Friday, April 02, 2010

Emerging Market Stock Market Rally; 19 Mo. High

The MSCI Emerging Markets Index has increased six straight days, by a cumulative 6-day percentage increase of almost 4%, and reached a new 19-month high today of 1028.5, the highest closing value since August 1, 2008. From the lows last year of below 500, the Emerging Markets Index has more than doubled to levels now above 1,000.

Twitter Can Predict Future Movie Box Office Revenues and That Might Be Just the Beginning

From the paper "Predicting the Future With Social Media" from two researchers Hewlett-Packard's Social Computing Lab:

Abstract: In recent years, social media has become ubiquitous and important for social networking and content sharing. And yet, the content that is generated from these websites remains largely untapped. In this paper, we demonstrate how social media content can be used to predict real-world outcomes. In particular, we use the chatter from Twitter.com to forecast box-office revenues for movies. We show that a simple model built from the rate at which tweets are created about particular topics can outperform market-based predictors. We further demonstrate how sentiments extracted from Twitter can be further utilized to improve the forecasting power of social media.

Conclusion: In this article, we have shown how social media can be utilized to forecast future outcomes. Specifically, using the rate of chatter from almost 3 million tweets from the popular site Twitter, we constructed a linear regression model for predicting box-office revenues of movies in advance of their release. We then showed that the results outperformed in accuracy those of the Hollywood Stock Exchange and that there is a strong correlation between the amount of attention a given topic has (in this case a forthcoming movie) and its ranking in the future. We also analyzed the sentiments present in tweets and demonstrated their efficacy at improving predictions after a movie has released.

While in this study we focused on the problem of predicting box office revenues of movies for the sake of having a clear metric of comparison with other methods, this method can be extended to a large panoply of topics, ranging from the future rating of products to agenda setting and election outcomes. At a deeper level, this work shows how social media expresses a collective wisdom which, when properly tapped, can yield an extremely powerful and accurate indicator of future outcomes.

MP: The chart above shows the Predicted vs. Actual box office scores using the tweet-rate as a predictor of box office revenues and the Hollywood Stock Exchange (HSX), "a popular playmoney market, where the prices for movie stocks can accurately predict real box office results.... and which can be considered the gold standard." According to the authors, "the model built using the tweet rate outperforms the HSX-based model."

Buy New Apple iPad for $50,000, Get Free Hyundai

From the NY Times: -- That’s not exactly the equation, but that’s the idea. Anyone who buys a new Hyundai Equus — the car will be out in September — will receive an iPad instead of a printed owner’s manual.

“Who reads a 300-page manual anyway?” asked John Krafcik, the chief executive of Hyundai North America. “Instead, they’ll have a gorgeous color touchscreen loaded with the manual electronically, as well as photos of the whole Hyundai lineup.”

Another Bright Spot in Today's Employment Report

1. Manufacturing employment (data here) has increased for the last three months, the first time in four years of three consecutive monthly increases.

2. The gain of 45,000 jobs this year through March is the largest three-month employment gain in the manufacturing sector since May of 2004, almost six years ago.

ASA Staffing Index Surges 15% From Year Ago

According to the American Staffing Association (ASA):

1. "Temporary Help Employment Is a Strong Coincident Economic Indicator When the Economy Is Emerging From a Recession — A sustained upturn in staffing jobs would signal the end of the current recession."

2. "Temporary Help Employment Is a Leading Indicator for Nonfarm Employment - Staffing job trends lead nonfarm employment by three months when the economy is emerging from a recession and by six months during periods of normal economic growth."

From the ASA's
most recent report:

"Staffing employment in March is 15% higher than in the same month last year, according to the ASA Staffing Index (see chart above). The index for March is 83, up from 80 for February, suggesting that staffing employment has increased almost 4% over the past month. Staffing payrolls have shown steady growth over the past five weeks."

Other highlights:

1. Since the first of the year, the ASA Staffing Index has increased or remained flat in every week except one.

2. For the last 17 weeks going back to last November, the ASA staffing increased from the same week in the previous year, following 80 consecutive weeks of annual percentage decreases that started in May 2008.

As I
reported earlier, today's BLS report showed a record 6-month increase of 312,600 temporary workers from October 2009 to March 2010. Along with the recent strong improvement in the ASA Staffing Index, these two positive trends in temporary hiring provide convincing evidence that the labor market is gradually improving, and as leading indicators suggest a continuation of the employment gains that started in March (162,000 jobs).

In the early stages of economic recovery, employers remain cautious in their hiring decisions, and use temporary workers initially to meet higher demand for their products. As the current economic rebound gains greater momentum and employers become more confident about a continued economic expansion, they'll start hiring permanent workers - which will bring down the jobless rate in the coming months.

Early Indicators: Record 6-Month Increase in Temp Workers; 19-Month High for Mfg. Overtime Hours


From today's BLS employment report:

1) Manufacturing overtime hours increased slightly to 3.7 hours in March, reaching the highest level since August 2008 (see graph). Except for 0.10 hour decline in February, overtime hours have increased or stayed the same for each of the last 12 months. Compared to the low last March of 2.6 hours, overtime has increase by more than a full hour to 3.7 hours in March, which is 42 percent increase.


2) The number of temporary help workers increased in March by 40,200 to 2,037,000 employees, the highest level since December 2008 (see graph above). The March increase follows similar recent monthly increases of 49,200 in January and 36,700 in February. Temporary workers increased in March for the sixth straight month, following 23 straight months of declines, and it marks the first time since 2005 of six consecutive monthly increases.
The 312,600 increase in temporary jobs since the September-low is the largest 6-month increase since this data series started in 1990.

3) Nonfarm payrolls increased by 162,000 in March, the largest monthly gain in three years - since March 2007, although about one-third of those jobs were temporary Census jobs.

Bottom Line: Both the surge in temporary workers and the increase in overtime hours are early indicators of a broader recovery in the labor market, and signal future increases in job creation. In the early stages of economic recovery, it makes sense for cautious employers to both increase temporary hiring and increase overtime hours of existing workers. As the economy stabilizes and expands and employers become more confident there will be broader hiring for permanent workers.

Thursday, April 01, 2010

Worldwide Bull Market Rally Hits 18-Month High

The MSCI World Stock Market Index reached an 18-month high today of 1,212.14, the highest closing index level since late September 2008. Compared to a year ago, world stock markets have risen by more than 48%.

Related story:

(Reuters) - "Factories in the United States, Europe and Asia cranked up production last month, suggesting recovery from a deep recession was taking root in economies around the globe. The U.S. manufacturing sector grew at its fastest pace in more than five years last month and activity in Europe bounced higher, with a cheaper euro helping stimulate exports. UK manufacturing expanded at its fastest pace since 1994, while China's vast industrial sector also grew in March."

How Mobile Phones and IT Promote Economic Development in Africa and Even Increase Literacy

Some excerpts from an excellent Boston Reivew article "Africa Calling: Can mobile phones make a miracle?" by economsits Jenny Aker and Isaac Mbiti:

"There are some good reasons to believe that mobile phones could be the gateway to better lives and livelihoods for poor people. While some of the most fundamental ideas in economics about the virtues of markets assume that information is costless and equally available to all, low-income countries in sub-Saharan Africa are very far from that idealization. Prior to the introduction of mobile phones, farmers, traders, and consumers had to travel long distances to markets, often over very poor roads, simply to obtain price (and other) information. Such travel imposed significant costs in time and money.

Mobile phones, by contrast, reduce the cost of information. When mobile phones were introduced in Niger, search costs fell by half. Farmers, consumers, and firms can now obtain more and in many cases “better” information—in other words, information that meets their needs. People can then use this information to take advantage of arbitrage opportunities by selling in different markets at different times of year, migrating to new areas, or offering new products. This should, in theory, lead to more efficient markets and improve welfare.

An emerging body of research suggests that perhaps theory is meeting reality. In many cases, these economic gains from information have occurred without donor investments or interventions from non-governmental organizations. Rather, they are the result of a positive externality from the information technology (IT) sector.

African governments, donors, mobile phone companies, and NGOs recognize the potential of mobile phones in many arenas of economic development. An emerging trend is the development of mobile phone-based services and products—applications or “apps”—that go beyond basic voice calls. In wealthy countries apps have mainly been sources of entertainment, but in poorer countries, they provide opportunities for disseminating market information, monitoring health care, and transferring airtime and money. In most cases these apps are developed by the private sector and then adopted (and adapted) by the development community. Projects in agriculture, health, education, and governance increasingly rely on the services uniquely available via mobile phones.

Simple and affordable mobile phones are also being used as a means to promote adult literacy in Africa. In addition to a regular literacy curriculum, adults in the Nigerien village of Falenko learn where to find letters and numbers on a mobile phone and how to send and receive SMS messages. Within four months, students are able to practice their newly acquired literacy skills by sending SMS messages to their friends and family. In a country without vernacular newspapers and village libraries, SMS makes literacy functional. Early results suggest that students who use a mobile phone as a learning device make faster progress and achieve greater literacy than those relying solely on traditional classes. Similar mobile-literacy projects are starting in Senegal, and others in India are using smart phones and mobile games as teaching tools for children."

Wal-Mart Sometimes More Selective Than Harvard

April 1 (Bloomberg) -- Harvard University admitted a record-low 6.9 percent of students seeking undergraduate admission after attracting the most applications ever, including almost 3,600 from seniors ranked first in their high school. Harvard College offered admission to 2,110 of this year’s 30,489 applicants. Last year, the Cambridge, Massachusetts, college accepted 7 percent."

Harvard is obviously very, very selective when offering admission to its applicants, but at least on some occassions, Wal-Mart is even more selective when offering jobs to its applicants.

(Crain's, January 2006) — The new Wal-Mart Stores location opening Friday in suburban Evergreen Park, Illinois received a record 25,000 applications for 325 positions, the highest for any one location in the retailer’s history, a company official says. Wal-Mart's Chicago-area manager Chad Donath said generally stores receive between 3,000 and 4,000 applications for about 300 to 450 positions.

That would mean Wal-Mart accepted only 1.3% of job applicants at its Chicago store, making it harder to get a job at Wal-Mart than gain admission to Harvard University. Of course, Wal-Mart's normal acceptance rate is closer to 10%, making it slightly less selective than Harvard on average.

Bottom Line: Just like Harvard has to be a pretty desirable place to attend college since it gets more than 14 applications for every opening, Wal-Mart must be a pretty desirable place to work if it routinely gets 10 applications for every job opening. And yet the standard assumption is that Wal-Mart's wages are unreasonably low. A Google search of Wal-Mart and "low wages" results in 47,000 hits.

But with Wal-Mart receiving 10 applications per position, you could actually make a stronger case that Wal-Mart's wages are actually TOO HIGH. That is, Wal-Mart could lower its wages considerably and still have too many applications.


Feb. Restaurant Index Highest Since Nov. 2007

"Driven by a solid improvement in restaurant operators' outlook, the National Restaurant Association's comprehensive index of restaurant activity rose to its highest level in 27 months in February (see chart above). The Association's Restaurant Performance Index (RPI), a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry stood at 99.0 in February, up 0.7 percent from January and its strongest level since November 2007.

However, despite the solid improvement, the RPI remained below 100 for the 28th consecutive month, which signifies contraction in the index of key industry indicators. The RPI's strong gain in February was the result of broadbased improvements among the forward-looking indicators. Restaurant operators' optimism for sales growth stood at its strongest level in 29 months, with capital spending plans also rising to a two-year high."

March ISM Manufacturing Index Highest Since 2004

"Economic activity in the manufacturing sector expanded in March for the eighth consecutive month, and the overall economy grew for the 11th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business (see chart above).

The manufacturing sector grew for the eighth consecutive month during March. The rate of growth as indicated by the PMI is the fastest since July 2004. Both new orders and production rose above 60 percent this month, closing the first quarter with significant momentum going forward. Although the Employment Index decreased 1 percentage point to 55.1 percent from February's reading of 56.1 percent, signs for employment in the sector continue to improve as the index registered a 10 percent month-over-month improvement, indicating that manufacturers are continuing to fill vacancies. The Inventories Index provided a surprise as it indicated growth for the first time following 46 months of liquidation — perhaps signaling manufacturers' willingness to increase inventories based on expected levels of activity."


MP: Add this to the growing list of V-shaped signs of economic recovery, especially in the manufacturing sector. Notice that the recovery of manufacturing activity since mid-2009 is much stronger than the recovery in the period following the 2001 recession, and we're quickly approaching the peak manufacturing activity reached in 2004.

Jobless Claims (4-Week Avg.) Fall to 80-Week Low

The Department of Labor reported today that jobless claims (4-week average) fell to 447,250 last week, the lowest level since mid-September 2008, meaning that jobless claims fell to an 80-week low (see chart above). From the peak in April 2009, jobless claims have fallen by 195,750 over the last year. Jobless claims (4-week average) have fallen for each of the last three weeks, and have declined in six out of the last eight weeks. The worst of the labor market problems are definitely behind us, as jobless claims have trended down for the last year. Compared to the 643,000 claims a year ago in early April, we've made a lot of progress, and the trend should continue.

Monster Employment Index Rises 6% from 2009

"The Monster Employment Index (MEI) had a monthly rise of one point in March, as employers continued to expand hiring efforts at the end of the first quarter. The annual growth rate in the MEI accelerated in March, with the current online demand level six percent above where it was a year ago.

“We’re encouraged by the positive uptick in the Index in the past two months,” said Jesse Harriott, senior vice president and chief knowledge officer at Monster Worldwide. “The Index results may be a signal that companies intend to start hiring again. While the labor market continues to be challenging for those looking for work, we are encouraged to see early signs of what may be a return to consistent job growth.”

Highlights include:

• New growth in real estate, rental and leasing; and construction industries; public administration and information decline.


• Continued gains in healthcare practitioner occupations, while community and social service; protective service and business edge down.

• Online job demand rises in all of the 28 major metro markets, with Orlando showing strongest monthly gain."

Wednesday, March 31, 2010

Global Shipping Rebound Gains Steam, Leading to Shipping Delays, Some Shortages of Container Ships

I've had a couple of persistent requests for updates on global shipping trends, so here is a summary of recent news:

1.
Packed Containers Piling Up At Asian Ports Because There's Too Much Demand From West - "Packed containers are piling up at Asian ports as strong demand from the U.S. and Europe causes a lack of supply of ships. Shipping companies had purposefully idled capacity during the economic downturn, then started to bring it back recently. Yet they didn't do it fast enough to keep up with the robust pick-up in demand from the West."

2.
Shippers Rattled By Shortage Of Ships Due To Trade Surge - "Here's a breath of fresh air for struggling container ship owners -- U.S. shippers are starting to worry about a shortage of container ships, due to the recent trade rebound on Transpacific routes.

A lot of ships were idled during the economic downturn and this dormant capacity is unlikely to come back online fast enough alongside a surge in shipping activity. It's a tangible sign that the global trade rebound is both real and gaining steam."

3.
Rumor: Flood Of Idle Ships Coming Out Of Lay-Up Because They See A Sustained Global Rebound - "Ship owners and managers with a ground-level view of global trade, plus massive skin in the the game of physically shipping goods (bringing a ship out of lay-up is a risky proposition), are starting to regain confidence in the current global rebound. That says a lot more than any pundit or analyst could since when ship owners get it wrong they get murdered (figuratively, usually)."

4.
U.S.-Bound Boxes Pile Up in Asia as Lines Avoid Adding Ships - "South Korea’s biggest port, overwhelmed with empty containers a year ago, is now dealing with shipping lines that have more cargo than they can carry. Surging shipments of furniture, electronics and clothes to the U.S. and Europe, coupled with capacity cuts by shipping lines, has caused as much as 15 percent of containers to be delayed in Busan this year, often by more than a week, according to Park Jong Ho, assistant general manager at Busan International Container Terminal Co.

“With the economy recovering, we have been seeing a lot of containers that didn’t make it out on time because there wasn’t enough space on ships,” he said.

Int'l Air Traffic: Passenger +7.5%, Cargo +26.5%

Geneva - "The International Air Transport Association (IATA) announced that February 2010 international scheduled air traffic showed continued strengthening of demand. Compared to February 2009, passenger demand was up 9.5%, while cargo demand grew 26.5% (see chart above).

These are strong gains, but it must be noted that February 2009 marked the bottom of the cycle for passenger traffic during the global economic recession. Passenger demand must recover by a further 1.4% to return to pre-crisis levels. Cargo hit bottom in December 2008, with little improvement realized by February 2009. Cargo traffic, which plunged much further than passenger demand, has a further 3% to recover in order to return to pre-crisis levels.

“We are moving in the right direction. In two to three months, the industry should be back to pre-recession traffic levels. This is still not a full recovery. The task ahead is to adjust to two years of lost growth,” said Giovanni Bisignani, IATA’s Director General and CEO.

The highlight for February was improved load factors which stood at 75.5%. Considering that February is traditionally the weakest month for travel, and if seasonally adjusted, this translates to an all-time record February load factor of 79.3%."

Canada's Turnaround from a High-Debt, High-Tax, High-Deficit Country to Lowest Tax Rates in G7


TORONTO GLOBE AND MAIL -- "Canada's relatively low corporate taxes have helped to make this country one of the best places in the world for companies to set up shop. Canada ranks second among 10 key countries as a cost-effective place to do business, and relatively low taxes are one of the main factors, consultants KPMG said in a report released yesterday.

KPMG said one key reason for Canada's high standing is that federal and provincial governments have been cutting taxes and reforming tax laws in recent years. Indeed, Canada now has lower business taxes than any other G7 country.

"It's really over the last 10 years Canada's tax position has changed quite significantly from being a high-tax jurisdiction to now actually leading the G7," said Glenn Mair, director of MMK Consulting, which assisted in preparing the KPMG study.

Since 2000, the overall corporate income tax rate in Canada has fallen to about 31 percent from about 43 percent, said Jack Mintz, chair of the University of Calgary's School of Public Policy. It will fall further, to about 26 percent, over the next few years.

When it comes to attracting business, "there is no question that the tax system helps a lot," Mr. Mintz said. Fifteen years ago, "we were viewed as a high-debt, high-tax, high-deficit country," he said. "Today we look like a much better country, and certainly we had a much better balance sheet going into the recession.""


MP: The Heritage Foundation chart above shows that Canada's corporate tax decrease to 26% over the next few years, will put it 12.7% below the U.S. rate of 39.3%, and bring it below the 26.6% average corporate tax rate in 2008 for non-U.S. OECD countries. In quite a turnaround, it looks like Canada and the U.S. have traded places - the U.S. is now the high-debt, high-tax, high deficit country, and Canada has become the low-debt, low-tax, and low-deficit country.

Canada Leads USA in Real Estate Recovery


Canadian home prices in January were up 7.5% from a year earlier, according to the Teranet-National Bank National Composite House Price Index (see top chart above), which was released today. January was the fourth consecutive month in which prices increased from a year earlier, after 10 consecutive months of 12-month deflation. The turnaround is due to nine straight monthly increases in the countrywide index (see bottom chart above) that followed eight straight monthly decreases. Compared to the previous peak in August 2008, home prices in Canada have increased by 1.6%, to set a new record high level in January.

To get an idea how home prices in Canada compare to the U.S. since 2001, the chart below tells the story. Home prices in both countries increased by about 80% since 2001, but peaked much earlier in the U.S. (early 2006) than in Canada (mid-2008), and U.S. home prices fell by much more from the peak (-30%) compared to the drop in Canada (-9%). Home prices have now completely recovered in Canada, whereas it might be many years before home prices in the U.S. return to the 2006 level.



Flat Tax: How it Works and Why It's Good for U.S.



This Center for Freedom and Prosperity Foundation video featuring Dan Mitchell of the Cato Institute shows how the flat tax would benefit families and businesses, and also explains how this simple and fair system would boost economic growth and eliminate the special-interest corruption of the internal revenue code.

If you're getting frustrated completing your tax returns for 2009, note the easy-to-fill-out postcard-size tax forms that would be a key feature of a flat tax. It reminds me of the very first IRS Form 1040, which was a one-page tax form with two pages of simple worksheets, and one page instructions for a grand total of only four pages, view it here.


Haiti's Tent Cities: Incubators for Entrepreneurs

After the devastating earthquake -- tent cities in Haiti have become something of an incubator for entrepreneurs. Watch a Reuters video here.

HT: Colin

Computers Just Keep Getting Cheaper and Better and We Should Eagerly Await the Days Ahead



Craig Newmark points to a great website "Classic PCs vs. New PCs: Their True Cost: Doing the math makes technology's relentless progress even more amazing," where they compare the costs and specifications of various computers from the 1970s and early 1980s to today's computers.

One example is illustrated above: a 1984 Apple Macintosh vs. a 2009 Apple iMac. Adjusted for inflation, today's Apple iMac is 26% cheaper ($3,849) than the 1984 Macintosh ($5,186). Measured in the number of hours of work at the
average hourly wage ($8.48 in 1984 and $18.57 in 2009) to purchase a computer at the retail price in current dollars, the price of an Apple computer has fallen by almost 30% (294 hours in 1984 vs. 207 hours in 2009). But what's maybe even more interesting is to adjust for the phenomenal increase in computer power, and compare the real dollar cost per CPU (MHz) and RAM (KB) in 1984 versus today. Here's that comparison:

Real Dollar Cost per CPU (MHz)
1984 Apple Macintosh: $662.35
2009 Apple iMac: $0.34

Real Dollar Cost per RAM (KB)
1984 Apple Macintosh: $40.52
2009 Apple iMac: $0.00025

In terms of the cost of processing speed (real dollars per MHz), the 2009 Apple iMac is 1,947 times cheaper, and in terms of memory cost (real dollars per KB), the 2009 Apple iMac is 162,000 times cheaper. And keep in mind that the 1984 Macintosh didn't even have a hard drive - you had to store all of your files on a floppy disk!

From the website:

"Computers today are mind-blowingly more powerful than they used to be. More importantly, consumers get vastly more computing power and capacity for their dollar today than they ever have before. The low end of the market gets lower, and the high end…also gets lower. It’s very difficult to buy a non-diamond encrusted $10,000 PC, much less a $20,000 one, which you could do back in 1980s without breaking a sweat. But it’s easy to buy a steel-encrusted $350 bargain PC that’s just as powerful as a top of the line model a few years ago.

From this simple analysis of computer cost, I suspect that baseline desktop PC prices will continue to decrease over time. To what end and how much, I’ll leave to professional market analysts. But I do know that, in the computer industry at least, the past is often a good indicator of broad trends that will continue to unfold for years to come. I eagerly await the days ahead."

MP: If the dramatic price reductions and quality/speed improvements of computers and other electronic products happened suddenly all at once, it would probably be declared to be a miracle. If nothing else, it would certainly catch our attention. But when the price reductions and quality improvements happen continually and relentlessly all the time, we become immune and either don't even pay attention, or tend to take the improvements for granted.

Thankfully, the comparison of today's economy to the Great Depression have started to fade, because it was easy for many to think our standard of living would somehow return to the level of the 1930s. This comparison of computer prices helps us appreciate how technological improvements elevate the standard of living of the average American to levels that previous generations couldn't have even imagined. Another lesson here might be that even a Great Recession can't stop the progress of human ingenuity, technological improvements, and the entrepreneurial spirit that will continue the relentless trend towards better and cheaper products, and a continually rising standard of living.

Tuesday, March 30, 2010

4th Straight Week of Gains for Rail Freight Traffic; 16 of 19 Commodity Groups Increased vs. Year Ago

The Association of American Railroads reported that for the fourth consecutive week, freight traffic on U.S. railroads increased compared with the same period a year ago during the week ended March 20. Highlights include:

1. U.S. railroads originated 287,639 carloads during the week, up 4.3 percent from the comparable week in 2009.

2. Intermodal traffic totaled 201,300 trailers and containers, up 9.5 percent from last year.

3. Sixteen of 19 carload commodity groups showed gains from a year ago, with 13 of them showing double digit percentage gains, led by a 69.2 percent increase in loadings of metals and products. Other commodities showing significant increases included grain, up 24 percent; motor vehicles, up 20.8 percent; waste and scrap, up 33.1 percent; lumber and wood products, up 21.8 percent, and chemicals, up 14.4 percent.

4. Combined North American rail volume for the first 11 weeks of 2010 on 13 reporting U.S., Canadian and Mexican railroads totaled 3,941,811 carloads, up 3.6 percent from last year, and 2,772,992 trailers and containers, up 8.7 percent from last year.

The Rich Are Not Docile Sheep Waiting to Be Shorn

"President Barack Obama's new health-care legislation aims to raise $210 billion over 10 years to pay for the extensive new entitlements. How? By slapping a 3.8% "Medicare tax" on interest and rental income, dividends and capital gains of couples earning more than $250,000, or singles with more than $200,000.

The president also hopes to raise $364 billion over 10 years from the same taxpayers by raising the top two tax rates to 36%-39.6% from 33%-35%, plus another $105 billion by raising the tax on dividends and capital gains to 20% from 15%, and another $500 billion by capping and phasing out exemptions and deductions.

Add it up and the government is counting on squeezing an extra $1.2 trillion over 10 years from a tiny sliver of taxpayers who already pay more than half of all individual taxes.

It won't work. It never works. Punitive tax rates on high-income individuals do not increase revenue. Successful people are not docile sheep just waiting to be shorn."

~Cato's
Alan Reynolds in today's WSJ

Here are some reports on how tax increases on millionaires worked out in Maryland:

1.
Wall Street Journal -- "Maryland's Mobile Millionaires: Income tax rates go up, rich taxpayers vanish."

2.
Washingont Post -- "The number of self-reported million-dollar earners in Maryland has dropped by roughly a third compared with this time last year, renewing debate yesterday about whether the state's year-old "millionaires' tax" is driving rich people beyond its borders."

3.
Baltimore Sun -- Top Payers Fade Away; Maryland Was Depending On Taxing Millionaires, But They're Disappearing.

4.
Wall Street Journal -- Millionaires Go Missing; Maryland's fleeced taxpayers fight back.

Case-Shiller Home Price Indexes Rise for 8th Month


The S&P/Case-Shiller Home Price Indices for January 2010 were released today. Highlights include:

1. Both the 10-City Composite and the 20-City Composite Home Price Indexes have increased for eight consecutive months for the first time since the spring of 2006, almost four years ago, and both indexes in January reached their highest levels in 12 months, since January 2009 (see top chart above).

2. Based on the percentage increase from the same month in the previous year, the annual rates of returns for both home price indexes improved in January for the 12th consecutive month, and while still slightly negative (-0.04% for the 10-City Index and -0.69% for the 20-City Index) the annual returns are close to be being in positive territory for the first time in three years (February 2007).

3. In three of the cities with the biggest annual January-to-January price declines in the Case-Shiller index like Las Vegas (-17.4%), Miami (-6.77%) and Phoenix (-4.5%), I have reported recently (
here, here (for all of Florida) and here) that the home sales in those markets have been strong, and consistently above sales levels from the same month in the previous year in each month for the last year or longer.

For example, both Florida and Las Vegas home sales increased in February for the 18th month in a row, and Phoenix home sales in February were the highest for that month since 2006.

Bottom Line: Nationally, home sales bottomed in January 2009, and have been on an upward trend for the last 12 months. The Case-Shiller Composite Home Price Indexes both reached a bottom in May 2009, and have now increased for eight straight months. Now that there's a gradual upward trend in both home sales and home prices, it's a positive sign that we've moved past the bottom of the real estate market, and are now moving slowly towards a full recovery. The falling prices through the middle of 2009 helped to bring buyers back into the market and bring about a better balance in the market, as excess inventories have gradually been cleared. As Larry Kudlow reminds us, "Market forces work."

Univ. of Florida Fall 2010:150 Women Per 100 Men

According to University of Florida spokesman Steve Orlando, six out of 10 new UF students will be women in fall 2010, which is the largest gender gap favoring female students that UF has ever had. UF’s fall 2009 enrollment was 54% female and 46% male, according to the UF Office of Institutional Planning and Research.

UF is aware of the gap but not doing anything to balance the numbers, Orlando said. But he said the school isn’t discriminating against male applicants. “Boys wouldn’t be admitted because they’re boys,” he said. “Girls are being admitted because they are doing the things to be admitted and boys aren’t.”


MP: Can they really still call it the "freshman" class?

The Power of the Market: Haitian Entrepreneurs Are Kick-Starting the Local Economy in Tent Cities

Nearly three months after the devastating earthquake in Haiti, small businesses are springing up within the tent communities housing displaced people. Adam Davidson of NPR'S "Planet Money" reports on the entrepreneurs who are kick-starting the local economy. Click here to watch video.

"There's more competition now than before the earthquake."

Update on the NYC "Taxi Cartel"; Medallion Prices Reach Record Highs in 2010 of $588k and $779k

The "priciest piece of aluminum in NYC" - a taxi medallion to operate a single cab in NYC - reached a new record-high of $588,000 in February for an individual medallion (see chart above, data here), more than double the average prices in 2004. The average price for a corporate-owned taxi medallion reached a new record high in January at $779,000, and fell slightly in February to $775,000.

Membership in the "taxi cartel" certainly has its privileges: above-market returns of 20.75% per year for corporate medallions and 15.32% for individual medallions in a permanent bull market. See previous CD posts here,
here and here.

Monday, March 29, 2010

Florida Home Sales Increase in February for the 18th Month As Falling Prices Stimulate Sales

"Florida’s existing home sales rose in February, which means that sales activity has increased in the year-to-year comparison for the past 18 months, according to the latest housing data released by Florida Realtors.

Existing home sales increased 21 percent last month with a total of 11,890 homes sold statewide compared to 9,867 homes sold in February 2009. Statewide existing home sales last month increased 13.6 percent over statewide sales activity in January. Florida’s median sales price for existing homes last month was $131,300; a year ago, it was $141,800 for a 7 percent decrease."

From Larry Kudlow's article "
Foreclosures, Lower Prices Will Do Trick":

"And take a look at places like California, Florida and Las Vegas, where foreclosure activity has been high and prices have fallen the most. What you see is a sharp pickup in home sales, which is steadily clearing away the price-depressing inventory overhang of unsold homes. In other words, market forces work."

From
Barry Ritholz's blog:

"It may sound counter-intuitive, but the best thing for the nation (but not necessarily the banks) is to allow the foreclosure process to proceed unimpeded. We need more, not fewer foreclosures."

STEM Research Careers: Not Very Family Friendly

"In an era when women are increasingly prominent in medicine, law and business, why are there so few women scientists and engineers? A new research report by AAUW presents compelling evidence that can help to explain this puzzle. Why So Few? Women in Science, Technology, Engineering, and Mathematics presents in-depth yet accessible profiles of eight key research findings that point to environmental and social barriers – including stereotypes, gender bias and the climate of science and engineering departments in colleges and universities – that continue to block women’s participation and progress in science, technology, engineering, and math."

Diane Auer Jones responds in today's
Chronicle of Higher Education:

"What are the reasons for this persistent gap? According to the report, social and environmental factors are to blame. Shocking. Sadly, this report serves only to regurgitate age-old accusations and assumptions, and to make worn-out recommendations that we've heard so many times before—none of which have proven terribly effective in closing the gap in certain fields.

Research careers are highly competitive. No matter how long you've been at it, to be a successful researcher means competing against a growing group of applicants for a shrinking supply of grant and contract resources. As federal spending on interest and entitlement programs grow, the competition is only going to increase. Peer reviewers and contracting officials are compelled to give priority to those with the strongest track record and the highest likelihood of success, which generally means that the rewards are greatest for those who devote the most time and energy to their work.

This isn't gender bias. It is reality. There are rare exceptions among a few scientists who can focus intensely—or farm the work out to enough graduate students—that they get the job done with breathtaking efficiency. But for the most part, no dean or tenure policy in the world can change the fact that research careers are demanding and not very family friendly, because in general, being smart isn't nearly as important as being persistent, and persistence requires time. Designing better experiments is good, but being there to repeat them over and over again, in every possible iteration, is even better."

The $64 Billion Physician Cartel Got a Free Ride

1. According to a 2007 study by McKinsey Global Institute: "U.S. physicians are more highly paid than their counterparts in other developed countries. U.S. generalists make 4.1 times per capita GDP, compared with 2.8 times per capita GDP in other OECD countries. Across all U.S. physicians, higher earnings add $64 billion in costs to the U.S. system."

2. "How has the American Medical Association managed to get away with such princely remuneration that ordinary mortals in other professions—even ones such as law and engineering that also require arduous training—can only dream of? After all, in a functioning market, a profession offering such handsome returns would become a magnet for more people who, over time, would bid down "excess" wages.

But that's not how it has worked in medicine since 1910 when the Flexner report, commissioned by the AMA, declared that a surplus of substandard medical schools in the country were producing a surplus of substandard doctors. The AMA convinced lawmakers to shut down "deficient" medical schools, drastically paring back the supply of doctors almost 30 percent over 30 years. Few new medical schools have been allowed to open since the 1980s.

~
Shikha Dalmia

3. There are 131 medical schools in the U.S. (
data here), which is 21% fewer than the number of medical schools 100 years ago (166 medical schools, source), even though the U.S. population has increased by 300%.

By restricting the supply of medical schools and physicians, the AMA has "
enforced cartel-like restrictions on entry that benefit physicians at the expense of consumers, and which have created significant barriers to effective, cost efficient health care."

4. Here's one recent example of the "AMA Cartel's" attempt to restrict competition:

NASHVILLE -- St. Jude Children's Research Hospital won unanimous state legislative approval to bring foreign-trained physicians onto its Memphis staff without the one- to three-year U.S. medical residencies required for a Tennessee medical license.

The bill won 97-0 approval in the House Thursday and it passed the Senate 33-0. Although it won unanimous approval, the Board of Medical Examiners voted in January to voice its opposition, out of concern it will open the door for other institutions to seek exemptions.

"While the board acknowledges and fully appreciates the wonderful work done at St. Jude, we are gravely concerned about the precedent-setting nature of the bill and thus unanimously oppose it. It is the board's view that should this well-intentioned legislation become law, it would open the door for any institution whose physicians cannot otherwise qualify for licensure ... (to) seek legislation that would create similar special licensure," the examiners' letter said.

5. And the AMA Cartel doesn't just want to restrict the supply of physicians, it also wants to restrict competition from other health care providers, like retail health clinics. For example:

MedPage Today -- Retail clinics first came on the scene in the middle of the last decade, and there are now some 1,200 of them operating in 32 states, according to the Convenient Care Association, a retail clinic trade association founded in 2006.

Not surprisingly, retail clinics have been targeted nearly from their inception by physician organizations, which charge that the clinics disrupt continuity of care and provide lower-quality care than physicians' offices or hospitals. In a 2006 policy statement, the American Academy of Pediatrics (AAP) said flatly, "The AAP opposes [retail clinics] as an appropriate source of medical care for infants, children, and adolescents and strongly discourages their use, because the AAP is committed to the medical home model."

6.
Another example: "Midwifery, once a robust industry in this country, has been virtually destroyed, thanks to the intense lobbying against it by the medical industry. In 1995, 36 states restricted or outright banned midwifery, even though studies have found that it delivers equally safe care at far lower prices than standard hospital births."

MP: The $64 billion estimate of higher health care costs resulting from excessive physician compensation in the U.S. is just part of the story. The AMA's aggressive turf-protection against competition from retail clinics, midwives, pharmacists, and chiropractors have added additional medical costs that go way beyond just the $64 billion. In all of the discussions about health care costs and health care reform over the last year, the cartel power of physicians and their excessive compensation was barely mentioned.

Markets in Everything: Market-Based Health Care in Canada

"The distinguishing feature of Canadian public healthcare is the nearly universal waitlists for virtually all diagnostic procedures and for surgeries (see chart above). The public health care system in Canada has a waitlist in every province and surgery dates are often cancelled or bumped due to a more urgent case arising or a shortage of beds being available.

Timely Medical Alternatives was founded in 2003 as Canada’s first facilitator of private pay medical services and diagnostic imaging. Since then, we have expedited private medical services for thousands of clients and in the process, have saved the lives of 6 of our fellow Canadians.

We are able to facilitate private medical services and diagnostics within 2 – 3 days and surgeries as quickly as 48 hours, in urgent cases. Many of our referrals are to facilities within Canada, and some are available in the U.S., where we have a network of hospitals and private medical services clinics with which we work."

Sunday, March 28, 2010

Milton Friedman in 1978:Market-Based Health Care



In 1978, at the Mayo Clinic, Milton Friedman discussed the free market solution to America's health care problems, and the more "general problem America faces - whether we are going to continue down the road to a completely collectivist society in every area, as we have been going for the past 40 years, or whether we are going to stake thought and halt that trend."

Nobel Economist Gary Becker in the WSJ: Drafting A Good Health Care Bill Would Have Been Easy

"The health care legislation is a bad bill. Health care in the United States is pretty good, but it does have a number of weaknesses and this bill doesn't address them. It adds taxation and regulation. It's going to increase health costs—not contain them.

Drafting a good health care bill would have been easy. Health savings accounts could have been expanded. Consumers could have been permitted to purchase insurance across state lines, which would have increased competition among insurers. The tax deductibility of health-care spending could have been extended from employers to individuals, giving the same tax treatment to all consumers. And incentives could have been put in place to prompt consumers to pay a larger portion of their health-care costs out of their own pockets.

Here in the United States we spend about 17% of our GDP on health care, but out-of-pocket expenses make up only about 12% of total health-care spending (see chart above). In Switzerland, where they spend only 11% of GDP on health care, their out-of-pocket expenses equal about 31% of total spending. The difference between 12% and 31% is huge. Once people begin spending substantial sums from their own pockets, they become willing to shop around. Ordinary market incentives begin to operate. A good bill would have encouraged that."

~Nobel economist
Gary Becker in the WSJ

Las Vegas Feb. Home Sales Highest in Four Years

From DQNews -- Las Vegas region February home sales fell just shy of their 16-year average but were still the highest for that month in four years as investors and first-time buyers continued to dominate the market. Other highlights include:

1. Foreclosure resales – homes that had been foreclosed on in the prior 12 months – fell to 59.6% of all resales in February, down from 62% in January and down from 70.6% a year ago.

2. A total of 3,698 new and resale houses and condos closed escrow in the Las Vegas-Paradise metro area in February, up 9.8% from January and up 10.5% from a year earlier (see chart above). A rise in sales between January and February is normal for the season, with the gain averaging 5.7% since 1994.

3. February’s sales total was the highest for that month since February 2006, when 6,065 homes sold, but it was 2.0% lower than the average February sales tally back to 1994.

4. Last month marked the 18th in a row in which total sales rose on a year-over-year basis.

5. The number of existing houses and condos that resold (excludes new homes) in February rose to 3,311, up 7.1% from January and up 9.5% from a year earlier to the highest point since 3,875 resales in February 2005.

6. Existing-home resales have risen on a year-over-year basis for 22 straight months.

7. The median price paid for all new and resale houses and condos sold in the Las Vegas metro area in February was $126,197, up 0.4% from $125,750 in January but down 17.2% from $152,500 a year earlier (see chart above). The year-over-year decline was the smallest since March 2008, when the median dropped 16.0% from a year earlier, to $247,925.

Currency Manipulation Used to Be Law of the Land; Isn't Hong Kong Also A Currency Manipulator?

"We shouldn’t forget that what they are calling “currency manipulation” today was the law of the land between WWII and the early 1970s. The Bretton Woods system was a system of currency manipulation (i.e. currency fixing or pegging) and movements away from its rules were considered breaking the rules."


MP: The chart above shows that the value of the Hong Kong dollar has been fixed at a fixed exchange rate of 7.8 Hong Kong dollars to the U.S. dollar for the last 25 years, while the Chinese Yuan has fluctuated from between 3 yuan and 9 yuan to the U.S. dollar over the last 25 years. Why are there never any claims that Hong Kong is a "currency manipulator"?

Treasury Spread Model: No Chance of Double-Dip


A few weeks ago, the New York Federal Reserve updated its "Probability of U.S. Recession Predicted by Treasury Spread" with data through February 2010, and the Fed's recession probability forecast through February 2011 (see top chart above). The NY Fed's model uses the spread between 10-year (3.69% in February) and 3-month Treasury rates (0.11% in February) to calculate the probability of a recession in the U.S. twelve months ahead (see details here).

The Fed's model (
data here) shows that the recession probability peaked during the October 2007 to April 2008 period at around 35-40%, and has been declining since then in almost every month. For February 2010, the recession probability is only 0.57% (about 1/2 of 1%) and by a year from now in February 2011 the recession probability is only .054%, the lowest reading since April 1993.

According to the NY Fed Treasury Spread model, the recession ended sometime in middle of 2009, and the chances of a double-dip recession through early 2011 are essentially zero.

Phoenix Housing Markets Shows Signs of Recovery; February Home Sales Highest Level in Four Years

From DQNews -- Phoenix region total home sales (houses and condos) in February rose to the highest point for that month in four years and posted a normal gain over January as already-robust demand from absentee and cash-only buyers grew. The median sale price inched up from the month before and was the same as a year ago, marking the first time since January 2007 that the overall median didn’t drop on a year-over-year basis. Other highlights:

1. The $131,900 median paid for existing, single-family detached houses was 5.5% higher than a year ago – the first time that median increased year-over-year since March 2007.

2. The median price paid per square foot for those resale houses increased 5.8% percent from a year ago, marking the first annual gain since October 2006.

3. A total of 6,824 new and resale houses and condos closed escrow in February, up 9.6% from the month before and up 13.0% from a year earlier (see chart above).

4. February’s total sales were the highest for that month since February 2007, when 8,940 homes sold. Total resales – houses and condos combined – were the highest for a February since 2006.

5. The median price paid in February for all new and resale houses and condos combined was $135,000, up from $131,540 in January and the same as a year earlier (see chart). The median paid last month for resale single-family detached houses was $131,900, up 1.5% from $130,000 in January and up 5.5% from a year ago.

6. Foreclosure activity dipped in February: The 4,635 single-family house and condo units foreclosed on in the Phoenix region represented a 6.2% decline from January and an 18.4% drop from a year earlier.

MP: Phoenix housing sales in February were the highest since 2006, with some upward movement in single-family home prices, and a reduction in foreclosure activity in February - important factors that signal a gradual recovery in one of the hardest-hit real estate markets.