Monday, May 14, 2012

Shale Boom Sets Off a Midwest Sand Boom

From the WSJ article "Midwest Sees a Sand Rush" (with video above):

"Sand is in high demand among U.S. oil and natural-gas producers, setting off a sand rush in Wisconsin, Minnesota and other Midwestern states. Sand mined in the Midwest is used in places such as North Dakota and Pennsylvania to tap oil and gas reserves. 

Sand mined in the Midwest is used in places such as North Dakota and Pennsylvania to tap oil and gas reserves. The U.S. producers' demand for sand reached 28.7 million tons in 2011, up from six million tons in 2007 (see chart above). 

The surging demand is making sand the Midwest slice of a national energy boom. Oil and gas producers in recent years have greatly boosted the use of horizontal drilling and hydraulic fracturing to tap reserves once out of reach. Sand, injected deep underground to prop open fractures in shale formations and allow oil and gas to flow out, is important in "fracking."

Wisconsin and Minnesota have abundant supplies of the type of sand that oil and gas producers need. Geological conditions were right hundreds of millions of years ago to form sand hard enough to withstand the pressure thousands of feet underground, while also having round grains that leave space so the oil and gas can escape. Fracking sand can fetch around $50 a ton, depending on quality."

MP: Drill, drill, drill = jobs, jobs, jobs in many supporting industries like fracking sand. 

HT: Jon Murphy

N. Dakota Oil Sets Another Record in March; Will Probably Surpass Alaska This Summer for No. 2 Spot

North Dakota Hockey Stick: Oil production has increased almost 6 times in the last 6 years.
The "Economic Miracle State" of North Dakota pumped another record amount of oil during the month of March at a rate of 575,490 barrels per day, which was an increase of 3% compared to February, and 60% above the output level from a year ago (see top chart above). The new record-setting production in recent months has moved the Peace Garden state ahead of California to become the nation’s No. 3 oil-producing state, behind only Texas and Alaska. If North Dakota continues to increase monthly output at the current rate, it will pass Alaska this year to become America's No. 2 oil-producing state, possibly as early as June or July. 

As a result of the ongoing oil boom in the Bakken area, North Dakota continues to lead the nation with the lowest state unemployment rate at four-year low of 3.0% in March, and more than five percentage points below the national average of 8.1%. There were 10 North Dakota counties with jobless rates at or below 2.5% for March, and Williams County, which is at the center of the Bakken oil boom, boasts the lowest county jobless rate in the country at just 0.9%.  The exponential growth in North Dakota oil production has fueled exponential growth in the state's "Natural Resources and Mining" employment, which has tripled in less than three years, and reached 21,000 in March.  

Bottom Line: The ongoing record-setting oil production in North Dakota continues to make it the most economically successful state in the country, with record levels of employment and income growth, a labor shortage, increasing tax revenues, the lowest foreclosure rate in the country, a strong real estate market, and jobless rates in many counties of the Bakken region below 2.5%.

Smart Phones and Tablets Might Be Spreading Faster Than Any Technologies in Human History

Click to enlarge.

From an article in MIT's Technology Review "Are Smart Phones Spreading Faster than Any Technology in Human History?":

"Presented in the top graphic above is the U.S. market penetration achieved by nine technologies since 1876, the year Alexander Graham Bell patented the telephone. Penetration rates have been organized to show three phases of a technology's spread: traction, maturity, and saturation. 

Those technologies with "last mile" problems—bringing electricity cables or telephone wire to individual homes—appear to spread more slowly. It took almost a century for landline phones to reach saturation, or the point at which new demand falls off. Mobile phones, by contrast, achieved saturation in just 20 years. Smart phones are on track to halve that rate yet again, and tablets could move still faster, setting consecutive records for speed to market saturation in the United States.

It is difficult to conclude categorically from the available data that smart phones are spreading faster than any previous technology. Statistics are not always available globally, and not every technology is easily tracked. Also, because smart phones have not yet reached market saturation, as electricity and television have, the results are still coming in.

Smart phones, after a relatively fast start, have also outpaced nearly any comparable technology in the leap to mainstream use. It took landline telephones about 45 years to get from 5 percent to 50 percent penetration among U.S. households, and mobile phones took around seven years to reach a similar proportion of consumers. Smart phones have gone from 5 percent to 40 percent in about four years, despite a recession. In the comparison shown, the only technology that moved as quickly to the U.S. mainstream was television between 1950 and 1953."

MP: How does this fit in with "The Great Stagnation" hypothesis? 

April Real Estate Blowout?

In what might be looked upon as a major turning point for the U.S. real estate market, April is shaping up to be one of the best months in years for home sales.  Based on news reports for April sales that have been released in the last few week, there are now at least 20 21 22 23 24 25 26 28 metro markets that have reported double-digit gains in either the number of homes sold, or median home prices, or in some cases, both.  See the list here.

The full national report for existing-home sales in April will be released next Wednesday by the National Association of Realtors, and the early sales data that covers most parts of the country predicts a very positive April sales report for both homes sold and median home prices. Until then, I'll continue to follow and report on metro area home sales, as those reports become available.    

Job Market Improves for the College Class of 2012

"The class of 2012 is leaving college with something that many graduates since the start of the Great Recession have lacked: jobs. To the relief of graduating seniors — and their anxious parents — the outlook is brighter than it has been in four years. Campus job fairs were packed this spring and more companies are hiring. Students aren't just finding good opportunities, some are weighing multiple offers."

2. Job news is good for many 2012 college grads: Campus recruiting is up, and more new college graduates will leave with diploma and job offer in hand.

3. National Association of Colleges and Employers: More Jobs, More Offers for Class of 2012.

4. Job prospects improve for college graduates: More positions posted, hired, say schools' career counselors.

5. Job market offers hope for college graduates.

6. Graduates have reason for hope in job market

7. Job prospects for college grads are improving

MP: Note that the unemployment rate for college graduates fell below 4% in April for the first time since 2008.  At 3.7%, the jobless rate for college grads is at a 40-month low. 

Chameleon Nation and Victimization: We Might Soon Run Out of Concession-Granting Oppressors

From the editorial "Chameleon Nation" by historian Victor Davis Hanson (also featured in today's WSJ's Notable and Quotable):

"Identities are sometimes put on and taken off, like clothes, as self-interest dictates -- given that so often they are no longer ascertainable from appearance. If that sounds crass or unfair, ask Elizabeth Warren, who dropped her Native American claims as soon as she at last received tenure and found her 1/32 con suddenly superfluous -- to the apparent unconcern of her similarly cynical but now mum employer, Harvard.

Nor is race sure proof of either poverty or past oppression. Asian Americans, for example, have a median family income more than $10,000 a year higher than white Americans. And if pigmentation is proof of ongoing prejudice, why don't darker Punjabis and Arabs -- who do not qualify for special racial preferences -- deserve consideration over those lighter-skinned minorities who do?

How long after a Mexican national crossed the border would he become a Chicano eligible for affirmative action? Do Attorney General Eric Holder's children qualify? Do 1/32 (one great-great-great grandparent) or 1/16 (one great-great grandparent) Cherokees receive preferential treatment? And if so, who administers this odious Jim Crow one-drop DNA test, and how?

In truth, after a half-century in our self-created racial labyrinth, no one quite knows who qualifies as an oppressed victim or why -- only that the more one can change a name or emphasize lineage, the better the careerist edge. The real worry is that soon we will have so many recompense-seeking victims that we will run out of concession-granting oppressors.

How odd (or rather, how predictable) that something that started out as a supposedly noble lie -- that to atone for past bias we must be judged by the color of our skin rather than the content of our character -- has become utterly ignoble and beneath us."

Markets in Everything: Degrees in "Social Justice"

Who knew? You can now get a college degree (bachelor's or master's) in "Social Justice," here are some examples:

1. Social Justice & Human Rights Degree (M.A.) at Arizona State University

2. Bachelor's degree in Social Justice at Hamline University

3. Master of Arts in Social Justice and Community Development (M.A.) at Loyola University.

4. Social Justice Education Concentration at University of Massachusetts Amherst.  

HT: Mike K in the comments section of this recent CD post about Jonah Goldberg's new book. 

Mothers Against America's War on Drugs

Moms United to End the War on Drugs gathered on the steps of the Los Angeles Superior Courthouse to deliver a message yesterday on Mother's Day: No More Drug War War on Peaceful Americans Who Voluntarily Choose To Use Intoxicants Not Currently Approved of by the Government, Who Will Put Users in Cages if Caught. was on the scene to talk with mothers who'd had their families torn apart by U.S. drug policy, watch the video above.

Sunday, May 13, 2012

Chrysler Will Skip Summer Shutdowns at Four Plants to Keep Up With Strong Demand

From a recent Bloomberg report:

"Stronger demand for automobiles bolstered U.S. manufacturing, which grew in April at the fastest pace in almost a year, according to Institute for Supply Management. The group’s factory index climbed to 54.8 last month, the best reading since June.

Chrysler Group LLC, the biggest gainer of U.S. market share through April, said four plants will skip normally scheduled two-week midyear shutdowns to meet increased demand. Factories in Belvidere, Illinois; Toluca, Mexico; and Detroit, and a parts factory in Toledo, Ohio, will stay open, the company said May 2 in a statement on its website. Two more plants will shut for one week instead of two, according to Auburn Hills, Michigan-based Chrysler.

“We need to build a few more vehicles, so they’re staying open,” said Jodi Tinson, a company spokeswoman."

Commercial Loan Volume Back to 2007 Levels

The chart above displays the volume of commercial and industrial loans at all U.S. commercial banks on a weekly basis back to 2000, through the first week of May, and shows that bank lending to small and medium size businesses has been steadily increasing since the fall of 2010.  Business loan volume has been above $1.4 trillion in every week since early April, which is back to the pre-recession commercial loan levels of November 2009 (see chart).  A year ago, commercial lending to businesses was growing at an annual rate of only about 3%, but since then business loan growth accelerated to double-digit levels starting last November, and now business loan growth has been about 13% since early February.

Commercial banks have been increasingly more willing to extend credit to America's small- and medium-sized companies over the last 18 months, as confidence about current and future economic conditions has been improving, leading to greater willingness by banks to take on credit risk.  It's an important economic milestone that bank business loan volume has returned to its pre-recession 2007 levels.    

Jonah Goldberg on the Asininity of Social Justice

Here's an excerpt from Jonah Goldberg's cover story in the current issue of National Review, "The Tyranny of Clichés," based on his new book with the same title (emphasis added):

"In 1840, the theologian Luigi Taparelli d’Azeglio came up with the concept of social justice as a way to defend civil society from the ever-increasing intrusions of the state. Social justice, according to Taparelli, was the legitimate realm of justice beyond formal legal justice. Since then, the term has become completely inverted: “Social justice” has become an abracadabra phrase granting the state access to every nook and cranny of life. 

The only way for social justice to make sense is if you operate from the assumption that the invisible hand of the market should be amputated and replaced with the very visible hand of the state. In other words, each explicit demand for social justice carries with it the implicit but necessary requirement that the state do the fixing. And a society dedicated to the pursuit of perfect social justice must gradually move more and more decisions under the command of the state, until it is the sole moral agent.  

Social justice is a Trojan horse concealing a much more radical agenda. “Social justice” is a profoundly ideological term, masquerading as a generic term for goodness. In short, it is a tyrannical cliché, a seemingly benign truism that, like a pill with a pleasant protective coating, conceals a mind-altering substance within."

Gross Hypocrisy: Trump Clothing Made in China, II

Donald Trump tells CNN in the video above: "When it comes to manufacturing, China is making all of these products. And they could be made in North Carolina, they could be made in Alabama, they could be made in lots of our places. And right now they’re not. Personally, I’d tax China very, very heavily."

MP: First, a clarification for The Donald: "Personally, I’d tax China American consumers and businesses who voluntarily decide to purchase products made in China for their price and/or value very, very heavily."

Then there's Exhibit A below of The Donald's gross hypocrisy, a "Made in China" label on one of his shirts being sold in a Manhattan Macy's about a year ago, via Salon, featured on CD about a year ago

And now here's Exhibit B below, a "Made in China" label on a Trump tie being sold at a Macy's in Fairfax, via Don Boudreaux at Cafe Hayek. 

The obvious questions for The Donald are: "Couldn't his clothing be made in North Carolina or Alabama?" and "Shouldn't his 'Made in China' clothing be heavily taxed with import tariffs?" 

Saturday, May 12, 2012

Chart of the Day: Peak What?

World oil production surpassed 75 million barrels per day for the first time ever in December 2011, at 75.45 million barrels, and went even higher in January of this year at 75.58 million barrels, setting a new monthly production record, according to data recently released by the EIA.  The red line in the graph shows the upward linear trend in world oil production from 1973 onward, with daily production increasing by almost 600,000 barrels per day on average every year since 1973.

Thanks to Walter Olson for the inspiration for the post title. 

200 Year Supply of Oil in Green River Formation

The Green River Formation, the world's largest oil shale deposit, is located in a largely vacant region of mostly federal land on the western edge of the Rocky Mountains that includes portions of Wyoming, Utah, and Colorado (see map above).

Here's an excerpt from testimony about the Green River Formation that was provided on Thursday by Anu K. Mittal, Government Accountability Office (GAO) Director of Natural Resources and Environment, to the House Subcommittee on Energy and Environment, Committee on Science, Space, and Technology titled "Unconventional Oil and Gas Production: Opportunities and Challenges of Oil Shale Development":

"The Green River Formation—an assemblage of over 1,000 feet of sedimentary rocks that lie beneath parts of Colorado, Utah, and Wyoming—contains the world’s largest deposits of oil shale. USGS estimates that the Green River Formation contains about 3 trillion barrels of oil, and about half of this may be recoverable, depending on available technology and economic conditions. The Rand Corporation, a nonprofit research organization, estimates that 30 to 60 percent of the oil shale in the Green River Formation can be recovered. At the midpoint of this estimate, almost half of the 3 trillion barrels of oil would be recoverable. This is an amount about equal to the entire world’s proven oil reserves."

MP: Surprisingly, this testimony got almost no press coverage, here's one exception from CNS News.  Shouldn't it be newsworthy that the U.S. has 1.5 trillion barrels of recoverable oil in  the Green River Formation, an amount even greater than this estimate of 1.392 trillion barrels of proven oil reserves in the entire world?  The GAO did issue a study in October 2010 that may have already identified the vast resources in the Green River area, so maybe this is old news and not worth reporting.    

But with current U.S. daily oil consumption running at about 19.5 million barrels, the staggering amount of Green River reserves would by itself supply domestic oil consumption for more than 200 years! The testimony also mentioned that industry experts estimate future development of Green River to be 15-20 years away, but it's not clear if that's due to federal regulatory issues or limitations of current drilling technology. 

Even if development is 15-20 years away, the vast untapped energy resources of Green River, the largest oil shale deposit in the world, provide additional support for the idea that "peak oil" is "peak idiocy" (Mike Munger explains here).    

Friday, May 11, 2012

North Dakota's Amazing Economic Success; It's Not Just About Oil, A Pro-Business Climate Gets Credit. Let's Call it the "Dakota Model" of Job Creation

The "Dakota Model"of Economic Development and Job Creation
It's been widely reported here and elsewhere that North Dakota's economy is booming, thanks largely to the energy-related prosperity in the western part of the state.  The Peace Garden State's jobless rate is the lowest in the country at 3% for March, more than five percentage points below the national average of 8.1%.  Per-capita personal income in North Dakota increased more than 78% since 2000, more than double the 37.4% increase in per-capita income nationally.

The chart above displays monthly payroll employment levels for North Dakota and the U.S. back to January 2000 with both series expressed as indexes equal to 100 in January 2000.  Overall employment in North Dakota has been growing steadily over the last decade, with a sharp acceleration over the last four years.  Even the Great Recession that crippled the national labor market, barely slowed job creation in North Dakota.  While the national economy is still 3.6% and five million jobs below December 2007 levels, North Dakota's payrolls are 15% above pre-recession levels (see chart).

A recent news report highlights the fact that North Dakota's economic success is not only due to oil prosperity, but also because of its pro-business climate and amazingly well-diversified economy, with many booming sectors including manufacturing, tourism, advanced manufacturing, information technology and agriculture. According to North Dakota Commerce Commissioner Alan Anderson, “Oil is just one piece of our economic success and our economy is much bigger and more diverse than ever before.” In fact, the oil industry is responsible for only 25% of the state's revenue collections. Mr. Anderson highlights some of North Dakota's diversified economic success:

1. The state's technology sector has gained national recognition and its information technology job growth has been triple that of the nation. Microsoft and Amazon have both recently expanded in the state. Amazon added a 30,000-square-foot facility that will expand its customer service operations in Grand Forks and create 200 full-time jobs. Microsoft’s Fargo campus is one of the larger Microsoft locations worldwide, and its three buildings house over 1,500 employees, vendors and contingent staff.

2. Manufacturing continues to grow in North Dakota. One example is the recent expansion announcement by Caterpillar in West Fargo. Construction has started on a $50 million project that will create about 250 new jobs during the next three years, nearly doubling the plant’s current workforce. Caterpillar officials told us that North Dakota’s pro-business climate was a major factor in its decision to expand in West Fargo. Phoenix International, a company that manufactures electronics for John Deere, recently broke ground on a $22 million expansion project that will include 90,000 additional square feet in Fargo for an expanded work force. Other industrial expansions include WCCO Belting in Wahpeton, Harris Manufacturing in Oakes, and at the Monsanto and Cargill facilities in the Fargo area. Cargill recently started a $50-million expansion project and Monsanto has completed a $17.5 million expansion that has created 20 new jobs.

3. Tourism is another area that continues to drive North Dakota’s economy as the third-largest contributor to gross state product. The tourism industry growth is visible by looking at the number of new hotels constructed across the state. In the past two years, 21 new hotels have opened, adding 1,474 sleeping rooms in 11 communities. Another 24 hotels are under development and are expected to add another 1,800 rooms by later this year.

MP: It's interesting to know that North Dakota's economic success goes beyond its energy sector. The state's pro-business climate gets some of the credit for the impressive job growth over the last five years. Whatever North Dakota is doing, it's working, and the state should be a nationwide model for economic development and job growth - call it the "Dakota Model" (HT: Eagle Eye, see comments). 

Oil Prices Have Fallen $10 per Barrel Since May 1, Proving That Prices Are "Stubbornly Flexible"

From Delta Airlines CEO Richard Anderson writing in Delta's Sky Magazine (May issue):

"Why do gasoline prices remain stubbornly high? The reason is that the commodity futures markets have become the new stock market for the 21st century. No matter what we do as energy consumers and producers in the United States, there is little direct effect on what we pay for barrels of crude oil.

Passive futures investments on the part of large commodities traders, commodity funds and passive investors have led the oil futures market to become disconnected from the true fundamentals of the market. The increase in the oil futures markets is largely due to speculation, which has undermined the historical relationship between supply and demand on one hand, and oil prices on the other.

Record high fuel prices increase our costs, constrict our flying and ultimately increase the fare you pay. To dampen the speculative inflation of oil prices, we’d like to see rules in place that would limit trading to the companies that actually intend to use the oil they trade. It is clear that market forces are not at work here."

MP: Where to start?  

1. Obviously gas and oil prices don't "remain stubbornly high," they remain "stubbornly flexible" or "stubbornly volatile" maybe, but "stubbornly high"?  I don't think so.  Gas prices at the pump change almost daily, reflecting the reality that they are market-determined, and have been falling now almost daily for the last month. "Stubbornly high" would mean retail gas prices would still be at mid-April peak levels of $3.90 per gallon, but instead they've fallen steadily to the current average price of $3.73. 

2. Likewise, oil prices are now at year-to-date lows and crude is selling below $96 per barrel for the first time since last December (see chart above).  In just the last 8 trading days, oil has fallen more than $10 per barrel from $106.17 on May 1 to $95.83 in late afternoon trading today.  How can oil prices be "stubbornly high" and yet fall by almost 10% in less than two weeks?   

3. And now that oil prices have plummeted 10% in the first two weeks of May, are those price declines due to speculative trading? Or have market fundamentals suddenly re-appeared after disappearing for some time?

Bottom Line: Delta's CEO should know better, and he can't have it both ways. If speculators get the blame for rising prices, they should also get the credit for falling prices.  It would be inconsistent to claim that rising oil prices are "disconnected from true market fundamentals" due to speculators, but that falling prices result from market forces?  Do speculators only appear occasionally and create havoc by forcing prices higher, but then disappear when prices are falling? 

The logic of the "speculators cause high prices" crowd is so inconsistent and flawed that I think they would have a more convincing case if they instead took the "speculators cause price volatility" position, which is also a refutable and flawed position, but at least it's plausibly more consistent and convincing. And at least that way the speculators get the credit/blame for falling prices, not just rising prices.

Cartoon of the Day

Producer Price Inflation Eases in April to 1.9%

The BLS reported today on producer prices for April, here are some highlights:

1. Prices for finished goods increased annually by 1.9% through April, the seventh straight month of slowing year-over-year inflation rates following a 7% increase for the 12 months through September 2011.  It was the smallest annual increase in producer price inflation for finished goods since October 2009 (see brown line in chart above). 

2. Intermediate goods increased by only 1.1% on an annual basis through April, the smallest yearly increase since June 2010 (see red line in chart).

3. Prices for crude goods fell by 7.3% from April last year, led by sharp declines in food and energy prices (see blue line).

MP: Overall, the declining inflation rates for producer prices in April should ease some of the fears of inflationary pressures at the consumer level. Falling raw material costs for producers means that there won't be any input-cost based incentives to raise prices on consumer goods, and we can expect low and stable consumer inflation this year.     

Signs of Nationwide Real Estate Recovery in April? Double-Digit Gains in Sales and/or Prices Have Now Been Reported in 33 Metro or State Markets

Real estate sales reports for the month of April are just starting to be released by local realtor associations, and the reports out today are showing some strong signs of recovery with double-digit gains in unit sales and/or home prices for April in Minneapolis-St. Paul, Nashville, Des Moines, the D.C. area, Baltimore and Reno. 

1. "Twin Cities home prices bounced up in April with the largest jump since before the housing market meltdown. The median sales price leaped 12.4% from last April to $163,000, the largest jump since January 2004, the Minneapolis Area Association of Realtors found in their monthly report, released todayThe number of closed sales was up 7.1 percent in April, to 3,730. Year-to-date, sales are up nearly 15 percent from last year. Pending sales were up strongly compared to last April, 26.4 percent."

2.  "Monthly home sales rose 25 percent in the Nashville area last month compared to a year ago, with the median price of a single-family home up 3.8 percent to $165,120, reflecting a further stabilizing of the market."

3. "Home sales jumped nearly 20% in the Des Moines area in April over a year ago, and climbed 5% over March. Pending home sales were about 23% higher last month over April 2011, and inched 2% higher than March. The average home sale price was $164,847 in April, nearly 6% higher than a year earlier, the report shows.

"This is what recovery looks like in the Des Moines market," said Les Sulgrove, general manager of Re/Max Opportunities in Ankeny."

4.  "D.C. home prices increased by the greatest amount over the past year since 2006, according to a report released Thursday by Real Estate Business Intelligence.  “Pricing in the D.C. metro area continued recent positive trends with a year-over-year median sale price gain of 11.2%, the highest annual gain in more than six years,” the firm reported.  Prices increased in every jurisdiction in the D.C. metro area, with the greatest gains occurring in Arlington, with 27.7% and Falls Church City, with 19.8%."

5. "The Baltimore region saw a double-digit gain in average home sale prices in April, the most in six years — driven by a shrunken supply of cheap foreclosures rather than by homes seeing a rapid resurgence in value.  The average price for a home sold in April was $281,000, a 10 percent increase over the year."

6. "April home sales in the Reno Nevada area saw double-digit gains over the previous year, according to a report released today by the Reno/Sparks Association of Realtors. Sales of existing single-family homes rose 17% from April 2011."


7.  "April home sales in the greater Milwaukee area increased 44.2% with 1,541 houses sold, 472 more than in April 2011, according to the Greater Milwaukee Association of RealtorsWith the boost in April, home sales for the first four months of 2012 were 29.6% higher than in 2011 and 10.1% higher than in 2010." 

8. "Home sales across the Birmingham area rose 21 percent in April, a positive sign for the market as it heads into the typically busy summer selling season.  The Birmingham Association of Realtors said today that 973 homes were sold last month, compared to 805 in April 2011. The average price of $170,945 represented a 2 percent uptick from a year ago."

9. The median home price for the Phoenix area increased in April to $137,611, up 25% from $110,000 last year.

10. "A rebound in high-end home sales helped propel April home sales in Champaign County IL — and prospects look good for a strong May. April sales were up 19 percent from a year ago in terms of the number of homes sold. They were up 38 percent in terms of sales volume in dollars.

"The high end has finally awoken after a very long hibernation," said Matt Difanis, president of the Champaign County Association of Realtors."

11. "Home sales in the Lehigh Valley increased 33.2% over the same time last year with 445 homes sold in April 2012 compared with 334 sold in April 2011."

12. "Fewer listings and a deep well of buyers helped spark an unusually high number of multiple offers during April, bolstering home prices and the notion that the housing market is on the mend. Throughout the Chicago metro area, the number of closed sales last month rose 7.1 percent compared with last year, while the median price of those deals jumped 12.4 percent to $163,000 -- marking the second consecutive month of year-over-year price increases."

13. April home sales in Tucson were 11% above last year, following a 18.6% gain in March.

14.  The 389 Madison-area (Dane County) home sales recorded in April were 22.7% higher than the 317 home sales in April of 2011, representing the second highest total for any April over the last 5 years. 

15.  Central Indiana home sales in April were up 12 percent over April of last year.

16. "For Long Island realtors, the spring market has sprung. There were 16 percent more homes sold in Nassau and Suffolk counties last month than were sold in April 2011. In fact, last month’s numbers represent the fifth straight month of year-over-year sales gains."

17.  "Metro-Denver home sales climbed in April as the spring home-selling season kicked off. Buyers placed 5,681 homes under contract in April, up 7 percent from March and up 20 percent from April 2011."

18. The median price of sold homes in the Detroit metro area soared 18.6% in April to $70,000 from $59,000 a year ago.

19. The North Dallas area is reporting double-digit sales gains in April vs. last year in five different regions, including a 43% gain in North Dallas and 36% in Far North Dallas. 

20. New London County (Connecticut) home prices rise 16%, sales 18% for the February-April period.

21. "Seattle home prices increased 10.4% in April as compared to the same month in 2011, while King County median home prices were up 3% in the same time period.  King County home sales were 15% higher than in April of 2011, and total sales in the city of Seattle were up 8%."

22.  "For the 10th month in a row, home sales in the Kalamazoo area increased year over year in April. Residential sales numbers increased 13.9% over 2011, jumping to 319 from 280 the year before."

23. Wilmington-area home sales rose for the third straight month in April, and were up by 14% over a year ago.

24. April residential sales in the Shoals Area of Alabama experienced an 34.3% increase when compared to April 2011. April represents the sixth consecutive month that Muscle Shoals home sales have improved when compared to the same month from the prior year.

25. Durham County (NC) saw a 13.5% increase in closed home sales in April compared with the same period last year, with 278 homes sold in the month.

26. California home salesand median price both jumped in April, with sales shooting up to their highest level in more than two years, and the median price rising above $300,000 for the first time in 16 months. Sales in April were 10 percent higher than March's pace and 11 percent higher than in April 2011. 

27.  Home sales in the Louisville area improved in April, as the volume of sales and median price of homes rose from the same month a year earlier. According to a report from local realtors, 1,054 homes were sold in April, up 14.44% from 921 sold in April 2011. The median price of homes rose 8.7 percent in April, to $138,000 from $127,000 a year earlier.

28.  Sale prices for homes sold in the Flint metro area (Genesee County) showed a 51.9% jump in April compared to last year.  The median price for non-foreclosure home sales went up 38.9%.

29. Baton Rouge-area homes sales rose 21 percent in April.

30. Orlando median home prices increased in April by 10% compared to a year ago.  

31. April marked the eleventh straight month of growth in Houston home sales. Total sales and sales of single-family units registered increases of nearly 10% each over April of 2011.
The average price of a single-family home rose by 11% year-over-year to $223,000.

32.  Orange County had the fastest April home-selling pace since 2006. Overall, house shoppers bought 2,920 residences last month, up 17.5% in a year.

33.  April home sales in Tuscaloosa experienced a 25.2% increase when compared to April 2011. The last time Tuscaloosa's real estate market experienced positive sales growth in April when compared to the previous year was in 2010 and that was primarily due the home buying tax credit. April marks represents the eleventh consecutive month that Tuscaloosa home sales have improved when compared to the same month from the prior year."

Thursday, May 10, 2012

Oil Prices Are Falling, Do Speculators Get Credit?

July 2012 crude oil futures prices.

Crude oil spot prices.

The top chart above displays the daily CME July futures contract prices for light crude oil back to late January, and shows the price increase in February from $98 to $111 per barrel, and the subsequent decrease to below $97 in recent trading, including the 9% decrease just during the month of May, from $106.50 to $96.50 per barrel.  The bottom chart displays the spot price of crude oil over the same period, which follows the exact same pattern as prices for crude oil futures contracts.

Question: Since oil speculators got the blame for rising prices in February, do they now get the credit for falling oil prices in May?  How exactly does the "speculators cause high oil prices"crowd now explain the falling oil prices?  Do speculators somehow contribute to only rising prices, but not to falling prices?  Do speculators only trade when prices are rising, but somehow exit the market suddenly when prices are falling?  To be fair to speculators, it seems like the popular press should be giving them credit now for the falling oil and gas prices.

Markets in Everything: Home Rental REITs

WSJ -- "Investors can buy stakes in malls, apartment towers, timber forests and even cellphone towers through real-estate investment trusts. Now, add to the list: single-family homes transformed into rental properties. 

Beazer Homes USA Inc., one of the nation's top home builders, has formed a REIT that will buy and then rent single-family homes, one of the largest and most talked-about asset classes in the real-estate business. The Atlanta-based company last week announced that it was joining with buyout firm Kohlberg Kravis Roberts & Co. to form the REIT, which eventually plans to go public."

Interesting Fact of the Day: Plastic Surgery

The top three countries in the world for cosmetic plastic surgery procedures: Brazil, China and U.S., but in which order?  Find out here.  Just the fact that Brazil and China are in the top three is evidence that "free market capitalism is the best path to prosperity."  

Mortgage Rates Fall to Record Lows This Week

Mortgage rates fell to fresh lows this week, according to data released today by mortgage-buyer Freddie Mac, with the 30-year rate falling to 3.83% (see chart above) and the 15-year rate dropping to 3.05%.  The 30-year (15-year) rates are the lowest since at least 1971 (1991) when Freddie Mac's records start.  

Total U.S. Trade Sets New Record High in March

Total U.S. international trade (exports + imports) set a new monthly record of $425.3 billion in March (see chart above), as both monthly exports ($186.7 billion) and imports ($238.6 billion) reached record high levels in March, according to today's BEA report.

Other highlights include:

1. Total international trade increased in March 2012 by about 8% compared to March 2011 ($394 billion), and was 53% above the recession-related cyclical low of $277.5 billion in April 2009.  Adjusted for inflation, the increases were 5.2% vs. March 2011 and 42% vs. April 2009.

2. Compared to the previous cyclical highs in July 2008, total trade for the U.S. last month was above that previous peak by 7% in nominal terms and by 2.3% adjusted for inflation (see chart). 

3. Foreign consumers and businesses set a new monthly record by purchasing $187 billion of consumer and industrial products that were "Made in the USA" in March, which was an increase of 7.4% from purchases in March 2011 and 50% above the recession-related cyclical low in 2009. 

4. U.S. consumers and businesses purchased a new record high volume of $238.6 billion worth of consumer products, raw materials and inputs from the rest of the world, which was an increase of 8.4% from last year, and 58% more than the cyclical low in 2009.

Bottom Line: What is already getting the most media attention about today's trade report is the "bad news" that the "trade deficit" widened/rose/jumped in March.  

What won't receive much (any?) media attention is the good news that total U.S. international trade activity (Exports + Imports) set a record high in March and is now well above pre-recession levels in both nominal and real terms.  Foreign consumers and producers purchased a record volume of "Made in the USA" exports in March, and American consumers and producers purchased a record volume of "Made Outside the USA" imports, which is a positive sign of worldwide economic strength and vibrancy. 

As former Cato trade analyst Dan Griswold pointed out last year on his blog:

"Politicians and commentators love to focus on the deficit, as though it were a scorecard of who is winning in global trade, but the real measure is the total volume of trade. As economies expand, so does trade, both imports and exports. Exports help us reach new markets and expand economies of scale, while imports bless consumers with lower prices and more choices, while stoking competition, innovation, and efficiency gains among producers."

Related: See "Made on Earth: How Global Economic Integration Renders Trade Policy Obsolete," by Cato's Dan Ikenson, and also Don Boudreaux's post "Made on Earth."

Wednesday, May 09, 2012

Booming Eagle Ford Shale: 47k "Shale-Ready Jobs" and $25 Billion in Economic Development in 2011

The Eagle Ford Shale in Texas is the "economic opportunity of a lifetime" and will potentially create 117,000 "shale-ready" full-time jobs by 2021.

From the Center for Community and Business Research at University of Texas-San Antonio:

"Development of oil and natural gas in the Eagle Ford Shale contributed $25 billion in total economic output to the region in 2011, according to a study released today by the Center for Community and Business Research.

"The Eagle Ford Shale has proven to be one of the most important economic engines in the state," said Dr. Thomas Tunstall, director of the UTSA Center for Community & Business Research, and the study’s principal investigator.  "In 2011 alone, the play generated over $25 billion in revenue, supported 47,000 full-time jobs in the area, and provided $257 million in local government revenue."

The study also concluded that in 2011 shale development:
  • Paid $3.1 billion in salaries and benefits to workers;
  • Provided more than $12.6 billion in gross regional product;
  • Added more than $358 million in state revenues, including $120.4 million in severance taxes;
  • And spurred a triple-digit sales tax revenue increase in various local counties.
"We view the Eagle Ford activity as an economic opportunity of a lifetime," said Mario Hernandez, president of the San Antonio Economic Development Foundation.  "The key goal is the increase in investment and jobs. And if the communities will partner with the private companies that are creating these jobs, it can be a win-win for everybody."

The increased revenue from the Eagle Ford Shale is rebuilding local communities.  New schools and new hospitals are being built, and new training programs have been launched to maximize hiring from the local workforce.  The study projects the creation of approximately 117,000 full-time jobs by 2021."

Interesting Fact of the Day: NYC Food Trucks

The number of food trucks and carts in NYC?  Find the amazing answer here.

The New Digital Oil Field: How Information Technology is Helping to Boost Oil Production

Mission control: Chevron's new real-time drilling optimization center in Texas.
From MIT's Technology Review: "Big Oil Goes Mining for Big Data: As petroleum production gets trickier, digital innovation becomes more crucial":

"The world isn't running out of oil and natural gas. It is running out of easy oil and gas. And as energy companies drill deeper and hunt in more remote regions and difficult deposits, they're banking on information technology to boost production.

Data, in this case, really is the new oil. "It's pretty sweeping," says Paul Siegele, president of the Energy Technology Company at Chevron. "Information technology is enabling us to get more barrels of each asset."

Oil companies are using distributed sensors, high-speed communications, and data-mining techniques to monitor and fine-tune remote drilling operations. The aim is to use real-time data to make better decisions and predict glitches.

The companies began to employ such technologies more than a decade ago, partly to help its aging workforce multitask remotely. But the technologies have gained speed along with the underlying trends: cheaper computing and communications technology, and a proliferation of data sensors and analytical software."

MP: This is another reason why "peak oil" is "peak idiocy."

HT: Gary Lyle

Chronicle of Higher Education Fires a Blogger

From a Chronicle of Higher Education (paid subscription required) article highlighting the first cohort of students graduating from Northwestern University's doctoral program in black studies, including Ph.D. candidate La TaSha B. Levy:

"Ms. Levy is interested in examining the long tradition of black Republicanism, especially the rightward ideological shift it took in the 1980s after the election of Ronald Reagan. Ms. Levy's dissertation argues that conservatives like Thomas Sowell, Clarence Thomas, John McWhorter, and others have "played one of the most-significant roles in the assault on the civil-rights legacy that benefited them." Ms. Levy says that with patronage from what she calls white conservative think tanks like the Manhattan Institute and the Heritage Foundation, black conservatives are now being "used to legitimize a larger discourse around racial progress that delegitimizes civil-rights policies." 

Naomi Schaefer Riley, author, editor and blogger, responding in the Chronicle of Higher Education's blog "Brainstorm: Ideas and Culture":

"The assault on civil rights? Because they don’t favor affirmative action they are assaulting civil rights? Because they believe there are some fundamental problems in black culture that cannot be blamed on white people they are assaulting civil rights?"

 Seriously, folks, there are legitimate debates about the problems that plague the black community from high incarceration rates to low graduation rates to high out-of-wedlock birth rates. But it’s clear that they’re not happening in black-studies departments. If these young scholars are the future of the discipline, I think they can just as well leave their calendars at 1963 and let some legitimate scholars find solutions to the problems of blacks in America. Solutions that don’t begin and end with blame the white man."

For that response, Ms. Riley was fired by the Chronicle of Higher Education, here's some commentary below from today's WSJ.

From Naomi Schafer Riley:

"My longtime familiarity with the absurdities of higher education did not, I confess, prepare me for this most absurd of results. The content of my post, after all, is hardly shocking; the same thing could have been written 30 years ago. And perhaps that's the most depressing part of all this. Despite the real social and economic advancement that has been made by blacks in this country, the American faculty is still stuck in the 1960s."

From a WSJ staff editorial:

"Now more than ever, too many college graduates discover that their expensive higher educations send them into a modern workplace with skills that few employers want or need. The graduates sit home, unemployed and unemployable. Meanwhile, back inside the school walls, the Chronicle of Higher Education stands ready to eliminate any writer who causes distress to the modern generation of scholars who teach these students."

 From James Taranto:

"[This situation] encapsulates the intellectual corruption of academia, a profession that ought to encourage intellectual adventurousness, not pander to those who are unable to withstand the "distress" of having their ideas challenged."

Keystone XL Update: Obama is Losing Battle

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.  As I pointed out last November:

It's important to understand that: a) the United States already has a huge, safe 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 segment of an existing and extensive pipeline network that makes a significant contribution to America's dependable and affordable energy.

Reason science correspondent Ronald Bailey has an excellent update on the Keystone XL pipeline, here are some excerpts from his article "Obama Is Losing the Keystone Pipeline Battle":

The Keystone pipeline became a defining issue for political environmentalists who dramatized their opposition during protests outside the White House by getting themselves arrested. The activists claimed that pipeline leaks could threaten the Ogallala aquifer in the Sand Hills region of Nebraska and would exacerbate man-made global warming by enabling consumers to burn fuel produced from Canada’s oilsands.

Meanwhile the labor union wing of the Democratic Party was eagerly lobbying the Obama administration on behalf of the jobs that constructing and operating the pipeline would create. In November, Obama bravely announced that he was putting off any decision on allowing the construction of the pipeline until after the 2012 presidential election. That's real leadership! Clearly in his electoral calculations, the Green faction won out over the union vote.

In a March trip to oil country, Obama reiterated his support for building the southern leg of the Keystone pipeline, assuring audiences that it is a “priority” for his administration. Perhaps recent poll numbers showing that 57 percent of Americans approve of the pipeline and that only 29 percent oppose it is prompting the president to do a bit of recalculating with regard to his electoral math. Meanwhile the clock is ticking because TransCanada’s February southern leg application triggered a 45-day deadline by which the Army Corps of Engineers must deny construction permits, or they are automatically approved by default. We will soon find out just how expeditiously helpful the Obama administration means to be.

And if that isn’t bad enough for Obama, TransCanada’s new application is raising tensions among the interest groups that generally support the Democratic Party. Over the weekend, AFL-CIO President Richard Trumka told C-SPAN that labor unions favor building the pipeline. On the other hand, environmental activists who thought they had succeeded in killing off the pipeline only to see it rise from the grave are near apoplectic. Finally, if the transportation bill emerges from Congress with a provision mandating the construction of the Keystone pipeline, will the president really risk vetoing a bill that promises to create a total of three million jobs in order to satisfy the demands of the environmentalists? It’s not like they are going to vote for Romney anyway."

HT: Warren Smith

Quarterly Punctuation Rant on It's vs. Its

Some recent examples of the misuse of it's for its:

The dollar has lost 22% of it's value since late 2008.

GM has recognized it's mistake…..

Why wouldn't China's manipulation of it's currency….

Good proof of the adage “Don’t judge a book by it’s cover."

Social Security law has a mechanism which is supposed to prevent it's insolvency.

Other demonstrators claim DTE is not paying it's fair share of taxes and it's time that changed.

No industrialized country leaves it's elders fortunes to the free market.

MP: Sorry, it actually hasn't even been quite a quarter since my last rant in February, so I apologize for my obsession with this simple, but grossly overlooked grammar/punctuation rule.

Tuesday, May 08, 2012

Tuesday Night Energy Links

1. Mark Green at the Energy Tomorrow blog points to the video above about the resurgence of jobs, hope and opportunity that has come recently to the Ohio steeltown of Lorain, thanks to the shale/hydraulic fracturing revolution. 

2. The shale "gold rush-like" revolution is spreading prosperity all over the country and bringing jobs and production to other states like Pennsylvania and Texas, based on this report from Plastics News:

"The [shale] discoveries have prompted several firms — including Dow Chemical Co. and Shell Oil — to announce plans to build new North American ethylene crackers, with Shell making the almost-unheard-of decision to place its new cracker in western Pennsylvania, near the gas-rich Marcellus Shale. Other companies, including Chevron Phillips Chemical and Formosa Plastics, have announced plans to increase their North American polyethylene output as a result of the shale gas wave.

It’s like the gold rush,” Dow executive Mauro Gregorio said of the shale boom. “The discovery of shale gas is one of the most important events in the U.S. in a long time.  It will be a winner for North America as a region,” added Gregorio, commercial vice president for Dow’s Performance Plastics unit in North America. 

Dow officials confirmed April 19 that their new ethylene cracker will be built at the company’s massive site in Freeport, Texas. The cracker is expected to open in 2017 and will have annual production of 3.3 billion pounds.

Shale discoveries “have given North America really inexpensive access to raw materials,” said PolyOne Chairman, President and CEO Stephen Newlin. “It’s made us more competitive."

3. And of course North Dakota leads the country in shale-related prosperity, with the lowest state jobless rate at 3% for March, and the highest growth in state per-capita personal income since 2000 at 78.7%, more than twice the national average of 37.4%.  An IBD editorial suggests that North Dakota's oil boom should inspire our federal energy policy, and they ask us to "Imagine the impact at the national level if Washington stopped blocking energy development."

Anti-Keynesian Supply Side Tax and Spending Cuts in Sweden, and the Finance Minister Behind It

From the U.K. Spectator's report on the amazing success of supply-side economics in Sweden, and finance minister Anders Borg, the man behind it:

"When Europe’s finance ministers meet for a group photo, it’s easy to spot the rebel — Anders Borg (pictured above) has a ponytail and earring. What actually marks him out, though, is how he responded to the crash. While most countries in Europe borrowed massively, Borg did not. Since becoming Sweden’s finance minister, his mission has been to pare back government. His ‘stimulus’ was a permanent tax cut. To critics, this was fiscal lunacy. Borg, on the other hand, thought lunacy meant repeating the economics of the 1970s and expecting a different result.

Three years on, it’s pretty clear who was right. "Look at Spain, Portugal or the UK, whose governments were arguing for large temporary stimulus," he says. "Well, we can see that very little of the stimulus went to the economy. But they are stuck with the debt." Tax-cutting Sweden, by contrast, had the fastest growth in Europe last year, when it also celebrated the abolition of its deficit. The recovery started just in time for the 2010 Swedish election, in which the Conservatives were re-elected for the first time in history.

All this has taken Borg from curiosity to celebrity. The Financial Times recently declared him the most effective finance minister in Europe.

"Everybody was told 'stimulus, stimulus, stimulus'," he says — referring to the EU, IMF and the alphabet soup of agencies urging a global, debt-fueled spending splurge. Borg, an economist, couldn’t work out how this would help. "It was surprising that Europe, given what we experienced in the 1970s and 80s with structural unemployment, believed that short-term Keynesianism could solve the problem." Non-economists, he says, "might have a tendency to fall for those kinds of messages."

He continued to cut taxes and cut welfare-spending to pay for it; he even cut property taxes for the rich to lure entrepreneurs back to Sweden. The last bit was the most unpopular, but for Borg, economic recovery starts with entrepreneurs. If cutting taxes for the rich encouraged risk-taking, then it had to be done. "In most cases, the company would not have been created without the owner," he says. "There would be no Ikea without [Ingvar] Kamprad. We would not have Tetra-Pak without [Ruben] Rausing. They are probably the foremost entrepreneurs we have had in the last few decades, and both moved out of Sweden."

But they were not rich, I say, when they were starting out. "No, but they were becoming rich. If you have a high wealth tax and an inheritance tax, people emigrate because it becomes too costly to own a company. Ownership is a production factor. Entrepreneurs are a production factor. Yes, these people are rich and you can obviously argue that we want to encourage social cohesion. But it is also problematic if you drive out entrepreneurs from your country, because they are the source of job creation."

Update: The chart below displays constant dollar GDP growth rates for Sweden vs. the U.S. from 2002 to 2011, and shows that Sweden's economy has outperformed the U.S. economy over the last ten years by 0.8% per year on average (OECD data here).  Over the last two years (2010 and 2011), Sweden's real GDP growth has averaged 5%, or more than twice the U.S. average of 2.35%, and provides evidence that Sweden's supply-side approach to the 2007-2009 recession has been more successful than the demand-side Keynesian approach in the U.S.