Tuesday, November 15, 2011

Amazing Time Lapse Views of Earth from Space

Earth | Time Lapse View from Space, Fly Over | NASA, ISS.

The video above features time lapse sequences of photographs taken by the crew of expeditions 28 & 29 onboard the International Space Station from August to October 2011 at an altitude of around 350 km.

HT: Sprewell

Happy 40 Year Anniversary Information Age 2.0

INTEL -- "The microprocessor has been the engine of the digital revolution that has changed our society dramatically over the past few decades, democratizing access to information and making for a more equalitarian world. This year Intel celebrates the 40th anniversary of the microprocessor and the 40th birthday of the Intel® 4004 which was the first customer-programmable microprocessor to become available on the commercial market."

MP: After the invention of the printing press in the 15th century that started Information Age 1.0, the commercial introduction of the mircochip in 1971 was the second most important information-related breakthrough in human history. Thanks to the introduction of the microprocessor in 1971, we can celebrate this year the 40th year anniversary of Information Age 2.0.  

Even in a Sub-Par Jobless Recovery, There Are Labor Shortages in the U.S. and Around the World

1. Wall Street Journal article "The $200,000-a-Year Mine Worker" (HT: Bob Wright):

"Demand for [workers] willing to work 12-hour days in sometimes dangerous conditions, while living for weeks in dusty small [mining] towns, is huge.

"It's an historical shortage," says Sigurd Mareels, director of global mining for research firm McKinsey & Co. Not just in Australia, but around the world. In Canada, for example, the Mining Industry Council foresees a shortfall of 60,000 to 90,000 workers by 2017. Peru must find 40,000 new miners by the end of the decade.

Behind this need for mine workers is a construction boom in China and other emerging economies that has ramped up the demand for iron ore, used to make steel, and other metals used in construction, such as copper, typically used for wiring buildings.

The [labor] shortage is particularly acute in Australia, the world's biggest source of iron ore and the world's second-biggest gold producer. The Minerals Council of Australia estimates the country needs an additional 86,000 workers by 2020, to complement a current work force estimated at 216,000.

"It's a tight labor market and difficult cost environment," said Ian Ashby, president of BHP BillitonLtd.'s iron-ore division. To attract workers, BHP and other companies are building recreation centers, sports fields and art galleries in hardscrabble company towns."

MP: Maybe that's what will happen in places like Williston, ND?

2. Business Week article "Why Americans Won't Do Dirty Jobs":

"Alabama enacted an immigration law in September that requires police to question people they suspect might be in the U.S. illegally and punish businesses that hire them. The law, known as HB56, is intended to scare off undocumented workers, and in that regard it’s been a success. It’s also driven away legal immigrants who feared being harassed.

[There] are [now] thousands of vacant positions and hundreds of angry business owners staring at unpicked tomatoes, uncleaned fish, and unmade beds. “Somebody has to figure this out. The immigrants aren’t coming back to Alabama—they’re gone,” says Randy Rhodes, owner of Harvest Select, a catfish processing plant. “I have 158 jobs, and I need to give them to somebody.”

There’s no shortage of people he could give those jobs to. In Alabama, some 211,000 people are out of work. In rural Perry County, where Harvest Select is located, the unemployment rate is 18.2%, twice the national average. One of the big selling points of the immigration law was that it would free up jobs that Republican Governor Robert Bentley said immigrants had stolen from recession-battered Americans. Yet native Alabamians have not come running to fill these newly liberated positions. 

Many employers think the law is ludicrous and fought to stop it. Immigrants aren’t stealing anything from anyone, they say. Businesses turned to foreign labor only because they couldn’t find enough Americans to take the work they were offering.

At a moment when the country is relentlessly focused on unemployment, there are still jobs that often go unfilled. These are difficult, dirty, exhausting jobs that, for previous generations, were the first rickety step on the ladder to prosperity. They still are—just not for Americans."

MP: More evidence that there's been a structural shift in the U.S. economy (especially the second story), leading to a temporary mismatch between the jobs available (which might be plentiful) and the skills and willingness of available employees to fill those jobs (which might be scarce), which is contributing to a stubbornly high jobless rate. 

Fact of the Day: North Dakota Oil Production Approaches OPEC Member Ecuador's Level

BLOOMBERG -- "Surging crude output in the Bakken shale formation is set to make North Dakota a bigger oil producer than OPEC member Ecuador. The CHART OF THE DAY above tracks North Dakota’s production, which has almost doubled in the past two years, as Ecuadorean output has stagnated."

Markets in Everything: Canine Food Truck

"Fido to Go is Chicago's premier gourmutt food truck serving hand-crafted canine cookies & doggy ice creams! Find us out and about at the city's dog parks, beaches, and special events. We are also available to cater doggy parties and can even provide the games, activities, and photographer!"

HT: Mike W. 

Quote of the Day on Taxpayers as the Government's ATM, and Really Expensive $500 Haircuts

"The government's chief asset—in fact, pretty much its only asset—is its ability to tax people, now and in the future. The taxpayers are the government's ATM. Make a withdrawal today, and there's less available tomorrow.

Now the ability to tax is a pretty huge asset and the government has not (yet!) come close to depleting it. In that sense, there's a lot of money in the bank. But no matter how much you've got in the bank, a policy of ever-increasing withdrawals is nothing at all like a decision to earn more income. It's important to get the analogy right. And it's clear from the blogs and the op-ed pages that not everybody gets this.

Instead, the notion persists that an extra trillion in federal spending can be converted from "irresponsible'' to "responsible'' as long as it's accompanied by an extra trillion in tax hikes. That's like saying a $500 haircut can be converted from "irresponsible'' to "responsible'' as long as you withdraw the $500 from your bank account. If the super committee loses sight of this fundamental truth, it is doomed to fail."

~Steven Landsburg in today's WSJ

Jobs in Texas vs. California (the Lost Decade State)

Following up on a CD post yesterday about companies leaving California in record numbers, the chart above shows the difference in employment levels between California and Texas. While Texas employment was stable through the recession and is now 242,000 jobs above the December 2007 level, California lost jobs for 23 consecutive months starting in February 2008 and the September employment level is more than one million jobs below December 2007.  In every month since September 2009, the employment level in California has been below 16 million, which is back to the employment level of 2000, more than a decade ago.  In contrast, Texas employment is about 14% above the 2000 level.

Further evidence of companies and employees leaving California for better opportunities in prospering states like Texas is provided by the U-Haul rates for a one-way 26-foot truck rental:
Dallas to LA: $1,024
LA to Dallas: $1,762
Premium to leave California for Texas: 72.1%

Houston to LA: $892
LA to Houston: $1,884
Premium to leave California for Texas: 111.2%
Assuming that one-way U-Haul truck rental rates are based on relative demand, there are a lot more people and trucks leaving California for Texas than vice-versa, resulting in huge premiums to rent trucks going to Texas and large discounts for trucks going to California. 

Related: "The Long Stall: California’s jobs engine broke down well before the financial crisis," by Wendell Cox in City Journal and commentary at Coyote Blog.  (ht: morganovich)

Markets in Everything: Price Check iPhone App

"As we near Black Friday and Cyber Monday, Amazon is launching a new way to comparison shop on the go. Called Price Check, the free iPhone app allows users to scan the barcode of a product, take a picture of an item or say the product’s name to access product listings on Amazon.com’s marketplace. If the product is listed on Amazon, customers can then purchase the item with one click."

Austrian School Economist Hayek Finds New Fans

NPR had a segment today on Nobel economist Hayek, with some commentary from Cafe Hayek's Don Boudreaux.

Yesterday Ayn Rand was featured.  

Monday, November 14, 2011

Housing Slump Leads to Some Unusual Outcomes

1. "Here in Merced, California a city in the heart of the San Joaquin Valley and one of the country’s hardest hit by home foreclosures, the downturn in the real estate market has presented an unusual housing opportunity for thousands of college students. Facing a shortage of dorm space, they are moving into hundreds of luxurious homes in overbuilt planned communities."

2. "Las Vegas has a pot home problem. And like many of the region's maladies, it's tied to the housing slump. Major cultivators spend tens of thousands of dollars turning cheap homes into greenhouses. Last year, authorities took down 153 indoor grow sites in Nevada and seized more than 13,000 plants, compared with 18 sites and 1,000 plants in 2005, the U.S. Drug Enforcement Administration said."

Chart of the Day: Structural Shift in U.S. Economy

I have featured charts similar to the one above that displays real GDP and civilian employment over the last ten years.  More than any single chart, I think this one really helps to accurately describe the current state of the U.S. economy:

1. Measured by real output (GDP), the U.S. economy has made a complete recovery from the 2007-2009 recession now that real output in Q3 was higher than the 2007 Q4 level when the recession started. 

2. While real output has completely recovered to above pre-recession levels, U.S. employment at 139.6 million is still 6.6 million jobs (and 4.5%) below the 2007 peak of 146.2 million, and that translates into the ongoing "jobless recovery."   

3. The recovery of real output to historical highs with 4.5% fewer employees has also translated into record-level corporate profits, which are now almost 40% above pre-recession levels.  

4. The recovery of both output and profits to above 2007 levels with 6.6 million fewer workers could explain the sluggish job growth that will probably continue for several more years.  If companies can produce more output now than in 2007 with fewer workers and record profits, where's the incentive to hire more workers?  

The Great Recession stimulated huge productivity and efficiency gains as companies shed marginal workers and learned how to do "more with less (fewer workers)."  The surge in productivity over the last few years may be unprecedented in recent history and may be responsible for a "structural shift" in the U.S. economy that will have long-lasting effects, e.g. an extended period of time with a jobless rate above 7%.

From ‘Made in China’ to ‘Bought in China’

Fact of the day:

Boston Globe -- "China is now the world’s largest consumer in a number of categories, including beer, cigarettes, and — remarkably — cars. Some Western automakers have begun skipping US and European markets and debuting models in China first."

Markets in Everything: Chipotle Asian Style

Washington Post -- "With more than 1,000 locations in North America and the United Kingdom, most of us are exceedingly familiar with Chipotle’s colossal mountains of Mexican deliciousness. But at least for the foreseeable future, ShopHouse Southeast Asian Kitchen — the brand new brainchild of Chipotle CEO Steve Ells that just opened recently — has only one location: Dupont Circle (DC). 

Chicken and pork meatballs, right, are one of the meat offerings at ShopHouse. The new fast-casual concept has the same pick-and-choose style of Chipotle: Choose either a banh mi sandwich or a rice bowl, with your choice of chicken satay, tofu, steak or chicken and pork meatballs. The sandwiches are topped with green papaya slaw, herbs and crushed peanuts, while the rice bowls offer your choice of veggies, sauces, toppings and garnishes. Early favorite toppings include those with the word “spicy” in them: spicy red curry sauce, spicy charred corn and the even spicier long beans."

Here's the menu.  I've tried it twice and really liked it. I predict success. 

Companies Continue to Leave Anti-Business California in Record Numbers to Save 40% in Costs

Los Angeles - "It's time to take a hard look at why businesses are leaving the state.

Since 2007, more than 2,500 employers have left California. They've taken about 109,000 jobs with them. Why is that happening and... more importantly... how can it be stopped?

Joseph Vranich, a business relocation expert, explains the exodus in the video report."

According to Joe Vranich, "Business leaving the City of Los Angeles for a nearby county can save up to 20% in costs while moving to another state can save up to 40% in costs."

It's Not Just Members of Congress Who Benefit from Insider Trading, Congressional Staff Also Gain

Wall Street Journal (October 11, 2010) -- "At least 72 aides on both sides of the aisle traded shares of companies that their bosses help oversee, according to a Wall Street Journal analysis of more than 3,000 disclosure forms covering trading activity by Capitol Hill staffers for 2008 and 2009. 

"Congressional staff are often privy to inside information, and an unscrupulous person could profit off that knowledge," says Vincent Morris, a spokesman for Rep. Louise Slaughter (D., N.Y.), a leading backer of the "Stop Trading on Congressional Knowledge Act," or STOCK Act. "The public should be outraged there is no law specifically banning this."

Congressional aides have ringside seats on the making of laws that affect American business. Receiving salaries up to roughly $170,000 a year, they can glean information about policies and government action before the public. They have access to information about hearings or legislation that can move stocks and markets." 

HT: Cyril Morong

Happy Birthday P.J. O'Rourke

It's P.J. O'Rourke's 64th birthday today, here are some quotes:

1. Giving money and power to government is like giving whiskey and car keys to teenage boys.

2. If you think health care is expensive now, just wait until you see what it costs when it’s free.

3. The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn't work and then they get elected and prove it.

4. The mystery of government is not how Washington works but how to make it stop.

5. The Clinton administration launched an attack on people in Texas because those people were religious nuts with guns. Hell, this country was founded by religious nuts with guns. Who does Bill Clinton think stepped ashore on Plymouth Rock?

6. Social Security is a government program with a constituency made up of the old, the near old and those who hope or fear to grow old. After 215 years of trying, we have finally discovered a special interest that includes 100 percent of the population. Now we can vote ourselves rich.

7. When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.

8. No drug, not even alcohol, causes the fundamental ills of society. If we're looking for the source of our troubles, we shouldn't test people for drugs, we should test them for stupidity, ignorance, greed and love of power.

9. If government were a product, selling it would be illegal.

10. Feeling good about government is like looking on the bright side of any catastrophe. When you quit looking on the bright side, the catastrophe is still there.

11. America wasn't founded so that we could all be better. America was founded so we could all be anything we damned well pleased.

12. Bureaucrats want bigger bureaus. Special interests are interested in whatever's special to them. These two groups bring great pressure to bear upon politicians who have another agenda yet: to cater to the temporary whims and fads of the public and the press.

13. People who are wise, good, smart, skillful, or hardworking don't need politics, they have jobs.

14. If we're going to improve the environment, the first thing we should do is duck the government. The second thing we should do is quit being moral. Screw the rights of nature. Nature will have rights as soon as it gets duties. The minute we see birds, trees, bugs, and squirrels picking up litter, giving money to charity, and keeping an eye on our kids at the park, we'll let them vote.

15. The U.S. Constitution is less than a quarter the length of the owner's manual for a 1998 Toyota Camry, and yet it has managed to keep 300 million of the world's most unruly, passionate and energetic people safe, prosperous and free.

16. When you look at the Republicans you see the scum off the top of business. When you look at the Democrats you see the scum off the top of politics. Personally, I prefer business. A businessman will steal from you directly instead of getting the IRS to do it for him. And when Republicans ruin the environment, destroy the supply of affordable housing, and wreck the industrial infrastructure, at least they make a buck off it. The Democrats just do these things for fun.

Markets in Everything: Superhydrophobic Coating

The product NeverWet provides water repellent, anti-corrosion, anti-bacterial, anti-icing and self-cleaning properties to anything it coats. Your stuff will never get wet again, check out the video above.

Natural Gas Prices at 10-Year Low for November

WSJ Blog -- "Home heating costs for many Americans will be lower this year. Natural gas futures closed on Friday at $3.58 for a million British thermal units, down 20% from early June (see chart, data here). In a typical November, natural gas prices start rising in anticipation of higher demand, but this year a supply glut is weighing on the market. It has been 10 years since prices were this low heading into the winter."

MP: The chart above shows inflation-adjusted natural gas futures prices back to 1994.  November futures prices of $3.58 are 14% below a year ago, 39% below two years ago, about half of the price in November 2008 of $7.13 and well below the average real price of natural gas futures contracts over the last decade of $6.73.  Welcome to the shale gas revolution.     

Above the Law: Insider Trading on Capitol Hill

On Saturday, there was a CD post featuring a preview of the "60 Minutes" segment "Congress: Trading stock on inside information?" The full episode aired last night and appears above; it's based on Peter Schweizer's forthcoming book, "Throw them All Out." Following a preview by Steve Kroft, here's how the segment opens:

Peter Schweizer: "This is a venture opportunity [being in Congress], this is an opportunity to leverage your position in public service, and use that position to enrich yourself, your friends and your family."

Sunday, November 13, 2011

Quote of the Day on the Cornucopia of Taxpayer Dollars for Renewable Energy, aka Crony Capitalism

“It is like building a hotel, where you know in advance you are going to have 100 percent room occupancy for 25 years,” said Kevin Smith, chief executive of SolarReserve, whose Nevada solar project has secured a 25-year power-purchase agreement with the state’s largest utility and a $737 million Energy Department loan guarantee and is on track to receive a $200 million Treasury grant. 

Interesting Fact of the Day: As the "Saudi Arabia of Natural Gas," the U.S. Could Become an Exporter

Philadelphia Inquirer (fixed now) -- "Now, another potentially large rival market for natural gas is emerging: Exports.

The Department of Energy has received five applications from companies that want to create terminals to ship liquefied natural gas (LNG) overseas. One application has been approved.

The natural gas industry, which is eager to sell more fuel, says overseas markets could generate billions of dollars in export earnings, improve the nation's balance of trade, and boost the economy in shale-gas areas such as Pennsylvania.

The fact that policymakers are even discussing exports is a remarkable statement about how the shale-gas revolution has turned energy markets on their head."

Big Farm's Crony Capitalism and Corporate Welfare

What do Christmas tree growers have in common with producers of beef, blueberries, cotton, milk, eggs, avocados, honey, lamb, mangoes, mushrooms, peanuts, popcorn, pork, potatoes, soybeans, and watermelons?  They are all well-organized, agricultural special interest groups that have lobbied the Department of Agriculture to impose taxes or fees on their products (and raise prices to consumers) to fund the marketing and promotion of their products to the public.   

The Christmas tree growers’ efforts to use the federal government’s coercive power of taxation to benefit their industry had to be postponed last week due to public pushback about higher taxes and the display of blatant crony capitalism.  Maybe it’s time for some public outrage (OWS protestors?) over the corporate welfare bestowed on "Big Farm" for producing blueberries, avocados, peanuts, etc. 

See related: 1) WSJ editorial "About That 'Christmas Tree Tax': The real story is a case of business and government collusion," and 2) Heritage Foundation post "Agricultural Marketing Fees: Not Just for Christmas Trees"  (HT: Matt B.). 

Filmmaker Michael Moore's $2m Torch Lake Vacation Mansion in a 99% White Community

Michael Moore's $2 Million Michigan Vacation Mansion

Michael Moore: "Capitalism did nothing for me.  The system is not set up to help somebody from the working class."

Andrew Breitbart: "Left-wing filmmaker Michael Moore has been touring Occupy Wall Street demonstrations across the country urging activists to continue their fight against the wealthy “one percent” of Americans.

According to public tax records, Moore owns a massive vacation home on Torch Lake, Michigan–one of the most elite communities in the United States–in addition to his posh Manhattan residence. Through an independent source, Big Hollywood has obtained exclusive photographs of the house matching the address of Moore’s waterfront mansion (see samples above). It is the kind of luxurious summer home that 99 percent of Americans can only dream of owning (estimated value = $2 million).

In addition, according to statistics from 2009, Forest Home Township [where Torch Lake is located] has no black residents. The township is roughly 98 percent white. Call that 99 percent, and Moore’s claim to be among “the 99 percent” begins to have some basis in reality."

Update: See Henry Payne's excellent article in the Detroit News "Occupy Michael Moore: His opulent Michigan lake estate."

Peter Thiel on Higher Education Bubble. Aptitude Tests for Employers Instead of College Degrees?

In this WSJ video, Peter Thiel, founder of Clarium Capital and The Thiel Foundation, explains why young Americans need to be encouraged to take on more risk to spur innovation and why the cost of a U.S. education is hindering that.

HT: Sprewell

Related: Craig Newmark points to a 2009 George Will article that might help explain why we have a higher education bubble:

"In 1964, there were more than 2,000 personnel tests available to employers. But already an Illinois state official had ruled that a standard ability test used by Motorola was illegal because it was unfair to "disadvantaged groups."

A heavy burden of proof was placed on employers, including that of proving that any test that produced a "disparate impact" detrimental to certain minorities was a "business necessity" for various particular jobs.

Small wonder, then, that many employers, fearing endless litigation about multiple uncertainties, threw up their hands and, to avoid legal liability, threw out intelligence and aptitude tests for potential employees. Instead, they began requiring college degrees as indices of applicants' satisfactory intelligence and diligence. This is, of course, just one reason college attendance increased from 5.8 million in 1970 to 17.5 million in 2005."

MP: Peter Thiel describes higher education as a "giant selection mechanism" and estimates that only 10% of the value of a college degree comes from actual learning, and 50% of the value comes from selection (getting into a selective university) and 40% comes from signalling (graduating from a selective college becomes known to employers).  If employers could use intelligence tests instead of college degrees as measures of aptitude, it might be a lot more efficient and more cost-effective than the current practice of using very expensive four-year college degrees that add very little in terms of educational value (at least according to Thiel).    

The Long, Undistinguished, and Very Costly Graveyard of Failed Government Energy Projects

From an article in yesterday's Washington Post by energy writer Steven Mufson "Before Solyndra, A Long History of Failed Government Energy Projects":

"Solyndra, the solar-panel maker that received more than half a billion dollars in federal loans from the Obama administration only to go bankrupt this fall, isn’t the first dud for U.S. government officials trying to play venture capitalist in the energy industry. The Clinch River Breeder Reactor. The Synthetic Fuels Corporation. The hydrogen car. Clean coal. These are but a few examples spanning several decades — a graveyard of costly and failed projects.

Not a single one of these much-ballyhooed initiatives is producing or saving a drop or a watt or a whiff of energy, but they have managed to burn through far more more taxpayer money than the ill-fated Solyndra. An Energy Department report in 2008 estimated that the federal government had spent $172 billion since 1961 on basic research and the development of advanced energy technologies."

Conclusion: "Perhaps the federal government is, as former Obama economic adviser Lawrence Summers put it, “a crappy VC,” or venture capitalist. Or perhaps it should stick to funding basic research. But if more recipients of Energy Department loan guarantees falter, they will become part of a long, if undistinguished, history of failure."

Saturday, November 12, 2011

Natural Gas Is Boosting U.S. Regional Economies

AreaDevelopment.com -- "Hydraulic fracturing (“fracking”) and horizontal wells now make it possible to economically produce natural gas from low permeability shale rock, greatly increasing natural gas supplies while reducing prices. These shale rock formations are found primarily in Louisiana, New York, North Dakota, Pennsylvania, Texas, and West Virginia. Their development is helping many “downstream” businesses grow and create jobs.

For example, estimates of Pennsylvania job creation due to increased shale gas production since 2009 range from 44,000 to 72,000. In Bradford County, Pa., the 2009 unemployment rate of 10 percent has been halved because of Marcellus Shale gas development. New York’s economically depressed Southern Tier is also benefiting from gas field development in nearby Pennsylvania. Case in point: RB Robinson Contracting, Inc., a family construction business in Candor, N.Y., had eight full-time employees in 2009. Today, it provides full- and part-time work for 120 people.

Ohio’s steel industry has also felt the economic impact of the revival of shale production. More than 400 workers in Youngstown are constructing a new $650 million steel mill for Vallourec & Mannesmann Holdings, Inc. It will annually produce a half million tons of seamless steel well tubing used in drilling and “fracking” natural gas wells. U.S. Steel is spending $95 million to expand and upgrade its tubular steel mill in Lorain, Ohio, and Timkin is spending $50 million on a similar project at its Canton mill."

MP: The chart above shows the increase in mining jobs in Pennsylvania, which have almost doubled since 2004, due to the shale gas boom in the Marcellus region of the state.    

HT: Energy Tomorrow

"The 99%" of Us Get Fined and Go to Jail for Insider Trading, But the Exempt "Political 1%" Can Get Rich

Congressional Inside Traders Are Above the Law

(CBS News) -- "Martha Stewart went to jail for it. Hedge fund honcho Raj Rajaratnam was fined $92 million and will go to jail for years for it. But members of Congress can do the same thing -use non-public information to make stock trades -- and there's no law against it. Steve Kroft on "60 Minutes" reports on how America's lawmakers can legally make tidy profits on information only they know, simply because they won't pass a law against themselves. The report will be broadcast on Sunday, Nov. 13 at 7 p.m. (watch preview above).  

If senators and representatives are using non-public information to win in the market, it's all legal says Peter Schweizer, who works for the Hoover Institute, a conservative think tank. He has been examining these issues for some time and has written about them in a book, "Throw them All Out." "Insider trading laws apply to corporate executives, to Americans...If you are a member of Congress, those laws are deemed not to apply," he tells Kroft. "It's really the way the rules have been defined... lawmakers have conveniently written them in such a way as they don't apply to themselves," says Schweizer.

Efforts to make such insider trading off limits to Washington's lawmakers have never been able to get traction."

MP: Maybe the OWS protests should direct some outrage at the greed of the political class "who get rich off insider stock tips, land deals and cronyism that would send the rest of us to prison" (from the front cover of Peter Schweizer's book)?

Update 1:  A 2011 research article in the journal Business and Politics ("Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives") found that the stock portfolios of House of Representative members outperformed the overall stock market by 55 basis points per month, or 6.6% on an annual basis between 1985 and 2001, suggesting that lawmakers have a "substantial informational advantage" over the general public and even over corporate insiders.

Update 2: The chart below illustrates how an additional return of 6.6% per year for House Members would have affected an investment in the stock market between 1985 and 2001. A $1,000 investment in the S&P500 at the beginning of 1985 would have grown to $6,043 by the end of 2001, earning an annual return of 11.16%.  In contrast, adding a 6.6% premium for lawmakers due to their informational advantage would have generated an annual return of 17.76%, and a $1,000 investment in 1985 would have grown to $16,172, or roughly 2.7 times as much as an investment in the S&P500. Not bad.  Insider trading has its advantages.

Wage Gap With China Continues to Shrink, Which Will Mean More Manufacturing Production in U.S.

Chart has been updated to end in 2015.

1. CNBC --"Slowing wage growth in the United States, coupled with rising wages in China and other emerging markets, could soon make the U.S. more competitive. While wage levels in China are still far below the average wage in the U.S,, better technology, transportation and services in the U.S. could help make the difference for companies, according to Bart van Ark, Chief Economist at The Conference Board.

"There are other factors at play here, from access to services, high technology and innovation, to transportation," he told CNBC Friday. As wages increase in the major cities in China, companies are having to move lower-paid jobs further inside the country, where infrastructure has not yet caught up, to get the same benefits."

2. BEIJING, China — "Factories in China’s manufacturing heartland are feeling the squeeze again, with minimum wages in Guangdong province set to rise by as much as 20 percent on Jan. 1 for the second time in less than a year. And while one Chinese province’s minimum wage might seem like a local issue, the salary question underlines a continuing momentum in China toward building higher-end business and better jobs. In other words, the days of endless, cheap Chinese labor are limited."

MP: The chart above illustrates the shrinking manufacturing wage gap between the U.S. and China, as wages increase in the U.S. at about 2% compared to 15-20% wage increases in China (Note: Those wage increases in China may obviously not continue in the long run, but are shown here to illustrate the shrinking wage gap).  As recently as 2005, average manufacturing wages in the U.S. were more than 20 times higher than in China, but the U.S./China wage ratio had shrunk to only 10 times by 2010, and will likely be only 5-to-1 by 2015 at the current rate of wage increases.  

Along with the shrinking wage gap, there are other factors that are starting to favor increased manufacturing production in the U.S. including greater productivity of American workers, the cost of shipping goods 8,000 miles from China with a 3-week delivery time, the logistical advantages of domestic production to avoid the challenges of coordinating design changes or addressing quality issues when production is taking place 13 times zone away, cheap industrial and commercial land in the U.S. and weak enforcement of intellectual property rights in China, among others. 

As the Boston Consulting Group reported in May, "Within the next five years, the United States is expected to experience a manufacturing renaissance as the wage gap with China shrinks and certain U.S. states become some of the cheapest locations for manufacturing in the developed world.  We expect net labor costs for manufacturing in China and the U.S. to converge by around 2015. As a result of the changing economics, you’re going to see a lot more products ‘Made in the USA’ in the next five years."

HT to Gary Lyle for the CNBC link

Friday, November 11, 2011

Today 11/11/11 is Nigel Tufnel Day

EW.COM -- "Because sometimes, you just need to take things to 11. Nearly three decades after 1984 mockumentary "This Is Spinal Tap" introduced us to Nigel Tufnel, fans have joined together to declare today, Nov. 11, 2011 (a.k.a. 11/11/11), Nigel Tufnel Day."

Federal Raid on Gibson Signals U.S. Is Not Open for Business and Obama Is Not Serious About Jobs

From Saturday's WSJ article by Nancy Dewolf Smith:
On Aug. 24, federal agents descended on three factories and the Nashville corporate headquarters of the Gibson Guitar Corp. Accompanied by armored SWAT teams with automatic weapons, agents from the Fish and Wildlife Service swarmed the factories, threatening bewildered luthiers, or guitar craftsman, and other frightened employees. A smaller horde invaded the office of CEO Henry Juszkiewicz, pawing through it all day while an armed man stood in the door to block his way.

The incident attracted national attention and outrage. Like Boeing—whose plans to locate new production in South Carolina are opposed by the National Labor Relations Board—here was an iconic American brand under seemingly senseless federal fire. The fact that Gibson was singled out when other guitar makers use the same woods has fed speculation that the company was targeted—because it is not unionized, perhaps, or didn't donate enough to the Democratic Party. 

"I don't think it's a political issue," Mr. Juszkiewicz says, shaking his head. "But I will say this: I wrote a letter to President Obama. I spelled out what happened. I said: You know, we got raided and here are the facts, I think it's unfair. What do you think we should do? No response."

Maybe the president is not a music lover? "He knows who we are," Mr. Juszkiewicz says. "His daughters have a couple of Gibsons. [Mrs. Obama] gave a guitar to [the French president's singer-songwriter wife] Mrs. Sarkozy. And we called up to make sure that he saw the letter, and he did. No response." 

Outsourcing Shifts Into Reverse: Caterpillar Brings Production Back from Japan = +1,000 New Jobs

Wall Street Journal -- "Caterpillar said it plans to shift production of small construction machinery from Japan to a new plant in North America that is expected to employ more than 1,000 people. The new plant, whose location wasn't identified, will become the company's global source for small bulldozers and mini-hydraulic excavators. It also will export partially assembled mini-excavators to Europe to improve delivery times for European customers. 

 "The markets for smaller track-type tractors and mini-excavators have evolved significantly in the past 30 years, with the majority of customers now located in North America and Europe," said Mary Bell, vice president for Caterpillar's Building Construction Products division. "Producing these machines at a North American location will put us in the best possible position to serve our customers in the building construction industry." 

Caterpillar also is moving assembly of its larger excavators from Akashi, Japan, to a new plant in Victoria, Texas, to free up production capacity for Asian markets where sales of Caterpillar equipment have been surging in recent years. The new Texas plant is expected to be completed by the middle of 2012.

Caterpillar's announcement of a new plant without naming a location will likely set off an intense competition between U.S. states hungry for manufacturing jobs. States interested in hosting plant can be expected to offer the company incentive-laden aid packages with tax breaks and government grants for training new employees.

Nearly all of Caterpillar's investments in new U.S. plants in recent years have been in the South, particularly Texas and North Carolina, where the company's Building Construction Products division is based. Caterpillar already builds compact construction machinery in Clayton and Sanford, N.C."

HT: Mike W.

Interesting Fact of the Day: More Than Half of Walmart Sales Come from Its Groceries Business

We typically think of Walmart as a retail giant, so I was surprised to learn in today's WSJ that for the last several years more than 50% of Walmart sales have come from its grocery business. 

The article "Wal-Mart Sets Prices Sizzling For Choice Beef" discussed how "The massive buying power of Wal-Mart is driving the wholesale price of choice beef to a nearly eight-year high as the retailer stocks its refrigerator cases for the first time with higher-quality cuts."

Because Wal-Mart is purchasing domestic beef, "The interest by Wal-Mart in higher quality meat is being welcomed by the cattlemen who raise choice animals. They haven't always been rewarded for the higher feed costs and better animal genetics it takes to produce choice beef."

And how are Wal-Mart's purchases of choice beef benefiting American cattle producers' bottom lines?

"The shift by Wal-Mart has translated into a noticeable jump in profits for ranches such as Mushrush Ranches, in Strong City, Kan. Ninety percent of the cattle it produces achieve the grade of choice."

We also frequently think of Wal-Mart purchasing most its retail inventory from China and Mexico, but that's likely changing as the company has increasingly shifted towards selling food, and now sells more groceries than electronics products, clothing and toys.  It's probably the case that the shift towards groceries means that Wal-Mart now buys more of its products (e.g. milk, eggs, meat, cheese, vegetables, fruits, etc.) from American producers today than in the past when electronics, clothing, footwear, toys, etc. were the majority of its sales.  If that's the case, there are probably thousands of American farmers like the Kansas cattle producers who have higher profits today because of Wal-Mart's shift to being America's largest grocer.     

Pipeline Decision Signals U.S. Is Not Open for Business and Obama's Not Serious About Jobs

Some commentary on postponing the Keystone XL pipeline decision until after the 2012 election:

1. "If Keystone XL dies, Americans will wake up the next morning and continue to import 10 million barrels of oil from repressive nations, without the benefit of thousands of jobs and long-term energy security."  

~CEO Russ Girling of TransCanada Corporation, the company that applied for the permit to build the pipeline.

2.  "So much for the U.S. being the bastion of free enterprise and respecting due process.

With the State Department announcing Thursday it wants to explore alternative routing for TransCanada's Keystone XL pipeline, after the project has been subject to 36 months of review - dutifully following a prescribed process that resulted in thousands of pages of documentation - the U.S. has signalled to the world it is not open for business.

Businesses need certainty and transparency to make investment decisions; that has been destroyed with one news release."

~Deborah Yedlin, Calgary Herald

3. "President Obama used to be fond of "shovel-ready projects." He's also demanding that Congress pass his jobs bill immediately because 9% unemployment is a crisis, and, by the way, he's for making the U.S. less reliant on energy from tyrants. So how about putting 20,000 Americans to work on a North American energy project that's as shovel-ready as they come? Sorry, Mr. Obama is voting present."

 ~WSJ editorial 

Obamacare Destroys 1,000 Jobs at Stryker Corp.

What is the medical device tax?

The $20 billion tax was included in the Affordable Care Act that was signed into law in 2010. The amount is based on a 2.3% excise tax that will be levied on the total revenues of a company, regardless of whether a company generates a profit, starting in 2013. Many companies will owe more in taxes than they generate from their operations. The result will be devastating to innovation, patient care and job creation.


Nov. 10 (Reuters) - "Medical device maker Stryker Corp (NYSE: SYK) said it will cut 5 percent, or about 1,000 jobs to largely offset costs related to the scheduled implementation of the new Medical Device Excise Tax in 2013.

"While it is still uncertain whether the device tax will exist in its current form come 2013, we believe that companies across the space will make moves to mitigate the P&L impact of the new excise tax," Susquehanna International Group analyst David Turkaly wrote in a note.

The maker of hip and knee replacements and surgical products, which expects to save about $100 million from the restructuring, said it will record $85-$95 million of the entire $150-$175 million charge in the current quarter. Stryker expects to complete the restructuring activity by 2012-end."

MP: Should it be any surprise to the Obama administration that we've got a sub-par recovery with weak job creation, when there are massive job-killing regulatory reforms pending in the  form of Obamacare and Dodd-Frank, along with uncertainty about future environmental regulations and future taxes, and anti-job decisions like the delay of the Keystone XL pipeline?

HT: Buddy Pacifico

Gene Marks on MSNBC: Three Must-Read Blogs

On this segment of MSNBC's "Your Business," New York Times' small business columnist and blogger Gene Marks recommends three must-read blogs for small business owners to get up-to-date economic information: 1) Washington Post columnist Ezra Klein's Wonkblog, 2) Calculated Risk and 3) Carpe Diem.     

How Smart Are You?

Take a 30-question "IQ test" here and find out how you compare to others who have taken the test. You have about 8 seconds to answer each question.

Occupiers Are Blaming the Wrong People

Margaret Wente writing in Canada's Globe and Mail:

"It’s not the greedy Wall Street bankers who destroyed [the Occupiers'] hopes. It’s the virtueocracy itself. It’s the people who constructed a benefit-heavy entitlement system whose costs can no longer be sustained. It’s the politicians and union leaders who made reckless pension promises that are now bankrupting cities and states. It’s the socially progressive policy-makers in the U.S. who declared that everyone, even those with no visible means of support, should be able to own a home with no money down, courtesy of their government. In Canada, it’s the social progressives who assure us we can keep on consuming all the health care we want, even as the costs squeeze out other public goods.  

The Occupiers are right when they say our system of wealth redistribution is broken. But they’re wrong about what broke it. The richest 1 per cent are not exactly starving out the working poor. (In the U.S., half all income sent to Washington is redistributed to the elderly, sick and disabled, or to those who serve them, and nearly half the country lives in a household that’s getting some sort of government benefit.) The problem is, our system redistributes the wealth from young to old, and from middle-class workers in the private sector to inefficient and expensive unions in the public sector.  

Among the biggest beneficiaries of this redistribution is the higher-education industry. In Canada, we subsidize it directly. In the U.S., it’s subsidized by a vast system of student loans, which have allowed colleges to jack up tuition to sky-high levels. U.S. student debt has hit the trillion-dollar mark. Both systems crank out too many sociologists and too few mechanical engineers. These days, even law-school graduates are having trouble finding work. That’s because the supply has increased far faster than the demand."

The U.S. Already Has a Safe Network of Pipelines That Are An Integral Part of Our Energy System

The map above (click to enlarge) shows the existing, extensive network of energy pipelines in the U.S. with the following code: green for oil, red for gas, and blue for products such as gasoline, propane and ethylene.
In a temporary victory for environmentalists, the Obama administration has delayed its decision on whether to approve the controversial Keystone XL oil pipeline until after the 2012 election, which further delays the creation of 20,000 jobs for this "shovel-ready" project.  Environmentalists claim that the Keystone XL pipeline's route across the Midwest "would endanger sensitive lands and drinking water supplies."

With all of the environmentalism NIMBYism/alarmism about the proposed Keystone XL oil pipeline, it might be a good time to point out that:  a) the United States already has a huge network of existing pipelines for oil, natural gas and gasoline illustrated in the map above, b) pipelines have been used successfully and safely in the U.S. for more than 100 years, and c) pipelines are an integral part of our domestic energy system.   In other words, we live safely with energy pipelines every day and the Keystone XL pipeline would simply become one new part of an existing and extensive pipeline network that makes a significant contribution to America's dependable and affordable energy.  

HT:  Dwight Oglesby

Thursday, November 10, 2011

Cost of Thanksgiving Dinner Increases 13%, But Remains a Bargain at Less than $5 Per Person

WASHINGTON, D.C., November 10, 2011 – "The retail cost of menu items for a classic Thanksgiving dinner including turkey, stuffing, cranberries, pumpkin pie and all the basic trimmings increased about 13 percent this year, according to the American Farm Bureau Federation (AFBF). AFBF’s 26th annual informal price survey of classic items found on the Thanksgiving Day dinner table indicates the average cost of this year’s feast for 10 is $49.20, a $5.73 price increase from last year’s average of $43.47.

“The cost of this year’s meal remains a bargain, at just under $5 per person,” said AFBF President Bob Stallman, a rice and cattle producer from Texas. “The quality and variety of food produced for our dinner tables on America’s diverse farms and ranches sets us apart from our contemporaries around the world.  It is an honor for our farm and ranch families to produce the food from our nation’s land for family Thanksgiving celebrations.”

The AFBF survey shopping list includes turkey, bread stuffing, sweet potatoes, rolls with butter, peas, cranberries, a relish tray of carrots and celery, pumpkin pie with whipped cream, and beverages of coffee and milk, all in quantities sufficient to serve a family of 10. There is also plenty for leftovers.

The big ticket item – a 16-pound turkey – came in at $21.57 this year. That was roughly $1.35 per pound, an increase of about 25 cents per pound, or a total of $3.91 per whole turkey, compared to 2010.  The whole bird was the biggest contributor to the final total, showing the largest price increase compared to last year. “Turkey prices are higher this year primarily due to strong consumer demand both here in the U.S. and globally,” said John Anderson, an AFBF senior economist."

MP: The 13% increase in the cost of Thanksgiving dinner this year is the largest annual nominal increase since a 16.8% increase in 1990, and the 10% increase in the inflation-adjusted cost is the largest real increase since a 10.8% increase in 1990.  However, about half of this year's 13% increase is because turkey prices increased by 22% over last year; without turkey, the increase in the cost of the other ingredients was only about 7%. 

In 2011 dollars, the $49.20 cost this year for a dinner for ten was the highest since 1990, when the inflation-adjusted cost was $49.53.  Compared to the highest inflation-adjusted cost in the AFBF's data series of $58.78 in 1986, this year's Thanksgiving dinner for ten is 16.3% lower than 25 years ago.

Update: The bottom chart above shows the "time cost" of a Thanksgiving dinner measured in the number of hours of work at the average hourly wage that would generate enough income to purchase the turkey dinner for ten at the retail price.  This year it will require about 2.5 hours of work at $19.53 per hour to purchase the dinner for $49.20, and that "time cost" has been relatively stable for the last twenty years, and 22% below the "time cost" of  3.22 hours in 1986.  

Bottom Line: The fact that the average American family can celebrate Thanksgiving with a turkey dinner feast for ten people at a "time cost" of only 2.5 hours of work for one person means that we really have a lot to be thankful for on Thanksgiving: an abundance of cheap, affordable food.  Exhibit A: In 1929, the average American family spent 22.7% of their disposable income on food, and today's families spend half that amount: only 11.4% (data here).

Bon appetit!

HT: Bob Wright

The Public-Union Albatross

In yesterday's WSJ, Philip K. Howard writes that public-union pension abuses are so common that they're taken for granted.  Some examples:

1.  "Spiking" union pensions with excess overtime in the last year of employment.
2. Until recently, over 90% of Long Island Rail Road (LIRR) workers retired with a disability—even those who worked desk jobs—adding about $36,000 to their annual pensions. The cost to New York taxpayers over the past decade was $300 million.  As one investigator put it, fraud of this kind "became a culture of sorts among the LIRR workers, who took to gathering in doctor's waiting rooms bragging to each [other] about their disabilities while simultaneously talking about their golf game." How could almost every employee think fraud was the right thing to do? 

3. That kind of "disability abuse" is not just happening in New York - in California, 82% of senior state troopers are "disabled" in their last year before retirement. 

Howard's solution?  "America must bulldoze the current system and start over. Only then can we balance budgets and restore competence, dignity and purpose to public service."

The Quiz Daniel Kahneman Wants You to Fail

"In the December 2011 issue of Vanity Fair, Michael Lewis profiles Nobel Prize–winning psychologist Daniel Kahneman, who pioneered research into “heuristics,” or the shortcuts humans use when making decisions. At this link, take a 5-question quiz to see how your own mind works."

Typical Example of Media Mis-Reporting Trade Data

WASHINGTON POST — "The U.S. trade deficit fell in September to the lowest point this year as foreign sales of American-made autos, airplanes and heavy machinery pushed exports to an all-time high. The deficit narrowed 4 percent to $43.1 billion, the third straight decline and the smallest imbalance since last December, the Commerce Department reported Thursday.

Through September, the deficit is running at an annual rate of $558.2 billion, up 11.6 percent from the imbalance for all of last year of $500 billion. A higher deficit acts as a drag on economic growth because it means fewer jobs for American workers."  

MP: The story from the Washington Post above (emphasis added) is a typical example of how the media frequently mis-reports international trade data, for the following reasons:

1. Once we account for all international transactions including:  a) purchases of goods and services, b) investment income payments and receipts, and c) purchases of financial assets, there is an overall balance of U.S. international transactions, and the "balance of payments" account equals zero.  That is, the only way the media can report a trade "imbalance" is to completely ignore investment income, financial transactions and capital flows.  

2. The assertion that fictitious "trade imbalances," or "trade deficits" for only goods and services, are associated with "fewer jobs for Americans" is not supported by the empirical evidence.  According to research at the Cato Institute by Dan Griswold:

"Trade deficits are routinely blamed for job losses, yet civilian employment grew a healthy 1.4 percent annually during periods of rising trade deficits while job growth was virtually zero during those periods when the deficit was declining. Ditto for the unemployment rate. The jobless rate ticked down 0.4 percentage points per year on average when the trade deficit was on an upward trend, and jumped a painful 1.0 point per year when the trade deficit was shrinking. In four of the five periods in which imports did outpace exports, the unemployment rate fell, and in every period in which imports grew more slowly than exports, or fell more rapidly, the unemployment rate rose."

Markets in Everything: $19 Unlimited Phone Plan

YAHOO NEWS -- "When it comes to mobile carriers, consumers may have four major choices, but they're all starting to look the same — and that isn't a good thing. But a new provider, Republic Wireless, headquartered in North Carolina, is shaking things up with a rather unbelievable $19 a month no-contract plan. That's $19 not just for unlimited calling and texting, but mobile data too."

MP: Gotta love the cutthroat competition, often the best form of "regulation" and market discipline, and the consumers' best friend.