Home Builders, the New OPEC

I remember getting reprimanded for using the word "glut" in one of my reports one time.

A middled aged, banker who made money lending money to his nearly bankrupt cronies condemned my report when I said there was a "glut" of housing on the market. "Glut is an insulting word, it suggests gluttony." Which I thought to myself, "Well, that's exactly what's been going on, hasn't it????"

Regardless, I changed the word to "oversupply" but that still doesn't change the fact that the best word in the entire English language to describe the situation was indeed "glut." There was a 12 month supply of housing for the particular area we were looking at and it was the four letter word known as "glut."

And though I have no direct experience in home building, with such over supply and low housing prices it seemed to me that home builders would quit producing homes altogether. That new housing starts would drop to zero, allowing the market to catch up and eat through this excess inventory. Alas, this has not seemed to happen;

For while housing starts have plummeted, they're still producing them at a near historic average. And what I don't get is how home builders can't look at this and realize that are now facing a commodity market. And that if they continue to produce more homes for an already gluttonous market, it will depress their prices further. Therefore home builders as a whole are not much different than OPEC in the late 90's where the price of a gallon of gas was 85 cents. The price of their good is at a historic low and if they were smart, they'd cut off the supply.

Seriously, the best thing for home builders would be to take a year long vacation. You can work 60 hours a week, but the market price for your end product will be so low, that if you just wait a year or two, you could work 40 hours and make the same amount of money in just two years. Why work? Do America and all of the home owners a big huge favor and go on vacation.

Of course, I'm assuming home builders have a basic grasp of economics. And given the ruinous oversupply (read "glut") of homes they produced with not one of them, NOT ONE, conducting an absorption study, I am foolish to think they'd drive housing starts to my recommended red line.

No Reason to Panic Despite the Down Jones Dropping 310 Points

So the Dow Jones dropped by 310. So what?

Unlike the idiots who I graduated with from college during Dotcom Mania, that drove stock prices to insane levels the average US stock is accurately valued, based on historic measures, namely the P/E ratio.

The S&P 500's P/E ratio is at about 16 right now, just one point higher than its historic average of 15 since 1928. This is in contrast with a P/E ratio of 61 at the height of Dotcom Mania.


I know that the recent bull market may have some cautious minds scared, but unlike our last bubble the earnings are actually there, legitimazing the Dow's current level.

Additionally, corporate profits are at an all time high relative to the economy.


Corporations, unlike their government and citizen counterparts, are actually very efficient with their money, squeezing ever more profit out of their sales and assets. You may be a beer drinking slob, watching American Idol and the local sports franchise but the corporation you work for is actually a bit more hard working than that.

So do yourself a favor and relax. The only way stocks are overvalued is if there's a recession on the way...oops.

Shouldn't the Baby Boomers Be Paying Down Their Debts?

I was under the presumption that as you approach retirement, you not only store up enough cashiola to float you through to your death, but that you also pay down your debts. Alas, this does not seem to be happening;


And it concerns me a little bit because I see people older than me not only cashing out all the equity in their homes, but more and more people using the reverse amortization mortgage as a means to bleed out all the equity in their homes as they retire. Effectively leaving their children with a fully leveraged house. My question is what will happen to the value of these inherited properties when Gen X sells them, because we already have our own homes and don't need them? The flood of properties will lower the price below the amount owed on it and we'll have ourselves a nice little debt problem.

Alas it seems a generation is unknowingly committing the perfect crime, racking up debt, only to die before they pay for it...then again, I don't know how this materially differs from social security.

The Most Toys

This chart is a bit dated, but I found it interesting none the less.

Making It Difficult to Be Against a Progressive Tax System

I am as ardent a supporter of capitalism as there will ever be.

I largely view the majority of people's circumstances in the developed and free world as a product of their work ethic and drive. I largely view the developed world as meritocracies where you get what you deserve. I was dirt poor and I couldn't care less about your problems because I've been there and chances are you haven't.

But then this happens.

And it becomes insanely difficult to defend my position to be against the redistribution of wealth.

At what point does your moral compass kick in and say,

"You know, for $210,000 I could do a LOT of good in the world. I could put some poor kids through college. I could get some tutors for some kids that have trouble at school. I could pay for single parents to get some training or college or have their children get day care while they get some schooling." Or something of noble worth you could do with $210,000.

But $210,000 FOR DRINKS?????

Come on!!!!! WTF???? Wouldn't you feel a bit better about yourself if you donated it to a charity? Or heck, just threw it out into a street and made a bunch of normal schleps happy? Hell, I'd pay somebody's mortgage off just for kicks. But no, you're going to spend it on booze. And on booze, that frankly, probably tastes no better than a cold Sam Adams.

Forgive me while I feel a little socialist for a while.

If You're Happy and You Know It Clap Your Hands

The Economist came out with another interesting chart, showing once again money does correlate with happiness.

Of the many observations I could make, I will only make two;

1. The UAE, the most capitalist (and least radical) Arab country is pretty darn happy.

2. What the hell are the Finlanders so happy about?

(though I can see a joke "Why is Finland so happy? "Because they're not Norway")

Of The Economist, Fred Thompson and Hair

HAR!!!

Economics Made Very Simple

Economics, when it really boils down to it, comes down to one simple, cardinal rule;

If you don't work, you don't eat.

If there was just one person on the planet and that person didn't work to find food and find shelter he/she would die.

And even though there is more than one person on the planet, if everybody took the attitude, "I don't have to work" then as a whole since we don't work, we don't eat, we'd all die.

Therefore self-supportation or self-reliance is the single most honorable moral a human can have out of respect for his fellow man and society.

I will work, therefore I shall eat and therefore not rely upon you to take care of me.

However, the left finds refuge in the fact that if there's enough people on the planet and if they work hard enough, then there is a surplus of food and shelter and that some people don't have to work in order to eat. And the left (and I mean this in the sincerest sense) only has the power it does because it convinces people that "no, you really don't have to work in order to eat" and promises those weak-minded fools such a scenario.

Playing off of victimhood, conspiracy theories and any other half-baked reason they can find, the left convinces people they were deprived of food, deprived the opportunity to work, and therefore are entitled to eat at others' expense. And human nature is all too accommodating to this type of thinking because provides them with a benefit with no cost.

But that still doesn't change the cardinal rule that if you don't work, you don't eat.

So, even though common sense, just basic kindergartener common sense would prove this simple rule to be true, because such a large percentage of the population's livelihood is based on the opposite of this rule I find no greater joy in providing empirical evidence to prove them wrong.



For it seems that the freer a society is, the more one is allowed to pursue not just wealth, but allowed to keep the majority of their wealth, the more successful that society is, and not just for the individual, but for society as a whole.

And it is this that gets to the heart of the matter. If you are genuinely concerned about the poor, if you are genuinely concerned about advancing society and increasing the standards of living for ALL people, you would be the most ardent supporter of capitalism, low taxes, freedom and individualism. Alas, because of the left's vehement opposition to economic freedom, I am only left to conclude that the left uses "the advancement of the poor" as a farcical and cowardly cover argument to rationalize the transfer of wealth to themselves.

Craft and construe the argument however you want, it still doesn't change the fact that if you don't work, you don't eat.

Hugo the Hypocrite

If I recall correctly we let some piece of sh!t slime ball into our country where he promptly began to call our president the devil in front of the UN.


I may not agree with GW all the time, but he is without a doubt the bigger man.

The Idiocy of Argentinian Economics

Christina Kirchner, the wife of Argentina's current president Nestor Kirchner, is running for president.

And to make a long story short, Argentina is much akin to Ecuador, Bolivia and Venezuela in that (very long economic story made short) the people blamed the IMF, America and the West for their problems, elected idiots or outright dictators into office who are now about to destroy not just their economies, but their democracies.

But this takes the cake. To show you how utterly stupid and naive Kirchner (wife or husband) really is. She asks, rhetorically, the audience how Argentina lowered its debts. Claiming the lowering of the debt was due to some economic genius on the part of her husband. Look closely at the red highlights in the article.


"HOW DID WE CUT OUR DEBT?????!!!!"

Are you joking?

Yeah, what Argentinian economic genius. Lower your debts, by just refusing to pay for them.

Wow, seriously, she must have gone to the U of Chicago.

I think I'm just going to do the same with my mortgage and then brag about it. I can see it now, chatting up some girl at the bar;

"Hey baby, I just got rid of my mortgage."

"Really, how? Through hard work? Creative investments? You won the lottery?"

"No baby, I pulled an Argentinian. I just refused to pay it. I'm an economic deadbeat. And I blame America and the IMF."

"Wow, you're so dreamy!"

What gets me is she's the most popular candidate and likely to become the president of Argentina. Are the Argentinian people really that stupid to elect somebody like her when within 2 minutes of a speech she clearly displays her ignorance of basic economics???

Yeah, right, enjoy those 4 years of economic growth in Argentina. It will be coming to an end.

Snidley Whiplash Doesn't Adjust for GDP

Ryan had a better title so I went with it.

Originally it was titled "Military Spending" because I get a kick out of how the left complains we always, ALWAYS spend too much on the military (which a quick perusal of the federal budget would tell you otherwise). Regardless, to convey context as to just how much we spend on the military and for all the troubles we have with terrorism in the middle east, you all should just shut the hell up and enjoy your plasma screen TV's because it really isn't that bad. We spend nothing, I mean nothing on the war on terror. The Japanese killed 3,000 of our men and women and we responded with a budget that allocated 40% of our GDP to the military.

Muslim nutjobs killed 3,000 Americans and we ever so slightly bump up our military spending from 3% to 4% GDP, to the howls and protests of anti-war leftists. Sheesh!

So new lesson people. It's always got to be as a percent of GDP.

Don't care what you're measuring, you have to account for not only the increase in the country's population as well as the increase in its economy. Otherwise inflation and population growth distort your figures.

Just the other day I was on a date and she asked me "what do you do for fun?" And I said, "I like playing video games but only after converting them to a percentage of GDP."

When I get to the pearly gates, St. Peter will ask, "What did you do with your time on Earth? Donate to charity? Work with children?" and I'll say, "I converted things into a percentage of GDP."

My Mom will call me up and still to this day ask if I brushed my teeth. But she'd be wiser in asking if I brushed my teeth adjusting for GDP.

So remember, Americans, Patriots and all around cool guys and redheaded libertarian gals adjust for GDP. Commies, liberals and Snidley Whiplash don't.

Delinquency and Default

Interesting chart from the WSJ showing where defaults and delinquencies have increased the most.


What's up with Stockton or Modesto, CA?

Almost Makes You Want to Be a Virgin

http://arbyte.us/blog_archive/2007/07/Bad_Assumption_Justice.html

China's Economy Forecasted to be Larger than US' by 2025

I was predicting 2016 the way their growing, but The Economist differs.

The Housing Market Index

Well seems it dropped to a historic low.

This would be expected seeing it was at a historic and unsustainable high.


But what I find interesting about this is that it is the "builders" perception of the housing market. Builders thought that the future of housing was going to be GREAT in late 2005 while the rest of us educated schleps knew otherwise. Which means we should really view this as a good thing.

I don't mean to become the cheerleader for the housing market. I truthfully enjoy watching it tank, destroying those that laughed and mocked me and my economic brethren who warned of a housing crash. But in my experiences in banking and the housing market I realized one key thing;

Builders aren't economists.

I never once, NOT ONCE saw a builder bother to sit down and do economic research. I've never seen a builder do an absorption study. All I ever saw builders do is say, "Hey, I sold 4 houses last year. I'm going to build 20 this year!!!!" And that was the extent of their economic and market research.

And given their track record of miserably failing to predict the market, if they view things as being so bad, then I have a hard time thinking there isn't something good ahead.

But don't get excited. I'm not forecasting a quick recovery here. I'm just pointing to the beginning signs of a recovery, the most recent of which are the home builders' claiming doom and gloom.

Best License Plate EVER

Please, Buy Our Crap

Funniest thing I've read in a long time.

This Horrible Country Known as America

Another wretched night at the officers club.

Life is just horrible in this country. Is there any country on this planet that could possibly be worse than this God-forsaken country known as the United States of America? I suppose I'll get on with this horrible life I lead in this horrible country.

I Have Chart Envy

A microcosm of the unionized American labor force in general, Dr. Mark Perry makes an EXCELLENT point with and EXCELLENT CHART!!!

Read the whole post here (which you will, you will conform!)

Many thanks to Dr. Bob!

Those Sub Prime Blues

I admit I take a sadistic joy in watching all the banks and mortgage brokers who threw any means of quality control or credit out the window to line their fat pockets with commission and closing costs, get theirs in the end.





Enjoy the unemployment line boys and girls!

The Economics of Girls' Showers

I ran.

Therefore I stank.

But before I could return to the Captain's Cave I got a call from a female friend of mine who invited me over for dinner.

And seeing I'm an economist and I outsource all my cooking, there is nothing better than homemade food prepared by anybody else but me, and so I gladly accepted her invitation.

However, as I mentioned before, I stank.

So upon arriving at her place I asked her if I could take a shower and fortunately, I had brought an extra change of clothes along with some deodorant.

Now, as a guy there are only two things I want when I take a shower. Two SIMPLE, BASIC GOD-GIVEN THINGS!

1. Soap.

and

2. Shampoo.

However, it seems a Herculean, Indiana Jones-esque crusade to find these two items for I was not in my humble shower, but that of a girl's.

Go into any guys' shower stall and you will find only two things. JUST TWO SIMPLE THINGS!

Soap and shampoo.

In mine there is the knock off brand of Head and Shoulders (which I save a tidy $2 per bottle on over the brand name) and a half melted bar of Irish Spring.

That's it! That's all I need. That's all ANYBODY needs. Maybe a wash cloth. I'll even go so far as to permit a loova. But as for hygienic products all any human, the richest of the rich, and the poorest of the poor, all they need is

Soap and shampoo.

But go into a girl's shower and there are a billion body care lotion thingies that are anything BUT
Soap and shampoo.

You then spend the next three hours, racing the water heater before it runs out of hot water to find those two rare and coveted items;

SOAP AND SHAMPOO.

But oohhh, no! You can't find the soap or shampoo.

No, your thwarted by knock offs. Posers. Things that aren't quite

SOAP AND SHAMPOO.

So I started cataloging all the different things in this girl's shower stall that were NOT

SOAP AND SHAMPOO.

Item 1 - Moisturizing Face Wash (will not the water moisturize your face????)
Item 2 - Body Lotion (I don't want any!)
Item 3 - Body Wash (WHAT WAS THE LOTION FOR THEN???)
Item 4 - Dumb Blond Infusion (Is it wise to infuse things with running water?)
Item 5 - Lavender Bead Infused Body Wash (Why do I want beads? And what was wrong with the regular body wash???)
Item 6 - Cocoa Butter Skin Moisturizer (see item 1!)
Item 7 - "Enfuz" Treatment for Dry to Normal Hair (why are they always trying to infuse things in the shower?!?!!?)
Item 8 - Citrus Skin Treatment (What was wrong with the cocoa butter???)

Now I could go on for there were literally, LITERALLY a dozen more products. And that was the stuff just in the shower stall! You go to the bathroom counter and there is countless other products that I could never use.

I inevitably did find the shampoo (Strawberry Enhanced Shampoo no less) but could never find the soap! But my question to all of you ladies out there, especially those studying economics, COULD YOU PLEASE TELL ME WTF IS GOING ON WITH ALL THIS LOTIONY STUFF IN YOUR SHOWERS??? WHAT IS THE ECONOMIC RATIONALE FOR HAVING ALL THIS STUFF?????

I patiently await your answer! You could probably win the Nobel prize in economics if you could explain this phenomenon!

Based on GDP per Kilometer, Property May Not Be as Overvalued as You Think

Property, it is assumed, always goes up in the long run. This is based on the assumption that there is a limited amount of land, yet the population will continue to grow, therefore housing prices will forever trend upward.

However, if that was the case then countries like Ethiopia, Somalia, Sudan, etc., that have significant populations would have high property values. Alas they don't since they are constantly plagued by war, famine, plague, etc. However, they are also plagued by another disease; the lack of economic growth.

While I'm sure at some level population does correlate with higher property prices, a better determinant of property prices is the amount of wealth created from that land. The more wealth that can be produced per square mile of a particular piece of land the higher its underlying rents would be and therefore its value. Thus I crafted a new ratio;

GDP per Square Kilometer (I had to use kilometer because the CIA World Fact Book has the countries' area in kilometers)

Real GDP per sq. km. in the US has gone from just under $200,000 almost $1.3 million today. As technologies have advanced, managerial efficiencies invented and employed, we here in the US are able to squeeze out almost 7 times the amount of wealth from our land per square kilometer than we were just 50 years ago (quite identical to farming yields on a per acre basis).

It is this increase in wealth that we can extract from each square mile of our land that has truly increased our property values. However, combine the two, high levels of the production of wealth with high populations, and you get property that is most highly valued; cities.

It is no coincidence that New York, London, Hong Kong, Singapore, Tokyo etc. etc. have the highest property values in the world because not only do they have some of the largest populations, but they are also centers of commerce where disproportionate amounts of wealth are created.

However, GDP per square kilometer also provides us with a tool by which to gauge property values. In theory as more and more wealth is squeezed from a particular piece of land, the value of that land should increase proportionately. Therefore the ratio between GDP per square kilometer and the value of that land should remain constant. Introduce a new measure;

Median Housing Prices divided by GDP per Sq. Kilometer.

In theory the average price of a home in the US should increase in sync with GDP per Sq. KM resulting in a constant ratio. However, that has not been the case;

Average (mean) housing prices were originally 28% of the wealth produced on a per square kilometer basis in the US. This has trended downward to 19% in 2001, only to recover to 21% in 2006.

In other words, the value of our land is not keeping up with the wealth that is produced by it. And although property prices did seem to recover in the latest housing bubble, they look set to trend back down towards the 19% mark (coincidentally implying a 10% over-valuation in the housing market).

Therefore there must be a macro-economic variable driving this ratio down. Without additional research and left to guess, I surmise it is the transition from manufacturing to services that is disconnecting the market value of the land from the wealth that is produced from it. Services require less land than manufacturing. Goldman Sachs has produced ever increasing wealth from it's meager .9 square kilometers of land it owns in New York by offering ever more profitable services, while GM has barely produced squat with its arguably scores of square kilometers of land that its factories and facilities sit on.

Alas I'd be curious to see if my theory would hold for China which is experiencing a manufacturing boom.

Labor Lost to Strikes

Interesting chart. Didn't know Iceland was trying to become the next Detroit.

You Go to the Penalty Box. You Feel Shame

"Long term unemployment" is defined as when you've been unemployed for a year or longer. And while people may cite different variables for it, I surmise that if the most advanced student of econometrics at the U of Chicago were to do a thorough analysis of it, it would boil down to two things;

1. How generous/stingy a country's unemployment benefits are.
2. How lazy/hard working its people and culture are.

And so The Economist has come out with the most recent long term unemployment figures.


Sadly it does not include South Korea and Mexico where the shame of being unemployed is enough to make people lie about it and the unemployment benefits are nil (and it showed on the last chart where less than 2% of both countries' unemployed were long term).

Now I understand the occasional person that has a spat of bad luck. I can even understand entire swathes of laborers unemployed for a year or more if their industry is rendered obsolete or is going through a dramatic change, but to be in Germany or Italy where over half your unemployed people have been so for a year or more is disgraceful.

Alas, maybe the European Union doesn't need labor reforms to get the economy going as much as going into the penalty box and feeling a little noble South Korean shame.

Executive Pay as a Multiple of the Average Worker

They like to blame Bush, but it was highest during the Clinton years.

Don't Forget, the French Gave Us the Statue of Liberty

Much as I ridicule the French (deservedly so), there is the occasional one or two Frenchmen that fought in the resistance, joined the French Foreign Legion or displayed some semblance of independent thought and manliness that would make you say, "you know, I would trust to have this Frenchman in my platoon if I were in Vietnam. Dien Bien Phu and all that aside, I'd still trust them."

And this guy is one such person.

Only problem is I don't speak French. But on the birth of my nation, that would not exist without the support of the French (an accursed historical fact I wish could be purged from the history books), I think we owe it to our French brothers who didn't capitulate to Vichy and were of the caliber that fought for America's freedom (or at least hated the Brits enough to do so) a little hat tip on this 4th of July.

Not that this means there will be end to the French jokes and mockery, just so you know! They shall forever be cheese-eating-surrender-monkeys.

You Think We Have a Housing Bubble? Check Out the Brits!

Though, it is an island after all. I'd be curious if Ireland and Australia are experiencing something similar.

How Video Games Explain All Religions

And so all religions are basically explained here.

The Real Slim Shady

Please stand up

So my question is do Mexicans hate this guy like most Americans hate rich people here or do they hold him up as a national champion and something to emulate?

China's Stock Markets May Not Be Overvalued

As you know when I make outlandish stock recommendations they tend to be disproportionately in China. And the reason is simple;

China produces wealth.

Come up with as many reasons and rhymes as you want for what a stock should go up, but it ultimately boils down to wealth (in the form of profit) that will drive prices up. Not how to make new B2B platforms work. Or how a search engine is going to revolutionize mapping with effectively what is only a toy. Or that you can flip it and sell it for more later.

The production of wealth ultimately drives up asset prices.

Now an investment banking colleague of mine and I were discussing it and he suggested that China was in the middle of a bubble. That millions of Chinese were borrowing to invest in the stock market and that stock market had increased in price at an unsustainable level. But allow me to share one dandy chart suggesting China may not be as overvalued as you think;



China's market capitalization as a percent of GDP is a mere 25% while Britain and the US are over 150%. It's a testament to just how much wealth is being produced in China. Additionally this does not consider the fact that China is certain to grow at rates triple that of Western economies which makes it seem even more undervalued. Add to this the fact their middle class is growing and these people will want to invest in the stock market as well, this new infusion of money will also provide upward support on prices.

So go ahead and invest in American companies, there are some good ones out there. Go ahead and invest in Apple because of the i-Phone. Just look on the back of the i-Phone and see where it was made.

Women, Children and Education

The Economist (which all aspiring and junior deputy economists should be reading) came out with an amazing article on the effects of education on divorce, women and children.

Allow me to share just two charts from the article. The first one showing divorce rates versus education.

The most obvious relationship here is that the more a woman is educated the less likely she is to be divorced (also the younger the woman, the less likely as well).

The second chart shows that the more education women have the less likely their children are going to be raised by a single parent.

Now the article is amazing and important in that it shows the importance of education. Not just for earnings sake, but for healthy relationships' sakes and the sake of the children. it also shows smart women know that we men are cool dudes and not worth getting divorced from for we provide a heaven that is known as eternal bliss.

Alas, I would like to see the same figures for men.

How the Minneapolis Public Schools Piss Away Money

Friend of mine sent this to me.

I don't want to hear from the Minneapolis public schools or any of these leftist "we-need-more-money-for-education" cheerleaders telling me they need more money.

COSMETOLOGIST????? OJIBWE?????

WHY ARE WE PAYING HARD EARNED TAX DOLLARS TO TEACH COSMETOLOGY AND A DEAD LANGUAGE????

I can understand cosmetology in that it teaches a trade, but jeez, talk about low expectations! What, just because they go to the inner city schools they'll never become doctors or engineers? So let's set them up to become salonists???

And Ojibwe???? I'm sure it's interesting, but how is teaching a dead language going to help a student find a job???

The motto for the Minneapolis Public Schools is;

"Minneapolis Public Schools; Expect Great Things."

It aught to read;

"Minneapolis Public Schools; Setting Your Kids Up for Failure"

Corporate America Might Just Save the Baby Boomers

They pioneered rallying against "the man" and may have made "Corporate America" a four-letter word, but the Baby Boomers may yet come to appreciate Corporate America just yet in that it may just save their asses when it comes to retirement.

During the Dotcom Mania days and the successive crash, I was somewhat concerned that with 401k's, IRA's and the bevy of other retirement programs out there that these programs would incentive people (namely the Baby Boomer generation) to flood the stock market with retirement dollars, artificially driving up prices only to crash when the Baby Boomers retire and start pulling their money from the stock market. I noted this as the S&P 500's P/E ratio has never been below it's historical average since 1928 of 15 ever since the Baby Boomers entered their prime earning years in the late 80's. The S&P 500 P/E ratio didn't even drop below its average after the stock market crash suggesting there was a lot of excess cash floating around.


However, what amazes me is that even with this excess cash in the market AND the recent bull market, I would have sworn when I updated my charts that the S&P 500 P/E ratio would have skyrocketed again as America went back to mindlessly flooding the stock market with their retirement dollars. But no such thing has happened. Actually, the S&P 500's P/E ratio suggests the markets are accurately valued, borderline sane with the P/E ratio hovering around 16, just a smidge over the historical average.

With a bull market driving prices sky high, mathematically the only culprit that could be keeping the P/E ratio down is profits, and sure enough that's what it is.

Corporate profits in America have reached an all time high as a percent of GDP of just over 10%. This not only provides merit to the recent bull market, giving it some underlying value, but also suggests that a "Baby Boomer Crash" may not ensue as the Baby Boomers start to retire and switch their investments from equities to bonds. Corporate America, evil and vile as it may be, might just be able to keep the profits up making the stock market a viable and wise long term investment and making sure millions have the money in their retirement accounts.

Of course, I'd be curious to see what would happen to corporate profits when we enter a recession triggered by a housing bubble. But that certain isn't a possibility now is it?

Taxi Cab Economics

I found this interesting about Thailand's taxis. If you're looking for a lighter "fare" read. (Ha! get it??? "Fare?" I'm so witty!)

Loser!

Hee hee.

Socialists always lose in the end.

Simply because they do not live in the real world.

Only in a socialist economy could the world's 4th largest oil producer have to ration oil.

Yes, Still On Vacation

HI All,

Got a couple e-mails and I'm out in the wilderness so this is the first time in about 4 days I've had e-mail access, but anyway, yes, I'm still on vacation. A well-deserved one I might add.

But as a teaser for what is to come next, the first CHARITABLE post on Cappy Cap will be made upon my return. Amazing what you'll run into out in the middle of nowhere.

I Predict Unemployment Will Go Up to 4.9%

My economic spidey senses were tingling. And although not based in research, data and statistics, those spidey senses have rarely been wrong. They were triggered when I noticed a good third of my friends have either been laid off or quit their jobs. Anecdotal, I admit. Could be completely wrong? I admit. That being said, I think we're in for an unpleasant surprise here pretty soon. I predict unemployment is going to jump. I'd say to 4.9-5% or so.

But that is just my economic spidey senses.

The Other Captain Capitalism

So they have wifi at my hotel and I've been checking out the "other" Captain Capitalism.

This is hilarious (it's a cartoon so it's not like you have to "read" or anything lame like that)

Kate and her readers will love it.

Shiller Should Be Award the Nobel Prize

Couldn't resist, but I stopped in at the local library (which actually has internet access!) and saw these charts sent to me by Dav e.

This is the expected decrease in prices for major cities by the Case/Shiller model (though I respectfully disagree and think prices should drop more);


This is historical price changes in some sample cities (the link above has them all)

The Captain Goes on Vacation

Adios alles! (I'm getting multi-cultural here)

Off for another exciting episode of fossil hunting and hiking. And mayhaps the occasional red-headed fair maiden economist that frequently dot my path through life.

Will be back on Friday-ish.

Selma Hayek or Friedrich Hayek

So the debate is going around who would you rather take economics from;

Friedrich Hayek, world famous Austrian economist,


or

Selma Hayek, world famous actress who (in the Captain's opinion) is the hottest woman alive



It really is a tough choice!

Once a Commie, Always a Commie

OK, so reunification of Germany started in 1990. How long does it take the East to get its act together?

16%???? And this is after the Hartz V reforms. I wish there was a chart showing long term unemployment rates between the West and the East.

A Telling Screen Shot

So I hit Drudge and there were two pictures on the page that tell volumes of the differences between the "West" and the radicals in the "Middle East".

In one photo you have a bunch of Hamas militants pointing their AK-47's in the air claiming victory because they captured Fatah's key power points. While there's an astronaut hovering in space and something or other about them fixing a computer.

And I ask this as a serious question, but who do you really think has the bigger achievement and what does that tell you of the pettiness of the other's achievement?

You Will Read El Borak

"El" has linked to me for a while and I feel guilty in not returning the link. You will read him. You will confirm.

Now wouldn't that be great? A world where all conforms to Cappy Cap's orders. Ahhh, one can only dream. Selma Heyek would be serving me martini's now whilst reading "The Wealth of Nations" with that entrancing accent of her's. Now that I think about it, how many more economics majors would there be if Selma Heyek were the professor?

The French Do Something Right...Again

First it was Sarkozy, now their energy policy. They keep this common sense up lord knows what will happen.


That being said, I'm curious, but since global warming is now a much more pressing threat than the ills of nuclear waste, shouldn't we be all for nuclear power now?

So, It's Just Like Communism Then?

There was an article about how the police in China busted a slave racket. And there was this excerpt from the article I find some cynical humor in;




So it's just like the good ol' days of Communist China, right?

States by the Size of Other Nation's GDP

The Commander sent this to me;

What I particularly like is how Russia's economy is all the size of New Jersey's.

Yeah, right, "communism" did wonders for them.

How Much We Spend On Gas

I remember, not too long ago, students at the University of Minnesota complaining about the increases in tuition. They went on protest as uneducated, brainwashed young skulls full of mush are wont to do. Yet, while these poor students will always contest they can't afford the increase in tuition, they certainly seem to have enough money to spend it on beer and booze at the local bars in Dinkytown and Stadium Village. And I always said, "when these bars start to noticed a slip in sales, that will be the true economic sign that tuition costs have risen to the point the students truly cannot afford those increases. In the meantime, increase away."

But we adults are not guilt free either. For we complain about the price of gas, but rarely do we look at our personal expenditures to see exactly how much gas is costing us. So I went to the BEA and pulled the national income accounts to see how much the typical American spends on gas as a percent of their total income and today it is at 2.4%.


Now albeit at a recent high, compared to the 1950's we spent nearly 3% of our income on gas whereas during the oil embargo we spent 3.75%. And we're complaining about 2.4%?

But where we really ought to be ashamed, similar to the college students complaining about tuition when they have no reservations about spending $50 a night on booze, we spend roughly the same amount on clothing and shoes. And this despite a precipitous drop in the real price of clothing as we import textiles from China, India and the Pacific Rim;

Now I don't know about you, but I literally spend no more than $100 a year on clothes. Boxer shorts, jeans and socks taking up the majority of that expenditure. So I can't imagine spending anywhere NEAR the same amount on clothes as I do gas. And sneaking a peek into some of the closets of my female friends, not to mention I don't think I've seen them wear the same pair of shoes twice (ahem, FED EX!), methinks I have found the culprit for the large expenditure on clothes.

Regardless, before you get upset about spending $3 per gallon at the pump, you might want to check to see how much you dropped on that latest pair of shoes or what your tab was last night at the bar or maybe add up how much you dropped on cigarettes this week.

When Liberals Make Charts II

A reader sent this to me.

Cripes. Again, and I mean this in the truest sense of the word, it is a bold face LIE.

They are lying, as in not telling the truth, as in posing information that is incorrect. I don't see Social Security anywhere and they've been able to massage the figures to (how convenient) get the military budget up to 51%. It really begets the question whether they even bothered looking at the Federal government's budget. And it further points out that there are people in the world that would rather live in a false world that unfairly benefits them at the cost of the rest of society and will gladly let their ideology form their "truths" instead of the truth form their ideology.

And good lord, I've never seen such a budgetary allowance to the HR department! Catbert would become dictator supreme if that percent of the US budget was given to an HR department.

JESUS WILL SAVE YOU...But Only on Tuesdays

And so it happens again.

I had a friend a while ago that was a single mother. Got pregnant when she was 16, was a party girl, didn't really take her life seriously, drank, let her folks bring up the kid, didn't study in school and then one day the parents cut the purse strings.

Faced with the harsh realities of not just self-supportation, but the supporting of a child, she managed it for about a year before she (you guessed it) "found Jesus." And I always found it interesting how people who can't deal with the harsh realities of life always become born agains and "find Jesus."

And it basically boils down to something as simple as this;

People will goof up. People will make mistakes. You can either be a man about it, admit you made those mistakes, face up to those mistakes and live with the consequences or go find some excuse as to why it isn't your fault. And the latter case is the born agains and that is why I cannot stand them.

For it is has nothing to do with the noble purposes of religion (salvation, repentance, etc.) but to shield the ego of a person who does not have the character and wherewithal to be an adult and look at themselves in the mirror and say, "I goofed up."

Now I know Christianity isn't the only religion out there where people will abuse seeking for something else to make their lives easier or explain why their lives suck. If you are a poor young Arab the local imam may trick you into believing that it's Israel and foreign powers intervening in your life, making you poor, thereby incentiving you to go and join Islam and blow yourself up. I remember a woman desperately trying to marry a Jewish man so her son could become Jewish. I even remember one particularly intellectually weak-minded person that joined Christianity because she got in trouble for stealing a pair of pants in middle school (akin what Hilton above has done). But whatever the reason, the true reason for joining the religion is avoid serious self evaluation, criticism and blame and to make your life easier by jettisoning your responsibility for your actions and your situation. It is ulterior to the true purpose of the religion and is an insult to that religion. They're hypocrites.

But Christianity is different and is why I theorize it attracts more born agains (like Paris). And the reason I say this is two fold;

1. The forgiveness aspect. Hey, you could have kills a bunch of kindergartners, punched some nuns or been Hitler and as long as you ask for forgiveness, you are forgiven.

Are you joking me? This is the big attraction to those where reality or the authorities have caught up with and are now going to suffer punishment. Living life as if they are above all others, when revenge is about to take its toll, then they start to search for an excuse for their behavior. Having none, how convenient there's a bible there. And how convenient according to this doctrine you are forgiven. It absolves a person of any personal responsibility. This still doesn't change the fact my friend's kid has grown up in poverty is not going to have a decent shot of getting out of it.

2. The "Fateism" or "Calvinistic" aspect of religion. That everything is in God's hands or fated to happen. That God has a plan and you have no ability to control or change the outcome. I don't know how many times I've seen the direct consequences of an action a Christian friend of mine has made and when I asked them, "why did that happen?" "Well, God has a plan." Yes, a plan. I'm sure this morning when I woke up, God planned me to have a Rooster Booster light. My personal tastes and preferences had nothing to do with it. I was powerless, I really wanted a diet Coke, but God forced my hand to grab the Rooster Booster. Just as I'm sure it was God's plan for Mao Zedong to wipe out 40 million Chinese. Mao was completely powerless. Hey, he didn't want to wipe out all those people, he wanted to help them. But God had a plan. And I'm sure God made my friend have unprotected sex at 15 so she had a kid and has since lived in poverty.

But think about this aspect of Christianity (or at least the Calvinism sect of it) and how it again absolves you of any personal responsibility. And how convenient it must be for people whose lives just got too difficult for them to face. "Hey, it's not your fault, God has a plan."

So here's the deal people. I'm not a particularly religious fellow, but I do respect religion. And I don't much care to see people pervert and abuse a religion for purposes it wasn't intended for. So the next time you run into trouble do us all a great big favor, don't become an intellectual weakling and say "you found Jesus." That doesn't excuse your behavior or any of the bad things you've done to society. All it's done is convince you in your own little mind that you're still an OK person. Be an adult, be a responsible person, pay your dues and face the music. You'll get more respect from society and probably true forgiveness.

You Will Conform

You will watch this.

You will conform.

I have no relation to this guy, but it's freaking hilarious.

Welcome to the Real World

I am truly indifferent to Paris Hilton. If she died tomorrow I wouldn't really care, which I surmise is the same opinion most of you share here. The only genuine intellectual thought I have of Hilton is "If I had access to the billions in capital she has, how much more I could do with it than her."

Regardless there is just something about seeing a spoiled little brat who thought she was above the law and money could buy her way out of any legal trouble, get dealt the crushing blow that, "No, you stupid b!tch, you aren't special. You're just like every one of us. Get in line and deal with it. Welcome to the real world kid."

And no, I won't claim that it is beneath me to derive joy from this.

The judge who ordered her back should be given a medal.

Men Determine Whether Women Are Attractive Or Not. Not Women.

Arguably the most inciting and controversial thing I've said many times in my life is when speaking to a woman;

"You do not determine whether you are beautiful or attractive, let alone what is beautiful or attractive in women. Men do."

And I will never shy away from this statement. Matter of fact I will stand firm by it my entire life, because it is true. Men determine what is beautiful or attractive in women, just as women determine what is handsome or attractive in men.

The reason why is that IS the definition of attractive. If you attract other people, then you are "attractive." I'll be as intellectually honest to agree that people of the same sex who are homosexual can also define whether you are attractive. But setting the homosexual rule aside, you cannot decide simply by yourself that you are attractive or somebody of the same sex is attractive. It simply does not work that way. Other people define it.

Naturally this insults people because how dare I take away their right to determine whether they find somebody attractive or not. Of course I'm not taking their right away, you can find whoever you want to be attractive. If you asked me, I would say Clive Owen is probably the most handsome man in the world. But my opinion doesn't matter because in the end what ultimately determines whether a woman is beautiful or a man is handsome is the opposite sex. And though I may look like Clive, because I am attracted to women, I have no authority as to whether or not he is actually attractive.

Now, this is a simple FACT. Meaning it is not an opinion. It is not questionable. It is just the simple reality of life. And when it comes to facts you have two options;

1. Accept the fact. - this is the healthiest option because, well, that's what sane people do. You are an adult. You may not like some facts, but they are facts and you have the intellectual maturity to acknowledge that. (for example men usually have to accept the fact that women like taller men).

2. Deny the fact and become delusional.

Guess which one is going to lead to a happier and more productive life?

A 48 Hour Work Week is TOO MUCH???

Are you joking?

I knock out 90 hours a week on average. Everybody I know does at least 50. And now 48 is too much?

The ILO has "set forth" the "appropriate" number of hours to work per week.

I'm so glad we have some entity to establish how much I should work.

While I harp on what makes society's great and advances people is working smarter, creation, innovation and creativity, one cannot deny the benefits of just working harder.

Japan in the 1960's-1990's would not have advanced as quickly as it did from a war torn country to a first world nation that surpassed its European counterparts. South Korea even more so.

The US enjoys higher standards of living than the French simply because we work more (despite the fact the French have higher labor productivity rates by some measures)

So, an ode to those countries that ignore what some hoity toity, upper class policy analyst at the International Labor Organization thinks should be the "average" work week (who no doubt had such a cushy life they don't realize sometimes you have to work more than 50 hours a week in order to make it). I present to you the average work year;

The Captain Goes Tornado Chasing

Sorry junior, deputy, aspiring and professional economists, no post today.

Going to go tornado chasing today! Storms are a-brewin'!

A Question for My European Counter Parts

I was hanging out at a jazz club last night, enjoying a cocktail like I do. People are decked out pretty nice and when the 3rd set is finished I decide to head back to the Captain Cave and call it a night. So I resurface (the jazz club was in the basement of a building) and upon getting back to street level I see a bunch of college kids with their hats on side ways, some kid with baggy poofy pants that looked like the group's token idiot and a car goes by with rap music blaring a heavy bass beat. And of course you can't make it back to your car in down town without some schmuck bum asking you for money. But this bum was all of 25 years old, not you're typical down and out 45 year old alcoholic.

And it just further reminded me how much American culture has deteriorated since the WWII generation.

We went from men and women in suits and dresses, just like in the jazz club, listening to Duke Ellington, to a bunch of Baby Boomers getting high on pot listening to "Come on Baby Light My Fire" whilst they threw the US into the throes of the worst recession since the Great Depression as they "came of age" who then begat my generation, Gen-X the most pathetic group of misfits that thought baggy pants, poetry slams, nose and tongue piercings, and Kurt Cobain were cool.

And my question is, has the same deterioration occurred in Europe? Or is it just us in America?
Of course, this is the perfect time to once again "Compare and Contrast." Yes "Compare and Contrast" where we take music from the horrible and oppressive 40's and compare to the enlightened and superior music of today.

Today's contestants are Louis Armstrong in "Gone Fishin'" and the musical mastermind Yo Gotti in "After I F@ck Your Bitch"

Gone Fishin'

I'll tell you why I can't find you
Every time I go out to your place...

You gone fishin' (well how you know)
Well there's a sign upon your door (uh-huh)
Gone fishin' (I'm real gone man)
You ain't workin' anymore (could be)
There's your hoe out in the sun
Where you left a row half done
You claim that hoein' ain't no fun (well I can prove it)
You ain't got no ambition

Gone fishin' by a shady wady pool (Shangrila, really la)
I'm wishin' I could be that kind of fool (should I twist your arm?)
I'd say no more work for mine (welcome to the club)
On my door I'd hang a sign
Gone fishin' instead of just a-wishin'

Papa Bing (yeah Louis)
I stopped by your place a time or two lately
And you aren't home either
Well, I'm a busy man Louis. I got a lotta deals cookin'
I was probably tied up at the studio
You weren't tied up you dog
You was just plain old...

Gone fishin' (bah-boo-bah-boo-bah-boo-bah-boo-bah)
There's a sign upon your door (Pops, don't blab it around, will you?)
Gone fishin' (keep it shady, I got me a big one staked out)
Mmm, you ain't workin' anymore (I don't have to work, I got me a piece of Gary)
Cows need milkin' in the barn (I have the twins on that detail, they each take a side)
But you just don't give a darn (give 'em four bits a cow and hand lotion)
You just never seem to learn (man, you taught me)
You ain't got no ambition (you're convincin' me)

Gone fishin' (bah-boo-dah-do-dah-do-dah-do)
Got your hound dog by your side (that's old Cindy-Lou goin' with me)
Gone fishin' (mmm-hmm-hmm-hmm-hmm)
Fleas are bitin' at his hide (get away from me boy, you bother me)

Mmm, folks won't find us now because
Mister Satch and Mister Cros
We gone fishin' instead of just a-wishin'
Bah-boo-baby-bah-boo-bah-bay-mmm-bo-bay
Oh yeah!

After I F@ck Your Bitch

[Chorus]
After I fuck your bitch
Then I'mma tell you bout it
If you a trick ass nigga
You'll be fuck up about it
I hope you don't start
No fuckin' beef about it
Or I'll take her name and yo name
And make a rap about it

[Verse 1]
Now all y'all niggas know pimpin' ain't dead
And these hoes followin' us like simon said
I only trust me myself and I, you ask me why
Cause the first time I seen a man cry
Was because a bitch
She broke his heart
She left him for dead
Though my h boom coon
Gast up the bitch head
Every nigga don't love you
He just tryin' to rich
And here the bitch fail for the shit(so hear this)
These niggas got a couple birds
You know how that go
We snatch a rumor that we heard
We finna vamp out
We rush in and ran in the door
In the ?????
The bitch start screamin'
I padded her on the ass
Job well done
We got what we wanted, it's to roll
I'm sittin' on a brick and half, nothin' but old
These niggas lookin stupid it's hard to swallow
Imagine a bitch taking every dollar you done earn

[Chorus]
After I fuck your bitch
Then Imma tell you bout it
If you a trick ass nigga
You'll be fuck up about it
I hope you don't start
No fuckin' beef about it
Or I take her name and yo name
And make a rap about it

[Verse 2]
Now you the hardest nigga in the hood
You talkin shit
But you weak than a motherfucker
We it comes to that bitch
You better watch before I knock her
And get cha hot
You suppose to be my nigga
But you huggin' your glock
You wanna kill me, you wanna steal me
Over a bitch, you wanna hurt me
You wanna curse me, put me on disc
You dislike, you fight me, you wanna strike me
Wanna catch me, and wear me like an old pair of nikes
It ain't over, I saw your hoe, ridin' in your rover
I was sober, I pulled her over, now I done stole her
My nigga better watch your bitch, cause she been creepin'
My nigga me and your bitch, we been like sleepin'
She been talkin' about your stash and I been hurtin'
I gotta tech-nine in the mat I'm about to serve ya
Run up on ya, and pull it on ya, and put it through ya
Just to let you know what your hoe will do to ya

[Chorus]
After I fuck your bitch
Then Imma tell you bout it
If you a trick ass nigga
You'll be fuck up about it
I hope you don't start
No fuckin' beef about it
Or I'll take her name and yo name
And make a rap about it

[Verse 3]
You better watch your bitch, like you watch your mail
If you ain't train that bitch then you goin' to jail
Or gone be dead gone ????? but runs they mouth
Love to fantasize about they man cars and house
You can give the bitch the world
She still gone gice up that car
But you a nobody nigga that sellin' rocks on the block
You better watch your bitch cause I'm shinin' like diamonds
You bring her around me it's gone be a matter of time
For I fuck your bitch and let you know about it
If you a trick ass nigga you'll be fuck up about it
I hope you don't throw no fuckin' fit about it
That's life and you really can't do shit about it
You wanna hi-side dick ride cause you think I'm on
You comin to me wrong tryin' to popcorn, bitch gone
For I catch a fuckin aggrivated, see you then violated
You told them folk that I was drug related
I gotta grudge with the judge she ??????
Domestic violence three years without parole
Watch your bitch, and stop your bitch, before your bitch
Get your ass in a world of shit

[Chorus]
After I fuck your bitch
Then Imma tell you bout it
If you a trick ass nigga
You'll be fuck up about it
I hope you don't start
No fuckin' beef about it
Or I'll tale her name your name
And make a rap about it
(repeat 4x)

Real Estate Loans as Percent of American Banks' Total Portfolio

Again, I am just a dumb economist.

I play video games, pick my nose, jump out of trees, run into bushes and climb rocks.

What do I know?

I'm too busy melting ants in my back yard with a magnifying glass and that's when I'm not polishing off a 5th of Jack Daniels drawing pretty pictures on my parent's walls with the 164 box of Crayola crayons.

So why listen to me, or for that matter any one of these moron economist types out there that "claim" there's some kind of housing bubble?

Well that might be changing because banks, mortgage brokerage outfits among other financial service firms that had exposure to real estate are posting losses. Default rates have started to skyrocket and more and more often banks are being left holding collateral for loans that is worth less than the amount they lent out on it due to overly-optimistic appraisals. And while rich, middle aged gray haired men who thought they knew better than us dumb monkey-economists who swing from tree branches and scratch our armpits, these losses along with the increasing chance the board of directors will fire their asses are making them more receptive to listening to the other camp. That "camp" I like to call "reality."

So here's a little tidbit that I think we can all enjoy and it also shows you we're not out of the housing bubble yet. Not by a long shot; Real estate loans as a percent of total loans for all the banks in the US;

(adjustment of the y-axis is duly noted)

You see, banks are going to have to eat through their excess loans and diversify into other loans like commercial, equipment, and other loans. Sadly though, most businesses or sole proprietors who want those kind of loans are just going to pony up real estate as collateral for these loans anyway, not really reducing the exposure of banks to real estate. And I've thought of some great ways to diversify banks' loans portfolio's to lower their exposure to real estate that would turn them profitable in 2008, not to mention lower the overall risk of their loan portfolio. Only problem is (and I'm not kidding) that I've literally approached banks and offered them such services and they poo-pooed me away because (as you know) I'm just a dumb economist.

But something tells me that there will be a potential consulting gold mine for economists, consultants and other various finance professionals out there who know why there was a bubble and are able to help banks salvage their crumbling operations. I think it will just take another two quarters of losses that quadruple the losses experienced in the first quarter of 2007 in the banking industry to finally convince the middle aged, MBA'ed, non-stop-golfing gray hairs that maybe they ought to listen to economists.

Too bad we'll all probably be too busy playing with our Legos eating our Jello Pudding Pops.

When Liberals Make Charts

Liberals making charts. It's like giving a kid some whiskey, a gun and the keys to an SUV. Please, everybody on the left, leave the chart making to the professionals.

Some idiot sent me this chart trying to "prove" to me that the military is the largest expenditure of the federal budget.


I didn't even have to look up the budget to find out what MAJOR expense item was missing (which also happens to be the TRUE single largest expenditure in the federal government.)

Any takers?

If Marriage Were a Horse Race

HAR!!!

Warning cursing involved, not child friendly, but accurate