Tuesday, August 31, 2010
Global Economic Recovery Watch: India +8.8%
Financial Times (free subscription required) -- "India’s economy grew a brisk 8.8 per cent from April to June, its fastest pace in two-and-a-half years, highlighting the strength of India’s economic recovery despite high inflation now acting as a drag on consumer spending.
Growth during the first quarter of India’s April to March financial year accelerated from the 8.6 per cent last quarter, driven by robust manufacturing and services growth, and a pick-up in farm production."
Growth during the first quarter of India’s April to March financial year accelerated from the 8.6 per cent last quarter, driven by robust manufacturing and services growth, and a pick-up in farm production."
Case-Shiller Home Price Indexes Highest Since '08
In June, 17 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were up; and the two composites and 15 MSAs showed year-over-year gains. Housing prices have rebounded from crisis lows, but other recent housing indicators point to more ominous signals as tax incentives have ended and foreclosures continue. In June, the 10-City and 20-City Composites recorded annual returns of +5.0% and +4.2%, respectively."
MP: Both the Composite-10 and Composite-20 Home Price Indexes reached their highest levels in June since December 2008.
Buy Now or Wait? Check the Airfare Prediction Tool
When booking air travel, the dilemma is often: should I buy now or wait later to try to get a better price? Now you've got some help.
The Bing Travel Farecast provides a free airfare prediction tool that allows you to specify your travel dates and destinations, and you'll get a prediction of whether fares for your flight are rising or falling, so you can decide whether you should buy now or wait.
From the Bing website: "According to a third-party audit of our predictive technology, we're about 75% accurate and on average, customers will save over $50 on a typical round-trip transaction."
Here are details on Bing's predictive technology.
The Bing Travel Farecast provides a free airfare prediction tool that allows you to specify your travel dates and destinations, and you'll get a prediction of whether fares for your flight are rising or falling, so you can decide whether you should buy now or wait.
From the Bing website: "According to a third-party audit of our predictive technology, we're about 75% accurate and on average, customers will save over $50 on a typical round-trip transaction."
Here are details on Bing's predictive technology.
ECON 101: The Answer to A Housing Recovery is Lower Prices, Not Incessant Government Tinkering
"In order for the housing market to build a firm foundation that does not require government aid we will need to see a reduction in prices.
Congress is currently discussing creative new ways to prop up this market. It should be plain as day at this juncture that the government cannot fix the housing market with their incessant fidgeting. The market needs to correct further before reaching a sustainable bottom. Lower prices will act as an automatic stabilizer by generating significant demand. At this point, more government intervention merely kicks the can down the road by pulling demand from the future. We can continue to deny the simple economics at work here, but at some point the market will prevail and prices will settle at a level that the market can absorb. In my opinion, the sooner this happens the sooner we can get on with the recovery process. Unfortunately, politicians have elections to win so they will continue to use their law degrees to attempt to change the laws of economics. It won’t work."
~The Pragmatist Capitalist writing in the Business Insider
Congress is currently discussing creative new ways to prop up this market. It should be plain as day at this juncture that the government cannot fix the housing market with their incessant fidgeting. The market needs to correct further before reaching a sustainable bottom. Lower prices will act as an automatic stabilizer by generating significant demand. At this point, more government intervention merely kicks the can down the road by pulling demand from the future. We can continue to deny the simple economics at work here, but at some point the market will prevail and prices will settle at a level that the market can absorb. In my opinion, the sooner this happens the sooner we can get on with the recovery process. Unfortunately, politicians have elections to win so they will continue to use their law degrees to attempt to change the laws of economics. It won’t work."
~The Pragmatist Capitalist writing in the Business Insider
Monday, August 30, 2010
Global Recovery Still on Track, Despite Angst
"At an annual Federal Reserve retreat, angst, not panic, was the order of the day among officials and economists chastened by a deep recession and a disappointing rebound. "We'll slog our way through this," said Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, which sponsored the symposium, summing up two days of presentations, discussions, dinner-table conversation and hiking.
Several foreign central bankers said they were struck by the unusual degree of pessimism they had witnessed in the U.S., a contrast to typical American optimism. "I can't wait to get back to my side of the world," said Alan Bollard, governor of the Reserve Bank of New Zealand. Growth in New Zealand, seen at around 3% this year and next, has been underpinned by strength in Australia and China."
~From today's WSJ article "Global Recovery Is Still Seen On Track, Despite the Angst"
Several foreign central bankers said they were struck by the unusual degree of pessimism they had witnessed in the U.S., a contrast to typical American optimism. "I can't wait to get back to my side of the world," said Alan Bollard, governor of the Reserve Bank of New Zealand. Growth in New Zealand, seen at around 3% this year and next, has been underpinned by strength in Australia and China."
~From today's WSJ article "Global Recovery Is Still Seen On Track, Despite the Angst"
What a Difference 5 Years Can Make
Time Magazine cover stories are marvelous contrary indicators.
Time Magazine cover from June 13, 2005.
Time Magazine cover from June 13, 2005.
Time Magazine cover from September 6, 2010.
GSEs Prevented Private Secondary Market
"A private secondary market for prime mortgages should have been a natural market development. Why did it never develop? The answer is obvious: no private entity could compete, or can now compete, with the government-granted advantages, and now the huge explicit subsidies, of the Government Sponsored Enterprises (GSEs). There can be no evolution of a private prime mortgage loan market while the GSEs make private competition impossible.
The core issue about GSEs is this: You can be a private company, with market discipline; or you can be part of the government, with government discipline. But you can't be both."
Read more of AEI's Alex Pollock's article "To Overhaul the GSEs, Divide Them into Three Parts" here.
The core issue about GSEs is this: You can be a private company, with market discipline; or you can be part of the government, with government discipline. But you can't be both."
Read more of AEI's Alex Pollock's article "To Overhaul the GSEs, Divide Them into Three Parts" here.
Sunday, August 29, 2010
Promoting Homeownership Is Not Only Un-American: It Contributed to the Housing Bubble
"For nearly a century it has been the policy of the U.S. government to increase American homeownership. Its efforts include (but aren't limited to) bouts of easy money from the Fed, the mortgage-interest deduction, the exclusion of capital gains on primary residence sales, direct and indirect subsidies from the Department of Housing and Urban Development, and artificial liquidity pumped into the mortgage market via government sponsored entities Fannie and Freddie.
Policymakers assure us that the next generation of government housing programs will be "carefully designed" (bring on the next five-year plan, Comrade!). But the real question is why the government should be doing anything to promote homeownership.
"I do believe in the American Dream," said President Bush in 2002. "Owning a home is a part of that dream, it just is. Right here in America, if you own your own home, you're realizing the American dream." Bush was echoing a theme that reaches back at least to Herbert Hoover: When the government encourages homeownership, the story goes, it strengthens individuals and communities and thereby fosters the American Dream. They're wrong. A government crusade to promote homeownership is un-American.
America's distinction is that it was the first nation founded on the principle that you have a right to pursue your own happiness without government interference. But the government's homeownership crusade means it gets to decide how you should live, and stick-and-carrot you into living that way.
Here's the real lesson: The American Dream is not some government-subsidized house foisted on you by George W. Bush or Barney Frank. It's the undiluted freedom to decide how you want to live--and, if you want to own a home, it's the freedom to work, save, establish credit, and earn one. In America, the government's job is to protect our freedom to pursue our values, not to dictate what our values are. Its homeownership policy should be the same as its toaster oven policy: laissez-faire.
Government intervention in housing runs deep, and it can't be eliminated overnight. But the government should make its long-term goal to fully extricate itself from the housing market. It can then start gradually dismantling Fannie, Freddie, tax preferences for homeowners, and every other government housing program."
MP: You can add the government's role in promoting fixed-rate 30-year mortgages, and subsidizing FHA mortgages that only require a 3.5% down payment to the list of policies that the government has used to increase homeownership.
The chart above shows how the political promotion of homeownership in the U.S. may have contributed to the housing bubble. The blue line is the quarterly homeownership rate from the Census Bureau (data here) going back to 1991, which went from 64% in the early 1990s to a record high of more than 69% in 2004. During that same time period, the Federal Housing Finance Agency's (FHFA) Home Price Index (data here) doubled from 100 in 1991 to 200 in 2005, before reaching a peak of more than 222 at the height of the real estate bubble in 2007.
In the aftermath of the real estate bubble's crash, the homeownership rate has fallen to a 10-year low of 66.9% (QII 2010) and the FHFA home price has fallen back to 2004 levels. Promoting homeownership is not only un-American, but it helped create an unsustainable real estate bubble, which turned the "American dream" into an "American nightmare" for millions of Americans by turning "good renters into terrible homeowners."
Lessons on Trade, U.S. Manufacturing from Chile
1. WEST CHESTER, PA — "With the world captivated by the plight of 33 Chilean miners trapped in a mine more than 2,300 feet below the surface, a local manufacturer of drill rigs is involved in the rescue effort. Schramm Inc. is a major manufacturer of drill rigs and the manufacturer of the particular rig — the T685 — that reached the trapped miners a few days ago. There are 40-plus Schramm drill rigs in Chile right now, said Edward Breiner, president and CEO of Schramm, in an interview Friday."
2. MILWAUKEE, WI -- "If not for a tiny camera system developed by Aries Industries of Waukesha, the families and rescuers of 33 trapped Chilean miners might not have caught a glimpse of their loved ones. Aries manufactures pipeline inspection and rehabilitation equipment for water, wastewater, natural gas, oil and disaster recovery services. The company manufactures a camera system that has been used many times in coal mine disasters in this country and was available to Chilean rescuers."
A few points:
1. Chile has achieved a great deal of economic success in the last twenty years, largely because it has pursued free market policies that include very open free trade policies. The OECD recognized Chile's economic success last December by inviting it to be the first South American country to join the club of developed countries, see CD post here. With a more protectionist approach to trade with high tariffs, Chile may not have had access to the drill rigs and camera systems manufactured in the U.S. that are now helping in the rescue of the 33 miners.
2. We hear a lot of news about the "death of American manufacturing sector," the "loss of millions of manufacturing jobs," and how this will contribute to some permanent decline in the U.S. economy. And yet the data show that manufacturing output was reaching historical all-time record highs before a sharp recession-related decline, and manufacturing output is gradually increasing and will probably be at record levels again within a few years (see CD posts here, here, and here). The manufacturers highlighted here are probably just two examples of the thousands of successful American manufacturers that are world-leaders in high-tech manufacturing equipment.
HT: Colin Grabow
2. MILWAUKEE, WI -- "If not for a tiny camera system developed by Aries Industries of Waukesha, the families and rescuers of 33 trapped Chilean miners might not have caught a glimpse of their loved ones. Aries manufactures pipeline inspection and rehabilitation equipment for water, wastewater, natural gas, oil and disaster recovery services. The company manufactures a camera system that has been used many times in coal mine disasters in this country and was available to Chilean rescuers."
A few points:
1. Chile has achieved a great deal of economic success in the last twenty years, largely because it has pursued free market policies that include very open free trade policies. The OECD recognized Chile's economic success last December by inviting it to be the first South American country to join the club of developed countries, see CD post here. With a more protectionist approach to trade with high tariffs, Chile may not have had access to the drill rigs and camera systems manufactured in the U.S. that are now helping in the rescue of the 33 miners.
2. We hear a lot of news about the "death of American manufacturing sector," the "loss of millions of manufacturing jobs," and how this will contribute to some permanent decline in the U.S. economy. And yet the data show that manufacturing output was reaching historical all-time record highs before a sharp recession-related decline, and manufacturing output is gradually increasing and will probably be at record levels again within a few years (see CD posts here, here, and here). The manufacturers highlighted here are probably just two examples of the thousands of successful American manufacturers that are world-leaders in high-tech manufacturing equipment.
HT: Colin Grabow
Saturday, August 28, 2010
Quote of the Day on the "Two Americas"
"Few Californians in the private sector have $1 million in savings, but that's effectively the retirement account they guarantee to public employees who opt to retire at age 55 and are entitled to a monthly, inflation-protected check of $3,000 for the rest of their lives."
~Arnold Schwarzenegger in yesterday's WSJ
~Arnold Schwarzenegger in yesterday's WSJ
Record-High Corporate Profits in QII: The Mother's Milk of Stocks, Business Success and Job Creation
1. Nominal corporate profits in the second quarter reached almost $1.2 trillion, which is an all-time record high, and 54.5% above the recent bottom of $774.6 billion in the fourth quarter of 2008.
2. Nominal corporate profits have now doubled in less than ten years, from $600 billion at the end of 2001 to the current level of $1.2 trillion. The S&P 500 Index is actually lower now (1047) than at the end of 2001 (1148).
3. Quarterly profits have been growing at an average annual rate of 30% over the last six quarters, which would suggest that the equity market is extremely undervalued (see Scott Grannis' comments here).
4. On an inflation-adjusted basis, real corporate profits are slightly below the $1.2 trillion record in 2006, but 53% above the QIV bottom.
5. For either measure of corporate profits, it's clear that there has been a complete V-shaped recovery from the 2007-2009 recession, and the record-high profits would be completely inconsistent with any chance of a double-dip recession.
6. Larry Kudlow has frequently reminded us that corporate profits are the "mother’s milk of stocks, business success, and job creation." In that case, the record-high profits of American companies suggests that the U.S. economy is doing better than the "economic hypochondriacs" keep telling us, and we could be poised for an economic boom for stocks, businesses and job creation.
Friday, August 27, 2010
Obama Is Gradually Losing Independent Voters
When Obama took office in January 2009, only about 15% of independent voters disapproved of Obama according to Pollster.com's consensus of about ten different polls, but that percentage has gradually risen over the last 20 months, and now 54.5% of independent voters disapprove of the president. Over the same period, the percent of independent voters who approve of Obama has fallen from 62% to 38.7%.
The Onion Uncovers a New Form of Test Bias
Are Standardized Tests Biased Against Students Who Don't Give A Shit? Click on the arrow above to start video.
Economic Hypochondria
VIDEO: The Economy's Not Sick, Says Brian Wesbury--Everyone Just Says It Is
Click on the arrow above to start video.
Click on the arrow above to start video.
Consumption, Investment and Trade Are All Up
Here's a breakdown of the percent changes in the components of real GDP for the second quarter (from Table 1 of today's BEA report):
1. Personal consumption expenditures (PCE): 2.0% in QII, matching the growth rate of personal consumption spending in third quarter of 2009, and the highest growth rate in PCE since the 2.4% rate in the first quarter of 2007. The 2% growth in PCE follows increases over the previous three quarters of 2.0%, 0.9% and 1.9%, which marks the first period of four consecutive quarterly increases since 2007 (QI to QIV), and follows four straight quarterly decreases from QIII 2008 to QII 2009.
2. Gross Private Domestic Investment: 25.0% in QII, which was the fourth consecutive quarterly increase in investment, following double-digit increases of 29.1% in the first quarter, 26.7% in QIV 2009, and 11.8% in QIII 2009. The four consecutive quarterly increases over the last year follows eight consecutive quarterly decreases from QIII 2007 to QII 2009. The average quarterly growth in investment spending of 23.15% over the last four quarters is the highest annual average since 1987.
3. Exports: 9.1% in QII, following increases of 11.4% (Q1 2010), 24.4% (QIV 2009) and 12.2% (QIII 2009), for an average growth rate over the last year of 14.3%, which is the highest annual average since 1996. The positive increases in exports over the last four quarters follows four quarters of negative growth from QIII 2008 to QII 2009.
4. Imports: 32.4% in QII, the highest quarterly growth in imports since 1975, and the fourth consecutive quarterly increase (11.2% in Q1, and 4.9% and 21.9% in QIV and QIII 2009) following four straight quarterly decreases. The average quarterly increase of the last year of 17.6% is the highest since 1984.
Bottom Line: Except for the fact that we subtract imports from exports to calculate GDP, the growth rates above in private sector activity (consumption, investments, and international trade) in the second quarter of this year, and over the last four quarters, suggest that the economy may be in better shape than indicated by the 1.6% growth in real GDP.
1. Personal consumption expenditures (PCE): 2.0% in QII, matching the growth rate of personal consumption spending in third quarter of 2009, and the highest growth rate in PCE since the 2.4% rate in the first quarter of 2007. The 2% growth in PCE follows increases over the previous three quarters of 2.0%, 0.9% and 1.9%, which marks the first period of four consecutive quarterly increases since 2007 (QI to QIV), and follows four straight quarterly decreases from QIII 2008 to QII 2009.
2. Gross Private Domestic Investment: 25.0% in QII, which was the fourth consecutive quarterly increase in investment, following double-digit increases of 29.1% in the first quarter, 26.7% in QIV 2009, and 11.8% in QIII 2009. The four consecutive quarterly increases over the last year follows eight consecutive quarterly decreases from QIII 2007 to QII 2009. The average quarterly growth in investment spending of 23.15% over the last four quarters is the highest annual average since 1987.
3. Exports: 9.1% in QII, following increases of 11.4% (Q1 2010), 24.4% (QIV 2009) and 12.2% (QIII 2009), for an average growth rate over the last year of 14.3%, which is the highest annual average since 1996. The positive increases in exports over the last four quarters follows four quarters of negative growth from QIII 2008 to QII 2009.
4. Imports: 32.4% in QII, the highest quarterly growth in imports since 1975, and the fourth consecutive quarterly increase (11.2% in Q1, and 4.9% and 21.9% in QIV and QIII 2009) following four straight quarterly decreases. The average quarterly increase of the last year of 17.6% is the highest since 1984.
Bottom Line: Except for the fact that we subtract imports from exports to calculate GDP, the growth rates above in private sector activity (consumption, investments, and international trade) in the second quarter of this year, and over the last four quarters, suggest that the economy may be in better shape than indicated by the 1.6% growth in real GDP.
Buying Votes in Arkansas With Our Money
Intrade contract for Blanche Lincoln to win, odds now at 5.5%, down from 70% a year ago (click to enlarge):
"Arkansas Senator Blanche Lincoln is down 20 points in the polls, but the Democrat is apparently going to go down swinging—with $1.5 billion of your money. She is the spending problem, in profile.
Last year heavy rain damaged cotton and rice crops across the South. The 2008 farm bill, passed by a Democratic Congress, created the Supplemental Revenue Assistance Program (SURE) to aid farmers hit by such weather-related disasters. The admirable intent was to stop farm-state Senators from looting the Treasury after every early frost or the like. To qualify for SURE funds, farmers are now required to buy crop insurance (federally subsidized to the tune of about $6 billion a year) and to have lost more than 30% of their crop value.
Mrs. Lincoln wants to pull an end run around this law and make Arkansas farmers eligible for retroactive taxpayer payments. The payments would be made even if the recipients didn't buy crop insurance and even if their damages were as little as 5%. Most small businesses in America suffered far more than a 5% fall in revenues during the recession, but few are getting six-figure handouts from Uncle Sam. Rice and cotton prices have recovered nicely this year in any event.
Nearly 200 Arkansas farms and 100 Louisiana farms will get a check for $100,000 or more, and the 10% richest farmers will get almost two-thirds of the money. One of the few federal programs the Obama administration has said it wants to eliminate is farm subsidies to wealthy farmers -- unless, apparently, the money goes to the state of an endangered Democratic Senator."
Thanks to Bob Wright.
Thursday, August 26, 2010
Markets in Everything: Fantasy Sports Insurance
Now available for the 2010 NFL season - disability insurance for fantasy players.
Featured last year on CD.
Featured last year on CD.
Weekly Intermodal Rail Volume Sets 2010 Record
Carload traffic continued moderate weekly gains, with U.S. railroads originating 296,634 carloads for the week (see top chart), up 6.2 percent compared with the same week in 2009 (see top chart), but down 11 percent from the same week in 2008."
Bottom Line: As I reported last week, Warren Buffett's favorite economic indicator continued to show signs of improvement again in this week's report from the AAR on rail traffic. Based on the volume of raw materials, natural resources, lumber, coal, grains, chemicals, metals, motor vehicles and paper products moving around the country by rail, the economic picture continues to get a little brighter almost every week.
Wednesday, August 25, 2010
The Case for Optimism and 20 Charts to Prove It
From today's Wall Street Journal article "The Case for Optimism" by Ross Devol, executive director of economic research at the Milken Institute:
"There's a point at which pessimism becomes a self-fulfilling prophesy, scaring businesses away from investing or hiring. The dark tone of today's discourse is at risk of doing just that.
The Milken Institute's new study, "From Recession to Recovery: Analyzing America's Return to Growth" is based on extensive and dispassionate econometric analysis. It concludes that the U.S. economy remains more flexible and resilient—and has more underlying momentum—than is generally acknowledged. In fact, our projections show cause for measured optimism: A return to modest but sustainable growth is close at hand.
America's businesses are capable of navigating around policy uncertainty and the twists and turns of a volatile global economy. While slow private-sector job growth is to be expected in the early stages of a recovery, the U.S. should add 1.5 million jobs in 2010, 3.1 million in 2011, and 2.6 million in 2012. That will translate into real GDP growth of 3.3% in 2010, 3.7% in 2011, and 3.8% in 2012.
In this pessimistic climate, this forecast will likely be considered contrarian. So why is our economic outlook more sanguine than the current consensus? For one, robust (albeit moderating) economic growth in developing countries, particularly in Asia, will provide support for U.S. exports. Look no further than Caterpillar, which reported a doubling of its earnings in the second quarter of 2010 and whose product line is sold out for the rest of the year."
Read the rest of the article here.
See related excellent post today from Scott Grannis: "20 Bullish Charts."
"There's a point at which pessimism becomes a self-fulfilling prophesy, scaring businesses away from investing or hiring. The dark tone of today's discourse is at risk of doing just that.
The Milken Institute's new study, "From Recession to Recovery: Analyzing America's Return to Growth" is based on extensive and dispassionate econometric analysis. It concludes that the U.S. economy remains more flexible and resilient—and has more underlying momentum—than is generally acknowledged. In fact, our projections show cause for measured optimism: A return to modest but sustainable growth is close at hand.
America's businesses are capable of navigating around policy uncertainty and the twists and turns of a volatile global economy. While slow private-sector job growth is to be expected in the early stages of a recovery, the U.S. should add 1.5 million jobs in 2010, 3.1 million in 2011, and 2.6 million in 2012. That will translate into real GDP growth of 3.3% in 2010, 3.7% in 2011, and 3.8% in 2012.
In this pessimistic climate, this forecast will likely be considered contrarian. So why is our economic outlook more sanguine than the current consensus? For one, robust (albeit moderating) economic growth in developing countries, particularly in Asia, will provide support for U.S. exports. Look no further than Caterpillar, which reported a doubling of its earnings in the second quarter of 2010 and whose product line is sold out for the rest of the year."
Read the rest of the article here.
See related excellent post today from Scott Grannis: "20 Bullish Charts."
More on Global Shipping Boom. What Double-Dip?
1. "Georgia's Port of Savannah reported the busiest month for container shipments in its history in July, with 251,126 20-foot equivalent units moving through the port in an accelerating shipping recovery. The 20.7 percent year-to-year increase marked the eighth straight month of double-digit growth in volume at the Georgia Ports Authority’s Savannah terminals."
2. "Container volume at the Port of Charleston increased 26 percent in July over the same month last year, giving the port its strongest month since October 2008."
2. "Container volume at the Port of Charleston increased 26 percent in July over the same month last year, giving the port its strongest month since October 2008."
Truck Tonnage Index Increases for 8th Month
ATA Chief Economist Bob Costello said that July’s data didn’t change his outlook for subdued tonnage growth in the months ahead, stating, “The economy is slowing and truck freight tonnage has essentially gone sideways since April 2010.” Nevertheless, Costello believes that tonnage will post moderate gains, on average, for the second half of the year. “After accounting for the reduction in supply over the last few years, even small gains in tonnage will have a larger impact on the industry than in past.”
MP: Compared to last year, the July index this year is up by 7.4% but down by 5.3% compared to the index level of 116.2 in July 2008. However, in July 2007 before the recession officially started, the ATA's Truck Tonnage Index was just slightly higher, at 110.9, than the index reading last month.
Teranet House Price Index - June 2010
AUGUST 2010 | ||||||||||||||||||||||||||||||||||
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Since the resale market has been slackening across Canada - from April to July of this year, more existing homes came on the market than were sold - it is too early to conclude that the relatively vigorous prices rises of April, May and June launched a trend. The prospect of harmonized sales taxes coming into effect July 1 in Ontario and B.C. may have stimulated sales in Vancouver, Toronto and Ottawa in the preceding months. Teranet – National Bank House Price Index™
The historical data of the Teranet – National Bank House Price Index™ is available at www.housepriceindex.ca.
The Teranet–National Bank House Price Index™ is estimated by tracking observed or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation of the index. This is known as the repeat sales method; a complete description of the method is given at www.housepriceindex.ca
Teranet - National Bank House Price Index™ thanks the author for their special collaboration on this report. |
International Air Travel Shows Continuing Strength in July; Volumes are Above Pre-Recession Levels
Updated Graph (back to 2007)
These year-on-year comparisons for July were less than the June growth data showing 11.6% and 26.6% increases for passenger and cargo traffic, respectively. The apparent slowdown was entirely due to the fact that by July 2009 traffic was already starting to recover. After adjusting for seasonality, the improvement in demand was faster month-to-month in July than it was in June."
Other highlights include:
1. July global passenger traffic was 3% higher than the pre-crisis levels of early 2008.
2. July global cargo demand was 4% higher than pre-crisis levels in early 2008.
3. Year-to-date global freight volume is 27.5% higher than 2009.
4. During the second half of 2009, demand was rebounding at an annualized rate of 12% for passenger and 28% for cargo. In the year to July, the annualized growth rates had dropped to 8% for passenger and 17% for air freight. However, this is still considerably above the industry’s traditional 6% growth trend.
MP: International air travel (passenger and freight volumes) are both above the pre-crisis levels in early 2008, and the annualized growth rates (8% for passengers and 17% for freight) of 6%.
Is War Between Generations Inevitable? What About a War Between The Sexes?
From the 2001 study "Is War Between Generations Inevitable?" by economists Jagadeesh Gokhal of the Cleveland Fed and Laurence J. Kotlikoff of Boston University:
"Seniors today will receive far more benefits from government transfer programs (programs that redistribute resources among groups) than their share of the national tax burden. On average:
1. A male reaching 65 years of age today can expect to receive $71,000 more in government transfer benefits (of all kinds at both the federal and state levels, but mainly from Social Security and Medicare) than he will pay in taxes (of all kinds at both the federal and state levels) before he dies.
2. A 65-year-old female can expect a net gain of more than twice that amount; she can expect $163,000 more in benefits than she will pay in taxes.
A far different picture confronts people entering the labor market today. In general, they will pay far more in taxes than they will receive from transfer programs, and any expansion of elderly entitlements will make things worse. For example:
3. A 20-year-old female can expect to pay $92,000 more in taxes than she will receive in transfer benefits over her lifetime.
4. The future looks more than three times as bleak for her male cohort, who can expect to pay $312,000 more in taxes than he will ever receive in benefits."
HT: Walter Williams
MP: We've got quite a gender gap here! On average, 65-year old men today will receive only 43.6% of the net benefits that women receive, and young men today can expect a net tax burden over their lifetimes that will be 3.4 times greater than for women.
"Seniors today will receive far more benefits from government transfer programs (programs that redistribute resources among groups) than their share of the national tax burden. On average:
1. A male reaching 65 years of age today can expect to receive $71,000 more in government transfer benefits (of all kinds at both the federal and state levels, but mainly from Social Security and Medicare) than he will pay in taxes (of all kinds at both the federal and state levels) before he dies.
2. A 65-year-old female can expect a net gain of more than twice that amount; she can expect $163,000 more in benefits than she will pay in taxes.
A far different picture confronts people entering the labor market today. In general, they will pay far more in taxes than they will receive from transfer programs, and any expansion of elderly entitlements will make things worse. For example:
3. A 20-year-old female can expect to pay $92,000 more in taxes than she will receive in transfer benefits over her lifetime.
4. The future looks more than three times as bleak for her male cohort, who can expect to pay $312,000 more in taxes than he will ever receive in benefits."
HT: Walter Williams
MP: We've got quite a gender gap here! On average, 65-year old men today will receive only 43.6% of the net benefits that women receive, and young men today can expect a net tax burden over their lifetimes that will be 3.4 times greater than for women.
Tuesday, August 24, 2010
Housing: The End of the Artificial Stimulus
1. LA Times -- "Many buyers who rushed to beat the April 30 deadline to sign a sales contract were closing their deals in May and June, helping to propel the market. With many of those deals now apparently closed, the market is faced with standing on its own. Real estate experts said the tax credits led many buyers to speed up their plans to buy houses, boosting sales this spring, but sapping demand over the summer.
A few months ago "we were getting eight or nine offers on every property, and we knew that we would have a tremendous drop-off, because it was being artificially stimulated," said Gary K. Kruger, a real estate agent with HomeStar Real Estate Services in Hemet."
2. Lawrence Yun, NAR chief economist, said “Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September,” he said. “However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs."
“Even with sales pausing for a few months, annual sales are expected to reach 5 million in 2010 because of healthy activity in the first half of the year. To place in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years."
3. Nigel Gault, IHS Global Insight: All of the action earlier this year appears to have been driven by the tax credit. … The underlying path of housing sales is not as disastrous as July’s number suggests – we are now undershooting, as sales that would have happened now were pulled forward by the tax credit. But a sustained upturn will depend on an improvement in the jobs market, which at the moment is slowing down rather than gathering pace."
Random Roundup
1. NY Times -- Some scholars are challenging the peer review monopoly and are instead using the Internet to "expose scholarly thinking to the swift collective judgment of a much broader interested audience." (HT: Steve Bartin)
2. If all elite private universities enacted race-blind admissions, the percentage of Asian students would jump from 24 percent to 39 percent (similar to what they already are now at Caltech and Berkeley, two elite institutions with race-blind admissions; the former due to a belief in meritocracy, the latter due to Proposition 209).
3. Top 10 NBA Player Highlight Reels On Youtube
4. Tiger Woods and World's Top 10 Highest Divorce Settlements
5. Did Bully Boss Prompt Editor's Suicide at University of Virginia? Editor Made 18 Calls to University Before Committing Suicide
2. If all elite private universities enacted race-blind admissions, the percentage of Asian students would jump from 24 percent to 39 percent (similar to what they already are now at Caltech and Berkeley, two elite institutions with race-blind admissions; the former due to a belief in meritocracy, the latter due to Proposition 209).
3. Top 10 NBA Player Highlight Reels On Youtube
4. Tiger Woods and World's Top 10 Highest Divorce Settlements
5. Did Bully Boss Prompt Editor's Suicide at University of Virginia? Editor Made 18 Calls to University Before Committing Suicide
Leading Economic Indexes: 4 Up, 1 Down
ASA Staffing Index Reaches 97-Week High
The American Staffing Association (ASA) Staffing Index for temporary and contract employment activity reached a 97-week high of 95 for the week of August 9, the highest index level since a reading of 97 in the week of September 29, 2008 (see chart above, data here).
Compared to the same week last year, the latest ASA Staffing Index has improved by 26.7% for Week 33 (see bottom chart above). This marks the 17th week in a row with percentage gains above 20% compared to the same month in 2009, the 26th straight week of double-digit percent increases vs. 2009, and the 32th consecutive week for the ASA Index being above the same level in the previous year (every week this year). The improvements this year follow 80 consecutive weeks of percentage declines in the weekly index that started in May 2008 and continued through the end of 2009.
The ongoing improvements in the ASA Staffing Index in every single week this year compared to 2009, along with the recent 97-week high in temporary help suggest that the labor market is gradually recovering from the recession, and the increases in demand for temporary and contract employment are a leading indicator of broader-based job gains in the months to come.
Putting Tomatoes on the "Bathroom Scale"
Steven Landsburg has a related post about how to correctly compare the total cost (including all energy costs) to a New Yorker of a locally-grown tomato from a lavishly heated greenhouse in the Hudson Valley and a tomato transported all the way from California.
"How can we possibly gather enough information to compare the opportunity costs of land, fertilizers, equipment, workers, transportation and energy costs (among many others) and reach a conclusion about which tomato imposes the fewest costs on our neighbors?
Well, it turns out there’s actually a way to do that. You do it by looking at a single number that does an excellent job of reflecting all those costs. That number is known as the price of the tomato."
HT: Don Boudreaux
Monday, August 23, 2010
Shipping Boom = Rates Have Doubled Since 2009
MP: Compared to shipping rates last summer and fall of about $1,200 per FEU between Hong Kong and L.A., shipping costs have more than doubled to the record high of $2,838 in earlyAugust, before falling slightly to $2,737 last week. Scott Grannis reported today that the Harpex Shipping Index (based on rates charged by container ships in the North Atlantic) has experienced a very similar increase over the last year (rates have more than doubled). Given the ongoing boom in global shipping and the related rising rates (along with improvements in other economic indicators), there's nothing to suggest a slowdown in the global economic recovery, and certainly nothing to suggest a double-dip recession, as Scott points out.
Why The Current Job Market Recovery Is Stronger Than You Think; Stronger Than Last Two Recessions
1. At this point in the previous two recoveries – following the 1990-1991 and 2001 recessions – the job market was actually getting worse. Many people are so caught up looking at the weekly and monthly numbers, that they fail to look at the bigger trends, which indicate just how much the job market has improved over the last 12 months. The statistics indicate that the job market has made great strides over the last 12 months and appears to be rebounding sooner compared to the previous two recessions.
2. Monthly job cuts have numbered fewer than 100,000 for 14 consecutive months, a streak that has not been achieved since 1999-2000. The current 12-month moving average, which stands at 52,778 as of the end of July, is already well below the lowest annual average achieved during the last period of economic expansion, when the moving average bottomed out around 64,000 (see chart above).
3. Job losses due to the recession turned to gains as of January 2010, with payrolls experiencing five consecutive months of net growth that saw more than one million new jobs added to the economy. The gains slowed in June and July as the government shed tens of thousands of temporary Census workers, resulting in overall total non-farm job losses of 352,000 over the two-month period. Despite those losses, payrolls have still seen net growth totaling 654,000 jobs so far this year, due in large part to steady job gains in the private sector. The private sector has had seven consecutive months of job gains, adding a net total of 630,000 new jobs to the economy since January 1. While the payroll gains remain weak, they are occurring much sooner when compared to the 2001 recession, when it took 21 months before the economy began to add jobs on a consistent basis.
4. While the unemployment rate remains historically high and the decline is not occurring fast enough for most, it definitely appears to be heading in the right direction. If the economy were following the same pattern as the early 1990s recession or the 2001 recession, we would be facing another three to six months of rising unemployment.
5. When you look at any of the employment statistics on a month-to-month or week-to-week basis, there are going to be ups and downs; particularly at this stage of the recovery. However, when you look at the overall trend since June 2009, everything is headed in a positive direction.
6. Hiring will accelerate in the coming months, but not before employers maximize the productivity of their existing workers by adding new technology and increasing hours. In the meantime, the job market will remain fiercely competitive as the recently unemployed square off against the long-term unemployed as well as with job seekers re-entering the labor pool after abandoning it out of frustration. Job seekers should view Labor Day as the beginning of the workplace New Year and make a resolution to abandon all passive job-search strategies for ones that are far more aggressive.
Global Economic Recovery Watch: Surging Cargo Volume on Key N. America-Asia-Europe Routes
The broadly based rally has driven up the Association's ConTex index, which covers six ship sizes from 1,100 TEUs to 4,250 TEUs, to 583 from 532 at the end of June and 275 at the beginning of March. Ocean carriers' pursuit of chartered tonnage is driven by robust cargo growth on the export trades out of Asia to Europe and North America where most ships are sailing fully loaded with boxes.
Cargo volume on the Far East-U.S. trades grew 25.7 percent during the first three months of the new trans-Pacific contract season from May to July based on preliminary customs figures. Weekly capacity deployed on Far East-U.S. trades is already back to 2008 levels and is 12 percent above 2009 levels.
Container ship prices also are surging as carriers and charter ship-owners place orders for new ships and step up purchases of second hand tonnage."
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