The Dark Horse of the Global Economy

I figured with all their extra labor, newly elected reform minded leadership in Brazil and Mexico and increasing market prices for commodities (read Chile and copper), Latin America was overdue for a little economic come back.


To success.

Though I don't think Venezuela and Bolivia will be getting in on the action.

Big Oil Found to Have Done...

Absolutely nothing.

Now, just think of all the hours, days, if not years of people's lives wasted on getting all hot and bothered about "big oil."

If you think about it, it's really sad.

Labor Productivity

Imagine what would happen to the US figures if we banned;

American Idol
Paris Hilton
Hip Hop
People Magazine
and
Reality TV

HAR!

Implodometer!

You will click on it.

You will conform!

Buyer's Market Arrogance

I remember Top Gun. Where Sundown, Goose's replacement, is in with Maverick and they're going against Viper. Viper sets Maverick up with an easy shot. Cake, pure cake. And Maverick says, "It doesn't look good."

Sundown, not paralyzed by the loss of Goose says, "What do you mean it doesn't look good? It doesn't get to look any better than that!"

And so is the housing market.

Buyers, much as I have been on your side and advocating this is a buyers market, you are goofing up big time. Wake the ef up and quit being so God damned arrogant.

I don't know how many times I've seen buyers come into the market and have the unrealistic expectations that housing is just going to be given to them for free. Matter of fact, not just free, but the seller is going to pay them to take their house. Furthermore, I don't know how many friends of mine I've said, "Hey, have you gotten pre-approved? Now is the time to start looking." only to have them say, "Well, I don't know, you know. I mean housing is on the way down, I think if I wait a while longer I might get a good deal."

The only problem is in "a while longer" there may not be such great deals.

Led by a media blitz that the housing market is in dire straights, buyers have been led to believe to postpone their purchasing decision indefinitely. Only problem is indefinitely means you'll pass up on what is arguably going to be the greatest time in your life to buy property. Prices are on the way down, interest rates are still at a historic low, debt servicing costs relative to potential rents are reasonable, but oh no, we're not going to buy. We're going to wait until the market tanks even more.

Now, I've always insisted that prices are going to go down (which I still opine they will). But what I've seen based on anecdotal stories and some incidental research is that not only are buyers passing up on discounted prices, but they're passing up on prices where they actually cash flow. Where if you rented out the property, your rental income would cover the mortgage, insurance, utilities and taxes. In other words, buyers have unrealistic expectations and are going to wait too long.

So here is my humble advice to all you aspiring junior, deputy, official or otherwise economists;

Don't let this opportunity pass you up.

Yes, there is a glut of housing, but based on housing starts, they're cutting back production drastically. Which means that once this excess inventory is eaten through, you'll be back to a balance market, and I surmise rather quickly. Yes, yes, I've insisted that the market has a ways to go, which it does, but buyers have become so loth to pull the trigger I fear they'll NEVER pull the trigger until it is too late.

So for me, for yourself, for the sanctity and holiness of capitalism, do yourself a favor and at least get pre-approved for a loan and be on the hunt, be on the look out. It is an opportunity, especially for those of you aspiring economists that are younger that may not present itself again.

All that being said, I could be completely wrong, you could lose everything, markets are inherently risky, you are a fool to listen to my advice, blah blah blah and all the other legal mumbo jumbo that alleviates me of any responsibility of you investment decisions.

Real GDP Per Capita 1790 to Present

I had received a challenge from Rammage over at Atlas Blogged. To find Real GDP per capita from 1776 to the present.

I failed him miserably since the only data set I could find went back to 1790.


Oh, what a bad economist am I.

That Was Then

Friend of mine sent me this link to an old US propaganda poster from WWII.

I could only imagine the furor that would arise today if something similar was done today...of course that was during FDR's days...which means he must have been TWICE the terrorist and racist that GW is.

An "Economist" Too Far

I remember the movie "A Bridge Too Far" where there was a military analyst who kept trying to warn the higher ups about intelligence he was getting about German armor being spotted in the vicinity Arnhem (it is SOOO worth clicking on the link for this is the exact same thing that has happened to every analyst, economist and researcher out there). While his commanding officer appreciated his concerns, inevitably he become too much a thorn in people's side and was relieved of his duties. I even remember the Chaplin coming up to relieve him, saying, "You're tired. You need to rest." To which he responded "Isn't there a way to stop it?"

And that was me about three years ago. I would go to management, present my research and my findings, showing them much more conclusively than a handful of pictures of German tanks that there was a housing bubble and that if they didn't pull back on the real estate development deals, they'd lose their shirts. I too was "relieved" of duty after I refused to capitulate and play ball and start producing research that they wanted to see, not that reflected the realities of the economy and housing market.

And so with today's news I watch as I see the Allies get slaughtered in Operation Market Garden, sitting there thinking "how many billions would have been saved if the banks just listened to me." Alas I don't have gray hair and therefore I'm just a dumb economist. But with housing prices dropping so quickly...


maybe next time the higher ups might start listening.

Executive Pay

Shooting yet another hole in one of the flawed premises that is a tenet of leftist thought;

That American corporate executives are the most overpaid in the world;



Of course, the chart doesn't show stock options and bonuses.

World's Largest Refineries

Seriously, those of you who think the price of gas is somehow being manipulated have just got to look at the refining capacity here in the US. Heck, we're the world's largest economy and consumer of oil, you'd think we'd have the largest refinery here.

Nope. India and Venezuela. Heck, Singapore has a larger refinery than we do. Again, it's economics, it's not that hard people.

From Montana

Here are some pictures from my trip to Montana. Thought I'd share some with you.

This is Flinsch Peak. I decided to climb it the first day I got there. Only problem was that's not mist or haze, that's smoke from all these damn forest fires they had out there.


This is a picture from the top of Flinsch Peak looking down at some other mountain. You can make out Old Man lake at the bottom right. The map says the peak is 9,225, but my GPS said the elevation was 9,276. Regardless there wasn't a lot of air up there, just smoke;


This is what Flinsch Peak looks like when there is no smoke (it's the pointy peak to the left);


This is Hidden Lake, more or less smack dab in the middle of the park;


This is Hungry Horse dam. It's bigger than it looks. They canceled the tours thanks to those SOB's on 9-11.


This is Iceberg Lake and its surrounding cauldron;


This is a moose;


This is a ram or mountain goat or something with horns. Kept following me around. I surmise people have fed the goats because they follow you around and have no problem walking where humans are;


There are more pictures, but I won't bore you with all of them.

Backdoor Economics

I was always interested in the different ways by which economists check the growth of an economy. Traditionally you measure it by calculating GDP, however accounting errors or erroneous assumptions can result in inaccurate measurements. Or in the case of China, political pressure to "make" GDP growth a certain number. But by measuring other things you can check the "official" GDP figures to see if they're legit.

For example, Alan Greenspan (if I recall correctly) liked to look at rail road ties and repairs and the more the economy grew, the more goods were being produced and thus the railways of our nation were further worn.

But another simple, but ingenious way of going about checking economic growth figures is electricity usage. This should be in direct relation to GDP.



Originally I had misread the chart as I assumed electric useage was falling behin GDP growth, but then Zephyr pointed out to me that there are two scales and that electric use has actually EXCEEDED official GDP reports. GDP is growing around 11-12% while electric use has been between 12-16%.

China may be growing even faster than you previously thought.

A Question for All the Female Aspiring Economists

So I'm about to round off my vacation here in Montana and I had a repeat experience that has repeated itself too many times now to be coincidence so I need you lovely and sexy female economists out there to explain this to me;

Last night I go to one of the local bars out here in the Glacier National Park area. I run into a motley crew in the truest sense of fun loving 20 somethings who are spending their days contributing to GDP by running rafting tours, rangering, and other sorts of odd jobs. Everybody is having a good time, dancing and drinking at the local bar. One of the girls in the group fancies me and constantly strikes up conversations, asks me to dance and basically does all the leg work that the guy normally does.

Now, not to be mean or rude, but just to state the truth, I have no romantic or sexual interests in this girl because she is a little overweight. Call me a jerk, call me an ass, but that's just the way it is. I have no physical interest in this girl. That being said she is a nice girl and I genuinely enjoyed her company and very much enjoyed her conversation until....

The "Mother Hen" would intervene every time this young lady and I would embark on a conversation.

We would be in the middle of an engaging conversation and this other girl would come out of nowhere and pull her away from me.

We would be in the middle of a dance and sure enough the Mother Hen would yank her away in the middle of the dance floor.

And it angered me to the point that here I am, an innocent guy, with no plans or intentions with this girl and some nazi-goose-stepping, nanny-state totalitarian intervenes somehow thinking she's doing the Lord's work and "saving" this girl from my evil clutches when I had not clutching intent.

Now normally I would write this off as some crazy chick, but as I mentioned before, this is a repeat occurrence, and nor is it relegated to young 20 somethings.

A mere year ago I was hanging out with my good buddy Enrique. He's about 50 and we're with his buddy Ron who is also about 50. The establishment we were at was on a lake and a boat pulls up to dock and off walks a girl that Ron knows and works with. I forget her name, but she too was middle aged.

So Ron and this girl are in the middle of a conversation. And again, Ron has no plans or intentions with this girl. It was obvious through their conversation they were cordial, professional and co-workers.

But sure as scheit, another middle aged woman comes out of nowhere and "yanks" this girl away from Ron in the middle of their 100% innocent conversation.

Now I thought this was an ailment largely relegated to young teens/early 20's type women. But with this resurgence in instances of the "female yank" and at ages in excess of 30, it seems to me to be a mental illness or an ailment that transcends all ages and something I'm going to run into again and therefore will need to know how to handle in the future.

So my question you sexy intelligent economists of the female persuasion is this;

Who the hell are these chicks?

And WTF is their damage?

What's Wrong with This Picture 3

Anybody want to take a guess?


If only those in the mainstream media ever shot a gun.

Thanks to SDA.

Charts that Will Make You Smart

Again, as I have said before, if you really want to impress the girls at the clubs, you should really just bring your laptop in, crack open Excel and start making charts. Having the latest issue of The Economist folded and tucked in the back of your pocket with "The Economist" logo showing out will help too, but chicks really dig charts.

Plus, charts make you smart. Take somebody who never looked at a chart. Their arguments consist of "well I just FEEL" or "I just think" when there is no substitute for "I know."

Therefore I thought it worth our while to post a bevy of charts I've had stored up in the past couple of months that I haven't gotten around to posting yet. And since I'm off on vacation in a couple days, I will not be posting for a good solid week, so consider this a week's worth of posts.

But before I go on vacation one other request I have is that I've had a GREAT response to Help the Captain Help the Major, supporting my buddy who is returning to the military to go to Baghdad. The idea was to gather a lot of pictures of different folk from around the world to make what would be a nice calendar for him and his detachment to have in their barracks. However, I've received more than 12 photos so I've decided to make a photo album for him instead (HOWEVER, I have received some pictures from some lovely ladies, so if I get 10 more of those, I might make a calendar out of that which our boys in camo would certainly appreciate - plus he's single ladies! ;)

In any case, I expect my e-mail box to be FULL of photos of all you good folk (and maybe some classy 1940's poses from some of the ladies out there) upon my return. My e-mail is captcapitalism@yahoo.com (ensure you copy and paste the e-mail because people keep misspelling it). This is the LEAST you can do to help the Major and his detachment!

Anyway onto the charts;

Chart 1 makes a great case for going nuclear with our power production. Since global warming is the biggest threat to world (even more so than radical Islam) then it only makes sense to go nuclear. Of course the leftists will protest that too, betraying their true incentives; to destroy capitalist economies.


Chart 2 shows what I KNOW to be the true engine of economic growth; innovation and creation. I was surprised the Swiss were so high, not that I wasn't expecting them to be creative, I've just never heard anything about the Swiss before.


Chart 3 shows once again the US spends more than any country on health care. I've often thought about taking health care out of GDP and GDP per capita figures as an adjusted measure for the true standards of living, for I think the majority of the money we spend on health care is wasted. The chart also shows health care taking a larger and larger percentage of the economy. Soon when the baby boomers retire we'll all be working in nursing homes or the medical field.


And chart 4 just kind of jumped out at me. I knew white men were the more prolific committers of suicide, but I didn't notice that black males also commit suicide relatively more as well. Plus the time lag between the two groups committing suicide. Blacks peak in their 20's while whites peak in their older years. Any social scientists that have an explanation for this?


Anyway, enjoy the week all. I'll be out climbing mountains. AND FILL IN MY INBOX WITH PHOTOS!!!

Foreclosure Rates

From Macroblog a spiffy chart showing you the default rates.


I love how they say, "well as a percent of total mortgage, the overall default rate is 2%."

Give it time.

Gen Y, The Slacker Generation

I may have great disdain and disrespect for the Baby Boomer generation, but I will grant them one thing;

They worked their asses off as kids.

Their labor force participation rates were through the roof back in the day when they were young achieving the highest levels on record. And (a smug point I might add) that despite our loserness, we Gen-X'ers (at least the older ones) managed to achieve a similiarily high participation rate.

But good lord, what the hell happened to Gen Y????

Labor force participation rates for teenagers has tanked since 2000 to the lowest level on record, and precipitously so.

Now I'd like to go on and speculate about how children are spoiled rotten today. I'd like to go on about how parents find it easier to pay off their children than to bring them up right and teach them a work ethic, and I'd like to go on and point out it's my generation that taught their children this lack of work ethic, but frankly I find it pointless. Parenting has deteriorated to the point it is unsalvagable. Whatever I say will fall on dead ears or ears that have already plotted and set a course for the destination of arrested development for children and ultimately to the detriment of our economy...not to mention the likelihood I will never never see a social security check with that work ethic. And so I will write it here, just for the rights to say in the future "I told you so." For this lack of work ethic will be one of the key reasons for the inevitable collapse of our economy and our continuing decline as a world super power.

And to all the Australians that are e-mailing in, THIS IS AMERICAN DATA! This has nothing to do with Australian Gen-Y'ers. I have no clue what the Australian data looks like.

I Will Weather the Storm, I Have My Love to Keep Me Warm

Sadly I don't think love will get us through this housing market because based on this chart, we have about another year before all those ARM's are done resetting...of course then there's a new wave of option ARM's coming due for reset.

So, if you want to get an idea of when this housing market will "recover" it looks like at least another year.

A Real Frenchman

This is cool.

The Opportunity Costs of a Saturday Night

So my old man comes to visit me.

"How's the career?"

"Fine, busy as snot."

"How's the dancing?"

"Fine, busy as snot."

'How's the running and hiking?"

"Fine, busy as snot, hell crazy hiking schedule planned for Montana"

"How's the love life?"

"Non-existent, busy as snot."

"So there are no lovelies in your life?"

"Nope."

"Why not?"

"I'm too busy with work, and if I get a break I'd rather play Raving Rabbids than go to the bar or dance club."

And this perplexed him a bit as to why his eldest would prefer to play a video game about rabbits than go to the local discotec and flirt with the ladies on a Saturday night. But my father, who was not trained in the Economic Arts, does not fully comprehend the concept of opportunity cost and expected rate of return which warranted a lesson in economics that I think we can all enjoy.

Picture if you will it tis a Saturday night, like it is at this very moment while I am writing.

You have this precious evening off without the reminding responsibility that you must go to work tomorrow. Most people view this as the best time of the week since they are truly, and very Americanly "free." So how you spend this time is very important as you would like to get the absolute most out of it. Leaving you, me and every other red blooded American bachelor out there with the classical, philosophical debate of our time;

"Do I go out and scope out chicks, or do I stay at home and play video games?"

Yes, this great and unsolvable question has plagued mankind for thousands of years. Ever since the Atari 2600 came out (thousands of years ago) bachelors of all colors, creeds, religions, regards, stripes and sizes have asked themselves;

"Do I stay in and play video games? Or do I try to hit on chicks?"

And you girls may mock us, but we truly do debate this in our minds. And more so than you may think.

When it comes to any other decision, we spend less time making it than we do the aforementioned. For example;

"Do I want Chipolte or Jimmy John's?" - Decision time 10 seconds. "which is closer?"

"Do I want Amber Bock or Miller Light?" - Decision time 7 seconds, "which is cheaper?"

"Do I want to hit a jazz club or a rave?" - Decision time 14 seconds, "what has the lower cover?"

But when it comes to a Saturday night and you've just recently purchased yourself a video game where you can beat cute little rabbits senselessly, that easily takes up 2 hours of contemplation.

And the reason is two fold;

Opportunity costs and expected rate of return.

It's MY Saturday night. This precious and rare time of the week where I am truly free. Now, do I go and spend it chasing down the local lovelies, trying to enchant them with some witticism or line, only to find myself $30 poorer and with a phone number that only has 6 digits or starts with "555" and maybe, MAYBE if I'm lucky land a date that isn't psycho? Or, do I look at that 6 pack of Samuel Adams in the fridge, remember I have Halo 2 and call the guys over to engage in a 10 hour, Sam Adams-sponsored Halo-killing-fest-extravaganza where I am guaranteed, GUARAN-freaking-TEED to;

1. Have a blast
2. Get drunk
3. Have a blast while getting drunk
4. Have a blast while getting drunk and blasting away my best friends with the plasma rifle
5. Spend at tops, TOPS, $7 on beer, and if lucky, I'll end up with a surplus of beer because they'll forget their beer as they go home half-inebriated.

The second issue is expected rate of return. Sure, I'd like to go to the local hoity toity bar and find myself a rich, Selma Hayek look alike, but that has not happened in the past 16 years, so I don't know why it would happen now. However, I am guranteed, GUARAN-freaking-TEED once again to have a good time with my buddies, playing video games, grilling, and having a beer.

And I think both the universal and age old paradox of what to do with a Saturday night and a rule of financial management governs both decisions in retirement planning and what you do with your Saturday night.

When you are young and foolish, you have all the time in the world. You can invest or engage in outlandishly risky ventures where the payoffs are high, but very unlikely. Invest in a hedge fund, trade options, do what you want, because you have all the time in the world. But as you get older, you need more for-sure things. You want that fixed income. You want that guaranteed rate of return with little to no risk. Therefore Saturday nights and portfolio management theory have much in common for as we wise men of bachelortude age, we look back at our youth and see how much time and money was wasted at the clubs and the bars. And when we did land a date, what kind of quality and caliber it was that we succeeded with.

And thus, in our old age, we realize that it's more important to get a rate of return than to effectively gamble hoping to win the lottery. That a night playing vids with the guys, watching a good flick, or heck, who knows, blogging about the opportunity costs of a Saturday night is going to provide us with a higher expected (and more often) realized rate of return than putting on the old gear and heading out to chase after some girls. Alas, therefore you can forgive if I return to playing my video game.

(Coincidentally, it is a REALLY funny video game. Here and here are examples of the game I'm playing. You don't even have to be drunk to enjoy it, besides how can you NOT play a video game with these guys;