It's Nice to See Efficient Markets Working

I despise dead beats.

My favorite is when some schmuck who bled every penny of equity out of his house to pay for a brand new pick up truck, an ATV, a flat panel TV and a snowmobile (because he doesn't earn enough money to pay for these things) comes to my company begging for a loan because he can't afford all the new interest he's incurring and needs to consolidate all his debts.

And then when the interest rates on the ARM's adjust, WOW, who would have guessed;

They all go into default.

Now, that's usually on some slack-jawed yokel up in the northern hick suburbs of Minneapolis where (if you're not familiar with the area) it is nothing but a sea of trailer courts and a severe dearth of tornadoes. However, these are not the only dead beats.

The biggest dead beat of them all is probably Argentina.

Remember Argentina? When they defaulted on what amounted to $132 billion in debt (and accrued interest)?

Not a lot of people think about Argentina and ponder even less about the country's historic finances, but I do. And since I so despise dead beats and what an utter parasite they are on society, I thusly despise Argentina. (I further despise the country because the arrogance of some of their people were to BLAME THE US AND THE FOREIGN LENDERS THAT LOANED THEM THE MONEY FOR THEIR INCOMPENTENCE AND INABILITY TO PAY IT OFF!!!! I even recall a couple foreign banks getting torched and destroyed).

Alas, I was very happy to see this;



While most people may have forgotten the fleecing they received for loaning Argentina money, it seems the market's memory is more keen. And this makes me happy for this is exactly what the markets should reflect; Argentina is a higher credit risk in that it cannot be relied on to pay back its debts, therefore it should be charged a higher interest rate as it is essentially a "super-sub-prime-borrower." Even more subprime than the slack-jawed yokels of the northern Minneapolis suburbs (heck Argentina's even worse than Nigeria and Pakistan!)

Now, if you want a good guffaw, check this web site out;

http://www.inversiones.gov.ar/ing_info.htm

I'm glad I could give you your Monday morning laugh.

A Question Tendered to All You Economists Out There

Hey all.

Terribly sorry for the delay in posts, but I'm currently working on buying some new property (remember, all aspiring economists, it's now a buyers market out there!).

So to whet your appetite for economic discourse, here's something that's always been bothering me;

Monetary policy.

Monetary policy was never a strength of mine, but I’m finding it harder and harder to see why it’s so difficult.

Will somebody please tell me why we have a target inflation rate of 2% and not 0%? And I know that if we get inflation of 0% the deflationary fighters’ fear/argument is that, "we could fall into deflation which would have the same misallocation/wealth redistribution effects and problems inflation has except in reverse."

So what?

It would seem to me deflation is the easiest thing to fight and politically beneficial;

PRINT MONEY.

Japan had been staving off deflation for years, most recently by printing money and this was actually heralded as "genius monetary policy" in The Economist no less.

Like to think I’m missing some gapping thing here, but I just can't see it.

Any central bankers out there?

You Can't Make This Up

I had the unfortunate experience of spending a year in a small Wisconsin town during my youth. And of course the stereotype is that it's a small Wisconsin town, they're all hicks, they drink beer and drive old pick up trucks.

But we have intellectually evolved here in the US to know that stereotypes aren't true. That stereotypes exist for no reason other than to promote bigotry, racism and prejudice. That there isn't a seed, an ounce, a kernel of truth to the stereotypes out there and if you categorize people based on stereotypes you are a racist/bigot/homphobe/sexist, etc.

Yeah right.

Whilst Studying Ethanol

So I'm looking at an ethanol plant, which obviously necessitates a fair amount of economic research, particularly commodity pricing.

However, during my research I happened upon an interesting little chart that highlights the common refrain, "well, if there weren't so many rules and regulations about detergents, additives, etc. on gas, then (fill in state here)___________ wouldn't have such high gas prices."

Not a perfect correlation, but it does seem the Left and East Coasts bring it upon themselves. And if memory serves me correctly, wasn't it California and New York that not only experienced rolling black outs this recent spat of a heat wave this year, but suffered a severe black out a couple years back AND an energy crisis under Gray Davis?

Yeah, NIMBY all the way!

Spousal Bounty Hunters

It started out innocently enough. Bradman and myself were talking about something or other when all of the sudden the conversation took a weird wild tangent;

“I’ll pay $1,000 to whoever finds me my future wife.”

Tired of going to the clubs and bars (not that I really frequented them anyway) and tiring of courting ditz after drug-addict after psycho-path after spoiled brat daddy’s girl, dating has quickly gone from something that would put you on cloud nine for a week when you were 16 to a chore you abhor by the age of 31. And instead of having that giddy optimistic feeling of (what was that thing called again….ummm…OH YEAH) hope, now I find myself asking, “OK, what the hell is going to be wrong with this one.” Thus, without any rational economic thinking, I just blurted out, “Look, I’ll pay you or anybody who finds me my wife $1,000.”

But the more I thought about this idea, the more I realized this was genius. Outsourcing your dating to other people. And not just one person, but allowing the competitive free market to work for you by just posting a bounty and letting other people vie for the money. This would not only free you from the financial burden of going out and the expenses of dating, but would also free up your time to allow you to pursue whatever pursuits you desire. You could play video games all day, work out, swim. A compelling economic argument exists that you could work instead, thereby earning more than the $1,000.

Enthralled by this idea, I was more than willing to pay Brad, or anybody else for that matter, the $1,000 bounty for finding me a spouse.

But Brad is a greedy bastard.

Brad pointed out that;

$1,000 is a one time fee. There is not much economic incentive to go hit the pavement, let a lone poke around when the “benefits of marriage” would arguably be more than one year.
Therefore he should get “retaining fees” or “royalties” annually.

Being the economist, I concurred. Not only should the bounty hunter be rewarded, but this would tie his/her financial incentives in with my long term marriage incentives. For without annual retaining fees, the bounty hunter may have the incentive to just grab any ol’ person that can put on a good game for a year, get married, and then make my life hell for the next 30 years. Thus, I proposed a sliding scale compensation scheme.

Each year the bounty hunter’s royalty would be based on the level of “happiness” I would have with my marriage. This would be rated on a scale of 1-10. 1 good, 10 bad and 5 being average. If the marriage scored anywhere between 1-5 then the spousal bounty hunter would receive no royalties. However, if it was rated 6 or higher, the following compensation would be paid out;

6 – I might make it to year 2 - $100
7 – I’m reasonably happy with my wife - $200
8 – Wow, I kind of still actually like my wife and enjoy spending time with here, GOOD JOB BRAD! - $300
9 – DAMN! Life is ACTUALLY BETTER WITH HER! This is a rare woman indeed! - $400
10 – She serves me martini’s while in French Maid lingerie, reads The Economist, does not want children, and makes better charts that I” - $500

All good and well, but what incase of divorce? Divorce would be an obvious failure on the part of the spousal bounty hunter. Thus I proposed that if I were to get divorced, Brad would have to pay me $2,000 AND $2,000 towards lawyers fees.

Then the cynical Andrew L came in and suggested this was just an elaborate scheme to swindle $1,000 from Brad. As if I’d go through the hell of being married for one year for a cheap grand.

But that was another point to all this. The original $1,000. Was that the true economic price that somebody would be willing to pay? Would be enough to incentive enough people to look. So I asked around.

I asked my producer who said, “no way, not in a million years for only $1,000.”

I asked my best friend, who presumably would just do me the favor of setting me up without financial recompense, “no way, not in a million years for only $1,000.”

I asked myself if I would look around if somebody paid me a $1,000. Hell no, it wasn’t worth the time.

It seems that it is already well known what a hideous waste of precious time and resources this is, let alone a lot of my friends are already currently pissing away their resources on this futile pursuit. A mere $1,000 is not going to incentive them to bother looking.

So I went and did what all economists try to do but what efficient markets end up doing for us anyway; estimate the price of things that are not estimatible, but we’ll give it a go anyway because an estimate must be concocted.

And based on the projected total outlays for dating and courtship, assuming the average age one gets married, prorating one’s time at the market wage and discounting it to today’s value I came up with a rough estimate of $44,420. ie- you are going to spend $44,420 in time and money on chasing down your spouse and should be the economic price you are willing to pay to find somebody else out there thereby freeing up your life to pursue other pursuits.

Of course, just like Brad, I am a cheap bastard. That’s the costs to me, that doesn’t mean I can’t tender the offer to the public and let the forces of competition whittle away at the price. Besides, that’s the whole idea of outsourcing; specialists can do it better and cheaper than what I can. Furthermore, I should be paid for my financial innovation and genius and being the first to market with this idea.

Alas, I will gladly pay whoever finds me my spouse $5,000, without any of the complicated “retainer fees/divorce penalties” proposed by Brad. Just a straight flat fee of $5,000.

And now that I’ve effectively outsourced that heinous burden, you’ll excuse me whilst I no longer go to a bar or approach a girl ever again and pursue life’s pursuits that interest me. Ahhh, the life of an economist.

A Very Happy 10 Year Anniversary for Welfare Reform

I've always said,

"If you pay people not to work, guess what, they won't."

And it was with much anger and ballyhoo that the left said welfare reform in 1996 would bring about Great Depression levels of poverty and children would die and have to eat each other's feces to survive.

Well, not only has billions of wealth been produced and millions of people's self-esteem been bolstered, welfare cases have gone down.


Now if we could only force the parasites at AARP to follow the same high standards of our poor.

NEWS FLASH!!! WORLD'S TWO DUMBEST WOMEN FOUND!

So I don't read the paper. As I've said before, the paper, is for old people who want to be told what to think and how to feel. But there was a copy of the Pioneer Press on the table in the atrium and I couldn't help but notice the headline;

"CHICAGO COUNCIL OKs LIVING WAGE"

What seems to have happened is that Chicago's city council, in all of its wisdom, decided to pass a law requiring employers beyond a certain size to pay $10/hr minimum wage and $3/hr in health benefits.

The purpose in this I presume is to provide the workers of Chicago a living wage.

So riddle me this, riddle me that aspiring and junior deputy economists, WHAT IS THE EFFECT THIS NEW LAW GOING TO HAVE ON CHICAGO'S LABOR MARKET???!!!?!!!?

One doesn't have to be a U of Chicago grad student to realize that companies will just not set up shop in the first place in Chicago, IRONICALLY HAVING THE REVERSE EFFECT OF WHAT WAS INTENDED BY THE IDIOTS IN THE CHICAGO CITY COUNCIL!!!

Again, it seems the parasite has killed off its host and not realized it and in doing so has condemned itself. For while it may be grand that wages are now higher, unfortunately, this will deter companies and potential employers from conducting business in Chicago, and thus THERE WILL BE NO FREAKING JOBS, let alone ones that pay $10/hr. Furthermore, this will contribute to the divide between rich and poor in Chicago as now the only businesses that will set up shop are those that need specialized labor and would have to pay about $10/hr anyway, and thereby denied unskilled and presumably poor labor any employment prospects.

But what I get a kick out of the most is the response of those useful idiots who failed to understand this basic economic concept of the labor market. These morons who don't realize their jobs are gone. These idiots who think 0 jobs at $10 is better than 50,000 jobs at $7 or $8. What is their response?

Jubilation;



U of Chicago graduates, they are not.

The Best Economic Sites

Hey all!

So I've been asked to compile a list of sites that are the "best" for researching and studying economics.

Now, if you're like me, you found yourself a bevy of sites, and if those sites suit your purpose, you don't really go out and explore or look around for additional sites. And while I may have a slightly broader list than most, I'd be curious if any of you aspiring, deputy or real-life economists out there could recommend your favorites.

Thus far, some of the key ones off the top of my head are;

www.oecd.org

www.ilo.org

www.bls.gov

www.bea.gov

www.stlouisfed.org

www.nationmaster.com

www.economagic.com

www.transparency.org

www.economist.com

http://origin.www.gpoaccess.gov/usbudget/

Any others I'd really appreciate!

When Oil Prices Crash

So one of the radio show hosts' passion is ethanol. And not that I'm not interested in it, but it's not necessarily a forte or a particular interest of mine.

That is until my daytime gig required I analyze an ethanol plant as a prospective investment.

Now, truthfully, I couldn't care less about the ethanol deal. Yeah, I'm sure it's interesting, but as far as I can tell, oil has to be pretty darn high to make ethanol economic WITHOUT the subsidies.

And that's my whole point.

It's only when oil is in the nose-bleed section does ethanol (among other alternative fuels) ever become addressed or contemplated or make the news. Of course oil doesn't remain in the nose-bleed section forever. And if/when any one of the following happens;

1. The Mideast settles down, grows up and instead of killing people to get to Allah they find out they can make a tidy living pumping oil
2. A new large deposit of oil is found
3. The US goes into recession thereby dropping demand for oil
4. China grows only at 7% GDP instead of 12%!
5. We build some refineries

Interest and demand for these alternative fuels are going to tank as the price of oil is going to tank (bringing ethanol prices with it) and thus go back to being once again the fuel of choice;



And while I may lament the loss of ethanol for a discussion topic, when oil tanks (which it will), there will be a much more interesting topic in its place;

How the hell will Hugo Chavez stay in power without his oil money?

Israeli Approach Versus Kofi Approach

So it took the Israeli's 2 weeks of ass kicking and wreaking revenge to get something that Kofi hasn't been able to do in 6 years of pussy-footing-puppy-talk with terrorists;

Get the terrorists to do capitulate

Kind of reminds me of the mother versus father approach.

Mother approach; "Oh please stop beating up your brother. That's not nice. Oh, think of what you're doing. Please be rational. I'll give you a cookie if you stop peeing on the floor. You don't want me to think about letting you know that I might be contemplating maybe asking you to perhaps go to your room, do you?"

Father approach; "WHACK!!!!!" Do that again and I'll beat you effing senseless again!

I Should Clean More Often

Cleaning has always been a paradox for me. If it were just up to me, I’d do what I do the majority of the time;

Clean up ONLY the biological messes.

ie-I’ll clean the bathroom, wash the dishes, take out the garbage etc., anything that will grow germs, mold and so forth, but I have a hard time finding the rationale for picking up the place, or putting away my video games, organizing that pile of papers, or picking up my clothes, let alone that pointless evil brainwashing process foisted upon us by women; folding them.

These objects are hurting no one, laying there on the floor. They are innocent. They are not spewing disease and fermenting infectious germs like say, children. Thus, I say leave the non-bacterial stuff alone and clean up only what truly matters.

Alas, while these are one of the many benefits of bachelorhood, there comes the time where I unfortunately must clean BEYOND my standards and that is anytime I have the prospect for a date.

Notice, I said "prospect." For we all know that just because a girl says yes to a date, doesn’t mean you’re actually going on it (thus prompting me to come up with the Theory of 505025). But regardless of the probability that you’re actually going to go out on a date, bachelors have to assume that you are going out on the date.

And not only are you going out on the date, but you must also assume the girl will have poor judgement, and therefore you might get lucky and she might actually go home with you, thereby leaving you no option but to fully clean the bachelor pad.

And that is the paradox.

Is the probability that you are actually going to score with a chick worth the AT MINIMUM 4 HOURS of unnecessary cleaning?

The short answer is no, but again it is the only bet you can make, thus you have no choice.
So you spend the next 4 hours cleaning your house head to toe. And based on statistics, 78% of the time it will be pointless, because girls (at least in Minnesota, be curious about other states/countries) bail out at the last minute or somehow fail to show up 78% of the time. And upon further thought, it’s even less likely than that, in that it’s only about 5% of the time will the girl actually see the inside of your house.

However, as much as I’d like to say that it ends there, it does not. For while it is most certainly likely a waste of your time to clean the house, you LITERALLY HAVE NO OPTION WHEN IT COMES TO CLEANING YOUR CAR!

I don’t know about you, but I use my car as kind of a separate, off-site mobile storage unit. Why rent some place to store my excess wares when I have a perfectly good automobile trunk. And if you don’t have children and look in the owners manual of your car, you’ll see that the backseat automatically defaults to "Extra Storage Space for Your Crap."

Unfortunately, women don’t see the economic genius in using all storage space available to you, so unless she’s picking you up or you’re biking over to her place, you get to clean the car.
Here is where certainly the 78% Bail Out Ratio becomes tedious and annoying as all hell. Assuming you not only clean out the car, but also wash and wax it, as well as Windex the interior, you at minimum will spend 1.5 hours on that car. Add that to the 4 hours you spend cleaning out the house, you’ve now spent 5.5 hours in total cleaning.

This unspoken opportunity cost is rarely considered when budgeting yourself for a date. If you take 5.5 hours and multiply it by your hourly wage at work, it will provide some insight as to just how truly costly dating is and that’s assuming you’re going on the date.

Fortunately, there is a solution, and your Captain Capitalism has found it.

For those aspiring Male economists, we all know that women do not like to be chased.

Actually, let me rephrase that;

We have no freaking clue what women like.

But we do know when we chase them or show any interest in them, they do not have any interest in us. However, when we ignore them and act indifferent to them, then we need sticks and RPG’s to keep them away.

Thus, fellow Economists of the Bachelortude Order, I propose that for the first date you do not pick them up, but rather meet them at the venue or location of the date. This not gives you the air of indifference to them, thereby making you look irresistible in their feminine eyes, but it also alleviates us of the responsibility of cleaning the car since we will not be picking them up.

Furthermore, should things go so well that there might be the potential for a little smoochy-smooch, then I suggest you insist on going to her place.

This alleviates you of the responsibility of cleaning the house.

If you follow these rules, I estimate this will save you 5.5 hours worth of labor, which translates into $88 at average market wages.

However, for all the drawbacks of unnecessary cleaning, I must admit today, I’m glad I am cleaning the place head to toe in preparation of selling the house. For not only did I unearth those two old charts from The Economist, but also this political cartoon.

It’s 2 years old, but I’d still like to point out where 2 years of negotiations and warm fuzzy puppy talk with the Iranians have gotten us.

The Baby Boomer Melt Down

I've often warned people about investing in the US securities markets as a rather large side effect of designating stocks as the "bona fide vehicle for retirement" via 401k/IRA and other retirement programs is that this floods the securities markets with money, thereby artificially driving up prices, only inevitably to come down when the Baby Boomers sell out of their equity positions thereby driving stock prices (and with the presumable switch to fixed income, interest rates too) down.

So I found it interesting when I was cleaning out the house in preparation to move out of the crap hole that is known as the "city" and into those boring, yet low crime and low tax suburbs a couple articles from The Economist I had set aside.

Dated by about 2-3 years, the charts are phenomenal and support my theory that US stock prices are being driven more by retirement cash flows than corporate profits;


Also of concern is the larger and larger percentage the financial sector accounts for in market capitalization, increasing 5 fold since 1980.



But fear not. I'm sure, just like Dotcoms....and Tulip Bulbs...and Beanie Babies...and the South Seas Company...and Indonesia...and the Housing Bubble we're in now, I'm sure, I'M ABSOLUTELY SURE THIS TIME I'M WRONG!

China never looked so good.

My Archrival in Charts

This Calculated Risk fellow has a fair amount of decent charts. I'm somewhat concerned because how else am I supposed to attract the ladies when somebody out there seemingly might have just as good of charts as me????

Anyway, here's one that was BROUGHT to my attention!

I concur with the implication that a recession is on the way.

Fortunately, it will only affect those stupid enough to finance their houses with ARMS or Negative Amortization mortgages.

A Connection???

It's always been posed that women make less than men because of sexism.

Of course, why would it be any other way? I mean there certainly couldn't be any sociological or demographic reasons for it. Right? I mean, men are evil and oppressive, end of story, now increase my pay you sexist bastard!

Of course there are those that would contest otherwise. Some would contest that it's because of the biological fact that women get pregnant whereas men don't. Some suggest that when you account for degree, education and continual experience, there is no difference. I've been bold enough to suggest that a larger factor in this is that women tend to major in subjects that won't get them jobs, or at least high paying ones.

Regardless women have been catching up.



But I don't think it has anything to do with measures taken by the hyphenating-name/60's-70's/baby boomer crowd and their gender-equalizing legislation. It could be, I don't know, something as simple as women are having less kids and thus have more time for careers (that and men's income hasn't been increasing as fast)?


It's crazy how complicated this economics schtick it.

Regardless, I will point out one final thing;

I find it utterly ironic that data on "births" and children are found at the Center for Disease Control.

How appropriate.

Join Us for The Economics Supper Club!

Hey, it's going to be that time of the week again.

Time to pour yourself a cocktail and tune in to The Economics Supper Club!

The Station is AM 1500 KSTP

The Time is 1-3PM CENTRAL STANDARD

The phone numbers are 651-646-8255 and 1-877-615-1500

And you can listen online here

On a side note, this chart might come in handy. Will be talking about how more and more Minnesota students (and students in general) are opting to major in crap,...err... I'm sorry, I meant to say, "the social sciences and art." I'll then point out that maybe, just MAYBE, Asians make more than anybody else in the country because they emphasize the sciences. But what the heck do I know? I'm just an economist;


Regardless, be sure to tune in!

Time is Money...Literally

I found this interesting. "HOURS" is now officially a currency. Be curious to see if there was some room for arbitrage in tradnig HOURS versus the dollar;

http://www.hourexchange.org/drupal/node/5

HA HA HA HA HAAAAAA!

http://www.thesun.co.uk/article/0,,2-2006330629,00.html

How We Pay for Health Care

New report out from the OECD. Found a chart there that was pretty interesting. Shows us how we pay for our health care be it government spending, private health insurance, out of pocket, etc.

Enjoy!

The Law of Supply...and More Supply

I never really credit home builders as savvy economists.

I know of one project in a small Minnesota town where the population is 2,200 people, and the developer wants to put in 115 MULTI-FAMILY UNITS!!!

Just assuming 2 dwellings per unit, that means this guy actually thinks the population is going to grow by 25% in 3 years...and that they're all going to want crappy, cookie cutting side to side town homes.

Of course, no study was done to see if demand would actually meet or exceed supply, and home builders just keep on building assuming it will always sell.

Well, aside from high interest rates there's another factor affect/driving housing prices lower; a glut o' supply.

We have record levels of inventory of housing/houses for sale;



And this was an interesting little chart I found, you can read the description below;


Now, if my economic spidey senses are correct, they tell me that when supply overly exceeds demand something happens to prices. Unforutnately I went to the public schools, so this is a difficult one for me, but I'm guessing, I don't know, maybe they're ummmm going down????

Like I Said, 2016

China will have a larger economy than the US.

http://www.ft.com/cms/s/e0a7397e-1613-11db-9950-0000779e2340.html