Category Archives: Business, The Economy and The Markets

Pretty self-explanatory, isn’t it?

Brown Bag Nation

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Joe Doakes from Como Park emails:

The Post makes a discovery.  About 20 years behind the rest of the nation, but yeah, lunch is expensive.  How is this possible, since there’s no inflation under the Obama administration?  The article doesn’t say.

The correlation between price and the decline in visits is a revelation to the Post but glaringly obvious to me.  Prices have shot way up.  Three years ago, the Golden Arches offered several value meals for under $5.00.  Now there aren’t any, most are in the $7.00 range.  A 40% price increase is noticeable to guys like Joe Shlabotnik, whose disposable income has not kept pace.  So he packs a lunch from home, which pointy-headed economists call “substitution” but which everybody else calls “the new normal.”

 More proof of the utter disconnect between coastal elites and fly-over country hicks.  We knew about this years ago; they’re just now figuring it out.  So who are the real dummies?

 Joe Doakes

Rhetorical question, right, Joe?

Diminished Expectations

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I find myself more and more these days trying to give historical context to current events, to clarify current events for the various millennials in my life.

Here’s a big one:  while the media is turning cartwheels about the “Obama Recovery” (happening an unprecedented eight years after the crash – worse than the Great Depression), the best quarter of GDP growth in this “recovery” is lower than the worst quarter of Reagan’s recovery, from 1983 through 1987.

But never mind – the media will keep the narrative of Obama the Economic Lightworker warm and dry.

But with Hillary Clinton in the picture, there’s another wrinkle.   John Hinderaker notes at Powerline (with some emphasis added):

n 1992, Bill Clinton announced that “It’s the economy, stupid.” That was pretty much the sole theme of his campaign. He ludicrously claimed that the country was then experiencing “the worst economy since the Great Depression,” a lie that the press, to its everlasting shame, not just allowed but often endorsed. So what was the level of GDP growth that Clinton relentlessly denigrated?

According to the Bureau of Economic Analysis, the quarterly growth numbers for 1992, in chained 2009 dollars, were 4.8%, 4.5%, 3.9% and 4.1%. That’s right–the growth that Bill Clinton derided as the “worst economy since the Great Depression” was around four times what we are now seeing under Barack Obama. And Hillary Clinton promises to continue Obama’s anti-growth policies.

I remember the recession at the tail end of the Bush 41 administration – as the economy adjusted from a Cold War economy to civilian spending – very well; it slowed down my transition from radio to IT by a few harrowing months when I was welcoming a couple of new children into the world.  But it was a short recession with a sharp recovery (“Thanks, Ronald Reagan, for that “peace dividend!”) that led to 15 mostly-prosperous years…

…whose various windfalls are long in the past.

Some Poor Chump Is Always The Last To Get The Word

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Joe Doakes from Como Park emails:

The US economy grew in the first quarter of 2016, but only a tiny bit, 0.5%.  That’s technically enough to keep us out of a “recession.”

 First, do you believe that number?  Economic estimates are routinely announced with pronounced spin showing how well the administration’s policies are working, then quietly revised downward a few months later.  There’s not much room to revise this number downward.

 Second, look at the formula for calculating GDP: 

Gross Domestic Product = Consumption + Investment + Government Spending + (Exports – Imports)

 If the federal government wants the GDP number to look good, it can manipulate the result by increasing government spending to offset decreases in Consumption, Investment and Net Exports.  But federal government spending slowed down in the first quarter as Quantitative Easing winds down.  And the GDP number is falling as a result.  The implications are important.

 It means there never was any growth in the Consumer or Investment side of the economy, that’s all been propped up by federal government spending.  In other words, we’ve been experiencing negative economic growth for months, maybe years, but it’s been masked by federal government spending.  I’m looking at you, Barack Obama, and your $20 Trillion national debt.

 The take-away is simple: don’t worry about Great Depression 2.0 coming; it’s already here.  Worry about what happens when the ordinary public figures it out.

 Joe Doakes

Look!  Bathrooms!

Your Smile Is Thin Disguise

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Joe Doakes from Como Park emails:

Liberals claim the economy has been turned around for years, big recovery going on, stock market booming, unemployment at all-time lows.  I don’t believe the government’s statistics; I think bureaucrats manipulate the numbers to make the administration look good. 

 How about a more concrete number: vacant buildings in St. Paul.  856.   Economy is in a huge rebound thanks to the libs who have fixed all Bush’s errors but 856 vacant properties remain?  That’s nearly as high as during the bad years.  People generally don’t just walk away from their homes, their businesses, their investments, not without a damned good reason and in recent years that reason has tended to be “can’t afford to make the payments.”  That is not a sign of prosperity.

 When the city is littered with vacant buildings, businesses are moving out, restaurants are folding up, but the government statistics say everything is rosy, who are you going to believe: them or your lying eyes? 

Joe Doakes

There’s a place for “fake it ’til you make it”; the old Hungarian saying “the best way to become wealthy is to appear as if you already are” is one of the guiding principles of my life.

But not for “journalism”, thankewverymuch.

What Could Possibly Go Wrong?

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Obama apparently had so much fun during the original Housing Bubble, he’s setting up another.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Read:  Again, the government will socialize the risk, while privatizing the rewards.

Eating The Seed Corn

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Minnesota DFLers are romping and frolicking in money from the “surplus” – a misnomer referring to the billion dollars overtaxed from Minnesota’s productive class.

DaytonDustbowl

But more and more, the evidence shows that the “surplus” is a false positive – and that Minnesota’s productive class is choosing greener, lower-tax pastures:

Minnesota, on net, lost $1 billion of income to other states between 2013 and 2014. Specifically, the state lost $944 million in adjusted gross income reported by tax filers who moved in and out of Minnesota. This is the largest net loss of income ever reported for Minnesota, and it represents a dramatic rise from just three years ago, when the state lost $490 million.

Gotta tell you – if Wisconsin somehow manages to stay the course, the greater Hudson area is looking better and better…

“But it’s mostly retirees leaving the state!”.

Well, no (emphasis added):

While the IRS has been tracking income movement since 1992, it released a new data series last year that for the first time provides annual information on who is moving from state to state, based on age and income. These new data refute a long-held assumption that Minnesota’s income loss is primarily due to retirement.

In fact, people in their prime working years represent the largest portion of the net loss of taxpayers and income. Working-age people between 35 and 54 account for nearly 40 percent of Minnesota’s net loss of tax filers for the 2013-14 period. People between 55 and 64 — most of whom are still in the workforce — account for another 23 percent.

“But it’s just the ‘one percent’, moving to their beach houses in Coral Gables!”

Some of them certainly are; capital is mobile, and when it needs to, it moves.

But no – in fact, the biggest chunk is the part of the middle class that provides both much of the spending and many of the entrepreneurs that provide jobs for, well, everyone else:

But this isn’t just about the top 2 percent, as the governor wants people to believe.

Minnesota taxes on the middle class are still high relative to other states. Not surprisingly, Minnesota is, on net, losing this population, too. In fact, between 2011 and 2014, taxpayers earning between $100,000 and $200,000 accounted for 41 percent of the state’s net population loss.

 

Minnesota’s consistent net loss of people and income to other states poses serious challenges to the state both today and into the future. Economic growth is currently constrained by a tight labor market, which, in part, is due to the state not attracting the people with the qualifications necessary to fill today’s jobs.

The parable of the ant and the grasshopper springs to mind.

The DFLers are the grasshoppers.

Capital Runs

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Carls Junior / Hardees corporate HQ flees California for Tennessee.

Yes, we know that CKE’s official line is that the firm is relocating because it has less need for office space as it consolidates operations. But the company executives say this with a wink. Tax savings are a big factor, as is the stifling regulatory environment on the left coast, where businesses are treated like villains and rich people as cash dispensers for big government programs. It’s not a coincidence that CKE’s CEO Andy Puzder has been one of the leading critics of high taxes and onerous rules in Washington D.C. and Sacramento.

The next time some liberal hamster asks “what’s the matter with Kansas?”, one might respond “the usual.  What’s the matter with California?”

The state legislative group ALEC finds in its latest “Rich States, Poor States” rating of the states on business climate that California ranks 44th of all the states in business competitiveness.  California has lost roughly 9,000 companies over the last decade, with most of them moving to Texas, Florida, and Tennessee. Last year, in a major loss, Toyota moved its North American headquarters from the Golden State to North Texas.

And that’s just the headquarters – although with many small-to-medium companies, the HQ and the production/distribution/retail is all under one roof.

But with bigger companies?

Minnesota liberals love to hide behind the fact that the Twin Cities is home to a lot of Fortune 1000 companies.  The part they omit (or don’t understand) is that the Headquarters  – with its staffs of senior executives and high-level technocrats, with their taste for the lifestyle and ameniities and central location of major metro hubs like the Twin cities – is a small part of the organization.

Quick – when was the last time 3M or Ecolab built a manufacturing or distribution facility in Minnesota?

(Don’t use Target for an example; it manufactures nothing. It’s employees are all white-collar headquarters workers, and red-collar service employees out in the retail world).

But when things get bad enough?   Even the headquarters staff can move – or, as 3M did during the tax-happy Perpich and Carlson eras, start thinning out the central HQ and moving people to Austin.

Armageddon Lost

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1985:  “IBM is going to dominate the entire world!”.   1995:  IBM is fading fast.

1995:  “Microsoft is going to own the entire world!”  2005:  Microsoft has settled into a niche.

2005:  “WalMart is going to destroy small business!”.  2016:  WalMart seems to be hitting limits.

As little as the left seems to trust the market, it seems to be keeping “monopolies” pretty well under control.

Who could have foreseen it?

(Answer:  every single free market conservative).

Low Expectations

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Democrats are fond of trying to find statistics that try to show that the Obama Administration has not been a complete economic disaster.

One way is via a blizzard of charts that claim to show a long series of months with job growth:

Raw Numbers

“It’s Bush’s fault! It’s Bush’s fault!”

Of course, as Mark Twain once said – and it’s a cliche I almost regret to say – but there are three types of data; lies, damned lies, and statistics put out to defend Democrat economic policy.

A graph will look very, very different, and depict very different things, depending on the two dimensions you select, as Philip Bump points out in the Wall Street Journal.

Obama looks best when you compare his job creation record with the day he took office – a graph which, by the way, has some liberals chortling, in that it makes Jimmy Carter look like a boss job creator:

Versus First Month

Of course, Clinton is the champ – he’s the only two-term president since World War II that didn’t have a recession on his watch – thanks, of course, to Ronald Reagan and the Peace Dividend, as well as Newt Gingrich stifling the worst of Bill and especially Hillary’s agenda.  Clinton was a champ in spite of himself, and largely due to his opposition.

We also note that more jobs were created on Dubya’s watch in three years than in six and a half of Obama; remember, Dubya had the 9/11 recession and the housing bubble in his eight years.

But isn’t comparing job growth versus a president’s first day in office a little artificial?

Sure.  Let’s compare presidents with their administration’s low points:

Versus Low

 

 

So in other words, Obama’s like Nixon.  I wasn’t very old at the end of the Nixon administration, but we all know what a lousy time that was.

But of course, the population has changed; Reagan added 17 million jobs in a population that was around 260 million.  Obama has added nine million jobs in a nation of 315 million (although nobody’s really counting anymore).  So how about we measure this in terms of concrete percentages?

Versus Population
As anyone who was looking for work back then knows, life under Reagan was infinitely better; the economy added a higher percentage of jobs in the quarter after the end of the’82 recession than it has in the six years of the Obama recovery.

Print out that last graph.  Share it with your liberal friends.

Follow The Money. And Jobs. And People.

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I do a lot of speaking to GOP, Tea Party and Conservative groups around the Metro Area.  And when I drive out to a place like Mound, or Maple Grove, or Lakeville, I often start my remarks with something like “It’s so nice to be here – with that smell of competence, prosperity and success all around”.

It’s at least in part a dig at Saint Paul – a beautiful city with a failed one-party government.

But census data also shows it’s absolutely true; Red states are leading whatever economic “recovery” that’s going on:

The new Census data on where we live and where we moved to in 2014 shows that the top seven states with the biggest percentage increase in in-migration from other states are in order: North Dakota, Nevada, South Carolina, Colorado, Florida, Arizona, and Texas. All of these states are red, except Colorado, which is purple.

Meanwhile the leading exodus states of the continental states in percentage terms were: Alaska, New York, Illinois, Connecticut, New Mexico, New Jersey, and Kansas. All of these states are blue, except Alaska and Kansas.

There’s a reason the left’s noise machine focuses as much “energy” as it does on Kansas; it’s neither a failing Democrat hellhole like New York, nor a booming Conservative success story like North Dakota, Florida or Texas.

“A Cold Mississippi”

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One of the Minnesota left’s favorite conceits is that Minnesota is just plain better than The South.  Their favorite imprecation against some conservative budget-cut or program-trimming plan is that conservatives would “turn Minnesota into a cold (fill in a southern state)”.

Perhaps Minnesota’s African-American community would wish that were the case; household income for black people in Minnesota plunged 14% in the past year, dropping black Minnesotans’ incomes below those in Mississippi (I’ve added all emphasis):

From 2013 to 2014, the median income for black households in the state fell 14 percent. In constant dollars, that was a decline from about $31,500 to $27,000 — or $4,500 in a single year.

Meanwhile, the statewide poverty rate for black residents rose from 33 percent to 38 percent, compared to a stable overall state poverty rate of 11 percent.

The median black household in Minnesota is now worse off than its counterpart in Mississippi. Among the 50 states, along with Puerto Rico and Washington, D.C., Minnesota ranked 45th in median black household income. Mississippi ranked 44th.

Income and poverty for other racial groups in Minnesota — whites, Hispanics and Asians — remained stable. Only blacks saw a worsening of income and poverty.

“It’s alarming,” said Steven Belton, interim president and CEO of the Minneapolis Urban League. “It’s a deepening of the income disparity, not only across the state but across the nation. When you pair that with the continuing disparities we have in education, health and wealth, it’s disturbing.

“The alleged rising tide has not lifted all boats.”

Of course, the Urban League is a DFL front; of course they’re going to take a whack at classic bit of conservative rhetoric.

But the truth is this; the vast majority of Minnesota’s Afro-Americans vote DFL, and live in DFL-dominated cities.   I don’t have the figures handy, but I don’t think it’s controversial to say that they are disproportionally not heavily represented in the parts of Minnesota’s economy that are prospering – health insurance, medical devices and financial services, all heavily subsidized by the Obama Administration.

They tend to live – again, no stats immediately at hand, but by all means, try to prove me wrong – on the economy that the rest of Minnesota lives on; the one that, for all of the DFL’s boasting and bragging, just isn’t doing all that well.

Consistent

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SCENE:  Mitch BERG is sitting on the hood of a Dodge, drinking warm beer in the soft summer rain, beneath the light of a giant Exxon sign.  

Avery LIBRELLE putters up to BERG in a Prius and climbs out of the car.  

LIBRELLE:  Hey, Merg!

BERG:  Hey, Avery.

LIBRELLE:  I’ve got a question for you, mister Immigrant Hater.

BERG:  Bla bla bla.  I don’t hate immigrants, and I won’t let a stupid manipulative strawman pass without showing it up as the idiocy it is.

LIBRELLE:  Why do you hate science?  Anyway – so it’s time for you immigration opponents…

BERG:  …We’re not “immigration opponents”.  We oppose illegal immigration.

LIBRELLE:  If NPR says it, it’s settled science.  Anyway – it’s coming time where you have to decide; are immigrants taking our jobs, or are they soaking up welfare dollars?   You can’t have both.

BERG:   Saying the two are mutually exclusive is like saying there’s no way white people could simultaneously produce Beethoven and Jefferson and James Watt while also including people who sit around Walmart parking lots lighting their beer farts and arguing about whether Van Halen is hard rock or heavy metal.

Because it’s a fact that Immigrants are disproportionally on welfare – counter to years of media chanting points – and they are also taking most of the new jobs in the Obama Economy this past seven years.  You’re presenting me a false dilemma – and, given that this policy disporoprtionally affects African-Americans, presenting yourself a real dilemma.

So there is no contradiction.  Fact is, unrestricted immigration of low-skill workers drives down the price of low-skill jobs – which aren’t worth much to begin with, and don’t pay much with the glut of workers, who have families, which disproportionally use welfare.

LIBRELLE:   Why do you hate women?

BERG:   Of course.

And SCENE.  

Imbalance

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Joe Doakes from Como Park emails:

Does it seem as if Americans are struggling to find jobs, but immigrants have no problem? That’s because it’s true.

Joe Doakes

“They take the jobs Americans won’t to do”, in some cases, because Americans don’t get to them first.”

No, it’s not hyperbole:

The one chart that matters more than ever,has little to nothing to do with the Fed’s monetary policy, but everything to do with the November 2016 presidential elections in which the topic of immigration, both legal and illegal, is shaping up to be the most rancorous, contentious and divisive.

The chart is the following, showing the cumulative addition of foreign-born and native-born workers added to US payrolls according to the BLS since December 2007, i.e., since the start of the recession/Second Great Depression.

Anyone wanna seize this one from The Donald?

The New Consumer Math

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Joe Doakes from Como Park emails:

In the olden days, waitresses got less than minimum and earned the rest in tips.  It created a moral obligation to tip: if you can’t afford the tip, you can’t afford the meal, you owe her a tip as part of her wages.

Now that waitresses make $9.00 hourly, they don’t need to rely on tips to supplement wages.  They can quit trying so hard and I don’t need to feel guilty about not tipping, right?

Joe Doakes

Oh, why not?  Every other consequence of political manipulation of wages is unintended; why should quality of service be any different?

 

The Shallow, “Message”-Obsessed Left’s War On Women

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Joe Doakes from Como Park emails:

New York bar charges women 77 cents on the dollar because . . . pay equity?  Great deal . . . for ugly women.   Pretty girls never pay for drinks.  And most of the wait staff is women, who work for tips, which are based on total tab, which is now 23% smaller.  So women get paid less to protest women getting paid less?  Genius.

Joe Doakes

So will the female servers be giving part of that to the ugly male bartenders, who don’t make nearly as much as they do?

Doakes Sunday: DIY

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Joe Doakes from Como Park emails:

Starving workers demand living wage, but only from national chain restaurants and only in the New York City limits.

 

That’s okay, I already bag my own groceries and pump my own gas.  I’m ready for the fast-food touch-screen order menu.  I can enter “No. 5 Extra Value Meal, Small Coffee, 2 Splenda, 2 Cream, To Go” as well as that minimum wage worker can, so go ahead and lay her off.

 

Joe Doakes

And it’ll be boom-time for UX designers in the kiosk business.

Patching The Balloon

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Joe Doakes from Como Park emails:

Fannie Mae used to allow 97% loan-to-value meaning you only had to have 3% down to buy.  After the crash, they lowered that to 95% meaning borrowers needed to save up 5% to buy.  It turns out women and minorities are hardest hit by that change.  So Fannie Mae raised it again to 97%.

 

They point out that only 7% of all such 97% loans given between 1999 and 2012 went bad, about the same as all other loans.  What could go wrong?

defaultrate

Yes, and if you started with all loans since Moses, it’d be an even smaller percentage.  Look at the loans given in 2007, when prices were at the max and everyone knew the crash was coming but the feds were still signing up any warm body they could find.  28% of the low-money-down loans failed.  And by 2011, lending restrictions were so tight nobody could qualify for a house so none of those loans went bad, which makes the overall percentage look even better but means millions of people lost homes they should never been able to buy in the first place.

 

I can’t help but wonder if this is the start of another boom-bust cycle in housing.  Are we intentionally repeating the mistakes of the past because it would be politically incorrect not to?  Has fiscal sense gone completely out the window?

 

Joe Doakes

Or does crisis become the current regime?

A Thousand Words

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If there’s one thing I cordially detest about social media today, it’s the photo-memeification of all political debate.  On Facebook and Twitter, thousands of people can pass along a graphic, often wrong, frequently giggly/snarky photo in lieu of understanding an issue or being able to state a coherent case.

But sometimes they’re right:

I’ve been harping on the workforce participation numbers since 2011 – and they’ve just gotten worse.

And the fact is, if we’re ever going to reduce that debt figure (which doesn’t, by the way, count all the other unfunded entitlements that are floating about in the ether in numbers that look like they should be expressing Zimbabwean currency), it’s going to take actual productivity – which you’re not going to get when a huge percentage of your most-nominally-productive population are sitting idle, having given up hope that the economy will find a place for them.

(“But Mitch”, someone will no doubt say, “the workforce number reflects the number of baby-boomers that are retiring!”.  Sure, some of it.  But the percentage of Americans over 65 who are at work has actually risen – alone among the age groups – since the recession started.  And people drop off the Bureau of Labor Statistics’ figures after 70, so any retiring boomers will be out of the statistical picture momentarily, here…).

Ghost Of Crisis Future

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“Progressives” the world over are pretty much all the same.  Kevin Williamson on the Greek crisis:

When Greece’s sham economy went ass over teakettle, it agreed to a bailout package, finalized in 2010. That deal is now widely blamed by the Left for exacerbating Greece’s economic crisis with excessive “austerity.” The problem with that line of argument is that there was no Greek austerity: Greece lied about its debts before the crisis, and it lied about its reforms after the bailout. It didn’t take the meat axe to its public sector: Greece went out and hired 70,000 new government employees instead. It stopped selling government assets, which it had agreed to do, and government’s share of GDP actually increased rather than declining.

Lying about finances to lull the gullible?  Sounds like the DFL to me.

Greece’s problem – and you’re seeing it here, too – is that “progressive” economists (and the governments who love them) have the wrong measure of economic health:

As one Greek supporter of Tsipras’s wheedling told the New York Times: “We’re all pensioners here.” Indeed, and that’s the problem. A society’s wealth may be measured by its consumption, but its wealth consists of its production. One cannot consume what has not been produced, and consumption can exceed production only as long as your credit lasts, and credit — n.b., congressional clown conclave — is never eternal. Greece has too few people working in productive business enterprises and too many receiving government checks, either as employees or as welfare recipients — a distinction that is increasingly difficult to make in Greece and elsewhere.

Keep that in mind, as America’s employment participation rate drops below its lowest levels in a generation or two, even as our population  – especially the population with a Greek-like love of getting something for nothing – grows.

Options

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Joe Doakes from Como Park emails:

Boris Yeltsin*, head of the Federal Reserve, declares the short-term interest rate the Fed charges banks will remain nearly zero.  That will keep loan interest rates down hoping to stimulate the economy.  And with interest rates low, buyers can afford a larger loan so sellers can afford to retire to Fort Meyers.  Unalloyed good, right?

Maybe not.  When I bought my first house in 1987, our loan was 9.5% because the seller paid two points to buy down the rate.  My wife and I were dancing in the street – Free Money!  On a $70,000 house, our PITI was about $1,000 per month.  We could afford that as we were both working full time.

That same house today would cost $150,000.  At 4%, the payment is still around $1,000 per month.  But can Millennials afford to pay that?  They have more student loans than we did.  Their debt to income ratio is worse.  Are they getting married as my generation did, working full time as we did, giving up vacations and iPhones and luxuries as we did?  If not – how can sellers afford to sell and move?

I don’t have a solution, I merely note that zero interest rate is not a silver bullet to cure all economic ills.  And once you’ve fired it – as the Fed has done – there’s nothing left to try.  After that, we’re down to the Iceland Option.

*Oops, I misspoke – Janet Yellen is head of the fed.  Boris Yeltsin was the dictator whose policies led to economic collapse.  I get confused.

Joe Doakes

Something liberals, with their decades of tinkering with the buttons and levers and switches of government, never quite understand; the intrinsic value of things never really changes (allowing for variables like location, quality, or whatever applies).  A house is a house.  An appendectomy is an appendectomy.  A flipped patty is a flipped patty.

Tinkering with the money supply only changes the value of the things we use to represent those concrete values.  Making more money only works if you make more stuff for that money to represent.

We’re not doing nearly enough of that.