Saturday, November 27, 2010

Best Sentence (Alliteration) I Read All Week (Year)

Pittsburgh Post-Gazette -- "A jury on Tuesday ordered SAP to pay $1.3 billion -- more than half of its total profit last year -- for a subsidiary's skullduggery in stealing a stockpile of software and customer-support documents from password-protected Oracle websites."

HT: J. Kennedy

Friday, November 26, 2010

Sept. Leading Indicators: Three Up, One Down

The Conference Board reported this week that Leading Indicators increased in September for:

1. France by 0.8%.

2. Germany by 0.3%.

3. Mexico by 0.6%.

But decreased in September for

4. Australia by 0.1%.

Weekly Rail Freight Continues to Post Gains

"The Association of American Railroads today reported for the week ending Nov. 20, 2010, U.S. freight railroads continue to post weekly rail traffic gains, originating 297,990 carloads, up 3.9% compared with the same week last year. Intermodal traffic for the week totaled 235,999 trailers and containers, up 10.6% compared with the same week in 2009, with container volume up 11.7% and trailer volume up 5.2% (see chart)."

Thursday, November 25, 2010

October International Air Traffic Rises Above Pre-Crisis 2008 Levels: Recovery is Strengthening

The International Air Transport Association announced today that there was a 10.1% year-on-year increase in passenger traffic for the month of October and a 14.4% year-on-year increase last month for international freight volume (see chart above).  Passenger traffic has now increased in 14 out of the last 15 months, and five of those months have been double-digit improvements. Freight traffic has increased for 13 consecutive months, and the last 12 have been double-digit gains. 

Giovanni Bisignani, IATA’s Director General and CEO said:

“As we approach the end of 2010, growth is returning to a more normal pattern. Passenger demand is 5% above pre-crisis levels of early 2008, while freight is 1% above. Where we go from here is dependant on developments in the global economy.  The US is spending more to boost its economy. Asia outside of Japan is barrelling forward with high-speed growth. And Europe is tightening its belt as its currency crisis continues. The picture going forward is anything but clear, but for the time being, the recovery seems to be strengthening."

The Pilgrims and Property Rights

Wednesday, November 24, 2010

Happy Starvation Day

"Had today's political class been in power in 1623, tomorrow's holiday would have been called "Starvation Day" instead of Thanksgiving. Of course, most of us wouldn't be alive to celebrate it."

John Stossel explains in his column today about the "lost lesson of Thanksgiving." 

Giving Thanks for Capitalism, The Invisible Hand, The Miracle of the Market and No Turkey Czars

Like in previous years, you probably didn't call your local supermarket ahead of time and order your Thanksgiving turkey this year. Why not? Because you automatically assumed that a turkey would be there when you showed up, and it probably was there when you showed up "unannounced" at the grocery store to select your bird.

The reason your Thanksgiving turkey was waiting for you without an advance order? Because of "spontaneous order," "self-interest," and the "invisible hand" of the free market - "the mysterious power that leads innumerable people, each working for his own gain, to promote ends that benefit many." And even if your turkey appeared in your local grocery stores only because of the "selfishness" or "corporate greed" of thousands of turkey farmers, truckers, and supermarket owners who are complete strangers to you and your family, it's still part of the miracle of the marketplace where "individually selfish decisions lead to collectively efficient outcomes."

In a 2003 Boston Globe column titled "Giving Thanks for the Invisible Hand" (available only in the paid archives) Jeff Jacoby explains below why he is thankful for the miracle of the invisible hand that makes affordable turkeys automatically available so efficiently at Thanksgiving:

The activities of countless people over the course of many months had to be intricately choreographed and precisely timed, so that when you showed up to buy a fresh Thanksgiving turkey, there would be one -- or more likely, a few dozen -- waiting. The level of coordination that was required to pull it off is mind-boggling. But what is even more mind-boggling is this: No one coordinated it.

No turkey czar sat in a command post somewhere, consulting a master plan and issuing orders. No one forced people to cooperate for your benefit. And yet they did cooperate. When you arrived at the supermarket, your turkey was there. You didn't have to do anything but show up to buy it. If that isn't a miracle, what should we call it?

Adam Smith called it "the invisible hand" -- the mysterious power that leads innumerable people, each working for his own gain, to promote ends that benefit many. Out of the seeming chaos of millions of uncoordinated private transactions emerges the spontaneous order of the market. Free human beings freely interact, and the result is an array of goods and services more immense than the human mind can comprehend. No dictator, no bureaucracy, no supercomputer plans it in advance. Indeed, the more an economy *is* planned, the more it is plagued by shortages, dislocation, and failure.

It is commonplace to speak of seeing God's signature in the intricacy of a spider's web or the animation of a beehive. But they pale in comparison to the kaleidoscopic energy and productivity of the free market. If it is a blessing from Heaven when seeds are transformed into grain, how much more of a blessing is it when our private, voluntary exchanges are transformed - without our ever intending it - into prosperity, innovation, and growth? 


Tuesday, November 23, 2010

Don't Blame U.S. Consumers for Overspending

A senior CNN writer cooked up quite "a stew of errors, misunderstandings, and non sequiturs" (to quote Don Boudreaux referring to another recent "trade stew") about trade imbalances in an article titled "The Trouble With 'Global Imbalances'."  Don responded here to this example of the "hysteria stirred up by the incessant barrage of uninformed reporting about trade and trade deficits."

One theme of the CNN article of "global imbalances" is that Americans "overspend" and "overconsume," and this consumer profligacy allegedly contributes to the "global imbalances."  Here are some excerpts: 

"The real problem is overspending by U.S. consumers, and not enough spending by consumers in some of those other markets.

"The bottom line is we overconsume," said Diane Swonk, chief economist at Mesirow Financial. "What [rebalancing] means is fundamentally changing what we're doing. It's going to be painful."

How to reduce that overconsumption by Americans, and how to spur spending by consumers in emerging economies such as China and India is not easy, according to economists."

MP: The chart above of the U.S. personal savings rate shows that Americans have been saving between 5-6 percent of disposable personal income in every month for the last two years, and that's the highest level of savings since the mid-1990s.  With Americans now saving at the highest rates in 15 years, can there really be a problem with "overspending by U.S. consumers?"  If there is a problem in the U.S. of "overspending," it's not the millions of consumers who are to blame, it's probably gotta be that other group - the one that has 535 members. 

Rapacious Income Inequality?

In a recent editorial titled “A Hedge Fund Republic?” New York Times columnist Nicholas Kristof claims that if you want to observe “rapacious income inequality,” you don’t need to travel to a banana republic. Rather, you can simply look around the United States to see “stunning inequality” that is supposedly the result of some rapacious plundering of America’s poor by wealthy plutocrats.

Will Wilkinson responded in The Economist (”This Ain’t No Banana Republic“) and takes Kristof to task for his “confusion and laziness” about claims of “rapacious income inequality.”  I respond here at The Enterprise Blog

Online Holiday Shopping Already Up By 13% in Nov. Expected $32B Sales This Season, Highest Ever

PR Newswire -- "comScore, a leader in measuring the digital world, today reported holiday season retail e-commerce spending for the first 21 days of the November – December 2010 holiday season, as well as its official spending forecast for the season. For the holiday season-to-date, $9.01 billion has been spent online, marking a 13% increase versus the corresponding days last year (see chart)."

"The beginning of the online holiday shopping season has gotten off to an extremely positive start, outperforming our earlier expectations," said comScore chairman, Gian Fulgoni. "Despite continued high unemployment rates and other economic concerns, consumers seem to be more willing to open up their wallets this holiday season than last. While this early spending surge reflects, in part, heavy promotional activity on the part of retailers occurring earlier this season, it is nevertheless a very encouraging sign."

The official comScore 2009 holiday season forecast is that online retail spending for the November – December period will reach $32.4 billion, representing an 11% gain versus year ago. This strong growth rate represents an improvement compared to last season's 4% increase.

"After a year in which we already saw growth rates return to solid positive territory, the recent strength in holiday spending has led us to raise our official forecast to 11 percent from the 7 to 9 percent we were initially expecting," added Fulgoni. "We are seeing online spending surpass the totals we saw in 2007 prior to the recession and expect sales this holiday season to be the highest on record with more than $32 billion being spent during the November and December period."

Consumer Spending Is Back to Pre-Recession Level

From Table 8 in today's BEA report: Real personal consumer expenditures reached $9.34 trillion in the third quarter, the highest amount of quarterly spending since the slightly higher $9.342 trillion in the fourth quarter of 2007 when the recession started (see top chart).

On a percentage basis, real personal consumption expenditures grew by 2% in the third quarter compared to the same quarter last year, and this was the largest quarterly increase in consumer spending in three years going back to the third quarter of 2007 - the quarter before the recession started (see bottom chart). 

Satellites Show Mall Traffic Surge in November

BARRONS -- "Mall traffic for November 2010 has shown a steep rise recently, according to a report released today by Thomson Reuters. Using satellite images the firm is able to measure parking lot traffic, which correlates well with same-store sales. 
“Based on this relationship, we may be seeing an early sign that stronger November 2010 mall traffic is pointing to stronger same-store sales,” wrote Thomson Reuters analyst Jharonne Martis-Olivo in the report. At 3.5%, the Thomson Reuters Same-Store Sales Index for November is significantly stronger than the 0.5% in November 2009 and the -7.8% for November 2008.

“Retailers seldom release average ticket prices, but the CPI was flat as of the Nov. 17, 2010 reading,” Martis-Olivo wrote. “Thus, if November mall parking lot traffic has been on the rise, while inflation remains unchanged, then there’s a pretty good chance that shopper conversion rates could be higher this year.”

HT: Norman Berger

SNL Skit on TSA Enhanced Security Procedures

Real Corporate Profits Back to Pre-Recession Levels

U.S. corporate profits reached a new record high in the third quarter of $1.221 trillion (at an annual rate), after taxes and adjustments for inventory valuation and capital consumption (see graph above, data here), according to today's BEA report.  Compared to the second quarter, corporate profits increased by $12.6 billion during the summer months, and that makes seven straight quarterly gains in profits going back to the first quarter of 2009.  From the cyclical bottom of $774 billion of profits in the fourth quarter of 2008, profits for U.S. companies have rebounded by 57.6%, and by $446.5 billion.

Adjusted for inflation (using the Business Sector Deflator), real corporate profits in the third quarter were just slightly below the all-time record high of $1.229 trillion in third quarter of 2006 (see red line in graph above). 

See related NY Times report here.

Markets in Everything: Hire A Professional Ad Writer to Help With Your Dating Profile

"Make your inbox go from empty to full of promise. I'm Kate Houston, I've been an award winning ad writer for 20 years. I find out what makes you special then, with a few choice words, I make you irresistible. 

Online dating is competitive. With thousands of singles online, even good looks are not enough. But, you can stand out from any crowded online dating site! All you need is a dating profile so engaging, it gets attention and keeps it - and that's my speciality (sic)!"

MP: Prices start at $20 to re-write an existing profile, and $80 to write an entire new profile.  Let's hope the spelling is better than Kate's own ad copy above!

Monday, November 22, 2010

Gotta Love Wal-Mart

THE ATLANTIC -- "In October, Walmart unveiled its commitment to sustainable agriculture, including a goal to double the amount of locally grown produce we sell in the United States. But what does that mean and how will we do it? To better understand where Walmart is heading, let's take a look at what we're already doing with jalapeño peppers.

Today, we source jalapeño peppers from 20 states—including some you wouldn't think of, like New York and Michigan—and jalapeños have proven to be a win-win-win. Our customers get a fresher product. We save money on freight so we can keep our prices low, while slashing carbon emissions. And our farmers are thrilled with our new strategy—they are earning more, and they're now coming to us to ask what else the market might want that they can grow."

MP: Although Wal-Mart has a reputation for: a) outsourcing its products overseas, and b) putting local, small merchants out of business, this is an example of exactly the opposite: a) sourcing its produce locally, and b) supporting local, small farmers. 

Case Study in Rent-Seeking and Capture Theory

WASHINGTON — "The companies with multimillion-dollar contracts to supply American airports with body-scanning machines more than doubled their spending on lobbying in the last five years and hired several high-profile former government officials to advance their causes in Washington, records show.
L-3 Communications, which has sold $39.7 million worth of the machines to the federal government, spent $4.3 million to influence Congress and federal agencies during the first nine months of this year, up from $2.1 million in 2005, lobbying data compiled by the Center for Responsive Politics show. Last year, the company spent $5.5 million on lobbying.

Rapiscan Systems, meanwhile, has spent $271,500 on lobbying so far this year, compared with $80,000 five years earlier. It has faced criticism for hiring Michael Chertoff, the former Homeland Security secretary, who has been a prominent proponent of using scanners to foil terrorism. Officials with Chertoff's firm and Rapiscan say Chertoff was not paid to promote scanner technology. It spent $440,000 on lobbying in 2009. The government has spent $41.2 million so far on Rapiscan's machines."

U.S. Hotel Industry Improves in October

HENDERSONVILLE, Tennessee—"The U.S. hotel industry posted increases in all three key performance measurements during October 2010. In year-over-year measurements, the industry’s occupancy was up 6.9 percent to 61.3 percent. Average daily rate ended the month with a 1.2-percent increase to $100.89. Revenue per available room for the month rose 8.2 percent to finish at $61.89 (see chart,click to enlarge)."

“Overall, industry fundamentals continued to improve across the board in October,” said Mark Lomanno, president of STR. “While room rate growth remained sluggish in October, we attribute that to lower rated group business that was booked months before there was a significant demand turnaround. We’re hopeful that we will see steady, but probably slow, room rate growth for the remainder of the year.”

For both: a) the three month period from August-October, and b) year-to-date through October, hotel occupancy rates improved compared to last year. 

Sunday, November 21, 2010

Markets in Everything: Oil-Filled Wine Bottles

"Wine bottles have been flying off the shelves at gas stations in North Dakota recently. Bakken Formation Wine, however, isn’t meant for drinking.

The bottles, being sold at Cenex gas stations in Tioga and Stanley, are filled with Bakken oil “Vintage 100 million years,” according to the stickers on the bottles. Diane Clark, station manager at the Tioga Cenex station, said 1,000 bottles of Bakken Formation Wine were made.

“All proceeds will be set aside for donations to local charitable organizations in the Tioga and Stanley areas,” said Clark. Bottles of Bakken Formation Wine have a sale price of $10." 

2010-2015 Could Be The Strongest Six-Year Period of World Real GDP Growth in a Generation

The International Monetary Fund is now predicting world real GDP growth this year of 4.6%, followed by 4.3% next year, and then 4.50% growth or above from 2012 to 2015.  If so, the 2010-2015 period would be the strongest growth for the world economy during a six-year period in at least 30 years (see chart above).  

Japan: Exports Surging from Strong Global Demand

1. "Japanese export ship orders surged 88.5 percent in October compared with a year ago to 675,300 gross tons. Climbing back after 15 months of steep decline in the global recession, ship orders have grown by large double digits and sometimes into triple digits in the last 11 months. In August the gain was 111.3 percent." 

2. "All Nippon Airways (ANA) increased its international cargo volume 32.6 percent from last year to 42,007 tons in September, the 13th consecutive month of growth. Gains outpaced the 30.2 percent increase in August.  In the first half of fiscal 2010, ANA's international cargo volume totaled 240,421 tons, up 40.4 percent from a year earlier. The carrier's domestic cargo volume between April and September amounted to 232,509 tons, up 4.1 percent from the same six-month period last year."

The Mandarins Now Come to Cuba By Boat

You would think that oranges on most citrus-friendly Caribbean islands would be a common, locally grown, readily-available fruit.  Well, not if that island is Cuba, as Cuban blogger Yoani Sanchez explains here in a post titled "The Mandarins Come by Boat."