The Captain Officially Endorses Walter E Williams for President

Unfortunately, he will not run.

(This post made just to depress Mahan and others about what could have been possible had the nation just studied up on a little bit of economics)

Just How Much Sub Prime Garbage Was There?

Trillions and trillions of dollars!

Again, because of the sheer size of this stupidity I will find it hard to believe the economy doesn't at least slow down drastically.

I Predict She Will Fail

Barring some truly genuine independent thinking, Christina Kirchner will continue the failed policies of her husband, worsen the already deteriorating economic fundamentals of Argentina,
and further cement that nepotism and cronyism are in general bad for societies.

I know everybody is excited because of the presupposition that if Christina can win, then so too can Hillary, but when we're all done with the warm fuzzies feelings and ready to look at people critically, especially when they're in important positions of power such as presidents and their decisions affect millions of normal every day folk, then maybe we can take off the rose colored glasses, absolve ourselves of sexism, overlook the fact they're females (and NOT Margaret Thatchers by any stretch of the imagination) and the "gee shucks howdy wouldn't it be swell if we had a female president" and instead treat them in a truly non-sexist, non-discriminatory fashion and ask "Gee, shucks howdy, will they really lead and help out our country or are they just riding on the coat tails of their husbands?" then I think both countries might just benefit.

Sadly I do not credit either population (Argentinians or Americans) with the intellectual fortitude and independent thinking to put ahead the idealistic desire to have the first female president ahead of their;

1. Ability to lead a country
2. Their policies and their ramifications for that country
3. The inevitable outcome, progress or lack thereof due to their election

Even if it would be on the whole, a generally positive and frankly interesting thing to have a first female president.

Thus, I predict, more so in Argentina's case than America's, Christina will prove to be more of a celebrity than an effective statesman, falling far short of a true genuine leader like Margaret Thatcher. And should Hillary get elected president, I predict the same.

For it isn't about sex or gender. That is key to understand. The key to the success of a nation and its progress is the policies that are implemented, regardless of the gender, sex, religion or race of the person implementing them. That is why I'm betting Christina will fail and Hillary would should she get elected. And why I lament the loss of Condi Rice or Walter E Williams to consider running for president. Christina will continue the policies of expansionary and reckless fiscal policy of Nestor, promise everything to everyone, and hope to high heaven commodity prices remain high so Argentina's economy can afford her vote-bribing promises, only to have it inevitably collapse like it did in 1999.

Regardless, cripes, could you imagine the fun and just outright pride that would be rejuvinated in America should Walter E Williams become "President Williams?" I might actually tune into presidential speeches then! I'll take a Walter E/Condi ticket over Hillary/Edwards any day.

Sadly it will not happen.

For the Last Time, MORE MONEY DOES NOT EQUAL BETTER SCHOOLS!

It just equals a higher tax bill;

How Far Will Housing Prices Fall?

I often get asked "How far will housing prices fall?"

And I say "about 25%."

The reason I say that is because, unlike pretty much every other estimate I've seen that speculates on the future drop in housing prices, is that I actually have some research that would back it up. And that research is based in the simple concept of house price to rents or house price to incomes. Meaning, that housing prices tend to stay withing a certain multiple of the rents that could be plausibly be gotten from renting out that house or the incomes of people that buy the house.

Historically, houses have "traded" at a multiple of 17 times the rent they could have been rented out for. However, with the new and creative financing methods, allowing people who should have never been loaned money in the first place to (as I like to say) "rent their house from the bank" this artificially and temporarily increased demand for housing, driving the average house price to rents to 30. This would imply a nearly 45% devaluation in the future, but not all that increase was due to fleeting ARM and interest only loans. Some of it was due to long term interest rates dropping and therefore the price increase would be a bit more sticky on the way down, once the sub prime mess is cleansed from the system.


Similarly is house price to incomes. Incomes being the median income of the average US Joe. Normally houses traded at around 3.25 times a person's median income, jumping to nearly 4.75. This implies a nearly 33% drop in housing prices must occur in order to come back in line with historical averages. And seeing housing has already dropped 5%, I'm thinking another 25% would do the trick.

I'm just wondering if those banks, in all of their wisdom and genius, can handle a 25% drop in value of their collateral...actually, I don't wonder.

Remittances as a Percent of GDP

I found it interesting that some countries are so poorly managed that those people who have emigrated from those countries are able to supply nearly or over a third of the countries' GDP through remittances.

That being said, remittances are supremely superior to foreign aid. The money is sent directly to the people, directly sent to the market, needn't go through a bureaucracy such as the UN and thus actually might get something done.

Chinese P/E Ratios

They're getting kinda pricey in China.

The debate is whether you suffer lousy future economic growth, declining corporate taxes, recession, increasing taxes under pressure from social security and pay a P/E of 16 for the current average American firm, or do you pay a P/E of 60 for a firm in a country with 12% RGDP growth, no debt, increasing labor productivity, AND a lower corporate tax rate in "communist" China.

Economic OUCH!

Talk about an economic rude awakening!

Chicks Dig Me, I Contribute to GDP

I was discussing with my friends the other day, and the topic of conversation had turned to charity. They accused me of being a cold hearted man and that I probably never contributed to charity once in my life.

To which I responded, "Hey, I contribute to charity. I contribute to GDP."

Since then I have referred to "going to work" as "I'm contributing to GDP" for I think it sounds better and it impresses chicks.

For example;

Girl - "What are you doing Wednesday night?"

Me - "I'M WORKING."

Girl - "Oh, that's too bad."

vs.

Girl - "What are you doing Wednesday night?"

Me - "Oh, I'd love to join you, but I'm contributing to GDP that night."

Girl - "Awwww! Wow, you're so kind and sweet and caring! Let's make out!"

Totally happens like that all the time.

In any case, I thought the phrase might make for a good shirt and was kicking around the idea of having the following just on a white t-shirt;


Of course I would charge enough to cover my expenses and include a profit, but I guarantee all of you that 100% of the proceeds would go to the US National Income Accounts and help me contribute to GDP. There's a shop nearby I think I can get them made for $7-8 a shot, with shipping, I don't know, around $15 a piece I'd surmise. Anybody interested?

Last Chance!

Hey, it's the last chance for all Junior, Deputy, Aspiring, Official or otherwise economists to send me photos they want to be included in Major Swanson's photo album.

Major Swanson is currently stationed in Iraq and since he is a member of the blogging world I thought it'd be nice to have a whole sh!tload of complete strangers send in pictures that appreciate his service so we could make him and his outfit a nice gift.

E-mail them to me at captcapitalism@yahoo.com, REMEMBER TO COPY AND PASTE, it is CAPTcapitalism, not CAPTAINcapitalism.

For the French Protestors

I made this post quite some time ago when the students protested the French government passing legislation that their students pay for their own lives. Given the resurgence of protests because (OH GASP) the French taxpayers shouldn't pay for livelong retirement for lazy government workers, I thought it apprapoe to remind them of their own idiocy.

Are you a hard-working business owner looking to expand overseas?

Looking to tap that lucrative Euro market and it's potential 500 million customers?

Do you need labor that is not only loyal, but highly trained and skilled?

then...

THINK FRANCE!

Yes, France, where the future hard-working leaders and workers of France pummel journalists for their camera.

THINK FRANCE!

Where future workers know how vital it is for an economy to distribute goods, services, products and labor efficiently

THINK FRANCE!

Where your future employees will hurl crap at you

THINK FRANCE!

Where the youth are trained to be mature, respectable representatives of your company

Don't go to other countries where their labor is so predictable and cheap.

Go to where all spoiled brat American girls who have not a freaking clue as to how the real world works and people with not the slightest ounce of economic sense want to go!

THINK FRANCE!!!

Hip Hop Has Nothing on the Old School

First Avenue is not just a street in Minneapolis, but also a dance hall. And to date myself (as well as dispel the notion economists are nerdy geeky guys who stay indoors all day) at First Avenue I saw;

Gwar
KMFDM

and

the Revolting Cocks.

But First Avenue is also just hands down the best dance club in the Twin Cities, I might even say the US. And I remember in my college days watching on the big screen there while dancing to the Beastie Boys they had thrown up some old 1940's dance film of this tap dancing duo. Don't know why, usually they just threw up some kind of music video, but this time they threw up this dancing duo.

HANDS DOWN THE BEST DANCING I HAD EVER SEEN!

I asked around. Nobody knew who I was talking about. I soon forgot about my crusade to find it.

Until it occurred to me to check You Tube for it on my way back from dancing.

Here it is. You will NOT be let down;

The Nicolas Brothers in "Stormy Weather"

I just like to see the kings of Hip Hop pull off anything with 1/10th the level of this skill.

Want to Help Out People Being Foreclosed Upon? LOWER PROPERTY TAXES!

Minneapolis, as you've surmised, is like any other major city in the US in that there's a leftist core and pretty much all the wealth producers have escaped to the suburbs. Oh sure, some like me who detested the concept of suburbia with the latest in Ambercrombie and Fitch and trophy wives driving aimlessly in an urban assault vehicle, stayed in the city, insistent the culture and "realness" of city life made it worth the lefter leaning yard signs and the occasional towing of the car and continued to contribute to GDP. But after your place gets broken into, the cops give you 2 rolling stop tickets because they're bored and the city of Minneapolis jacks up your property taxes 300% in 6 years with no noticeable improvement in city services or schools, all of the sudden having the appetizer platter at Applebee's, wearing the latest in Ambercrombie and Fitch doesn't look so bad.

And so I fled.

But now, like in pretty much every other major city throughout the US, city council members are scrambling to secure votes in the next election by calling for some level of assistance in helping the unfortunate people in their city that are facing foreclosure. Some advocate "crisis lines" to help people figure out a way to avoid foreclosure. Others are advocating bail outs calling on state and federal tax payers to bail their citizens out.

But here's a crazy idea I had. How about you lower the freaking property taxes? In many cases the reason people are facing foreclosure is that their ARM has reset and now they must shell out an additional $50-$100 a month (I'm not kidding, I've heard and read stories where they can't afford an extra $50-$100 a month). Well if that's the case, and so many of these poor unfortunate home owners are at risk of losing their homes, why don't you lower the property taxes to help them out? That would probably do more to help them keep their home than a crisis line.

Beyond which, lowering property taxes will also help in another regard;

It will increase the value of homes in the city.

In increasing the property taxes, what cities have done is decreased the net rents that can be received from renting out the property. The supply and demand for apartments and rentals is more or less independent of property taxes. Thus market rents are set. So if property taxes are increased, then the landlord must eat the extra costs. He can go ahead and try to increase rents to offset the increase in property taxes, but with so many affordable housing developments, chances are he's just going to have to eat it.

With these lower profits, this decreases the market value of a house or rental property. One of the three major valuation techniques used by appraisers is income approach, looking at what cash flows the property will provide. If property taxes were to be lowered, this would increase the net cash flow provided to the owner, and thus the appraised value of the property.

Of course the likelihood of this happening is zero. Most major cities' city councils are far left leaning, even Minneapolis has a Green party member if I recall correctly. And, if you were foolish enough like me to contact your city council member in the hopes of getting your property taxes lowered, you are always told there's not enough money and the reason your property taxes went up was through some weird, tangled logic that inevitably blamed the evil Republicans at the state. This is because democrats, socialists and other lefter leaning sorts stay in power by raising taxes on a minority and transferring the wealth to the majority effectively bribing the masses. So they are not going to lower taxes, even if it is on the poorer folk, because it's not in their nature. if anything, they're going to raise taxes on the rich and then try to provide some government service or program to bail these people out.

Thus, it seems time again to bring out what the left hates the most, and that is facts and statistics.

According to the City of Minneapolis property taxes have gone up 60% since 2000. Inflation however, has only gone up 20%.


Right off the bat you can tell, mathematically, that there is enough room to cut property taxes and provide these people a little relief. Secondly, and albeit anecdotally, instances of the city blowing money on a $200 million library, who knows how much on "green roof tops," and I recall a "sculpture" which was nothing more than a cube I saw in the city park that after some investigation I found cost $50,000 (If anybody wants me to make a cube, I'll cut them a deal for $30,000. We'll call them "Captain's Cubes" and I'll sign them and you can put them in parks or in your yard or something). Regardless, as always there is plenty of fat to trim from the city budget and pass onto the people.

The question is whether the council members are going to help out those unfortunately facing foreclosure with real help or whether they're going just help themselves.

I'm just happy I'm in the burbs.

Go Rush Go

There's not enough paper towels in the world to wipe the egg off the democrats face on this one.

He Is Man Enough to Handle This

Which is what makes him the first real FrenchMAN in a long time.

Great Minds Think Alike

David, for some reason, thought that I would not post his graph or chart up here as it would be too assuming of me that I would. When one must understand that Captaincapitalism.blogspot.com is all about three simple things;

1. Charts
2. Capitalism
3. Selma Hayek

So, please, people, send me your charts. I am totally for posting new charts you come up with. Even The Economist followed my lead because I'm such a trend setter;

www.economist.com/charts

So, you will visit David and his identical chart. For when different people come up with that same data or chart, then you know there's something to it.

Adios Joey

So long, Joey. Have a drink for us with Frank and the crew.

Dividends Ultimately are the Only Thing that Matter

I do a seminar on how to research stocks and one of the first lessons I try to convey to my students is that the reason you invest in a company is NOT the fact that you will try to sell it for more down the road, but that you should really invest in a company for dividends.

For ultimately, that is all a company will ever pay until the point it is either sold or goes bankrupt. Therefore dividends are the only cash flow provided by the company over the course of its life and are therefore the real driver of its value.

So a while ago I had pulled some data to get the average dividend yield for the S&P 500 from Globalfindata.com, and I'm glad I did because they started charging for it when I went to look for an update this morning. Here's my old chart;



Noticed that back in the Great Depression, based on dividend yield stocks were a steal, at one point dividends providing a near 10% of the firm's stock price. But with the nearly 20 year bull market stocks increased at a rate faster than dividends, driving the dividend yield to its historic low of just 1.1%. So roughly, based on the amount of dividends the firm was paying, you'd have to wait almost 100 years to break even.

But that was at the peak of Dotcom Mania and I wondered if the dividend yield, like the S&P 500's P/E ratio had recovered to more normal levels. This required I find more up to date data and found a data series going back to 1927, but then had to supplement it with an old Excel chart I had found (the source of which I did not notate so I don't remember where it came from, but nonetheless I assume it's legit);

And what a whopping recovery. Instead of realizing dividend return of 1.1% you can now expect a full 1.8% return! Seems the market is still partying like it's 1999.

Average Time Spent on the Job

The days of being a loyal, hard working blue collar man are long gone in the United States. With increasing wealth, rich parents for the rich kids, and the bevy of government programs for the poor kids, it's kind of hard to tolerate the pointy haired boss that seemingly every employer is hell bent on becoming. Thus, telling your boss to take this job and shove it is more common. However, I was surprised to see just how much longer people stay on the job in Europe than do their American cousins;



That being said, I'm surprised the average work length in the US is as high as 4 years. I would have guessed 2.

Two Sides to the P/E Ratio

People wonder how the stock market can do so well, when the housing market is doing so horribly. And the reason is simple; corporate earnings are doing great.

Corporate earnings as a percent of GDP have never been higher in recorded history.


These high profits have driven the P/E ratio down from their stratospheric levels to more sane ones that are more or less in line with historic averages.

However, while the majority of people focus on stock prices as the primary measure by which to determine whether markets are over valued, they forget P/E ratios are a double edged sword forgetting that earnings can also sway dramatically, quickly eroding price support to stocks. This is the true risk to the stock markets.

For while the housing market has yet to "infect" the rest of the economy, it will do its damnedest to. First to fall will be the financial sector. This is evidenced by the spate of earnings and write off troubles various financial institutions are having. And we're not talking the schleppy, b-movie firms. We're talking top shelf firms; Bear Sterns, UBS, even Merrill Lynch posted it's first loss since 2000. Nor are we talking US firms. Foreign firms were fed a line of bull when they bought up 17% of our worthless MBS's and now they're suffering the consequences.

The question is whether it will spill into the non-financial sector and drive down overall earnings thereby triggering a stock market crash. And while I think that is a very real possibility, allow me to point out a silver lining that might just save us.

In a weird and perverted twist of economics, Americans' utter disdain for any measure of fiscal discipline may save them. For in spending more than they make, they've essentially tanked the US dollar against practically all other currencies.

However, corporate America has been wise, investing more than most other countries overseas, and therefore have diversified themselves into other markets, inoculating themselves against a downfall here. Plus, while on the domestic front things may collapse, profits made in foreign countries, denominated in foreign currencies may bolster profits here as they're remitted back home and converted into dollars. Additionally, a weak dollar may boost foreign demand for US assets and firms, such as China's sovereign wealth fund, putting upward pressure on stock prices.

Of course I doubt a favorable exchange rate and increased foreign demand for US stocks will solely prevent the stock market from at least some kind of correction, but it may soften the blow.