Monday, July 25, 2011

Markets in Everything: Testicular Pet Implants

"Neuticles are a patented, revolutionary testicular implant procedure for pets. Over 425,000 caring pet owners worldwide have selected Neuticles as a safe, practical and inexpensive option when neutering their beloved pet. Neuticles allows your pet to retain his natural look, self-esteem and aids in the trauma associated with altering."

Neuticles: "It's Like Nothing Ever Changed" 

HT: Brad Parkes

Fashion Crime Scene: Flip-Flops = Fashion Flop

Flip-flops.... they used to be for the beach only..... Now we've become "Flip-Flop Nation" and They're Everywhere ... Workplace, hotel lobbies, airplanes, shopping malls, restaurants, museums.

2010 House Vote Portends an Obama Loss in 2012

AEI Fellow Michael Barone presents some really interesting political analysis in his article "How to Understand Obama’s Chances in 2012":

House VotePresidential Vote
YearRep% Dem%      Rep%Dem%

"To what extent can we consider the popular vote for the House in off-year elections as a prediction of the presidential vote in the next election? The answer appears to be: pretty good. The chart above shows the Republican and Democratic percentages for the House popular vote and for the presidential popular vote, starting with 1994.

In the three most recent cases, the off-year percentages for the House are almost exactly the same as the presidential year percentages for president. However, Republicans signally failed to replicate their 1994 House percentage in the 1996 presidential contest. They would have been closer if 6% of the 8% cast for independent candidate Ross Perot is counted for Republican nominee Bob Dole—who polls suggested was the second choice of the overwhelming percentage of Perot voters—but that would still have left Clinton ahead 51%-47%.

Absent a considerable redefinition by the incumbent president, he or his party’s nominee is likely to run just about as well (or poorly) in the next presidential election as his party’s House candidates did in the most recent off-year elections.

Obviously, the three most recent examples portend an unhappy 2012 for President Obama and the Democrats, while the 1994-1996 example is a precedent for an incumbent Democratic president overcoming a “thumping” (George W. Bush’s term) in the off-year and winning reelection by a nontrivial margin. 

What I think these numbers suggest is that, absent a considerable redefinition by the incumbent president, he or his party’s nominee is likely to run just about as well (or poorly) in the next presidential election as his party’s House candidates did in the most recent off-year elections. The off-year vote represents a settled opinion on how the president and his party have performed in nearly two years in office, and unless the president takes a significantly different course toward governing, as Bill Clinton arguably did in 1995-1996, then that settled verdict remains more or less in place. Or so the numbers suggest."

Google Searches for "Buy a House" Trending Up

The chart above shows the Google Trends online search volume for the term "buy a house" (for the U.S. only) back to 2007.  This was one of the "uncommon economic indicators" featured on a CNBC segment this morning featuring Nick Colas, Convergex Group Chief Market Strategist, who reported this as the most optimistic of the five uncommon indicators discussed.  Searches for the terms "buy a house" and "buy a home" are reaching post-crisis highs on Google Trends (see chart above), and could be a leading indicator of home purchases six months to a year in the future. 

Michigan: More Administrators Than Faculty

The Chronicle of Higher Education released a report today "Great Colleges to Work for 2011" based on responses from nearly 44,000 people at 310 institutions. The University of Michigan-Ann Arbor made the list, and its profile included the institutional details displayed in the chart above: 9,652 full-time administrators and professionals vs. 6,305 full-time faculty and 1,260 part-time faculty.  In other words, there are 53% more full-time administrators than full-time faculty.  Is this evidence of "administrative blight?"   

Note: The data above from the Chronicle of Higher Education was preliminary. The final 2011 numbers reduced the "Administrators" category from 2,415 to 1,893. The final numbers also reduced "Exempt Professionals," a category that includes all exempt employees in instruction, research and student support, from 7,237 to 4,915. The accurate comparison of administrators to full-time faculty is not 9,652 administrators divided by 6,305 full-time faculty: 153%, but rather 6,808 administrators divided by 6,305 full-time faculty: 108%.

Sunday, July 24, 2011

Reversal of Fortune: Amazon vs. Borders

In early January 2002, Borders stock was selling at $21.48 per share, more than twice the price of Amazon shares at $10.16 (see chart above).  Now Amazon is selling for $216.52 and Borders is selling for $0.02. 

Bill Gates on World Energy Issues

From an interview with Bill Gates by Wired Editor Chris Anderson: 

Q: When you look at the big picture, where should we be focusing besides nuclear? On massive solar plants in the desert? On middle-size stuff for office roofs? Or is there a reinvention that could be done right in the home?

Bill Gates: If you’re going for cuteness, the stuff in the home is the place to go. It’s really kind of cool to have solar panels on your roof. But if you’re really interested in the energy problem, it’s those big things in the desert.

Rich countries can afford to overpay for things. We can afford to overpay for medicine, we can overpay for energy, we can rig our food prices and overpay for cotton. But in the world where 80 percent of Earth’s population lives, energy is going to be bought where it’s economical. People are going to buy cheap fertilizer so they can grow enough crops to feed themselves, which will be increasingly difficult with climate change.

You have to help the rest of the world get energy at a reasonable price to get anywhere. It’s great to have the rich world, because we’re there to think about long-term problems and fund the R&D. But we get sloppy, because we’re rich. For example, despite often-heard claims to the contrary, ethanol has nothing to do with reducing CO2; it’s just a form of farm subsidy.

If you’re using first-class land for biofuels, then you’re competing with the growing of food. And so you’re actually spiking food prices by moving energy production into agriculture. For rich people, this is OK. For poor people, this is a real problem, because their food budget is an extremely high percentage of their income. As we’re pushing these things, poor people are driven from having adequate food to not having adequate food. 

About solar: I think people deeply underestimate what a huge problem this day-night issue is if you’re trying to design an energy system involving solar technology that’s more than just a hobby. You know, the sun shines during the day, and people turn their air conditioners on during the day, so you can catch some of that peaking load, particularly if you get enough subsidies. It’s cute, you know, it’s nice. But the economics are so, so far from making sense. And yet that’s where subsidies are going now. We’re putting 90 percent of the subsidies in deployment—this is true in Europe and the United States—not in R&D. And so unfortunately you get technologies that, no matter how much of them you buy, there’s no path to being economical. You need fundamental breakthroughs, which come more out of basic research.

Q: So suffice to say we will find no solar cells on the roof of the Gates residence?

Gates: Oh, we like to be cute like everyone. For rich people, this is OK. Rich people can do whatever they want.

HT: Pete Friedlander

AEI's Arthur Brooks on the Debt Ceiling in the WSJ

From AEI President Arthur Brooks in the WSJ:

"Budget reformers need to remember three things. First, this is not a political fight between Republicans and Democrats; it is a fight against 50-year trends toward statism. Second, it is a moral fight, not an economic one. Third, this is not a fight that anyone can win in the 15 months from now to the presidential election. It will take hard work for at least a decade.

Consider a few facts. The Bureau of Economic Analysis tells us that total government spending at all levels has risen to 37% of gross domestic product today from 27% in 1960—and is set to reach 50% by 2038. The Tax Foundation reports that between 1986 and 2008, the share of federal income taxes paid by the top 5% of earners has risen to 59% from 43% (see chart above). Between 1986 and 2009, the percentage of Americans who pay zero or negative federal income taxes has increased to 51% from 18.5% (see chart above). And all this is accompanied by an increase in our national debt to 100% of GDP today from 42% in 1980.

Where will it all lead? Some despairing souls have concluded there are really only two scenarios. In one, we finally hit a tipping point where so few people actually pay for their share of the growing government that a majority become completely invested in the social welfare state, which stabilizes at some very high level of taxation and government social spending. (Think Sweden.)

In the other scenario, our welfare state slowly collapses under its weight, and we get some kind of permanent austerity after the rest of the world finally comprehends the depth of our national spending disorder and stops lending us money at low interest rates. (Think Greece.)

In other words: Heads, the statists win; tails, we all lose.

Anyone who seeks to provide serious national political leadership today—those elected in 2010 or who seek national office in 2012—owe Americans a plan to escape having to make this choice. We need tectonic changes, not minor fiddling.

Rep. Paul Ryan's (R., Wis.) budget plan is the kind of model necessary. But structural change will only succeed if it's accompanied by a moral argument—an unabashed cultural defense of the free enterprise system that helps Americans remember why they love their country and its exceptional culture.

Conclusion: No one deserves our political support today unless he or she is willing to work for as long as it takes to win the moral fight to steer our nation back toward enterprise and self-governance. This fight will not be easy or politically safe. But it will be a happy one: to share the values that make us proud to be Americans."

Quote of the Day: Understanding Mercantilism

"No politician ever gained power by not interfering in the market, and no special interest ever sponged off the rest of society by competing in the free market. That's all the analysis you need to understand mercantilism."

~Geoih in a comment on this April 14, 2011 CD post

Chart of the Day: Texas Jobs vs. California Jobs

In response to some discussion on this recent CD post about state tax burdens, the chart above is an updated comparison of monthly employment levels in Texas and California back to 1996.  Since January 2008 when the recession was starting and the California employment level was peaking, Texas has gained 228,000 jobs (and never really had much of a downturn in employment even during the worst recession in modern times), while California has lost more than one million jobs (1,113,200).  In contrast, during the 1996-2007 period employment levels were increasing in both states at about the same rate.  

Africa's Mobile Economic Revolution: It's Now the Silicon Valley of Banking and Will Change the World

"Mobile Phone Revolutionaries?"

"It may seem unlikely, given its track record in technological development, but Africa is at the center of a mobile revolution. In the west, we have been adapting mobile phones to be more like our computers: the smartphone could be described as a PC for your pocket. In Africa, where a billion people use only 4% of the world's electricity, many cannot afford to charge a computer, let alone buy one. This has led phone users and developers to be more resourceful, and African mobiles are being used to do things that the developed world is only now beginning to pick up on.

The most dramatic example of this is mobile banking. Four years ago in Kenya, the mobile network Safaricom introduced a service called M-Pesa which allows users to store money on their mobiles. If you want to pay a utilities bill or send money to a friend, you simply dispatch the amount by text and the recipient converts it into cash at their local M-Pesa office. It is cheap, easy to use and, for millions of Africans unable to access a bank account or afford the hefty charges of using one, nothing short of revolutionary.

Safaricom didn't invent mobile banking: it existed previously in countries such as Norway and Japan, but on a small scale and with nothing like the seismic effect it had in Kenya. The established banks weren't happy at first – they tried to shut down M-Pesa soon after it started – but now they are getting in on the game, and it is estimated that by 2015 global mobile transactions will exceed one trillion dollars."

According to California-based mobile-banking innovator Carol Realini, executive chairman of Obopay: "Africa is the Silicon Valley of banking. The future of banking is being defined here… It's going to change the world."

Saturday, July 23, 2011

Markets in Everything: Crowd-Funding Books

From The Economist:

"Unbound is a British effort to “crowd-fund” books. Visitors to its website can pledge money for a book that is only part-written. If enough money is raised, the author can afford to finish it—and the pledgers will get a copy.
Having launched in May, the firm announced its first success on July 18th. Terry Jones, of Monty Python fame, has secured the funds to finish a book of quirky stories. Handsome edited volumes and e-books will follow."

Tax Burden by State

Top TenTaxes Paid By Residents, % of IncomeTaxes Paid by Non-Residents (%)
1New Jersey12.220.5
2New York12.128.6
5Rhode Island10.729.1
Lowest Ten
1New Mexico8.441.0
3South Carolina8.134.0
4New Hampshire8.043.6
8South Dakota7.644.0

24/7 Wall Street -- "Different states tax their residences at different levels. In some states, like New Jersey, residents pay 12.2% as a percentage of their income. In others, like Alaska, they pay as little as 6.3% (see table above) . 24/7 Wall St. reviewed a report recently released by the Tax Foundation to identify the states where residents paid the most and least in state and local taxes as a percent of income.

The amount varies widely as not all states have the same sources of revenue. Some get more from business levies than others. Some have a statewide sales tax. Some cities and towns tax property based on value, while others don't. The issue of what people are taxed at the state and local level is complex, among other reasons, because states often receive a large amount of their tax receipts from sources other than the simple payments of state residents.
The most important reason for the variation is that some states generate a significant amount of their tax revenue from businesses and out-of-state residents, thereby minimizing the burden of taxes borne by residents. Alaska, for example, gets 80% of tax receipts from such sources. State residents get the equivalent of a subsidy from some of the world's largest oil companies.

Conversely, states with low out-of-state business receipts must collect a higher percent of taxes from their residents. This is the case in New Jersey, which gets only 20% of its tax receipts from such sources. As a matter of fact, most of the really large companies in the region are on the other side of New Jersey's northeast border in New York State, thereby creating a higher burden on residents.

The Tax Foundation's report divides state tax revenue into two categories: the amount contributed by residents, including income, property and sales tax, and the amount contributed by non-residents, including taxes paid by out-of-state businesses and taxes collected by in-state business and paid by out-of-state residents."

MP: The table above shows that for the ten states with the highest tax burden on residents, the average tax rate as a share of residents' income is 10.9% and they pay 74.1% of the taxes collected; for the ten states with the lowest tax burden on residents, the average tax rate is only 7.7% because almost half of total state taxes are generated from non-residents (47.9%).  

Markets in Everything: Vessel Repossession

"Max Hardberger (pictured above) is a 62-year-old adventurer from Louisiana who specialises in stealing back ships that have been fraudulently seized in corrupt ports, mostly in Latin America and the Caribbean. 

He describes himself as a 'vessel repossession specialist’, a kind of maritime repo man who ghosts into tropical hellhole ports, outwits the guards and authorities, and ghosts out again with a 5,000- or 10,000-ton cargo ship, usually under cover of darkness and preferably during a heavy rainstorm.

For his clients he is a godsend, well worth the $100,000-plus that he charges to retrieve a ship. To foreign port authorities, judges, coastguards, naval commanders and government officials, he is a flagrant and notorious law-breaker, and if they ever manage to catch him at it, he can expect a long sentence in a vile prison." 

The Failure of Borders is a Glorious, Beautiful Thing

"For consumers, the downfall of Borders is glorious, much as was its climb to success. In the rearrangement of resources to serve customers we see the beautiful actions of the market economy reconfiguring the world to provide the goods and services that are most wanted and needed in the most effective way. To ignore the upside to Borders’ downfall is as fallacious as to focus only on the downside of its upswing, as did most of the anti-corporate left in the last decade.

But today we see that it was not government, nor socialist agitation, that brought the axe down on this big company. It was the matrix of demand provided by customers. It was the consumer base, acting in a manner much more democratic in the good sense of the word, and much more peaceful and socially productive, than anything we see in the political process. Thank goodness there is no doctrine of “too big to fail” in the book store industries. If the government bailed out Borders as it has so many financial institutions, surely the customers would suffer.

The failure of Borders is a beautiful thing, coming as it does from the market process. If voluntary competition should one day bring down, in the midst of a competing commercial success today unimaginable but even more friendly to consumers than that wonderful online store, we will again have reason to celebrate."

~From "The Glorious Failure of a Big Business" by Anthony Gregory 

MP: A reminder that capitalism operates by a "profit and LOSS" system.  

America's Top 20 Beer Cities

From Travel + Leisure, Portland ranks #1 with 39 operating breweries—more than any other city in the U.S. The big names include MacTarnahan's and BridgePort—the latter offering a seasonal Stumptown tart made with local strawberries.

TED: A Robot That Flies Like a Bird

HT: Sprewell

Friday, July 22, 2011

Gotta Love Walmart: Serving Food Deserts, Hiring Women in Brazil and Offering Free Healthcare

1. "Walmart announced that it will open between 275-300 stores serving the Department of Agriculture (USDA) designated food desert areas by 2016. These estimates are based on the company’s current real estate plans. These stores, in both urban and rural areas, will provide access to groceries for more than 800,000 people living in food deserts. Walmart made the announcement at the White House this week with First Lady Michelle Obama.

Since 2007, the company has opened 218 stores serving food deserts. The projected new and existing locations, totaling about 500 stores, will provide access to fresh and healthy food in more than 700 food deserts and will serve approximately 1.3 million people living in these areas. To be included in this figure, a person must both live in a USDA designated food desert area and be within one mile of an urban Walmart or within ten miles of a rural Walmart store."

2. "Unprecedented in the Brazilian retail market, Walmart Brazil launched a structured program aimed at hiring women to work in the construction of its new stores. The company will hire women trained through the Training Course for Women Bricklayers, promoted by city halls in partnership with the Department of Policies for Women (SPM) and the presidency.

A Sam’s Club in São Bernardo do Campo, in greater Sao Paulo, will be the first built using these women construction workers - around 50 female bricklayers will be hired for the project. By the end of the year, a total of 200 women will be employed by Walmart in cities that are building new stores and have professional training courses promoted by city halls and SPM."

3. "With back-to-school time just around the corner and kids still taking advantage of long days off from school, Sam’s Club is helping families by offering free children’s health and ID screenings across the country on Saturday, July 9, from 11 a.m. to 3 p.m. Every Sam’s Club that has a pharmacy participated in the free screenings, which includes more than 500 locations in the U.S."

MP: For its ongoing humanitarian efforts and community service to enrich and empower low-income people around the world by: a) bringing fresh groceries to America's food deserts, b) empowering working women in Brazil, and c) providing free health care screenings to America's youth, I hereby nominate Walmart for the 2011 Nobel Peace Prize.  It has done more to lift people out of poverty than many of the past Peace Prize recipients like Mother Theresa, Al Gore, Jimmy Carter, Barack Hussein Obama, and the United Nations, combined.  

MIT's BPP Monthly Inflation Falls to .10% in June

The Billion Prices Project @ MIT has just been updated with daily price data through June 30, and is reflecting significantly moderating inflationary pressures through last month.  The chart above shows monthly inflation rates over the last year, and inflation for the month ending June 22 hit the lowest rate all year, before turning up slightly towards the end of the month.  

Inflation for the month ending June 22 was only about 0.10% (1.20% at an annual rate), compared to a peak of more than 0.80% earlier this year. For the month ending June 30, inflation was still only about 0.20% (2.40% annually). Unless the recent upward month-end trend continues to accelerate significantly, it would really hard to make a strong case for rising inflationary pressures based on the new BPP daily price data.  The deceleration in monthly inflation from more than 0.80% in February to 0.10% in June makes a stronger case for deflationary pressures than inflationary pressures.   

Update: According to MIT about its methodology on daily prices, "Our data are collected every day from online retailers using a software that scans the underlying code in public webpages and stores the relevant price information in a database. The resulting dataset contains daily prices on the full array of products sold by these retailers. Our data include information on product descriptions, package sizes, brands, special characteristics (e.g. “organic”), and whether the item is on sale or price control."

Leading Economic Index Increases in June

Despite a lot of uncertainties and concerns about a pending economic slowdown, the Conference Board reported yesterday that its Leading Economic Index (LEI) increased again in June, as part of an upward trend in the index that started in April 2009 (see chart above).  The ongoing increases in the 10-variable composite economic forecasting index suggest that positive economic growth will continue this year, even if the rate of growth moderates, and the chances of a double-dip recession this year remain very low. 

Says Ataman Ozyildirim, economist at The Conference Board: “The U.S. LEI continued to increase in June, but the strengths among the leading indicators have been balanced with the weaknesses in recent months. The Coincident Economic Index, a monthly measure of current economic activity, continued to increase slowly. The leading indicators point to slowly expanding economic activity in the coming months."

In recent weeks, the Conference Board has also reported strong increases in the Leading Economic Indexes for the U.K. (0.6%), Korea (0.4%) and China (0.5%), all for the month of May.  

Is It Cheaper to Fly or Drive?

Enter your travel information (dates, car model, number of nights in a hotel while driving, number of hours driving per day, rental car cost at destination if flying, airfare cost, transportation cost to get to airport, baggage fees, etc.), and find out here with the Fly or Drive Calculator.

HT: Newsalert

Update: The comparison is based on the out-of-pocket monetary cost only, and does not account for the higher "time cost" or "opportunity cost" of traveling by car, as Morganovich points out in the comments. 

Thursday, July 21, 2011

Finally, An End to NASA's Manned Space Shuttles

"Issues of mismanagement and expense certainly dogged the space shuttle program throughout its 30-year run, which came to an end Thursday with the safe touchdown of the shuttle Atlantis in Florida. Thank goodness. Maybe now NASA can concentrate on what it does best—mainly, unmanned space exploration—while private enterprise takes over the business of putting humans into orbit. 

When it was first conceived, the shuttle was supposed to be a kind of space truck, going into orbit 50 to 75 times a year and carrying large payloads at a cost of $54 million a launch in 2011 dollars. It didn't work out that way. The shuttle went aloft an average of five times a year. The cost-per-launch averaged some $1.5 billion. Its heaviest payloads barely exceeded what an unmanned Delta IV rocket can carry. 

Not that the shuttle didn't have its uses, like the dramatic repairs of the Hubble telescope, or its moments of splendor. But it also had its tragedies, with the loss of Challenger and Columbia and their 14 astronauts. And it exacted a huge opportunity cost on an agency that could have done more with its money than put humans in orbit again and again."

Thanks to Pete Friedlander for the link to The Unbroken Window Blog, with this great comment about the WSJ editorial above: 

"I’m reminded of what the expectations were for Medicare and Medicaid were in the 1960s. Something about that generation…"

MP: It's probably the case that without "putting humans in orbit again and again" the public and politicians would have lost interest in the space program years ago after the novelty factor wore off, and it would have been harder for NASA to justify its ongoing increases in taxpayer funding (totaling almost $1 trillion in constant dollars since 1958).  With manned space shuttles, NASA could promote an endless series of "firsts" to maintain public interest in its missions: the first woman in space, the first minority in space, the first minority woman in space, the first school teacher in space, the first minority woman in space, etc.   

Victory in Louisiana! The Institute for Justice and the Saint Joseph Monks Bury State Casket Cartel

Institute for Justice -- "A federal court today ruled that Louisiana’s government-imposed monopoly on casket sales in the state is unconstitutional, closing the lid on the economic protection scheme and resurrecting an opportunity for local monks to provide for themselves by creating and selling their handmade caskets. The monks of Saint Joseph Abbey of Saint Benedict, La., and the Institute for Justice, which represents the order in court, had filed suit to fight Louisiana’s government-imposed casket cartel." 

From the court decision of Judge Stanwood Duval, U.S. District Court for the Eastern District of Louisiana (emphasis added is mine):

"Before the Court was the issue of whether it is unconstitutional to require those persons who intend solely to manufacture and sell caskets be subject to the licensing requirements for funeral directors and funeral establishments. After considering all testimony and evidence presented at trial and the relevant law, the Court finds that this requirement is in contravention of the Due Process Clause and the Equal Protection Clause of the United States Constitution. 

There is no rational basis for the State of Louisiana to require persons who seek to enter into the retailing of caskets to undergo the training and expense necessary to comply with these rules. Simply put there is nothing in the licensing procedures that bestows any benefit to the public in the context of the retail sale of caskets.  It appears that the sole reason for these laws is the economic protection of the funeral industry which reason the Court has previously found not to be a valid government interest standing alone to provide a constitutionally valid reason for these provisions."

MP: Sounds like Judge Napolitano on Freedom Watch!

Congratulations to the Institute for Justice for another defeat against economic protectionism and another victory for economic freedom on behalf of America's small businesses and entrepreneurs.  I hereby nominate the Institute for Justice for the 2011 Nobel Peace Prize for their humanitarian work empowering individuals and small businesses and defending their right to earn an honest living!

Markets in Everything: Hard Money Mortgages

From today's WSJ "Home Loans Via Mom & Pop Inc.":

"Across the nation, a number of mom-and-pop investors are pulling money out of their retirement accounts and safe, but low-yielding, savings to take on the risk of becoming "hard-money" mortgage lenders, who charge high interest rates to borrowers who have been rejected by traditional banks.

Hard-money mortgage lending represents just a tiny slice of the mortgage market, although the activity is growing rapidly. Guy D. Cecala, publisher of trade publication Inside Mortgage Finance, estimates hard-money loans will account for about 1% of the 5.5 million mortgages expected to be originated this year. But he says activity in that sector is up sharply from a few years ago, when very few hard-money loans were originated."

Thanks to Regulatory Burdens, We've Got Both A Creditless Recovery and A Jobless Recovery

We had "jobless recoveries" after the 1990-1991 and 2001 recessions, but they were mild compared to the current "jobless recovery" of 2009-2011. At the current rate of private job creation over the last year, about 141,000 jobs per month, it will still take roughly four more years just to replace the jobs lost during the recession. When you also consider the addition of millions of new entrants every year into the labor market, it will likely be even longer before the U.S. labor market ever approaches anything close to full employment again.

Why is this jobless recovery so much worse than the last two?  

Maybe it has something to do with a serious deficiency in the amount of credit being created, which is contributing to a "creditless recovery"?  The chart above illustrates graphically the current “creditless recovery” by displaying the quarterly ratio of total credit market borrowing to GDP back to 1952. Despite some improvements over the last year, the amount of credit available in the economy in relation to the size of the economy (GDP) remains at a critically low level, less than half of the historical average. 

Read more here at the Enterprise Blog.  

Record High North Dakota Oil Production in May

Oil production in N. Dakota set some new monthly records in May:

1. A new record for monthly production: 1,120,4576 barrels, a 21% increase from last May, and a 75% increase from two years ago (see chart above).

2. A new record for average daily production: 361,438 barrels. 

3. A new record number of wells producing: 5,329

4. A new record for oil-related jobs: 15,200 (see chart), which is more than double the number of North Dakota oil jobs two years ago.  

Related News: "North Dakota Tax Commissioner Cory Fong says taxable sales and purchases the first three months of the year totaled $3.5 billion, an increase of nearly 34 percent over the year. Fong says officials expected the state's economy to remain strong but were still surprised by the level of the increase. The five cities with the biggest percentage increases for the first quarter all are in western North Dakota's booming oil patch."

As I wrote recently on a previous CD post:

North Dakota's impressive economic success clearly illustrates some of the benefits of domestic energy production: more jobs, record economic growth, huge gains in personal income, and even more tax revenues.  There's no reason that the economic success of North Dakota can't be duplicated elsewhere, if we would only open up more U.S. land and off-shore areas to domestic energy exploration and drilling.     

Update: "According to a new study from the Western Energy Alliance, North Dakota oil production could soon outpace imports from oil-rich nations like Russia, Iraq and Kuwait. The Bakken formation spanning North Dakota and Montana will lead oil production in the region, with an expected 685,000 barrels of oil and condensate a day by 2020 (Note: That's almost double the current daily production)."

Markets in Everything: Kindle Textbook Rental

"Amazon's Kindle Textbook Rental is a flexible and affordable way to read textbooks. You can rent for the minimum length, typically 30 days, and save up to 80% off the print list price. If you find you need your textbook longer, you can extend your rental by as little as 1 day as many times as you want and just pay for the added days."

One example is "Fundamentals of Financial Management" by Brigham and Houston, which has a retail list price of $186.95, sells in hardcover on Amazon for $142.27, or $107.16 for a Kindle edition, and $40.03 for a 60-day rental, $47.09 for 90 days, and $51.01 for 120 days.      

Wednesday, July 20, 2011

Markets in Everything: Private Job Loss Insurance

Income Assure is a private insurance company that sells supplemental unemployment insurance so that you can maintain 50% of your income if you lose your job.  The company covers the difference between 50% of your monthly income and what your state pays for unemployment compensation.  Monthly premiums vary by state, occupation and income level, here are some examples for workers in the state of Maryland with an annual salary of $60,000:

Construction: $62.20 per month
Leisure and Hospitality: $39.73
Manufacturing, Durable Goods: $37.35
Financial Activities: $20.17
Education and Healthcare Services: $15.05
Public Administration: $12.23

Obviously, the monthly premiums are risk-adjusted by industry based on the chances that workers will lose their jobs, with construction workers having a much greater chance of unemployment (and a much higher monthly premium) than public administration (translation = government job).  

HT: Peter Krieger

Lessons from Borders' Bankruptcy for Foodtrucks?

"The loss of Borders is a signpost on the road to progress.  Amazon offered consumers what they wanted, faster, less expensive, and now with Kindle, better.  This is exactly what is happening with the Gourmet Food Trucks."  Read more here

Medical Links: Cash-Only in U.S., Rationing in U.K.

1. Cash only doctor in Minnesota: She accepts cash, checks, eggs or pie, but no insurance:

2. GracePoint Healthcare near Nashville offers "modern medicine the old-fashioned way," i.e. "patient-centered" instead of "insurance-driven" with a cash-only, self-pay policy for same-day or next-day appointments, individualized no-rush appointments, and housecalls after hours and on weekends.  Various payment plans are offered, including a basic option for $49 per month and $40 per visit (with most lab fees included), which is about the same monthly cost as a cell phone. Even with one office visit per month, the monthly cost would be about the same as most cable or satellite TV plans.  

3. Meanwhile, the U.K.'s National Health Service (NHS), in an effort to save money, has started to ration access to non-urgent surgery like hip replacement operations by not allowing smokers and overweight patients to get on the waiting list until they go through some "reeducation" training.   

Tuesday, July 19, 2011

The Second Recession for Teenagers from Raising the Minimum Wage, Especially Black Teenagers

From an editorial in today's Investor's Business Daily  by economists William Even and David Macpherson:

"Each 10% increase in the minimum wage [since 2007] was accompanied by a decrease in employment of 1.2% for Hispanic males, 2.5% for white males and 6.5% for black males. When looking at hours worked, we saw a similar effect: Each 10% increase in the minimum wage reduced hours worked by 1.7% for Hispanic males, 3% for white males and 6.6% for black males.

The data clearly show a disproportionate loss of hours and employment for black young adults. Let's put these lost opportunities into context. Between 2007 and 2010, employment for 16- to 24-year-old black males fell by approximately 34,300 as a result of the recession; over the same time period, approximately 26,400 lost their jobs as a result of increases in the minimum wage across the 50 states and at the federal level.

In other words, raising the minimum wage essentially created a second recession for these black young adults."

MP: In other words, demand curves for unskilled labor really do slope downward, as economic theory predicts. 

California Mortgage Defaults Fall to 4-Year Low

Following some relatively positive news about June home sales in California comes this additional positive news about the California real estate market:

DQ News -- "The number of California homes that went into foreclosure fell to a four-year low last quarter, the result of a more stable housing market as well as policy changes in the mortgage servicing industry.  A total of 56,633 Notices of Default (NoDs) were recorded at county recorders offices during the April-to-June period. That was down 17.0 percent from 68,239 for the prior quarter, and down 19.2 percent from 70,051 in second-quarter 2010 (see chart above). Last quarter's activity was the lowest for any quarter since 53,493 NoDs were recorded in the second quarter of 2007. It was well below half the record 135,431 default notices recorded in the first quarter of 2009."

DQ President John Walsh said "A lot of theories are being floated as to why the numbers are down. Bank policy changes. Legal challenges. Politics. Holding back temporarily so as not to flood the market. The fact of the matter is that no one really knows, outside of lending and servicing industry insiders. One thing is certain: Homeowner distress spreads fastest when home price declines are steepest. And it now appears likely that, barring some new economic shock, the worst of the price declines are behind us."

Tax Foundation Map of State and Local Tax Rates

From the Tax Foundation, the map above shows the "state-local combined sales tax rate" by state, ranging from a low of 0% in Montana and Oregon, to a high of 9.44% in Tennessee, followed next by California with 9.08% and Arizona at 9.01%.  

Boskin and Kennedy on Lowering Tax Rates

"The lower marginal tax rates in the 1980s led to the best quarter-century of economic performance in American history. Large increases in tax rates are a recipe for economic stagnation, socioeconomic ossification, and the loss of American global competitiveness and leadership. 

There is only one solution to this growth-destroying, confiscatory tax-rate future: Control spending growth, especially of entitlements. Meaningful tax reform—not with higher rates as Mr. Obama proposes, but with lower rates on a broader base of economic activity and people—can be an especially effective complement to spending control. But without increased spending discipline, even the best tax reforms are doomed to be undone."

a. "It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now ... Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."

~ Nov. 20, 1962, president's news conference

b. "Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government."

~ Jan. 17, 1963, annual budget message to the Congress

c. "In today's economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarges the federal deficit – why reducing taxes is the best way open to us to increase revenues.  It is no contradiction – the most important single thing we can do to stimulate investment in today's economy is to raise consumption by major reduction of individual income tax rates."

~Jan. 21, 1963, annual message to the Congress: "The Economic Report Of The President"

d. "Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate."

~ Jan. 24, 1963, message to Congress on tax reduction and reform

e. "A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues."  

~Sept. 18, 1963, radio and television address to the nation on tax-reduction bill

Markets in Everything: Billionaire Snagging School

BEIJING (Reuters Life!) - "Want to marry rich? Then the unlikely named Beijing Moral Education Center for Women is for you. 

For 30 hours of training costing 20,000 yuan ($3,080), Chinese women keen to snag a billionaire, millionaire or even just an affluent man learn techniques to make them more attractive, from how to put on make-up in the most flattering way to how to spot a liar by looking at his facial expressions.

The school in the world's second largest economy -- home to 189 billionaires and just under one million millionaires -- has attracted over 2,800 mainly middle class women since it opened in August last year."

HT: Peter Parlapiano

Monday, July 18, 2011

Walmart: The Most Successful Retailer in History

Walmart is without question the most successful retailer in the history of the United States, and in the history of the entire world by almost any measure (number of stores, sales revenue, number of employees, market share, etc.) Here are some Walmart facts:

1. In 2010, American consumers bought almost as much merchandise at low-priced Walmart ($307.7 billion in U.S. retail sales) as they purchased from the next five largest U.S. retailers combined ($324.5 billion): Kroger ($78.3 billion), Target ($65.8 billion), Walgreen ($61.2 billion), Home Depot ($60.1 billion) and Costco ($58.9 billion).   

2. In 2010, American consumers purchased more than 7% of their retail sales at a Walmart or a Sam's Club stores, and more than 8.5% of retail sales if autos are excluded.  

3. Walmart now operates more than 9,000 retail outlets around the world in 15 countries.  

4. For the first time in its history, 2011 marked the first year that Walmart operated more retail stores outside the U.S. (4,803) than in the U.S. (4,427), and the international units generated more than 27% of Walmart's 2010 revenue. 

5. In 2005, almost half (46%) of Americans lived within 5 miles of a Walmart or Sam's Club, and 88% lived within 15 miles of a Walmart or Sam's Club.  

6. As Vincent Geloso points out on his blog (which inspired this blog post), "The growth of productivity at Wal-Mart, matched by real wages growth, has allowed the corporation to cut prices systematically and provide consumers with a service they really desire.  This has resulted in growth that is faster than the overall rate of economic growth."

The chart above shows how Walmart sales as a share of U.S. GDP have grown from about one-third of one percent (0.37%) in 1989 to more than 2% (estimated) in 2011.  In other words, for every $45 dollars spent in the U.S. economy this year, almost $1 will be spent on a purchase at a Walmart. If we account for Walmart's total world sales, its sales as a share of GDP will approach 3% this year.  

MP: There has probably been no other company or organization in the history of the world that has done a better job of serving consumers than Walmart, with its "Everyday Low Prices" and obsession with supply chain efficiency.  Walmart's increasing share of U.S. GDP is a testament to its amazing success at creating more consumer surplus than any company in history. 

Related: Watch this animation of Walmart's amazing expansion in the U.S. from 1962 to 2004:

Sunday, July 17, 2011

North Dakota's Higher Education Boom

I've featured the booming, oil-rich North Dakota economy many times, some recent examples appear here, here, and here.  And now there's another economic success story for the state: a higher education boom is taking place at North Dakota's universities, with college students flocking to the Peace Garden state in ever greater numbers, according to this New York Times story titled "Frigid North Dakota Is a Hot Draw For Out-of-State College Students":

"Even as the number of North Dakota high school graduates fell below 7,400 in 2010 from 9,058 in 2000, enrollment at public colleges surged, climbing 38% in the decade ended in 2010, to 48,120. Leading that growth was a 56% jump in nonresident students. 

Out-of-state students account for about 55% of the 14,500 enrolled at North Dakota State University, as well as at similarly sized University of North Dakota in Grand Forks. Nonresident students at North Dakota's 11 public colleges constitute a higher ratio than in almost every other state.

High school juniors and seniors scouring online college guides find North Dakota universities are inexpensive and well-regarded, with modest-sized classes typically taught by faculty members rather than adjuncts or graduate students."