" Where economics isn't just a job, but an adventure"
New blog is out: the Death Penalty and Cost
Quote of the Week
In an interview, General Norman Schwarzkopf was asked if he thought there was room for forgiveness toward the people who have harbored and abetted the terrorists who perpetrated the 9/11 attacks on America.
His answer was classic Schwarzkopf.
The General said, "I believe that forgiving them is God's function... OUR job is to arrange the meeting."
Click on the pictures to enlarge
BLOG Topics 2013
January Do Protected Seals lead to Depleted Fish Stocks
February Prohibition: Profits to Cartels & Increased Violence for Americans
March Increased Minimum Wage & Extended benefits lead to Higher Unemployment
April Ethanol from corn & Agflation
May Cash for Clunkers lead to Higher Used Car Prices & Wasted Tax Dollars
June The Affordable Care Act; Anything but Affordable Part 1
July The Affordable Care Act; The poster Child for False Advertising
August Detroit: Higher Taxes + Liberal Benefits = Bankruptcy
September No Keystone Pipeline leads to more pollution
October Global Warming! Or is it Global Cooling!
November Poverty & Benefits
December Does Affirmative Action lead to Reverse Discrimination?
February Prohibition: Profits to Cartels & Increased Violence for Americans
March Increased Minimum Wage & Extended benefits lead to Higher Unemployment
April Ethanol from corn & Agflation
May Cash for Clunkers lead to Higher Used Car Prices & Wasted Tax Dollars
June The Affordable Care Act; Anything but Affordable Part 1
July The Affordable Care Act; The poster Child for False Advertising
August Detroit: Higher Taxes + Liberal Benefits = Bankruptcy
September No Keystone Pipeline leads to more pollution
October Global Warming! Or is it Global Cooling!
November Poverty & Benefits
December Does Affirmative Action lead to Reverse Discrimination?
Blog Topics 2014
January Will Lake Meade become another Aral Sea
February Does Taxing the rich hurt the economy
March The Cause of the Great Depression
April Temporary Agricultural Subsidies lead to wealthy Farmers and Higher Prices
May The Presidents Stance on Gun Control leads to Increased Gun Ownership
June Is there really a Gender Pay Gap
July Did the Supreme Court decision in Roe v. Wade lower the crime rate
August The Department of Education and wasted Money
October The Financial Follies of the EPA
November Social Security and Portfolio Diversification
December The White House and Terrorism
February Does Taxing the rich hurt the economy
March The Cause of the Great Depression
April Temporary Agricultural Subsidies lead to wealthy Farmers and Higher Prices
May The Presidents Stance on Gun Control leads to Increased Gun Ownership
June Is there really a Gender Pay Gap
July Did the Supreme Court decision in Roe v. Wade lower the crime rate
August The Department of Education and wasted Money
October The Financial Follies of the EPA
November Social Security and Portfolio Diversification
December The White House and Terrorism
Updates/Advisories 1-23-2015
The Dow surged 260 points today after the European Central Bank promised to expand the money supply in the Eurozone more than what was expected. In other words, this is the European version of quantitative easing that helped the American economy. Mario Draghi, the chairman of the ECB (European Central Bank, will purchase €60 billion worth of bonds a month as part of its so-called quantitative easing program, a good bit higher than chatter Wednesday predicting just €50 billion. As a result, everything rallied with the hopes that this would take the eurozone (the 18 of 28 countries in the European Union that have have adopted the Euro dollar), out of recession into positive economic growth. This will also probably strengthen the dollar in relation to the euro. The effect? A strong dollar makes US exports more expensive and generally isn't that good for business but it makes foreign goods cheaper which is good for Americans travelling abroad and it makes imports cheaper. If this makes American more expensive, why would this be good? Simple, by coming out of a recession, consumption increases (unemployment goes down) and the belief is that this would outweigh the increase in prices from the strong dollar. To put the above chart in perspective, When the Euro was 1st introduced in 1999, the exchange rate was $1.17 = €1, and at the height of the most recent recession, it was $1.57 = €1.
In the pre-market, the Dow is up 40 points on positive earnings reports from GE and Honeywell (not to mention some inertia from yesterday's 260 point gain, oil is up slightly at $46.54/gallon, gold is holding its own at $1298/oz and the average price of a gallon of has is at $203.8/gallon, down once again compared to $3.28 this time last year. The AAA (American Automobile Association) estimates that on the aggregate, Americans saved over $14 billion in 2014 on gasoline compared to 2013.
In the pre-market, the Dow is up 40 points on positive earnings reports from GE and Honeywell (not to mention some inertia from yesterday's 260 point gain, oil is up slightly at $46.54/gallon, gold is holding its own at $1298/oz and the average price of a gallon of has is at $203.8/gallon, down once again compared to $3.28 this time last year. The AAA (American Automobile Association) estimates that on the aggregate, Americans saved over $14 billion in 2014 on gasoline compared to 2013.
Updates/Advisories 1-21-2015
After being up over 70 points at the open, the Dow finished the day 3 points higher after dropping 150 points midday. Investors shook off a mixed batch of earnings reports and concerns about global growth as oil prices tumbled again. Benchmark U.S. crude fell 5% to $46.13 a barrel.
The IMF downgraded projections it issued in October by 0.3 percentage point each, predicting global growth at 3.5% this year and 3.7% in 2016.
Chinese stocks rebounded slightly from a dramatic dive the day before. The Shanghai composite gained 1.8% Tuesday following an 8% plunge the day before after the country's securities regulator imposed margin trading curbs on several major brokerages, a sign that authorities are trying to rein in the market's big gains. China's economy grew at a 7.3% year over year rate in the fourth quarter of 2014. That was short of the official target of China-7.5%-but slightly ahead of the 7.2% expected by economists surveyed by Bloomberg and well ahead of market fears that growth would break below 7%. On the news, the Shanghai Composite Index, which had tumbled 7.7% on Monday night, breathed a sigh of relief and recovered some ground to close up 1.82% which helped stocks prior to the markets open. The International Monetary Fund released its updated forecasts for global economic growth. The world economy will grow by 3.5% in 2015, down from the October forecast of 3.8% growth. According to the IMF, China's economy will grow by 6.8% in 2015. That's down from a 7.1% forecast in October.
Just after the market's open the Dow is down 30 points, oil is relatively steady at just below $48/barrel, gold is over $1300/oz. and gas is down again at $2.048/gallon
The IMF downgraded projections it issued in October by 0.3 percentage point each, predicting global growth at 3.5% this year and 3.7% in 2016.
Chinese stocks rebounded slightly from a dramatic dive the day before. The Shanghai composite gained 1.8% Tuesday following an 8% plunge the day before after the country's securities regulator imposed margin trading curbs on several major brokerages, a sign that authorities are trying to rein in the market's big gains. China's economy grew at a 7.3% year over year rate in the fourth quarter of 2014. That was short of the official target of China-7.5%-but slightly ahead of the 7.2% expected by economists surveyed by Bloomberg and well ahead of market fears that growth would break below 7%. On the news, the Shanghai Composite Index, which had tumbled 7.7% on Monday night, breathed a sigh of relief and recovered some ground to close up 1.82% which helped stocks prior to the markets open. The International Monetary Fund released its updated forecasts for global economic growth. The world economy will grow by 3.5% in 2015, down from the October forecast of 3.8% growth. According to the IMF, China's economy will grow by 6.8% in 2015. That's down from a 7.1% forecast in October.
Just after the market's open the Dow is down 30 points, oil is relatively steady at just below $48/barrel, gold is over $1300/oz. and gas is down again at $2.048/gallon
Updates/Advisories 1-20-2015
The Dow was up 190 points on Friday. This was courtesy of the headline Consumer Price Index measure of inflation falling 0.4% in December after a 0.3% drop in November. The core CPI, which excludes changes in more volatile energy and food prices, came in unchanged for the month after a 0.1% increase in November. Economists surveyed by Briefing.com had projected a 0.1% increase in core CPI in December. This is a very good indication that the FED will raise interest rates later rather than sooner. The drop in prices is a function of the price of oil dropping more than 50% since June and mostly all businesses benefiting by lower costs and little upward pressure on prices. The markets in the US were closed on Monday because of the Martin Luther King holiday, however international markets were open and active. Oil was up $2.27/barrel finishing at $48.48/barrel and gold shot up over $17 finishing the day at $1280/oz. Gold's rise was in part due to the volatility in the Chines stock market that was down at one point over 8%. That would be similar to a 1400 point drop in the Dow. The Chinese stocks plunged Monday after the country's securities regulator rapped three major brokerages for continuing to lend money for stock purchases in violation of rules. As punishment for extending so called "margin trading" contracts, the brokerages are forbidden to offer credit to new customers for three months. Investors and analysts see the penalties against the brokerages as foreshadowing more curbs on credit-financed trading by China's government, hence the large drop.
In the pre-market, the Dow is up 70 points, oil is about the same and gold is up to $1289/oz. and gas is down once again with the national average being $2.05/gallon.
In the pre-market, the Dow is up 70 points, oil is about the same and gold is up to $1289/oz. and gas is down once again with the national average being $2.05/gallon.
Updates/Advisories 1-16-2015
The Dow open up 90 points and finished the day at 17,320, down 106 points. Financial markets were given a jolt early Thursday after Switzerland's central bank unexpectedly scrapped its currency cap against the euro. U.S. stock futures and European markets took a dive after the announcement before recovering. In addition both Citi Group and Bank of America disappointed on earnings. Shares of both banks fell more than 3%. That followed an earnings miss from JPMorgan Chase (JPM) the day before. Wells Fargo (WFC) managed to match estimates. After rising more than 6 percent on the day, the crude oily promptly sold off, falling 9 percent in five hours settling just over $46/barrel. However, not everyone is benefiting from cheat oil. 9,000 workers have lost their jobs at Schlumberger, a company that provides tools and services for oil and gas companies. The company said Thursday that the falling price of oil is the cause. It also expects to slash spending on future exploration and production. The layoffs impact about 7% of the company's employees. It operates in more than 85 countries. Gold continued its upward swing and finished the day at$1263/oz.
In the pre-market, the Dow is down 40 points, gold is down $6.50/oz and oil is up over $1/barrel at $47.46 and Goldman Sachs is set to announce earnings this AM.
And last but not least, the average price of gas is $2.08/gallon.
In the pre-market, the Dow is down 40 points, gold is down $6.50/oz and oil is up over $1/barrel at $47.46 and Goldman Sachs is set to announce earnings this AM.
And last but not least, the average price of gas is $2.08/gallon.
Both gold and many gold stocks have broken long term resistance lines
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Updates/Advisories 1-15-2015
It wasn't a pretty day on Wall St yesterday. After being down 300 points shortly after the open, the Dow managed to recoup some losses and ended the day down 186 points to finish the day at 17,427. There were a number of factors that contributed to the loss. Surprisingly, retail sales were down by about 1% for the month of December and the big banks, JP Morgan And Wells Fargo, disappointed on earnings. In addition, the World Bank cut its forecast for 2015 global economic growth. The bank, which forecasts growth twice a year in its report on Global Economic Prospects, now projects that the world economy will grow by 3% in 2015 and 3.3% in 2016. That forecast is down from 3.4% for 2015 and 3.5% in 2016 in the World Bank’s June report. Also on the downside, the bank cut its forecast for the EuroZone to 1.1% from 1.8% and projected that Russia would drop into recession with growth contracting by 2.9% in 2015; keep in mind, 50% of Us big business sales are international. Worries about global growth are likely to rise further next week when China reports its figures for annual GDP growth for 2014. Economists are expecting that China will miss its growth target—7.5% for 2014—for the year. That would be the first time that the country has missed its target since 1998 (from Jim Jubak). Tesla's Elon Musk (the CEO) stated that not only will Tesla not be profitable this year, but he doesn't expect profitability to return until 2020. Tesla was down more tha 11 points yesterday and the downturn is continuing in the pre market. Oil finished the day up by more than a dollar and is currently trading at $48.10/barrel, up once again. The dollar continues to gain strength against the euro and the exchange rate is $1.17 to 1 euro. This time last year it was $1.33 to 1 euro. If you travel to Europe or buy European goods this is a plus for the consumer, but make American products more expensive as they are sold abroad (see Fed Speak, exchange rates). A bright spot is gold, it is currently up $20/ounce at $1254/ounce, a 4 month high. Along with the price of gold, gold mining stocks are uptrending also (KGC, ABX and NEM).
In the pre-market, the Dow is all over the place; it was up triple figures, down triple figures and is now recovering and is up 40 points. Buckle your seatbelts and prepare for another roller coaster ride.
In the pre-market, the Dow is all over the place; it was up triple figures, down triple figures and is now recovering and is up 40 points. Buckle your seatbelts and prepare for another roller coaster ride.
Updates/Advisories 1-14-2015
How do you define volatility? If it is when the market is up 280 points within 1/2 hour of opening, then decreases to a negative 110 points, recovers to minus 40, back to negative 125 back up to a positive 15 points and finally finishing the day at negative 27 points (to finish at 17,613) then today met your definition of volatility. The bottom began to fall out at 2 PM and analysts and newscasters alike were looking for reasons. At about that time Goodyear Rubber and Gilead sank on a poor earnings outlook and a number of traders believed that may have kicked in a number of computer generated sell programs. In case you haven't done the math, Tuesday's Dow went thru a 400 point swing. Also turning the tide were rumors that the ECB might get some pushback from Germany on its plans to launch a bond-buying program to jump start the Eurozone economy.
In corporate news, Credit Suisse upgraded Apple (AAPL) to "outperform" from "neutral" and raised its price target by $20 to $130 per share, citing strong sales of iPhones. Apple shares initially jumped almost 3% but fell back and were up 1.1% in afternoon trading. GoPro shares dove Tuesday (7 points) after Apple received a patent for a wearable camera that could compete with a certain high-definition camera maker that just went public last year (hint:GoPro). The drop in GoPro stock is part of a broader decline since early October, when it reached a 6-month high of $93.85. GoPro shares ended at $49.81.
After oil dropped more than a dollar to under $45/barrel, a 6 month low, it ended the day at $45.26, up 32 cents for the day.
In the pre-market,,JPMorgan and Wells Fargo disappointed on earnings dragging down the Financial Sector and the Dow which is down over 90 points. Tesla is down 15 points as a result of a speech Elon Musk gave in China where he said Tesla may not be profitable in quarter 4. ; oil is up 7 cents a barrel and the average price of gas is down again (ho-hum) pricing at $2.10/gallon nationally.
In corporate news, Credit Suisse upgraded Apple (AAPL) to "outperform" from "neutral" and raised its price target by $20 to $130 per share, citing strong sales of iPhones. Apple shares initially jumped almost 3% but fell back and were up 1.1% in afternoon trading. GoPro shares dove Tuesday (7 points) after Apple received a patent for a wearable camera that could compete with a certain high-definition camera maker that just went public last year (hint:GoPro). The drop in GoPro stock is part of a broader decline since early October, when it reached a 6-month high of $93.85. GoPro shares ended at $49.81.
After oil dropped more than a dollar to under $45/barrel, a 6 month low, it ended the day at $45.26, up 32 cents for the day.
In the pre-market,,JPMorgan and Wells Fargo disappointed on earnings dragging down the Financial Sector and the Dow which is down over 90 points. Tesla is down 15 points as a result of a speech Elon Musk gave in China where he said Tesla may not be profitable in quarter 4. ; oil is up 7 cents a barrel and the average price of gas is down again (ho-hum) pricing at $2.10/gallon nationally.
December Jobs Report 1-9-2015
The economy was expected to create 240,000 jobs in December and the unemployment rate was expected to decrease to 5.7%. The numbers didn't disappoint. Actual figures were an unemployment rate of 5.6%, and 252,000 jobs were created in December. The real unemployment rate,
U-6, was 11.2%. The real unemployment rate includes marginally attached workers (people who haven't looked for a job in 4 weeks) and pert-time workers. The number of long term unemployed (those unemployed for 27 weeks or more) was virtually unchanged at 31.9% and the labor force participation rate dropped slightly to 62.7%. The teenage unemployment rate was 16.8% and amongst the various ethnic groups, blacks had the highest rate at 10.4% (they also have the lowest education levels) and Asians the lowest at 4.8% (highest educational levels). For all of 2015, 2.9 million jobs were created, the best year since 1999.
The market loved the numbers and the Dow went from being down 70 points to plus 10 with in 5 minutes in the premarket
U-6, was 11.2%. The real unemployment rate includes marginally attached workers (people who haven't looked for a job in 4 weeks) and pert-time workers. The number of long term unemployed (those unemployed for 27 weeks or more) was virtually unchanged at 31.9% and the labor force participation rate dropped slightly to 62.7%. The teenage unemployment rate was 16.8% and amongst the various ethnic groups, blacks had the highest rate at 10.4% (they also have the lowest education levels) and Asians the lowest at 4.8% (highest educational levels). For all of 2015, 2.9 million jobs were created, the best year since 1999.
The market loved the numbers and the Dow went from being down 70 points to plus 10 with in 5 minutes in the premarket
JANUARY BAROMETER
JANUARY EFFECT
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January Barometer
As goes January, so goes the year. Studies for the last 50 years of the 20th century showed that if the market is up in the month of January, there is a good possibility (90%) that it will be up for the year (chart left). This is usually more pronounced with small cap stocks (left below).The investment banker Sidney B. Wachtel first observed the effect in 1942, and noted that since 1925 small companies had outperformed large companies with the majority of the disparity occurring in the first half off the month, and noted the effect was even more pronounced during the third year of a president's term. Looking at a number of market indicators (according to Laif Meidell of CMT), "breadth is positive, volatility is low and the S&P 500 remains above both its intermediate- and longer-term trends. Unless there is an unforeseen event that rocks the boat, investors have more to gain by holding the tiller steady and staying on course than by making any bold corrections as we head into the last few trading days of the year." In pre-market trading, The Dow is down about 7 points and remember what I said in my post of 12/26 about an oil supply side shock; well it's occurring in Libya as escalating civil war conflict with Islamist extremists, i.e., the usual suspects, has closed down Es Sider oil terminal which accounts for 1/2 of Libya's exports of about 600,000/barrels/day. As a result, oil is up almost 2% this morning at $55.5/barrel. Gas has once again declined and the average price of a gallon of gas is $2.28/gallon. According to AAA, over 20,000 gas stations nationwide have gas priced at under $2/gallon. |
Obamacare Revised Costs
More on Obamacare
In a recent survey by the New York FED on businesses, the median increase in healthcare premiums is expected to be 10%. More than a quarter of the manufacturing and service firms surveyed said they either have or will boost prices for goods and services "because of the effects that the ACA is having on your business." About 20 percent of respondents said they were reducing their number of workers and/or raising the share of part-time workers as a result of the ACA. His is in stark contrast to the presidents remarks earlier this year that healthcare costs are decreasing.
Maybe CEO's were right when they said the president "Just doesn't get it".
Commentary on Minimum Wage
There is currently a debate in the state of NH on whether to increase the minimum wage to 8.25 from 7.25. The main argument is that it will help to alleviate poverty. That is clearly not the case. As you can see from the chart at the left, the poverty rate dropped dramatically in the 1960's. This was a function of great society legislation; specifically, increase in Social Security benefits in addition to the inception and implementation of Medicare and Medicaid. Since then, the poverty rate has fluctuated between 9-15% and is highly correlated with the unemployment rate. The vertical grey area's in the graph represent periods of recessions in the US. As can be expected, unemployment rises during recessions and peaks at the end (unemployment is said to be a lagging indicator). As you can also see from the chart, so too does the poverty rate. There is no indication whatsoever that the poverty rate is affected by increases in the minimum wage. Generally, this is quite the contrary. As can be evidenced from the below left chart, increases in minimum wage can contribute to unemployment and as we can infer from the above chart, as unemployment increases so to does poverty. If you look at NH, they have the lowest state poverty rate in the nation and it generally parallels the national unemployment rate. By raising the minimum wage, you increase business costs. As a result; businesses either pass these costs onto the consumer (in which case inflation nullifies any wage increase), substitute capital for labor, or simply go out of business. If you look at the chart below right, UAW (United Auto Workers) membership has decreased in the late 1970's from 1.5 million to 350,000 in 2009. The reason for this is simple. Detroit isn't making fewer cars, they are making more, but they have made their assembly lines more robotic and have substituted capital for labor, which became cheaper in the long run. This can also happen to those fast food workers who want a $15 minimum wage. There is currently a machine on the market that can make 300 burgers/hour. In other words, capital can be substituted for labor. Someone please e-mail me and explain how someone is better off unemployed at $8.25/hour as opposed to being gainfully employed at $7.25/hour
You cannot legislate equality. If you want to decrease poverty, implement policies to insure that higher levels of education is available to all.
You cannot legislate equality. If you want to decrease poverty, implement policies to insure that higher levels of education is available to all.
The Congressional Budget Office predicted this week that more than 2 million people will leave the labor force because of Obamacare. Specifically, more people will leave the labor force or reduce their hours, to stay under the cap for federal subsidies. If you are a family of 4, and household income is under, WAIT FOR IT, $94,000, you are eligible for a federal subsidy. The number of part time/temporary workers has already increased by 35% since Obamacare was passed in 2010; and yes it will get worse, wait until 2015 when it becomes mandatory for businesses.
For a good laugh on Obamacare, go to this web site and watch this video; http://www.youtube.com/watch?v=qpa-5JdCnmo. It shows the president on 36 different occasions stating that if you like your healthcare plan you can keep it. Obviously there are 1 of two explanations for this misunderstanding. He was ill advised on the 2700 page, 4500 provision Affordable Care Act, or he knew about it and lied. According to a study by Forbes magazine, the ACA will increase premiums to men under 27 by 77%, 40 year olds, 37% and 64 year olds by 37%.
"We have to pass the bill ..."
http://blog.heritage.org/2010/03/10/video-of-the-week-we-have-to-pass-the-bill-so-you-can-find-out-what-is-in-it/
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 trillion. 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."
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 trillion. 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."
iOMe Challenge 2012
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.
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Unintended Consequences
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.
iOMe Challenge 2012 - Video |
iOMe Challenge 2011 - Video |
