Thursday, June 30, 2011
Though I could speculate, I do not know the precise reason why housing starts forecast unemployment so well. I do know, whether the correlation is spurious or not, it's been a pretty good predictor in the past which is why I wanted to revisit and update the chart. I also wanted to revisit the chart because this recession is different than most others (duuhhhh!) in that unemployment has remained stubbornly high. Instead of a traditional recession where (cough cough, WHEEZE WHEEZE) FREE MARKET FORCES are brought about to take advantage of lower labor costs and lower cost opportunities presented by recessions and bring about a SHARP drop in unemployment, this time around it has not happened as unemployment stalls above 9%.
The question is of course, "when will unemployment come back down?" and this chart tells us the answer;
Not any time soon.
Notice that housing starts have also stalled. Unlike recessions before, when housing tanks, but then quickly recuperates, this time around it has not only tanked, but stayed tanked. Housing is still down and out, and assuming the correlation between housing starts and unemployment holds, you can expect unemployment to be hovering around 9% for some time to come.
Now this is GOOD NEWS in some regards because many political pundits (lacking the super awesome economic genius I am gifted with) are worried that Obama will be like Ronald Reagan. Reagan during his first term had very low approval figures just like Obama, but then an economic boom occurred in the third year of his first term, vaulting him into a second term. Those of the right side of the political spectrum are worried this could happen with Barry.
However, that is unlikely to happen. If you look at housing starts under Reagan in both parts of the double dip recession/Volcker Recession, housing starts recovered immediately. Additionally, they never went below 800,000. In Obama's case, housing starts tanked to 500,000 and have consistently stayed down there for over 2 years.
Of course, I don't know why housing starts track unemployment so well. And I am nowhere near as "educated" as the likes of Christine Romer and Paul Krugman. But so far this chart is batting about .925 while Keynesian-addicts such as Romer and Krugman are batting at about .000.
So those of you on the political right need not worry. The economy is not going to recover in time and strongly enough to the point it will save Obama. More importantly though however, is that we should not be cheering on a moribund economy so we can defeat somebody for political gain. We should be cheering this on because it's simply going to be another metric ton of empirical evidence that socialism and Keynesianism does not work, and free markets and a free people do. Of course "tell them that."
Not much will be changing here at my main blog, other than the look, but I've now revealed my secret identity and written a bit more about the conception of this blog and its direction moving forward. Always being an all or nuthin' kinda gal, there's probably a lot more about me there than anyone needs to know.
Tuesday, June 28, 2011
I don’t believe I’ve ever told you about this big, and I mean big guy called Fierce who was bull-dogging a small kid in for 2½ years for stealing cars. Fierce had heard about me and when I hit the yard, he looked me up and down like he either wanted to eat me or take me to bed. I was scared because I didn’t know why he was checking me out like that. I started to look around for something to hit him with. The only thing was the mop, and it was a long way away.
He came at me slowly and my adrenaline shot to the roof and my legs were shaking. He offered to shake my hand, so we did, and as I tried to let go he said, “Mind your own business, nigger boy.”
I couldn’t believe it at first because there is some respect even though the black prison population in Arizona is small. He disrespected me because the devil had a hold of his heart and mind. He was and is evil. I thank God that he didn’t hit right then and there because my guard wasn’t up due to the handshake.
I stood there for a second.
He turned and looked at me.
I walked away, and turned to God. I can’t say that God spoke to me, but I can say that he answered my prayer.
Four days went by and Fierce had that kid bleeding from the mouth and anus. Just thinking about it I am still moved by the brutality of it all. None of the kids race would stand up for him. That’s when God touched me and moved me. I couldn’t do anything out in the open, so I waited, listening to the kid scream “No!” at night, and Fierce walking out in the morning like he had been with his woman.
This old man who went to church services told me that Fierce was coming after me because a few troublemakers were encouraging him to do so because they were afraid of him. They wanted to use me to get rid of him.
Fierce was lost in himself, meaning he didn’t care about anyone else. He only cared about getting high on heroin and the power he had over the people in prison including the guards allowing him to act out in certain ways.
Led by the good Lord, I stayed up one night at the door listening and watching. I heard his cell door opening slowly, so I put shampoo on the floor and stepped back.
Wham! The door flew open and I braced myself.
He slipped and his hands grabbed for the sink and the wall. I hit him in the solar plexus, and went to town on his sorry ass. His size and strength were something to behold. I put everything I had into every punch and kick. Fierce jumped up and ran out. My hand was a mess.
He went to his cell, got a weapon, and came running back yelling, “I’m gonna kill you, nigger!”
The cop in the tower told him to lock-down, and he did right away.
That morning he was gone, moved by the guards to another yard.
Fierce only had five weeks left to serve. The word now is that he lives in California, where he’s doing time for rape. The kid he raped in the Arizona Department of Corrections tried to kill himself when he got out and is still on medication.
But there is one investment, especially for young men, I am STRONGLY recommending.
Men, listen to me. You can go ahead and look on them there interwebz and read all about different prohibitively cars that have great mileage and worry about how the price of gas eats into your disposable income, or you can just buy a motorcycle. The compelling reason is NOT the money you'd save on gas, though that is certainly a factor. the compelling reason is the money you'd save on courting.
Gas, if you look at personal expenditures, is actually not that large of an expense. It usually is less than rent and even less than what you spend on booze, cigarettes and other vices. But if you employ your motorcycle correctly you can save a TON in....
Look, women LOVE motorcycles. Even the ones that don't claim to, once you throw them on the back, they LOVE motorcycles. You don't have to take them to fancy dinners, overpriced movies, trips to Cancun. You just say, "hey, get on" and off you go.
Better than that even is the money you save not having to go and search for a nice young lady to court. When you get a motorcycle, you don't go to the "clubs" or "discotecs" or "parties." You simply show up where the object of your affection is on a regular basis with your motorcycle jacket and helmet. And when you have built a repoire with the young lady you simply say, "Hey, want to go for a ride?"
It's almost, if not easier than asking a girl to ballroom dance. It is the perfect in.
Of course, motorcycles are not just for the young man. They are also for the young lady. Owning and driving a motorcycle immediately puts you in a higher regard amongst most males. Sure it may be a bit tom-boyish, but no man in the history of men ever said, "Oh, no! She has a motorcycle! That sucks! I'm never dating her!" Additionally, your ownership of a motorcycle also saves you the unnecessary time, money and expense of going out "clubbing" and buying the latest in night-club-wear. Put on some good jeans, some bootsy-boots, and BAM! You'll have plenty o' men pining for your affection and better gas mileage to boot!
So youth, for those of you looking to invest, but you plain just don't believe your 401k will be there. Or you just plain don't have the money to afford investing, then invest in a motorcycle. It will pay itself back VERY quickly and make your love life all that much easier.
In the beginning of 2008 I read Gary Taubes’ book Good Calories Bad Calories. This book shifted my paradigm (and that of so many others). I probably misinterpreted it in those days, but it made me so carbophobic that I practically eliminated all carbohydrates from my diet. I mainly ate meat, fish, eggs, coconut oil and butter. And I surely lost weight, but in the long run I also got starvation symptoms like irritability and shakiness.
After years of self-studying biology and physiology and reading a lot of blog posts, books and scientific publications I have come to the conclusion that when you’re not diabetic or metabolically derailed you can safely consume reasonable quantities of carbohydrates. Reasonable is somewhere between 15 and 30 percent of your calories; this as long as you match your calorie intake with your level of activity. Starch, which consists of mainly glucose, is the preferred carbohydrate. Fructose, fructan and lactose can best be firmly restricted.
Read more »Of course I brought this insight into practice and it resulted in a desired weight gain mainly coming from extra muscle. Adding about 100 net grams of carbs very much improved my body composition. Also the irritability and shakiness disappeared.
Monday, June 27, 2011
Sunday, June 26, 2011
Here's the blog post I was discussing: http://livinlavidalowcarb.com/blog/jimmy-moores-may-2010-testimony-before-the-usda-regarding-the-2010-dietary-guidelines/10989
Saturday, June 25, 2011
Chris is a young person sentenced to a UK prison for death by careless driving. Chris crashed while under the influence of drugs. His passenger/best friend died.
The build up to my sentencing made me uneasy. I was on bail for one year one month. During that time, I didn’t have a clue who I was. I was addicted to smoking weed as I thought it would heal the pain of me losing my best friend, Tom, and the death I had caused. But really, cannabis was making feel and act badly. I pushed my family further away when I needed them most.
My court date crept up on me. I entered the court room full of anger knowing it was the last time I’d see my family, girlfriend and friends for a long time. I was sentenced to 33 months, having to spend a minimum of 16 months in prison. I was angry, upset, tearful and lost within.
I was taken downstairs into custody to be transferred to a prison. My deceased best friend, Tom, had a cousin at a particular prison called High Down. He wanted my blood, so I needed to avoid going to that prison at all cost.
“Please don’t send me to High Down,” I said to the guards getting ready to ship me out.
“Why not, petal?” asked a female guard sympathetically.
“There is someone there who is after me.”
“Do you want a cup of tea?” she asked.
She assured me that no one would be after me at the prison I was going to.
The next thing I knew I was in a Serco van being transferred to my first prison – High Down.
The drive was an hour’s stretch. Outside was darkening. I shut my eyes from exhaustion.
We pulled up to the prison, and were let out of the van one by one to enter the reception and holding cells. There was a big group of black men in one corner aged between 16 and 29, all taking about how they’d been caught.
Anxiously, I waited to be strip-searched. My thoughts were quick. I was worried and confused. I didn’t know what was ahead of me. I wanted to get in a bed and fall asleep and feel like I was dead.
“Smith, step forward!” a guard shouted even though I was the last one in the holding cell.
I came out and slouched over his desk, really tired, ready to fall asleep.
“Stand up, boy! Where do you think you are?” he belted as if I were in a military school.
He booked me in quickly.
I had to undress in front of a guard and bend over.
I was given a hotplate of food, which was the last thing on my mind. I had no appetite, and could barely walk I was so exhausted. I carried my plate down a corridor.
A trustee called me over. “Oi, you, come into my office.”
I went into a room where mops and buckets were stored.
“Sit. Eat your dinner. No smoking.”
The man filled his paperwork with my details. I didn’t eat.
I was finally led to house block 3, the induction wing. I was shown to my door with a boy called Mark, my first cellmate, a skinny lad age 18. It was his third time in prison and he didn’t seem disappointed. I was worried about getting beaten up in prison, but not by Mark. We put our stuff down, and smoked a rolled cigarette, commonly known as a “burn.”
After settling down, Marc got his toothbrush and razor from his wash bag. He was behaving suspiciously, so I kept an eye on him. My instinct was right. He was making a blade, a shank, by attaching the razor blade to the toothbrush. He hid it in his mattress. Not knowing who he was or what he was capable of, I slept with one eye open in case he decided to attack me.
The next morning, we were let out for induction. I felt sad and vulnerable in my new surroundings. Our block had three wings separated by bars. A prisoner called me over to the end of the wing. As I got closer, I recognized him. He had tattoos on his neck and looked like an evil man. It was my best mate’s cousin who wanted me dead.
“What’s your name?” he asked.
Giving me an evil look, he said to the other prisoners, “Stay away from him. He is no good.”
I felt intimidated, not knowing what he was planning to do.
Friday, June 24, 2011
Anyone? Anyone? Bueller? Bueller?
My First Book Club Talk
I recently did my first talk to a book club. I told them my prison story, followed by the ups and downs I went through to become a published author. The talk was supposed to last for less than two hours, but the questions kept it going for almost three. The audience of around twenty-five genuine interested people, including bookworms and aspiring writers of all ages, helped create a great atmosphere. I felt honoured to have received such a warm reception. Above and below are YouTube videos of the latter half of the event after I finished my prison story and got down to literary matters.
Thursday, June 23, 2011
Remember, flowers on birthdays and Valentines Day are more expensive and expected, rendering them ineffective.
But on non-descript days, like today, it's worth dropping $5 at your local grocery store.
This concludes the Captain's public service announcement.
It’s safe to say that the “Paleo Movement” has taken off. What started as a relatively small bunch of ‘reformed Zoners’ and ‘ahead of their time meat lovers’ has evolved into a large group of people dedicated to performance, health and longevity. The overall ruling concepts of Paleo are pretty much the same across the board – and like any diet or training program getting started is the hardest part but once you’re in, results will follow – at least for awhile… But in time circumstances and needs change. Your body adjusts and what worked once or for awhile may not be the answer anymore.Now the rest of the post is about Robb's Paleo Charlie's Angels whose services one can contract to figure out how to get Paleo working for you again, but I think it's more interesting that this is being admitted. I will differ with the notion that Paleo-principles are quite so similar across the board. It seems almost the opposite to me, hence so many different versions of/books on the Paleo diet.
Read more »
Wednesday, June 22, 2011
Tuesday, June 21, 2011
Of course the only thing worse than Evil Big Oil is CANADIAN Evil Big Oil. Don't get me started about those evil Canadians with their hockey and Rumpleminze and civilized society. Don't want none of that stinking Canadian oil do we? No, much better to have stable, pro-US Middle Eastern oil.
Monday, June 20, 2011
It’s a drizzly, grey Monday afternoon in England, and I just woke up. Still recovering from several days of non-stop events, including two book signings, talks to schools, and my first talk at a book club. Mum is still asleep, convalescing, barley able to croak out a word. Our goal was to smash our previous book-signing record of 98 copies of Hard Time – sold at Wigan Waterstone’s a few days before Christmas. We were praying for Father’s Day shoppers to come to the Manchester mall in droves on Saturday.
“I’m signing my book today if you like true stories,” I said to the first shopper on Thursday at Waterstone’s in Liverpool.
Eyeballing the display of jail outfits, he barked, “I’m not giving any support to criminals!”
Mum and I shrugged him off.
Mum approached the next shopper. “We’ve got an author signing his book today. It’s a great Father’s Day gift.”
The lady’s face creased, her eyes filled with tears. “My father died last week.”
“Oh, I’m terribly sorry,” Mum said.
“Oh, it’s alright.” The lady rushed away, head lowered, leaving Mum and I exchanging shocked expressions.
“Got an author signing his book today. It’s a great Father’s Day gift.” Mum handed a leaflet to a lady.
“The only thing I’d give my dad for Father’s Day is arsenic.” The woman marched away as if going home to murder her father.
Mum turned to me, her face resonating despair. “How can we tell anyone else it’s a good Father’s Day gift?”
“If it continues like this, we’d better go home in an hour or so,” I said. “Maybe it was a mistake to sign on a Thursday.”
Mum closed her eyes, hummed meditatively, and started waving her hands around as if drawing shapes in the air.
“What’re you bloody doing?” I asked, worried.
“The atmosphere is all wrong. I’m changing the energy.”
As if Mum had conjured them up, three young lads approached. Fans of Prison Break, they questioned me for ten minutes, attracting others to the display.
Although footfall was low, interest was relentless for the next few hours. No more negative reactions. We sold out, all 41 copies, and left early.
On the drive home, I said, “Do you really think we’ll set a new record on Saturday if footfall is low like today?”
“It’s Thursday. The Trafford Centre is always very busy on a Saturday.”
“Yes, we will make it happen!”
“We sold fifteen in the first hour,” I said to Mum. “But we need to increase that to get over a hundred.”
The new manager introduced himself.
I asked him, “Do you mind if we set up a satellite display of books where people queue? It’s worked well for us in the past because they pick the book up while they’re waiting to pay.”
He gave the go ahead, and it started working right away.
The shoppers increased every hour. The three of us couldn’t keep up with everyone coming in. Our average kept rising 16 an hour, 17, 19…
I shook hands with the two other authors signing that day in the same store: Penny Avis and Joanna Berry. Friendly, classy and professional, their book Never Mind the Botox: Alex just went on sale. For aficionados of chick lit, it is riding high on Amazon so far and has had great reviews.
A few people stopped by to say that they had read Hard Time, and enjoyed it. As usual, they demanded that I get the next book out soon.
A young woman approached, “My mum’s read your book, and she keeps telling everyone about you!”
“Thanks for stopping by to tell me that,” I said, smiling.
“Can I get a photo for her?”
After the photo, I said, “Why don’t you get her on the phone, and I’ll say hello?”
She did. We had a chat until the next wave of shoppers surrounded the table.
Even without the help of the mechanical cockroach – I forgot to bring it – we broke the record ahead of schedule. I announced it was time to pack up, took a box to the car, and returned.
“I sold three more copies while you were gone!” Mum said, excitedly. “We’re at one-hundred and three now!”
“Great. We can all go home now.”
Natalie and I packed up the last of the display, and started to leave. But Mum dashed off, her eyes wide, frenzied as if possessed. She ran around slapping flyers on everyone in sight, commanding the attention of dozens of people. “Author signing his book today! We’re leaving now! You need to buy it now if you want a good Father’s Day gift! If you like the Shawshank Redemption, you’ll love this!”
So many people flocked to the bare table, I had to unpack my pen, cockroach stamps and business cards to resume signing. Infected by Mum’s enthusiasm, half of them didn’t even know what they were buying and I had to keep explaining my story.
Twenty minutes later, Natalie and I urged Mum to leave.
Mum shrugged us off, and yelled, “We’re leaving now! We’ve only got so many copies left! You’ll have to make up your mind quick!”
The subsequent surge of shoppers rocketed the total up to 122 copies, smashing the record set in Wigan. The manager congratulated us, and said he’d never seen anything like it.
The book-selling frenzy took its toll on Mum. Attempting to buy Dad a bottle of wine on the way home, she almost collapsed in the shop. She stumbled out, fell onto her seat, and tried to stabilise herself with breathing techniques. I gave her some water, and went into the shop to complete the purchase.
Our effort did not go unrecognised by my publisher either. Just received this:
Just dropping you a quick line to thank you for all your hard work with book signings. We've just found out that you sold 122 copies of Hard Time at Waterstone's Trafford Centre, which was our most successful pre-Father's Day signing. Every one here at Mainstream are extremely impressed with how all your events have been going, and we'd like to give you a very big thank you.
Click here for the previous signing blog.
Tomorrow, Tuesday, I am being interviewed on the Meria Heller Show from 7 to 8pm in England. 11am US Pacific time.
Saturday, June 18, 2011
Friday, June 17, 2011
This is not to say that there aren’t excellent reasons to be physically active, as these reports invariably point out. We might just enjoy exercise. We may increase our overall fitness; we may live longer, perhaps by reducing our risk of heart disease or diabetes; we’ll probably feel better about ourselves. (Of course, this may be purely a cultural phenomenon. It’s hard to imagine that the French, for instance, would improve their self-esteem by spending more time at the gym.) But there’s no reason to think that we will lose any significant amount of weight, and little reason to think we will prevent ourselves from gaining it.and
Read more »
Thursday, June 16, 2011
Regardless, I wanted to take a look at how our Canadian brothers and sisters were fairing up north, and thought the charts would be of some interest to our fellow Cappy Cap readers. I apologize for the size, you will have to click on it to get a decent size view of it.
Wednesday, June 15, 2011
Renee – Only a teenager, she received a 60-year sentence. Now 15 years in, Renee is writing from Perryville prison in Goodyear, Arizona, providing a rare and unique insight into a women's prison.
"You know, you young kids may hate rich people, but if you look at how much they pay into the system you'll realize you don't want to piss them off. I mean, do you know those charts where they show you how much money is being spent or made? Yeah, Bill Gates would have like a million little dollar bills on the chart and then average guy would be a fraction of of a fraction of a dollar sign. You don't want that guy leaving."
Of course some people do.
But then there is a consequence.
Enjoy the decline!
Tuesday, June 14, 2011
Of course, it is from Big Oil, so it should be ignored as we continue to pin our hopes of economic recovery on that there booming "green economy."
Low carb dogma would have us believe that the triglycerides pumped out by our livers are not from the fats in our diet but the carbohydrates. And specifically that they are formed from fatty acids derived from de novo lipogensis - DNL - aka excess carbs converted to fat. As was discussed in Part I, in a whole food carbohydrate diet, DNL is not a major contributor to VLDL-triglycerides.
Monday, June 13, 2011
For example, most of you have NO clue what the big hubbub is between "Mac" and "Windows" and "Linux." (Answer - It's nothing, TRUST ME. Just go back to using Window's machines and enjoy your lives citizens)
Or, when an IT geek cuts a joke and all the other geeks laugh, is it really that funny? (Answer - No, even when you understand the punch line, the jokes are really not that funny).
But every once in a while when the IT and economics worlds mix, it gets really interesting.
"She works for the same place as me," I said, "The McLellan Practice, doing talks to schools." Sandra was a school teacher who tried to smuggle heroin out of Thailand. She was sentenced to death, but the sentence was reduced by the King of Thailand. Here's the link to her excellent book.
Saturday, June 11, 2011
Friday, June 10, 2011
From 10.30am until 4pm, I will be at Waterstone's 174-176 The Harlequin Centre, Watford, Hertfordshire, WD17 2WS (01923 218 197) Click here for a map.
On Saturday morning at 7.20am (England GMT), I will be on BBC Three Counties Radio Click here to listen live on Saturday.
Next week's book signings are in Liverpool on Thursday and Manchester on Saturday. Click here for more info.
Thursday, June 9, 2011
Wednesday, June 8, 2011
This should be disconcerting for Obama and Obama cheerleaders because it is now put up or shut up time. And sadly, there are no more bullets left in his exhausted Keynesian elephant gun. Worse still, the extra 100,000 jobs came at a price of indebting the country to the point of insolvency. And worse than that is GW's economic boom was preceded by an expansionary fiscal policy that focused on tax cuts as opposed to spending.
Chris is a young person sentenced to a UK prison for death by careless driving. Chris crashed while under the influence of drugs. His passenger/best friend died.
The food in here is just rank! It’s no good if you’re trying to stay healthy. Stews look like vomit. Curries are bowls of coloured water with disturbing meat, and chips are like rubber. I mean proper rubber – they are not edible.
Click here for Chris’s previous blog
The Captain has a mission for those of you with an expertise and knowledge he doesn't have.
I remember watching a WWII documentary about the siege of Berlin during WWII. As the Russians approached and it was becoming very apparent the Germans would lose the war, Berliners in a weird psychological way started celebrating. NOT because the war would soon be over, but because they were doomed.
Nazi's would shoot people trying to escape and even if they did manage to escape the Russians would shoot them. So they were trapped and more or less forced to sit there and wait for the Russians to come.
Since there was nothing else they could do, they started throwing parties. I saw some eerie video of Germans drinking and partying away. Sometimes these parties would often end in suicide.
Now it's one thing for me to simply recall this documentary, it's another thing if one of you would be so kind refer me to a documented source or link that actually cites it. I've tried searching teh interwebz, but am having no luck.
Any historian economists out there?
Tuesday, June 7, 2011
So, do you see what I see?
Monday, June 6, 2011
It was an honour to be invited back to perform at the Stoke Newington Literary Festival on Saturday. I was paired with Gavin Knight, author of Hood Rat, an eloquent speaker and all-around good-vibe guy.
Here’s what a reviewer wrote about the session with Gavin:
Shortly after it was time to see journalist Gavin Knight and ex-convict Shaun Attwood talk about their experiences of the criminal underworld in a brilliantly intimate little room upstairs in the White Hart pub. Knight discussed his research into some of Britain’s most notorious gangs, which is collected in his book Hood Rat. Attwood told of his experiences in one of America’s toughest prisons, which was kind of like an aural, more graphic equivalent of Louis Theroux’s latest documentary for the BBC. This was an event made up of exhilarating anecdotes, and some of the stuff that Attwood came out with was thrilling and sickening in equal measure, such as the horrific beatings he was witness to first hand. The pairing of Knight and Attwood was the perfect example of what a literary festival should do: give members of the public a direct and fascinating insight into areas of life they would never normally be privy to. Fantastic.
Video clips will be available later this week.
Other than performing, I enjoyed the events, especially Alexei Sayle, whose hilarious anecdotes about being raised by Jewish, atheist, communist radical parents in Liverpool generated lots of laughter. He infused his readings with theatrical voice inflection and funny faces, all the time coming off as natural, spontaneous and sincere.
Perhaps the biggest name there was Steven Berkoff, the famous super villain in so many movies. General Orlov in James Bond's Octopussy. Lt. Col Podovsky in Rambo 2. Approaching Berkoff in the lobby just before his performance, seeing that distinct face, especially his eyes, the eyes belonging to so many evil characters, filled me with terror. Why did he have to hunt Rambo down so ruthlessly during my formative years? Hollywood has conditioned me to be frightened of him. And I am not alone. Others have experienced this. Including the lady who booked Berkoff. I believe it is called the Berkoff effect. So many people showed up to see Berkoff unveil a bust of Edgar Allen Poe that traffic came to a standstill on the high street. A magical moment.
On Sunday night, I had a chat with Howard Marks, the pot dealer whose book, Mr. Nice, I enjoyed in prison. He served time in America. His life was made into a movie last year.
My theory was that because of a general decline in long term average economic growth rates as evidenced here;
Corporate profits would also be in long term decline. I also contested the general work ethic in the US economy has declined over time at all levels of management as well as innovation and creation and this would also translate into deteriorating corporate profit growth. So I did the exact same thing below as I did above. I took REAL non-financial corporate profits over time and averaged their growth rates on a "generational" basis (20 year span).
Of course I was completely wrong. Corporate profit growth had never been higher than in the past 20 years.
Now, many things can explain this. Two bubbles (housing and Dotcom) overstated corporate profit growth in the past 20 years and thus (barring another bubble) corporate profit growth would return to normal. Also, globalization where domestic companies have milked as much profit as they can from the domestic economy and now go overseas for growth in developing nations. But I truthfully don't know the answer.
The only real reason I posted this up here is because I put so much time into it, I was saying to myself, "the heck if I'm not posting this chart!"
Sunday, June 5, 2011
Not much good came out of the 70's. There was...umm....yeah...ahhh....hmmm.....
So there you have it, not much good came out of the 70's.
But there was a movie starring an underappreciated actor, Walter Matthau.
You all know him for his comedic appearances beside Jack Lemon, but if you look at his acting career, he actually played some pretty bad ass guys. Watch "Charade" starring Cary Grant and Audrey Hepburn and you'll see what I'm talking about.
Regardless, he plays a very hateable anti-hero in the movie "Charlie Varrick." It's a dirty, sleazy, crime-infested movie that is about the only thing great to come out of the 70's. I won't even tell you any details because it would just ruin the movie. I want you to go and watch it and appreciate it as much as I did.
So Netflix it or just buy it, because you'll want to own it as part of your collection. Just trust the Captain on this one.
His advice boils down to "up the fat" to hasten the transition into ketosis so that your "induction flu" is as short as possible. Now, I've never experienced any such symptoms so I can't really relate to this, but apparently newbies and restarters have done very well taking the advice in The New Atkins to increase salt intake by sipping a little bullion. Anyway, Eades -- oddly enough author of a book subtitled "The High-Protein/Low-Carbohydrate ..." -- has now jumped full on into a tub of Mangalista lard.
Increasing the protein content of the diet from 15 to 30% resulted in an 35% increase in IGF-I regardless of whether the carbohydrate content was 40%, 20%, or 30% as in the present study. Thus the dietary protein-induced increase in IGF-I is independent of the amount of dietary carbohydrate and fat.
Saturday, June 4, 2011
There’s a novel concept for you. 60 years ago there was no such thing as a 401k, 403, IRA or SIMPLE plan. People retired by selling the family farm, enough heads of cattle or the family business. Less fortunate people had to rely on their children for retirement and some unfortunate souls, believe it or not, had to work till death.
But retirement programs are funny things and they have funny consequences. Especially when ALL of the retirement programs designate financial securities (read stocks) as the only medium by which you can save for retirement.
Let me repeat that again;
RETIREMENT PROGRAMS ARE FUNNY THINGS AND HAVE FUNNY CONSEQUENCES ESPECIALLY WHEN ALL OF THE RETIREMENT PROGRAMS DESIGNATE FINANCIAL SECURITIES AS THE ONLY MEDIUM BY WHICH YOU CAN SAVE FOR RETIREMENT!
Translated into English, this means with the advent of 401ks, 403bs IRA's, etc., this has channeled all retirement money into the stock market with little regard as to whether or not this would artificially inflate stock prices, thereby causing a bubble.
ie-are the cash flows below;
contributing to a long term bubble?
Of course history has told us that any time you abandon fundamental value as the only reason to invest in something, bubbles always occur.
For example, the famous Holland Tulip Bulb Bubble shows you what happens when you no longer value a tulip bulb for the fundamental value that it will bloom and look pretty, but rather value it based on the idea that you can sell it for more than what you paid for it because the person buying it from you doesn't care what they pay for it, because they know they can turn around and sell it to another person because they don't care what they pay for it because they know they can...etc, etc..
Or Beanie Babies. Paying $600 for something that is nothing more than cloth and beads. Doesn’t clean the house. Doesn’t pay a dividend. Just sits there. Once again, you have abandoned its fundamental value and paid $600 for (as far as I’ve been able to figure it) something to feed a middle-aged woman's midlife crisis.
Alas, today's modern stock markets I contest are no different For people no longer invest in stocks for their potential cash flows, profits and dividends, but rather invest in stocks as a vehicle for retirement. And in a very zombie-like fashion I might add.
Every month, every paycheck, without even thinking, there they are, millions of them, zombie Americans doing what their HR overlords and financial advisors told them to do;
HR Director - “You WILL invest in a 401k”
In unison - “We will invest in a 401k”
Government - “You WILL invest in an IRA!”
In unison - “We will invest in an IRA.”
With little or no regard as to whether the mutual funds (and underlying stocks) are actually worth the value.
Now couple this dramatic change in investment behavior with several factors;
1. The entire Baby Boomer generation is the first generation en masse to use the financial markets as their mainstay for retirement
2. The Baby Boomers are a plurality of the population
3. And are in their prime income earning years
Is it any shock the average S&P 500 P/E ratio has been consistently trading above its 80 year average of 15?
The question is what will happen when the Baby Boomers start to retire? And instead of contributing every month to their 401k’s like sheople, they withdraw?
Of course, there are arguments that a rise in the average P/E is legitimate and sustainable. One could argue that this is a behavioral change that is permanent. That the Gen Xer’s are contributing nicely and will pick up any slack. One could also make the argument that with the advent of the internet and online trading that prices to trade have fallen, allowing millions of Americans to flood the market with billions of dollars that would not have been invested otherwise.
Good arguments, and I agree.
But I wanted to check out to see how much of the past stock market performance was due to the market just being flooded with new money and not necessarily an increase in the profitability of companies.
So the first thing I did was compare the S&P 500 against new mutual funds sales (going back to 1984 which is as far back as ICI has the data), resulting in the chart below.
In obvious bubbles and crashes you can see the correlation, however, the S&P, as well as monthly contributions to mutual funds are in nominal dollars. Inflation alone would increase the correlation, so I adjusted the figures (and the S&P 500) for inflation (this causes for some unconventional measures, but they are meritous just the same).
The relationship still stands, and is particularly noticeable in the Dotcom Mania/Bust days. But girls aren’t impressed by economists who only adjust for inflation. Economically savvy and drop-dead gorgeous girls that have IQ’s of 490 and double as super models can see the obvious shortcomings of this chart and would say,
“Hey, Mr. Economist. If you want to stand any shot with me, you better darn well adjust those figures for the size of the economy and population!”
And we accommodate them, for we wish to stand a shot with them.
So then you have this, the S&P 500 divided by GDP (another weird figure, but interesting enough in itself) versus monthly contributions as a percent of GDP
(notice in Dotcom Mania, new sales of equity only funds accounted for more than 1% of GDP, as opposed to less than .2% just 15 years prior).
This is where it gets interesting because the two data series alone tell us many things;
1. Our broadest stock market index divided by GDP provides an interesting ratio, showing that it has consistently been increasing as denoted by the green line. ie-We apply more value to stocks, regardless of the amount of wealth our economy is producing.
2. Monthly new sales of equity only funds are amazing in themselves. Going from literally less than 1/10th of 1% of our GDP as late as 1992, monthly contributions have skyrocketed to .6% of GDP in all of 13 years! Furthermore, the insanity of Dotcom Mania had convinced people to forefeit money on the order of 1% of GDP a month into equity only funds for a solid year (1.6% in one month!).
3. Of course this could be because people had higher profit expectations of companies, and thus flooded the market with money, driving up prices, but it had nothing to do with the actual increase in our ability to produce wealth (from which profits derive). Even after the crash, we're still on an upward trend contributing a higher percentage of our wealth into the stock market, thereby increasing the value of the stock market, regardless of our wealth producing abilities.
However, there are more pertinent adjustments to be made.
In trying to find the appropriate base by which to adjust for inflation and economic growth, I was predisposed to use GDP as GDP is typically the base you adjust for. But after contemplation what mutual fund flows and indices should really be compared against is corporate profits as corporate profits are what ultimately drive the value of a stock.
Here, a similar correlation again, but this focuses on the heart of the matter; corporate profits. The only one true thing that should dictate stock prices.
Note the behavior of the S&P 500 relative to corporate profits. The stock market bubbles of 1987 and 1999 are obvious. Also note the highly correlated behavior of the monthly new sales of equity only funds as a percent of corporate earnings.
Ideally this should be a constant ratio, meaning people apply the same amount of market value to corporate earnings, thus, if corporate earnings go up, demand for that stock would go up by a corresponding amount, thus keeping the ratio constant (ie-if corporate profits go up 5%, demand for stocks would go up by 5%). Of course this ratio is not going to be constant because people's expectations of future profitability is changing and people's perception of value changes as well.
This is VERY obvious in the run up to Dotcom Mania. Traditionally sales in new equity funds would amount to no more than a percent or two of corporate profits. However, when people started having irrational expectations of corporate profits, this skyrocketed monthly sales to almost 70% of corporate profits. Arguably the clearest sign there was a bubble.
Regardless of temporary and irrational fluctuations in people's perception of value and expectations, look at the long term trend. After the stock market crash and people becoming disenchanted with stocks, new sales of equity only funds dropped down to a more "sane" 20%. While a significant drop, it still is significantly higher than the 2 or 3% and shows a general trend upward since the 1980's.
This suggests something a bit more permanent than just the random and chaotic whims and emotions of the market is afoot. And this something is disconnecting the relationship between what we pay in stock price and their corresponding profits, further suggesting to me we have once again abandoned profits, dividends and cash flow as reason to invest in stocks and are purchasing them for ulterior reasons. Given the high correlation between the increase in the S&P500 relative to corporate profits and new sales of mutual funds as a percent of corporate profits (.89) it suggests to me that gains in the market are primarily due to retirement money flooding the market and not so much increases in corporate profits.
All this being said, there is one final adjustment that should be made. Thus far all the charts and correlations have been made with "Monthly New Sales of Equity Only Funds" provided by ICI. This tells us nothing of redemptions that were made, ie-people pulling their money OUT of equity only mutual funds. If pure volume of retirement dollars flooding the equities markets is to blame for higher prices and not corporate profit-chasing dollars, then the net flow into equity only funds would be a more appropriate measure. Thus I ran the same figures of "Net New Flows into Equity Only Funds" as a percent of corporate profits versus the S&P 500 divided by corporate profits.
Albeit not as pretty as the previous charts, there is a correlation again, .30. Not as high as the New Sales figures, but a postive one none-the-less. And with with 262 data points, it is probably statistically significant.
However, speculate as we might that all this is being caused by new retirement money entering the market, we cannot know for sure. In Dotcom Mania was it just people’s irrational expectations of unrealistic profits that flooded the market with money? Is the rise in money entering the market now due to lower trading costs? Will Gen X continue this investment behavior? Or all of these things in play at once?
Alas, it seems all we’ve accomplished is proving that when a market is flooded with money, prices tend to go up.
Economists are very good at proving something that we already know.