Saturday, August 11, 2012

3D Printer Could Build a Custom House in 20 Hours

Yahoo News -- "An engineering professor, Behrokh Khoshnevis, at the University of Southern California, is really thinking big: He has figured out a way to build housing with a giant 3D printer. The apparatus, instead of being the size of your typical laser printer, would actually be somewhat bigger than the house it would build through a concrete layering system called Contour Crafting.

The professor explained the process in a speech at the TEDx conference, which you can watch above. (Start at 4:30 to see the animation demo.) In the video,  the professor demonstrates how the machine lays down a concrete foundation, puts up walls, even inserts wiring and plumbing, and eventually constructs an entire building, which Professor Khoshnevis says can be completed in less than a day. (All that's left to add are doors and windows.) Robotics could even be used to add details like tiles, says the professor."

MP: The 3D printing revolution has just begun. We can expect hundreds and probably thousands of more examples like this in the future, as this amazing, innovative, game-changing technology revolutionizes manufacturing, construction, and our entire world.

Two Mind-Blowing Illusions

Amazingly, the two tabletops above look like they are different shapes but are actually identical, and the two photographs below of the Leaning Tower of Pisa look different, but are actually identical.  You can find explanations, and more illusions here.

Great Animated Video of Hydraulic Fracturing

Here's the technology driving our energy bonanza.

From Marathon Oil --"Safe, cost-effective refinements in hydraulic fracturing (also known as fracking), horizontal drilling and other innovations now allow for the production of oil and natural gas from tight shale formations that previously were inaccessible. This animated video introduces you to the proven techniques used to extract resources from these shale formations in a safe, environmentally responsible manner."

Great animation of the drilling technology that is responsible for America's revolutionary, game-changing, shale-based energy bonanza, the "energy equivalent of the Berlin Wall coming down."  

Global Trade and U.S. Exports Are at Record Highs

No sign of recession based on record world trade volume in May and record U.S. exports in June.
According to perma-bear Gary Shilling this week, "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."  

But if the U.S. and world economies are in recession, why are merchandise world trade and U.S. merchandise exports at all-time record high levels, see chart above?  The CPB Netherlands Bureau for Economic Policy Analysis is reporting that world trade increased by 2.5% in May to the highest level on record (see blue line in chart).  May's increase in world trade volume was the highest monthly gain since December 2009.  The slight decreases in Europe's exports (-0.1%) and imports (-0.3%) in May were more than offset by strong gains in Asia's exports (5.1%) and imports (7.8%).  Of course, the CPB reports comes out with almost a 2-month lag, so world trade might have declined in June and July. 

Separately, the IMF's latest World Economic Outlook points to downside risks in Europe and the U.S. that could stall the global economic recovery, but the IMF is still predicting world GDP growth of 3.5% this year and 3.9% next year.  Both of those growth rates would be above the 3.2% average annual growth in global GDP since 1980, and far from the negative growth rates in 2008 Q4 of -7% and -6% in 2009 Q1 during the worst of the global slowdown.        

The BEA reported this week that both total exports ($185 billion) and goods exports ($133 billion, see red line above in chart) reached new record highs in June.  June merchandise exports were 10.6% above the previous peak of $120 billion four years ago, and 61% above the cyclical low of $82.5 billion in 2009.  Similarly, world trade is 6.5% above its previous cyclical high in 2008 and 33% above the cyclical low in 2009. 

Bottom Line: Based on the ongoing increases and record highs for world merchandise trade in May and U.S. merchandise exports in June, and the IMF forecasts for above-average growth in 2012 and 2013,  it seems like it would be hard to make a strong case for either a global or U.S. recession.      

Update: The 174,148 loaded export containers shipped in June from America's largest sea port - Los Angeles - set a new all-time record high for the month of June, and was an increase of almost 7% above the same month last year.   

Friday, August 10, 2012

Coin Scalping: Dime Sells for 16M Times Face Value

The 1873 dime pictured above just sold for $1.6 million at auction, with strong interest and bidding from four or five serious buyers.  Here are the details.

A Michigan lawmaker plans to introduce legislation that would limit the price of tickets for concerts and sporting events to no more than 10 percent above their face value when sold on the secondary market.  State representative Douglas Geiss was upset when he found some $100 Detroit Tigers tickets selling on StubHub for $1,000, and said he found that “usurious.” (I'm 100% certain that Mr. Geiss would gladly sell shares of stock he might own for ten times the price he paid for it, and he would not find that price "usurious".)

Q: What would the politician think about coins sold on the secondary market for prices far above face value like the one above that just sold for 16 million times its face value of 10 cents (and $15,999.999.90 above face value)?  Wouldn't that be a case of usurious "coil scalping"?  

Q: Is there any legal or economic difference between scarce coins and scarce concert tickets that makes "ticket scalping" different from "coin scalping," to the point that one is often illegal (or regulated) and the other is completely legal and unregulated?  

I don't think there is any logical, legal, or economic case that can be made to treat tickets and coins differently, and the prices for both should be determined by market forces, and not limited by some arbitrary "face value." But if anybody (a musician or concert promoter maybe?) wants to make that case that scarce tickets are somehow different than scarce coins, and they should therefore be subject to different legal price restrictions, please do so. And then you'll have to also explain why you think it's acceptable for houses, cars, and bonds to sometimes sell (or "be scalped") above their face values/list prices, but not concert tickets. 

Not Even a Bronze Medal for the Command-and-Control Approach to Olympic Tickets in London

The Fan Freedom Project has been tracking the Summer Olympic ticket fiasco, here's a sample of links below that document how despite the high demand for tickets, there have been a lot of half-empty stadiums because of the lack of an efficient secondary market for tickets.  The economic lesson is that any shortage or surplus is almost always the result of a failure to allow market pricing, and/or preventing markets to operate.     

1. "No Gold Medal for Olympic Ticket Market" - These Olympics provide a disturbing snapshot of what happens when event organizers stack the deck against ordinary fans and try to stop the free market from working.

2. "The London Olympics Ticketing Fiasco" -- A San Francisco woman says she had a "carpe diem" moment (gotta love that) last week and decided at the last minute to attend  the Summer Olympics in London with her two sons.  She reports:

"Booking the flight and hotel room was simple. There was plenty of room on the direct flight from San Francisco to London. We got a great deal at a hotel. Getting tickets to the events? Not so easy."

After describing the details of her difficulties getting tickets, she concludes:

"My hope is that the next Olympic host city outsources their ticketing operations to, or another online retailer that knows a thing or two about high volume Internet commerce. And, hey, corporate sponsors and members of the "Olympic family," give us commoners a break. If you aren't using your tickets, be kind enough to re-sell them. There are a lot of eager buyers out there."

3. From The Economist: "Bring on the Touts" (British term for scalpers):  The author observes that "A command-and-control approach to Olympic tickets works no better than a command-and-control approach to any other market," and he blames the half-empty stadiums on Olympic organizers and Britain’s politicians "for refusing to allow a market in tickets."

Bottom Line: The market for tickets, like all markets, is a harsh mistress.  Attempts to ignore or circumvent incontrovertible market forces will be punished with severe and predictable consequences: shortages, surpluses, and inefficiencies. 

Markets in Everything: Indoor RV Park in N.D.

The video above comes from KARE-11 in Minneapolis, and features the world's first "Indoor RV Park," currently under construction near Williston, North Dakota, as one creative solution to the area's housing shortage.  When completed this fall, the RV complex will accommodate 240 campers at a cost of about $1,500 dollars per month. There will be hook ups for sewer, water, and electricity, and fresh air will also be pumped in to each unit.  

IJ Wins Major Victory for Economic Liberty in Utah

In April 2011, I featured the Institute for Justice's lawsuit challenging Utah's cosmetology cartel on behalf of African hairbraider Jestina Clayton. Prior to the Utah case, the Institute for Justice had successfully challenged state cosmetology regulations in seven states on behalf of hairbraiders, and had never lost a case.  IJ's record against state cosmetology cartels is now 8-0 with a favorable ruling this week in Utah, here are the details:

1. Salt Lake Tribune -- A federal judge said Wednesday the state’s demand that an African hair braider get a cosmetology license was unconstitutional since most of the training required is "irrelevant" to her home-based service.

In ruling in favor of Jestina Clayton, U.S. District Court Judge David Sam cited a 1915 U.S. Supreme Court ruling that held the right to work for a living in common, community-based occupations is the "very essence of the personal freedom and opportunity" protected by the U.S. Constitution.

2.  Institute for Justice --  In a major victory for economic liberty, a federal court ruled late Wednesday that Utah’s requirement that hairbraiders have a government-issued cosmetology license is unconstitutional.  

The Honorable David Sam of U.S District Court for the District of Utah held, consistent with decades of U.S. Supreme Court precedent, that “The right to work for a living in the common occupations of the community is of the very essence of the personal freedom and opportunity that the Constitution was designed to protect.”

IJ President and General Counsel Chip Mellor added, “This is just the most recent decision in a string of decisions by federal courts across the country to protect the constitutional right to earn an honest living.  If the State of Utah decides to appeal, we will vindicate economic liberty again, and we will keep going all the way to the U.S. Supreme Court.  The Constitution does not allow the government to make entrepreneurs jump through pointless hoops.  This is an opinion that will not only help Jestina, but will also help other entrepreneurs nationwide who find their right to economic liberty violated by state and local regulators for no legitimate reason.”

HT: Jake Williams

Pew Research's Latest News IQ Quiz

Test your knowledge about the candidates and the election by taking Pew's 11-question quiz.  Pretty easy questions....

Thursday, August 09, 2012

Pittsburgh and Ohio Rebound With Shale Gas

1. Pittsburgh Rebound -- "Pittsburgh, once known as America’s Steel City, is laying its Rustbelt heritage to rest by fostering growth in education and health services, while drawing strength from the booming natural-gas industry it keeps at a distance. 

Drilling into Marcellus shale deposits is banned in Pittsburgh, yet hydraulic-fracturing, or fracking, operations in the countryside nearby have helped bring in jobs and boost demand for office space in Pennsylvania’s second-biggest city.

New methods of extracting natural gas and oil are boosting the economies of states from Pennsylvania to North Dakota and Texas. Unconventional gas production alone is forecast to spur almost $3.2 trillion in new investment by 2035 and support more than 2.4 million jobs in the lower 48 U.S. states, according to an HIS Inc. study released in June. It projected a 14 percent annual compound-growth rate in Pennsylvania jobs tied to gas." 

2. Ohio Rebound -- "Today, Ohio once again has the opportunity to become an economic power, creating the jobs and economic revitalization that goes along with having reliable, more affordable energy. And once again, the solution lies right beneath our feet in the vast domestic shale formations that hold immense reserves of oil and natural gas. 

The good news is that in Ohio, policies and actions are already encouraging and supporting shale energy development, opening access to new lands and adopting stringent regulatory controls to address potential environmental and public health and safety concerns. As a result, shale energy is expected to contribute 65,000 jobs, with an average salary of $50,225 per job, and more than $4.8 billion to Ohio’s economy by 2014. Nationally, shale energy contributed 600,000 jobs and more than $76 billion to U.S. GDP in 2010 alone.

Here in Ohio, evidence of the potential for this shale-driven economic engine abound. The domestic steel industry, particularly in Youngstown, Canton and the Mahoning Valley, is enjoying its first growth boom since the 1980s, driven largely by the demands of oil and gas producers who need pipe, drilling platforms, heavy equipment and specialty tools. Last year shale development helped to create 2,275 new Ohio jobs and increased Ohio’s gross domestic product by $162 million. And that growth is, in turn, causing an increase in consumer confidence — people are buying cars again, which further increases the demand for steel and increases employment in Ohio.

For the first time in more than 100 years, Ohio has the chance to once again be a leader in the production of oil and gas. Shale energy provides the state a unique opportunity to build on its history to ensure a strong economic future, ensuring more affordable energy while helping to increase our nation’s energy security."

"Taxation Hero": ExxonMobil Paid More Than $1 Trillion in Taxes Since 1999, Three Times Its Profits

Click table to enlarge.
In their July 2012 policy brief "Investment Heroes: Who’s Betting on America’s Future?" Diana Carew and Michael Mandel of the Progressive Policy Institute (PPI) recognized 25 American companies as "Investment Heroes" of 2012 for their collective investment of $136 billion in U.S. capital expenditures.  Ranked as America's third largest "investment hero" was ExxonMobil, for its $11.7 billion of investment spending in the U.S. last year building oil and natural gas pipelines and exploratory costs for new sources of oil and gas. 

In a Forbes article today, "Taxation Hero: ExxonMobil Pays $3 In Taxes For Every $1 In Profit," AEI's Nick Schulz points out that since Exxon and Mobil merged in 1999, the energy giant has paid more than $1 trillion in taxes to various governments, see chart above.  Nick conludes: 

"That’s more than double its net cash flow over the same period and almost three times its profits of $352 billion.  Think about what this means: For every dollar in profits it earns for its shareholders, ExxonMobil earns nearly three dollars for governments.

Here’s an idea: Mandel and his team might also want to compile a list of “taxation heroes” given the enormous sums of money firms such as ExxonMobil pour into government coffers."

MP: I concur and hereby nominate ExxonMobil as a model, American "taxation hero" for its $1 trillion of tax payments over the last thirteen years.   In 2011 alone, ExxonMobil's total tax bill was an eye-popping $104.52 billion, which works out to $286 million in taxes every day, $11.9 million in taxes every hour and a tax bill of almost $200,000 every minute.

Further, ExxonMobil paid more than $3 in taxes last year ($104.52 billion) for every one dollar it spent on "capital and exploration expenditures" ($33 billion total, of which $11.7 billion PPI says was invested in the U.S.).  If ExxonMobil deserves "Investment Hero" status for its capital expenditures last year, it certainly deserves "Taxation Hero" status for its even much greater spending on taxes.  

Mich. Politician Objects to Tickets Selling for 10X Face Value, What About Tickets 10X Below Face?

Detroit News -- "A state representative said Friday 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, 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."

Geiss said after seeing infield box seats listed at 10 times face value on StubHub, he discovered Michigan case law allows venue operators to grant permission to resell tickets, but nowhere in the law does it permit the markup price on those tickets."
To Rep. Geiss: What about tickets that are selling for 10 times below face value, wouldn't you consider that to be as objectionable as tickets that are selling for 10 times above face value?  That is, if a ticket selling for 10 times its face value implies that the seller is "scalping" the buyer, then wouldn't a buyer of a ticket priced at 10 times below its face value be "scalping" the seller?  

Exhibit A: Some $52 face value tickets for the Detroit Lions-Cleveland Browns pre-season game tomorrow night (August 10) are selling for as low as $5 on SeatGeek and eBay.

Therefore, in the interest of fairness and to prevent buyers from taking advantage of ("scalping") sellers, would you consider including in your bill a provision that would cap the discount on tickets sold in the secondary market to 10 percent below face value, along with a cap of 10 percent above face value? 

Wednesday, August 08, 2012

Target Gives $3 Million a Week to Its Communities. Q: Aren't Its Prices Too High, or Wages Too Low?

The Minneapolis-based Target Corporation makes a big deal about its "caring for the community" and brags on its website and in its stores that "since 1946, Target has given 5% of our income - which today totals more than $3 million a week - to our communities" (see graphic above).   

Q1: Doesn't that mean Target is really overcharging its customers with "everyday high prices" in amounts that are sufficient to generate the $3 million necessary to give those dollars back every week to the very communities where Target shoppers live?  

Q2: Couldn't Target give the $3 million back to its communities more directly by just lowering its prices, or having more sales? 

Q3: Alternatively, if Target has $3 million every week to give back to its communities, doesn't that mean Target is really underpaying its employees in amounts sufficient to generate the $3 million extra it needs to give back to the very communities where Target employees live?

Q4: Couldn't Target give $3 million to the communities it serves more directly by just increasing its wages for hourly employees, who are members of "Target's communities"?  

Q5: What does Target mean by "our income"?  Isn't that really the shareholder's income, and why is Target management spending $3 million of shareholder income every week on community giving?  

Q6: Couldn't that $3 million per week be paid out in dividends to shareholders, who could then decide how best to spend their money?    

Bottom Line:  Isn't Target's strategy just a deceptive publicity stunt or public relations gimmick that allows it to overcharge customers with high prices and/or underpay its employees with low wages, under the guise of a "caring corporation"? 

I'd love to see this advertisement from a retail giant

"Our rock-bottom prices are so low and our wages are so high that we give money directly back to our communities daily through our "everyday low prices" and "everyday high wages."  We believe that's a more effective, direct and honest strategy of serving our communities than if we were to over-charge customers with high prices and/or under-pay employees with low wages and then generate publicity by bragging about how we give back 5% of our inflated profits to the community. Our goal is to cut out the charitable foundation middlemen with expensive overhead, bureaucracy, and administrative costs, and serve our communities by giving money directly to our customers and employees through low prices and high wages. Our commitment to publicized community giving is 0%, because we've already given everything we can through low prices and high wages, and after a normal rate of return for our shareholders, we've got nothing left to give back."  

Update: The chart below shows the performance of Target (blue line) vs. Walmart (green line) over the last five years -- Target stock has been flat (0% return), while Walmart stock has appreciated by 60% since 2007.  While other factors could certainly be playing a role in the financial performance of the two companies, we do know that Target was selling for about $60 in August of 2007 and it's selling for about that same price today.  During the same period, Walmart's stock has increased from about $45 to $75.  Judging by their stock prices, Walmart's "everyday low prices" is apparently a more effective corporate strategy than Target's strategy of high prices and $150 million a year in community giving? What might Target be selling for today if instead of spending $750 million over the last five years on charity, it had repurchased $750 million of its shares?       

Markets in Everyting: 3D Printed Fetus

Japanese company will 3D print your fetus for $1275

Wednesday Evening Links

1. Late Payments on Mortgages Hit a Three-Year Low of 5.5% in Q2, Lowest Since Q1 2009.  America's most economically successful state, North Dakota, leads the country with the lowest mortgage delinquency rate in Q2 for any state, at only 1.3%.     

2. If you tax something, you get less of it, French edition:

As French President François Hollande vows to tax income above one million euros at 75%:

"Many companies are studying contingency plans to move high-paid executives outside of France, according to consultants, lawyers, accountants and real estate agents. They say some executives and wealthy people have already packed up for destinations like Britain, Belgium, Switzerland and the United States, taking their taxable income with them. They also know of companies — start-ups and multinationals alike — that are delaying plans to invest in France or to move employees or new hires here."

3. U.S. cross-border truck trade with Mexico rose by 17.1% in May year-over-year to an all-time record monthly high of $29.1 billion, reflecting the steadlily increasing trade between the NAFTA members and growing consumption by the Mexican middle class.

4. Interesting interactive map from the EIA showing the energy infrastructure of the Gulf of Mexico.  

5. Chimera Energy Corporation of Houston, Texas, has announced that it is licensing a new water-less method for extracting oil and gas from shale fields that uses exothermic reactions instead of water to fracture shale.

6. Justice Department hits Gibson Guitar with a $300,000 fine over fingerboards.  

Why Taxpayer Subsidies of Solar Are Diabolical

From a "rare guest post" on Steven Landsburg's The Big Questions blog by David Bergeron, president and founder of solar-powered refrigerator company Sundanzer:

"Here is the real problem: Subsidies make solar appear viable today, so where is the motivation for an entrepreneur to risk money, or even focus on developing real energy alternatives when solar is “almost” there? How can an inventor justify striving with the effort it takes to really develop something great when he is competing against a straw man technology which can provide power at almost the same cost of traditional power sources today? But of course it really doesn’t.

The answer is he can’t justify the effort, so the next great thing is not developing, at least not with the sense of urgency it should be. Why enter a contest when you are competing against someone with an unfair advantage? You may be the faster swimmer, but your competitor is using flippers.

Solar subsidies are a placebo which is giving the general public a sense of security about our energy future and is robbing the motivation of those entrepreneurs that could actually address our energy problems. Subsidies are much worse that just wasteful, they’re diabolical. They lull us into thinking we have almost solved the problem and they hinder us from seeking the real solutions."

HT: Jon Murphy

Tuesday, August 07, 2012

$1.3B Greendoggle in Sen. Reid's Nevada: $4.6 Million per Job, and 4X the Cost of Fossil Fuels

LAS VEGAS (NEVADA JOURNAL) — "As U.S. Senate Majority Leader Harry Reid prepares to host his fifth annual National Clean Energy Summit on Aug. 7, a Nevada Journal examination of Nevada’s renewable energy sector shows that over $1.3 billion in federal taxpayer funds funneled into geothermal, solar and wind projects since 2009 has yielded and is projected to yield just 288 permanent, full-time jobs. That’s an initial cost of over $4.6 million per job.

Despite this, Sen. Reid continues to hype Nevada as the “Saudi Arabia of renewable energy,” even though the renewable energy subsidized with federal taxpayer dollars and mandated under Nevada’s Renewable Portfolio Standard costs consumers and NV Energy, Nevada’s publicly regulated utility company, up to four times as much as fossil fuels, such as natural gas.

Even with these government-granted advantages, the few clean-energy jobs in the state of Nevada are still precarious."

Read more here

June Job Openings Highest in Four Years

Highlights from today's Job Openings and Labor Turnover report from the BLS:

1. There were 3.76 million total job openings and 3.4 million private job openings on the last day of June, up from 3.65 million openings and 3.28 million, respectively, in May. The number of job openings has been steadily trending upward since the end of the recession in June 2009 (see top chart above).

2. Private job openings in June were at the highest level in more than four years, since May 2008, and total June job openings were the highest since July 2008. 

3. The overall number of seasonally adjusted job openings in June increased over the year by 16% and for total private openings by almost 17%.  Openings for government jobs fell by 12.8% over the year.

4. June job openings in the manufacturing sector were above 300,000 for the second time this year, a level of factory job openings not seen since 2007. 

5. In another sign that the labor market is slowly recovering, the number of private workers voluntarily quitting their jobs has been steadily increasing since the recession ended and been around the 2 million level for the last four months starting in March.  That's up by about 31% since the recession-related low of 1.51 million quits in September 2009.   

CoreLogic Home Price Indexes Increase in June for 4th/5th Month, With Highest Yearly Gains in 6 Yrs.

CoreLogic released its monthly report today on June home prices based on its Home Price Index (HPI), along with its new Pending HPI for July, with these highlights:

1. Home prices nationwide, including distressed sales, increased on a year-over-year basis by 2.5 percent in June 2012 compared to June 2011 (see top chart above). On a month-over-month basis, including distressed sales, home prices increased by 1.3 percent in June 2012 compared to May 2012. The June 2012 figures mark the fourth consecutive increase in home prices nationally on both a year-over-year and month-over-month basis.

2. Excluding distressed sales, home prices nationwide increased on a year-over-year basis by 3.2 percent in June 2012 compared to June 2011. On a month-over-month basis excluding distressed sales, home prices increased 2.0 percent in June 2012 compared to May 2012, the fifth consecutive month-over-month increase. Distressed sales include short sales and real estate owned (REO) transactions.

3. The CoreLogic Pending HPI indicates that July home prices, including distressed sales, will rise by at least 0.4 percent on a month-over-month basis from June 2012 and by 2.0 percent on a year-over-year basis from July 2011. Excluding distressed sales, July house prices are also poised to rise by 1.4 percent month-over-month from June 2012 and by 4.3 percent year-over-year from July 2011. The CoreLogic Pending HPI is a new and exclusive metric that provides the most current indication of trends in home prices. It is based on Multiple Listing Service (MLS) data that measure price changes in the most recent month.

4. “At the halfway point, 2012 is increasingly looking like the year that the residential housing market may have turned the corner,” said Anand Nallathambi, president and CEO of CoreLogic. “While first-half gains have given way to second-half declines over the past three years, we see encouraging signs that modest price gains are supportable across the country in the second-half of 2012.”

MP: A few more of my own highlights:

1. For CoreLogic's HPI excluding distressed sales, the 3.2% gain in June was the largest annual increase in six years, going back to the summer of 2006. 

2. For CoreLogic's combined HPI (including distressed sales), there were 15 states in June with 12-month increases of 4% or higher and 7 states with 12-month increases of 6% or more (see map above), led by Arizona (13.8%), Idaho (10.4%), South Dakota (10.1%), Utah (8.3%), Wyoming (7.7%), N. Dakota (6.3%) and Colorado (6.2%).

Bottom Line: With almost every new real estate report, evidence continues to accumulate that the housing market has passed the bottom and is in a new cycle of sustainable recovery.  Look for ongoing increases in home prices during the month of July, based on CoreLogic's Pending HPI estimate of a 4.3% gain, which would be the largest 12-month gain in more than six years. 

Natural Gas Production Sets New Records in May as Marcellus Shale Becomes Country's Top Producer

Updated EIA data on monthly natural gas production in the U.S. through May is displayed above, and shows that both "gross withdrawals" and "marketed production" of natural gas set new monthly all-time records on a 12-month moving average basis (to smooth out monthly variations).  Other highlights include:

1. Gross withdrawals of natural gas in May set a new record for the month of May, and were 4.4% above last year and 7.2% above last year for the January-May period. 

2. Marketed production of natural gas in May was 4.3% above last year, and it was also the highest-ever production level for the month of May, and 7.1% above last year for the January-May period.  

3. Over the last four years, both measures of natural gas production have increased by almost 20%.  

Where are the significant increases in natural gas production taking place? A lot of the increase is coming from the Marcellus Shale region, which is about to become the most productive natural gas field in the U.S., according to this new Associated Press report:
Though serious drilling began only five years ago, the sheer volume of Marcellus production suggests that in some ways there's no going back, even as New York debates whether to allow drilling in its portion of the shale, which also lies under large parts of Pennsylvania, West Virginia, and Ohio.

In 2008, Marcellus production barely registered on national energy reports. In July, the combined output from Pennsylvania and West Virginia wells was about 7.4 billion cubic feet per day, according to Kyle Martinez, an analyst at Bentek Energy. That's more than double the 3.6 billion cubic feet from April, and represents more than 25 percent of national shale gas production.

That's neck and neck with production from the Haynesville region in Arkansas and Texas, but new drilling permits there have declined sharply.

The Powell Shale Digest, an industry newsletter based in Fort Worth, Texas, concluded that a recent report from the U.S. Energy Information Agency means "it is reasonable to assume" the Marcellus has or will soon pass Haynesville as the top producer. The Marcellus Shale is a gas-rich formation of rock thousands of feet below ground. Advances in drilling technology made the shale accessible, which led to a boom in production, jobs, and profits, and a drop in natural gas prices for consumers.
MP: At the same time that natural gas production continues to increase, spot prices are also rising, and natural gas is now selling at $3.20 per million BTUs, the highest level since November 2011.  The higher prices are likely reflecting higher demand from electric utilities and industrial customers, and will naturally support ongoing increases in natural gas production. 

Monday, August 06, 2012

Markets in Everything: Salt Gun for Shooting Flies

The original salt gun for shooting flies from Bug-a-Salt

HT: Robert Wright

Economist Paul McCracken, 1915-2012, R.I.P.

Economist Paul McCracken on his 95th birthday.
Legendary economist Paul W. McCracken died last Friday in Ann Arbor, Michigan at the age of 96.  In addition to being a professor of Business Administration, Economics, and Public Policy at the Ross School at The University of Michigan since 1948, Paul McCracken served as an economic adviser to Presidents Nixon (chair, Council of Economic Advisers), Eisenhower (member, Council of Economic Advisers), Kennedy (member, task force on the domestic economy) and Johnson (member, Commission on Budget Concepts) from the 1950s through the 1970s.  McCracken was associated with The American Enterprise Institute in Washington, D.C. and chaired AEI's Council of Academic Advisers in the 1980s and also served as interim president of the institute in 1986.

Here are some related links:

1.  Around the time of his 95th birthday in February 2011, I featured Paul McCracken on CD.  At the time, he was still keeping regular office hours at the University of Michigan at age 95!  I featured a quote from Professor McCracken explaining why he opposed President Nixon's "temporary, 90-day" wage and price controls in 1971, which ended up lasting until 1974:

"I thought price controls were a bad idea for a very simple reason. You couldn't look back into history and point to a success story."

That's some timeless economic logic from Professor McCracken that is still relevant today and should be more widely observed by politicians who advocate price controls like the minimum wage, ticket re-sales (Michigan politician wants to limit the markup on tickets sold on the secondary market t0 10% above face value), and rent control.

2. Paul McCracken's New York Times obituary.

3. Washington Post article on Paul McCracken.   

4. Notice from the Ross School of Business

5. Article in the Michigan Daily (student newspaper in Ann Arbor).

Note: Paul and I served together on the Mackinac Center for Public Policy's Board of Scholars for the last 15 years, and I was privileged to have met him several times and will fondly remember those encounters.  For a scholar of such impressive accomplishments, he was one of the most friendly, gracious and approachable people I have ever met.    

Sunday, August 05, 2012

Recent Readings from Five Different Economic and Financial Indicators Suggest No Signs of Recession

"The Aruoba-Diebold-Scotti (ADS) business conditions index is designed to track real business conditions at high frequency. Its underlying (seasonally adjusted) economic indicators (weekly initial jobless claims; monthly payroll employment, industrial production, personal income less transfer payments, manufacturing and trade sales; and quarterly real GDP) blend high- and low-frequency information and stock and flow data.

The average value of the ADS index is zero. Progressively bigger positive values indicate progressively better-than-average conditions, whereas progressively more negative values indicate progressively worse-than-average conditions. The ADS index may be used to compare business conditions at different times. A value of -3.0, for example, would indicate business conditions significantly worse than at any time in either the 1990-91 or the 2001 recession, during which the ADS index never dropped below -2.0."

MP: The chart above displays the daily ADS index from the beginning of 2000 through the end of July.  Recent values of the ADS business index are close to zero and have gradually been increasing from the recent lows in March.  This real-time measurement of business conditions is indicating no statistical evidence of a recession, and is in fact providing support for business conditions that are close to average.

Recent readings from other financial and economic indicators are also showing no evidence of  recessionary conditions in the U.S. economy including:

1. Bloomberg's "U.S. Financial Conditions Index" has been rising for the last year, indicating a gradual and ongoing improvement for the underlying conditions in the U.S. financial markets. 

2.  The Chicago Fed National Financial Conditions Risk Subindex is at the lowest (best) level in more than a year, and has been declining (improving) since the beginning of the year. 

3. The St. Louis Financial Stress Index has been trending downward (improving) since last October and is back to pre-recession 2007 levels.  

4. The Kansas City Financial Stress Index has been below zero for the last five months (a sign of low stress), and this measure of financial stress is also now back to pre-recession 2007 levels.    

Bottom Line: Where's the recession?  Surely there would be indications from at least one of these five measures of economic and financial conditions if the economy was weakening to the point that a recession was underway or pending?  All five indicators accurately signaled the last recession in 2007-2009, so they can't all be wrong this time, can they?

EIA Revises Estimates of America's Energy Bonanza: Record Increases in Proved Reserves of Oil and Gas

On Wednesday, the U.S. Energy Information Administration (EIA) updated its estimates of America's proved reserves of oil and natural gas for 2010.  Here's a summary of the key findings:

1. Proved reserves of both oil and natural gas in 2010 rose by the highest amounts ever recorded in the 35 years EIA has been estimating U.S. proved reserves.

2. Technological advances in drilling and higher prices contributed to gains in reserves. The expanding application of horizontal drilling and hydraulic fracturing in shale and other "tight" formations, the same technologies that spurred substantial gains in natural gas proved reserves in recent years, played a key role. Further, rising oil and natural gas prices between 2009 and 2010 likely provided incentives to explore and develop more resources. 

3. Oil proved reserves rose 12.8% to 25.2 billion barrels in 2010, marking the second consecutive annual increase and the highest volume since 1991 (see chart above). 

4. Natural gas proved reserves (estimated as "wet" natural gas, including natural gas plant liquids) increased by 11.9% in 2010 to a record-high 317.6 trillion cubic feet (Tcf), the twelfth consecutive annual increase, and the first year U.S. proved reserves for natural gas surpassed 300 Tcf (see chart above).

5. Proved reserves reflect volumes of oil and natural gas that geologic and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.   

John Hanger provides this commentary on the EIA report:

"Most impressively, proved gas reserves in 2010 were up 50% compared to the 2005 number or the 1980 number.  That's right, our proved gas reserves are 50% higher in 2010 than 30 years ago, despite using a lot of gas during that 30 year period.

Indeed, during the last 30 years, the country consumed more than double the amount of our 1980 proved gas reserve number. How could that be? Exploration and production activities are never ending. They keep filling the U.S. natural gas cup that has never emptied and is now overflowing.

So our proved reserves of natural gas have gone up for 12 straight years, increased during 2010 by the highest amount in 35 years, and are 50% higher than in 2005 or 1980." 

MP: The EIA's significant upward revisions for proved reserves of U.S. oil and gas provide more evidence that America's job-creating, game-changing, economic-stimulating energy bonanza just keeps getting better and better all the time.

As Walter Russell Mead wrote recently:

"Nature — or perhaps Nature’s God — seems to love mocking pundits. Just when the entire punditocracy, it sometimes seemed, had bought into the “American decline” meme, Europe collapsed and huge energy reserves were discovered underneath the United States. The “special providence” that observers have from time to time discerned in America’s progress through history doesn’t seem to be quite finished with us yet."

The Real Internet Came from Spontaneous Order

From a 1998 article in The Freeman by Andrew Morris:
The Internet today bears little resemblance either to what the government wanted to build or to what it actually built. The innovations in networking that produced today’s Net occurred as much despite government funding as because of it. If anything, therefore, the Internet represents the success of spontaneous ordering over central planning, not the successful design of a new technology by the state.

Today’s Internet is the embodiment of a spontaneous order in many ways. No agency or board controls it. No central planner decides how it will operate. It ignores national borders. It has changed the world.

Yet a few years ago, little of what we know today as the Internet existed: no bookstores, no Web pages, little public access beyond academic institutions. Before the Internet, there was ARPANET—the Advanced Research Projects Agency Network—a U.S. Department of Defense (DOD) network that is often described as the forerunner of today’s Internet. The ARPANET connection is thus the source of the “we wouldn’t have it without the government” story.

Unlike the mythical Internet that sprang forth from the ARPANET, the real Internet grew out of a spontaneous ordering process of the interactions of millions of individual users. The uses we make of the Internet were unimaginable to the researchers and scientists who created the networking protocols and hardware advances we rely on today. Far from being the result of the government’s “strategic” investment in the original Defense Department networks, today’s Internet developed at most accidentally from and often in spite of those investments. The explosive growth in commerce, for example, became possible only when the government’s ban on commercial use of the networks it financed was lifted.

Moreover, the “strategic” nature of the early investment in networking is a myth. No one consciously created the Internet. While an international network of networks undoubtedly would look different today had ARPANET never existed, there is also little doubt that packet-switching and e-mail would have evolved anyway. Dedicated, motivated people with a need to communicate—for commercial and noncommercial purposes—would have surely seen to it.
HT: John Stossel via Warren Smith