Amazon Economics: The Amazon Doctrine
In the video above, while unveiling the new Kindle Fire HD tablets, Amazon CEO Jeff Bezos explains one the reasons for Amazon's amazing success starting about 1:05:00, it's called:
Professor Mark J. Perry's Blog for Economics and Finance
The jobs report today was pretty grim even though the jobless rate fell to 8.1%. But there's at least one place where the job market is booming like never before, where the state jobless rate is only 3%, where there are ten counties with jobless rates below 2% and where one county with a jaw-dropping 0.7% unemployment rate: North Dakota.
The blue line in the chart above displays total annual print newspaper advertising revenue (for the categories national, retail and classified) based on actual annual data from 1950 to 2011, and estimated annual revenue for 2012 using quarterly data through the second quarter of this year, from the Newspaper Association of America (NAA). The advertising revenues have been adjusted for inflation using the CPI, and appear in the chart as millions of constant 2012 dollars. Estimated print advertising revenues of $19.0 billion in 2012 will be the lowest annual amount spent on print newspaper advertising since the NAA started tracking ad revenue in 1950.
CNBC's Diana Olick reports that:
After losing 70 percent of their business in the housing crash, the nation's home builders are breaking ground again. New orders for homes are rebounding strongly, and housing starts have shown sustained growth over the past year. The demand is there; unfortunately, in some areas, the workers to build these homes are not.Update: In today's Monster Employment report, they are reporting a 6% overall increase in online job postings for August compared to a year ago, while online listings for construction jobs increased by 9% versus last year.
Many former construction workers moved on to facilities maintenance work or remodeling, or whatever jobs they could find. Replacing them is difficult because today's market demands highly skilled workers, and there is simply no available base. In the past, builders would hire workers and train them on the job.
"They don’t have the luxury of that now," says John Courson, CEO of the Home Builders Institute, an industry training group. "They want workers that are available to them, that come out trained with a skill, and ready to hit the ground working. They don’t want the expense of on the job training.”The shortage is across the spectrum, but especially in need are framers, concrete workers, plumbers, roofers and painters. The shortage is also felt most in areas where housing is coming back strongest, and permitting is easiest, like Texas and much of the West. The situation is not nearly as dire in the Northeast, where home building volume is smaller, and it can take years to get a project off zoned and ready to build. Still, as construction across the nation pulls itself off life support, the bitter irony persists. After years of nobody knocking on the door, suddenly this industry is struggling to meet demand.
To the MBA students at the Flint campus of The University of Michigan who are enrolled in MGT 551 (Business Economics) for the Fall term 2012:
MP: Taxes are always distortionary, for one reason: People can change their behavior to avoid them, as this case demonstrates.Only one year after its implementation, the Danish government is planning to scrap the “fat tax.” The reason why: reports show that it simply doesn't work.Denmark is now likely to abolish the tax levied on saturated fats, as empirical evidence shows that its negative effects outweigh the benefits for the Danish Treasury. In particular, reports point to job losses in the food processing industry and Danes crossing the German border to buy cheaper products.The proposals to scrap the fat tax have been included in the 2013 draft budget, which is currently under consideration by Parliament. Under current law, Denmark is applying a tax of DKK16 ($2.40) per kg of saturated fat on food items. This tax was introduced back in autumn 2011 to combat obesity and raise tax revenues.
From today's San Francisco Chronicle, an article about how social media, smart-phone technology and "on-demand ridesharing" is challenging the city's taxi cartel:
The taxi business in San Francisco is famously fractious. "It's like a car crash - you can't look away," says Hansu Kim, owner of DeSoto Cab Co. Drivers and cab companies bicker, freelance town cars poach fares, and there are not enough cabs on the streetHT: Morgan Frank
That's how it has been for years, which is why it's been easy for some savvy startups to jump into the market. They've invented smartphone apps that combine ride sharing, social media and (in one case) pink mustaches to capture a trendy new way to get around town. Suddenly, a taxi looks old, dated and sadly unhip.
The startups - SideCar, Lyft, Uber, RelayRides and Getaround - let riders pay with a preloaded credit, request a ride with a click of a smartphone and track it in real time on a Google map. It's far more efficient than calling a switchboard, talking to a surly dispatcher and standing on the corner at 2 a.m. wondering whether a cab would show up.
"We are offering a more enjoyable alternative," said John Zimmer, co-founder of Lyft, which uses cars with pink mustaches. "We offer a marginally less-expensive experience with extreme convenience and personality experience."
The popularity of these companies is forcing taxi folks to realize they need to make changes. "The industry is spoiled," said Kim. "Many of the ills have been self-inflicted."
1. Global outplacement consultancy Challenger, Gray & Christmas announced today that:
Marginal Revolution bloggers, economists, and George Mason University professors Tyler Cowen and Alex Tabarrok announced today the creation of Marginal Revolution University. The first course to be offered will be Development Economics, taught by Tyler and Alex. Here are posts today at the Marginal Revolution blog from Tyler and Alex.
CNBC reporter Frank Byrt travelled to the Bakken region of North Dakota and wrote this report:
Among the biggest beneficiaries of the demand for transport of crude oil out of North Dakota’s Bakken shale region are the owners of the two main rail links to the region, Canadian Pacific Railway and Burlington Northern Santa Fe, which is owned by Warren Buffett’s Berkshire Hathaway.MP: The chart above shows annual rail car shipments of oil for the years 2007 to 2011 according to rail traffic reports from the American Association of Railroads, and an estimate for 2012 shipments based on data through Week 34 of this year. The number of carloads transporting oil this year will likely be at least 35% ahead of last year. Rail shipments of oil year to date this year are 41% ahead of last year, and shipments for Week 34 (the week ending August 25) were 56% above the same week last year.
The companies are exploiting the lack of pipeline capacity needed to ship the region’s rapidly growing production of crude to refineries thousands of miles away, and that demand is serving to more than offset expected weakness from their shipment of agricultural products due to the drought and lower coal shipments as utilities shift to burning the cheaper natural gas.Oil production from the 200,000-square-mile Bakken basin, which extends into Montana and southern Canada, is skyrocketing, thanks in part to the use of hydraulic fracturing, or hydro-fracking, a process where a mixture of water, sand and chemicals is blasted deep underground to release oil and natural gas trapped within shale rock.My recent visit to the Bakken underscored the importance of rail traffic to the region, as this projected long-term boom, still in its infancy, is in dire need of infrastructure to support it.
That means material for the build-out of roads, housing, pipelines, and oil-storage facilities has to be shipped in, in addition to the pipes, machinery, chemicals and sand used in the hydro-fracking drilling process creating high demand for inbound rail traffic, while oil is being shipped out over the same rail network.
From Trulia’s press release today:
Trulia today released the latest findings from the Trulia Price Monitor, the earliest leading indicator available of trends in home prices. Based on the for-sale homes listed on Trulia, this monitor takes into account changes in the mix of listed homes and reflect trends in prices for similar homes in similar neighborhoods through August 31, 2012. (Note: The Price Monitor leads the commonly watched sales price indexes by several months, see details here.)
Asking prices on for-sale homes–which lead sales prices by approximately two or more months – increased 2.3% in August year over year (YoY) and rose in 68 of the 100 largest metros. Excluding foreclosures, prices rose 3.8% YoY. These are the largest YoY gains since the recession. Meanwhile, asking prices rose nationally 1.8% quarter over quarter, seasonally adjusted. Month-over-month asking prices rose by 0.8%, the seventh consecutive month of increases (see chart above).
Jed Kolko, Trulia’s Chief Economist commented, “Asking prices rose 2.3% year over year in August, hitting two housing recovery milestones. First, asking prices rose faster than at any time since the recession. Second, asking prices excluding foreclosures are now rising faster than wages, putting an end to many years of affordability gains. In addition, price gains are catching up with slowing rent increases, which will tip some renters in favor of staying put in their rentals rather than buying a home."
Business owner and blogger Warren Meyer explains at his Coyote Blog how the California Department of Labor forces employers to force employees to take an unpaid 30-minute lunch, even when employees want to work through lunch and get paid and employers agree. Here's part of Warren's post:
Theoretically, under California law, employees have a choice - work through lunch and get paid while eating at the job post, or employees can leave the job post for 30 minutes for an unpaid lunch break. As background, every one of our employees have always begged to have the paid lunch because they need the extra 30 minutes of pay.HT: Morgan Frank
Unfortunately, it does not matter what preferences the employee expressed on the job site. In the future, the employee can go to the labor department and claim he or she did not get their break, and even if they did not want it at the time, and never complained to the employer about not getting it. The employer always, always, always loses a "he-said-she-said" disagreement in a California court or review board. Always.
So, we find ourselves at the bizarre crossroads of making working through lunch a fireable offense, and employees who generally want to work an extra thirty minutes each day to earn more money are not allowed to do so. Yet another example of laws that are supposed to be "empowering" to employees actually ending up limiting their choices.
1. Northwest Natural Gas Co. has asked Oregon regulators for permission to reduce rates for residential customers by 8% and commercial users by 9%. The Portland-based company also filed a request in Washington to curb residential rates there by 9% and commercial rates by 9.5%, because of the "oceans of natural gas" in the U.S. and historic low prices.
From the newsroom at the University of Nebraska-Lincoln:
As predicted several weeks ago by J.D. Power based on the first 16 selling days of August, U.S. new car sales did reach a four and-a-half year high last month. Slightly more than 14.5 million units were sold in August (at an annual rate, seasonally adjusted), which was an increase of 20% from a year earlier (exactly as predicted by J.D Power), and the highest sales month since March 2008. By individual auto company, Honda had the largest annual increase of 59.5% in August, followed by Volkswagen at 48.2%, and Toyota at 45.6%. Chrysler led the Big Three with a 14.1% increase, followed by Ford's 12.6% gain and GM's 10.1% increase. On a year-to-date basis, U.S. auto sales are 14.7% above last year.
From the Time Magazine article titled "Why We're So Gloomy" (full article is behind paid firewall):
Well, why are Americans so gloomy, fearful and even panicked about the current economic slump? U.S. consumers seem suddenly disillusioned with the American Dream of rising prosperity. Hard times are forcing some people to turn their back on the American Dream.MP: Note that this article appeared in Time Magazine's January 13, 1992 issue, although it could have just as easily been written at any time during the last several years. The article was written almost a year after the July 1990-March 1991 recession had officially ended, and in the first year of a 10-year expansion that ended up being the longest and strongest economic expansion in the history of the country (from March 1991 to March 2001).
"Whining" hardly captures the extent of the gloom Americans feel as the current downturn. The slump is the longest, if not the deepest, since the Great Depression. Traumatized by layoffs that have cost million of jobs during the slump, U.S. consumers have fallen into their deepest funk in years.
While some economists have described the current slump as a near depression, that phrase overstates the case if it is taken as a comparison with the period 1929-33, when the U.S. economy contracted by nearly a third. The D word becomes more valid, especially with a small d, when it is used to compare the growth rate of the 1930s, which averaged 0.5% a year, with the expected sluggishness of the next decade, which some economists predict will see an average growth rate of 2%.
"I'm worried if my kids can earn a decent living and buy a house," says Tony Lentini, vice president of Mitchell Energy in Houston. "I wonder if this will be the first generation that didn't do better than their parents. There's a genuine feeling that the country has gotten way off track, and neither political party has any answers. Americans don't see any solutions."
The deeper tremors emanate from the kind of change that occurs only once every few decades. America is going through a historic transition from a heedless borrow-and-spend society to one that stresses savings and investment. When this recession is over, America will not simply go back to business as usual.
The underlying change in the way American consumers and business leaders think about saving and spending will make the recovery one of the slowest in history and the next decade one of lowered expectations. Many economists agree that the U.S. will face at least several years of very modest growth as consumers and companies work off the vast debt they assumed in the last decade.
"Never in my adult life have I heard more deep-seated feelings of concern," says Howard Allen, retired chairman of Southern California Edison. "Many, many business leaders share this lack of confidence and recognize that we are in real economic trouble."
Says University of Michigan economist Paul McCracken: "This is more than just a recession in the conventional sense. What has happened has put the fear of God into people."
If America's economic landscape seems suddenly alien and hostile to many citizens, there is good reason: they have never seen anything like it. Nothing in memory has prepared consumers for such turbulent, epochal change, the sort of upheaval that happens once in 50 years. Even the economists do not have a name for the present condition, though one has described it as "suspended animation" and "never-never land."~Time Magazine cover story "The Long Haul" (click to see the date of the article, text above was modified slightly from the original).
The outward sign of the change is an economy that stubbornly refuses to recover from the recession. The current slump already ranks as the longest period of sustained weakness since the Great Depression. That was the last time the economy staggered under as many "structural" burdens, as opposed to the familiar "cyclical" problems that create temporary recessions once or twice a decade. The structural faults represent once-in-a-lifetime dislocations that will take years to work out.
Among them: the job drought, the debt hangover, the banking crisis, the real estate depression, the health-care cost explosion and the runaway federal deficit. "This is a sick economy that won't respond to traditional remedies," said Norman Robertson, chief economist at Pittsburgh's Mellon Financial. "There's going to be a lot of trauma before it's over."
The photo above comes from Wordsmith.org, with the following comments from the website's founder Anu Garg:
If there's an apostrophe hell this has to be it. If you see that fellow with his banner, ask him, "Why do you ♥ the apostrophe so much? Repent and believe in grammar."HT: Larry Terry
My thank's to the reader who sent me that mans photo.
From the August 31 Financial Times article "Field of dreams: Israel’s natural gas":
For decades a barren energy island, forced to import every drop of fuel, Israel today stands on the cusp of an economic revolution, fueled by the vast riches that lie below its waters.And it's not just natural gas, Israel also might have as much as 250 billion barrels of shale oil in the recently discovered Shfela Basin southwest of Jerusalem (see map below), according to this July 13 article in the Financial Post article titled "Israel's Shale Gale."
With reserves of almost 10 trillion cubic feet of natural gas, the Tamar field is a hugely valuable asset for the Israeli economy (see map above). Discovered in January 2009, it was the biggest gas find in the world that year, and by far the biggest ever made in Israeli waters. But the record held for barely two years. In December 2010, Tamar was dwarfed by the discovery of the Leviathan gasfield some 20 miles farther east – the largest deepwater gas reservoir found anywhere in the world over the past decade.
The two fields, together with a string of smaller discoveries, will cover Israel’s domestic demand for gas for at least the next 25 years, and still leave hundreds of billions of cubic feet for sale abroad. The government take from the gasfields alone is forecast to reach at least $140 billion over the next three decades – a staggering sum for a relatively small economy such as Israel’s.
Experts are convinced that Tamar and Leviathan will not be the last big Israeli discoveries. They point to the US Geological Survey, which estimates that the subsea area that runs from Egypt all the way north to Turkey, also known as the Levantine Basin, contains more than 120 trillion cubic feet of natural gas. Israeli waters account for some 40 per cent of the total. Should these estimates be confirmed through discoveries in the years ahead, Israel’s natural gas reserves would count among the 25 largest in the world, on a par with the proven reserves of Libya and ahead of those of India and The Netherlands.
Richard Eggers doesn't look like a mastermind of financial crime. The former farm boy speaks deliberately, can't remember the last time he got a speeding ticket, and favors suspenders, horn-rim glasses and plaid shirts. But the 68-year-old Vietnam veteran is still too risky for Wells Fargo Home Mortgage, in Des Moines, Iowa, which fired him on July 12 from his $29,795-a-year job as a customer service representative.Egger's crime? Putting a cardboard cutout of a dime in a washing machine in nearby Carlisle, Iowa, on Feb. 2, 1963.Eggers got a chance to explain himself to company officials after they received the results of his criminal background check from a Florida company called First Advantage. He was fired anyway.The computerized report obtained by First Advantage listed Eggers' crime as "fraud." However, records in the Warren County Courthouse confirmed his account of the 1963 incident. The files say he was arrested as a 19-year old for "operating a coin changing machine by false means" and convicted of that charge.Big banks have been firing low-level employees like Eggers since the issuance of new federal banking employment guidelines in May 2011 and new mortgage employment guidelines in February. The tougher standards are meant to weed out executives and mid-level bank employees guilty of transactional crimes, like identity fraud or mortgage fraud, but they are being applied across-the-board thanks to $1 million a day fines for noncompliance.Banks have fired thousands of workers nationally because of the rules, said Natasha Buchanan, an attorney with Higbee & Associates in Santa Ana, Calif., who has helped some of the banking workers regain their eligibility to be employed.