The Improving Economic Picture: From 25% to 95% Odds Since March for Positive Q3 Real GDP Growth

Back in early March, as the U.S. and global stock markets were bottoming out and the general economic outlook for the U.S. was pretty uncertain, the odds of third quarter U.S. real GDP growth being positive was only about 25%, according to futures trading on Intrade. As the economic picture has gradually and significantly improved over the last six months, the odds of positive economic growth in Q3 (which ends next Wednesday) have increased to 95% (see graph above, click to enlarge).

Michigan's Babysitting Gestapo

MIDDLEVILLE, MI - A West Michigan woman says the state is threatening her with fines and possibly jail time for babysitting her neighbors' children. Lisa Snyder of Middleville (pictured above) says her neighborhood school bus stop is right in front of her home. It arrives after her neighbors need to be at work, so she watches three of their children for 15-40 minutes until the bus comes.

The Department of Human Services received a complaint that Snyder was operating an illegal child care home. DHS contacted Snyder and told her to get licensed, stop watching her neighbors' kids, or face the consequences.

"It's ridiculous." says Snyder. "We are friends helping friends!" She added that she accepts no money for babysitting. Mindy Rose, who leaves her 5-year-old with Snyder, agrees. "She's a friend... I trust her."

HT: Jonathan Turley

MP: What happened to all of that talk about how "It Takes A Village" to raise a child?

Everything's For Sale. Sometimes for Just $20

There is almost nothing on earth that cannot be had for a price. The question is, what is that price? And the answer is twenty dollars.

I've always wanted to test myself, to establish the weight and worth of a twenty in the world. So last month I took two grand in twenties, rolled them up, and left for New York. I was going to spend three days greasing palms from gate to gate and see what it got me. This is about as much Zen as I can muster: Stuff your pockets full of twenties and doors will open by themselves.

From the article "The $20 Theory of the Universe," published in Esquire in 2003.

Unemployed? Try Working for Cash

From the Marketplace story "Can't Find Work? Try Looking for Cash."

Michael: I'm getting $272 a week [in unemployment benefits]. Which is just, bare bones. It's so bad that at one time I was going to the food bank. And, you know when you're really hungry and when you're facing eviction, you've got to do something.

Marketplace: So he started looking for work on the side. He found it pretty quickly.

Michael: So right now I have Craigslist open. And what I've done is I've opened three different tabs: I've opened free stuff, all gigs and all jobs.

Marketplace: He's found all sorts of work this way: software testing, landscaping, bouncing and lots of focus groups. All have paid cash. He says some weeks he's earned three times as much as his benefits check. Like everyone on unemployment, he's meant to report any earnings to his unemployment insurance office. Then they adjust his benefits down. So how does Michael answer the question, have you earned any money this week?

Michael: I opt to say, you know, no. I opt to say no, I have not. Because this is my own hard work, this is my own ingenuity, this is my own genius, and I am still looking for work every day.

MP: We hear a lot about how the official unemployment rate doesn't count those who are "underemployed" and doesn't count discouraged workers, and therefore we are underestimating the stress and pain in the labor market. However, those unemployed workers receiving unemployment compensation who are actually working for cash would offset some of the underestimation of the official jobless numbers.

America's Ridiculously Large $14T Economy

Click to enlarge.

Which economy is larger: the NYC metro area or India? San Francisco metro area or Argentina? Detroit or Israel? St. Louis or New Zealand? Baton Rouge or Guatemala? Davenport (IA) or Bolivia? Flint (MI) or Brunei? Palm Coast (FL) or Belize?

In all cases, the economies of those American cities are approximately the same size as the economies of the entire countries listed above, both measured by GDP in 2008 (GDP data here for U.S metro areas, GDP data here for countries). More than 100 U.S. cities are matched in the table above to countries that produced approximately the same amount of annual output in 2008.

We often lose sight of: a) how big the U.S. economy is, b) how productive American workers are, and c) how much we produce vs. other countries. After all, who can get their mind around $14 trillion, the size of the U.S. economy measured by GDP ($14,000,000,000,000)? Maybe this comparison of the GDP of U.S. metro areas to entire countries will help put the enormous size of the U.S. economy in some perspective.

Truck Tonnage Index Rose 2.1% in August, Follows 2.1% Increase in July, Reaches Six-Month High

ARLINGTON, VA — The American Trucking Associations’ (ATA) advance seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 2.1% in August, matching July’s increase of the same magnitude. The latest gain raised the SA index to 104.1, which was the best reading since February 2009. Compared with August 2008, SA tonnage fell 7.5%, which was the best year-over-year showing since November 2008.

ATA Chief Economist Bob Costello said that the latest increase was another positive sign for the industry. “The gains in tonnage during July and August reflect a growing economy and less of an overhang in inventories,” Costello noted. He is hopeful that the overall trend in truck tonnage during the months ahead will be upward; however, he acknowledged that the pace of increase will likely moderate from the cumulative 4.3% gain over the last two months. “While I am optimistic that the worst is behind us, most economic indicators, including industrial output and household spending, suggest freight tonnage will exhibit moderate, and probably inconsistent, growth in the months ahead."

Markets in Everything: Left-Handed Underpants

LONDON (Reuters) - A British store is launching a range of underpants for left-handed men, an innovation it says will save them both time and embarrassment in front of the porcelain. The new range, by UK-based Hom, will have a horizontal opening instead of a vertical slit accessed from the right-hand side, breaking a tradition that has lasted for 75 years.

Consumer Confidence at Highest Level Since January 2008, Largest 6-Month Gain in 15 Years

NEW YORK (Reuters) - U.S. consumer sentiment rose in late September to the highest since January 2008 as expectations of an economic rebound gathered momentum, a survey showed on Friday (see chart above). The data added to indications the economy is pulling out of a lengthy recession more powerfully than many analysts had expected a few months ago, although doubts persist about how much staying power the rebound may have.

The Reuters/University of Michigan Surveys of Consumers said its final index of sentiment for September rose to 73.5 from 65.7 in August. This was above economists' median expectation for a reading of 70.3, according to a Reuters poll.

MP: The 16.2 point increase in Consumer Sentiment from 57.3 in March to 73.5 in September of this year is the largest six-month gain in consumer confidence in 15 years, going all the way back to January of 1994, and it's the third biggest 6-month gain since 1990 (see chart below).

The Gallup Consumer Confidence Index is also at the highest level since January 2008, see chart below.

The Worst Economy Since…. the 1980s?

Read my full post here at the Enterprise Blog, based on the chart above.

Markets In Everything: The New Congruent Tie

APPLE VALLEY, MN. (WCCO) ― Eric Glennie, of Apple Valley, MN, came up with what he calls a "congruent tie," where the stripes of the knot go in the same direction as the rest of the tie (see picture above). For all the years that men have been wearing neckties, it seems no one has figured out how to get the stripes in the knot going the same direction as the rest of the tie...until now.

Eric Glennie, of Apple Valley, was tinkering around in his home after being laid off from his job in a trucking firm when he came up with the solution. The result is what he's calling the "congruent tie." "The stripes in the tie knot have always gone the wrong way," said Glennie. "I think it's over 100 years, so this is something that is totally unique, totally different. It could be a paradigm shift in menswear."

Watch video of a news report here about the congruent tie.

HT: Joyce Howe

Home Inventory Measure Falls to April 2007 Level

The best news in today's housing report from the National Association of Realtors on existing-home sales (data here) was that at the current sales rate (425,000 homes sold in August), it would take 8.5 months to sell off the current inventory of 3,622,000 homes, and this inventory measure is at the lowest level since April of 2007 (see chart above). A year ago August, the months supply of homes was 10.6, and had averaged more than 11 months in the four previous months, so there has been a significant improvement over the last year in the balance of homes available for sale relative to the demand.

Equity Activism Run Amok: Double Standards for Behavior and Race-Based Discipline in Tucson

The Tucson School board is calling for a two-tiered form of student discipline. One for Black and Hispanic students; one for everyone else.

With the goal of creating a "restorative school culture and climate" that conveys a "sense of belonging to all students," the board is insisting that its schools reduce its suspensions and expulsions of minority students to the point that the data reflect "no ethnic/racial disparities."

From the section of the 52-page plan titled "Restorative School Culture and Climate": "School data that show disparities in suspension/expulsion rates will be examined in detail for root causes. Special attention will be dedicated to data regarding African-American and Hispanic students."

The board approved creating an "Equity Team" that will oversee the plan to ensure "a commitment to social justice for all students." The happy-face edu-speak notwithstanding, what the Tucson Unified School District (TUSD) board of governors has approved this summer is a race-based system of discipline.

Offenses by students will be judged, and penalties meted out, depending on the student's hue. TUSD principals are being asked to set two standards of behavior for their students. Some behavior will be met with strict penalties; some will not. It all depends on the color of the student's skin. It is an invitation to chaos.

~Doug MacEachern writing in the Arizona Republic

Jobless Claims Fall to Lowest Level in 34 Weeks

Unemployment claims were reported today by the Department of Labor, showing that the 4-week moving average fell 11,000 to 553,500, the lowest level since late January, 34 weeks ago (see graph above). Weekly claims (4-week average) have fallen in 10 of the last 13 weeks.

25 Awesome Homeless Guy Signs

These days, being homeless is more competitive than ever. Only the most clever and creative signs are going to get people to let go of their precious spare change. This makes for some pretty awesome homeless dude signage.

Perry's Law: "Competition breeds competence."

Men: The New Second Sex in Higher Education

The charts above are based on new data recently released by the Council of Graduate Schools in its study “Graduate Enrollment and Degrees: 1998 to 2008,” showing how women have been making solid and steady gains in graduate degrees (both master's and doctoral) over the last ten years, in all disciplines, including engineering and physical sciences.

Please see my full post on the American Enterprise Institutes's Enterprise Blog.

Map of the Day: Where is McFarthest Spot in U.S.?

The map above is a visualization of the contiguous United States, colored by distance to the nearest McDonald’s, courtesy of Stephen Von Worley (via Felix Salmon):

For maximum McSparseness, we look westward, towards the deepest, darkest holes in our map: the barren deserts of central Nevada, the arid hills of southeastern Oregon, the rugged wilderness of Idaho’s Salmon River Mountains, and the conspicuous well of blackness on the high plains of northwestern South Dakota. There, in a patch of rolling grassland, loosely hemmed in by Bismarck, Dickinson, Pierre, and the greater Rapid City-Spearfish-Sturgis metropolitan area, we find our answer. Between the tiny Dakotan hamlets of Meadow and Glad Valley lies the McFarthest Spot: 107 miles distant from the nearest McDonald’s, as the crow flies, and 145 miles by car!

American Consumers Get Their Driving Mojo Back; Largest Monthly Travel Increase Since Jan. 2006

The chart above shows the percent change in U.S. traffic volume through July (from the same month in the previous year), in a report released today by the Federal Highway Adminstration (data and report here). After falling for 17 consecutive months starting in November 2007, traffic volume has increased in three of the last four months. The 2.3% July increase was the largest monthly gain since January 2006, and matches the 2.3% increase in October 2006.

The chart below shows traffic volume as a moving 12-month total, with a similar pattern to the percentage monthly increase above. After falling for 16 straight months going back to December 2007, the moving 12-month total has now increased in 3 out of the last 4 months to the highest level since last year.

MP: Another sign that the recession probably ended in June.

Part II: Betting on Progress and Technology

In recent years, natural gas producers in the United States have struggled, mostly in vain, to be taken more seriously in the energy world. Big oil companies like Exxon had concluded that natural gas reserves in the United States were not sufficiently abundant to warrant big investments in exploration and drilling. When small independent gas producers argued otherwise, they were often ridiculed.

But the natural gas folks now have numbers on their side due to new successes in getting gas out of shale rock. Geologists have always known that shale rock, often found in combination with coal and oil deposits, holds substantial amounts of natural gas. If a piece of shale rock is broken and lit with a match, it will actually burn for a few moments with a small flame.

The shale gas was previously considered unreachable, but advances in drilling techniques have changed that assessment. The result is a dramatic increase in estimated natural gas reserves. The Potential Gas Committee, loosely affiliated with the Colorado School of Mines, reported in June that natural gas reserves in the United States are actually 35% higher than believed just two years ago, and some geologists say even that estimate is too conservative.

"I used to say the nation is awash in natural gas," Hefner says. "Now I say we're drowning in it." (See price chart above, data here.)

Shale formations are deep underground — 6,000 feet or more — and the rock is relatively impermeable. Deep drilling is expensive, and in the past the amount of gas that could be reached was not considered sufficient to justify the cost. In recent years, however, gas producers expanded the use of "horizontal" drilling. After boring more than a mile below the Earth's surface to reach the shale layer, a drill operator will slowly "steer" the drill bit to one side, until it is heading sideways across the shale layer, thus achieving access to more of the shale than a traditional vertical well could provide (see chart above).

~National Public Radio, part 1 of 3-part series on natural gas. Part 2 available here, here's an excerpt:

In the energy world, Big Oil has long been the key player — with one notable exception: The natural gas business in the United States is dominated by small, independent companies. More than 80% of U.S. natural gas supplies are produced by companies with a market capitalization of less than $500 million. On average, these companies have only a dozen employees.

But their business is booming. New production techniques in recent years have enabled companies to extract natural gas from shale rock formations deep underground. As a result, estimates of accessible natural gas reserves have been revised dramatically upward. Small gas producers can justifiably take the credit for the transformation of their industry.

MP: What a great tribute to America's entrepreneurial spirit, the important role of small businesses for the U.S. economy, and a clear demonstration of how advances in technology and the invisible hand of the private sector are our most effective "energy policy."

Quote of the Day: Betting on Progress, Technology

The “Peak Oil’ers” tell us that there are no new “whale” oil finds to be found; that the drilling to find crude oil is too expensive and that further exploration is a waste of time. The problem is that they are wrong. As we like to say, the world did not stop using Whale Oil to light its lamps in the late 19th century; the world stopped using Whale Oil because its cost had gotten too high creating the “technology” needed to find a new source of energy, fossil fuels. Now, the technology involving seismic geology, and the technologies involving multiple drilling points from one initial hole in the ground, et al has succeeded in finding new, massive oil pools… most of which is now offshore where the finding is good and getting better.

Twenty five years ago, oil was not drilled for in water deeper than 600 feet. The platforms were not stable; the pipe too weak; the technology simply not extant. Now, however, oil drilling firms are comfortable drilling in water 6000 feet deep, and the huge new oil finds reported two weeks ago by Anadarko Petroleum found off the western coast of the African nation of Sierra Leone was drilled for and found in water that deep. Two years ago, Anadarko found another huge pool of oil in deep water off of the Cote d’Ivoire and Ghana. BP recently found a “whale” in deep waters in the Gulf of Mexico, and Petrobras continues to drill for and find huge new pools of crude off shore from Brazil in ever deeper water.

We tell the “Peak Oil-ers” to sit down and shut up, for they are wrong. They are bettors in favor of antiprogress… in stasis… and we are far more willing to bet in favor of progress, and of technology and of the eventual replacement of fossil fuels with something else entirely. Betting on progress has been the better of the bets to be made through history; we’ll go with for a while longer anyway.

~Dennis Gartman in today's The Gartman Letter (subscription required)

Emerging Markets Index Reaches New Yearly High

The MSCI Emerging Markets Index closed today at 922.31, reaching the highest level since September 2, 2008. Many of the emerging markets like Argentina, Brazil, India, Hong Kong and Taiwan are trading at the highest levels in more than a year.

Did You Know?

Watch the full video below (may take some time to load).



Link.

HT: Richard.

Volatility Index Falls to 1-Yr. Low, Bloomberg Financial Conditions Index Reaches New 2-Yr. High

The CBOE Volatility Index (^VIX) closed at 23.08 today, the lowest level in more than a year, since September 5, 2009 (see chart above).

The Bloomberg U.S. Financial Conditions Index reached a new record high for 2009, and closed at the highest level (-.50) since August 2007, more than two years ago (see chart below).

Real Lesson from Great Depression: Tax Damage

Arthur Laffer in today's Wall Street Journal ("Taxes, Depression, and Our Current Troubles") writes:

In 1930-31, during the Hoover administration and in the midst of an economic collapse, there was a very slight increase in tax rates on personal income at both the lowest and highest brackets. The corporate tax rate was also slightly increased to 12% from 11%. But beginning in 1932 the lowest personal income tax rate was raised to 4% from less than one-half of 1% while the highest rate was raised to 63% from 25% (see charts above). (That's not a misprint!) The corporate rate was raised to 13.75% from 12%. All sorts of Federal excise taxes too numerous to list were raised as well. The highest inheritance tax rate was also raised in 1932 to 45% from 20% and the gift tax was reinstituted with the highest rate set at 33.5%.

But the tax hikes didn't stop there. In 1934, during the Roosevelt administration, the highest estate tax rate was raised to 60% from 45% and raised again to 70% in 1935. The highest gift tax rate was raised to 45% in 1934 from 33.5% in 1933 and raised again to 52.5% in 1935. The highest corporate tax rate was raised to 15% in 1936 with a surtax on undistributed profits up to 27%. In 1936 the highest personal income tax rate was raised yet again to 79% from 63%—a stifling 216% increase in four years. Finally, in 1937 a 1% employer and a 1% employee tax was placed on all wages up to $3,000.

Because of the number of states and their diversity I'm going to aggregate all state and local taxes and express them as a percentage of GDP. This measure of state tax policy truly understates the state and local tax contribution to the tragedy we call the Great Depression, but I'm sure the reader will get the picture. In 1929, state and local taxes were 7.2% of GDP and then rose to 8.5%, 9.7% and 12.3% for the years 1930, '31 and '32 respectively.

The damage caused by high taxation during the Great Depression is the real lesson we should learn. A government simply cannot tax a country into prosperity. If there were one warning I'd give to all who will listen, it is that U.S. federal and state tax policies are on an economic crash trajectory today just as they were in the 1930s. Net legislated state-tax increases as a percentage of previous year tax receipts are at 3.1%, their highest level since 1991; the Bush tax cuts are set to expire in 2011; and additional taxes to pay for health-care and the proposed cap-and-trade scheme are on the horizon.

Richmond Fed Index: It's Over

Manufacturing activity in the central Atlantic region expanded for the fifth straight month in September, according to the Richmond Fed’s latest survey. All broad indicators—shipments, new orders and employment—landed in positive territory, with manufacturers noting their first increase in worker numbers since December 2007. Other indicators were mixed, however. Capacity utilization grew more slowly, while backlogs and vendor delivery times shrank. In addition, manufacturers reported slower growth in inventories.

Looking ahead, assessments for business prospects for the next six months were also generally more positive. Contacts at more firms anticipated that their new orders, backlogs, capacity utilization and capital expenditures would grow more quickly in the months ahead than they expected in August.

MP: The Richmond Fed Index been in positive territory for five consecutive months for the first time in three years (since April to September 2006).

History of Leading Indicators: The Recession's Over

Here's a long-term view of the monthly Index of Leading Economic Indicators back to 1972, covering the last six recessions. As the chart shows, each of the last five recessions has ended when the Leading Indicators have increased five months in a row, and history now suggests that the Great Recession is either ending, or is already over.

Quote of the Day: Thomas Sowell on Underdogs

One of the problems with trying to help underdogs, especially with government programs, is that they and everyone else start to think of them as underdogs, focusing on their problems rather than their opportunities. Thinking of themselves as underdogs can also dissipate their energies in resentments of others, rather than spending that energy making the most of their own possibilities.

~Thomas Sowell

The Distortionary Effects of Taxes and Regulations

Several times a month, Transit Connect vans from a Ford Motor Co. factory in Turkey roll off a ship here shiny and new, rear side windows gleaming, back seats firmly bolted to the floor. Their first stop in America is a low-slung, brick warehouse in Baltimore where those same windows, never squeegeed at a gas station, and seats, never touched by human backsides, are promptly ripped out. The fabric is shredded, the steel parts are broken down, and everything is sent off along with the glass to be recycled.

Workers cut out the rubber window seal with a special knife and popped out the glass using suction cups. The space is plugged with a metal panel that cures for 15 minutes before being tested outside for waterproofing. Another worker unhooked a rear seat belt as easily as he would pop the top off a soda bottle. Using a drill, he quickly unscrewed six bolts to free the seats. Workers at the other end dump the seats into cardboard boxes, which are hoisted onto an open tractor-trailer and shipped to Ohio. Ford says the shredded seat fabric and foam become landfill cover, while the steel is processed for other uses.

Reason? Find out here in the WSJ article "To Outfox the Chicken Tax, Ford Strips Its Own Vans," although you probably guess that it has nothing to do with economics and everything to do with politics. Thanks to Michael Kelly.

MP: This story perfectly illustrates why taxes and regulations are almost always distortionary: because people and companies can change their behavior to avoid or circumvent them. Other examples include free food on airlines to circumvent ticket price-fixing by the government, employer-sponsored health insurance to circumvent price/wage controls during WWII, free "stuff" (toasters, etc.) at banks in the 1960s and 1970s to avoid interest rate controls, etc.

Update: As Greg Mankiw points out, this story also illustrates the "deadweight loss" (loss of economic efficiency) of a tariff.

Lists

1. 10 Uncommonly clever economic indicators, from Forbes, e.g. the size of restaurant garbage piles.

2. The 15 Strangest Buildings of the World, including the one pictured above. Thanks to Joyce Howe.

LA Shipping Volume Increases 5 of the Last 6 Months for the First TIme Since Mid-2007

According to container statistics just released by the Port of Los Angeles, August shipping volume reached a 9-month high of 612,581 TEUs (20 foot equivalent units), the highest level since November of 2008 (see graph above). Additionally, the shipping volume from Los Angeles has increased in 5 out of the last six months, for the first time since the six-month period from April to September in 2007 (see shaded areas above).

Climate Reversal: Global Warming is Cooling Off

Calgary Herald - When a leading proponent for one point of view suddenly starts batting for the other side, it's usually newsworthy. So why was a speech last week by Professor Mojib Latif of Germany's Leibniz Institute not given more prominence?

Latif is one of the leading climate modellers in the world. He is the recipient of several international climate-study prizes and a lead author for the United Nations Intergovernmental Panel on Climate Change (IPCC). He has contributed significantly to the IPCC's last two five-year reports that have stated unequivocally that man-made greenhouse emissions are causing the planet to warm dangerously.

Yet last week in Geneva, at the UN's World Climate Conference--an annual gathering of the so-called "scientific consensus" on man-made climate change --Latif conceded the Earth has not warmed for nearly a decade and that we are likely entering "one or even two decades during which temperatures cool."

The global warming theory has been based all along on the idea that the Atlantic and Pacific Oceans would absorb much of the greenhouse warming caused by a rise in man-made carbon dioxide, then they would let off that heat and warm the atmosphere and the land. But as Latif pointed out, the Atlantic, and particularly the North Atlantic, has been cooling instead. And it looks set to continue a cooling phase for 10 to 20 more years.

But it is increasingly clear that global warming is on hiatus for the time being. And that is not what the UN, the alarmist scientists or environmentalists predicted. For the past dozen years, since the Kyoto accords were signed in 1997, it has been beaten into our heads with the force and repetition of the rowing drum on a slave galley that the Earth is warming and will continue to warm rapidly through this century until we reach deadly temperatures around 2100.

Power to the People? Not In Chicago, It's Power to the Unions; Chicago Alderman vs. The People

Wal-Mart's plans to build a second store in Chicago remain bottled up in the Chicago City Council. The store that Wal-Mart would like to build on the South Side at 83rd Street and Stewart Avenue, is going nowhere because the aldermen live in fear of organized labor and organized labor despises Wal-Mart.

We know organized labor wants to keep Wal-Mart from expanding in Chicago. But what do the aldermen's constituents want? The answer is clear: They want the opportunity to work or shop at Wal-Mart. A new Tribune/WGN poll found that 68% of city residents would like to see a new Wal-Mart store in Chicago, and 72% say Wal-Mart would be good for the community. The support is even higher with African-Americans, who stand to gain the most economic benefit from the proposed South Side store. The poll found 72% of African-Americans want Wal-Mart in the city and 81% say it would be good for the community.

The Tribune poll, conducted in late August, mirrors polls taken this summer for Wal-Mart and for the Chicagoland Chamber of Commerce that showed strong public support for the retailer. But the aldermen aren't listening to their constituents. The unions provide money and troops at election time. Apparently the aldermen have decided that keeping the labor bosses happy is more critical than following the wishes of their citizens.

Two hundred construction jobs -- union jobs, by the way -- and up to 500 retail jobs. But City Council leaders won't even allow a vote on an ordinance that would clear the way for Wal-Mart to build and open on the South Side. They're in step with the union bosses, but they're out of step with the people.

~Chicago Tribune editorial

MP: When's the next election? November maybe? If so, it might be a good time for Chicago voters to express their opinion about their aldermen and alderwomen.

Amazon: The Digital Wal-Mart of the Web

Amazon vs. Wal-Mart, YTD Returns

NY TIMES -- Fifteen years after Jeffrey P. Bezos founded the company as an online bookstore, Amazon is set to cross a significant threshold. Sometime later this year, if current trends continue, worldwide sales of media products — the books, movies and music that Amazon started with — will be surpassed for the first time by sales of other merchandise on the site. (That transition already occurred this year in its North American business.)

In other words, in an increasingly digital age, Amazon is quickly becoming the world’s general store. Alongside the books and CDs and DVDs are diapers, Legos and power drills, not to mention replacement car clutches and more arcane items like the Jackalope Buck taxidermy mount ($69.97).

“Amazon has gone from ‘that bookstore’ in people’s mind to a general online retailer, and that is a great place to be,” said Scot Wingo, chief executive of ChannelAdvisor, an eBay-backed company that helps stores like Wal-Mart and J.C. Penney sell online. Mr. Wingo envisions e-commerce growing to 15% of overall retail in the next decade from around 7%.

MP: Year-to-date (YTD), Amazon stock is up by about 80% vs. Wal-Mart, which has declined by about 10%.

5th Straight Monthly Increase in Leading Indicators

Sept. 21 (Bloomberg) -- The index of U.S. leading economic indicators in August rose for the fifth straight time, capping the longest stretch of gains since 2004 and signaling a recovery is under way (see chart above). The Conference Board’s gauge of the economic outlook for the next three to six months rose 0.6 percent, in line with forecasts, after a revised 0.9% rise in July, according to data that the New York-based group released today.

The gains in stock prices, consumer confidence and homebuilding that are buoying the leading index bolster Federal Reserve Chairman Ben S. Bernanke’s view that the worst recession since the Great Depression has probably ended.

How America's Trade Policies Cost 585,000 Jobs

From the summary of a new study from the Chamber of Commerce, "Trade Action or Inaction: The Cost for American Workers and Companies:"

In recent months, the United States has taken a number of trade actions – and refused to take others – that have a negative impact on U.S. companies, their workers, and the economy. We examine three of these:

1. The failure to implement the U.S.-Colombia and the U.S.-Korea free trade agreements,

2. The “Buy American” provisions in the American Recovery and Reinvestment Act of 2009 (“Recovery Act”), and

3. The failure to implement the trucking provisions of the North American Free Trade Agreement and Mexico’s resulting retaliation against U.S. exports.

At the request of the United States Chamber of Commerce, we estimate these three trade actions/inactions would have a negative effect on U.S. companies and their workers, and that employment losses could total as much as 585,800 jobs (see chart above).

The Global Reach of America's Tort Lawyers

Zurich University Hospital has stopped treating North American "medical tourists," fearing million-dollar claims from litigious patients if operations go wrong. Hospitals in canton Valais have also adopted measures to protect themselves against visitors from the United States, Canada and Britain.

"The directive applies only to patients from the US and Canada who come to Zurich for elective, non-essential health treatments," said Zurich University Hospital spokeswoman Petra Seeburger.

"It is not because treatment is not financed; it is because of different legal systems." In a statement the hospital said it was "not prepared to risk astronomical damages or a massive increase in premiums." Seeburger emphasised that the restrictions only affected people not domiciled in Switzerland.

Markets In Everything: 99% Medical Savings

The chart above (click to enlarge) shows surgery costs in the U.S. compared to other countries that promote medical tourism, data are from the Medical Tourism Association. Note that savings are as high as 99%, e.g. for a heart value replacement in India for $1,200 versus $170,000.

Employer-Sponsored Health Insurance Insulates Employees From Full Cost, Promotes Overspending

Ezra Klein in today's Washington Post article "You Have No Idea What Health Costs" writes that "The average health-care coverage for the average family now costs $13,375, according to the the Kaiser Family Foundation's 2009 Employer Benefits Survey."

Actually that's not exactly accurate, since Kaiser actually reported that "In 2009, the average annual premiums for employer-sponsored health insurance are $4,824 for single coverage and $13,375 for family coverage. Premiums for family coverage are 5% higher than last year ($12,680), but there was no statistically significant growth in the single premiums."

According to America's Health Insurance Plans (AHIP), the Average Annual Health Insurance Premiums in 2007 were $2,613 for "individual market single coverage," and $5,799 for individual family coverage," or about half of the employer-sponsored health insurance costs quoted by Kaiser. The huge difference in premiums is likely because the AHIP data includes insurance for those not covered by employer-sponsored health insurance, including those who are self-employed or retired.

This difference in health care insurance premiums between Kaiser and AHIP highlights some of the major problems associated with employer-sponsored health insurance: a) it's a tax deductible expense for the business, b) it's non-taxable compensation for the employee, and c) employees are insulated from the full cost of medical insurance because they pay only 26% of the full cost, all of which serve to result in overspending on more expensive health care coverage, ceteris paribus.

As Jeffrey Flier, Dean of the Harvard Medical School recently wrote:

There is our inefficient and inequitable system of tax-advantaged, employer-based health insurance. While the federal tax code promotes overspending by making the majority unaware of the true cost of their insurance and care, the code is grossly unfair to the self-employed, small businesses, workers who stick with a bad job because they need the coverage, and workers who lose their jobs after getting sick.

"Titillating Bleak Media Reports on the State of the Economic Collapse"

If America's economic landscape seems suddenly alien and hostile to many citizens, there is good reason: they have never seen anything like it. Nothing in memory has prepared consumers for such turbulent, epochal change, the sort of upheaval that happens once in 50 years. Even the economists do not have a name for the present condition, though one has described it as "suspended animation" and "never-never land."

The outward sign of the change is an economy that stubbornly refuses to recover from the recession. The current slump already ranks as the longest period of sustained weakness since the Great Depression. That was the last time the economy staggered under as many "structural" burdens, as opposed to the familiar "cyclical" problems that create temporary recessions once or twice a decade. The structural faults represent once-in-a-lifetime dislocations that will take years to work out.

Among them: the job drought, the debt hangover, the banking crisis, the real estate depression, the health-care cost explosion and the runaway federal deficit. "This is a sick economy that won't respond to traditional remedies," said Bank of New York Mellon economist Norman Robertson. "There's going to be a lot of trauma before it's over."

~Time Magazine cover story "The Long Haul" (click to see the date of the article, excerpts above were modified slightly).

(Originally posted on June 14, 2009.)

Here's a previous CD post about "pessimism porn" and the "titillating bleak media reports on the state of the economic collapse."

Drug Decriminalization in Portugal is Working

The evidence from Portugal since 2001 is that its decriminalization of drug use and possession has produced many significant benefits and almost no harmful side-effects. Ten facts about Portugal's experience:

1. There is little evidence of drug tourism: 95% of those cited for drug misdemeanours since 2001 have been Portuguese.

2. The level of drug trafficking, measured by numbers convicted, has declined.

3. The incidence of other drug-related sexually transmitted diseases has decreased dramatically.

4. Deaths from drug overdoses have also decreased dramatically.

5. The number of addicts registered in drug-substitution programs has risen from 6,000 in 1999 to over 24,000 in 2008, reflecting a big rise in treatment (but not in drug use).

6. Between 2001 and 2007 the number of Portuguese who say they have taken heroin at least once in their lives increased from just 1% to 1.1%.

7. Portugal has one of Europe’s lowest lifetime usage rates for cannabis.

8. Heroin and other drug abuse has decreased among vulnerable younger age-groups.

9. The share of heroin users who inject the drug has also fallen, from 45% before decriminalisation to 17%.

10. Drug addicts now account for only 20% of Portugal’s HIV cases, down from 56% before.

Bottom Line: In contrast to the dire consequences that critics predicted, a Cato Institute study concluded that "none of the nightmare scenarios initially painted, from rampant increases in drug usage among the young to the transformation of Lisbon into a haven for drug tourists has occurred.”

~The Economist

Cartoon, Graph of the Day

From Henry Payne, Detroit News

Exhibit A: