Saturday, April 23, 2011

Why Do Air Traffic Controllers Fall Asleep on the Job? Because They Want a Three-Day Weekend

"For decades controllers themselves have had the last word on the schedules they work, and controllers and their union have fought to keep a "2-2-1 schedule" (known as "the rattler" because it comes back and bites the controllers) because it gives them a three-day weekend afterwards."

To Be PC, They're "Spring Spheres" NOT Easter Eggs

Responses to a Seattle public school policy requiring Easter eggs to instead be called "Spring Spheres" for a third grade class activity:

1. When the teacher said, "Oh look, spring spheres," the third graders said "Wow, Easter eggs."

2. Matt Gurney writing in Canada's National Post: "For this crime of extreme political correctness, let us all hope the school officials responsible receive a lump of carbon-based fuel in the cloth tube-sack they hang next to their December Light-Festooned Interior Coniferous Vegetation this Winter Holiday." ("Notable and Quotable" in today's WSJ).

3. No response yet from the White House about whether Monday's event will be re-named the "2011 White House Spring Sphere Roll," or whether the official souvenirs featuring the signatures of President and Michelle Obama will be re-named "Official White House Spring Spheres" (see photo above).

What's next for political correctness re-naming, will "Frosty the Snowman" become "Frosty the Snow Friend"?

Update: To be scientifically accurate, I think the correct term would be "Spring Prolate Spheroids." 

George Carlin on Environmentalism and Earth Day

George Carlin on "Saving the Planet" (some profanity).

Friday, April 22, 2011

Interesting Fact of the Day: We Walk Slower Now

"For years, traffic lights nationwide were timed to the stride of the average pedestrian, who covered 4 feet of ground per second, according to federal research carried out in the 1950s. A couple of years ago, however, the Federal Highway Administration urged traffic engineers to recalibrate to an average stride of 3.5 feet per second, after new research showed that Americans' average walking pace had slowed over the decades. That would give elderly walkers more time to cross safely."

Today Is Earth Day: What About a Capitalism Day?

From an Investor's Business Daily editorial on Earth Day in 2009, featured on Carpe Diem here (the IBD link no longer works):

"Of the estimated 1 billion people who will observe Earth Day worldwide this year, few will know about the progress that has been made. Fewer still will know how it was made. The media, uninterested in looking at the real story, will simply credit the environmental movement for the improvements.

Buried beneath all the badgering and fear-mongering about lavish Western lifestyles is a reality that the stuck-on-green left won't talk about and the average American isn't aware of: The world, especially in developed nations, is a cleaner — and greener — place than it was when the environmental movement began (the chart above shows the positive trends in air quality since 1980, data).

Topping the agenda of today's environmentalist groups is the pulling down of market economies, the raising up of central planning for egalitarian goals, forced lifestyle changes and the vilification — in hopes of the elimination — of signs of wealth.

None of these advance the planet's environmental health. But capitalism has. Through wealth generated by the free market, we have enough resources to move beyond the subsistence economies that damage the environment, enough disposable income to fund clean-up programs, enough wealth to scrub and polish industry.

Only in advanced economies can the technology needed to recycle hazardous waste or to replace dirty coal-fired power plants with cleaner gas or nuclear plants be developed. That technology cannot be produced in centrally planned economies where the profit motive is squelched and lives are marshalled by the state.

There's nothing wrong with setting aside a day to honor the Earth. In fairness, though, it should be complemented by Capitalism Day. It's important that the world be reminded of what has driven the environmental improvements since Earth Day began in 1970."

The Global Economy’s Remarkable Recovery

The CPB Netherlands Bureau for Economic Policy Analysis released its monthly report today on world trade and world industrial production for the month of February.  Here are some of the highlights:

1. World trade volume increased in February for the seventh consecutive month, bringing global trade to a new all-time record high (see chart).   This was also the third month in a row that world trade was above the previous peaks during early 2008 when the U.S. recession and financial crisis started spreading, causing world trade to drop by 20% in 2009.     

2. World trade in February was 10.5% above its year-ago level, and marked the 14th consecutive month of double-digit annual growth starting in December of 2009.  Compared to the cyclical high in April 2008, world trade volume has recovered to a level that is now 2 percent higher than its previous peak.  Compared to the cyclical low in May 2009, global trade has increased by 28% through February of this year. 

3. World industrial output was the same in February compared to January, but was above its year-ago level by 7.4%.  World output in the first two months of 2011 established a new, all-time record high level, which is 5.2% above the previous cyclical high of 134.4 in March 2008 (see chart above).   After falling by 12% during the global recession in 2008-2009, world output has increased by almost 20% during the last two years of a strong global rebound.  Global output has increased in almost every month compared to the previous month during the worldwide recovery that started in 2009, with only one month of decline in industrial output in the last two years. 

Bottom Line: Based on the ongoing and solid improvements in both international trade and world output, especially the fact that global trade and production are both at all-time historical highs, I think we can now say that the world economy has made a complete recovery from the financial crisis and global slowdown in 2008 and 2009.  The remarkable recovery in the global economy over the last few years is a testament to the ability of markets to recover from even a severe financial crisis and the worst economic slowdown in generations.  Even though there are still many uncertainties and headwinds moving forward, the strong world economic recovery so far is both remarkable and encouraging as we hopefully have entered a new period of global growth, expansion and prosperity. 

2011 Startup Outlook Optimistic for Business/Hiring

Key Findings of the "Startup Outlook 2011" released today by Silicon Valley Bank:

The near-term business outlook for startups is optimistic.
  • Nearly one in four companies (23 percent) exceeded their 2010 revenue targets, up significantly from 2009 (15 percent).

  • Two in three executives say that business conditions in 2010 are better than they were last year, and three in four expect they will get even better in the coming 12 months.

  • The vast majority of surveyed companies (83 percent) plan to hire in the coming year, up from 73 percent a year ago (see chart above).

Because They're Not Spending Their Own Money, Patients Aren't Consumers, But They SHOULD Be

Paul Krugman argues in yesterday's NY Times that Patients Are Not Consumers (link is fixed now):

"How did it become normal, or for that matter even acceptable, to refer to medical patients as “consumers”? The relationship between patient and doctor used to be considered something special, almost sacred. Now politicians and supposed reformers talk about the act of receiving care as if it were no different from a commercial transaction, like buying a car — and their only complaint is that it isn’t commercial enough. What has gone wrong with us?

Medical care, after all, is an area in which crucial decisions — life and death decisions — must be made. Yet making such decisions intelligently requires a vast amount of specialized knowledge. Furthermore, those decisions often must be made under conditions in which the patient is incapacitated, under severe stress, or needs action immediately, with no time for discussion, let alone comparison shopping. 

That’s why we have medical ethics. That’s why doctors have traditionally both been viewed as something special and been expected to behave according to higher standards than the average professional. There’s a reason we have TV series about heroic doctors, while we don’t have TV series about heroic middle managers.

The idea that all this can be reduced to money — that doctors are just “providers” selling services to health care “consumers” — is, well, sickening. And the prevalence of this kind of language is a sign that something has gone very wrong not just with this discussion, but with our society’s values." 

MP: Krugman is correct that patients are not consumers, but for a completely different reason that Krugman misses entirely: Almost 90% of health care costs are paid with "other people's money" (insurance companies, government and employers, see chart above, data here), and only about 11% is paid "out of pocket" by patients.  So patients are no longer the "consumers" of health care, and they haven't been for a long time, because the "consumer" paying almost the entire cost of medical care is a third party.  Over time, the "consumer" paying the bill for health care services has gradually become third party payers, and the trends projected in the chart above indicate that it won't get any better in the future.

But Krugman seems to be arguing that regardless of who is paying for health care, "there’s something terribly wrong with the whole notion of patients as “consumers” and health care as simply a financial transaction." Krugman's further claims that “'Consumer-based' medicine has been a bust everywhere it has been tried."

Well, what about LASIK surgery, retail health clinics, concierge medicine, medical tourism and cosmetic surgery, to name just some of the successful "consumer-based" medical services?  

When we think about soaring health care costs in the United States, isn't one of the main reasons precisely because patients have NOT been treated as consumers spending their own money?  In that case, I think Krugman has it backwards.  If the goal is to control health care costs, that will never happen until patients are treated like consumers

Markets in Everything: $6,500 High-Tech Toilet

Kohler introduces Numi, the world's most advanced, high-tech toilet with a motion-activated lid and seat, an integrated air dryer, heated seat, deodorizer, feet warmer, and built-in speakers with pre-programmed audio, touch-screen remote control, etc.  

Maybe a potential market for these $6,500 toilets will be the swelling ranks of the rich in China.  

Thursday, April 21, 2011

108 Cents on the Dollar Isn't Fair

A few adjustment in today's NY Times editorial: "77 108 Cents on the Dollar Isn't Fair":

In a disappointing defeat for women men, Senate Republicans worked overtime in December to ensure that a measure addressing gender-based wage discrimination never reached the Senate floor where it likely would have passed by a sizable majority. Fortunately, supporters of the Paycheck Fairness Act have not given up.

Last week, Senators Harry Reid, the majority leader from Nevada, and Barbara Mikulski, a Maryland Democrat, reintroduced the bill. Representative Rosa DeLauro, a Democrat of Connecticut, has reintroduced the legislation in the House.

Women Men now make up almost more than half of the American work force, but, according to data compiled by the Census Bureau,
James Chung of Reach Advisors, who has spent more than a year analyzing data from the Census Bureau's American Community Survey, single, unmarried, childless full-time female employees still make, on average, only 77 cents $1.08 for every $1 earned by men in America's largest cities.

The bill, a much-needed updating and strengthening of the nation’s half-century-old Equal Pay Act, would enhance remedies for victims of gender-based wage discrimination, shield employees from retaliation for sharing salary information with co-workers and require employers to show that wage differences are job-related rather than sex-based, and justified by business necessity.

President Obama has pledged to “keep up the fight” to pass the bill. In a recent radio address, he explained that he takes the issue personally, “as the father of two daughters a man who wants to see his girls young boys grow up in a world where there are no limits to what they can achieve.”
Women Men around the country — from both parties — need to speak up. Lawmakers might think twice about refusing to act if they knew that female male voters were taking down the names of those who would rather please corporate interests than stand up for a woman’s man's right to earn equal pay for equal work.  For young, single, unmarried childless women to be now earning $1.08 for every $1.00 earned by their male counterparts clearly demonstrates that paychecks for men and women are not equal, and that's why we need the Paycheck Fairness Act.  Simply put, 108 cents on the dollar just isn't fair. 

Leading Economic Index Increases for 24th Month, 1st Time in 40 Years; Recovery Remains on Track

The Conference Board reported today that its Leading Economic Index (LEI) increased again in March (see chart above), which is the 24th consecutive monthly increase starting in April 2009 just before the recession officially ended in June of that year. The last time the Leading Economic Index increased every month for a two-year period was in the early 1970s, almost 40 years ago. 

Says Ataman Ozyildirim, economist at The Conference Board: “The U.S. LEI continued to increase in March, pointing to strengthening business conditions in the near term. The March increase was led by the interest rate spread and housing permits components, while consumer expectations dropped. The U.S. CEI, a monthly measure of current economic conditions, also continued to rise, led by gains in industrial production and employment.”

Says Ken Goldstein, economist at The Conference Board: “The U.S. LEI continues to point to sustained economic growth through year end. Global disruptions, including unrest in the Middle East, rising oil prices and the Japan earthquake, may have some repercussions. However, it remains to be seen what the impact of these shocks will be on the United States and the broader global economy.”

Recovery Watch

1. The underwear indicator is rising.  (ht/Mike LaFaive)

2. Heavy Truck Orders Jump 20 Percent -- Production backlog hits level not seen since December 2006.
3. Today's WSJ -- "Global demand is revving up profits at big U.S. manufacturers, and investors are jumping on for the ride, shrugging off high oil prices and concerns about Japan. Manufacturing output, which has bounced back much faster than consumer demand over the past year, grew more than four times as fast in the first quarter as the estimated rate for the overall U.S. economy. A series of surprisingly strong earnings reports this week have underscored that momentum." 

MP: Manufacturing continues to be the "shining star" of the U.S. economic recovery. 

Tax Rates and Share of Tax Revenues from Top 1%

The chart above shows the relationship over time (from 1979 to 2007) between: a) the top marginal income tax rate, and b) the share of total income taxes paid by the top 1% (data).  In 1979 the top marginal income tax rate was 70% and 18.3% of the total taxes paid were collected from the top 1% of taxpayers.  By 2007 the top tax rate was 35% (half of the 1979 rate), and the tax share of the top 1% had more than doubled to 39.5% (from 18.3% in 1979).    

The historical record shows an inverse relationship between the highest marginal income tax rate and the share of taxes collected from "the wealthy."  It's a relationship to keep in mind during the current tax policy debate, where Obama wants to increase tax revenues by raising tax rates for "the rich," and Rep. Ryan alternatively suggests a cut in the top marginal rate to stimulate economic growth, which would likely increase tax revenues from the wealthy, and increase overall tax revenue. 

Thanks to Steve Moore for the idea for the graph.

Markets in Everything: Men in Kilts

Canadian Success Story, Men In Kilts, Launch First US Location in Seattle, according to this Press Release:

Men In Kilts, a window and exterior building cleaning company, has taken their kilted lads down south. CEO, Tressa Wood comments, “We’re very excited to bring the Men In Kilts' concept to the US and open our first franchise location in Seattle."

Tech Jobs, Tech Stocks: Boom-Boom-Boom-Boom

1. USA Today article "Tech Boom Like It's 1999" -- "Tech workers like Mersy are coveted commodities as the high-tech industry undergoes its biggest hiring binge in more than a decade. Not since the dot-com bubble of the early 2000s has competition been so fierce. Would-be employees are being enticed with fat contracts, hefty bonuses and such freebies as iPads, meals, sporting events and shuttle services. These and other perks are in play to hook top talent in engineering, social media, website development, product design and management.

The jump in tech hires highlights what some economists see as a bounce-back in the $805 billion U.S. tech industry that could eventually make a dent in the national unemployment rate of 8.8%.  A surge in tech hires in California could portend an upturn for the overall U.S. economy, says Jesse Harriott, chief knowledge officer at online job site"

2. Apple sells 18.65m iPhones in 2011 --  "Apple has revealed it shipped an enormous 18.65m iPhones in the first three months of 2011, representing a 113 per cent improvement on this time last year. The colossal tally is the highlight of the second fiscal quarter earnings report in which Cupertino boasted of a record net profit of $5.9 billion and income of $24.67 billion between January and the end of March."

MP: The chart above helps to illustrate the tech boom and bull market for technology stocks, showing that the NASDAQ-100 Technology Sector Index has almost doubled in the last two years, compared to a 60% increase in the S&P500 Index.  

HTs: Steve Bartin and Ben Cunningham

Wednesday, April 20, 2011

Why Are Banks Holding So Many Excess Reserves And Will Those Reserves Fuel Future Inflation?

The chart above shows how the monetary expansions known as QE1 and QE2 have expanded the monetary base (blue line) in about the same proportion as the increase in the excess reserves that banks are holding (red line, data here). Why are banks holding so many excess reserves, and will those reserves eventually translate into higher inflation?

Here's one explanation from the conclusion of a NY Fed research paper titled "Why Are Banks Holding So Many Excess Reserves?":

"We also discussed the importance of paying interest on reserves when the level of excess reserves is unusually high, as the Federal Reserve began to do in October 2008. Paying interest on reserves allows a central bank to maintain its influence over market interest rates independent of the quantity of reserves created by its liquidity facilities. The central bank can then let the size of these facilities be determined by conditions in the financial sector, while setting its target for the short-term interest rate based on macroeconomic conditions. This ability to separate monetary policy from the quantity of bank reserves is particularly important during the recovery from a financial crisis. If inflationary pressures begin to appear while the liquidity facilities are still in use, the central bank can use its interest-on-reserves policy to raise interest rates without necessarily removing all of the reserves created by the facilities."

In a blog post, Donald Maron summarizes the paper this way:

"Some have expressed concern that the excess reserves are fuel for future inflation. The authors argue, quite rightly in my view, that this concern is also misplaced. The key reason is that the Federal Reserve gained a new power in 2008 — the ability to pay interest on reserves. That ability breaks the traditional link (in U.S. monetary policy) between reserves, bank lending, and inflationary pressures."

Update: For some excellent commentary on this topic see Scott Grannis, who points out that excess reserves are a close substitute for T-bills now that the Fed pays interest on reserves.  And in fact, the Fed is currently paying 0.25% on excess reserves, which is higher than the rate on 3-month T-bills (0.06%), 6-month T-bills (0.12%), and even 1-year T-bills (0.23%).  No wonder banks are holding $1.4 trillion of excess reserves!

March Architecture Index Holds Steady

From the American Institute of Architects: 

"The March 2011 Architecture Billings Index (ABI) remains virtually unchanged and right at, or slightly above, the break-even level. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the March ABI score was 50.5, a negligible decrease from a reading of 50.6 the previous month (see chart above). This score reflects a modest increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.7, up significantly from a mark of 56.4 in February."

“Currently, architecture firms are essentially caught swimming upstream in a situation where demand is not falling back into the negative territory, but also not exhibiting the same pace of increases seen at the end of 2010,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “The range of conditions reported continues to span a very wide spectrum with some firms reporting an improving business environment and even ramping up staffing, while others continue to operate in survival mode. The catalyst for a more robust recovery is likely financing, with stronger growth occurring only when lending institutions begin approving credit for construction projects with much greater regularity.”

Key March ABI highlights:

Regional averages: Midwest (53.5), Northeast (51.4), West (50.6), South (49.7)

Sector index breakdown: commercial / industrial (54.7), multi-family residential (50.8), mixed practice (49.8), institutional (48.0)
Project inquiries index: 58.7
MP: The most positive part of this month's report is the fact that the new project inquiries index increased in March, and was at the highest level for the month of March since 2007.  Although a sustained recovery in construction will probably not be a reality until at least later this year, the upward trend in the new project inquires index suggests that the construction recovery is coming. 

IJ Takes on the High-End Limo Cartel in Nashville

From the Institute for Justice: "Until 2010, sedan and independent limo services were an affordable alternative to taxicabs in the Music City. A trip to the airport only cost $25. But in June 2010, the Metropolitan County Council passed a series of anti-competitive regulations requested by the Tennessee Livery Association - a trade group formed by expensive limousine companies. These regulations force sedan and independent limo companies to increase their fares to $45 minimum.

The regulations also prohibit limo and sedan companies from using leased vehicles, require them to dispatch only from their place of business, require them to wait a minimum of 15 minutes before picking up a customer and forbid them from parking or waiting for customers at hotels or bars. And, in January 2012, companies will have to take all vehicles off the road if they are more than 7 years old for a sedan or SUV or more than 10 years old for a limousine.

These regulations have nothing to do with public safety. Nashville is stooping to economic protectionism to put affordable car services out of business in favor of more expensive services that happen to have more political power. Many Nashville residents who regularly use limos and sedans will be forced to spend twice as much money for exactly the same service and hard-working sedan drivers will be driven out of business.

The Institute for Justice teamed up with three Nashville entrepreneurs and will file a federal lawsuit today in the U.S District Court for the Middle District of Tennessee to vindicate the right of Nashville's limo and sedan operators to earn an honest living free from excessive government regulation."

MP: This reminds me of something I read recently on Seth Godin's blog:

"Companies that operate in a free market generally work as hard as they can to make that market not free. The free market is a great idea, which is why we need to be careful when market incumbents lobby to make it un-free."

Thanks again to the Institute for Justice for its ongoing efforts to battle economic protectionism and challenge market incumbents, who are always looking for ways to use the political process to thwart competition, raise prices and make the free market less free.

Markets in Everything: One-to-One Video Chats

The website is now offering one-to-one private video chats with economists, authors, bloggers, investment advisors, sports coaches, and poker players.  The website is featured in this Bloomberg article.    

Some of the fees for a one-hour video chat are:

Nobel economist Gary Becker: $5,000
Economist Steven Levitt: $3,000
Author Steven Dubner: $3,000
Political blogger Nate Silver: $1,000
Harvard economist Jeffrey Miron: $400

HT: Peter Parlapiano

Tuesday, April 19, 2011

Significant Increases in Income Inequality for MLB

New York Yankees Salaries, 1988 vs. 2011

 Salaries19881988 Salaries in 2011 Dollars     2011
Ratio High/Low29.929.977.3
Gini Coefficient0.4590.636
Share of Payroll
Top 10%28.5%39.2%
Top 20%49.7%61.9%
Top 50%80.1%93.9%

The salary data displayed in the table above for the New York Yankees from 1988 and 2011 are from the USA Today Salaries Database.  By every possible measure (ratio of high:low salary, Gini coefficient, and shares of total payroll going to the  top 10%, 20% and 50% of players) income inequality has increased significantly for the baseball players employed by the New York Yankees between 1988 and 2011, and I suspect these huge increases in income inequality would be the same for other MLB teams, and for all players in MLB as a group.  And yet the typical pro baseball player is doing much better today than in 1988 because the mean and median salaries have increased dramatically, as has the salary of the lowest-paid Yankee, despite the huge increase in income inequality.  

What can we learn from this? 

The lesson from MLB  is that rising income inequality over time, whether it’s in professional sports or in society as a whole, can be a natural and expected outcome of competitive labor markets and the expanded opportunities that come from larger and increasingly competitive global markets. And those same competitive forces that lead to greater income inequality in both the MLB and the overall economy over time also usually help to make all MLB players and all Americans better off year after year, just not at exactly the same rate.

Ticketmaster to Start Dynamic Ticket Pricing

"Ticketmaster will begin pricing events based on consumer demand in a drive to take revenue from resellers and boost overall sales. Clients including sports teams, music acts and promoters will be able to adjust ticket prices based on how well the event is selling. 

The world’s biggest concert- promoter and ticketing company is partnering with Los Angeles- based MarketShare to provide the so-called dynamic pricing. The system lets venue owners target the markups that brokers charge for top events and sell more tickets for less-popular acts. Dynamic pricing will reduce scalping, freeing-up more tickets for consumers, the company said."

MP: So now Ticketmaster, venues, and bands and their promoters are acknowledging that it was under their control all along to reduce, minimize or even completely prevent ticket scalping by simply pricing and supplying tickets according to market forces.  It's only because venues, bands and their promoters have regularly under-supplied tickets at below-market prices relative to fan demand that a secondary market has flourished, with concert tickets frequently being sold above face value.

As Paul mentions in the comments below, when a band has a show that is sold-out, they can simply add more shows to increase the supply of tickets to meet the demand of their fans.  Greedy ticket brokers ("scalpers") have taken all of the blame for the secondary ticket market, when the real blame should be directed towards the non-market-based, anti-fan behavior of bands and their promoters, who frequently under-supply the number of tickets their fans want to buy.  They then play to sold-out shows, which creates the secondary market for tickets to those shows, but only because there is excess demand that the band failed to meet.        

Update: To paraphrase/quote NormanB in the comments, "The degree to which scalpers can make money is directly related to the: a) under-pricing and b) under-supplying of the tickets in the first place."  Since the: a) price and b) supply of tickets is under the direct control of the bands and their promoters/managers, they're the ones responsible for creating the secondary market.

Public Opinion: More Favor Drilling, Legalizing Pot

New CNN public opinion polls show that: 

1. The percentage of Americans favoring increased drilling for oil and gas offshore in U.S. waters has increased significantly since last year, with 45% of respondents now strongly in favor of increased offshore drilling, compared to only 26% in June 2010.

2. The percentage of Americans favoring legalization of marijuana is now 41%, compared to 34% in 2002 and only 18% in 1986.

Zillow Home Value Data Now Available for Feb. released housing price data today with home values through February, see the graph above of Zillow's monthly U.S. Home Value Index back to January 1996 (you can also get price data and graphs for more than 100 metro areas, and all states).   According to Zillow, its Home Value Index is calculated as the median value (Zestimate) of all homes in a particular geographic area, and for the national index shown above, the housing price data are weighted according to population in each area.

The median Zillow price in February 2011 of $170,000 was the lowest since June 2003, more than 7 and a-half-years ago, and is 29% below the $240,000 peak Zillow median home price in May 2006.  For an estimate (or "Zestimate") of your home's value, go here and type in your address. Warning: You might be depressed, I know I was, but maybe that's because my home is in Michigan. 

"A Testament to the Resilience of Markets": World Stock Market Capitalization Doubles in Two Years

The Paris-based World Federation of Exchanges, an association of  52 regulated stock market exchanges around the world, recently released data on the world stock market capitalization, which increased to $57.8 trillion in March.  That was a 39-month high for world equity values and the highest level since December 2007 when the U.S. recession started.  Compared to the cyclical low of $26.6 trillion two years ago in February 2009, the total world stock market capitalization has more than doubled to the current level of almost $58 trillion.  From the all-time high of $63 trillion in October 2007, the value of world equity markets is currently about 8% below that pre-crisis peak, or about $5 trillion in dollars.

See a related post here from Scott Grannis, "The $29 Trillion Recovery," where he comments:

"It is a testament to the resilience of markets, risk-takers, and workers that the global market economy has not collapsed under the weight of the fiscal and monetary policy errors that contributed to this extraordinary volatility. There are still plenty of problems left to deal with, but the recovery to date inspires hope that the problems can be overcome with time."

Monday, April 18, 2011

Vague Insider-Trading Rules Increase SEC Power

"For decades, the SEC has kept the insider-trading rules vague and undefined. This ambiguity increases the SEC's power and allows government lawyers to pick and choose among prosecution targets. Some, though by no means all, trading on the basis of informational advantage is and should be illegal. But the government should be compelled to provide clear guidance as to what constitutes illegal insider trading and what constitutes legitimate, albeit aggressive, research."

~Yale Law School Professor Jonathan Macey in the WSJ

Markets In Everything: Toys NOT Made in China

From the No More China Toys website

"In 2007, we walked through the toy department of big box retailers and could not find a toy produced outside of China. Gone were the wooden blocks, dolls and wooden trains we played with as children. These toys were replaced with cheap plastic toys that had character ties to movies and cereals. We then turned to the Internet and were frustrated by the lack of alternatives and lack of country of origin information. We experienced first hand the frustration and angst associated with taking away our child’s favorite toy that was recalled and we routinely threw away toys within a few days or weeks of purchase due to poor quality. These experiences led to the development of

NONE of the toys found in are Made in China. When it comes to our own home we choose to keep Chinese Made Toys out of our children's hands."

Monday Map: State Sales Tax Rates

From the Tax Foundation

"The map above (click to enlarge) shows state sales tax rates as of January 1st of this year.  This includes only the statewide rate. Many cities and towns impose a local rate on top of the statewide rate, which is not reflected in these numbers."

Note: Sales tax rates range from a low 0% in Oregon, Montana, New Hampshire, and Delaware to a high of 8.25% in California.  

Heritage: An Open Letter to Paul Krugman

From "An Open Letter to Paul Krugman" from Bill Beach, Director of the Center for Data Analysis at the Heritage Foundation:

"Over the past two weeks, you have relentlessly engaged in dishonest, deceptive and factually incorrect critiques of Heritage’s recent analysis of the Ryan budget plan, and they need to be addressed. With all of the work good people of every political stripe need to be doing in Washington today, the last thing we all have time for is correcting your typically contrived commentary. But when The New York Times gives you such a platform to spread distortions, they necessitate a response.

New Chicago Fed Financial Conditions Index

The Chicago Federal Reserve Bank recently released a new index called the National Financial Conditions Index (NFCI), which "provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems.  The NFCI is a weighted average of a large number of variables (100 measures of financial activity(pdf)) each expressed relative to their sample averages and scaled by their sample standard deviations.  The NFCI is constructed to have an average value of zero and a standard deviation of one over a sample period extending back to 1973.  Positive values of the NFCI indicate financial conditions that are tighter than on average, while negative values indicate financial conditions that are looser than on average.

MP: Every Wednesday, the Chicago Fed will update the NFCI based on financial data through the previous week.  The chart above displays the NFCI on a weekly basis back to January of 2005, and shows that the index in the last several months has fallen back to levels not seen since the summer of 2007, well before the beginning of the recession.     

Rampant Yosemite Park Reservation Scalping

Sacramento Bee -- "Campsite reservations and permits to scale Half Dome have become such hot commodities that the National Park Service is scrambling to halt the auctioning of park access to the highest bidder. The flipping of reservations and permits in Yosemite – the third-most-visited national park – is so rampant on Internet sites like Craigslist that park officials are "becoming more aggressive" in trying to shut down these operators, said Yosemite spokesman Scott Gediman."

"We want to stop it as much as we can," he said. "It's not fair. These (reservations and permits) aren't intended to go into the after-market. But it's becoming more sophisticated. … People are finding ways to abuse the system."

Jesse Jackson Jr. Blames The iPad For Killing Jobs

On the House floor back in March, holding an Apple iPad and an Amazon Kindle, Rep. Jesse Jackson, Jr. proclaimed "Let me be clear about a few things. These devices are revolutionizing our country — and they will fundamentally alter how we will educate our children." Now it looks like Rep. Jackson has flipped, and is blaming the iPad for being a jobs-killer:

Here's a great quote about this from Jonah Goldberg, "It’s not often one hears the case for Luddism made with so much earnestness and, not coincidentally, ignorance," in a post on the Enterprise Blog appropriately titled "Somewhere Ned Ludd is Smiling."

Monday Links

1. The Lost Beatles Photos: Rare Shots From 1964-1966.

2. Sales tax receipts rise in metro Chicago, signaling retail revival.

3. There is an active trade for Apple’s latest gadgets in China, and it’s evident in long lines of Chinese camping overnight outside NYC Apple’s stores waiting to buy the products — originally made in China — to send them back to that country for resale. 
4. In a blind taste test, most people are unable to distinguish between expensive and cheap wine

5.  From a Princeton  University Working Paper: "When we adjust for unobserved student ability by controlling for the average SAT score of the colleges that students applied to, our estimates of the return to attending a highly selective college fall substantially and are generally indistinguishable from zero."

6. Detroit Moves Against Unions: "Detroit Mayor Dave Bing presented a $3.1 billion annual budget to City Council in which he proposed substantial cuts in city workers' health care and pensions to close an estimated $200 million budget gap."

Thanks to Steve Bartin, Paul Kedrosky, Ben Cunningham and Pete Friedlander. 

Sunday, April 17, 2011

All-Time Record Profits for Silicon Valley in 2010; There's A Renewed Level of Energy and Optimism

Mercury News --"Roaring back from the Great Recession, the 150 biggest public companies in Silicon Valley had their most profitable year in history in 2010, as their combined stock value climbed to the highest level since the Internet boom of 2000. Revenue and profits soared as consumers flocked to buy new handheld gadgets, while corporations and public agencies resumed buying hardware and software to handle a rising tide of digital data -- from emails, tweets and videos to all manner of online transactions and Internet search results.

Those trends drove tech sales and profits higher than they were before the downturn of 2008 and 2009. For companies on the Mercury News' SV150 list, combined sales for the past four quarters rose 20.3% from a year earlier. Combined profit skyrocketed 78.6%. The list comprises the 150 biggest public companies, measured by revenue, that are based in Silicon Valley.

Apple (AAPL) led the way in profit, posting a stunning $16.6 billion in net income from its iPads, iPhones and other stylish gadgets. All told, the SV150 companies had a net profit margin of 15.6 percent -- the richest margin, by far, since the Mercury News began tracking the SV150 in 1985. Investors, for the most part, liked what they saw: The combined stock market value of the SV150 hit $1.55 trillion on March 31, up 11.4 percent from a year earlier.

Companies from startups to giants are moving into social networking and mobile computing -- new technologies that are luring consumers and workers into spending more time online, creating more data and spurring more sales for Silicon Valley businesses.  These new technologies gained traction even in "the darkest period" of the recession, Accenture's John Walsh said. Now, they're part of what he called a renewed level of energy and optimism in Silicon Valley."

State and Local Government Workers Have Fallen to 2006-07 Levels, Thanks to the Great Recession

In a recent WSJ editorial "We've Become a Nation of Takers, Not Makers" Steve Moore points a rather depressing statistic:

"Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million, see chart above). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government."

But what's far less depressing is to notice the trends in employment:  The manufacturing sector has added almost 200,000 jobs over the last year, while total government employment has decreased by more 350,000 jobs over the last year.  Most of that reduction in government workforce has taken place at the local level, which has shed 259,000 jobs since March of 2010, bringing the total number of local government job in March (14.195 million) down to the lowest level since August 2006, more than four and-a-half years ago (see bottom chart above).

Similarly, the number of public-sector employees at the state level was the lowest in March (5.119 million) since August 2007, slightly more than three and-a-half years ago.  Although the federal government's workforce has fallen by 74,000 over the last year to 2.852 million, that's above the pre-recession level by 95,000.  That's understandable given the fact that states and local governments are burdened with greater fiscal constraints (like having to balance their budgets) than the federal government.  Fiscal belt-tightening and reductions in government employees happened only at the local and state, and not so much at the federal level. 

Overall, the reduction in state and local government employment levels to their 2006-2007 levels is hopefully part of a trend that will continue, and won't reverse. The reduction in the government workforce at the local and state level by almost 500,000 from their peaks in the summer of 2008 through March 2010 is the largest reduction in modern U.S. history, and greater (in absolute values) than the 333,000 decrease in state and local public employees over a comparable period in the early 1980s following the back-to-back recession of 1980 and 1981-1982.  We can thank the Great Recession for 2007-2009 for what is possibly the largest reduction in state and public employees ever before in history. 

Trend Toward Concierge Medicine + Obamacare With a Flat Supply of MDs = Pending Doc Shortage?

From today's Boston Globe (via Newsalert): "More Doctors Gravitate Toward Boutique Practice":

"Concierge medicine is expanding as more doctors — and patients — tire of assembly-line primary care, opting for something more personal, and pricey. Concierge doctors care for a small number of patients who agree to pay an annual fee on top of insurance — $1,500 to $1,800 — in return for fast, unlimited access to the physician and to extra services like a comprehensive wellness plan. Patients also enjoy more leisurely appointments than the 15-minute visits that are now standard for most primary care doctors.

The numbers are still very small — a survey commissioned by a congressional agency last year identified 756 concierge medical doctors in the United States, up from 146 in 2005. And Florida-based MDVIP, a company that helps physicians set up these practices, said it will add six new MDVIP doctors in the Boston area this year, increasing its physicians statewide to 16.

But even a tiny number of doctors leaving traditional offices for boutique practices — out of thousands of primary care physicians — is enough to make some health care industry leaders nervous. They worry that more doctors will follow as insurers and government payers cut fees and hem in providers with regulations. And when even one doctor makes the switch, there are substantial side effects, leaving hundreds of patients to scramble for a new physician."

MP: The chart above of medical school graduates (AAMC data here) on an annual basis back to 1980 shows why the trend toward concierge medicine might present some future problems for the health care industry and Obamacare: the number of medical school graduates has been flat for 30 years, while the U.S. population has increased by 37.4% from 226.45 million in 1980 to 311.256 million today.  As more physicians abandon high-volume, paperwork-intensive practices for low-volume concierge practices, and as more Americans are soon forced into Obamacare, where will the doctors come from?