Saturday, May 21, 2011

Consumer Sovereignty Illustrated

The Post Office might be cutting back on service and hours (it wants to end Saturday delivery by early next year), but TD Banks ("America's Most Convenient Banks") are doing the opposite, they're open 7 days per week. 

Thailand's Train Track Market

Here's a longer video (with narration) of the Maeklong Market in Thailand that operates alongside the train tracks (shorter version was posted a few days ago).

Statistics on the Amazing Volume of Online Activity

Facebook: Users submit 650,000 comments every minute

YouTube: 35 hours of video are uploaded every minute

eBay: $2,000 of transactions every second

Google: 34,000 searches per second

Twitter: 1,600 Tweets per second

Apple: 3 billion apps downloaded from users in 77 countries.

Future: By 2024 the world’s enterprise servers will annually process the digital equivalent of a stack of books extending more than 4.37 light-years to Alpha Centauri, our closest neighboring star system in the Milky Way Galaxy.

~Technology Liberation Front blog

Friday, May 20, 2011

Here's One Way to Eliminate Ticket Scalping

"Prince will be continuing his “Welcome 2 America” residency style tour with a gigantic stand of 21 nights at the Forum in Los Angeles, starting April 14."

MP: Increasing the supply of concert tickets to satisfy fan demand is one market-based solution to reduce or eliminate the secondary market for re-selling tickets above face value.   The L.A. Forum seats about 17,000, so Prince is supplying more than 350,000 tickets for his 21 shows.  If that's not enough to satisfy demand, he can keep adding shows.  There is also a wide range of ticket prices starting at $25 and going up to $425, which is another market-based, approach to help achieve "concert equilibrium," similar to the dynamic approach of airline ticket pricing.  

Update 1: For Prince's final shows next weekend at the L.A. Forum, there are plenty of tickets available from Ticketmaster at face value, and almost 1,700 ticket available at StubHub! starting at $45 (not sure how that compares to face value) and thousands more at SeatGeek starting at $55.

Update 2: Just to clarify, I'm not against ticket scalping.  The strongest opponents of ticket scalping are usually musicians and their managers, concert promoters, and venue owners.  Ironically, it's those very critics of ticket scalping who have the power to reduce or eliminate ticket scalping by: a) raising ticket prices and/or b) increasing the number of tickets available for sale.  By offering 350,000 tickets for sale in L.A., some at very high prices, Prince may have successfully reduced, or largely eliminated, ticket scalping for his shows.  I applaud Prince's approach and suggest that it become a model for other musicians. 

What Recession? Miami Tourism Soars in 2010

MIAMI (CBS4) – "In a down economy, tourism in Miami-Dade County bucked the odds in 2010 setting records in every area, according to figures released by the Greater Miami Convention and visitors Bureau.If 2010 was a good year, 2011 promises to be even better, according to the bureau. Figures for the first quarter show hotel occupancy up more than 11 percent over the same period last year."

Current Intrade Odds to Run for President


Mitch Daniels: 70%
Michelle Bachmann: 89%
Mitt Romney: 99%
Tim Pawlenty: 99%
Chris Christie: 14%
Rick Perry: 30%
Sarah Palin: 35%
Vladimir Putin (Russia): 66%

Markets in Everything: Post-Rapture Pet Rescue

"When the Rapture comes what's to become of your loving pets who are left behind? Eternal Earth-Bound Pets takes that burden off your mind. We are a group of dedicated animal lovers, and atheists. Each Eternal Earth-Bound Pet representative is a confirmed atheist, and as such will still be here on Earth after you've received your reward. Our network of animal activists are committed to step in when you step up to Jesus.

Our service is plain and simple; our fee structure is reasonable. For $135 we will guarantee that should the Rapture occur within ten years of receipt of payment, one pet per residence will be saved. Each additional pet at your residence will be saved for an additional $20 fee. A small price to pay for your peace of mind and the health and safety of your four legged friends."

Friday Economic Updates

1. Talent Shortage -- "Employers say a talent shortage has saddled their efforts to fill jobs, according to a survey by ManpowerGroup. More than 50% of U.S. employers reported having difficulty filling "mission-critical" positions within their companies, up from 14% in 2010. Among the hardest positions to fill included jobs in skilled trades, sales and engineering."

2. Las Vegas Home Sales are the highest for the month of April since 2006.   

3. Chile’s economy expanded at 9.8% in the first quarter - the most in 15 years - outpacing other major Latin American economies as consumer spending jumped and manufacturing recovered from the biggest earthquake in half a century.

4. New Jersey — Some $913.4 million in new state tax revenue has been collected or is expected to come in through next July, which offers a possible answer to some of the state’s immediate budget problems.

Coming Soon to America: Increased Wait Times?

GUARDIAN -- "Doctors in the U.K. are blaming financial pressures on the National Health Service (NHS) for an increase in the number of patients who are not being treated within the 18 weeks that the government recommends. New NHS performance data reveal that the number of people in England who are being forced to wait more than 18 weeks has risen by 26% in the last year, while the number who had to wait longer than six months has shot up by 43%.

In March, 34,639 people, or 11% of the total, waited more than that time to receive inpatient treatment, compared with 27,534, or 8.3%, in March 2010 – an increase of 26% – Department of Health statistics show. Similarly, in March this year some 11,243 patients who underwent treatment had waited for more than six months, compared with 7,841 in the same month in 2010 – a 43% rise."

Thursday, May 19, 2011

Just How Close to a Train Track Can You Set Up a Vegetable Market? Pretty Damn Close!


HT: Lee Brown

4 of Our Top 5 Imports Have Fallen in Price

The chart above shows the top five imports and exports at the Port of Los Angeles for 2010, based on the number of loaded containers.  This Business Insider story points out that the top five U.S. exports are raw materials, while the top five imports are finished goods. 

Something else about the top five imports that might be interesting is to compare the changes in the price indexes for those items over the last ten years (April 2001 to April 2010) to the overall change in the CPI during that period:

CPI: All Items        +27.5%

CPI: Furniture:     -11.6%
CPI: Toys:                -43.3%
CPI: Apparel:           -7.2%
CPI: Footwear:         3.3%
CPI: Auto parts:      +35.9%

Bottom Line: The real prices of furniture, toys, apparel and footwear have all fallen substantially over the last ten years, by double-digit percent declines, and the real price of auto parts has increased.  Furniture, toys, apparel and footwear all require very labor-intensive production processes, and by purchasing these products from Mexico, China, Vietnam and India where labor costs are low, American consumers have probably saved many millions, if not billions of dollars.  

It's probably not a coincidence that the top imports coming through the L.A. Port are some of the products that have fallen the most significantly in real price over the last decade, to the great benefit of America's consumers.  Remember that countries don't trade with each other at the national level, people trade; and t's American consumers who are shopping globally for the best price and value.  For furniture, clothing, footwear, and toys, cost-conscious American consumers are wisely taking advantage of the falling real prices for those items that are imported from overseas, and that bargain-hunting consumer behavior ("consumer greed") is being reflected in the import volumes at the L.A. Port.  

Amazon: Kindle ebooks Outsell Printed Books

"Amazon has announced that it now sells more Kindle ebooks than all print books – that's hardcover and paperback combined – through the site. Introduced less than four years ago, the Kindle has quickly become Amazon's top selling product, and now digitised books for the reader have become more popular with its customers than their paper and ink fore-runners."  


"Big Computer" Made Almost $100 Billion in 2010

The "Big Five" made almost $68 billion in profits last year.  No, not the "Big Five" oil companies that have been in the news lately for making $77 billion last year in profits.  I'm talking about that other "Big Five": Microsoft ($18.7 billion), IBM ($15 billion), Apple ($14 billion), Intel ($11.4 billion) and Hewlett-Packard ($8.8 billion).  And when you add the next five most profitable computer companies - Google ($8.5 billion), Cisco ($7.8 billion), Oracle ($7.7 billion), Dell ($2.63 billion) and Ebay ($1.8 billion) - the "Big Ten" raked in almost $100 billion last year in "windfall" profits last year ($96.1 billion), boosted by strong demand for IT products as the U.S. and global economies recovered from the Great Recession.  

Suppose that Congress next investigated "Big Computer" for earning almost $100 billion in record profits last year, and imposed a higher tax burden on the "Big Ten."  

Q: What would likely happen to computer prices for the "Big Ten's" products; and what would likely happen to "Big Ten" spending on capital equipment and research?  A: Prices would probably be higher and investment spending would probable be lower.  And that's exactly what would likely happen to oil prices and investment spending by the other "Big Five."     

Corn Yields Have Increased Six Times Since 1940

The chart above displays annual U.S. corn yields (bushels per acre) back to 1866 (USDA data here).  After remaining flat between 1866 and 1939 at about 26 bushels per acre, corn yields started increasing dramatically in the 1940s due to the introduction of hybrid seeds, and the widespread use of nitrogen fertilizers and herbicides (source).  By 2009, average corn yields had increased by more than six times to a record high 165 bushels per acre, before falling last year to 153 bushels per acre.  

According to the Corn Farmers Coalition:

"Farmers today grow five times as much corn as they did in the 1930s – on 20 percent less land. That is 13 million acres or 20,000 square miles, twice the size of Massachusetts. The yield per acre has skyrocketed from 24 bushels in 1931 to 154 now, or a six-fold gain. And the Agriculture Department expects the average yield per acre to double in the next 25 years."

MP: I'm not sure how this fits in with the "Great Stagnation" story, but it appears that the amazing productivity gains for corn production over the last 70 years will continue into the future.

HT: Lee Coppock

Update: The chart below shows that real, inflation-adjusted corn prices have trended downward over time as corn yields have increased, from $16 per bushel in 1948 (2010 dollars) to about $4 per bushel in 2010. 

Wednesday, May 18, 2011

Partisan Grading: Democratic Professors Are More Likely to Redistribute Grades Than Republicans

From a very interesting forthcoming paper in the American Economic Journal titled "Partisan Grading" by economists Talia Bar (Cornell) and Asaf Zussman (Hebrew University):

Abstract: We study grading outcomes associated with professors in an elite U.S. university who were identified using voter registration records as either Republicans or Democrats. The evidence suggests that student grades are linked to the political orientation of professors: relative to their Democratic colleagues, Republican professors are associated with a less egalitarian distribution of grades and with lower grades awarded to Black students relative to Whites.

Dataset:  59,874 grade observations from 17,062 students taking 3,277 undergraduate level courses with 417 Republican and Democratic professors.

Results: The variance of grades is higher in courses taught by Republicans than in courses taught by Democrats. Moreover, in additional analysis we find that relative to their Democratic colleagues, Republican professors tend to assign more very low and very high grades: the share of the lowest grades (F, D-, D, D+, and C-) out of the total is 6.2 percent in courses taught by Republican professors and only 4.0 percent in courses taught by Democratic professors; the share of the highest grade (A+) out the total is 8.0 percent in courses taught by Republican professors and only 3.5 percent in courses taught by Democratic professors. Both differences are highly statistically significant. These suggestive results are consistent with our grading egalitarianism hypothesis.

A different illustration of the relationship between political identification and grading egalitarianism is contained in the chart above. The figure displays mean grades by student SAT score ranges in courses taught by Republican and Democratic professors. The observed pattern is consistent with the hypothesis that Republican professors are associated with a steeper slope of the grade-ability profile, i.e. with higher returns to student ability.

Conclusion: We found that relative to their Democratic colleagues, Republican professors are associated with a less egalitarian distribution of grades and with lower grades awarded to Black students relative to Whites.

Professors control the allocation of grades which serve as the primary currency of academia. Our results suggest that the allocation of grades is associated with the worldview or ideology of professors. This finding may inform the public debate on potential reforms to university grading practices. To the extent that the application of objective standards is an important university goal, policy makers should consider limiting the discretion professors enjoy when it comes to grading and making it more difficult for them to use student characteristics as factors in the grading process.

MP: One conclusion here might be that highly motivated, high-achieving students should prefer classes from Republican professors because it's more likely they'll be rewarded with a really high grade (A or A+), and less motivated, lower-achieving students should prefer classes from Democratic professors, because it's less likely that they'll receive a really low grade. 

Thanks to Norman Berger. 

Two Shopping Trends

1. With $4 Gas, More Folks Skip the Trip:  Wal-Mart and Lowe's Say Rise in Pump Prices Gives Some Consumers Pause About Shopping—and Sales Receipts Suffer.

MP: With "free" shipping becoming increasingly common, why spend gas money to drive to a "brick-and-mortar" retailer?

TIPS Breakeven Spread Falls to Three-Month Low

The "breakeven rate" - the difference between 10-year nominal Treasury yields and 10-year Treasury Inflation Protected Securities (TIPS) yields - is one market-based measure of expected future inflation.  As of yesterday the breakeven rate was 2.30%, down 30 basis points from the recent peak of 2.65% on April 11, and the lowest level in three months (since February 17).  

Tuesday, May 17, 2011

Will Apple's Profits Be Investigated Next?

Q1 2011   ExxonMobil     Apple
Earnings Before Tax$18.94B$7.96B
Income Taxes$8.0B$1.9B
Net Profit$10.65B$5.98B
Effective Tax Rate42.20%24.22%
Profit Margin9.30%24.27%
Profit/Employee$127,392 $128,470

I wouldn't want to give Obama or Congress any ideas, but in the first quarter of 2011, Apple was more profitable than ExxonMobil based on both having a higher profit margin (24.27% vs. 9.30% for Exxon) and higher profits per employee ($128,470 vs. $127,392 for Exxon).  In addition, Apple's effective income tax rate was only 24.22% compared to Exxon's 42.2% rate, so it must be getting some very generous tax breaks and subsidies?

If It Moves, Tax It. If It Keeps Moving, Regulate It.

D.C.-To-NYC Buses May Get More Expensive With New Regulations
"In D.C.'s Chinatown neighborhood, buses leave to or arrive from New York City at almost any hour. These buses have grown in popularity, thanks in large part to their low prices. 

But starting this summer, D.C. can charge companies using curbside space a public space rental fee of $80,000 a year or more.  Pete Pantuso, head of the American Bus Association, says that  this fee will be passed along to the riders in the form of higher prices. And he says D.C. is using a booming local industry as an ATM."

MP: You knew this had to happen....

Tax Rates (%) X Tax Base = Tax Revenue ($)

An endless source of confusion seems to exist regarding the frequently used term "raising taxes" (e.g., do a Google search for "raising taxes on the rich" and you'll find almost 3 million results), which usually refers to a proposal to raise tax rates in an attempt to raise tax revenues.  Not so fast.  It doesn't always work that way, and frequently works in reverse - higher tax rates result in lower, not higher, tax revenue collected.  Here's the relevant formula:


One explanation for the confusion is that the word "tax" appears in all three relevant terms in the equation, so it's easy to conflate the terms "raising taxes," "raising tax rates" and "raising tax revenues."  What we know for sure is that higher tax rates create disincentives for the activity being taxed (income, capital gain, consumption), which will cause the "tax base" to shrink.  Depending on how much the tax base shrinks in response to higher tax rates, tax revenue could increase, decrease or stay the same.  

Any discussion about "raising or lowering taxes" is always incomplete without considering how changes in "tax rates" will affect the "tax base," which then determines how the amount of tax revenue actually collected with change.  

Thomas Sowell addresses this issue masterfully in his column today, here are some excerpts:

"History has shown repeatedly, under administrations of both political parties, that there is no automatic correlation between tax rates and tax revenues.

When the tax rate on the highest incomes was 73 percent in 1921, that brought in less tax revenue than after the tax rate was cut to 24 percent in 1925. Why? Because high tax rates that people don't actually pay do not bring in as much hard cash as lower tax rates that they do pay. That's not rocket science.

Time and again, at both state and federal levels, in the country and in other countries, tax rates and tax revenue have moved in opposite directions many times. After Maryland raised its tax rates on people making a million dollars a year, there were fewer such people living in Maryland-- and less tax revenue was collected from them.

There is no automatic correlation between the direction in which tax rates move and the direction in which tax revenues move. Nor is this a new discovery."

Some Of Us Aren't Grossed Out By Profits

From David Harsanyi writing in NRO:

"Some of us, believe it or not, aren’t completely grossed out by the notion of profit — even a lot of profit. Strong earnings are good news not only for those dastardly Oil Barons, but for the millions of people who depend on the industry for their employment, as well as the vast number of Americans who rely on investments in oil to bolster their pension funds, retirement funds, college funds, etc.

An industry as useful, wide-ranging, and essential to the economy as fossil fuel is inevitably going to entail talk of “billions.” Oil corporations are indeed “highly” profitable, averaging around a 7–8 percent profit margin the past few years — but they’re less profitable than government, which hauls in a higher margin on, for example, gas taxes.

How much would Harry Reid and friends save Americans by ending these tax perks? In five years, an estimated $18 billion. To put this savings in perspective, the federal government borrows around $28 billion every week. To make this kind of trivial savings the focus of a high-profile plan to is to engage in transparently political gotchas."

Monday, May 16, 2011

The Economics of Globalization Are Changing Fast And Are Starting to Favor Moving Back to America

"Labor arbitrage—taking advantage of lower wages abroad, especially in poor countries—has never been the only force pushing multinationals to locate offshore, but it has certainly played a big part. Now, however, as emerging economies boom, wages there are rising. Pay for factory workers in China, for example, soared by 69% between 2005 and 2010. So the gains from labor arbitrage are starting to shrink, in some cases to the point of irrelevance, according to a new study by Boston Consulting Group (BCG).

“Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in America,” says BCG's Hal Sirkin. That calculation assumes that wage growth will continue at around 17% a year in China but remain relatively slow in America, and that productivity growth will continue on current trends in both countries. It also assumes a modest appreciation of the yuan against the dollar.

BCG lists several examples of companies that have already brought plants and jobs back to America. 

1. Caterpillar, a maker of vehicles that dig, pull or plough, is shifting some of its excavator production from abroad to Texas. 

2. Sauder, an American furniture-maker, is moving production back home from low-wage countries. 

3. NCR has returned production of cash machines to Georgia (the American state, not the country that is occasionally invaded by Russia). 

4. Wham-O last year restored half of its Frisbee and Hula Hoop production to America from China and Mexico."

Markets in Everything: Pay-What-You-Want Panera

USA Today -- "A Pay-what-you-want Panera in Clayton, MO is being called a success. The menu board lists "suggested funding levels," not prices. Payments go into a donation box, though the cashiers provide change and handle credit card payments.

The majority of patrons pay the "suggested funding level" or more. Statistics provided by Panera indicate that roughly 60% leave the suggested amount; 20% leave more; and 20% less. One person paid $500 for a meal, the largest single payment."

Motor Fuel Tax Rates for Selected Countries

United Kingdom447450
United States 3946

Source: U.S. Department of Transportation (November 2010)

HT: Larry G

Are Oil Prices a Threat to the U.S. Economy?

No, according to this video presentation by Fisher Investments,where they feature three charts to support the position that today's high oil prices don't pose a threat to the economic expansion: 

a) energy spending as a percent of disposable income is only 5.2% allowing to absorb temporarily high oil and gas prices, b) we have the most energy efficient economy in history, with oil consumption per real dollar of GDP at an all-time low, and c) while real output is now above its pre-recession level, U.S. oil consumption is 2 million bbls. per day below pre-recession levels.  Taken together, these three factors explain why we're better prepared for higher oil and gas prices than ever before.  

The Deleveraging of American Households

A week ago I featured the chart above showing that the household debt service ratio (red line) was 11.75% in the last quarter of 2010, which is the lowest ratio since the first quarter of 1998, and the household financial obligations ratio at 16.64% in Q4 2010 was the lowest since the first quarter of 1995. 

Dennis Cauchon has an article in today's USA Today that offers some explanations for the trend in the graph above: 

"Americans are reducing mortgage payments at a record clip, directing cash that once went for debt into consumer spending and savings. Low interest rates, defaults and refinancings have shaved more than $100 billion off the nation's annual mortgage bill — an amount comparable to all unemployment benefits for one year or this year's Social Security payroll tax cut.

Homeowners have trimmed interest payments alone by 11% — or $67 billion a year — from the peak in 2008, according to the Bureau of Economic Analysis (BEA). The savings come equally from grabbing lower interest rates and reducing what's owed by paying down principal or defaulting on loans. The nation has slashed total mortgage debt from nearly $11 trillion at the mid-2008 peak to $10.3 trillion in the first three months of 2011, the BEA reports."

MP: Many of the comments on the original CD post mentioned some of the same reasons for the significant deleveraging of American households over the last several years or more.  

Real Profits of U.S. Manufacturing Corporations Have Recovered To All-Time Record-High Levels

Mike Mandel has a post "New Manufacturing Data Show Weaker Factory Recovery, Deeper Recession," where he presents some new Census data on factory shipments of manufactured goods through the first quarter of 2011. Mike concludes that "real shipments are still 15% below their peak, and asks "Now that hardly looks like a recovery at all, does it?"

But Census also reported recently on U.S. manufacturing after-tax profits (see CD post here), and those data show that real manufacturing profits have completely recovered from the recession, and reached an all-time high in the fourth quarter of last year (see chart above, adjustment for inflation made using the Business Sector Deflator).  Fourth quarter 2010 profits of $135.5 billion were 10% above the pre-recession level of $122.9 billion in the fourth quarter of 2007.  

Bottom Line: Due to cost savings, improved productivity and increased efficiencies achieved during the last three years, U.S. manufacturing corporations are now more profitable than ever before, and that's part of the reason for all of the "happy talk" about manufacturing's comeback.  In the end, it's profitability that's the most important gauge for the health of a company or industry, not the amount of shipments, output, or employment levels.

For the manufacturing sector to have record-high profits today at a level of output 15% below the peak in 2007 is much better than the reverse - a record level of output with profits 15% below a 2007 peak. With record-high profits, American manufacturing corporations have the resources to make the very investments in research, technology and capital equipment that will allow them to become even more efficient, productive and profitable in the future.  The future of America's manufacturing sector has never looked brighter.  

Money-Making Speculators Must Stabilize Markets; Only Money-Losing Speculators Can Destabilize

"People who argue that speculation is destabilizing seldom realize that this is largely equivalent to saying that speculators lose money, since speculation can be destabilizing in general only if speculators sell when the currency (or commodity) is low in price and buy when it is high." 

~Milton Friedman, Essays in Positive Economics (p. 175)

The chart above illustrates Friedman's point. The blue line above represents commodity (or currency) price movements over time in a market WITHOUT speculators (due to a government ban on futures trading, e.g. onions), and the red line represents that same market WITH the fictional destabilizing speculators (as portrayed by the media and politicians) now being allowed to trade. For speculators to destabilize that market, they would have to make prices more volatile over time, and that is what the red line illustrates - there are greater price swings, and greater price volatility (both up AND down) WITH speculators compared to price movements over time WITHOUT speculators.

But saying that speculators destabilize the market above is also the same thing as saying that destabilizing speculators must BUY when the market prices are at a HIGH point (driving them up even higher) and must SELL when the market prices are at a LOW point (driving them even lower). And as we all know, buying HIGH and selling LOW is a sure way to lose money, and speculators can then only be destabilizing if they are LOSING money, as Friedman points out, and therefore the chart above can NOT represent reality.

Conversely, if and when speculators are making money, they have to be buying low and selling high, which would be the same thing as saying that they are stabilizing markets and reducing price variability. And the more "excessive speculation" and "unfair profiteering" they are accused of, the GREATER the role speculators play in stabilizing prices and markets.

Bottom Line: If speculators are making money, they MUST be stabilizing markets. If speculators are losing money, they MUST be destabilizing markets (fictional chart above). But speculators can NOT make money and destabilize markets at the same time.

Minneapolis in the News

2. Minneapolis, aka "The Mill City," is becoming a "phenomenal baking town" according to a recent NY Times article.  My personal favorite is the Franklin Street Bakery.

Edward Tufte: Information Sage/Graphics Guru

From the Washington Monthly article "The Information Sage: Meet Edward Tufte, The Graphics Guru to the Power Elite Who Is Revolutionizing How We See Data":

"Edward Tufte occupies a revered and solitary place in the world of graphic design. Over the last three decades, he has become a kind of oracle in the growing field of data visualization—the practice of taking the sprawling, messy universe of information that makes up the quantitative backbone of everyday life and turning it into an understandable story. His four books on the subject have sold almost two million copies, and in his crusade against euphemism and gloss, he casts a shadow over the world of graphs and charts similar to the specter of George Orwell over essay and argument.

Tufte is a philosopher king who reigns over his field largely because he invented it. For years, graphic designers were regarded as decorators, whose primary job was to dress up facts with pretty pictures. Tufte introduced a reverence for math and science to the discipline and, in turn, codified the rules that would create a new one, which has come to be called, alternatively, information design or analytical design. His is often the authoritative word on what makes a good chart or graph, and over the years his influence has changed the way places like the Wall Street Journal and NASA display data.

Tufte is equal parts historian, critic, and traveling revival preacher. For a few days each month, he goes on the road to teach a course called “Presenting Data and Information” in hotel ballrooms and convention centers."

MP: I'm registered for his class this Wednesday in Arlington, VA. 

Sunday, May 15, 2011

30-Year Mortgage Rates Fall to 6-Month Low

30-year mortgage rates have been falling since early February, and fell to a six-month last week of 4.63%, the lowest level since early December last year (data here).  If rising inflationary pressures are building up in the economy, wouldn't we expect rising, not falling, 30-year mortgage rates?  

The chart above shows the historical relationship between 30-year mortgage rates and annual CPI inflation over the last 35 years.  One clear market signal that inflationary expectations are increasing will be rising, not falling, 30-year mortgage rates.