurance pool, everything else -- especially cost containment -- could fall apart.

    MP: In other words, it seems like any real cost containment is pure fantasy, and will never happen under any conditions. Either you force 20-25 million young people to purchase insurance they aren't willing to buy now and overall costs go up, or the young people (and older people as well) pay the fine and remain uninsured until they need insurance (in the ambulance on the way to the hospital) and overall costs go up.

    U.S. Manufacturing's Exaggerated Death

    In 1790, farmers were 90% of the U.S. labor force. By 1900, only about 41% of our labor force was employed in agriculture. By 2008, less than 3% of Americans are employed in agriculture.

    What would you have Congress do in the face of this precipitous loss of agricultural jobs? One thing Congress could do is outlaw all of the technological advances and machinery that have made our farmers the world's most productive. Our farmers are so productive that if needed, they could feed the entire world.

    Let's look at manufacturing. According to Mark Perry's employment data in "
    Manufacturing's Death Greatly Exaggerated," U.S. manufacturing employment peaked in 1979 at 19.5 million jobs. Since 1979, the manufacturing work force has shrunk by 40%, and there's every indication that manufacturing employment will continue to shrink.

    ~Read more of Walter Williams in today's Investor's Business Daily

    Mainstream Media’s Trade Gap

    Dan Ikenson at Cato writes a great article about the mainstream media's "reporting deficit" when they cover trade issues and protectionism.

    If You Think Healthcare Is Expensive Now.....

    The Department of Health and Human Services released new data yesterday on healthcare spending and it reported that total health expenditures reached $2.3 trillion in 2008, or $7,681 per person. As a share of GDP, healthcare expenditures set a new record of 16.2%, which is double the 8.1% share of GDP in 1975, and more than three times the 5.2% share in 1960 (see chart above).

    The chart below (
    data here) shows what might be the two most important reasons for rising healthcare costs over the last 50 years: a) declining out-of-pocket payments for medical expenses, which have fallen from 47% of total health spending in 1960 to a record low of only 11.9% in 2008, and b) expanding public funding of healthcare, which reached a record high of 47.3% in 2008. There’s now been a complete reversal—whereas consumers paid 47% of total medical costs in 1960, it’s now the government paying 47% of health spending, while consumers pay less than 12% out of pocket for healthcare. That reversal is a guaranteed prescription for rising healthcare expenditures.

    Unfortunately, under the proposed healthcare overhaul we’ll likely see a continuation of the trends displayed in the graphs—more government funding of the nation’s healthcare expenditures, less out-of-pocket spending by consumers, and rising healthcare costs as a share of GDP. If you think healthcare is expensive now, just wait until you see what happens after 2,000 pages of healthcare “reform.”

    The Enterprise Blog.