CARPE DIEM

How to Save Endangered Species? Hunt Them

2012-01-29T19:58:00.007-05:00

On tonight's show, "60 Minutes" profiles private big-game game hunting in Texas, which has become a $1 billion industry and is credited with saving some exotic species that are now extinct in their native lands in Africa. It's a great example of how private property rights and profit-based game hunting give the animals a positive economic value and create strong economic incentives to increase the herds in far greater numbers than if we were to rely on pure altruism. The big-game hunters have become the true "conservationists," and the animal rights activist are not happy about that.

Watch the full segment below:

(CBS News) -- "The scimitar horned oryx . . . the addax . . . the dama gazelle - three elegant desert antelope that you'd hope to see on a journey through Africa, except that their numbers are dwindling there. Which is why Lara Logan went to Texas -- yes, Texas. There, on large grassland ranches, some exotic species that are endangered in the wild have been brought back in large numbers. But there's a catch: a percentage of the herd is hunted every year by hunters who pay big money for a big catch. The ranchers say this limited "culling" gives them the money they need to care for the animals and conserve the species. But animal rights activists don't buy that argument, claiming the hunts are "canned" and that hunting is wholly inconsistent with conservancy."

Chart of the Day: America's Energy Revolution

2012-01-29T13:26:00.012-05:00

The U.S. Energy Information Administration just released December 2011 data for U.S. petroleum trade. The EIA reports that net oil imports fell last year to 45.2% (lower even than previously reported based on data that didn't include year-end figures), which is the lowest level for net oil imports in 16 years, going back to a 44.5% share in 1995. Part of this 16-year low for net oil imports is because of the domestic shale oil revolution that allowed North Dakota to surpass the daily oil production of OPEC-member Ecuador last year.

At the current pace of monthly increases, North Dakota will be producing oil later this year at a level that could displace imports from Venezuela or Nigeria, and it will also likely surpass Alaska and California this year to become the No. 2 oil-producing state in the U.S. This year will also likely be the seventh consecutive year of falling U.S. net oil imports, and if net oil imports fall below 44% (which is likely), it will be the lowest level in 20 years.

Update: The new EIA data also show that U.S. petroleum production reached an 8-year high in 2011 (highest since 2003) and oil from the lower 48 states reached a 14-year high (highest since 1997), see chart below. Since the lows in 2008, total U.S. oil production has increased by 14.6% overall and by almost 20% in the lower 48 states.

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

2012-01-29T12:15:00.007-05:00

An earlier version of the chart above was featured on CD in November and it generated a lot interest and 133 comments, so I'm providing an update here based on employment and real GDP data through 2011. More than any single chart, I think this one really helps to accurately capture graphically the current state of the U.S. economy, although Scott Grannis has another GDP graph that also helps us understand today's economic situation.

1. Measured by real output (GDP), the U.S. economy has made a complete recovery from the 2007-2009 recession. Real output in Q4 of 2011 was higher than the 2007 Q4 level when the recession started by 0.72%.

2. While real output has completely recovered to above pre-recession levels, U.S. civilian employment at 140.56 million is still 5.7 million jobs (and 3.9%) below the 2007 peak of 146.27 million jobs, and that translates into the ongoing and persistent "jobless recovery."

3. The recovery of real output to historical highs with 3.9% fewer employees has also translated into record-level corporate profits, which are now 40% above pre-recession levels.

4. The recovery of both output and profits to above 2007 levels with 5.7 million fewer workers could explain the sluggish job growth that will probably continue for several more years. If companies can produce more output now than in 2007 with fewer workers and record profits, where's the incentive to hire more workers?

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

Sunday Morning Links

2012-01-29T11:33:00.013-05:00

1. North Dakota's oil prosperity is spreading statewide to cities on the far eastern edge of the state like Grand Forks and Fargo that are 300 miles away from the Bakken oil region in the far western part of the state. Oil prosperity may also start to spreading across state lines into Montana. (h/t BakkenBlog on Twitter)

2. A landslide Florida primary victory is being predicted for Romney, according to current Intrade odds of 96%. Odds for Romney to win the Republican nomination are 88%.

3. Houston Chronicle - "The fight for hearts and minds when it comes to climate change has moved to a new battleground: your television set. Climate change activists have launched a campaign, dubbed Forecast the Facts, that outs television meteorologists who are "deniers" of mainstream climate change science."

4. Brian Wesbury report that the weakest part of Friday's GDP report was government purchases. "Excluding government, real GDP grew at a robust 4.5% annual rate in Q4 and was up 2.6% for 2011 as a whole."

5. Bloomberg profiles oil wildcatter Harold Hamm, the biggest winner in the biggest American oil find (Bakken region of western North Dakota) since Prudhoe Bay.

6. VIDEO -- President Obama leaves event promoting clean energy in a motorcade of 22 fossil-fueled vehicles.

7. Residential real estate sales in Destin, Florida are stronger than they’ve been in the past five years. Agents report multiple offers on houses priced below $200,000 with the expectation that prices will rise. (h/t Gary Lyle)

Cartoon of the Day: The Word "Sustainable"

2012-01-29T08:38:00.003-05:00

Click to enlarge.

From XKDC.com.

Sugar Tariffs Cost Americans $3.86 Billion in 2011

2012-01-28T09:35:00.005-05:00

The chart above displays annual refined sugar prices (cents per pound) using data from the USDA (Tables 2 and 5) between 1982 and 2011 for: a) the U.S. wholesale refined sugar price at Midwest markets, and b) the world refined sugar price. Due to import quota restrictions that strictly limit the amount of imported sugar coming into the U.S. at the world price, the domestic producers are protected from more efficient foreign sugar growers who can produce cane sugar in Central America, Africa and the Caribbean at half the cost of beet sugar in Minnesota and Michigan.

Of course, there's no free lunch, and this sweet trade protection comes at the expense of American consumers and U.S. sugar-using businesses, who have been forced to pay more than twice the world price of sugar on average since 1982 (28.6 cents for domestic sugar vs. 14 cents for world sugar, see chart). How much does this trade protection cost Americans?

We can estimate the cost of sugar protection, using some additional data from the USDA (Table 1) about sugar:

1. American consumers and businesses consumed 10.18 million metric tons (22.44 billion pounds) of sugar last year, and therefore every 1 cent increase in sugar prices costs Americans an additional $224.4 million per year in higher prices.

2. The U.S. produced 7.15 million metric tons (15.76 billion pounds) of sugar last year.

3. Due to quotas, Americans were only allowed to purchase 3 metric tons (6.67 billion pounds) of world sugar, or about 30% of the total sugar consumed. Domestic sugar producers ("Big Sugar") are allowed to control 70% of the sugar market every year through protectionist sugar trade policies that strictly limit foreign competition.

4. If sugar quotas were eliminated, and American consumers and business had been able to purchase 100% of their sugar in 2011 at the world price (average of 31.68 cents per pound) instead of the average U.S. price of 56.22 cents, they would have saved about $3.86 billion. In other words, by forcing Americans to pay 56.22 cents for inefficiently produced domestic sugar instead of 31.68 cents for more efficiently produced world sugar, Americans pay an additional 24.54 cents per pound for the 15.76 billion pounds of American sugar produced annually, which translates to $3.86 billion in higher costs for American consumers and businesses.

(Note: This is an estimate based on the assumptions that: a) the amount of sugar consumed in the U.S., and b) world prices, wouldn't change if the U.S. sugar market was completely open.)

Bottom Line: The cost of most trade protection is largely invisible and hard to calculate, but the cost of sugar protection is directly visible and measurable, since the USDA and the futures markets regularly report prices for both high-cost domestic sugar and low-cost world sugar. Like all protection, sugar tariffs exist to protect an inefficient domestic industry (sugar beet farmers) from more efficient foreign producers (cane sugar farmers), and come at the expense of the U.S. consumers and the American companies using sugar as an input, and make our country worse off, on net.

I'm reminded of the recent Quote of the Day from Bastiat: "Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race." U.S. sugar policy has a long history, going back to 1789 when the First Congress of the United States imposed a tariff upon foreign sugar, and is a perfect illustration of trade protection that ignores the viewpoint of disorganized, dispersed consumers in favor of the concentrated, well-organized interests of producers.

Markets in Everything: Tater Tot Food Truck

2012-01-28T09:13:00.000-05:00

St. Paul Pioneer Press -- "Look for a new entry coming soon to the food truck scene in downtown St. Paul. Tot Boss will be the city's first truck specializing in Tater Tots. The owner is Dan Docken, a cabinet-maker-turned-chef, who grew up eating all things tots, including his mom's Tater Tot hot dish. The Tot Boss menu will include Tater Tot hotdish, of course, but also bacon-wrapped Tots, Tater Tot nachos, chili Tots and a Tot and beef burrito."

8 Amazing Artisan Videos Everyone Should Watch

2012-01-27T18:11:00.004-05:00

From the MakeUseOf.com website:

"Have you ever watched a masterful expert perform their work with such skill and passion that you had no choice but to watch and admire in awe? As I scour the Internet from day to day, I run into videos of these masters every once in a while. And every time, I can’t help but stare in wonder and respect.

An artisan is a craftsman who is a master of their field. Here is a collection of some of the most interesting and mesmerizing videos of artisans who take immense pride in their work and strive to be the best at what they do (watch the master tea server above)."

MP: I might also add that the artisans are all engaged in activities that involve serving others in a market setting....

Modern Automotive Manufacturing

2012-01-27T14:57:00.001-05:00

Impressive video of a state-of-the-art VW car factory in Germany, and this February 2009 video is now almost three years old!

What Obama Won't Mention Today in Michigan: Campus Has 53% More Administrators Than Faculty

2012-01-27T09:54:00.013-05:00

From an open letter to President Obama on December 16, 2011 from University of Michigan President Mary Sue Coleman:

"Higher education is a public good currently lacking public support. There is no stronger trigger for rising costs at public universities and colleges than declining state support."

According to the Washington Post, "President Barack Obama will announce a plan to shift some federal dollars away from colleges and universities that don’t control tuition costs and new competitions in higher education to encourage efficiency as part of an effort to contain soaring college costs. Obama will spell out his plans Friday at the University of Michigan in Ann Arbor."

One issue that will probably not receive a lot of attention today from either President Obama or President Coleman is the contribution of rising administrative positions and salaries to the rising cost of college tuition. For example:

1. According to data from the Chronicle of Higher Education (also available from IPEDS), the University of Michigan-Ann Arbor has 53% more full-time "administrators and professionals" (9,652) than full-time faculty (6,305), or a ratio of 1.53 administrative and professional positions for every full-time faculty member. Couldn't those administrative/professional expenses have something to do with rising tuition?

2. In a front page article on March 27, 2011, the Detroit Free Press reported that:

"Michigan public universities increased their spending on administrative positions by nearly 30% on average in the last five years, even as university leaders say they've slashed expenses to keep college affordable for families. The number of administrative jobs grew 19% over that period at the state's public universities, according to data submitted by the schools to the state budget office.

The increases took place from the 2005-06 school year through 2009-10 -- a period in which both student enrollment and state funding of universities remained about the same, state data show. The higher administrative costs were slightly exceeded by tuition hikes over this period."

3. From this Detroit Free Press database that accompanied the article above, administrative salaries at the University of Michigan-Ann Arbor increased by almost 27% in the five-year period between 2005-2006 and 2009-2010, compared to an 18.2% increase in faculty pay during the same period.

4. From a related March 13, 2011 story in the Flint Journal:

"The University of Michigan-Flint’s administrative ranks has grown the fastest among the 15 public universities in the state, according to figures from the Michigan Higher Education Institutional Data Inventory released earlier this year. The data showed that the percentage growth in full time administrative and professional staff positions swelled 74 percent between 2005 and 2009, although the percent of administrative positions on campus remains average compared to other universities.

As the number of deans, associate deans and program directors grew at the Flint campus over the last five years, so have administrative paychecks. Six-figure salaries more than doubled on campus since 2006, according to the newest faculty and staff salary information recently released by UM. Nearly 50 of the roughly 1,000 employees made $100,000 or more at UM-Flint, compared to about 20 four years earlier."

5. It's not just Michigan universities that have added administrators, it's a national phenomenon, here's a story from a few years ago about the growth in administrative positions in the University of North Carolina system.

Update 1: According to IPEDS data from the U.S. Department of Education, here are the headcounts for the Univeristy of Michigan-Ann Arbor in 2010 (most recent year available):

Full Time Faculty: 5,693
Full Time Executive/Managerial: 1,711
Full Time Professionals: 6,772
Total Executive/Managerial/Professional: 8,483

Therefore, in 2010, there were 49% more full-time administrative/professional staff than full-time faculty.

Update 2: Examples of positions in the Executive/Managerial category include: Deans (including Associates and Assistants), Program Directors, Office Managers, Supervisors, Registrar, Provost, President, Chancellor, Vice-Chancellors, etc.

Positions in the Professional category include Coordinators, Trainers, Graphic Artist, Program Manager, Analyst, Benefits Representative, Accountant, Associate Librarian, Financial Aid Administrator, Major Gifts Officer, Counselor, etc.

Interesting Fact of the Day

2012-01-26T20:40:00.002-05:00

The jobless rate for the manufacturing sector of the U.S. economy was below the national jobless rate for each of the last seven months of 2011 from June through December. That reversed a period from October 2008 to May 2011 when the manufacturing jobless rate was equal to or higher than the national average rate for 32 consecutive months. The gap during that period was at its highest in April 2009 when the manufacturing jobless rate was almost 4 points higher at 12.4% than the national average rate of 8.6%. There has never been any comparable 7-month period going back to when the BLS started tracking manufacturing jobless rates that the manufacturing unemployment rate was below the national average for that many consecutive months.

Update: See Table A-14 of the BLS Employment Report for jobless rates by industry.

U.S. Manufacturing Already Has Record Profits and Is Doing Quite Well Without Any Government Help

2012-01-26T15:52:00.010-05:00

Obama at the SOTU: "If you’re an American manufacturer, you should get a bigger tax cut. If you’re a high-tech manufacturer, we should double the tax deduction you get for making products here. And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers."

In December, I posted about the financial results for the U.S. manufacturing sector through Q3 of 2011, with the following highlights:

1. After-tax profits for U.S. manufacturing corporations were just short of $150 billion during the July-September period in 2011. Profits for Q3 fell by 4.5% from Q2, but were 20.4% ahead of the same quarter in the previous year, and were the second-highest quarterly profit total for U.S. manufacturers in history. Compared to the $118.6 billion in profits for Q4 2007 when the recession started, manufacturing profits are now 26% above that pre-recession level. The chart above show annual manufacturing profits back to 1999, with 2011 profits estimated at $600 billion based on results through the first three quarters.

2. The 20.4% increase in manufacturing profits over the last four quarters through Q3 was more than four times greater than the 6.5% increase in profits after-tax for all U.S. corporations during that time period.

3. While real GDP has increased by only 1.5% during the most recent four quarter period from 2010 Q3 to 2011 Q3, the manufacturing component of U.S. industrial production grew at almost three times that rate (4.22%) from September 2010 to September 2011.

4. Over the most recent 12-month period from November 2010 to November 2011, manufacturing employment grew by 1.82%, or almost four times the 0.46% growth in total payroll employment over that same period.

5. For the last seven months of 2011, the jobless rate for manufacturing was below the national average, and is currently at 7.9%, or almost a full half-point below the U.S. average of 8.3% (not seasonally adjusted).

6. By all relevant measures of economic performance: growth in profits, output gains, employment growth, and unemployment rates, American manufacturing remains the "shining star" of the U.S. economy.

Bottom Line: American manufacturing is doing quite well and experiencing record profits, without any special ~~government~~ taxpayer help or tax breaks ~~from~~ ~~Obama~~ financed by taxpayers. In fact, you could almost make a case that U.S. manufacturing is experiencing "windfall profits." But if that information spreads to Capitol Hill, there could be a call for a "Reasonable Profits Board" for American manufacturing, or a "windfall profits tax," which are the political responses whenever U.S. oil companies experience record profits!

The Newly Revised Leading Economic Index Finishes 2011 With Three Monthly Gains

2012-01-26T15:03:00.006-05:00

"The Conference Board Leading Economic Index (LEI) for the U.S., after its first major comprehensive revision since 1996, increased in December (see chart above). The largest contributors to the increase were the interest rate spread and improving employment indicators. In the six-month period ending December 2011, the leading economic index increased 0.1 percent (about a 0.2 percent annual rate), much slower than the growth of 2.7 percent (about a 5.5 percent annual rate) during the previous six months. But, the strengths among the leading indicators have been somewhat more widespread than the weaknesses through December."

Seven of the ten indicators that make up The Conference Board LEI for the U.S. contributed positively in December. The positive contributors – beginning with the largest positive contributor – were interest rate spread, average weekly initial claims for unemployment insurance (inverted), average weekly manufacturing hours, stock prices, ISM new orders index, manufacturers’ new orders for nondefense capital goods excl. aircraft, and manufacturers’ new orders for consumer goods and materials*. The negative contributors – beginning with the largest negative contributor – were average consumer expectations for business and economic conditions and Leading Credit Index(inverted). Building permits held steady in December."

MP: The revisions to the leading index included replacing three of the ten individual components with new economic variables, and making a minor adjustment to another component. The Leading Index has been on an upward trend since April 2009 as it signalled that the recession was coming to an end in June of that year, and the LEI has increased in 30 out of the last 33 months since the upward trend started in 2009. While the newly revised index has been relatively flat for the last 8 months, the index increased in each of three months at the end of 2011, and there's nothing to suggest a pending slowdown in economic growth this year.

Markets in Everything: Hire People for $5

2012-01-26T13:48:00.012-05:00

Fiverr.com -- The online marketplace for people to share things they're willing to do for $5. Examples include:

I will create a ventriloquist puppet video with any message you want for $5.

I will write anything on my feet in high heels for $5 and send you three photos.

I will edit your document for correct American English grammar for $5.

Chart of the Day: Energy Shares Through 2030

2012-01-26T10:44:00.005-05:00

The chart above is from the "BP Energy Outlook 2030" (p. 18) and shows the historical and estimated future mix of world energy sources through 2030. Some key points:

1. In the future, natural gas usage as a share of total energy will increase, oil usage will decrease, and coal's share of energy consumption will be about the same, and those three hydrocarbons will converge in 2030 at about a 28% share for each energy source.

2. Renewables (including biofuels) will increase in importance as a source of energy, but by 2030 will only represent about 5% of total world energy consumption.

3. Hydro, nuclear and renewables will converge at about a 5% share of energy usage for each source.

Bottom Line: BP's projections for energy shares through 2030 is more evidence that a new world energy map is emerging thanks to advances in drilling technologies like fracking and the abundance of natural gas, and the new energy map will be increasingly centered not on the Middle East but on the Western Hemisphere as Daniel Yergin pointed out recently in the Washington Post. The projections also demonstrate that renewable energy will continue to play a very minor role as a future energy source over the next several decades, and even massive taxpayer subsidies won't change that reality.

Markets in Everything: LowestMed App

2012-01-26T10:01:00.003-05:00

From MedGadget -- "LowestMed is a discount prescription service that shops for the lowest price for prescription medications. The idea is that you enter the medication prescribed, and whether you are at the doctor’s office or out looking for a refill, the app tells you (and shows you, via GPS), the pharmacy with the best deal on that prescription."

Women Have Less Political Ambition Than Men. So?

2012-01-25T21:02:00.013-05:00

From the executive summary of the article "Men Rule: The Continued Under-Representation of Women in U.S. Politics," by Jennifer L. Lawless (American University) and Richard L. Fox (Loyola Marymount University):

"Study after study finds that, when women run for office, they perform just as well as their male counterparts. No differences emerge in women and men’s fundraising receipts, vote totals, or electoral success. Yet women remain severely under-represented in U.S. political institutions (see top chart above). We argue that the fundamental reason for women’s under-representation is that they do not run for office. There is a substantial gender gap in political ambition; men tend to have it, and women don’t.

We arrive at this conclusion by analyzing data from a brand new survey of nearly 4,000 male and female “potential candidates” – lawyers, business leaders, educators, and political activists, all of whom are well-situated to pursue a political candidacy – and comparing our results to a survey we conducted in 2001. Despite the emergence over the past ten years of high-profile women in politics, such as Nancy Pelosi, Hillary Clinton, and Sarah Palin, we find that the gender gap in political ambition is virtually the same as it was a decade ago (see middle chart above). The gender gap in interest in a future candidacy has actually increased (see bottom chart above)."

Up to this point, the study seems to take an unbiased, gender-neutral, scientific approach by pointing out that female under-representation in holding political office is not because women are discriminated against once they decide to run for office, but rather that there are significant gender differences in terms of political ambition to run for office in the first place. In that case, isn't it possible that those gender differences and "political gender gap" might be innate and/or acceptable? Well, not if perfect statistical gender parity for holding political offices is the goal, and that's what the authors seem to be suggesting is the ideal outcome. For example, here's the concluding paragraph:

"Concerns about democratic legitimacy and political accountability necessitate that we continue to examine and work to ameliorate gender disparities in office holding. The large gender gap in political ambition we identify, coupled with the stagnation in the number of women serving in elected offices in the last decade, makes the road ahead look quite daunting. Indeed, many barriers to women’s interest in running for office can be overcome only with major cultural and political changes. But in the meantime, our results suggest that recruiting female candidates and disseminating information about the electoral environment and women’s successes can help narrow the gender gap and increase women’s numeric representation. The challenges in front of us are to continue to raise awareness about the barriers women face, and to continue to advocate for a more inclusive electoral process."

MP: Like most gender differences in outcomes, there only ever seems to be concern when women are under-represented in fields like politics, and never any concern when men are under-represented for outcomes like bachelor's degrees, master's degrees, doctor's degrees, graduate school enrollment, biology degrees, veterinary degrees, optometry degrees, pharmacy degrees, etc. The only exceptions are when the outcomes are negative like prison populations, learning disabilities, occupational injuries and fatalities, motorcycle injuries and fatalities, suicides and drug addiction and then there is no concern about female under-representation.

A Revolution in Higher Education is Underway

2012-01-25T16:25:00.001-05:00

A few days ago, I reported on how MITx could revolutionize higher education by offering free online classes along with a new benefit: credentials. Beginning this spring, students will be able to take free, online courses from MIT, and if they prove they've learned the material through an assessment, they can pay a fee and receive a certificate from MITx.

In a related recent development, Felix Salmon and The Chronicle of Higher Education report this week that Stanford University professor Sebastian Thrun, who taught an online artificial intelligence course to more than 160,000 students in the fall through Stanford, has given up his tenured teaching position there to go full-time with Udacity, a new start-up firm he co-founded that offers low-cost online classes.

From The Chronicle:

"Mr. Thrun told the crowd at the Digital–Life–Design conference in Munich, Germany that his move was motivated in part by teaching practices that evolved too slowly to be effective. During the era when universities were born, “the lecture was the most effective way to convey information. We had the industrialization, we had the invention of celluloid, of digitial media, and, miraculously, professors today teach exactly the same way they taught a thousand years ago,” he said.

He concluded by telling the crowd that he couldn’t continue teaching in a traditional setting. “Having done this, I can’t teach at Stanford again,” he said.

One of Udacity’s first offerings will be a seven-week course called “Building a Search Engine.” It will be taught by David Evans, an associate professor of computer science at the University of Virginia and a Udacity partner. Mr. Thrun said it is designed to teach students with no prior programming experience how to build a search engine like Google. He hopes 500,000 students will enroll.

Teaching the course at Stanford, Mr. Thrun said, showed him the potential of digital education, which turned out to be a drug that he could not ignore.

“I feel like there’s a red pill and a blue pill,” he said. “And you can take the blue pill and go back to your classroom and lecture your 20 students. But I’ve taken the red pill, and I’ve seen Wonderland.”

Watch his talk here. More evidence that the revolution in higher education in underway.

Obama Deserves No Credit for the Oil and Gas Boom

2012-01-25T15:28:00.003-05:00

From Warren Meyer in Forbes (ht/Morganovich):

"The one person who deserves no credit for this [oil and gas] boom is Barack Obama. In fact, this Administration has bent over backwards to make oil and gas production and exploration as difficult as possible. According to the Institute for Energy Research (IER), the Obama Administration has been issuing BLM oil and gas leases at the lowest pace of any president in the last 30 years – in fact at half the rate of the Clinton White House and 80% slower than in the Reagan era, dragging their feet to please the environmental lobby (see top chart above).

By comparing oil and gas production on Federal vs. state and private lands, we can get a true read on this Administration’s energy policy. Since Obama took office, according to the Institute for Energy Research, oil production has fallen precipitously on Federal onshore and offshore leases, while it has increased by an even larger amount on state and private lands largely outside of this Administration’s reach. The only reason total oil [and gas] production has increased since Obama took office is because private companies on state and private lands have increased production enough to offset the large drop that has occurred in Obama-controlled producing regions. Obama’s taking credit for the current oil and gas boom ranks up there in the pantheon of great political whoppers right next to Al Gore’s invention of the Internet."

MP: The bottom chart above shows that the share of total natural gas production taking place on federally administered land fell to 20% in 2010, the lowest share in at least 35 years.

Walmart Holds 'Idol'-Style Contest for Small Businesses; Winner Will Be Sold in Select Stores

2012-01-25T11:43:00.004-05:00

USAToday -- "Walmart is holding a contest called the "Get on the Shelf" program — an American Idol-style competition for small businesses. Two rounds of online voting will determine three winners, all of which will be sold online, with the grand prize winner gaining a spot in select stores."

Here are photos of some of the products that have been submitted, see photo above of "Uggs for dogs."

Will U.S. Oil and Gas Manufacturers Be Included?

2012-01-25T10:00:00.021-05:00

U.S. oil and gas companies have been increasing production in America with "high-tech" manufacturing and creating thousands of new U.S. jobs for years.

President Obama last night at the SOTU speech:

"If you’re an American manufacturer, you should get a bigger tax cut. If you’re a high-tech manufacturer, we should double the tax deduction you get for making products here. And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers.

My message is simple. It’s time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America. Send me these tax reforms, and I’ll sign them right away."

By some classifications, the "petroleum and coal products" industry is considered to be part of U.S. manufacturing, e.g. see IndustryWeek's report on the 500 largest publicly held U.S. manufacturing companies, which includes Exxon Mobil, Chevron, Conoco Phillips, etc.

Questions:

1. Will Obama include U.S. oil companies in the group of American manufacturers that qualify for a "bigger tax cut?"

2. Will oil and gas companies using advanced technologies like hydraulic fracturing (and the "super-fracking" technologies that are under development) qualify as "high-tech manufacturers" and get a double tax deduction for "high-tech" domestic energy production?

3. Will some of the oil and gas companies get any credit for re-vitalizing some formerly depressed communities in North Dakota and rust-belt states like Ohio and Pennsylvania, and creating jobs in America (see chart above)?

4. Will oil and gas companies (and other American manufacturers supporting the oil and gas industries with steel pipes, drilling equipment and sand, etc.) that create jobs in America, get rewarded with help financing new plants, equipment, or training for new workers for future energy production and the manufactured products that support the industry?

Somehow I don't think Obama was thinking of oil and gas companies when he talked about "American manufacturing," and I don't think he gives any credit to thousands of American energy-related jobs that have already been created thanks to advanced "high-tech" fracking techniques that created the "shale revolution" (see chart above).

Update: Marko in the comments section asks "By saying that he wants to cut taxes in certain sectors to encourage or help them, doesn't Obama admit that higher taxes hurt business?"

More Gains for U.S. Manufacturing

2012-01-24T16:58:00.001-05:00

From this morning's report on manufacturing activity in the Richmond Fed district (Virginia, most of W. Virginia, North and South Carolina and Maryland):

"In January, the seasonally adjusted composite index of manufacturing activity—our broadest measure of manufacturing—increased nine points to 12 from December’s reading of 3. Among the index’s components, shipments gained fourteen points to 17 and new orders doubled, picking up seven points to finish at 14. The jobs index picked up eight points to 4.

In our January survey, our contacts were more bullish about their business prospects for the next six months. The index of expected shipments increased nine points to 36, expected orders gained eleven points to finish at 32, and backlogs added eight points to 14. The capacity utilization and vendor delivery times indexes each rose nine points to finish at 11 and 20, respectively. Moreover, readings for planned capital expenditures moved up eight points to finish at 15. District manufacturers’ hiring plans in January were somewhat more optimistic as well. The expected manufacturing employment index edged up three points to 20, while the average workweek indicator held steady at 7. The index of expected wages was virtually unchanged at 19."

This follows a strong report last week from the Fed on both current and future manufacturing activity in New York state, and is consistent with today's ATA Truck Tonnage Index for December, which registered the largest annual gain in 13 years, largely due to solid manufacturing output.

Amazing YouTube Stats

2012-01-24T15:43:00.002-05:00

Uploads to YouTube:

One hour of video every second.

9 months every two hours.

A decade every day.

A century every 10 days.

YouTube Views per day:

4 billion.

BPP@MIT Data Show Inflation Slowing at Year-End

2012-01-24T14:54:00.004-05:00

The charts above shows monthly and annual inflation rates from the Billion Prices Project @ MIT over the 12-month period ending at the end of December. According to the BPP website, the index is "designed to provide real-time information on major inflation trends, not to forecast official inflation announcements. We are constantly adding new categories of goods, but we do not cover 100% of CPI goods and services. The price of services, in particular, are not easy to find online and therefore are not included in our statistics."

Bottom Line: Monthly inflation, measured by the BPP @ MIT, has been trending downward since February, and was showing slight deflationary pressures in November and December. Similarly, BBP annual inflation has been trending downward since July and reached an eight-month low on December 21. According to this real-time measure of inflationary trends in the U.S. economy, inflationary pressures are gradually moderating, and there is even evidence now of short-term deflation for the months of November and December.

Bakken Shale Oil Continues to Fuel a Shovel-Ready Successful Job Stimulus Program in North Dakota

2012-01-24T14:08:00.009-05:00

The state of North Dakota continued to lead the country in December with: a) the lowest state jobless rate at 3.3%, and b) the highest annual rate of employment growth in December at 5.7% (BLS data here), which also set a new all-time North Dakota record for the largest 12-month percentage employment increase since monthly records started back in 1990. The 5.7% over-the-year percentage job gain for North Dakota in December was almost twice the 3% pace of job growth in Utah, the state with the second highest job growth in 2011.

Job growth in the state's booming oil industry was spectacular, with almost a 40% increase in mining jobs in 2011. Further, North Dakota has nine counties with jobless rates at 2% or less for November, and one county - Williams County, at the epicenter of the Bakken oil region - with a jobless rate less than 1%.

The chart above shows the phenomenal employment growth in North Dakota since 2000, especially during the last three years. Over the 12-year period since 2000, U.S. payroll employment has been almost flat, with only a slight 0.86% increase between January 2000 and December 2011. During that same period, North Dakota employment grew by 24% overall and by 448% for the state's mining sector.

In a related story, Investor's Business Daily (IBD) reported this yesterday:

"High oil prices hurt at the gas pump. But they help at the wellhead pump. That has boosted profit margins at Continental Resources (CLR) the largest landholder in the Bakken Shale oil and gas play in parts of North Dakota, Montana and Canada. Continental generated almost 63 cents of profit for every dollar of sales last year, topping IBD's Screen of the Day for Monday, which ranks firms by that key metric. Northern Oil & Gas (NOG), another Bakken Shale play, also ranked high, with a 58.1% profit margin."

In a separate news item, IBD reported that Continental share prices hit a three-and-a-half year high Jan. 10 because of the recent strength in the oil market.

Bottom Line: Drill, drill, drill = jobs, jobs, jobs and also = profits, profits, profits. But don't tell Rep. Dennis Kucinich, he'll want to establish the first "Reasonable Profits Board" in the state of North Dakota.

ATR Presents Obama/State of the Union Bingo

2012-01-24T12:45:00.004-05:00

Americans for Tax Reform (ATR) once again presents these handy Bingo cards (see sample above, there are four other versions available) which you may use to check off terms and phrases likely to be used during President Obama's State of the Union address tonight.

ATR also provides a handy key for what the terms and phrases really mean, here's a sample:

Investment – Spending taxpayer money on Obama re-election constituencies such as government employee unions, teachers' guilds, and big-city political machines.

Energy – Something that flows from good intentions, government programs, "stimulus" spending but not pipelines.

Exports – That trade – and only that trade – acceptable to union bosses.

Compromise – Tax hikes.

Sacrifice – Tax hikes.

Bipartisan – Tax hikes.

Fair or Fair Share – Tax hikes.

Balanced – Tax hikes.

Obstructionists – House Republican lawmakers who have actually passed a budget – NOT the Senate Democrats who have refused to pass a budget for 1,000 days.

Wall Street – 1. Where your IRA and 401(k) live. 2. A bauble to distract you from noticing my bailout of Fannie and Freddie.

Jobs – "You want to find work on the Keystone XL pipeline? Tough luck – I've got a campaign to run."

Tuesday Links

2012-01-24T10:51:00.000-05:00

1. Some Chevrolet dealers are turning down Volts that General Motors wants to ship to them, a potential stumbling block as GM looks to accelerate sales of the plug-in hybrid.

2. GALLUP: U.S. economic confidence is rising and was at -25 for the week ending Jan. 22, improved from -29 the prior week and the highest level since the week ending May 22, 2011.

3. An international study of postal services in 30 high-income countries finds that most are profitable, and the ongoing losses in U.S. are an exception (losses in all five years from 2007-2011).

4. Thomas Sowell endorses Newt Gingrich.

5. U.S. $2 bills are a hot item in Vietnam for the Lunar New Year, and are selling above face value, some for $125, Isn't that "bill scalping?"

Markets in Everything: Weed Whacking Golf Driver

2012-01-24T08:37:00.006-05:00

"This is the golf driver with a built-in grass trimmer, ideal for surreptitiously improving one's lie. Destined for use by friendly foursomes that often find themselves in the rough, the club looks like an oversized driver that fits into any golf bag, yet a simple flick of a button on its plastic bottom flips open the club's bottom to reveal a single-string trimmer."

Available from Hammacher Schlemmer for $24.95, watch video demonstration here.

HT: W.E. Heasley

Rejecting the Keystone Pipeline: An Act of Insanity

2012-01-24T08:23:00.001-05:00

From Robert Samuelson in the Washington Post:

"President Obama’s rejection of the Keystone XL pipeline from Canada to the Gulf of Mexico is an act of national insanity. It isn’t often that a president makes a decision that has no redeeming virtues and — beyond the symbolism — won’t even advance the goals of the groups that demanded it. All it tells us is that Obama is so obsessed with his reelection that, through some sort of political calculus, he believes that placating his environmental supporters will improve his chances.

Aside from the political and public relations victory, environmentalists won’t get much. Stopping the pipeline won’t halt the development of tar sands, to which the Canadian government is committed; therefore, there will be little effect on global-warming emissions. Indeed, Obama’s decision might add to them. If Canada builds a pipeline from Alberta to the Pacific for export to Asia, moving all that oil across the ocean by tanker will create extra emissions. There will also be the risk of added spills."

HT: Warren Smith

Bakken Oil is Having Major Impact on Western ND

2012-01-23T16:10:00.018-05:00

From Fargo ND radio station KFGO:

A meeting was held of the North Dakota Sheriffs & Deputies Association in Bismarck, and as part of this meeting we had an opportunity to sit down with law enforcement officials from western ND to discuss what they are going through with the oil impact. Here are some oil issues from western North Dakota.

MP: There are 35 in total, these are my "Top 12" issues facing a community where the economy is booming, the jobless rate is less than 1%, and there are bound to be some "growing pains."

1. Traffic accidents, especially fatal traffic accidents are of very high concern. At one location on Highway 85 south of Williston, a traffic count was conducted in October of 2011. In one 24-hour period there where 29,000 vehicles through the intersection, with 60% of the traffic being semi trailer trucks.

2. Traffic is typically backed up for ½ to ¾ of a mile. One person stated that he recently sat at an intersection on Highway 85 for 30 minutes waiting for an opening in the traffic to cross over.

3. Rents in Williston currently range from $2,000 for a one-bedroom apartment to $3,400 for a three-bedroom apartment.

4. Williams County allows three campers per farmstead, the farmers almost all have three campers on their property and are charging $800 per camper per month for rent.

5. The Walmart in Williston no longer stocks shelves, they bring out pallets of merchandise at night, and set them in the aisles, and customer shops from the pallets.

6. On January 1, the Williston Walmart had 148 campers overnight in their parking lot.

7. The Williston McDonalds just announced that they will pay new workers $15 an hour, a $500 immediate signing bonus and full medical benefits.

8. The local restaurants are full and with limited staffing, they usually just have the drive through open. The restaurants that have inside seating are now experiencing an hour wait at all times.

9. The local Motel 6 in Williston now rents rooms for $130 per night.

10. Trinity Hospital in Minot has just hired 115 nurses from the Philippines, because they cannot get enough local nurses to apply.

11. The Williston General Motors dealership has now become the No. 1 seller of Corvettes in the upper Midwest.

12. The Williams County jail has increased bookings by 150%, with a 100% increase in the inmate population. Bonds of $5,000 to $10,000 are typically paid with cash out of pocket. The Williams County Sheriff stated that a couple of weeks ago he received a $63,000 bond in cash carried into the jail in a plastic Walmart bag.

Thanks to Steve Gorkis and Bob Anderson for sending this.

Monday Links

2012-01-23T13:45:00.012-05:00

1. Want the Lowest Possible Airfare? Buy your ticket six weeks before your flight according to a recent study.

2. In one of the starkest signs yet that chain stores fear a new twist in shopping, Target is asking suppliers for help in thwarting "showrooming"—that is, when shoppers come into a store to see a product in person, only to buy it from a rival online, frequently at a lower price.

3. Aspen judge sentences 76-year old man to jail for 15 days for operating an unlicensed taxi service. The senior citizen said he does not operate a taxi for profit but merely enjoys giving friends and service-industry workers a ride home late at night. The money he collects pays for gas and upkeep on his vehicle. (HT: Armin Ghazi)

4. Here's a link to Alltop, a pretty cool aggregating website for economics blogs (including CD). You can register and customize your selections for only the economic blogs (or general news websites) that you want to read on a regular basis.

5. Chart below is from the WSJ showing how crude oil and natural gas prices have been diverging since the last week of 2008.

6. North Dakota's oil boom is fueling an energy-related education boom in the state. The North Dakota State Board of Higher Education just approved the creation of a new department of petroleum engineering at the University of North Dakota in response to the needs of the petroleum industry, especially in western North Dakota.

Online Poll Shows Strong Approval for Gov. Walker

2012-01-23T12:17:00.008-05:00

Wisconsin Governor Scott Walker faces a possible recall election sometime between April and June. The chart above shows the current results of an online poll being conducted by the liberal-leaning Racine Journal Times for the question "Do You Approve of the Job Gov. Walker is Doing?" Based on almost 900,000 votes so far, there is more than a two-to-one margin in favor of the response "strongly approve" over "strongly disapprove." The issue is pretty polarizing, since almost nobody voted for either "approve" or "disapprove."

If these national results accurately reflect Wisconsin voters (which might not be the case), the recall election could be in trouble. Governor Walker doesn't seem too concerned, his comment to Greta Van Susteren is to "bring it on."

You can vote here, and then you'll see the most recent results. If you try to vote twice, your second vote won't count but you can still see the results.

HT: Phillip Beaver

Chart of the Day: The Bright Future of Shale Gas

2012-01-23T10:09:00.007-05:00

According to data in the EIA's Annual Energy Outlook 2012, domestic shale gas production will increase from its current 23% share of total natural gas production to 49% by 2035 (see chart above, click to enlarge).

MITx Could Revolutionize Higher Education

2012-01-23T09:54:00.004-05:00

From today's Chronicle of Higher Education:

"MIT has invented or improved many world-changing things—radar, information theory, and synthetic self-replicating molecules, to name a few. Last month the university announced, to mild fanfare, an invention that could be similarly transformative, this time for higher education itself. It's called MITx. In that small lowercase letter, a great deal is contained.

MITx is the next big step in the open-educational-resources movement that MIT helped start in 2001, when it began putting its course lecture notes, videos, and exams online, where anyone in the world could use them at no cost. The project exceeded all expectations—more than 100 million unique visitors have accessed the courses so far.

Meanwhile, the university experimented with using online tools to help improve the learning experience for its own students in Cambridge, Mass. Now MIT has decided to put the two together—free content and sophisticated online pedagogy—and add a third, crucial ingredient: credentials. Beginning this spring, students will be able to take free, online courses offered through the MITx initiative. If they prove they've learned the material, MITx will, for a small fee, give them a credential certifying as much.

In doing this, MIT has cracked one of the fundamental problems retarding the growth of free online higher education as a force for human progress. The Internet is a very different environment than the traditional on-campus classroom. Students and employers are rightly wary of the quality of online courses. And even if the courses are great, they have limited value without some kind of credential to back them up. It's not enough to learn something—you have to be able to prove to other people that you've learned it. The best way to solve that problem is for a world-famous university with an unimpeachable reputation to put its brand and credibility behind open-education resources and credentials to match."

MP: This development has the potential to be big, very, very big.

Update: Here's a news release from MIT, with a list of FAQs.

Minnesota's Anti-Consumer Embalming Laws

2012-01-23T08:55:00.002-05:00

From an editorial in the StarTribune about the Institute for Justice's latest case in Minnesota (featured on CD last week):

"Should the government require cabbies to drive six-wheeled taxis or make art galleries buy a Picasso just to prove how serious they are about serving the public? No, because it is silly to force entrepreneurs to waste money on things they don't want, don't need, won't use and can't afford. But the state of Minnesota thinks otherwise.

Verlin Stoll is a 27-year-old entrepreneurial dynamo who owns Crescent Tide funeral home in St. Paul. He wants to expand his business, hire new employees and offer the very lowest prices in the Twin Cities to even more people, particularly disadvantaged communities. But Minnesota refuses to let Stoll build a second funeral home unless he builds a $30,000 embalming room there that he will never use. Minnesota's law is irrational.

The only reason this law is still on the books is so that the big, full-amenity funeral-home businesses can benefit by a law that drives up prices for consumers and drives up operating expenses for competitors such as Stoll. Stoll's basic services fee is only $250, which is about 90 percent lower than the $2,500 that the average Twin Cities' funeral home charges. Stoll's business model is built on minimizing fixed costs, which is why he does not have a hearse or chapel.

This law -- to the advantage of his competitors -- stands in the way of his expanding his low-cost, high-quality approach. The government shouldn't force Minnesotans to do useless things. That's why Stoll and the Institute for Justice are challenging the law in a lawsuit filed last week."

MP: If we applied the Bastiat principle to "Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race" to this issue, Verlin Stoll and the Institute for Justice would easily prevail over the state of Minnesota and its anti-consumer, anti-competitive embalming laws.

Abundance: The Future Is Better Than You Think

2012-01-23T08:25:00.002-05:00

In the upcoming book "Abundance: The Future is Better Than You Think" (to be released February 21) space entrepreneur turned innovation pioneer Peter H. Diamandis (featured in the video above) and award-winning science writer Steven Kotler document how progress in artificial intelligence, robotics, infinite computing, ubiquitous broadband networks, digital manufacturing, nanomaterials, synthetic biology, and many other exponentially growing technologies will enable us to make greater gains in the next two decades than we have in the previous two hundred years.

Some factoids from the book's website:

1. A Masai warrior in Africa with a smartphone on Google has access to more information than the President of the United States did just 15 years ago.

2. The number of people living in absolute poverty has fallen since the 1950s has dropped by more than half. At the current rate of decline, it would hit zero around 2035.

3. From the very beginning of time until 2003, humankind created five billion gigabytes of digital information. In 2010, the same amount of information is created every two days; by 2013, every 10 minutes.

4. In 15 years, the average $1000 laptop should be computing at the rate of the human brain.

HT: Michael Breazeale

Government Fights to Perpetuate Artificial Bone Marrow Shortage By Banning Donor Compensation

2012-01-22T22:05:00.010-05:00

Here are some facts about bone marrow donation:

1. Thousands of Americans die of various blood diseases each year because they cannot find matching bone marrow donors.

2. Donor compensation could substantially increase the number of people who sign up to be a potential bone marrow match.

3. Advances in medical technology have made the extraction of the hematopoietic stem cells found in bone marrow essentially as easy as blood donation.

4. Last month a unanimous three-judge panel ruled in favor of a nonprofit group, MoreMarrowDonors.org, that wants to encourage bone marrow donations by offering $3,000 scholarships, housing allowances, or charitable donations to those who are matched with blood disease patients. The donor group said the application of the National Organ Transplant Act, which includes bone marrow among the "organs" that cannot be sold, violated the equal-protection clause, because there is no rational basis for government to treat donors undergoing apheresis differently from blood or sperm donors.

5. The Justice Department and the National Marrow Donor Program have moved quickly to try to overturn the decision that would allow compensation for bone marrow donors. Reasons? The Justice Department claims that that donor compensation undermines Congress’s clear policy of allowing only voluntary bone marrow donations. The National Marrow Donor Program claims that "a donor system that relies on the human desire to help others is far superior to one that focuses on self-gain."

MP: So the government and the National Marrow Donor Program want to perpetuate a needless bone marrow shortage and thereby sentence thousands of Americans to a guaranteed death sentence as a direct consequence of the artificial bone marrow shortage. Just wondering - would the National Marrow Donor Program likewise suggest that donor systems for food, clothing, cars, and shelter, which rely on the human desire to help others, are far superior systems to ones that focus on self-interest and self-gain? How would your current diet compare, in terms of quantity and quality, to the food available to you if you had to rely on the human desire of wheat farmers in Kansas, cattle ranchers in Texas, and dairy farmers in Wisconsin to help others and supply you with your food?

Question: Are there any material differences between the provision of life-sustaining food products and the provision of life-sustaining bone marrow that would justify allowing market transactions for food but not bone marrow? If so, what are those differences?

Quote of the Day from Frederic Bastiat

2012-01-22T19:57:00.005-05:00

Four days before his death in 1850, Frederic Bastiat sent this message to a friend:

"Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race."

MP: How simple and yet deeply profound at the same time, with major implications for public policy and policymakers, who routinely ignore the interests of the unorganized consumers and thereby the human race, but place close attention to the well-organized, well-funded, concentrated interests of producers when they enact legislation like farm subsidies, protectionist tariffs, anti-dumping laws, occupational licensing, forced unionism, restrictions limiting the number of taxicabs, etc.

HT: Adam Gurri via Cafe Hayek

Obama's Disgraceful Choice of Carbon-Intense Conflict Oil from Our Greatest Enemy in the Western Hemisphere Over Ethical Oil from Canada

2012-01-22T18:32:00.003-05:00

Here's how one Canadian, Toronto Sun columnist Ezra Lavant, views Obama's "Keystone Cop-out":

"U.S. President Barack Obama made a choice last week: He chose Venezuela over Canada.

That’s what he did when he rejected the proposed Keystone XL pipeline that would have taken oilsands oil from Alberta to the Gulf Coast of Texas.

That pipeline would have delivered 700,000 barrels of oil every day from Canada (and from a new oilfield called Bakken that straddles the North Dakota-Saskatchewan border). Which is almost precisely the amount of oil Venezuela now ships to the United States, to those same refineries in Texas.

With one fell swoop, Obama could have replaced conflict oil, from a belligerent, authoritarian OPEC regime, with ethical oil from Canada. But he didn’t.

Venezuela sells an enormous amount of oil to the U.S. About 800,000 barrels a day. At a hundred bucks a barrel, that’s $80 million a day. That’s about $30 billion a year America pays to its greatest enemy in the western hemisphere.

It’s not just conflict oil, though. Venezuelan oil is some of the most carbon-intense oil in the world — even more so than Canada’s oilsands. So by replacing Venezuelan imports with Keystone XL oilsands oil, not only would Obama have been doing the right thing geopolitically, it would have reduced America’s carbon footprint — which Obama claims to care about

Obama’s decision is a disgrace, but it’s America’s business. So now our business is to sell our oil to Asia. Not just for our economic success, but to prove we are an independent country.

If Obama doesn’t want our oil, well, the rest of the world does."

Twitter Reminder and A Blog Content Bleg

2012-01-22T16:48:00.001-05:00

1. Reminder that you can follow me on Twitter for daily updates, news, blog posts, links, economic reports, headlines, re-tweets, data, charts, etc.

2. The "hat tips" that you see at the bottom of many CD posts reveal the fact that about one-third of the posts (or more) originate with an email "tip" from a regular (or occasional) CD reader. Publishing CD as a "one-man operation" makes it impossible to be aware of even a fraction of all the interesting content, news, blog posts on the Internet every, so I'm forever grateful for the "research support" that I get on a regular basis from dozens of contributors. In the never-ending search for new blog content, I would gladly accept suggestions, links and recommendations by email (mjperry at umich.edu) from anybody who has the time and inclination to send me your ideas, links, articles, etc. I'm always happy to give the public "hat tip" to acknowledge my "sources," but can also keep you anonymous if you prefer it that way.

With New Super-Fracking Advances, the Shale Revolution Might Be Just Getting Started

2012-01-22T16:08:00.006-05:00

Last Wednesday, I posted a link to a Bloomberg article about "super-fracking" and commented that the ongoing advances in fracking technology might mean that the "shale revolution" is just beginning. Here are some excerpts from a longer and more detailed Bloomberg article about how "super-fracking" could continue to revolutionize domestic energy development by significantly lowering the costs of unlocking even more and deeper reserves of shale gas and tight oil than were accessible by traditional fracking:

Bloomberg -- "Oil services companies including Baker Hughes, Schlumberger and Haliburton are continuing their quest to devise ways to create longer, deeper cracks in the earth to release more oil and gas. These companies are no longer content to frack—they want to super frack.

High crude prices and newly accessible oil and gas embedded in shale rock in North America are driving the wave of innovation. The more thoroughly that petroleum-saturated rock is cracked, the more oil and gas is freed to flow from each well, raising the efficiency—and profit—of the expensive process.

1. Baker Hughes has set its sights on creating “super cracks,” a method of blasting deeper into dense rock to create wider channels. The aim of the technology, branded as DirectConnect, is to better concentrate the pressure of fracking fluids to reach oil or gas farther from the well bore, which existing methods fail to do as effectively. The company also is trying to speed up the fracking process. Wells usually are fracked in steps, as plastic balls are dropped down to plug the well at various stages and isolate different zones for fracking. It can take days to get a drilling rig to the site and fish out conventional frack balls, which can get stuck over the course of 20 or 30 preparation phases in a typical well before production can begin. With land-based rigs renting for up to $30,000 a day, reducing such delays is critical. So Baker Hughes has developed disintegrating balls, which turn into powder “like an Alka-Seltzer” after a couple of days.

2. Schlumberger has developed a technique called HiWAY. The technology can generate bigger cracks in surrounding rock formations than current methods by combining fiber with typical fracking materials such as sand so the stuff clumps as it’s being pumped in repeated pulses and at high pressure into the side of a well. The number of customers using HiWAY in North America has grown from two a year ago to more than 20. Chief Executive Officer Paal Kibsgaard told investors in October that the HiWAY technology is yielding larger oil and gas production while using less water and sand than conventional fracking.

3. Halliburton, the No. 1 provider of fracking services, is trying to reduce the amount of materials and labor used on each well. It’s rolled out RapidFrac, a series of sliding sleeves that open throughout the horizontal well bore to isolate zones for fracking. Fracking fluid is then injected at high pressure through multiple holes exposed by the sliding sleeve, cracking the surrounding rock. The process can be faster and cheaper than the most popular fracking method, which involves sending an explosive charge down the well to blast one hole at a time."

The Big Three's Dramatic U-Turn

2012-01-22T10:06:00.006-05:00

The chart above shows annual market shares for the U.S. vehicle market (Ward's Auto data here). From a peak of 90.6% in 1965, the market share of the Big Three (GM, Ford and Chrysler) fell in almost every following year, including a 16-year streak of annual declines in every year from 1994 to 2009. At the end of that 16-year period, the market share of the Big Three went below 50% for the first time in 2008 at 46.9%, before falling in the next year to an all-time low of 43.7% in 2009.

But the Big Three are making a comeback. The group gained market share in both 2010 and 2011, marking the first time since 1992-1993 of two consecutive annual gains for the Big Three. The 1.71% increase in 2011 to a 46.2% market share from 44.5% in 2010 was the largest single year gain since a 3.2% gain in 1988. All three companies posted solid sales gains in 2011, led by Chrysler at 26.1% and followed by GM at 13.2% and Ford at 10.8%.

Production, sales, profits and hiring are now improving significantly for the Big Three and the American automakers are back in the fast lane again, as CBS Sunday Morning reported today on a feature titled "The Big Three's Dramatic U-Turn."

Related: The Detroit Free Press reported this week that Michigan's unemployment fell to 9.3% in December, the lowest state jobless rate since September 2008, and there was positive net job growth in Michigan last year for the first time since 2000.

The Secret Document That Transformed China's Economy With Private Property and Competition

2012-01-21T17:45:00.015-05:00

For this great NPR story I thank John Chilton, who writes by email that it's "Just like the story of the Pilgrims whose economy was transformed when they gave up collectivism and the communal approach to farming." It's a great story with economic lessons in private property rights, competition, entrepreneurship, and the triumph of the individual over the state, here are some excerpts:

"In 1978, the farmers in a small Chinese village called Xiaogang gathered in a mud hut to sign a secret contract. They thought it might get them executed. Instead, it wound up transforming China's economy in ways that are still reverberating today.

The contract was so risky — and such a big deal — because it was created at the height of communism in China. Everyone worked on the village's collective farm; there was no personal property. "Back then, even one straw belonged to the group," says Yen Jingchang (pictured above), who was a farmer in Xiaogang in 1978. "No one owned anything."

In theory, the government would take what the collective grew, and would also distribute food to each family. There was no incentive to work hard — to go out to the fields early, to put in extra effort, Yen Jingchang says. "Work hard, don't work hard — everyone gets the same," he says. "So people don't want to work."

In Xiaogang there was never enough food, and the farmers often had to go to other villages to beg. Their children were going hungry. They were desperate. So, in the winter of 1978, after another terrible harvest, they came up with an idea: Rather than farm as a collective, each family would get to farm its own plot of land. If a family grew a lot of food, that family could keep some of the harvest.

This is an old idea, of course. But in communist China of 1978, it was so dangerous that the farmers had to gather in secret to discuss it. Despite the risks, they decided they had to try this experiment — and to write it down as a formal contract, so everyone would be bound to it. By the light of an oil lamp, Yen Hongchang wrote out the contract.

The farmers agreed to divide up the land among the families. Each family agreed to turn over some of what they grew to the government, and to the collective. And, crucially, the farmers agreed that families that grew enough food would get to keep some for themselves. The contract also recognized the risks the farmers were taking. If any of the farmers were sent to prison or executed, it said, the others in the group would care for their children until age 18.

The farmers tried to keep the contract secret — Yen Hongchang hid it inside a piece of bamboo in the roof of his house — but when they returned to the fields, everything was different. Before the contract, the farmers would drag themselves out into the field only when the village whistle blew, marking the start of the work day. After the contract, the families went out before dawn. "We all secretly competed," says Yen Jingchang. "Everyone wanted to produce more than the next person."

It was the same land, the same tools and the same people. Yet just by changing the economic rules — by saying, you get to keep some of what you grow — everything changed. At the end of the season, they had an enormous harvest: more, Yen Hongchang says, than in the previous five years combined."

MP: Sounds like this would be the perfect inspiration for a Chinese version of our "Thanksgiving" holiday.

Why Does Obama Want the U.S. To Be Energy Poor?

2012-01-21T09:39:00.001-05:00

From Thomas J. Pyle, President and CEO of the American Energy Alliance:

"One of the reasons the unemployment rate has been stuck above 8 percent for years is because the Obama administration is actively blocking the private sector from creating jobs. Approving the Keystone XL pipeline, now in its third year of review, would have gone a long way toward boosting American job creation and strengthening our energy security. But the President prefers the politics of energy poverty and has sided with environmentalist radicals over hardworking Americans and their families.

The reality at the White House has nothing to do with protecting the environment -- it’s about reinforcing a myth of energy scarcity on the United States and driving up the price of energy.

For decades, one of the key tenets of environmental doctrine has been that the United States, and North America as a whole, is running out of affordable energy sources like oil, natural gas, and coal. For this reason, they argue, our economy must switch to renewables like wind farms and solar panels that produce electricity at intermittent rates. Through mandates, government has forced consumers to buy these sources, and the Obama administration has propped up Big Green Energy through taxpayer-funded loans to companies like Solyndra.

Yet the discovery of cost-effective oil production from Canadian oil reserves—as well as the large-scale deployment of shale technologies here in the U.S.—turns the environmentalists’ politics of energy scarcity on its head, and that is at the heart of the administration’s opposition to Keystone XL. The president wants the United States to be energy poor."

Read more here.

Nat Gas: A Foundational Fuel for the Economy With A Surplus That Will Keep Prices Low for Years

2012-01-21T09:06:00.002-05:00

Charlotte Observer -- "Craig Schwartz's heating bill tells the story of a natural gas industry upheaval that's rippling through North Carolina. First, take a look at Schwartz's natural gas bill for December: $73.69. Then look at December 2010, just a year before. The Raleigh computer scientist paid nearly twice as much: $134.14. Now spread those numbers out over several months, and quite likely years.

"That's huge," Schwartz said. "I'll take $200 to $300 bucks a year in natural gas savings, no problem."

It's a familiar scenario for the 35 percent of state households that heat and cook with natural gas. Natural gas prices have been in a freefall as electricity prices are pushing upward, prompting some residents to make retrofits so they can switch to natural gas to heat their homes this winter. The state's two biggest natural gas utilities - Piedmont Natural Gas and PSNC Energy - are both planning rate cuts next month in response to the falling global price of natural gas.

Historically low natural gas prices, resulting from a glut in global reserves, have caused home heating bills to plummet to levels not seen in a decade. Experts anticipate the prices dropping further before they self-correct, with expectations that a long-term surplus could keep prices cheap for years.

"Natural gas is a foundational fuel for the economy. It's plentiful. It's here. And it's cheap," said Thomas Skains, CEO of Charlotte-based Piedmont Natural Gas."

Read more here: http://www.charlotteobserver.com/2012/01/21/2944639/falling-prices-fuel-natural-gas.html#storylink=cpy

Frack Away, There's No Reason Not To, Even Though It's Not the "Government's Energy"

2012-01-21T08:58:00.003-05:00

New Scientist -- "Frack away, there's no reason not to. Two of the main objections to "fracking" for shale gas have been blown out of proportion, according to British geologists.

"We think the risk is pretty low," said Mike Stephenson, head of energy science at the British Geological Survey at a press briefing in London on Tuesday of this week."

See other reports here from BBC News, Wired UK and the Free Republic, where John Ranson writes:

"As George Will noted at the beginning of the year:

Because progressivism exists to justify a few people bossing around most people and because progressives believe that only government’s energy should flow unimpeded, they crave energy scarcities as an excuse for rationing — by them — that produces ever-more-minute government supervision of Americans’ behavior.

Accordingly, liberals have been pushing for a ban on fracking, also called hydraulic fracturing, because of supposed health and environmental risks the method poses."

HT: Warren Smith

Cleveland Federal Reserve: Ten-Year Expected Inflation is Only 1.39%, the Lowest in 30 Years

2012-01-21T00:23:00.002-05:00

"The Federal Reserve Bank of Cleveland reports that its latest estimate of 10-year expected inflation is 1.39 percent. In other words, the public currently expects the inflation rate to be less than 2 percent on average over the next decade (see chart above).

The Cleveland Fed’s estimate of inflation expectations is based on a model that combines information from a number of sources to address the shortcomings of other, commonly used measures, such as the "break-even" rate derived from Treasury inflation protected securities (TIPS) or survey-based estimates. The Cleveland Fed model can produce estimates for many time horizons, and it isolates not only inflation expectations, but several other interesting variables, such as the real interest rate and the inflation risk premium."

MP: Inflation expectations are currently close to the lowest level in at least 30 years (see chart above).

HT: Benjamin Cole

Etta James, R.I.P.

2012-01-20T23:13:00.009-05:00

A classic 1987 performance above by the legendary Bluesy Diva Miss Etta James, accompanied by another legendary vocalist, Dr. John. Etta James died today, just five days shy of her 74th birthday. And of course, there's the song that will always be the one most closely associated with Ms. James, "At Last," which she performs here:

I highly recommend my top two favorite Etta James's CDs during her jazzier period in the mid-1990s: Mystery Lady and Time After Time.

Update: New York Times article.

Nitwitery Alert: House Democrats Are Proposing The Gas Spike Act and a "Reasonable Profits Board"

2012-01-20T15:24:00.011-05:00

How about Congress establishes the"Reasonable Deficits Board" and gets that to work first?

THE HILL -- "Six House Democrats, led by Rep. Dennis Kucinich (D-Ohio), want to set up a "Reasonable Profits Board" to control gas profits. The Democrats, worried about higher gas prices, want to set up a board that would apply a "windfall profit tax" as high as 100 percent on the sale of oil and gas, according to their legislation. The bill provides no specific guidance for how the board would determine what constitutes a reasonable profit.

The Gas Price Spike Act, H.R. 3784, would apply a windfall tax on the sale of oil and gas that ranges from 50 percent to 100 percent on all surplus earnings exceeding "a reasonable profit." It would set up a Reasonable Profits Board made up of three presidential nominees that will serve three-year terms. Unlike other bills setting up advisory boards, the Reasonable Profits Board would not be made up of any nominees from Congress."

Here's how the bill starts: "To amend the Internal Revenue Code of 1986 to impose a windfall profit tax on oil and natural gas (and products thereof) and to allow an income tax credit for purchases of fuel-efficient passenger vehicles, and to allow grants for mass transit."

MP: Just wondering, now that natural gas prices have spiked so low (see chart above) that some producers aren't even covering their costs of production, shouldn't there be a "windfall losses subsidy" for the natural gas producers that are losing money as part of the "Gas Spike Act." That is, market prices "spike" in both directions, up and down, so shouldn't there be some provision for downward spikes?

HT: Bob Wright

Update: According to the most recent rankings from YahooFinance!, the average profit margin for the 215 different American industries is 7.8% for the most recent quarter, and the profit margin for the "Major Integrated Oil and Gas industry" (includes ExxonMobil, Shell, BP, etc.) is right about average at 7.9%, and it ranks #90 out of 215 industries. So if the profits of the major oil companies are "unreasonable," what about the other 89 industries that are even more profitable, like publishing (53% profit margin), silver (41%), gold (25%), cigarettes (22.5%), etc.?

HT: Morganovich (see comments)

Update from some responses to me on Twitter:

"How about they get the "Reasonable Deficits Board" to work first?"

"I'll accept a "Reasonable Profits Board" when they accept a "Reasonable Income Board" for all public employees."

Cartoon of the Day

2012-01-19T21:35:00.001-05:00

Majors of the Top 1%? Economics is No. 2

2012-01-19T14:49:00.004-05:00

NY Times Economix -- "According to the Census Bureau’s 2010 American Community Survey, the majors that give you the best chance of reaching the 1 percent are pre-med, economics, biochemistry, zoology and, yes, biology, in that order (see chart above)."

IJ Wages New Fight for Economic Justice in MN

2012-01-19T10:21:00.003-05:00

Institute for Justice -- "The video above features the story of Verlin Stoll, a 27-year-old entrepreneurial dynamo who owns Crescent Tide Funeral and Cremation in Saint Paul, Minnesota. Verlin has built a successful business because he offers low-cost funerals (cremations from $750 and funerals with burials from $1,650) while providing high-quality service. His business is also one of the only funeral homes that benefits low-income families who cannot afford the high prices of the big funeral-home companies.

Verlin wants to expand his business, hire new employees and continue to offer the lowest prices in the Twin Cities, but Minnesota refuses to let Verlin build a second funeral home unless he builds a $30,000 embalming room that he will never use.

Why is Minnesota forcing Verlin to waste $30,000 on a useless embalming room as a condition of expanding his thriving business?

So that the big, full-amenity funeral-home businesses can benefit from a law that drives up prices for consumers and operating expenses for competitors such as Verlin. Verlin’s basic services fee is only $250, which is about 90 percent lower than the $2,500 that the average Twin Cities’ funeral home charges. Verlin’s business model is built on minimizing fixed costs, which is why he does not have a hearse or chapel, and this law—to the advantage of his competitors—stands in the way of him expanding his low-cost, high-quality approach.

The government should not force Minnesotans to do useless things. That is why on January 19, 2012, Verlin and the Institute for Justice challenged the law in state court."

Thursday Morning Links

2012-01-19T09:45:00.004-05:00

1. A free market for wheat comes to Canada for the first time since 1943 as the Canadian Wheat Board ends its 69-year grain monopoly.

2. TurboTax Goes Mobile: you can now prepare and file your income taxes with a mobile device.

3. Auto industry goes on a U.S. hiring binge.

4. Manufacturing employment has grown faster in the U.S. than in any other leading developed economy since the start of the recovery, as productivity gains and subdued pay rises raise hopes for an American industrial renaissance.

5. Reshoring: Business returns to U.S. as Asia loses edge.

6. North America will become almost totally self-sufficient in energy in two decades, thanks to a big growth in the production of biofuels, shale gas and unconventional oil.

It's Time to Pull the Taxpayer Plug for Electric Cars

2012-01-19T09:29:00.000-05:00

From my editorial in today's Detroit News:

The case for subsidizing electric cars was questionable from the start and is now a boondoggle.

Like many green initiatives promoted by the government and paid for by the American taxpayers, the electric car is more politically than performance or economically driven. Its subsidies and the government-imposed green energy mandates are contrary to the free market principles that undergird our economy.

What emerges most forcefully from experience with the electric car is that subsidies are a waste of taxpayer money. Although the government has provided plenty of help for electric vehicles, there remain major barriers in technology, cost and performance.

As battery technology improves and charging stations proliferate, we will eventually move to an electric-car future.

But the outcome of EV development needs to be like that of the internal combustion engines: the government doesn't have to subsidize regular cars because long ago, it became worthwhile for companies to do it themselves with rebates, discount pricing, and other promotions.

Private businesses will fund new technologies when there is a reasonable chance of commercial success. The private sector is entirely capable of developing EVs and other new automotive technologies without the need for subsidies.

When a new technology is economically viable, then government support is not needed. But if a technology isn't capable of surviving on its own, there's no amount of taxpayer support that will make it so.

It's time to pull the plug on politically motivated taxpayer subsidies for electric cars and see if they can survive on their own in the marketplace.

Auto Plants Are At Capacity and Adding Third Shifts Around the Country, Boosting Local Economies

2012-01-18T17:09:00.000-05:00

Bloomberg -- "Bobbi Marsh puts her 11-year-old son to bed each night and then heads to her job at General Motors Co. (GM)’s metal-stamping plant in Lordstown, Ohio. She gets home in time to make him breakfast. Marsh, 34, is one of thousands of auto workers in the U.S. benefiting from the return of a third shift at factories -- often from 11 p.m. to 7 a.m. -- translating to 24-hour-a-day production at many plants for the first time since the industry collapse in 2009. At the nadir, some plants ran only one eight- hour shift.

The new third shifts, adding more than 4,300 jobs in four states at GM alone, bring jobs to the economy and revenue to governments as well as demand at odd hours for everything from daycare and dentistry to financial services and food. U.S. auto plants this year may operate at about 81 percent of capacity after falling as low as 49 percent in 2009, according to estimates from IHS Automotive in Northville, Michigan.

U.S. Automakers are increasing production at the car plants after the U.S. light-vehicle sales rose by at least 10 percent for two straight years for the first time since 1984 and grew at a faster rate than China, the world’s biggest auto market, for the first time in at least 13 years. States that were hard-hit by the downturn, such as Michigan and Ohio, are among the biggest beneficiaries, adding jobs at places like Ross’ Eatery & Pub and Tony M’s Restaurant that operate near GM auto factories."

Natural Gas Updates; Here Comes Super-Fracking

2012-01-18T13:41:00.005-05:00

1. Domestic production of natural gas set another new all-time record high during the month of October at 2.48 trillion cubic feet of gross withdrawals (see chart below, data here).

2. Due to the record levels of natural gas production and the unseasonably warm weather this winter, prices keep falling. The price for U.S. natural gas futures contracts dropped to a ten-year low of $2.47 per million BTUs in trading on the NYMEX yesterday, see chart below.

3. The shale gas revolution that has produced record-setting levels of domestic production has been made possible by advanced drilling technology known as "fracking," which has unlocked vast supplies of gas from deep shale formations around the country. As effective and successful as fracking has been for unlocking deep shale gas and tight oil, it might soon get even better with new technologies that are under development and being called "super-fracking." According to a Bloomberg article, "Industry scientists are studying ways to create longer, deeper cracks in the earth to release more oil and natural gas." If "super-fracking" becomes a reality, it might be the case that the "shale revolution" is just getting started.

Thanks to Benjamin Cole for the Bloomberg article.

Obama Rejects 20k Jobs, aka Keystone Pipeline

2012-01-18T12:34:00.002-05:00

From an updated version of my recent McClatchy-Tribune editorial, to reflect the Obama administration's pending rejection of 20,000 new jobs for Americans, aka as the Keystone XL pipeline:

Kicking ~~the can down the road~~ 20,000 Americans while they're down and unemployed, as President Barack Obama did in ~~delaying a decision on~~ rejecting the construction of the Keystone XL oil pipeline from Canada to Texas, certainly pleased the green lobby. But it did absolutely nothing for jobs creation. Nor did blocking access to new federal offshore areas for oil and natural gas drilling produce any jobs.

At a time when more than 13 million Americans are unemployed, you'd think that the president would be doing everything possible to stimulate employment. But his jobs-creation policy lacks direction and focus.

~~Putting off a decision on~~ Rejecting the Keystone pipeline and stalling offshore drilling was grossly counterproductive, compromising our commitment to North American oil production and potentially threatening our energy security. These and other regressive actions don't augur well for domestic energy development or job creation.

Despite great handwringing over America's anemic job creation, the president demonstrates little understanding of the damage his policies are doing to millions of unemployed Americans desperate to find work. Unfortunately, pleasing the environmental lobby seems much more important to him now than jobs.

Markets in Everything: Boyfriend Rental in China

2012-01-18T11:13:00.002-05:00

FT.COM -- "This is a tough time of year for Chinese spinsters. Chinese New Year is just around the corner and every single girl knows what her parents want most for the holidays: a betrothal. Girls of a certain age (say, 30) do not dare go home at all without one; and even women in their 20s feel serious pressure not to turn up for this Sunday’s traditional new year’s eve dinner without a marriage prospect in tow.

Now, thanks to Taobao (the Chinese version of Ebay) and the inventiveness of the Chinese entrepreneur, they do not need to: for as little as Rmb100 per day (about $16), Chinese singles can rent a boyfriend to take home for lunar new year.

Chatting up the parents is included in the price, while hand-holding and hugging sometimes cost extra. The boyfriend-substitute will even share a bedchamber with the customer, if that helps persuade the doubting parents. There seems little limit to the a la carte ingenuity of the companies that provide this service: some even offer to waive the fee if the girl and guy share the same bed."

HT: Andrew Biggs

L.A. Port Sets Record in 2011 for Export Containers

2012-01-18T09:08:00.004-05:00

LA Times -- "The Port of Los Angeles set a new standard for exports in 2011, becoming the first harbor in the nation to ship more than 2 million containers carrying U.S. goods to customers overseas, according to year-end statistics released by port officials.
The nation's busiest seaport moved 176,531 export containers in December, enough to kick up its 2011 total to 2.11 million containers. That broke the port's former record of 1.84 million export containers set in 2010.

No other U.S. harbor has moved more export containers in one year. The closest competitors are second-ranked Long Beach, which moved 1.69 million export containers in 2008 and third-ranked New York-New Jersey, which moved 1.62 million export containers that same year."

MP: The 2.11 million loaded outbound export containers leaving the L.A. port last year (data here) was a 14.5% increase over 2010, and follows a 10.3% increase in 2010. The record number of loaded outbound export containers shipped overseas from the L.A. Port in 2011 were filled with manufactured goods from America's factories, which is further evidence of the ongoing expansion and growth of U.S. manufacturing.

Markets in Everything: Wedding Proposal Planners

2012-01-18T08:40:00.001-05:00

Daily Mail UK -- "We're all familiar with how wedding planners can navigate us around the tricky maze of getting married. But now a new industry has emerged, for helping men pop the question in the first place. Proposal planners have discovered a demand for lavish scenarios, be it white doves, helicopter rides, a favorite musician - all with a photographer on hand to record the magic moment.

Sarah Pease of New York-based Brilliant Event Planning says she only focused on weddings until she heard how one friend's proposal involved an engagement ring at the bottom of a bucket of Kentucky Fried Chicken.

'I figured there must be a better way,' she told the New York Times."

HT: Matt Bixler

Top 500 U.S. Manufacturing Firms Had 2011 Sales of $5 Trillion, Almost As Much as Japan's GDP

2012-01-17T21:56:00.022-05:00

The 500 largest U.S. manufacturing firms operate in 28 different industries. Here are the 10 largest manufacturing industries, based on those firms:

Rank	10 Largest U.S. Manufacturing Industries, 2011	Revenue (Millions)	Examples
1	Petroleum & Coal Products	$1,274,150	Exxon, Chrevron, Conoco
2	Computers & Other Electronic Products	$709,613	HP, IBM, Apple, Dell
3	Chemicals	$406,445	P&G, Dow, DuPont
4	Pharmaceuticals	$306,076	J&J, Pfizer, Merck and Co.
5	Motor Vehicles	$303,540	Ford, GM, Harley-Davidson
6	Food	$284,469	General Mills, Kellogg, Campbell
7	Aerospace & Defense	$254,126	Boeing, Lockheed Martin
8	Electrical Equipment & Appliances	$244,738	GE, Emerson, Whirlpool
9	Machinery	$227,481	Caterpillar, Deere, Xerox
10	Beverages	$120,356	Pepsi, Coke, Snapple
	Total	$4,130,994

IndustryWeek recently released its annual ranking of the 500 largest publicly held U.S. manufacturing companies in 2011 based on sales revenue, and the top ten U.S. manufacturing industries (of 28 total industries for the Top 500 companies) are displayed above. Here are some factoids:

1. The combined sales revenue (including global sales) of the top 500 U.S.-based manufacturing for 2011 was $5.13 trillion, which was a 12.75% increase over 2010 sales of $4.55 trillion. To put it in perspective, that amount of annual revenue ($5.13 trillion) of the 500 largest U.S.-based manufacturing companies was almost as much as the $5.8 trillion of GDP for the entire economy of Japan in 2011 (world's third largest economy).

2. The sales revenue from the top ten manufacturing industries totaled $4.13 trillion in 2011 (see chart above), which was more than Germany's entire GDP of $3.6 trillion last year.

3. Annual sales of $1.27 billion in 2011 for America's single largest manufacturing industry - petroleum and coal products - was larger than the GDP of both Mexico and South Korea, and larger than the Gross State Product of both Texas and New York.

4. Annual sales of $709 billion for America's second largest manufacturing industry - computers and other electronic products was more than the entire GDP last year of Switzerland ($594 billion) and almost as much as the GDP of Turkey ($797 billion) and the GSP of Florida ($754 billion).

5. The top ten largest U.S. manufacturing companies (Exxon, Chevron, Conoco, GE, GM, Ford, H-P, IBM, Valero, and Proctor and Gamble) had combined revenues of $1.57 trillion, almost as much as Canada's GDP in 2011 of $1.75 trillion.

MP: The comparisons above help put the enormous size of the U.S. manufacturing sector into perspective and demonstrate that American manufacturing is not withering and disappearing, but thriving, expanding and prospering. In terms of profits, the American manufacturing sector will have its best year ever in 2011. Based on data currently available through the third quarter, the U.S. manufacturing corporations are on track to earn more than $600 billion in profits for 2011, which will be a new record high, and double the profits in both 2008 ($26.6 billion) and 2009 ($28.6 billion), and 36% above the pre-recession level of $44.2 billion in 2007. American manufacturing is alive and well.

Dick Morris TV: Union Power Grab

2012-01-17T15:48:00.003-05:00

In the video above, Dick Morris explains why Obama's recess appointments to the Labor Relations Board could mean coerced, mandatory unionization.

HT: Phillip Beaver

Quote of the Day on Disparities in Achievements

2012-01-17T11:17:00.000-05:00

"Gross inequalities in skills and achievements have been the rule, not the exception, on every inhabited continent and for centuries on end. Yet our laws and government policies act as if any significant statistical difference between racial or ethnic groups in employment or income can only be a result of their being treated differently by others.

Nor is this simply an opinion. Businesses have been sued by the government when the representation of different groups among their employees differs substantially from their proportions in the population at large. But, no matter how the human race is broken down into its components -- whether by race, sex, geographic region or whatever -- glaring disparities in achievements have been the rule, not the exception."

~Thomas Sowell

Markets in Everything: Roll-Your-Own Cigarettes

2012-01-17T10:58:00.001-05:00

"A South Carolina store owner said smokers can get cigarettes without paying state and federal taxes because of a tax loophole. M.J. Farah, owner of Jake's One Stop in Pelzer, South Carolina is offering customers the chance to roll their own cigarettes.

"The customers are taking advantage of a tax cut. They don't have to pay the taxes on the tobacco if they are making it on their own," said Farah. "I have people who drive all the way up here 45 minutes just to come get their tobacco."

Farah recently got three new machines that stuff the cigarettes for customers. He was already selling roll-your-own supplies, but the new machines are less time-consuming and still save smokers money."

Gallup's Jobless Rate Falls to 8.3% in Mid-January

2012-01-17T10:38:00.006-05:00

PRINCETON, NJ -- "U.S. unemployment, as measured by Gallup without seasonal adjustment, is 8.3% in mid-January -- a slight improvement from 8.5% in December, and down from 9.9% in January a year ago. Gallup's mid-month unemployment reading, based on telephone interviews of a random sample of 18,500 adults in the 30 days ending Jan. 15, serves as a preliminary estimate of the U.S. government report, and suggests the BLS will likely report on the first Friday of February that its seasonally adjusted unemployment rate declined once again in January.

The U.S. government's January unemployment rate that it will report in early February will be based on mid-month conditions. Therefore, Gallup's mid-month unemployment reading, based on data collected through the 15th of the month, normally provides a good estimate of the government's unadjusted unemployment rate for the month. Because of employer layoffs after the holidays, unadjusted unemployment rates normally increase at this time of year, and the government seasonally adjusts for these layoffs. So it seems likely that the government will report another decline in its seasonally adjusted U.S. unemployment rate for January.

Regardless of what the government reports, Gallup's unemployment and underemployment measures show modest improvement so far in January, and that is particularly positive news for job conditions at this time of year because the early part of the year is usually slow for hiring. This is good news for the overall U.S. economy. It is also a plus for the president's re-election efforts."

Top 20 Predictions for Life 100 Years From Now

2012-01-17T10:13:00.004-05:00

From the BBC, the top 20 predictions for life in 2112 include:

1) Oceans will be extensively farmed for fish, energy, algae, and natural resources, 2) Telepathic communication will become common, 3) Immortality, 4) Ability to control the weather, and 5) Only three languages (English, Spanish and Mandarin).

New York State Manufacturing Expands in January; The Six-Month Outlook is Highly Optimistic

2012-01-17T09:38:00.005-05:00

The Empire State Manufacturing Survey indicates that manufacturing activity expanded in New York State in January. The general business conditions index climbed 5.3 points to 13.5, and the 5 point gain in January follows strong increases of 8 points in November and 7.4 points in December (see brown line in chart).

According to the NY Fed, "The new orders index rose eight points to 13.7 and the shipments index inched up to 21.7. The prices paid index was positive and slightly higher than it was last month while the prices received index jumped twenty points to 23.1, indicating a significant pickup in selling prices. Employment indexes were positive and higher, pointing to higher employment levels and a longer average workweek."

The future indexes conveyed a high degree of optimism about the six-month outlook, with the future general business conditions index rising 9.26 points to 54.9, its highest level since January 2011 (see blue line in chart). That follows gains of 18.1 points in November and 13.5 points in December, and that 41 point gain in the future index over the last three months is the largest three-month gain in more than ten years.

Low Natural Gas Prices Help Families, Businesses

2012-01-16T16:36:00.000-05:00

USA Today -- "The natural gas futures price fell 13% last week, to $2.67 per 1,000 cubic feet. That's the lowest winter level in a decade (see chart above).

"The market has been overwhelmed with gas," says Anthony Yuen, a commodities analyst at Citibank. He and other analysts expect the price to average near $3 for all 2012. If the weather stays mild, the price could even dip below $2, a level not seen since 2002.

Cheap natural gas is mainly a good thing for the economy:

• More than half of U.S. households use natural gas for heat, and a quarter of the nation's electricity is made from it. Falling heating and electric costs are offsetting the impact of high gasoline prices and enabling families and small businesses to spend on other things. Residential gas and electric customers are saving roughly $200 a year, according to a study by Navigant Consulting.

• For companies that make plastics, fertilizer and other chemicals derived from natural gas, falling prices are a windfall. The same goes for makers of products from steel to bricks to beer. All use a lot of natural gas to heat their furnaces. U.S. manufacturers are becoming more competitive globally as a result of the country's cheap natural gas, industry officials say."

Powerpoint Version of "I Have a Dream" Speech

2012-01-16T15:58:00.001-05:00

From economist William Easterly:

"Martin Luther King's "I Have a Dream" speech would have been even more successful if Dr. King had two things that have vastly improved in the last 47 years: (1) presentation software, and (2) the evocative jargon used by "social entrepreneurs" trying to change things. Using my expert knowledge of these two areas, I was able to improve the "Dream" speech considerably in this Powerpoint presentation."

U.S. Exports to China Have Increased by 21% per Year Since 2005, Twice the 11% Growth in Imports

2012-01-16T15:47:00.007-05:00

As much as we continually hear about China's currency manipulation to artificially increase its exports to the U.S., the chart above shows something very interesting. When: a) monthly U.S. exports to China, and b) monthly imports from China, are both normalized to equal 100 in January 2005, we can see that U.S. exports to China have actually grown much faster (about 21% per year) than imports from China (about 11% per year). Over the 7-year period from January 2005 to November 2011, U.S. exports to China have increased almost four times while imports from China have only doubled.

Another way to describe the trend: in 2005, there were about $6 of imports from China for every $1 of exports to China, and by 2011 the ratio of Chinese imports-to-U.S. exports to China had fallen to less than 4. Conversely, the ratio of U.S. exports-to-Chinese imports has risen from 17% to 26% since 2005.

Also, the current level of monthly imports from China (about $36-38 billion) is only slightly higher than the $34 billion peak in 2008 during the recession, while the current volume of U.S. exports to China (about $10 billion) is more than 50% above the $6.5 billion peak as the recession started in late 2007.

Although we still have a trade deficit with China, its relative size (in relation to the total volume of trade with China) has been shrinking over time. As disposable incomes increase in China and as more Chinese enter the new middle class there, their purchases of American goods have increased at a faster rate than our purchases of their products. That's a trend that we can expect to continue.

A Man's Home is the Government's Castle in NYC

2012-01-16T14:43:00.001-05:00

In December I had a post about James Harmon, an owner-occupant Manhattan landlord who is going all the way to the United States Supreme Court with his legal claim that New York City’s rent control laws constitute an illegal seizure of his five-story brownstone property on W. 76th Street without just compensation, and violate the Constitution’s contracts clause.

Nicole Gelinas, contributing editor to the Manhattan Institute’s City Journal, has an excellent editorial about NYC rent control laws and James Harmon's legal case in today's NY Post, appropriately titled "A Man's Home is the Government's Castle."

The Dental Cartel Objects to Competition from Dental Therapists, Out of Concern for Public Safety

2012-01-16T13:31:00.004-05:00

From Governing.com:

"Try finding a dentist in the remotest rural or deepest urban pockets of the land, and for blatantly economic reasons, they just aren’t there. That’s why states are looking to fix the problem by creating a so-called mid-level dental provider, sometimes referred to as a dental therapist or advanced dental therapist. Much like a nurse practitioner (NP) or physician assistant (PA) is to a doctor, this provider would be educated and licensed to perform basic dental services -- routine checkups, cleanings, filling cavities and extracting teeth -- under the supervision of a fully trained dentist. These providers would be charged with providing care in underserved areas."

MP: Sounds like a great innovative alternative that would make dental care more available, convenient, and affordable, right? Sure, unless you're a member of the "dental cartel," aka the American Dental Association, and you don't appreciate the possibility of increased competition for your services. Here's more from the article:

"In much the same way that the American Medical Association fought against the creation of NPs and PAs, the American Dental Association (ADA) and its state chapters are lobbying hard to thwart state legislatures as they work to create this new level of dental care providers, who are common and well liked in other parts of the world."

MP: It's probably not too surprising that the dental cartel's main publicly stated objection to the creation of a new level of dental provider is their concern about the public's "safety." The cartel's possible loss of business from increased competition hasn't been mentioned, but I think we know better, don't we?

HT: Steve Bartin

Medicare Sets 6 Billion Prices Across the Country; Is There Any Chance Those Are the Right Prices? NO

2012-01-16T10:40:00.012-05:00

From John Goodman's blog post today "How Doctors Are Trapped":

"Medicare has a list of some 7,500 separate tasks it pays physicians to perform. For each task there is a price that varies according to location and other factors. Of the 800,000 practicing physicians in this country, not all are in Medicare and no doctor is going to perform every task on Medicare’s list.

Yet Medicare is potentially setting about 6 billion prices across the country at any one time. Is there any chance that Medicare can get all those prices right? Not likely.

What happens when Medicare gets them wrong? One result: doctors will face perverse incentives to provide care that is costlier and less appropriate than the care they should be providing. Another result: the skill set of our nation’s doctors will become misallocated, as medical students and practicing doctors respond to the fact that Medicare is overpaying for some skills and underpaying for others.

The problem in medicine is not merely that all the prices are wrong. A lot of very important things doctors can do for patients are not even on the list of tasks that Medicare pays for."

MP: These problems sound a lot like the deficiencies of Soviet-style central planning in general when the government, rather than the market, sets prices, see Economic Calculation Problem.

Dear College Student......

2012-01-16T09:35:00.001-05:00

From the Forbes article "Dear Student: I Don't Lie Awake At Night Thinking of Ways to Ruin Your Life," by economics professor Art Carden:

"First, I do not “take off” points. You earn them. The difference is not merely rhetorical, nor is it trivial. In other words, you start with zero points and earn your way to a grade.

Second, this means that the burden of proof is on you to demonstrate that you have mastered the material. It is not on me to demonstrate that you have not.

The fact that you “don’t understand” why you didn’t earn full points for a particular question might itself help explain why you didn’t earn full points. Don’t take this personally or interpret it as a sneer. See it as a learning opportunity.

Finally, I’m here to be a mentor and instructor."

HT: Greg Mankiw

Markets in Everything: The Beer Mitten

2012-01-15T23:19:00.002-05:00

Keep your hands warm and your malt beverage cold with the beer mitten.

Update: 10 Surprising Health Benefits of Beer, via Instapundit

CBS News: 12 Clean Energy Firms Received $6.5B in Taxpayer Money, And Are All in Financial Trouble

2012-01-15T22:57:00.005-05:00

A CBS News investigation has found a pattern of the government pouring your tax dollars into clean energy.

CBS NEWS --"It's been four months since the FBI raided bankrupt Solyndra. It received a half-billion in tax dollars and became a political lightning rod, with Republicans claiming it was a politically motivated investment.

CBS News counted 12 clean energy companies that are having trouble after collectively being approved for more than $6.5 billion in federal assistance. Five have filed for bankruptcy: The junk bond-rated Beacon, Evergreen Solar, SpectraWatt, AES' subsidiary Eastern Energy and Solyndra.

Others are also struggling with potential problems. Nevada Geothermal -- a home state project personally endorsed by Senate Majority Leader Harry Reid -- warns of multiple potential defaults in new SEC filings reviewed by CBS News. It was already having trouble paying the bills when it received $98.5 million in Energy Department loan guarantees."

Find out more in the video above, or go here.

Sunday Night Links

2012-01-15T21:05:00.007-05:00

1. Because of its proximity to the Bakken shale oil formation, a record number of passengers flew out of Minot International Airport in 2011.

2. In South China, elderly diners savor cat meat, particularly during winter.

3. Less than one-fourth of a $2.5 million Tennessee state fund to encourage purchases of electric cars has been claimed since the vehicles hit the market a year ago.

4. Tampa Bay businesses find savings in new fingertip, credit card technology.

5. Among the best deals at some Dollar Tree stores is a $2 Sunday newspaper for a buck, with sales limited to three papers per customer.

Markets in Everything: Rent Your Stuff

2012-01-15T09:42:00.006-05:00

A marketplace where you can rent almost anything.

RentStuff.com -- "We connect people with other people (and rental businesses) nearby to rent out their everyday stuff such as sporting goods, camping gear, musical equipment, grills, lawn mowers, tools, tech gadgets and more. RentStuff.com makes it effortless for people to connect with friends, neighbors, local people and businesses in order to find stuff they need or make money by lending out stuff they own but are not using."

HT: Managerial Econ

VIDEO: The Hidden Beauty of Pollination

2012-01-14T12:55:00.001-05:00

The video above is "Hidden Beauty of Pollination," taken from this TED Talk by Louie Schwartzberg that gets a standing ovation.

A New World Energy Map is Emerging. Exhibit A: Natural Gas Glut in America Fuels An Export Debate

2012-01-14T12:01:00.014-05:00

Natural gas futures contracts for February closed at $2.67 (per million BTUs) in trading Friday on the NYMEX (see chart above). That's the lowest closing price since March of 2002, almost ten years ago, and that's not adjusted for inflation. In real terms, it's the lowest price since 1999. As VangeIV and some others have pointed out in the comments section, $2.67 is likely far below the actual cost of producing natural gas for most companies.

As this Houston Chronicle article points out, natural gas is selling for as much as $12 per million BTUs in Europe (see chart) and as high as $18 in some Asian markets (that's "off the chart" above!). Andrew Ware, a spokesman for Houston-based Cheniere Energy, is quoted in the article saying "We have so much natural gas coming up that we don't know what to do with it."

Well, it seems like a natural solution to our "glut" would be to export America's cheap, abundant American natural gas to Europe and Asia and allow U.S. companies to take advantage of the huge price difference, but that's generating some controversy as the article points out:

"Debate is brewing over whether to keep the nation's glut of natural gas at home for cheap energy or export it at five times the price, possibly creating jobs and boosting the domestic economy. Businesses that purchase natural gas for industrial and residential use have rallied against proposals to liquefy and export the fossil fuel to Asian and European nations willing to pay much higher prices.

Nine companies have sought federal approval to export about 10 billion cubic feet of liquefied natural gas per day, which would boost prices for U.S. customers. Cheniere Energy's Sabine Pass LNG plant in Louisiana already has won approval to ship out more than 2 billion cubic feet of liquefied natural gas a day.

There's little doubt that exports will cause the price of natural gas to rise. The debate is whether the rise in gross domestic product and gas field employment might offset the negative effects of higher domestic energy prices."

MP: It's quite an interesting development that the U.S. now has such an abundant supply of domestic natural gas thanks to the shale revolution that we're now having a debate on whether American companies should be allowed to export gas.

The debate over natural gas exports is more evidence that a new world energy map is emerging, and it is centered not on the Middle East but on the Western Hemisphere as Daniel Yergin pointed out recently in the Washington Post.

Very few people predicted the historic "game-changing" domestic energy developments that have emerged in 2010 and 2011. And Yergin provides some insight on why that is - "The transformation is happening not as part of some grand design or major policy effort, but almost accidentally. This shift was not planned — it is a product of a series of unrelated initiatives and technological breakthroughs."

HT: Jim Curtis

U.S. Shale Oil Revolution Has Only Just Begun

2012-01-14T09:16:00.001-05:00

From Robert Campbell, Reuters market analyst:

"If independent U.S. oil producers are right, last year was only a taste of the transformation that is coming to America’s oilpatch. Some optimists are already forecasting huge increases by 2015, perhaps taking U.S. oil production up by some two million barrels per day to 8 million bpd by then.

Both the expertise of the industry and huge amounts of investment capital are already moving into less established shale plays hoping to replicate the success that has already materialized in North Dakota and Texas, which put these places on oil traders’ lips as the unprecedented slump in West Texas Intermediate crude oil prices compared to globally-traded grades.

Well, get ready to learn a few more names.

Perhaps you have heard of the Utica Shale in Ohio now, where Total has just splashed out more than $2 billion on a prospect that is still in its infancy — production is essentially nil today— but which promoters say could be the next Eagle Ford shale. But have you heard of Colorado’s Niobrara shale, California’s Monterey Shale, Oklahoma’s Mississippi Lime Shale, the Tuscaloosa Marine Shale in central Louisiana or the Lower Smackover Shale that stretches from Northern Louisiana into Arkansas?

Every single one of those places, and others throughout the United States, are currently being combed over by cash-rich independent oil companies hoping to find the next big oil play."

Petroleum, Fuel Lead U.S. Exports in November

2012-01-13T14:40:00.022-05:00

	Top 15 U.S. November Exports	Millions
1	Petroleum products	$5,032
2	Fuel oil	$4,780
3	Pharmaceutical preparations	$4,356
4	Industrial machines, other	$3,881
5	Semiconductors	$3,508
6	Chemicals-organic	$3,470
7	Civilian aircraft	$3,260
8	Telecommunications equipment	$3,048
9	Electric apparatus	$2,929
10	Plastic materials	$2,839
11	Medicinal equipment	$2,718
12	Nonmonetary gold	$2,638
13	Computer accessories	$2,595
14	Industrial engines	$2,405
15	Engines-civilian aircraft	$2,386
	Source: BEA

According to today's BEA report on international trade in goods and services for November, the top two U.S. export categories were: 1) petroleum products ($5 billion) and 2) fuel oil ($4.78 billion), see chart above of the top 15 November exports. On a year-to-date basis through November, those same categories are the top two exports for 2011.

See previous CD post here about how the U.S. will be a net exporter of petroleum products in 2011 for the first time in 60 years.

Six Big Results of $3.53 Natural Gas in 2012

2012-01-13T10:33:00.007-05:00

The U.S. Energy Information Administration is forecasting $3.53 for the average annual spot price of natural gas in 2012 (see chart above), which will be almost 12% lower than the average price this year of $4 per million BTUs. In the first few weeks of this year, the spot price of gas has been below $3 (data here).

What are the six big results of $3.53 natural gas in 2012? According to energy expert John Hanger:

1. "Still lower natural gas bills for consumers, with a residential consumer saving probably another $45 on top of the $500 per year the gas price drop from 2008 has already provided.

2. Still lower electricity bills for those consumers in competitive electricity markets where natural gas pricing importantly impacts electricity prices. All other things being equal, another 50 cent decline in gas prices could reduce electricity bills by about 0.5 cents per kilowatt-hour and save electricity consumers about $50 during 2012. This $50 saving would be added to $500 per year in electricity costs that lower natural gas prices have already provided.

3. Lower natural gas bills and electricity bills will again prevent a broad energy shock, even though oil prices are at record levels for a full year and would go much higher if conflict with Iran erupts.

4. Another decline in the number of producing shallow, traditional gas wells in Pennsylvania will take place.

5. Gas will continue to displace coal in electricity generation. Power plants that can run on either coal or gas will use gas. More decisions will be made to convert coal plants to gas. Gas's electricity generation market share will rise and coal's fall to below 43%, into the 42% zone.

6. More natural gas displacing coal and oil will cut carbon emissions and other pollutants like soot and mercury. US carbon emissions will likely fall in 2012, in significant part due to natural gas.

John Hanger's Bottom Line: The 2012 pricing may well be the new floor on gas pricing. It is really hard to see how prices can go any lower, given that gas demand is rising, more drilling rigs are moving to oil, and prices are so low that more marginal wells are being shut in. EIA itself is forecasting an increase in gas prices for 2013 to $4.14, up but sill low.

Finally, perhaps another year of record gas supplies and establishing a new floor on gas prices will mean that the ridiculous smear that shale gas is a "Ponzi Scheme" and those that spread it will be ridiculed by one and all in 2012. I am not counting on that one, but another year of low, low natural gas prices looks almost guaranteed."

HT: Robert Kuehl

The Energy Treasures Beneath Our Feet

2012-01-13T09:27:00.001-05:00

From an editorial by Pete Jermann, a self-employed craftsman and home-schooling father from Olean, New York (full article here, shorter version here):

"To look on the treasures beneath our feet as a threat to our comfort rather than a contribution we can make to a more vibrant world economy, one that multiplies wealth rather than redistributes a static wealth, is simply selfish.

When we accept no risk in our own backyards, we have no right to expect it of those whose backyards have provided us with the gas we use to heat our homes, the electricity we use to drive our appliances, and the fuel we use to go to and fro. In all fairness, if we are not willing to accept this risk, we should turn out our lights, turn off our home entertainment centers, turn off our heat and learn how to scratch a basic existence out of our own backyards.

The Marcellus Shale and many other resources in this country can be mined responsibly, but none of it can be done completely without risk. There is neither progress nor freedom without risk. It is foolhardy to think that a life without risk is even possible. It is foolish to think that risk always favors the do-nothing position. The risk of doing nothing is the risk of poverty and stagnation. I think history will show that to be the greater risk.

The perfect world will be found in neither poverty nor prosperity. But one is better than the other. Prosperity will always be messy. There will always be accidents waiting to happen and unforeseen consequences. However, history shows — particularly the history of the United States — that more people live better lives when they are willing to take those risks and deal with the consequences as they occur."

Mortgage Rates Fall to New Historic Lows and Help Boost Nov. Miami-Area Home Sales to 5-Year High

2012-01-12T15:53:00.004-05:00

Mortgage rates fell again this week, and 30-year fixed rates (3.89%), 15-year fixed-rates (3.16%) and one-year ARMs (2.76%) are all at their lowest levels in history (see chart above).

Related: "Miami-area homes sold at the fastest pace for a November in five years as lower prices and mortgage rates continued to drive robust demand from investors and vacation-home buyers - both foreign and domestic."

MP: It's a sign that market forces are working - lower prices and lower mortgages rates stimulate demand for home sales in Miami.

U.S. Life Expectancy Reaches New High of 78.7 Yrs.

2012-01-12T11:51:00.002-05:00

Life expectancy in the U.S. increased to a new all-time high of 78.7 years in 2010, according to data released yesterday by the government. The chart above shows the significant correlation between real GDP per capita and life expectancy in the U.S. from 1929 to 2010.

For a longer interactive graphic from Gapminder that covers the period from 1800 to 2010 showing the relationship between U.S. life expectancy and real GDP per capita, go here.

Personal Bankruptcy Filings Decline 11.6% in 2011

2012-01-12T10:05:00.004-05:00

"Fitch Ratings says personal bankruptcy filings declined for the first time in four years in 2011, as economic conditions improved marginally during most of the year and consumers reigned in borrowing and paid down existing debt. According to National Bankruptcy Research Center figures, U.S. personal bankruptcy filings declined 11.6% from 2010. The results bettered Fitch's more moderate 5% decline forecast for the year. Actual filings fell 176,892 from 1,530,078 in 2010 to 1,353,186 in 2011.

The results helped drive the rapidly improving collateral performance in consumer Asset-Backed Securities (ABS) sectors throughout 2011. Notably credit card chargeoffs, which are directly affected by bankruptcy filings, fell significantly throughout the year, declining more than 37% from year-end 2010 to year-end 2011 (see chart above). Bankruptcy filings typically comprise 20%-30% of credit card chargeoffs while contractual defaults make up the rest. Lower consumer bankruptcies have a less profound, but still important, effect on auto ABS, given the utility and importance of the car to the borrower. Nonetheless, lower filings do have a positive effect on default frequencies, all else being equal."

MP: The chart above was featured on this recent CD post, and shows that for consumer credit cards, the delinquency rate in Q3 2011 fell for the 9th consecutive quarter to 3.47%, which was the lowest level since a 3.46% reading in the first quarter of 1995, more than 16 years ago (see blue line in chart). This downward trend in credit card delinquencies to a 16-year low helps explain the significant decline in personal bankruptcy filings last year.

HT: Robert Kuehl

A Most Incredible End to a College Football Game

2012-01-12T09:05:00.005-05:00

The video above shows a last-minute touchdown after 15 separate lateral passes, and the announcer hyperventilates that "it might be the most sensational, incredible ending in all of Division 3 football."

HT: William Heasley

Markets in Everything: Smart Contact Lenses

2012-01-12T08:43:00.010-05:00

PITTSBURGH (CBS) — "Forty-million Americans wear contact lenses. In the not so distant future, contacts may do a lot more than just help you see. What if the lenses could look inside of you to diagnose, monitor and even treat disease? Sound far-fetched? Well, it may not be too far away.

The new generation of contact lenses is being called “smart lenses,” and they are packed with circuits, sensors and wireless technology – all designed to keep an eye on your health.“There’s a possibility to develop a really, really important new tool for medicine,” said Babak Parviz, PH.D., the developer of the Smart Lens."

HT: Warren Smith

Recommended: FRED Add-In for Microsoft Excel

2012-01-11T14:13:00.005-05:00

I use the Federal Reserve Economic Data (FRED) from the St. Louis Federal Reserve on almost a daily basis and for those of you that also access these data on a regular basis, you might be interested in the free "FRED Add-In for Microsoft Excel" available here.

According to the St. Louis Fed,

"This Add-In is free software that will significantly reduce the amount of time spent collecting and organizing macroeconomic data. The FRED add-in provides free access to over 30,000 data series from various sources (e.g., BEA, BLS, Census, and OECD) directly through Microsoft Excel.

Key Features:

One-click instant download of economic time series.
Browse the most popular data and search the FRED database.
Quick and easy data frequency conversion and growth rate calculations.
Instantly refresh and update spreadsheets with newly released data.
Create graphs with NBER recession shading and an auto update feature."

MP: I just downloaded the FRED Add-In and tried it out, and it works great. It does save time by accessing FRED data directly in Excel, compared to going to the FRED website, downloading datasets in Excel format and then opening those datasets in Excel. To help get started you can review the 5-minute tutorial video on the Fed's website.

Dynamic Market Pricing Reduces Congestion on the 520 Bridge, With Maybe Some Help from an App?

2012-01-11T10:12:00.003-05:00

In early December, a CD post featured a Seattle-based company called Seabalt Solutions, which developed an app called Toll Avoider to help drivers avoid the new dynamically-priced tolls on the Highway 520 bridge that started in late December.

After just a few weeks following the implementation of the bridge tolls, the Seattle Times is reporting that:

"New tolls on the Highway 520 bridge have reduced traffic so much that drivers are commonly traveling at 65 mph, maybe three times as fast as they're used to. Bryan Bucklin, of Seattle, estimates that his former 35- to 40-minute ride from Microsoft to Montlake is now as short as 15 minutes.

Motorists are diverting to other roads, chiefly the toll-free Interstate 90 bridge."

MP: Maybe the mobile app, in addition to the dynamic pricing, is contributing to the reduction in traffic on the 520 bridge?

HT: Greg Mankiw

Salaries for New Ph.D.s in Economics

2012-01-11T08:58:00.000-05:00

Greg Mankiw links to the study "Survey of the Labor Market for New Ph.D. Hires in Economics, 2011-12," which reports the following results:

1. Eighty-two economics departments reported 516 new Ph.D.s who sought employment for the 2010-11 academic year. Of these job seekers, 457 (88.6 percent) were successful.

2. Among the successful job seekers, 62.4 percent found employment in academic institutions as compared to 62.8 percent in the 2009-10 year.

3. Respondents to the current survey report a mean actual salary for the 2010-11 academic year of $87,596 or 6.6 percent below what was expected.

4. For Ph.D. granting institutions, the mean actual salary in 2010-11 was $98,542, compared to an average of $115,000 for the Top 30 economics departments, and an average of $75,612 for bachelor and masters degree-granting institutions.

North Dakota Sets More Oil Production Records in November; Above 500k Daily Barrels for First Time

2012-01-10T17:15:00.012-05:00

The "Economic Miracle State" of North Dakota pumped another record amount of oil during the month of November at a daily rate of 509,754 barrels, which was 43% above last year's output, and the first time that the state's daily production exceeded 500,000 barrels (see chart above, data here). Oil production in the Peace Garden State has more than doubled from 246,000 barrels per day two years ago, and North Dakota is now producing enough oil to completely displace the imports of crude oil from Colombia (364,000 bpd) or Iraq (422,000 bpd).

Other highlights of the November production report:

1. The number of wells producing oil in the state increased to 6,060, which sets a new record, and exceeds 6,000 wells for the first time ever.

2. The amount of oil produced per well also reached a record high of 84 barrels per day in November, which is 50% higher than the 55 barrels per day two years ago, and probably reflects both increasing productivity from fracking technology and drilling in more productive areas.

3. The combination of a record number of wells producing oil at record-setting productivity levels has put North Dakota on a trajectory to surpass both California (539,000 barrels per day) and Alaska (555,000 bpd) this year to become the No. 2 oil-producing state in the U.S. At the current pace of record-setting monthly gains, North Dakota's oil production is currently on track to break the 600,000 barrels per day level by next March, break the 700,000 level by next August, and exceed 800,000 barrels per day by the end of this year. At that point, North Dakota oil could be enough to displace either Venezuela's or Nigeria's imports.

4. North Dakota's oil production has now surpassed OPEC-member Ecuador's daily production of 485,000 barrels.

As a result of the ongoing oil boom in the Bakken area, North Dakota continues to lead the nation with the lowest state unemployment rate at 3.4% for November, more than 5 full percentage points below the nation's average 8.7% rate for November. There are nine North Dakota counties with jobless rates at or below 2% for November, and Williams County, which is at the center of the Bakken oil boom, boasts the lowest county jobless rate in the country at 0.9%.

Bottom Line: The ongoing record-setting oil production in North Dakota continues to make it the most economically successful state in the country, with record levels of employment and income growth, increasing tax revenues, the lowest foreclosure rate in the country, a strong real estate market, and jaw-dropping jobless rates in many counties of the Bakken region below 2%.

Markets in Everything: Wi-Fi Quadricoptor Drone

2012-01-10T09:48:00.000-05:00

Engadget -- "The new Parrot Drone touts much improved 720p HD video-recording capability, a revamped app with updated flight controls and features, along with revised hardware and reinforced hulls. We recently spent a few minutes with the smartphone-controlled UAV, so check out the quick video overview above."

HT: Sprewell

Economics Blogs: "Dim Sum for the Mind"

2012-01-10T09:41:00.002-05:00

From a report in the Chronicle of Higher Education about a panel discussion on economics blogs at the American Economic Association meetings that were held last week in Chicago:

"In an age of sophisticated social media and rapidly evolving technologies, blogs would seem to be about as sexy as a pair of sensible shoes. Yet as simple as they may be, blogs have also proven to be valuable to economists debating principles and policy, and to faculty looking to breathe life into the teaching of their discipline, speakers said here on Saturday.

"The virtue of blogs is that they're living, real-time, and they respond to what's happening in the real world," said Steven D. Levitt, a professor of economics at the University of Chicago who is co-author of the book Freakonomics and of a blog of the same name. He was one of several scholars who joined a panel discussion at the annual meeting of the American Economic Association on the topic of using blogs to teach undergraduate economics.

The role of economics blogs started changing noticeably around 2008, said Alex Tabarrok, an associate professor of economics at George Mason University. Before then, blogs were expected to be clever and entertaining, and little else."

Markets in Everything: CSA for Local Art

2012-01-10T09:23:00.000-05:00

Michigan Radio -- "An arts advocacy group is stealing an investment idea from the agriculture world in an effort to get more folks to buy local art. A statewide arts advocacy group wants to serve up some fresh, local art. To do so, the group is copying an investment model popular in the agricultural world.

Lots of farms in Michigan participate in Community Supported Agriculture. Folks can buy a CSA share in a farm. In return, the shareholder gets a weekly crate of fresh farm produce.

Now ArtServe Michigan is launching a CSA for art in metro Detroit, based on a successful program in Minneapolis-St. Paul.

Cezanne Charles is with ArtServe. She said during the 3 month "growing season," which begins in April, shareholders will receive nine pieces of art from nine local artists: "This can be anything from...original small paintings, to the idea of doing like a limited edition 7-inch vinyl, to doing a short chap book of poetry or literary work," Charles said. Charles said 50 shares will be available March 5, and each share costs $350."

Let the Market Decide: Kodak and Post Office

2012-01-09T22:31:00.000-05:00

Thomas Sowell on why the market should decide on the fate of the Post Office, just as it has decided the fate of Kodak, Montgomery Wards, Studebaker, Eastern Airlines, etc.

"Just as Kodak's technology made older modes of photography obsolete more than a hundred years ago, so the new technology of the digital age has left Kodak behind. Great names of companies in other fields have likewise vanished as new technology brought new rivals to the forefront, or else made the whole product obsolete, as happened with typewriters, slide rules and other products now remembered only by an older generation.

That is what happens in a market economy, and we all benefit from it as consumer Unfortunately, that is not what happens in government. The post office is a classic example.

Post offices were once even more important than Eastman Kodak, and for a longer time, as the mail provided vital communications linking people and organizations across thousands of miles. But, today, technology has moved even further beyond the post office than it has beyond Eastman Kodak.

The difference is that, although the Postal Service is technically a private business, its income doesn't cover all its costs — and taxpayers are on the hook for the difference. Moreover, the government makes it illegal for anyone else to put anything into your mail box, even though you bought the mail box and it is your property. That means you don't have the option to have some other private company deliver your mail."

Welcome to the U.S. Manufacturing Renaissance

2012-01-09T21:42:00.005-05:00

Business Insider -- "Investment Bank Jeffries' Chief Equity Strategist Sean Darby predicts a U.S. industrial renaissance "through a combination of higher wage inflation overseas, a weaker U.S. dollar and better productivity gains."

The most important factor in U.S. competitiveness may be a decline in Chinese competitiveness:

The labor comparative gap that China has had has disappeared because the total costs of production for certain products have moved towards US costs. This is particular where labor costs are a smaller proportion of the total costs. Although readers may be feel that it is an exaggeration to claim that ‘off-shoring’ will immediately be reversed back to ‘on-shoring’, perhaps it is better to suggest that the ‘hollowing out’ of US manufacturing has reached its nadir. The worst of the transition is behind the US all other factors of production being equal. The important driver will be speed of productivity gains between the two countries that encourages CEOs to open and close plants in one or the other, not just the labour cost.

Industries like agriculture, coal and mining, oil, aerospace and autos have already shown better growth than people realize (see chart above).

Jefferies is bullish on the U.S. economy too, expecting 2.5% GDP growth next year, strong enough to save the world from a Europe-led Armageddon. Last year Jefferies had the most accurate equity team on Wall Street."

MP: The chart above shows that over the most recent four-quarter period from 2010 Q3 to 2011 Q3, the U.S. manufacturing sector grew at 4.37%, or three times the 1.46% growth rate of the overall economy (real GDP), demonstrating that American manufacturing is at the forefront of the economic recovery.

HT: Robert Kuehl

Phoenix Home Sales Up By 9%, Prices Are Stable

2012-01-09T15:04:00.007-05:00

DQ News -- "The number of homes that resold in the Phoenix area rose above a year earlier for the twelfth month in a row in November as activity increased across the price spectrum. A variety of median sale price measures trended higher month-to-month, and the region’s overall median sale price fell year-over-year by less than 1 percent – the smallest dip since the median began to erode consistently in summer 2010.

A total of 7,766 new and resale Phoenix area houses and condos sold in November, which was up 9.0% from a year earlier but down by 3.5% from October. Phoenix-area sales usually drop between October and November, with that decline averaging 7.1% since 1994.

The median price paid in November for all new and resale houses and condos sold in the Phoenix region was $127,000. That was up 5.8% from October but down 0.4% from a year earlier. November’s median was the highest since November 2010, when it was $127,500. Also, the year-over-year decline in the median was the lowest since the median began to drop consistently in July 2010."

MP: It's not a great report, but the Phoenix-area real estate market is starting to show some signs of a gradual recovery. Home sales increased by 9% in November over last year, led by especially strong sales gains for new homes (32.6%) and condos (10.4%). Median home prices have stabilized at around $127,000 for the last year as the market seems to have found a price bottom.

Update: Even more recent data on Phoenix home sales through the month of December confirm that a real estate recovery is taking place there (and also see first comment below):

"The number of Phoenix-area home sales in 2011 climbed to their highest level since the housing market’s peak in 2006. Foreclosures fell to their lowest level since 2008. And the number of Phoenix-area homes listed for sale has dropped to a figure not seen since 2005, indicating demand is finally exceeding supply. This is a complete turnaround from 2007, when the housing crash started and cheap foreclosure homes flooded the market while buyers were few."

Quote of the Day: The Glory of the Market vs. the Compulsory Monopoly of Bureaucratic Government

2012-01-09T08:45:00.002-05:00

"The essence and the glory of the free market is that individual firms and businesses, competing on the market, provide an ever-changing orchestration of efficient and progressive goods and services: continually improving products and markets, advancing technology, cutting costs, and meeting changing consumer demands as swiftly and as efficiently as possible.

The libertarian economist can try to offer a few guidelines on how markets might develop where they are now prevented or restricted from developing; but he can do little more than point the way toward freedom, to call for government to get out of the way of the productive and ever-inventive energies of the public as expressed in voluntary market activity. No one can predict the number of firms, the size of each firm, the pricing policies, etc., of any future market in any service or commodity. We just know—by economic theory and by historical insight—that such a free market will do the job infinitely better than the compulsory monopoly of bureaucratic government."

~Murray Rothbard in "For a New Liberty"

HT: Dennis Gartman in today's The Gartman Letter