The U.S.: Steel Exporter?

TW: Mix a domestic demand contraction, a lower dollar and stronger international markets together and what does one get? Net exports of steel...for the first time in decades. Folks get edgy because they think a "strong" dollar denotes weakness even though folks also bemoan the artificially "weak" Chinese yuan (which lowers Chinese imports and encourage Chinese exports). You cannot have it both ways. U.S. consumption needs to become less dominant, savings more prominent at which point the U.S. dollar will find a better level perhaps lower perhap higher.

From Floyd Norris NYT:
"The United States was a net exporter of steel in August, a trade group reports.

The American Institute for International Steel — a group of companies that import steel and therefore like free trade — says government data indicates that steel exports during August were about 975,000 tons, while imports were about 800,000 tons.

It was the first month in more than half a century that the United States was a net exporter of steel.

“This dramatic development shows the increasing importance of U.S. exports of steel to international markets which are returning to stronger levels of demand, as well as the high value placed on the quality of the American made steel and the efficient service provided by steel trading companies,” said David Phelps, the group’s president.

I suspect it shows just what a recession and a collapse of construction can do for the trade deficit. Construction companies that are firing many of their workers do not need as much steel. Nor do automakers who have been forced to scale back production..."
http://norris.blogs.nytimes.com/2009/10/13/how-to-become-a-net-steel-exporter/

Knife Grabbers (cont.)

TW: I remain highly skeptical about the economy and the markets. Recall personal consumption exceeds 70% of the total economy, if it is declining 5%ish then the recession will continue.

In addition to being concerned about the markets I am very concerned that the political environment will get extremely difficult if the economy continues to splutter and perhaps locks up again over the winter. We cannot seem to get any rational governance now, what would happen in that circumstance I do not even want to contemplate.

From Floyd Norris at NYT:
A good measure of retail sales growth, or lack thereof, is total retail sales less spending at gasoline stations. Here are the year-over-year figures for that measure, starting last September, the month the economy started to plunge.

September, 2008, -4.3%
October, -6.6%
November, -7.5%
December, -8.7%
January, 2009, -7.0%
February, -6.3%
March, -7.6%
April, -8.0%
May, -7.7%
June, -6.8%
July, -5.9%

You can take encouragement from that, if you want to do so. The year-over-year decline is the smallest since September. But it turns out that all of that improvement comes from a modest increase in auto sales, caused by the “cash-for-clunkers” program..."
http://norris.blogs.nytimes.com/2009/08/13/consumers-arent-spending/

Real Estate Half Full Or Half Empty

TW: The meme factories have moved from 2nd derivative gains, to green shoots to the recession is just about over. Perhaps all of them are true. But I remain skeptical.

This is the Bloomberg headline on June's existing home sales:
"U.S. Economy: New-Home Sales Climb 11%, Most in Eight Years"

This is Floyd Norris' take at NYT:
"Did new home sales really surge in June? No.

...That calculation is based on seasonally adjusted annual rates, which went from a rate of 346,000 in May to 384,000 in June, for the highest rate since November.

A year ago, when there were headlines about how bad sales were, the annual rate for June was 488,000, which was then the lowest for any month since 1991. Somehow a headline that says “sales fall 21 percent from year-ago levels” would not sound the same as the headlines that are now running.

In actual sales, the preliminary estimate is that 36,000 homes were sold, up 3,000 from May but down 9,000 from last June.

To put it another way, this was the second worst June since they began counting new home sales in 1963. It was not quite as bad as June 1982, when the country was mired in a deep recession and interest rates were sky high. Then 34,000 new homes were sold.

There are twice as many households in America as there were then, so relative to population this was the worst June ever, by far..."
http://norris.blogs.nytimes.com/2009/07/27/homes-sales-up-11-and-down-21/

Then there is this via the Big Picture blog:
“National New Home Sales, on a monthly basis, don’t even add up to half of the total foreclosure activity in California alone in a single month.”
-Mark M Hanson

The Credit Crisis Continues

TW: Despite much happy talk and the clear ability of certain financial institutions (i.e. Goldman Sachs) to either exert tremendous skill or tremendous gaming techniques depending upon your perspective; our financial markets remain precariously weak.

There are many observers at this point who believe our government is essentially seeking to bluff its way through the credit crisis. It creates a bit of a quandry, if the bluff works the demand for reform will be minimized, if it fails we are all f'ed. Therefore, the odds of real reform of the sort that would actually minimize the risk of the next crisis seems small. Folks like the status quos especially those which benefit themselves and especially those which benefit the incumbent powers that be.


From Floyd Norris at NYT:
"...Despite the slight opening of financial markets since the winter panic eased, this country does not have a decently functioning financial system. It is the Federal Reserve and the Treasury that decide which financial companies stay in business, which is something you expect from a centrally planned socialist economy, not from the great bastion of the free enterprise system.

Many of the better-off banks were able to repay the TARP money to the government, but they remain dependent on F.D.I.C.-guaranteed loans. CIT would be okay, at least in the short term, if it could get such loans.

There has been a lot of hand wringing over the failure of the Obama stimulus plan to get the economy moving, but where attention is really needed is the failure to get the financial system going. That was never going to be easy, but the worst possible decision was to allow the banks to fudge their financial statements. The Obama administration did not lift a finger to prevent Congress from demanding such a move, which the Financial Accounting Standards Board made under duress.

It is not easy to be sure how much difference that made in financial statements, although it clearly allowed some banks to pretend their losses are less than they really are — at least as measured by market values. The banks claim those market values are ridiculously low, but they will not divulge exactly what assets they own, or where they value them.

We are back to a situation where no one knows which balance sheet can be trusted. In that climate, the easiest decision is to trust no one — or at least no one without a credit line backed by Uncle Sam. Citi is too important to fail, but CIT may not be.

What has been needed for a long time is a way to figure out how much toxic assets are worth, and to get them off bank balance sheets and into the hands of speculators with secure funding. Then the financial institutions, with solid capital and believable balance sheets, could go back to lending, both to the public and to each other. It is tragic that has not happened."
http://norris.blogs.nytimes.com/2009/07/13/rip-cit/

Plus ça Change, Plus C’est la Même Chose. (cont.)

"Next to kidnappers, politicians seem to be the most unpopular men in this great Republic. Nobody ever really trusts them. Whatever they do is commonly ascribed to ignoble motives. The country is always glad to see them humiliated. . .

As for the governors, they are so low-down that 2 or 3 of the 48 are always being impeached and there is always at least one who is on his way to the hoosegow. During the past 15 years no less than 20 governors have been charged with downright felonies, and 4 or 5 have actually gone to prison. The rest, though maybe honest enough, are mainly only demagogues and mountebanks. It would be hard to find any other class of presumably reputable men who show so high an average of rogues and charlatans."
---HL Mencken 1934
(via Floyd Norris at NYT)

TW: As I mention frequently, democracy is flawed just better than the alternative. Our system breeds hypocrisy and those comfortable with it. To run for office is to be an egotistical freak. But if we as voters acted differently, rewarded better behavior then perhaps the politicians would act differently. Or maybe those more pure would be even less effective...

We Are All Big Spenders

TW: Norris specs out federal spending by party over the past 50 years. His point is the old cliche that Dems spend more than Republicans is not borne out. To me the point is that just about everyone spends too much but just on different things. Broadly speaking Dems generally want to spend more on things like education and health care, the Republicans defense and prisons. Clinton was the only one who saw material decreases and some of that was due to the "peace dividend" post-Cold War.

The net result is there never has been a clear consensus to cut spending everyone always has their pet priorities. So again if and when Americans decide they are serious about building a more secure economic future (i.e. less reliant on debt), they will sacrifice their own pet priorities and demand politicians cut the Big Three- social security, health care and defense. Until then the discussions are all BS.

From Floyd Norris at NYT:
"...It used to be — before Ronald Reagan — that the federal government grew when the Democrats were in office, and became smaller when the Republicans were in the Oval Office.
Since then, the relationship has reversed.

The figures that follow are the increase (or decrease) in real gross domestic product caused by federal government spending...In 2008, the federal government gain was 3.0 percent, according to preliminary data. That was the largest since 1967, when it was an increase in Vietnam War spending, coupled with the Great Society, that produced the surge in government growth. (Remember “guns vs. butter”?)

Here are the figures for average contribution of the federal government to growth in G.D.P., by four-year terms. A positive sign means the government grew in real terms. A negative one means it got smaller. The figures are compound annual changes for each term.
1949-52 (Truman, D) +8.7%
1953-57 (Eisenhower, R) -1.3%
1957-60 (Eisenhower, R) -0.2%
1961-64 (Kennedy-Johnson, D) +2.1%
1965-68 (Johnson-D) +4.3%
1969-72 (Nixon, R) -2.8%
1973-76 (Nixon-Ford, R) -0.7%
1977-80 (Carter, D) +1.0%
1981-84 (Reagan, R) +1.1%
1985-88 (Reagan, R) +1.7%
1989-92 (GHW Bush, R) +0.7%
1993-96 (Clinton, D) -2.6%
1997-2000 (Clinton, D) -0.1%
2001-04 (GW Bush, R) +0.9%
2005-08 (GW Bush, R) +0.9%
http://norris.blogs.nytimes.com/2009/05/06/big-government-republicans/

Our Trade Deficit Is Shrinking Finally

TW: After years of deterioration our trade deficit is shrinking very rapidly. Part of the improvement relates to plunging oil prices but part of it is attributable to our economy's shift away from consumption. Recall the simple equation:

GDP= P+I+G+X (where P= personal consumption, I= investment, G= government spending and X= net imports/exports)

The G and X components are keeping the U.S. economy from truly plunging. The Q1 GDP was off over 6%, without strong G and improving X it would have been off 10% plus.

The adjustment in the trade deficit is needed as part of the U.S. economy's molting process away from too much consumption. The transition will be painful. As the trade deficit swing shows economic re-balancing can happen very quickly in fact too quickly. What is unclear is how the world economy will adjust to a U.S. absorbing far fewer goods from the rest of the world. It is entirely possible the trade deficit will grow again rapidly if U.S. consumption rises faster than international consumption.

Furthermore, while adherents of both the left and the right generally agree a move away from over reliance on consumption is good for the U.S. economy (although they strongly disagree on how to accomplish the shift), I remain skeptical that the vast majority of the general public realize what such a shift entails. It is more than sacrificing some luxury goods, it also involves facing up to things such as runaway health care spending, unsustainable social security outlays and defense spending at levels 3X anyone else in the world.



From Floyd Norris at NYT:
"THE American trade deficit is collapsing at the fastest rate ever, a testament to the ability of a worldwide recession to sharply reduce global economic imbalances that had grown to unprecedented size.

...Few countries have reported first-quarter data as yet, and the American number will be revised. But what appears to be happening is that much of the pain from the fall in American consumption is being felt in other countries, since exporters in those countries supplied the products that Americans are no longer buying.

Declining trade deficits in the United States are likely to be matched by falling trade surpluses in countries that have historically been net exporters. That is one reason Germany’s economy appears to be faltering badly and China has embarked on a huge economic stimulus program.
The shrinking trade deficit is not being caused by a rebound in American exports. They are falling as well, but not nearly as much as imports are declining.

...For many years, critics of American economic policies, particularly in Europe, have said that the United States had to take action to reduce its trade deficit. Now that the reduction has happened, it is they who are among the most hurt by it.

Robert Barbera, the chief economist of ITG, pointed out that the elimination of the trade deficit — an idea that seemed beyond belief only a few months ago — could be within reach. The United States, he said, does not have to develop some new export industry. It simply has to refrain from importing more when exports recover to last year’s level.

For anything like that to happen, however, the engine of recovery in the world would have to be a country or region other than the United States, whose own recovery would need to be gradual and based in large part on growth overseas.

That seems unlikely to happen. Some countries that historically ran large trade surpluses are in no position to use fiscal stimulus to accelerate growth in their economies, because their own access to international credit markets has been damaged. Others, including most of Western Europe, have so far resisted large stimulus packages.

In the United States, however, the stimulus efforts have been very large, and that seems likely to continue. That same G.D.P. report showed a mild and tentative rebound in consumer spending in the first quarter. If that continues, the trade deficit may soon start to widen again."
http://www.nytimes.com/2009/05/02/business/02charts.html?_r=1&scp=1&sq=floyd%20norris%20trade%20deficit&st=cse

Real Estate the Not So Good Investment

TW: We have all heard for our entire lives BS about the immutability of real estate investments. These numbers should make one fairly skeptical of those claims. They symbolize the massive Ponzi scheme Americans (and many internationals) have participated in since about 1980 or so. Keep in mind these are nominal figures, if one were to inflation adjust the dates to which one would have to go to achieve break even would be farther back (1980's maybe 1970's for Detroit, 1990's for most others). Real estate figures by market:

From Floyd Norris at NYT:
Depth of Decline/How far back the decline takes you to achieve break even (nominally)
1. Phoenix -49%/February 2003
2. Las Vegas -46%/May 2003
3. Miami -43%/October 2003
4. San Francisco -43%/October 2000
5. San Diego -41%/August 2002
6. Los Angeles -39%/October 2003
7. Detroit -39%/August 1996
8. Tampa -37%/March 2004
9. Washington -32%/March 2004
10. Minneapolis -30%/June 2001
Twenty city composite -29%/October 2003
11. Chicago -22%/June 2003
12. Atlanta -20%/June 2001
13. Seattle -20%/September 2005
14. Portland -18%/August 2005
15. Boston -17%/April 2003
16. Cleveland -17%/August 2000
17. New York -16%/October 2004
18. Denver -13%/April 2002
19. Charlotte -11%/March 2006
20. Dallas -11%/May 2002
http://norris.blogs.nytimes.com/2009/03/31/how-low-can-they-go/

Will Sports Suffer Amidst the Contraction? Plus Convenience Fees Piss Me Off

TW: Norris' piece brings up several issues. One, those damn convenience fees one faces now when ordering tickets. As Norris points out why would a fee vary in cost by ticket value? But generally paying 10% and more for a fee on a ticket is merely a disguised base price component. We are becoming a fee soaked society (check out the details on a rental car bill next time! or almost any travel related bill). Fees are becoming ubiquitous and barely disguised base price components. I hate them.

Next, I certainly would not want to be the Yankees or Mets opening gold plated stadiums amidst the great contraction. Baseball should be interesting this year. Baseball has no salary cap unlike football and basketball where teams are limited in their spending but also obligated to spend just about the cap amount. Baseball teams have been increasingly careful with their dollars as the off-season progressed. I fully expect attendance to be off significantly. For those of you who attend games you know how expensive games are with the tickets being almost an afterthought compared to sky high concessions, parking etc. I really feel for folks trying to take kids to the games. There may be some very unhappy owners and players used to living the good life by mid-season.

Finally sports teams have become very good at squeezing the last penny out of their seats. Long gone are the days when all games regardless of the time of year or opponent were priced the same. Now April tix are far cheaper than those post June and the series against say the Cardinals at Wrigley Field are far more expensive than games against the Giants. This pricing makes economic sense and replaces much of the value scalpers extracted previously. Of course this year teams may need to deploy their micro pricing in reverse to put some fannies in the seats.

From Floyd Norris at NYT:
"This is the year that both the New York Yankees and the New York Mets open new stadiums, with fewer seats than the stadiums they replace. Both also have raised prices to levels that only an unlimited expense account could appreciate.

Will it work? Will some tickets go unsold because no one will pay the prices being asked? If so, will the teams act like airlines, selling tickets for what the market will bear at big discounts?
It’s a fair bet that when baseball executives designed the stadiums they did not expect Lehman Brothers to vanish. Nor did they anticipate the bailout backlash. (How do you feel about bankers partying in seats that cost more than $2,000 each?)

I received an e-mail message today from the Yankees proclaiming that “Tickets for Yankee Stadium’s inaugural week are still available.”

So I checked out the second home game of the season, on Friday afternoon, April 17. The cheap seats are sold out, but there are still some good seats left, at prices ranging from $375 (plus a $12.45 convenience fee) to $900 (plus a $23.45 convenience fee).

As it happens, the Mets are in town that same night. There you can get tickets for as little as $60 (plus $7 fee) for seats in what I would have called the bleachers but they call left field reserved. Seats costing as much as $270 (plus a $12 fee) are also available.

Let me know if anyone notices the teams cutting prices to fill seats.

And while I’m complaining, can anyone explain why the fee for buying an expensive ticket online should be higher than the fee for buying a less expensive one?
http://norris.blogs.nytimes.com/2009/03/30/this-is-the-year-that-both-the/

Schadenfreude: Tough Times For the Wealthy

From Floyd Norris at NYT:
"I point out some of the advantages that accrued to those of us who never managed to get lots and lots of dollars together.

1. We never got used to spending large bonuses. A cap of $500,000 on annual cash income would not present a serious problem in lifestyle maintenance.

2. We never got to invest in hedge funds. So we never found out out that our fund’s manager had invested in C.D.O’s, or had gotten those nice returns by funneling money to Bernie Madoff (TW: or Sir Allan Stanford)

3. We never had any reason to open a secret Swiss bank account. So we did not quake in fear when we read today that UBS has decided to tell the American tax authorities about the ways we used those accounts."

Not More Regulation Just Better

TW: This piece frames how an administration opposed to government regulation can hamstring the entire regulatory process. It was not necessarily changing the rules but it was slow walking the process during the period in which some of the more egregious excesses leading up to the present crisis occured. Our regulatory processes will likely change but most importantly I would hope the current administration instead of doing many things to put hurdles in front of existing regs would merely actually enforce them. We do not necessarily need a bunch of new regs just judicious enforcement. These type things are why you need competent governance in place of ideologues.

From Norris at NYT:
"One virtue of appointing Mary Schapiro as chairman of the Securities and Exchange Commission is that she used to be a member of the commission, and therefore knows how things were done before Chris Cox slowed them down.
Today she announced she is ending two Cox policies that delayed enforcement actions. No longer will the commissioners demand advance approval of penalties to be imposed on companies as part of settlement talks, and the commission will no longer stall for weeks on a decision on whether to allow the staff to open a formal investigation.

Here are the relevant parts of her speech:
As a first, but significant, step in empowering our enforcement staff, I am this week taking action to end the Commission’s two-year “penalty pilot” experiment, which had required the enforcement staff to obtain a special set of approvals from the commission in cases involving civil monetary penalties for public companies as punishment for securities fraud.
In speaking to our enforcement staff, I’ve been told that these special procedures have introduced significant delays into the process of bringing a corporate penalty case; discouraged staff from arguing for a penalty in a case that might deserve a penalty; and sometimes resulted in reductions in the size of penalties imposed.

At a time when the S.E.C. needs to be deterring corporate wrongdoing, the penalty pilot sends the wrong message. The action I am taking to end the penalty pilot is designed to expedite the commission’s enforcement efforts to ensure that justice is swiftly served to those public companies who commit serious acts of securities fraud.

Another immediate change I am putting in place to bolster the S.E.C.’s enforcement program is to provide for more rapid approval of formal orders of investigation — the permission slips given out by the commission that allow S.E.C. staff to use the power of subpoenas to compel witness testimony and the production of documents. When I was a commissioner, formal orders were routinely reviewed and approved within a couple of days by written approval of the commission or by “duty officer” — a single commissioner acting promptly and on behalf of the entire commission.

Today, however, many formal orders of investigation are made subject to full review at a meeting of all five commissioners, necessitating that they be placed on the calendar sometimes weeks in advance. In investigations that require use of subpoena power, time is always of the essence, and every additional day of delay can be costly. To ensure that subpoena power is available to S.E.C. staff when needed, I’ve given direction for the agency to return to the prior policy of timely approval of formal orders by seriatim approval or where appropriate, by a single commissioner acting as duty officer."
http://norris.blogs.nytimes.com/2009/02/06/unleashing-enforcement/

A Simple Stimulus Example

TW: A simple example of how government spending mitigates the collapse of demand. This is one type of stimulus the Republicans almost never oppose but for some reason cannot understand how it could work for almost any other type of spending (prison construction excepted of course).

From Floyd Norris at NYT:
"The durable goods orders for December, released today, provide more evidence that the economy fell off sharply late last year. There is a little bit of evidence that things stabilized a bit in January, but it is too early to say.

As it is, using a three-month moving average to smooth out somewhat volatile numbers, durable goods orders from October to December were down 16.8 percent compared with the same period of 2007. That is the sharpest year-over-year fall since they started collecting data in 1958.
But the real news is in the breakdown. Durable goods orders other than the military were down 18.6 percent, also a record. Within that group, car industry orders were off 25.9 percent, and nonmilitary aircraft and parts orders — hello, Boeing — were down 66.9 percent.
But military orders were up 18.4 percent.
Pentagon orders are notoriously volatile, so that might be a fluke if it was not continuing a trend. For the whole year, such orders were up 26.8 percent, while orders for nonmilitary goods were down 7.3 percent.
Perhaps that was economic stimulus. Perhaps it was an effort to spend the money before the Democrats took over. In either case, the Pentagon seems to be one of the few willing buyers these days."

Beware the Job Report

TW: The jobs numbers today actually spurred some relief as expectations were so low that they were exceeded. But the challenge with the data is that like most government reports it is very preliminary subject to significant revision. A problem with all such reports is that when the data is moving in a volatile manner the preliminary reports become more and more unreliable usually understating the move either up or down depending upon the underlying direction. Obviously these days down would be the likely direction. This is not subjective bias on the part of the government merely stats. They use formulas and estimates based on past trends as those trends themselves evolve they skew the initial estimates.

From Floyd Norris:
"Throughout much of 2008 — until the fourth quarter’s obvious economic collapse — there were a lot of economists denying a recession had begun, and asserting that the employment numbers were a prime piece of evidence.

They seemed to have a point. Job losses from February through August averaged 83,000 a month. That was not good, but it was not nearly the number you would expect as a recession was getting going.

Today the numbers were revised, and the recession appeared. The average over that span is now 147,000 jobs lost per month.

Why the change? The figures for March 2008 and before reflect the use of unemployment tax data. After that there are revisions stemming from the benchmark established by that data, as well as changes in seasonal adjustments and changes in the birth-death model the government uses to estimate jobs created by new companies.

Those economists who believed the numbers were fooled. Those who reasoned that a recession was obvious, given the troubles of the home and auto industries, were vindicated.

And now? Over the five months from September through January, the number of private-sector jobs is down 2.1 percent — the highest for any comparable period since 1975.

Among the unemployed, an unusually high percentage got that way by losing their jobs — not because they quit them, or were laid off with the possibility of being recalled, or by not having found work since joining the labor force.

Finally, the January figure may be worse, in reality, than the loss of 598,000 reported by the Labor Department. That is a seasonally adjusted figure. Before adjustment the figure was a loss of 3.6 million jobs.

That big adjustment reflects the fact that temporary holiday season workers see their jobs end. But this season there were fewer such workers hired, and that means that more of those who lost their jobs were probably permanent workers."
http://norris.blogs.nytimes.com/2009/02/06/lost-a-lot-of-jobs-that-never-were/

Counter Cyclical Spending In Action

TW: A large piece (roughly $200 billion) of the Obama stimulus plan is slated as payment to local and state governments to cover short-term budget deficits amidst the recession. Without the federal support the local and state governments, who cannot deficit spend, will be forced to slash spending across the board. Local governments in particular are hurt severely this time since real estate related taxes represent such a large part of their revenue.

Do the Republicans really want to cut local and state spending by $200 billion amidst this recession. There is a reason you may have seen Republican governors coming out far more strongly for the Obama plan over the weekend than their Congressional counterparts who are enjoying the political gamesmanship of "government sucks, lets cut taxes".

The other point to Norris' piece is that deflation grosses up nominal spending figures. We are used to inflation adjustments grossing down nominal figures. Instead of say a nominal number of 105 being reduced down to an inflation adjusted "real" 100 figure, a nominal 95 figure gets grossed up to a deflation adjusted "real" 100. That was a big factor btw in the real GDP number being better than forecast last week.

From Floyd Norris at NYT:
"Last week’s G.D.P. report included one number that seems ominous to me: Spending by state and local governments is plunging.

Few noticed this because it is common to focus on the “real” inflation-adjusted numbers. By that measure, state and local government consumption (as opposed to investment) spending was up 0.1 percent in the fourth quarter.

Evidently, however, the federal government thinks state and local governments are benefiting from a lot of deflation. The “nominal” figure — the estimate of actual dollars spent — fell at an 11 percent annual rate. That is simply unprecedented. The previous low for that figure came in the third quarter of 1952, when it fell 4.5 percent.

It is a hard figure to believe, and I suspect it will be revised upward. But if it is not, it is scary.
To get a feeling for why those governments are in trouble, turn to the S.&P. Case-Shiller house price indexes

...While I was in Davos, Switzerland, a letter arrived at my home from New York City, telling me my house was assessed for less than it was a year ago. It is no wonder the city is talking about layoffs."
http://norris.blogs.nytimes.com/2009/02/02/as-home-prices-go-so-do-cities/

Capital Gains Tax Benefits Are Sucked Up By the Few

TW: Republicans are pushing to keep the lower capital gains tax rates initiated by the former POTUS. One can see from the graphs that unless you buy into trickle down economics that the vast majority of the reduced tax benefit goes to the wealthiest members of society.

Restoring Competence

TW: The SEC under Bush has been a mess. Culturally Bush pushed an agenda of de-regulation and minimal oversight. His SEC leader, Chris Cox, is a long-standing conservative idealogue. John McCain was reviled for suggesting in September that Cox be fired. While the timing of McCain's suggestion was wrong, the sentiment was correct. This week's Madoff debacle is merely the latest transgression.

Obama appears to have appointed a more competent successor. Lets hope so.

From Floyd Norris at NYT:
"Mary Schapiro, a veteran and diligent regulator if ever there was one, is...Obama’s choice to head the SEC. It is a choice that should please those who hope the S.E.C. can recover from what must be the worst year in its history...

She helped clean up Nasdaq and now runs Finra, the industry self-regulator. She has been appointed to jobs by Republicans and Democrats...

During his tenure, [Cox] moved to make it harder for the staff to file charges against companies, and the commission delayed settlements while commissioners negotiated to impose smaller penalties than the companies had agreed to pay...

In picking Ms. Schapiro, Mr. Obama has chosen someone who knows all the issues and all the players and who is committed to effective and rational regulation."
http://norris.blogs.nytimes.com/2008/12/17/can-she-save-the-sec/

Minnesota Should Hold a New Senate Election

TW: Floyd Norris suggests a re-vote for the MN Senate seat. I agree. There is no valid way to arbitrate a vote that appears literally to have come down to a few dozen votes amidst several million, a statistically invalid difference by any measure. At that point the "winner" is merely the one who wins the political/legal battles associated with defining which votes are counted. Regardless of who "wins" the re-count a re-vote should be held. It would probably favor the Republican since the Obama coattails would have been shorn but to me it is the best solution. It certainly would be a doozy of a re-race (and stimulative for the MN economy!!).

From Norris via NYT:
"On the Op-Ed page today, Charles Seife says that there are enough missing ballots and other problems in Minnesota that we will never be sure who got the most votes. He calls for invoking a Minnesota law that allows for the flipping of a coin to decide a tied election.
The idea of a senator’s being chosen by a coin flip is unsatisfying, and there is a contrary precedent that could be applied if the Senate wishes.
In 1974, John Durkin, a Democrat, and Louis Wyman, a Republican, basically tied in the New Hampshire Senate race. As I recall, there were recounts with different outcomes, and the Senate finally threw up its hands and a new election was agreed to. For the better part of a year, New Hampshire had one senator, until Mr. Durkin won the runoff. He served until he was defeated for re-election in 1980.
(Full disclosure: In 1977, I briefly worked as Senator Durkin’s press secretary. The shortness of my tenure reflects the quality of my work in that role.)"

Never...Ever, Listen To Realtors!

TW: I continue to derive sick amusement from the disingenuous PR tripe issued by the National Association of Realtors. All industry PR is highly biased but these folks set the bar for unadulterated propaganda. When folks complain about the media fanning the flames of the current crisis I always hark back to the flip side. When things were smoking in the real estate and financial markets was the media tamping down the propaganda? NO. The sum of the Norris post relates to the still very weak housing market but he ends with a quote.

From Floyd Norris/NYT quoting Barry Ritholz:
"...Funny, I do not seem to recall [Natl Assoc. of Realtors] warning about upward distortions of prices due to the combination of absurdly easy credit, ultra-low rates, and the appraisal fraud some of their membership helped to promote.
The simple fact is that these “distressed” sales were the unavoidable result of money being lent to people who never should have received it, and these borrowers then buying homes they could not afford.
The so-called distortion took place years ago, and the current distressed sales are the repair of that distortion.
That the National Association of Realtors refuses to acknowledge this only further reinforces their image as absurd cheerleaders and idiot naifs. They have a significant degree of culpability in the entire housing debacle"
http://norris.blogs.nytimes.com/2008/11/24/go-west-foreclosure-man/

Economists: The Eternal Optimists

TW: I would not rate Norris up there with Nate Silver in terms of forecasting prowess, but he has been a helluva alot more right than 90% of the economists on this financial crisis. Unfortunately he finds the economists projections that this recession will ease by Q2 next year as unconvincing. I agree.

From Floyd Norris at NYT:
"...A year ago, the combined wisdom of the economists was that there was a one-third chance of any recession arriving. It was not until March that this group thought a recession was more likely than not...In July, when the third quarter was under way, just 5 of 53 thought that would be a negative quarter. The government’s first estimate for that quarter is a negative 0.3 percent, and there is a good chance that will be revised lower. Only 16 thought the fourth quarter would be negative. Now all but 3 expect it to be down.

The history of most forecasts is that they are overoptimistic. Economists as a group miss the start of nearly every recession, and they see the end before it actually comes.

The most interesting data that came out today was the sharp fall in export volumes in October. This data can have one-month gyrations, but if that continues it will be another indication that the worldwide recession is on."
http://norris.blogs.nytimes.com/2008/11/13/they-missed-the-start-now-they-see-the-end/

Yes I Did

TW: Am sure we are going to hear this over and over. Turnout is one of the most over-estimated phenomenons but still....this time...my own contribution...

In '04 was voter #5 at my precinct, this year #16 but in '04 there were maybe 15 folks waiting when I left the poll, today about 125. And we are in a very safe Dem district with zero competitive races (am very confident Obama will carry IL...).

From Floyd Norris NYT:
"I went to vote this morning, arriving at the Caton School in Brooklyn at 5:55 a.m. I have been voting at that school’s gym since 1984, and have never had to stand in line behind more than one or two people.
This morning, there were about 90 people in line ahead of me, waiting for the polls to open at 6 a.m"
http://norris.blogs.nytimes.com/2008/11/04/long-lines-where-there-never-were-before/