Tuesday, August 21, 2012

Markets in Everything: A $5 Doctor

From the Chicago Tribune, a story about a small-town physician in Illinois who charges only $5 for an office visit, and hasn't changed his price since the 1970s. 

What About the Legal "Usurious" Ticket Fees?

A $17 Tigers ticket purchased directly from the team's website costs $25.85 with fees, or 52% above face value:
From the Detroit News on July 27:
A Michigan state representative said he will introduce legislation capping the markup on tickets sold on the secondary market — in particular on websites like StubHub — at 10 percent above face value.

State Rep. Douglas Geiss, D-Taylor, requested a bill in response to a story published Thursday on DetroitNews.com, which showed ticket prices for the Detroit Tigers' upcoming seven-game homestand beginning Aug. 3 are, on average, listed at 17 percent above average ticket prices.

"It appears that we've got legalized scalping going on," Geiss said Friday. "There is a need within society for those with tickets that they can no longer use. But when you start talking about tickets with a face value of $100 being listed for $1,000 … that is usurious.
MP: Forget about the high ticket prices in the secondary market (sometimes), what about the "legalized, usurious scalping" going on in the primary market?  The graphic above shows that if you order a single $17 ticket for the August 31 Detroit Tigers home game against the Chicago White Sox from the Tigers' website, your total cost with a $4.75 "convenience fee" and a $4.10 "order fee," brings the total cost to $25.85, or a whopping 52% above face value! 
That's more than five times the 10% cap above face value Rep. Geiss is proposing for ticket sales in the secondary market!

Q: Would Rep. Geiss's legislation capping ticket prices to 10% above face value apply to the primary market as well as the secondary market, making the Detroit Tigers' current ticket pricing practices illegal?  And if not, why couldn't the secondary market cap price tickets at 10% above face value, but then add a $10-20-30 "convenience fee" and a $10-20-30 "order fee"? 

Instead of going after the "usurious" ticket prices in the secondary market, maybe Rep. Geiss should introduce legislation aimed at the usurious "ticket fees" in the primary market that can add more than 50% to the price of a ticket to a Tigers game?

Tuesday Night Roundup: Ten Links

1. Markets in Everything: NFL online courses for ejected fans and a West Hollywood restaurant that offers a 5% discount on your meal if you leave your phone with the receptionist.

2. The Billion Prices Project @ MIT updated daily prices for July, showing that annual inflation continues to decline, falling to 1.20% through the end of July.  Inflation is dead.  At least for now. Related article from NPR, "Everybody Always Thinks Inflation Is Higher Than It Really Is."

3. The American Chemistry Council recently introduced the Chemical Activity Barometer (CAB) - a leading economic indicator based on chemical industry activity.  The August CAB increased by 0.4% from July and by 1.1% from a year ago. This is the second monthly increase in the CAB, and follows upward revisions for June and July, suggesting slow economic growth for the rest of the year.  We've heard that before.

4. Boston Market announced today that it will remove all salt shakers from tables at all 476 locations, and will roll out reduced-sodium menu items in the coming months.  Was Mayor Bloomberg involved?

5. 3D printing updates: a) A 3D printed bikini is the world's first clothing made from a 3D printer and b) bicycle companies are now 3D printing prototype bikes.

6. California has a 10.7% jobless rate but a shortage of farm labor so serious that it's being described as the "worst it's ever been." Number of local residents applying for the farm jobs? None.  

7. D’oh! The U.S. Post Office is Stuck with 682 million unsold Simpsons stamps and a $1.2 million printing bill.

8. Post Office vs. Amtrak: Who wins the title for the most wasteful government agency? Find out here. Hint: They might not have accounted for the unsold Simpsons stamps.

10. Layoffs mount at U.S. wind power manufacturing plants as the production tax credit for wind nears its expiration. Another greendoggle for an energy source that can't survive without massive taxpayer life support.

Philly Fed Reports Today on State Coincident Indexes; North Dakota and Ohio Lead the Country

The Philadelphia Federal Reserve Bank released new data today on State Coincident Indexes (and a national index), which are composite index measures based on four individual variables that summarize the current economic conditions in each state in a single statistic. The four state-level variables in each coincident index are: a) nonfarm payroll employment, b) average hours worked in manufacturing, c) the unemployment rate, and d) inflation-adjusted wage and salary disbursements.  

Here are some highlights for the July coincident indexes:

1. Over the last three months, North Dakota led the country with the highest coincident index increase of 1.62%, followed by Ohio at 1.46% and California at 1.12%.  The national coincident index increased by 0.57% during the May-July period.  

2. Over the last six months, North Dakota's increase of 4.29% in its state coincident index was the highest in the country, followed again by Ohio at 2.92% and then by Massachusetts at 2.61%.  The increase in the national index from February to July was 1.28%.

3. Over the last year, North Dakota's coincident index improvement of 10.85% was by far the best in the country, followed by Ohio at 5.81% and Michigan at 4.97%.  The national coincident index improved by 2.71% from July 2011 to July 2012.  See chart above of coincident indexes for North Dakota and the U.S. over the last ten years.

MP: Once again, North Dakota leads the country on another economic indicator, along with leading the country with the lowest state jobless rate, and the highest rates of growth for employment, personal income and state product, among others.  The 0.57% quarterly improvement in the national coincident index from May to July and the 2.71% annual increase in the U.S. index since last July provide additional evidence that the U.S. economy continues to expand at a moderate pace.  For the last six months starting in February, the national coincident index has been above the index level in December 2007 when the recession started.       

Next to North Dakota, Ohio's state coincident index has shown the greatest improvement over the last quarter, the last six months and the last year. The recent increase in economic activity in Ohio is very likely related to a rebound in the state's manufacturing sector (28,000 new factory jobs since last July with strong gains in the state's steel industry), increased natural gas activity in the eastern part of the state, including the Appalachian region, and increases in the state's crude oil output.  Ohio's energy-related economic expansion demonstrates that North Dakota's energy prosperity can be duplicated in other states that pursue pro-energy, business-friendly environments.       

2012: The Year of the Housing Recovery

Here are some highlights from yesterday's RE/MAX National Housing Report for July, based on Multiple Listing Service housing data in approximately 54 metropolitan areas:

1. July home sales were 10.3% higher than sales last July and year-over-year home sales have now risen for 13 consecutive months

2. The median sales price of homes sold in July was $169,000, a 3.7% increase over the $162,970 median price of July 2011, and the sixth month in a row with year-over-year increases

3. For homes sold in July, the average Days on Market (days between listing with MLS and when a sales contract is signed) was 82. This was a drop of 2 days from the average in June and 6 days from July 2011.  The Days on Market average continues to fall in many markets due to low inventory.

4. The inventory of homes-for-sale fell 5.4% from June and 26.8% from July 2011. Inventories have now fallen for 25 consecutive months. A shrinking inventory is helping home prices rise, but may also be limiting sales. Given the current rate of sales, the average Months Supply is now 5.3, about two months lower than the 7.2 average in July 2011. Very low Months Supply exist in San Francisco (1.2), Los Angeles (1.8), Denver (2.4), Orlando (2.5), Phoenix and Miami (3.1). 

MP: RE/MAX points out that the low inventory levels of existing-homes are becoming a challenge to the recovering market and may be holding back sales.  But with rising home prices, many of the previously reluctant sellers and those with low or negative equity may now be increasingly willing to put their homes on the market, which could ease the low inventory issue.  Further, the 29.5% increase in July building permits and the 21.5% increase in July housing starts (data here) will add new housing inventory going forward, and could also help address the low housing inventory levels. 

The increases in July home sales and median sales prices reported by RE/MAX at the national level are being confirmed by recent housing reports coming from many metro and state areas, here's a sample:

St. Louis: Home sales increased 25% in July.

Wisconsin:  Home sales increased 17.3% in July, which was the 13th straight month of a double-digit sales gain. The median price increased by 2.1% and was the 5th consecutive monthly increase. 

Austin, Texas -- Central Texas home sales rose 20 percent in July, the 14th straight month of year-over-year increases. The median sales price increased by 9 percent to $214,000 and marked the sixth straight month the median increased compared with the same month last year.
California:  Home sales increased 14% in July and median sales price by +11.5%.

Minneapolis-St. Paul: July homes sales up by 14.6% vs. last year and 58% vs. two years ago.  Median sales price increased by 14.3% to a four-year high for July. Pending home sales in July were 24.3% higher than last year, and 65% higher than July 2010.  

Houston:  Home sales increased in July by 27%, while the median price increased 6.3% to a new record high.  

Bottom Line: RE/MAX is saying that "2012 has become the year of the housing recovery," and the housing sales data so far this year and for July supports that statement: multiple months of rising home sales and median prices, faster marketing time, increases in pending sales, and low inventory levels.  The National Association of Realtors reports on existing-home sales for July tomorrow, Census report on new home sales in July on Thursday, and the Case-Shiller report on home prices comes out next Tuesday, so we'll have lots more housing data over the next week to further assess the strength of the U.S. housing recovery.  

Beloit College Mindset List for Class of 2016

Beloit College -- Each August since 1998, Beloit College has released the Beloit College Mindset List, providing a look at the cultural touchstones that shape the lives of students entering college each fall. It was originally created as a reminder to faculty to be aware of dated references, but it quickly became an internationally monitored catalog of the changing worldview of each new college generation.

For this generation of entering college students, born in 1994, Kurt Cobain, Jacqueline Kennedy Onassis, Richard Nixon and John Wayne Gacy have always been dead.

Here's a sample from the full list of 75 items:

9. They have never seen an airplane “ticket.”

13. They can’t picture people actually carrying luggage through airports rather than rolling it.

20. Exposed bra straps have always been a fashion statement, not a wardrobe malfunction to be corrected quietly by well-meaning friends.

27. Outdated icons with images of floppy discs for “save,” a telephone for “phone,” and a snail mail envelope for “mail” have oddly decorated their tablets and smart phone screens.

47. Before they purchase an assigned textbook, they will investigate whether it is available for rent or purchase as an e-book.

71. Despite being preferred urban gathering places, two-thirds of the independent bookstores in the United States have closed for good during their lifetimes.

Monday, August 20, 2012

The Economics of Jazz Careers

"The world doesn't take kindly to jazz artists, and before long they find their ideals displaced by bitter cynicism. At best, one percent of them will eventually realize their dreams, and only after years of paying dues. These are the Chosen Ones, whose success results from a rare combination of often freakish talent, perseverance, good looks, personality, ambition, geography and an ability to skillfully navigate unpredictably changing public tastes."

"Why so few Chosen Ones? Simple economics: People who want to play jazz actually outnumber those who enjoy or even tolerate it, let alone pay to hear it. Consequently, in the microscopic jazz economy, there isn't nearly enough to go around, though competition for the crumbs is relentless and sometimes brutal. This simple financial reality underlies virtually all of the infighting, backbiting, and doomsaying that define the jazz condition."

"But when the jazz bug bites, it's hard to shake. Of the remaining 99%, the vast majority continues the battle, even in the face of shattered dreams and personal defeat. How do they get by? By compromising their music, their lifestyle, their self-respect, or any combination of the three."

Read more here of "Careers in Jazz" by Bill Anschell

California Puts Raw Dairy Farmers in Jail; While in France, Raw Milk is Sold in Vending Machines

Given the response to my post yesterday about raw milk, here's a re-post of a previous CD post and discussion on raw milk:

Raw milk vending machine in France:
Natural News -- "65-year-old senior citizen James Stewart, a California farmer with no criminal history, was nearly tortured to death in the LA County jail this past week. He survived a "week of torturous Hell" at the hands of LA County jail keepers who subjected him to starvation, sleep deprivation, hypothermia, loss of blood circulation to extremities, verbal intimidation, involuntary medical testing and even subjected him to over 30 hours of raw biological sewage filth containing dangerous pathogens."

MP: What was his alleged criminal activity?  Selling fresh, unpasteurized raw milk.  Bail for "The Milk Man" was set at $1 million.  By comparison, bail for alleged child rapist Jerry Sandusky, former Penn State sports coach, was set at $100,000.
"NaturalNews is calling upon Amnesty International and the American Civil Liberties Union to intervene in this extraordinary violation of basic human rights. For the record, James Stewart has no criminal record and is a permaculture farmer and fresh food advocate. His "crime" consists entirely of arranging for the distribution of raw milk to customers who actually line up to access this nourishing food (people love it!)."

Meanwhile, Natural News is reporting separately that:

"France, on the other hand, has embraced the health benefits of raw milk. There, innovative dairy farmer Michel Cantaloube has created a raw milk vending machine (see photo above). The vending machine is a tastefully-designed kiosk that blends right into the urban setting, allowing it to be set up on a street corner on a French town or even a major metropolitan area."

MP: Isn't this backwards?  We always hear about France being an example of heavy-handed government bureaucracy and "European-style socialism," but that seems to more accurately describe California's approach in this case while France takes the "laissez-faire" approach. 

UpdateGreat comment from morganovich, "Raw milk is illegal due to health fears but cigarettes, one of the biggest health risks in the country, are one of the most widely distributed products in the U.S.?"

Most Interesting Sentence I Read Today

"Belize, a Central American nation with an economy the size of Pine Bluff, Arkansas, is running out of money to pay its debts."

~Today's WSJ

MP: Actually, the economy of Pine Bluff in 2010 at $3.2 billion, was more than twice the size of Belize's $1.4 billion GDP in 2011, although adjusting for purchasing power parity brings Belize's GDP up to $2.8 billion. 

Leading Index Predicts Slow, Continuing Expansion

I'm reporting a few days late that The Conference Board released its Leading Economic Index for July last Friday, and the 10-component composite forecasting index is indicating a positive, but slow economic expansion going forward. Sound familiar? We've been hearing that a lot lately. Here are some of the details:

The U.S. Leading Economic Index (LEI) increased 0.4 percent in July to 95.8, following a 0.4 percent decline in June, and a 0.3 percent increase in May, matching the index level in May at the highest level in four years going back to June 2008 (see chart above).  Compared to its year earlier level, the July LEI is 1.50% higher, which is lower than the 6% annual gain last July compared to 2010, indicating that the pace of improvement in the LEI has slowed over the last year. 

Says Ataman Ozyildirim, economist at The Conference Board: “With this month’s increase, the U.S. LEI returned to its May level. The majority of its components improved, led by large contributions from housing permits and initial unemployment claims. The LEI’s six-month growth rate seems to be stabilizing, pointing to a continuing but slow expansion in economic activity for the rest of the year. Meanwhile, the coincident economic index, a measure of current conditions, has been rising slowly but steadily, with all four components improving over the last six months.”

Says Ken Goldstein, economist at The Conference Board: “The indicators point to slow growth through the end of 2012. Lack of domestic demand remains a big issue. However, back-to-school sales are better than expected, suggesting that the consumer is starting to come back. Retail sales this time of year are often an indicator of how the holiday season will turn out.”

MP: Like many other economic variables, indicators and forecasts, the LEI in July predicts ongoing, but moderately sluggish economic growth in 2012, but is not currently pointing to an economic slowdown that would be considered recessionary.  As Brian Wesbury's team at First Trust Portfolio has been describing it, we've got a "plow horse economy" that keeps moving forward, slowly but surely. 

Carbon-Tax Would Hobble Our Economy

In this week's McClatchy Newspaper's nationally distributed Pro-Con feature, I argue against a carbon tax, here's an excerpt:

Thanks to advanced drilling technologies and an abundance of gas from shale deposits, natural gas has accounted for more than 80 percent of new electrical generating capacity in the United States.

The share of U.S. electricity that comes from coal is forecast to fall below 40 percent this year, its lowest level since World War II, and down from 50 percent four years ago.

By the end of this decade it is likely to be near 30 percent. Now, we need to export U.S. technology for seismic imaging, hydraulic fracturing and horizontal drilling to other countries with large shale-gas deposits. Spreading advanced energy technologies globally would lower the cost of controlling emissions substantially.

By using advances in technology, we can expand the use of natural gas, nuclear power and renewable energies and achieve a substantial reduction in carbon emissions, without resorting to a carbon tax that would hobble our economy.

You Can't Give Away Free Food to Poor Children or the Homeless without Government Approval

1. Houston 

2. Philadelphia

July 85-Variable Chicago Fed National Activity Index Improves; We're Nowhere Near a Recession

The Chicago Fed National Activity Index is a weighted average of 85 individual indicators of U.S. economic activity. The indicators come from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.  Given the fact that the Chicago Fed Index is a composite index based on 85 individual economic variables across all sectors of the U.S. economy, it is the most comprehensive economic index available, and therefore gives us one of the best, broadest, and  most complete pictures of economic conditions.  

The Chicago Fed released its report today for July and is reporting that U.S. economic activity increased in July, here are some details:

"Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to –0.13 in July from –0.34 in June. Three of the four broad categories of indicators that make up the index improved from June, but only the production and income category made a positive contribution in July.

The index’s three-month moving average, CFNAI-MA3, decreased slightly from –0.18 in June to –0.21 in July—its fifth consecutive reading below zero (see chart above). July’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year."

MP: Historical research by the Chicago Fed concludes that it takes values of the CFNAI-MA3 below -0.70 before it's likely that the U.S. economy has entered into a recession, and that has been exactly and precisely the case for the last seven recessions - they were all periods associated with CFNAI-MA3 values below 0-.70 (see chart).   Therefore, the recent index readings for the CFNAI-MA3 below 0 indicate that economic growth is below trend, but there is no downward trend in the index, and it's nowhere close to -0.70, so it's safe to say that the U.S. economy is not in recession now, and is not headed toward a recession in the near future.    

Perma-bear Gary Shilling said a few weeks ago that, "We're already in a global recession," and ECRI's Lakshman Achuthan said in July that "the [U.S.] economy is in a recession already."  

According to the broadest and most comprehensive measure of U.S. economic conditions, we're nowhere near a recession and therefore as Scott Grannis commented recently, "The folks at ECRI have a lot more 'splainin to do."

Sunday, August 19, 2012

Replicator: 3D Printing a Custom iPhone Case

CNET.com -- In the latest episode of Always On, Sharon Vaknin dives into the world of 3D printing to find out what it takes to print a custom iPhone case.

HT: Terry Westley

Sunday Night Links

Already posted to my Twitter account over the last few days:

1.  Dutch company uses 3D printing technology and sells iPhone and Blackberry cases customized with your name for $40. Expect more of this customized 3D printing.

2.  "Rare," "Staggering," and "Speechless," is how they're describing the Bakken-based hotel boom in Minot ND, where hotel rooms will double from 1,600 several years ago to 3,000 this year. 

3.  In the wake of the shooting when an unarmed driver delivered a pizza by himself, a Jets Pizza franchise in Dearborn, MI announced that it will no longer deliver pizzas to Detroit after dark. Before the shooting, the pizza stores sent two drivers to every nighttime Detroit delivery, one of whom was armed. 

4. Replacing oil with natural gas for electricity generation in Hawaii could cut power bills "for years to come."

5. More government overreach: Philadelphia woman faces charges of $600 per day for distributing free food to poor children from her garage?

6.  From Reason.tv: 10 Years to Life for Medical Marijuana? The Trial of Aaron Sandusky.

7. Ten craziest items you CAN'T sell on eBay: Prison uniforms, eyeglasses, prayers, lockpicks, psychic readings, and more.

8. More from Reason.tv on Lemonade and Raw Milk Freedom Day (I was there yesterday and took the photo below after I made an illegal purchase of a pint of raw milk for $1.00 - it was illegal because the milk was from a farm in Pennsylvania and was brought across states lines, which is a federal crime).

Rail Industry Benefits from the Shale Revolution

Here's another example of how the shale revolution and energy prosperity are working their way down the supply chain, and revitalizing the support industries that supply materials, inputs, and drilling equipment to the shale industry.   I've reported before how the shale boom in North Dakota, Texas, Ohio, Pennsylvania and elsewhere has boosted the demand for Midwest sand found in Wisconsin and Minnesota that is ideal for use in the hydraulic fracturing drilling process, which has brought "sand prosperity" to America's new "sand box," and created many new "sand millionaires."

Now the frac sand boom and sand prosperity are revitalizing another industry - the railroad industry in Wisconsin and Minnesota that ships the frac sand to nearby North Dakota, as the StarTribune reports:
Hydraulic fracturing has created a major new business for railroads, because each horizontal well requires between 3,000 and 10,000 tons of sand. Drillers in North Dakota and elsewhere need the sand -- together with water, chemicals and organic lubricants -- to break up shale thousands of feet underground that holds natural gas and oil.

The demand -- about 60 new sand mines are in the works in Wisconsin -- is reviving sleepy trade routes. Railroads are striking deals with a spate of new sand processing plants, bringing dormant rail lines back into service, upgrading tracks and building rail yards and loading facilities across the Upper Midwest.

That has helped small-town industry that depends on freight trains, helping preserve jobs and clearing the way for industrial development.  All the major railroads are expanding across the region to accommodate sand in one way or another.

In two years, Union Pacific recorded a 265 percent increase in frac sand shipments. The railroad has rebuilt interchanges in Wisconsin, lengthened track at a Mankato rail yard and will lengthen another track this year. The company built a side track at Bricelyn, Minn., lengthened several tracks at a rail yard in Council Bluffs, Iowa, and is considering four more yard improvements in Wisconsin and Iowa.

Over the past six months, Canadian Pacific has struck deals with new sand-processing plants in Tunnel City, Oakdale and Sparta, Wis. The company is building a facility in Makoti, N.D., where sand will be loaded on trucks and driven to wells in the Bakken oil fields of North Dakota.

Unless energy companies figure out a less expensive way to get oil and gas out of the ground, they're going to need sand from Wisconsin and Minnesota, said Jean-Jacques Ruest, chief marketing officer for Canadian National. He expects railroads to be busy in western Wisconsin for 10 years, probably 20, maybe 30.
MP: Through its impact on the entire supply chain, the shale revolution is delivering a huge multi-billion dollar economic stimulus to the U.S. economy and creating thousands of new shovel-ready jobs.  Not only is the shale revolution bringing thousands of new direct jobs and economic prosperity to North Dakota and Texas, but it's also creating thousands of new jobs and prosperity in Wisconsin and Minnesota working in the frac sand industry, and it's now bringing jobs and new investment to the railroad industry in Wisconsin and Minnesota.  As the StarTribune article points out, the "added rail service doesn't only benefit energy companies," but provides benefits for many small and large industries that operate near the rail routes and depend on rail service to deliver their products to the market.  Count those as even more additional indirect benefits to the economy from shale.

Welcome to the shale revolution!

More on Ticketmaster's Legal "Ticket Scalping"

Following a recent post titled "Ticketmaster Must Be Stopped," several commenters defended Ticketmaster's right to operate its monopolistic, anti-competitive, anti-consumer business model free from government regulation, and I concede that's a valid position.  As one person wrote:    

"Are the purchasers of tickets not free to do business or not with Ticketmaster? Won't the free market eventually take care of such poor business practices?"

Another valid point - we can let market competition eventually take care of Ticketmaster's unsustainable practice of "legalized ticket scalping," which I illustrate above.  I was planning to buy three $25 tickets online, available online only through Ticketmaster, for an upcoming concert in D.C.  But then I was faced with an $8.20 "convenience charge" per ticket (32.8% of the ticket price) and an "order processing fee" of $4 to place the order, for a total cost of $103.60, of which only $75 is for the actual tickets, and $28.60 in exorbitant FEES (38% of the ticket cost)! Ouch! Note that the same $4 "order processing fee" applies even for one ticket, which would add $12.20 in total fees to a $25 ticket, for a total "scalped" cost of $37.20, with Ticketmaster charging fees of almost 50% of the ticket price!

And the fans (some), artists (most), promoters (all) and venues (all) are upset about some tickets reselling above face value on the secondary market (see photo below)?   Tickets are already selling for WAY above face value in the primary ticket market, with Ticketmaster's practice of legalized scalping fees on all of the tickets sold!  

Now I'm not arguing for government regulation of Ticketmaster's exorbitant fees, I was only making a property rights case against Ticketmaster's new "restrictive paperless tickets" in my previous post. 

Two points/questions:

1. Ticketmaster's business model seems clearly unsustainable, especially when the cost of selling and processing online ticket purchases is almost zero.  Why aren't competitors challenging Ticketmaster's monopoly? There don't appear to be any significant barriers to entry, are there?  There is an active competitive secondary market with lots of competition (Seat Geek, Stub Hub, Tickets Now, eTix, eBay, Craigslist, etc.), so why hasn't anybody challenged Ticketmaster's monopoly in the primary market? 

2. Why isn't there more fan and artist outrage over Ticketmaster's fees? Over the years, concert fans and musicians have directed a lot of outrage towards "ticket scalpers" (see photo below), but seem somewhat complacent about "legalized ticket scalping" when Ticketmaster sells tickets at 38% above face value? 

Personally, I'll be expressing my outrage over Ticketmaster fees by going to the venue tomorrow and purchasing the tickets there for $25.  Thankfully, that's an option in this case, but only because it's convenient for me to actually buy tickets directly, and would frequently not be an option for most buyers.   

Saturday, August 18, 2012

Some Amazing North Dakota Oil Facts

1. North Dakota drillers produced almost 20 million barrels of oil in June from a record number of 7,352 wells, which is more than double the state's oil output in February 2011.

2. There are about 35,000 wells yet to be drilled in western North Dakota’s oil patch, almost five times the number of existing wells, so we can expect the current exponential increases in Bakken oil output to continue in the future. 

3. Oil companies are increasingly making inroads with advanced drilling technologies, and drillers are finishing new wells at a rate of eight per day, up from less than one a day five years ago.   

4. The time needed to drill a well has dropped by two-thirds since 2007 from 60 to 20 days, as the industry continues to fine-tune cutting through dense rock to the oil trapped nearly two miles beneath the surface.  This significant increase in efficiency is due in part to the increased use of diamond-tipped bits and the growing number of "walking drill rigs," which can be moved between well sites on hydraulic feet without having to be disassembled.

5. Besides the 161 increase in producing wells added during the month of June, there were an additional 350 wells that were completed and awaiting hydraulic fracturing services.

6. State and industry officials are reporting that 99 percent of rigs in the Bakken and Three Forks formations hit oil, while nine of 10 rigs are profitable.

7. A typical well drilled in North Dakota will produce about 540,000 barrels of oil during its 29-year lifespan, which would have a market of value of $40.5 million at $75 per barrel and $54 million at $100 per barrel.    

8. It will take at least 15 more years to complete drilling in the Bakken formation.

Bottom Line: North Dakota's future looks very, very bright and its status as the "economic miracle state" will continue for decades.

Sources: Jamestown Sun and the North Dakota Department of Mineral Resources.

Peak what?

Quotation of the Day: Should the Government Try to Reduce Income AND Life-Expectancy Inequality?

“When I talk to people, I find that they generally agree with, and rarely strongly oppose, forcible government transfers of income from the rich to the poor to reduce income inequality. But when I suggest that the government transfer medical expenditures from women to men to reduce life-expectancy inequality, I get a very different reaction. Often, the listener will simply give me a strange look and quickly depart. Those who do respond, however, typically say that I couldn’t possibly be serious because my idea is outrageously silly. I agree. It is silly. But I am completely serious in suggesting it.”

“When we seriously consider an attempt to use government power to reduce the gender inequality in life expectancy, the problems that we have always faced when government uses its power to reduce income inequality suddenly become crystal clear. Government transfers to reduce the gender gap in life expectancy would do little more than reduce improvements in both women’s and men’s life expectancies. For similar reasons, government transfers have done little more than reduce the income growth of both the rich and the poor. So government attempts to reduce life-expectancy inequality by transferring medical expenditures would be silly, but no sillier than its attempts to reduce income inequality by transferring money.”

~Economist Dwight Lee

Pessimism Illustrated

Person A: The weather is beautiful today, clear skies, low humidity and 80 degrees.

Pessimist A: Yes, but it rained ten days ago. 

Pessimist B: Yes, but it rained a year ago on this day.

Pessimist C: Yes, but it will rain sometime in the future, just wait. 

Pessimist D: Yes, but it's raining right now in Nebraska and Nepal right now, so it's not beautiful there at all.   

Pessimist E: Yes, but the government manipulates the temperature and humidity readings, so if the temperature and humidity were re-calculated according to Shadow Stats, it would really be ten degrees warmer (or colder), and more (or less humid), so you can't trust government data, and the weather is actually horrible now, not beautiful.

Pessimist F: Yes, but if we don't get rain soon, we might have a drought. (ht/arbitrage 789)

On the 40th Anniversary of the "Limits to Growth"

It's the 40th anniversary this year of the 1972 release of the book "The Limits to Growth" from the Club of Rome, which used computer models to predict that world population growth and economic expansion would cause the Earth to "overshoot" its carrying capacity of finite resources, and eventually lead to overpopulation, mass starvation, smog disasters, pesticide-induced cancers, oceans devoid of fish, massive species extinction, and significant reductions in life expectancy among other inevitable calamities, disasters, and catastrophes.   

As George Will explains in his latest column ("Why Doom Has Not Materialized"), "We were supposed to be pretty much extinct by now, or at least miserable. We are neither."  He then asks, "So, what went wrong?" And responds (in the tradition of resource economist Julian Simon), "The modelers missed something — human ingenuity in discovering, extracting and innovating. Which did not just appear after 1972."

George Will's column and rebuttal of the exaggerated claims of The Limits to Growth is largely based on a detailed 18-page article by Bjorn Lomborg, a Danish academic and skeptical environmentalist in the July/August issue of Foreign Affairs titled "Environmental Alarmism, Then and Now."  Here's an excerpt from that article on recycling:
Ask someone today whether he cares about the environment and what he is doing about it, and you are likely to hear something like, “Of course I care; I recycle.” The caring part is all to the good and a major positive change from a few decades ago. But the recycling part is often just a feel-good gesture that provides little environmental benefit at a significant cost.

When people think of recycling today, they often think of paper. This, too, is not a new idea; trash has been a resource for centuries, with the extent of its culling and reprocessing depending on the current market prices of the goods in question. Throughout the past century, about 30–50 percent of all paper was recycled, before the advent of public information campaigns or peer pressure.

But now, in the wake of jeremiads such as The Limits to Growth, recycling tends to be seen less as an economic question and more as a matter of personal and civic virtue. Children learn to “reduce, reuse, and recycle” as part of their official moral education. They are told that by doing so, they are “saving trees.” Yet in fact, well-managed forests for paper production in countries such as Finland and Sweden are continuously replanted, yielding not fewer trees but more. Artificially encouraging the recycling of paper lowers the payoff for such forests, making them more likely to be converted into agricultural or urban land. Nor does recycling paper save the rain forests, since it is not made with tropical timber. Nor does recycling paper address a problem of municipal waste: incineration can recapture much of the energy from used paper with virtually no waste problems, and even without incineration, all U.S. municipal waste from the entire twenty-first century could be contained in a single square dump that was 18 miles on each side and 100 feet high.

The effort to recycle substances such as paper and glass, however, consumes money and manpower, which are also scarce resources and could be expended on other socially valuable efforts, such as building roads or staffing hospitals. And so as the price of paper has declined and the value of human work has risen dramatically, today we pay tribute to the pagan god of token environmentalism by spending countless hours sorting, storing, and collecting used paper, which, when combined with government subsidies, yields slightly lower-quality paper in order to secure a resource that was never threatened in the first place.
In other words, Recycling is Garbage, as science columnist John Tierney explained in the New York Times back in 1996, and could also be described as a "fundamentally religious impulse" according to economist Steven Landsburg.

At the end of his article, Bjorn Lomborg concludes that:
Even though the Club of Rome’s general school of thought has mercifully gone the way of other 1970s-era relics, such as mood rings and pet rocks, the effects linger in popular and elite consciousness. People get more excited about the fate of the Kyoto Protocol (aimed at fighting global warming) than the fate of the Doha Round (aimed at lowering trade barriers) —even though an expansion of trade would do hundreds or thousands of times as much good as feeble limitations of emissions, and do so more cheaply, quickly, and efficiently for the very people who are most vulnerable. It is past time to acknowledge that economic growth, for lack of a better word, is good, and that what the world needs is more of it, not less.
Economic growth is good.  Amen.

Friday, August 17, 2012

VIX Index Falls to Lowest Level Since May 2007

According to Freakonomics blogger and Yale professor Ian Ayres:

"One of the most important but under-reported financial indicators is the
CBOE’s Volatility Index (^VIX), which measures the market’s expectation of future volatility in stock prices (over the next 30 days). (The CBOE has written a nice technical white paper describing how it is calculated, here.) When it drops below 30 percent, it will be a strong indication that the market correction is complete and we’re back to business as usual." 

Often referred to as the "fear index," the VIX represents one measure of the stock market's expectation of volatility over the next 30-day period (Wikipedia). The VIX is a widely used measure of market risk and it is often referred to as the "investor fear gauge" (Investopedia).

The chart above shows that the VIX Index closed today at 13.45, the lowest level since May 2007, more than five years ago, and more than six months before the recession started in December 2007.  Investor fear in the stock market has been consistently subsiding, and market volatility is now back to normal, pre-recession levels.  

Ticketmaster Must Be Stopped

Ticketmaster is no stranger to controversy. Often criticized for its outrageous service fees, poor customer service and monopolistic control over the primary ticket industry, the ticketing giant — along with others in the ticket and live event industries — is now threatening to completely eliminate fan ownership of the tickets they buy.

How? By issuing “restrictive paperless tickets” that are non-transferable, and can only be used by the original ticket purchaser, similar to an airline ticket.  What if you get sick or end up having a conflict for a concert or game? Too bad, you would lose the ticket under Ticketmaster’s new policy for some events.

What is Ticketmaster’s motivation? The company already dominates the primary ticket market and is now attempting to elminate the secondary market with its new ticket restrictions.  In my commentary on MLive.com, I argue that when you purchase a ticket to a concert or a game, you should own it. Fortunately, there is legislation pending in both the Michigan House and Senate that would protect free-market competition in the secondary ticket market by banning practices that prohibit fans from transferring, reselling or giving away tickets to family and friends

Rail Shipping: Coal is Down; Oil, Cars & Lumber Up

Here's some interesting data from this week's report on U.S. rail traffic from the American Association of Railroads:

1. On a year-to-date (YTD) basis through the week ending August 11, total rail volume of 9,005,952 carloads this year is down by 2.4% compared to last year's loadings of 9,231,927 carloads from January through mid-August.

2. Of the 20 different categories of carload shipments, coal totally dominates this type of rail shipping, and made up 44% of the shipping activity in 2011 from January to mid-August.  This year, coal shipments represented about 41% of total rail car loadings.  

3. Due in part to the switch from coal to natural gas for electric power generation, coal shipments by rail YTD in 2012 are down by 9.4%, from 4,075,000 carloads of coal last year to 3,693,000 this year from January-August.   

4. If we take out coal shipments, rail carload volume is actually up by 3% this year for the other 19 categories, close to the 3.6% YTD increase in the intermodal form of rail shipping for trailers and containers (Note: intermodal shipments are not broken down by category).  

Bottom Line: Coal shipments by rail exert a huge influence on overall rail carload volume because coal's share of total shipping by rail is so high (41-44%).  Therefore, it's only because of the decline in coal shipments this year that overall rail carload volume has fallen.  Take out coal shipments, and carload volume then shows a healthy 3% increase.  Along with the 3.6% increase in intermodal volume, the overall increase in non-coal shipments this year presents a much more positive picture of the amount of inputs, raw materials, commodities, chemicals, vehicles, parts, products, etc. moving around the country, destined for some factory, plant, construction project or car dealership.  And like I summarized yesterday, the three largest contributors to increased carload shipments so far this year are petroleum (+40.2% YTD), motor vehicles and equipment (+21.4%), and lumber (+12.2%).  

So the economy's doing better than we thought once we exclude coal from carload rail shipments, and the environment's getting better because coal shipments to electric utilities are declining. And the petroleum, housing and auto industries are showing strong gains over last year for shipments of key inputs and outputs for those sectors.

Thanks to Market Forces, Technology, and Private Sector Activity, C02 Emissions Drop to 20-Year Low

Market forces, not government action, made this happen:
From the Associated Press comes this story "CO2 Emissions In US Drop To 20-Year Low":
In a surprising turnaround, the amount of carbon dioxide being released into the atmosphere in the U.S. has fallen dramatically to its lowest level in 20 years, and government officials say the biggest reason is that cheap and plentiful natural gas has led many power plant operators to switch from dirtier-burning coal.

Many of the world's leading climate scientists didn't see the drop coming, in large part because it happened as a result of market forces rather than direct government action against carbon dioxide, a greenhouse gas that traps heat in the atmosphere.

Michael Mann, director of the Earth System Science Center at Penn State University, said the shift away from coal is reason for "cautious optimism" about potential ways to deal with climate change. He said it demonstrates that "ultimately people follow their wallets" on global warming.

"There's a very clear lesson here. What it shows is that if you make a cleaner energy source cheaper, you will displace dirtier sources," said Roger Pielke Jr., a climate expert at the University of Colorado.

In a little-noticed technical report, the U.S. Energy Information Agency, a part of the Energy Department, said this month that energy related U.S. CO2 emissions for the first four months of this year fell to about 1992 levels (see chart above). Energy emissions make up about 98 percent of the total. The Associated Press contacted environmental experts, scientists and utility companies and learned that virtually everyone believes the shift could have major long-term implications for U.S. energy policy.

 While conservation efforts, the lagging economy and greater use of renewable energy are factors in the CO2 decline, the drop-off is due mainly to low-priced natural gas, the agency said.

The International Energy Agency said the U.S. has cut carbon dioxide emissions more than any other country over the last six years. Total U.S. carbon emissions from energy consumption peaked at about 6 billion metric tons in 2007. Projections for this year are around 5.2 billion, and the 1990 figure was about 5 billion.
MP: Unlike renewable energies like solar and wind that reduce carbon emissions but are uneconomical even with billions of dollars of taxpayer dollars, the shale gas revolution has made a significant contribution to reducing CO2 emissions to a 20-year low without any taxpayer support and it wasn't even part of any intentional energy policy from Washington, or any regulatory directive from the EPA.  As the article points out, it was market forces and private sector activity, not government policies, that brought CO2 emissions down to 1992 levels.  Another great example of how society is "cleaned by capitalism." 

Welcome to the shale gas revolution. 

HT: John Childress

Thursday, August 16, 2012

With New Technology Being Developed, Canada Could Soon Move to No. 1 in World Oil Reserves

Here's one more reason why Duke economist Mike Munger was correct when he wrote several years ago that "of all the idiotic things that people believe, the whole 'peak oil' thing has to be right up there."  Thanks to new, advanced oil recovery technologies currently being developed that would unlock Canada's vast oil sands deposits, our northern neighbor could soon surpass Venezuela and Saudi Arabia to become the No. 1 country in the world for oil reserves.  From a July 24 article in the WSJ:

"Ten years ago, new oil field technologies unlocked vast crude supplies from western Canada's oil-sands deposits, propelling America's northern neighbor to the top echelon of the world's petroleum repositories.

Now oil companies here are experimenting with technologies that could unlock even more reserves from what is some of the world's heaviest and stickiest petroleum. The new technologies could also drive down the cost of producing oil in Canada.

One consortium aims to get oil flowing to the surface by sending radio waves from huge antennae pushed through wells deep underground—adopting technology first developed for the U.S. government to eavesdrop on underground bunkers.

Another company is working on inserting electrical heating coils into wells to melt the oil, while other firms are tinkering with petroleum-based solvents they hope to pump into wells to get more oil out.

All the experimentation is aimed at improving a standard method of oil-sands extraction: so-called steam-assisted gravity drainage, or SAGD.

SAGD quintupled the amount of bitumen that may be possible to recover in Canada, and helped lift Canada's overall recoverable oil reserves to No. 3 in the world, behind Saudi Arabia and Venezuela.

But those reserves are only a 10th of the 1.7 trillion barrels of bitumen found in Canada. Alberta's Energy Resources Conservation Board estimates there are also more than 400 billion barrels of bitumen trapped in carbonate rock formations in Alberta, mostly in a large formation called the Grosmont that stretches across the center of the province.

"If we postulated that 25% of that can be recovered, Canada could move to No. 1" in world oil reserves, said Glen Schmidt, chief executive of privately owned Calgary energy-technology company Laricina Energy Ltd."

Related: Watch a WSJ video here that accompanies the article.  

Economic Data Points

1. From the American Association of Railroad's weekly report on rail traffic: Lumber shipments were up by 19.8% vs. the same week last year (+12.2% YTD), petroleum products by 44.4% (+40.2% YTD), and motor vehicles and equipment by 19.2% (+21.4%).  Conclusion: Housing, oil, and cars are booming. 

2. Mortgage rates are starting to head up, they increased for the third straight week to the highest levels since early July (3.62% for the 30-year fixed rate and 2.88% for the 15-year).  The 10-year treasury yield is the highest since May at 1.80%.      

3. From yesterday's CPI report: Natural gas prices have fallen by 12.7% over the last year, saving consumers millions, if not billions, of dollars.  

4. From today's Census report on construction: Building permits increased in July by 29.5% compared to a year ago, reaching the highest level since August 2008, almost four years ago.  

5. The Bloomberg U.S. Financial Conditions Index is at the highest level in more than a year.  

6. The S&P Volatility Index ("fear index") was at the lowest level this week since July 2007, more than five years ago. 

Hairbraider vs. Oregon's Cosmetology Cartel

Warning: This activity is illegal in the state of Oregon without a government license.

The Oregonian featured this article recently "Braiding African American hair at center of overregulation battle in Oregon," about occupational licensing in general, but with a special focus on hairbraiding in Oregon.  To perform hairbraiding in Oregon, even for free, currently requires a state cosmetology license, which involves 1,700 hours of training in a beauty school at a cost of $10,000-$20,000 for tuition.  The hairbraider featured in the story and video above, Portland-native Amber Starks, is currently performing hairbraiding across the Columbia River in Vancouver, Washington, where it's legal to perform hairbraiding without a cosmetology license.  Ms. Starks is awaiting a possible change in state law before she can legally perform hairbraiding in her home state. From the article:
Prompted by Starks' case, a group of Portland-area lawmakers have promised to file a "Natural Hair Act" for the 2013 legislative session. The goal is to braiders to work with some state oversight -- say, after passing classes in hair-care sanitation -- but without a full cosmetological education.
It's no surprise that Oregon's "cosmetology cartel" is fighting to keep its government-enforced barriers to entry in place that now require a full cosmetology license to braid hair:
In case after case nationwide, however, cosmetologists have opposed looser standards (see map above with hairbraiding licensing requirement by state). In several states, beauty schools canceled classes and bused students to the state capitol to lobby.

"We've worked so hard as an industry to get away from the dumb hairdresser stereotype, the 'beauty school dropout,' thing," said Katrina Soentpiet, who owns Face It Salon in Eugene. "We are professionals. If you work with hair, you should have to meet these standards."

The vice chairwoman of the state cosmetology board opposes any compromise. "As a practitioner for 40 years, it's offensive to me," said Sharon Wiser, an instructor at Bella Institute for Beauty in Portland. "Braiding is styling. It doesn't matter if it's Caucasian or ethnic hair. Ethnic hair is not different in that regard.
MP: The full article is worth reading; there is a good discussion of state occupational licensing in general.  In the 1950s only about 5% of Americans needed a state license to work, but now it's about one-third of the workforce can't work without a license from the state government. And the article points out that we can thank the recession for bringing excessive over-regulation of occupations into the public awareness, as workers run up against state occupational licensing as they face involuntary career changes.

I think the two most important questions to ask are: If hairbraiders are required to have a state cosmetology license to practice hairbraiding, 1) what would happen to the price they charge for their services, and 2) what would happen to the quality of their services.  If you answered, "Go up significantly" and "Nothing," you can go to the head of the class, as Walter E. Williams would say.

Like for so many issues, this a perfect time to invoke Bastiat's message: "Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race."

HT: Wayne Sanman

Markets in Everything: Mobile DNA Testing

NEW YORK (CBSNewYork)"It is a sign of the times — getting a quick DNA test is now as easy as walking up to a truck. The “Who’s Your Daddy” recreational vehicle is selling DNA tests for $300-600, mostly to fathers who suspect their children may not actually be theirs."

Cleaned by Capitalism, Polluted by Communism

Don Boudreaux at the Cafe Hayek blog regularly features posts titled "Cleaned by Capitalism," here's a recent example

"Modern, innovative, industrial competitive capitalism makes available to almost every denizen of the early 21st-century capitalist world a host of inexpensive and effective machines and substances to protect ourselves from what would otherwise be the daily, up-close-and-personal pollution of bacteria from rotting food particles. We have dinnerware – plates, drinking glasses, bowls, pots, pans, and utensils – made of ceramics, plastics, and metals that resist absorbing foods and that can be vigorously washed, daily. We wash these items using inexpensive detergents, hot potable water, and dish cloths and sponges (that more and more are disposable – thus making the cloths and sponges that we use cleaner than otherwise).

Increasingly, of course, we wash our dishes and utensils by using this incredible, electricity-powered anti-pollutant machine….

The hot water sprayed in powerful jets combines with special detergent to clean dishes more thoroughly – and with far less expenditure of human time and suffering of aggravation – than is achieved by washing dishes by hand.  Another instance in which our society is cleaned by capitalism."

I thought of Don's "Cleaned by Capitalism" series today when I read Cuban super-blogger Yoani Sanchez's post titled "Have We Become Accustomed to Dirt?" (I think the answer is YES), but which could have alternatively been titled "Polluted by Communism":
"A teenager writes — with his index finger — the words “Wash me” in the dust on the window of the bus. A mother asks her son what the school bathroom is like and he confirms that “it stinks so much you can’t go in there.” A dentist eats a french fry in front of her patient and with unwashed hands proceeds to extract a tooth. A passerby lets his pizza — just out of the oven — drip cheese over the sidewalk, where it accumulates in a pool of fat. A waitress cleans the tables at Coppelia Ice Cream with a smelly rag, and puts out glasses sticky with successive layers of badly scrubbed milk. A spellbound tourist drinks a mojito in which several ice cubes made from tap water are floating. A sewer overflows a few yards from the kitchen of a recreation center for kids and teens. A cockroach quickly darts along the clinic wall while the doctor listens to a patient’s chest.
All this and more I could enumerate, but I prefer to summarize what I’ve seen with my own eyes. The hygiene of this city shows an alarming decline and creates a scenario for the spread of disease. The cholera outbreak in the east of the country is a sad warning of what could also happen in the capital. The lack of health education from the earliest years of life lead us to accept filth as the natural environment in which we move. The material shortages also raise the epidemiological risk. Many mothers reuse disposable diapers several times, stuffing them with cotton or gauze. The plastic bottles collected in the trash serve as containers for homemade yogurt or for milk sold on the black market. The inadequate water supply in many neighborhoods reduces hand washing and even the number of baths per week. The high prices and shortages of cleaning products further complicate the situation. It is very difficult now to find stores selling mops to clean the floor and detergent is also scarce. Keeping clean is expensive and complicated."

MP: In a market-based economy, keeping clean is cheap and easy, as the "Cleaned by Capitalism" examples on Cafe Hayek clearly illustrate. It's only under market-repressing communism that "keeping clean is expensive and complicated." Perhaps Yoani Sanchez could have a series of posts on her blog titled "Polluted (or Fouled) by Communism."