How Housing Starts Will Prevent Obama from Being Another Reagan

Veteran readers know one of my favorite charts is to juxtapose housing starts vs. unemployment. I forgot how I ran into this particular chart or what compelled me to contrast the two, but many years ago I did, and what I found is that housing starts typical forecast unemployment by 6-18 months. Ergo, if housing starts tank, you can expect unemployment to spike within the next year and 1/2.

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."

My (New) Carb Sane-Asylum

Announcing my unveiling of the new look here at the Asylum!

If I were a conspiracy theorist I would believe someone jacked my usual browser as just after I applied the new template --  that needed quite a bit of tweaking -- blogger went down on me.  So much for doing it in the wee hours!  Then I saw a comment come through my reader on another blogspot blog and tried IE.  Well, thankfully that worked.

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.  

The most important new thing is the Discussion Boards are open!  Jump on in!!

I hope I have all the links going to the right places.  Please do let me know if you find any problems there.  And, as always, feedback is welcome!

Now off to raise some dust somewhere ....  {VBEG}



T-Bone v Fierce (by T-Bone)

T-Bone - Radiating power and strength, this deeply-spiritual massively-built African-American towers over most inmates. He is a prison gladiator with more stab wounds than Julius Caesar. A good man to have on your side.

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.

Click here for T-Bone’s previous blog

Shaun Attwood

Or Your Could Just Buy a Motorcycle

Financial advice is hard to give nowadays. Until the budget gets balanced and economic growth is enough to outpace population growth, I have a hard time finding something to recommend to people beyond hedging items such as "gold, silver, bullets, booze, foreign ETF's, and stable countries' currencies."

But there is one investment, especially for young men, I am STRONGLY recommending.

Motorcycles.

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....

courting.

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.

Sarah Conant - Professoinal Crusader

What did I tell you people about the threat of crusaders?

Is LC Healthy? Part I: What's with the Cramps?

At the risk of needing a hankie for my moist and dreamy eyes, I can't help but notice that so many seem so almost brainwashed to equate VLC with healthy, they don't listen to their bodies.  The two most recent blog posts by Dr. Eades, here and here, are illustrative for examining the validity of the "healthy low carb lifestyle" mantra.  

Let me say off the bat here that I do not consider the "induction flu" or a couple of days of feeling like crap whilst getting keto-adapted to be dangerous or unhealthy.  I've never experienced this myself.  But I have experienced one of the other side effects of low carbing -- that being severe cramps, usually in the middle of the night -- and I must say they were excruciating and worse by a mile than my worst menstrual cramps.  In his second post, Eades relates what I would consider rather scary episodes of cramping:

Read more »

Another one jumps off the bandwagon

Goodbye CutTheCarb

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.

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.

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Recession Medicine

HAR!

How's Sweden?

And this is coming from the country that was considering a "man tax."

Irresponsible Advice from Dr. Eades ... Again!

In a blog post entitled Tips & tricks for starting (or restarting) low-carb Pt II, Eades discusses cramps and hydration.  

Now, he does give the good advice about bone broth or bullion, but all of that is obscured to this reader by the frequent mentions of alcohol - complete with the picture atop the article and its caption.

A glass of Tinto de Verano pictured at left. A great way to hydrate. (See note bottom of post.)

Read more »

Government Guidelines - Let's Get Real!!

** I'm updating and bumping this post because my omission of a link to the blog post has led to some confusion as to the reference to Dr. Jeff Volek in the second to last paragraph.

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

-------------- original post -------------

So ...

If I've heard it once, I've heard it a thousand times. The USDA's misguided nutritional advice has wreaked havoc on our population and spawned the obesity epidemic.

Really?

Firstly, let me state flat out that I agree that the old pyramid was misguided. And I believe the newer guidelines are even more misguided. They aren't going to solve the problem. Basing a diet on whole grains and encouraging grain consumption when whole grains equates with flour and highly processed foods is absurd.  

That said, let's be honest here. When a 275-ish pound Jimmy Moore testified before the Congressional committee and made the following statements:

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The Death of Critical Thinking in the LLVLC World

A little history for those who haven't been following along here for very long.  I did my "planned cheats" and VLC plan from sometime in the summer of 2007 through spring 2009 doing essentially Atkins Induction with a few tweaks on VLC days from memory.  I did not tell anyone.  I did not seek any support.  I just went about my merry way.  I lost most of the weight in the first 10 months or so and lost very slowly to where I'd plateaued (and perhaps started to regain?) out in 2009.  It was then that I looked to the internet for answers.  I had never heard of other LC plans (e.g. Eades & Protein Power) or the Messiah himself Gary Taubes.  

At that time, Jimmy Moore's LLVLC Discussion Board seemed to match my fancy more than others, although I have registrations and read at Active LC'ers and Low Carb Friends, as well as following the goings on at a number of LC blogs.  If you're not a member of the LLVLC "wing" of the LowCarbOSphere, perhaps you feel that I'm unfair here at times pinning the goings on of this community and it's satellite friends on the whole "movement" such as it is.  That is fair.  Perhaps this post will serve as a wake up call to all of you who feel passionate to up your own volume and be heard.

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Going to Prison (by Chris)

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.
“Yes, please.”
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.
“Chris Smith.”
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.

Click here for Chris’ previous blog

Shaun Attwood

Notice the Statistics

I like the use of charts and statistics;

If This Doesn't Convince You...

then nothing will.

Oil Supports the Economies Leftists Are Most Proud Of

I will give a shinny nickel to any leftist or environmentalist that can explain why they love countries like Norway or they love people like Hugo Chavez, when their economies are largely based on "evil" oil.


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.

Shaun Attwood

2: Shaun Attwood Speaking to a Book Club

5: Shaun Attwood Speaking to a Book Club

4: Shaun Attwood Speaking to a Book Club

3: Shaun Attwood Speaking to a Book Club

7: Shaun Attwood Speaking to a Book Club

6: Shaun Attwood Speaking to a Book Club

9: Shaun Attwood Speaking to a Book Club

8: Shaun Attwood Speaking to a Book Club

10: Shaun Attwood Speaking to a Book Club

11: Shaun Attwood Speaking to a Book Club

13: Shaun Attwood Speaking to a Book Club

12: Shaun Attwood Speaking to a Book Club

14: Shaun Attwood Speaking to a Book Club

15: Shaun Attwood Speaking to a Book Club

17: Shaun Attwood Speaking to a Book Club

16: Shaun Attwood Speaking to a Book Club

18: Shaun Attwood Speaking to a Book Club

Google Giggles

Double hee hee, a twofer T'ursday

"gary taubes is a quack 2011"




DOUBLE CHEERS!

Your Next Netflix

If you have not seen Cowboy Bebop (or don't even know what it is), it is the next thing you're going to put in your Netflix queue. Here is a video that not only highlights its AMAZING jazz soundtrack, but also shows you a clip of one of the better episodes;

Google Giggles

Hee hee.  A recent search term bringing folks here is:  cherry carbohydrates

Guess this just  makes me smile!

CHEERS!

A Friendly Reminder from the Captain

A friendly reminder from the Captain that today is Thursday, June the 23rd. Nothing special on this day, no holidays, no festivities, which means it's the PERFECT day to buy your girl some flowers.

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.

Is LC Morphing to HAES? Part VI.1: Exercise & the Atkins Food Pyramid

In my recent highlighting of the LC response to the USDA 2010 Guidelines, I had meant to include the Atkins food pyramid.  But having neglected to, in light of this series of posts, I thought it might be more appropriate to put it here.  

Below is a copy of the Atkins Pyramid from here:

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When “One Size Fits All” Paleo Stops Working

Huh?

I've seen many "ex-Paleo-types" acknowledge this, but I found this a very interesting admission over at Robb Wolf's site:

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 »

Recession Medicine

Debt is GOOD for You!

“…we found that both kinds of debt had positive effects for young people. It didn’t matter the type of debt, it increased their self-esteem and sense of mastery.”

God help us.

Just for fun ...

Guess my ethnicity!

I'll tell you that the hair color comes from a bottle these days, but I was blonde until my 20's when it started to turn mousy "dirty blonde".  The brows have always been dark.  It's "my signature" as Mom says ;-)   That is a fairly recent pic of me up there sans makeup.  I'm sporting a bit of a tan as I'm a day or so into a Mexican vacation.

I'm majority of two nationalities.  And there's no prize for guessing correctly, although who knows, if I ever have anything to give away maybe I'll shoot ya a freebie.  

The Meria Heller Show Interview

Just did a radio interview out of America. Click here to listen. It takes a few minutes to download.

Click here for Meria's site

Three From Oz

Some commendable charty goodness from the Oz Conservative

a funny little piece from Joanne.

and why not visit our good buddy Frank if you haven't in a while?

"No, Not the Canadians!"

Currently doing some research for a Canadian client and over the course of the research came across a very heartening chart.



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.

Father’s Day Weekend Book Signing Madness

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!”

                                                                      With Dad in Manchester

On Saturday, we arrived early at the Trafford Centre, assisted by our friend Natalie (to whom I owe a big thank you) who put on a jail outfit. I was happy with the staff for getting a large table ready for us near the front and printing out tonnes of flyers. We quickly set the display up, put posters on the shop windows and started pitching the book.
“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?”
“Yeah. Sure.”
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:

Hi Shaun,

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.

Shaun Attwood 

Freedom in the States

For the full report.

Is LC Morphing to HAES? Part VI: At Least Exercise is Healthy, Right?

This post is mostly going to focus on the Big Guy, Jimmy Moore and the LC Supreme Guru Gary Taubes.  For a very long time, Taubes has been promoting the notion that exercise is worthless for weight loss, including this article published around the time of GCBC.  In this article we find gems like:

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
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During My Stroll Through the OECD

The OECD, I must admit, has vastly improved how it's organized its data and statistics. Beforehand you had to just jump in and try to figure out the logic by which some French economist tried to organize the data. This usually required 2 hours of your life and the consumption of copious amounts of booze to bring your blood pressure down. Now you can find it relatively easily.

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.

The Captain is "Pro-Hound"

If I were to ever have a ton of money I would buy the original painting. (you need to scroll up once clicking on the link)

Liverpool and Manchester Waterstone's Book Signings

I'm signing in Liverpool city centre this Thursday, and the Trafford Centre, Manchester on Saturday. Click here for the full information.

Fan Trouble (by Lifer Renee)

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.

Sunday was pyjama day. Just as it sounds – we got to stay in our pyjamas and watch reruns on the TV. I wasn’t paying much attention to the yard activities.

The 4 o’clock headcount came and went. The temperature was hitting 115 degrees. Who cares if I am in a sweat box. As long as I am breathing, life is great according to the Arizona Department of Corrections.

My cell door still hadn’t opened by 5.10pm. All I wanted was to get some cold water from the water cooler. That is if there was any in there.

I walked to the door to see if anyone was outside. I saw my friend, Kane, in cuffs, getting escorted off the yard. There were at least six officers, plus sergeants and lieutenants bringing handfuls of zip-tie handcuffs and large cans of pepper spray. The officers blocked both entry ways to the kitchen. A kitchen fan was thrown out, and another officer walked out.

Hours went by and I only saw Kane cuffed up. The fan that was taken out was put back in.

Me and my roommate came up with endless possibilities. Finally, we decided that our lockdown status had something to do with the heat.

At 6.30pm, I said, “Are they ever gonna feed us dinner?” The last time we ate was at 7am.

“I hope so soon. I’m starving,” my roommate replied.

“Me too.” I laid down and started channel surfing, waiting for the door to open for dinner.

Around 8pm, my roommate said, “Maybe we’ll get lucky, and they’ll bring us dinner on Styrofoam trays.”

“Yeah, right! We’ll be lucky to eat before nine.” I attempted to cool myself off with my “handy-dandy sprayer” – a hairspray bottle cleaned out and filled with water.

They opened our doors for chow at 8.30pm. I found out that a fan mounted on the chow-hall wall had fallen off and almost hit a woman stood behind it. The women told an officer what had happened. The officer decided the inmates had tore the fan off the wall, and didn’t call a maintenance worker to see if the fan was repairable. The girls in the kitchen asked to be moved to a larger area, to a makeshift dorm. The answer was no.

So twenty-five kitchen inmates went and sat outside in the shade because outside felt cooler than inside. This happened during headcount, causing a serious problem for the guards. The inmates were told to lockdown and they refused. That’s why staff with zip-tie handcuffs and pepper spray had mobbed the yard.

The sergeant told the girls, “Either you side with me, or her,” pointing at Kane.

The girls tried to hold their ground, but their ranks were broken. Kane, the most vocal, was cuffed up and taken to the Complex Detention Unit (CDU) for inciting a riot.

The officers told the women, “You can lockdown or be sprayed and taken to CDU.”

They locked-down.

Now Kane sits in CDU on a ticket that could bury her in the hole – all because she stood up not just for herself but for everyone in the kitchen, including pregnant women and women who have seizures.

Click here for Renee’s previous blog  

Shaun Attwood

Adam Corolla Economics

Many years ago I remember listening to "Love Line" and Adam Corolla said something to the effect of;

"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!

"Tax the Richest 2%"

You just can't make it up. Saw their commercial and couldn't believe they used it as their URL. Ergo it deserves the Double Palm Face Plant Award.



I wonder if the phrase "capital flight" is in their vocabulary.

A Message from EVIL Big Oil

Supplied by my EVIL contact in the EVIL big oil industry, this answers a simple question I had about whether between the US and Canada, and all the various shale oil fields we're discovering if we couldn't just simply jettison the Middle East for our energy needs.

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."

Where do triglycerides come from? Part II

Part I

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. 

So, now, we have additional work from the Hellerstein's research group at Berkley.  More specifically, a 2006 paper:

Delayed secretory pathway contributions to VLDL-triglycerides from plasma NEFA, diet, and de novo lipogenesis in humans 

I'm going to discuss the paper and the results thereof in Part III, but for this installment I wanted to show and discuss a nice graphical overview of VLDL-TG sources from this more recent paper:

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As If Apple Products Aren't Overpriced Enough

One of the fringe benefits of taking the occasional computer networking course at the local community college is that you start to understand the world of "geek humor" or the social side of the computer world.

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.

Watford Waterstone’s Book Signing

The first to arrive were three students from the Bushey Academy.

“We recognised your picture in the window. You did a talk at our school. It was the best talk we had all year. When are you coming back?”

“Hopefully next academic year,” I said.

“We still have your cockroach card.”

This true-crime addict said, "I just love Sandra Gregory's book, Forget You Had a Daughter."
"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.

Two security guards rushed into the store as if about to arrest me.

“We’ve seen you out in the mall with your cockroach! We’ve let it go for four hours, but now we have video evidence, we filmed you, and you must not continue!”

“Why?” I asked.

“You’re not allowed to promote outside the store.”

“OK. Sorry. I didn’t know.”

“We’re just here selling the book,” said my assistant, Gabriella. “Why don’t you buy a copy?”

“I don’t read!”

“Why not?” Gabriella asked. “Just read the first page. Humour me.”

Gabriella melted their moodiness. They agreed to a photo session, and one pledged to buy the book on his payday.

Thanks to the help of Gabriella and some of the most accommodating staff I’ve had the pleasure of working with, the event almost sold out: 45 of 51 copies. Events manager Catherine kept us armed with flyers, and even made some additional posters to advertise the book signing in the windows.

Some readers have questioned me along the lines of: “Shaun, breaking the book sales record at every store is not what art is about. What is wrong with you and your competitive nature?”

My response: There are all sorts wrong with me, including my competitive nature. I am governed by the laws of testosterone. A whiff of competition heats my blood up. Indeed, upon arriving at Watford, I announced to the staff, “No body goes home until all copies of Hard Time are sold!” A staff member responded, “You’re scaring me.”

But isn’t making fun of my foibles through writing a form of art? And not to be taken all that seriously

Click here for the previous book signing blog.

Shaun Attwood  

Google Giggles

One of the stats I get in Blogger is Google search terms.  Every now and again there have been some hilarious ones that have landed people here at the Asylum.   Some are rather specific.  So the first installment that made me laugh:

"wheat belly" davis wrong or stupid or ridiculous

Too funny!

Is LC Morphing to HAES? Part V: Health and Insulin Resistance

So let's continue with this look at the "low carbing for health" irrespective of weight loss trend.  The topic of this thread will be insulin resistance.  

I believe the misguided notion that carbohydrates cause insulin resistance, as put forth in GCBC by Gary Taubes, is one of the single-most potentially harmful theories circulating about the LC webosphere.  The research just doesn't support this etiology of pathological IR.  This is complicated further by confusing physiological IR with pathological.

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The Education Bubble - Stage 1 Denial

For your entertainment today I present to you an article wherein they interview 6 humanities majors and ask them "is it worth it?"

Watford Waterstone's Book Signing Saturday June 11th and BBC Radio Interview

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.

Shaun Attwood

8: Shaun Attwood and Gavin Knight at Stoke Newington Literary Festival

9: Shaun Attwood and Gavin Knight at Stoke Newington Literary Festival

10: Shaun Attwood and Gavin Knight at Stoke Newington Literary Festival

5: Shaun Attwood at Stoke Newington Literary Festival (Chow at Sheriff J...

6: Shaun Attwood at Stoke Newington Literary Festival (Cockroaches at Sh...

7: Shaun Attwood and Gavin Knight at Stoke Newington Literary Festival

2: Shaun Attwood at Stoke Newington Literary Festival (Violence at Sheri...

3: Shaun Attwood at Stoke Newington Literary Festival (Violence at Sheri...

4: Shaun Attwood and Gavin Knight at Stoke Newington Literary Festival (...

1: Shaun Attwood and Gavin Knight at Stoke Newington Literary Festival (...

It's Called "Capital Flight"

Adios Illinois.

A Note to My Readers

I've been struggling a bit of late with the content of this blog.  On the one hand, I'd love to keep it all science, all the time.  I clearly have a contingent of readers that are interested in just that.  But you know what?  I like to think that even in those science posts, my personality peeps through my writing and has some people reading (and hopefully learning) despite the otherwise rather bland content of said posts.

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Comparing Job Creation of Obama vs. Bush

Criticize them both as much as you will from both sides of the aisle, Presidents Bush and Obama do have some similarities. Notably they both inherited recessions. And though the recession President Bush inherited was weaker than the recession President Obama inherited (though it was constantly claimed to be the worst economy in 50's years) a juxtaposition between the two presidents in terms of job growth is very interesting.

Upon inauguration in January, both suffered job losses, Obama more than Bush, but again in intellectual honesty due to the severity of the recession. And though volatile, changes in non-farm payroll jobs was less volatile under Bush than it was Obama. Despite the volatility both presidents are more or less neck and neck in terms of job creation (or rather "destruction") for their 29th month in office. Bush had at this point in his presidency resided over the loss of 2.6 million jobs, Obama 2.5 million. But note what happens after the 29th month under Bush. Job growth BOOMS.


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.

In other words the ultimate show down between the two competing economic theories is about to occur. Keynesian vs. Austrian. Socialism vs. Capitalism.

Of course, it ultimately does not matter whether or not jobs are created because economics has largely become something of a religion. People want to believe in socialism. People want to believe in Barack Obama. People want to believe their "English" degree is going to land them a job. People want to believe in the Magic Job-Creating Unicorns. And so regardless of what happens, lessons will not be learned, intellectual honesty will not be adhered to and we will simply be condemned to repeat history.

Of course, the smart ones will enjoy the decline.

Prison Food (by Chris)

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

Where are you reading Hard Time?

Just received this by email from Dave reading Hard Time in Sardinia.

Shaun Attwood

Help the Captain Research WWII

Hello Lieutenants!

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?

Like Selling a Rabbid Badger as a Pet

Yeah, good luck selling those things.

A Common Sense Case for Starch

We discuss a lot of science here and for a change of pace I was thinking the other day about why I think humans were meant to consume starch for at least a goodly portion of our energy.  I'm not going to talk about obscure cultures most of you never heard of and Americans and most cultures around the world have never eaten like.  I'm not going to talk the minutia of evolution, genetic adaptation, extinct fauna, etc. etc.  

I'm going to talk look at that body of yours.  Clearly we've evolved or adapted or whatever over the centuries to eat both plant and animal foods.  Look at your mouth for starters.  And now look at the kitty's mouth below.

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P/E Ratios - What They Tells Us of Probable Returns

Given our high P/E ratios here in the US, I'm pulling up an old chart that needs to be revisited. Comes from Dr. Robert Shiller and it is a very insightful chart. However, methinks it may be high time to see if the loyal readers and lieutenants of the Captain are starting to understand to become economists in their own right and can deduce the lessons that need to be learned from it.

So, do you see what I see?

"Business Journalist"

Yet another reason you should be reading Cappy Cap and not listening to the mainstream media. Because their "business journalists" purposely spend more than they make.

Low Carb & Hypothyroid ~ Healthy?

It is very difficult to find peer review studies on thyroid function and the effects of a low carbohydrate diet.  I've found a few short term studies, but nothing long term.  It would be nice to have longer term studies on VLC, but there's just not a lot of people going to be willing to follow such a diet for a matter of years in a study.  So if anyone is aware of any studies that might be relevant, please do provide links in comments.  What I'm particularly interested in is the second half of the first year - e.g. months 7-12 - and beyond.  Because anecdotally, this is the time frame when hypothyroids seem to react rather poorly to a VLC diet.  Far more material is available on health and nutrition related sites.  While I prefer not to rely on such sources, I think the information available from reasonably reliable sources demonstrate that carbohydrate restriction reduces T3, reduces T4-to-T3 conversion and increases reverse T3 (rT3).  The latter happens with all diets but the T4-to-T3 conversion differences I've seen reported are reductions in the 25-35% range with VLC diets.

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Stoke Newington Literary Festival

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.

Rolling 20 Year Real Corporate Profit Growth Rate

When I make charts it's usually when I have a theory and I wish to prove it right or wrong. Most of the time, my theory is proven right. And I'm not talking like a batting average of say Christine Romer or a Paul Krugman, I'm usually right about 90%+ of the time. But this time my theory was wrong.

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!"

Charlie Varrick

This post has nothing to do with economics, politics or sociological matters. It has to do with a good solid guy flick that should rank up there with "Kelly's Heroes" "Midnight Run" and "Die Hard."

Charlie Varrick.

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.

Irresponsible Advice from Dr. Eades

Again, leaving aside the creepiness of this man's words, I've got to address how irresponsible his advice in a recent blog post was.  I may come back at some point and address the "Listen to your body?" stuff, but MM reminded me in the comments on another post of some more disturbing content in the post.

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.

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Protein, Insulin-like Growth Factor-1 (IGF-1) and Glucose Homeostasis

I've blogged previously on the LoBAG diets for treatment of diabetes.  These diets are higher in protein that standard recommendations - 30% vs. 15% - with varying carb content (20,30 & 40% have been studied).  With both of the lower carb diets, this group has achieved good improvements in HbA1c levels in relatively short time (5-10 weeks).  In comparing their diets  they observed:

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.

I believe the near-OCD obsession with insulin in the LC community overshadows the vast body of research on other hormones and peptides that's out there and their role in metabolism.

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Recession Medicine

What's the Difference Between Minneapolis and Cuba?

At least you can escape Minneapolis.

When You Abandon Fundamental Value

Retirement programs.

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.