" Where economics isn't just a job, but an adventure" and remember..., "There's no crying in Economics"
Quote of the Week The only difference between Genius and Stupidity is that Genius has its limitations. -Albert Einstein
It's 8:30 AM and stock traders are doing the happy dance; economists were expecting the economy to create 183,000 jobs and the number came in at 203,000, unemployment decreased to 7.0% and the labor force participation rate increased to 63% from 62.8%. More good news was in the form of average hourly earnings that went up 0.2%. Long term unemployed remained stubbornly high at 37.3% of those unemployed (see chart below) As a result, in pre-market trading the Dow is up 140 points Stay tuned for more news later today.
The Dow Broke its 5 day loosing streak today with Authority. It finished up 198 points finishing at 16,020. The rally was broad based with all sectors finishing in the green and many analysts today, both on CNBC and Bloomberg, felt that this rally had legs and would extend into next week.
Karina McClain is a 22 year old minimum wage, fast food worker who was the heart of a CNN article today online. She was quoted as saying that she can't make ends meet from her minimum wage job. The article further goes on to say that she took a day out of work to go on strike and when she does work, she only works 20 hours/week. I'm confused, how many people out there can live by working only 20 hours/week. When I was a full time police officer, I always worked overtime and I had a second job teaching at college as an adjunct faculty member. I have some other questions for Ms. McClain, does she live with her parents, is she married, if not, is she getting child support from her baby's father, and if not, why. As I said in yesterday's advisory, if you're looking for higher pay, have the drive and motivation to make yourself more valuable. What politicians must realize, "you cannot legislate equality".
In other economic news, the years end is st hand and there are a number of mini fiscal cliffs approaching. Once again, if Congress doesn't pass a new farm bill, milk prices will revert back to a 1949 law that will price a gallon of milk at $7(this represents a doubling of price). Also, extended unemployment benefits could expire, and they should. Currently, if you lose your job, you go on state unemployment benefits (usually 13-26 weeks depending on your state) and the the US government extends those benefits up to 72 weeks. WHAT is the incentive to work if you're living off the taxpayer's dime as is evidenced by the chart below of the long term unemployed (greater than 26 weeks)? As long as we have extended benefits, the unemployment rate will remain above 6.0-6.5%.
The Dow was down for the 5th day in a row and is on its worse loosing streak since September. It finished at 15,821, down 68 points in spite of upbeat economic data. Third quarter GDP was revised up to 3.6% from 2.8%, and the number of people filing for 1st time unemployment claims fell more than expected. The job's report is due out tomorrow and it is expected that 183,000 jobs were created in November. This number will be market moving if there is a significant deviation from the expected. Minimum wage workers from fast food restaurants went on strike today demanding a minimum wage of $15, up from $7.25. The main reason is that they want a sustenance level wage. What many people don't realize who want an increase in minimum wage is that there are two sides to the equation. Businesses are in business to realize a profit, cost increases are passed on to consumers in the form of higher prices which creates a wage price spiral and renders any increase in minimum wage useless in the long run. It most certainly does not help the poverty level (see November's blog) and over half of the minimum wage workers live with their parents. If people want to make more money, they have the option of working a second job or improve themselves by increasing their educational attainment. It requires drive and determination; of course you could also move to a state such as California or Massachusetts who render transfer payments(welfare or unemployment insurance) greater than the minimum wage and thereby destroy most motivation for these people to find a job or better themselves.
After a roller coaster ride, the Dow finished at 15,890, down for the 4th day in a row. there were data releases all day that caused the Dow to swing both ways. New family home sales increased by 25% which initially caused the Dow to gain, but then some traders felt that this would cause the FED to taper sooner rather than later and it started a downward swing (get over it, Tapering is coming). The ISM non-manufacturing index was released (this measures what's happening to the service industry in the US and service represents 60% of consumption which is 2/3's of GDP), and while it showed the index was expanding, it was not as fast as the previous month and the average 30 year fixed mortgage rate is still at 4.5%. Apple received an early Christmas gift in the form of two upgrades from investment banks with an average target price of $650. Apple hit an intra-day 52 week high of $575. Apple was also a previous stock pick of the week by me.
A truck carrying radioactive material was stolen recently in Mexico. A number of news stations have reported that they could make a bomb out of this. Let me clarify: they CANNOT make a nuclear bomb from this material, cobalt 60. It is not weapons grade. What they can do is make a "Dirty" bomb. In other words, if they put the material next to a conventional explosive, when it detonates it can cause radioactive dust to be released in the air. Anyone in the area if not affected by the blast, could breathe in the radioactive dust with dire consequences. Authorities also went on to say that if the thieves release the cobalt 60 from its shielding without the proper precautions, they will die a horrible death from radiation poisoning.
The cornerstone of Obamacare was "If you like your current health insurance, you can keep it." Not true. The following was from an investigation by the Associated Press: Dean Griffen and his 64 year old wife have a healthcare policy that costs $770/month with a $2500 deductible. Under Obamacare, this plan will be terminated. They turned to the exchange and the cheapest plan they found was $1275/month with deductibles of over $12,000. Essentially, they are buying insurance that they will not use unless they suffer a catastrophic event.The Griffins are among millions of people nationwide who buy individual insurance policies and are receiving notices that those policies are being discontinued because they don't meet the higher benefit requirements of the new law. However, 64 year old Mrs. Griffen can sleep soundly at night knowing that she has full maternity coverage.
The Dow was up 23 points and Tesla soared 14 points on anticipation of continued earnings and good news. Earnings will be released after the market close. If they disappoint I expect a blood bath.
When Obamacare was 1st released, The Congressional Budget Office predicted that it would cost $900 billion over 3 years. At the time, I made a prediction to my students that I estimate the final cost would be closer to $3 trillion. Three years later, the CBO has raised it's estimate to $1.6 billion. At this rate, we are on pace to reach the $3 trillion mark. www.healthcare.gov, the official website to sign up for Obamacare had an original cost of $100 million. That cost is now up to $292 million dollars and rising. If the government can't manage the costs on a web site, and these costs have trippled since it opened on October 1, how can it possible manage a 2700 page, 4500 provision bill. The words of Nancy Pelosi (see above) are acting as a harbinger of doom: "We have to pass the bill, so we can find out what's in it."
Please excuse my John McEnroe moment; but "You can't be serious!" Go to www.healthcare.gov. the website for the Affordable Care Act (Obamacare). Now scroll down and look at the number, get out your phone and look at the alphanumeric pad. the number is 1-800-3182596 What's that spell. f-uckyo Has anyone else noticed this?
The United States has amongst the lowest savings rate for all technological nations. The iOMe challenge is a nationwide competition between Colleges where teams submit a 10,000 page essay on how Americans can improve their savings rates. In addition, teams must produce an approximate 60 second video which complements the essay. If you click on the iOMe logo above, it will take you to Bentley University's 2012 video submission. The faculty adviser for the challenge is John Tommasi and is offered during his Fall EC 351 course, Contemporary Issues in Economics. I'm pleased to announce that on February 15, Bentley was declared the winner of the iOMe video portion of the contest. Congrats to the team members and great job!
EC 3900 Energy Economics
EC 3900, Energy Economics and International Markets, is a 3 credit, Short Term Program, that is offered during Spring semester. After 7 weeks of lecture, the class takes a 10 day educational/cultural tour to France where 80% of their electricity is produced by nuclear power. During the 10 day trip, students travel to, and tour various nuclear facilities Last year's class visited; Marsailles, Aix en Provance, Lyons, Brest and 4 days in Paris.
If there were ever words that can strike fear into the hearts of any man women or child, it's: "I'm from the Government and I'm here to help". On a monthly basis my blog, from an economic standpoint, will explore government laws, decisions and actions, which while well intentioned, had inadvertent results that were either disastrous, or made a bad situation worse. It wouldn't surprise me if you reached the conclusion that congress does two things well, nothing and overreact; and you may ask yourself, do Congressional members vote for what is best for the economy, or what will get them re-elected.