Relevant and even prescient commentary on news, politics and the economy.

The Cass County, Indiana, Easter Effect

As noted in my last post, I have been looking at data. This usually causes trouble, and today is no exception.

As anyone who was paying attention predicted, the “Easter Effect”–a large gathering of people (“EC” or Otherwise) in an enclosed area that likely has multiple asymptomatic carriers (and likely a few with symptoms) is a recipe for infection. With a two- to three-week gestation period, that there was going to be an increase in cases at the end of April was well known. The only question was how much. Without running the numbers carefully, it looks as if it was about 10% above trend.

But the overall data covers for a lot of local sins. If you look at the places that have a high percentage of people infected, the relatively large Metropolitan Areas are no surprise: Providence, Worcester (MA), and NYC suburbs and exurbs (think Rockland, Westchester, Nassau, Suffolk, and Orange Counties in NY State; Passaic, Union, Hudson, Bergen, and my own Essex County in NJ).

But Cass County, Indiana, is running at over a 4% infection rate. With a County size of about 38,000 people, they’re reporting just under 1,600 cases.

Will anyone be surprised that those cases were not evenly distributed? Not really convinced this is what people have in mind when they say, “He is Risen”:

My source is the New York Times’s County-level data (h/t Charles Gaba at acasignups.net); their source is probably the Indiana State Deparment of Health, which has been getting an A+ for their data from the Covid Tracking Project.)

Data excerpt attached below.

CassCountyTable

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The Comic Stylings of FRED, Employment Edition

I’m back to playing with data, so there will probably be more posts coming soon. (Sorry.)

Meanwhile, this one was irresistible. FRED® has a “Natural Rate of Unemployment” data series. Apparently, the evil of the United States is that—except for the second half of the Clinton Administration where it was worth people’s while—Americans Just Don’t Work Enough,

 

Same graphic, excluding last month and with the monthly employment data averaged to match the Quarterly NAIRU.

Figure 1

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THE Important Graphic from April’s Unemployment Report

What happens when you downsize a large number of people? Well, it depends on the cohort downsized. In this case,

Figure 1

That’s correct; Average Hourly Earnings skyrocketed from $28.67 to $30.01: up $1.34.

For context, that one-month change matches the average hourly earnings growth from September/October of 2018 until March of this year–18 months of increases in a month. And all it took was eliminating the jobs of about 6% of the U.S. population (not just workers).

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F**king Old Enough to Vote

It’s That Day again. I mostly stayed off Facebook (except for birthday greetings) and Twitter, but even LinkedIn has posts of now-yellowed newspaper articles of survivors–and probably some of those who didn’t.

In another ten years, it will be as far from 11 Sep 2001 as that date was from 11 Sep 1973.

At least now, most people know what a sh*t Rudy Giuliani was, both in setting up the firefighters for disaster and moving the NYC Office of Emergency Management Command Center from the safest location in the city–the basement of 1 Police Plaza–to the 23rd floor of a building in a complex that had already been bombed once before he did it. While he and Bernard Kerik got to Be Adulterers on taxpayer money, somewhere between one-third and one-half of the 343 firefighters they murdered outright certainly could have been saved. Though that would have been more people who, but for the grace (and anger) of Jon Stewart, would still be trying to get health care. Rudy’s tombstone should read: ““This group’s finding is that the security of the proposed O.E.M. Command Center cannot be reasonably guaranteed” — July 1998″

Yes, I’m still bitter. No, I’m not going to post anything nearly as subtle as this, which is probably my ultimate contribution to the genre of In The Shadow of The Towers. I’m going to talk about Milton Friedman. Because it’s the 18th anniversary, so it’s now old enough to vote–or, especially in the pre-26th Amendment world–be drafted.

Let’s be clear: Milton Friedman had one good idea in his life, and that was that his alma mater should not sponsor a football team. Even a broken clock, and the program whose highlights are Ray Rice and Greg Schiano (whose skills included guiding the team to a money-losing Bowl appearance) isn’t exactly something that could justify Superstar Economics Theory.

Milton Friedman, like Gary Becker, was wrong about almost every social policy recommendation he made. While it might be difficult to identify what he was most wrong about, a leading contender is The Elimination of the Draft, which he championed for years and finally shepherded through the Nixon Administration.

After all, people should be Free to Starve Choose, and conscription is certainly not a “choice.” Choice can discriminate; conscription means mandatory attendance or a demonstrable reason to be excused. Friedman’s ghost, twirling at Mach 3 in the Eighth Circle, probably rues that males still must register for Selective Service.

So we have a story published just over two years ago on America’s only remaining news source becoming evermore real. While before people who didn’t want to be subject to two years of training and possibly warfare had to at least come up with a somewhat reasonable excuse (*cough* bone spurs *cough*) or face jail time, the scions of the elite have no “skin in the game.” So the Longest War in U.S. History continues: planned as well as it was executed, executed as well as its objectives were planned. While the planners well know that their sons (and daughters) will not even have to come up with the lies they did to avoid any chance of being killed.

Because Milton Friedman said that would not be Freedom. And people believed him, because “freedom” means you don’t have to “have skin in the game” (literally, in this case) if you don’t want to, even if your actions caused the problem.

I suspect Rudy Giuliani approves.

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Projection is an Art, not a Science, especially for the SSA

The scary headlines of the past few days have been well-discussed below by Dale Coberly and Barkley Rosser.

Data, however, is only as good as its assumptions, and the overall trend is well worth a glance. (Note: I took the 2013-2017 data from BC professor (and director of their Center for Retirement Research) Alicia H. Munnell’s Table 1 here.

Year of Trustees Report: 2013 2014 2015 2016 2017 2018 2019
First year outgo exceeded income excluding interest 2010 2010 2010 2010 2010 2010 2010
First year outgo projected to exceed income including interest 2021 2020 2020 2020 2021 2018 2020
Year trust fund assets are projected to be exhausted 2033 2033 2034 2034 2034 2034 2035

 

Note that last year’s projection that 2018 would have a funding shortfall turned out to be so incorrect that this year’s report didn’t even pretend there would be excessive demand until next year.* Also note that, despite a relatively anemic recovery in the labor force, the projection “we’re out of funds” date keeps getting extended, though not so much as it did pre-Tepid Depression years.

More coming up. As usual, the report is only so good as its data assumptions and there are some interesting assumptions made.

*Part of this, as Henry Aaron noted Tuesday, is that the Disability portion of SSDI has declined precipitously from projections.

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What a Difference Three Days Makes?

March 27:

TEGUCIGALPA (Reuters) – The United States said on Wednesday it had reached an agreement with three Central American countries to carry out joint police operations in the region, as the Trump administration seeks to stem the flow of migrants across its southern border.

The governments of Guatemala, Honduras, El Salvador and the United States said in a statement they had agreed to a series of measures, including joint police work, improved border security, and efforts to deter international crime and curb “irregular migration.”

March 30:

WASHINGTON/EL PASO, Texas (Reuters) – The U.S. government cut aid to El Salvador, Guatemala and Honduras on Saturday after President Donald Trump blasted the Central American countries for sending migrants to the United States and threatened to shutter the U.S.-Mexico border.

A surge of asylum seekers from the three countries have sought to enter the United States across the southern border in recent days. On Friday, Trump accused the nations of having “set up” migrant caravans and sent them north.

As I have said before, it’s fairly easy to understand how the man went broke running casinos, even without noticing that Atlantic City is a drab and dreary place in the Winter.

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The Bank is the Colour of Malpasspractice, not Dead Televisions

If you want to understand why Mark Thoma’s 12-year daily-and-then-some blogging effort has become intermittent, consider that President Shit-for-Brains has made his nomination for the person to ru(i)n the World Bank.

David Malpass.

This David Malpass.

The best part of the nomination so far? This Twitter feed from Charles Kenny.

Brad DeLong concurs.

And I’m not the only one bringing back my writings from almost a decade ago. David Glasner at Uneasy Money remains in fine form. (via Krugman on Twitter)

ETA: pgl, chez delong, notes this 2012 piece from Bruce Bartlett as well.

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In the New Gilded Age, Capital is not for Investment

Many years ago, Goldman Sachs published research showing that, from about 1995 to 2004, more money had been taken out of S&P 500 companies in dividends and share buybacks than the companies had earned during that period.

You would think Boards of Directors and Shareholders would know better than to do it again. You would be wrong (registration required):

Stock buyback activity in US equity markets is simply staggering at present: $646 billion for the 12 months ending June 2018 for the companies of the S&P 500. Total dividend payments aren’t far behind, at $436 billion. The bright spot: the total of the two is $1,082 billion, only 90% of 12 month trailing operating earnings of $1,197 billion. That’s a better buffer than existed in 2015/2016, and an underappreciated positive for US stocks….

Unlike 2015/2016, the companies of the S&P 500 are no longer spending 100% or more of their operating profits on buybacks-plus-dividends. In those years, the ratios were 108% and 102%, respectively.[all emphases mine]

Companies are not re-investing.  Anyone who expects productivity growth in such an environment is probably going to be gulled into believing there is a Great Stagnation, and not the Return of the Robber Barons.

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Is this Short Covering, or Are the Suckers Flooding the Market?

Via ElNuevoDia at LG&M, “Gamblers are now betting that Kavanaugh will not be confirmed.”

The market in question, at PredictIt, seems rather straightforward. Note, though, that the contract only opened five days ago (18 September) and traded consistently in the 60-70% range through yesterday (22 Sep), closing at 61% and only reaching as low as 55%.

In the past two hours, more than 20,000 transactions has occurred, which is greater than the volume on any previous day, with no trade higher than 60, and none in the past hour above 42. (It is 9:13 EDT as I write this.) The 24-hour graphic is impressive in its consistency:

until it’s not.

The open question is whether the buyers at the lower level are the same people who were selling in the 60s and 70s (the ratio of Trades to Shares is roughly 2:1; some of the previous activity was clearly coverage) locking in a profit against new, relatively low-information buyers, or if the route is on.

It appears the opportunity for buying at the bottom has passed; it remains to be seen if the market will stabilize at low levels or recover as time passes without new information and/or the termination of the contract.

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Ten Years Have Got Behind You

It has been almost ten years since:

  1. Bear Stearns folded
  2. Lehmann collapsed of its own free will
  3. I posted on this blog
  4. All of the above

Those who guessed “c” or “d” are optimists. Those who are expecting a long series of posts dwelling on the correct answer of “b” (with some references to “a” and AIGFP) will not be disappointed.

But this is an introduction. I have been trying to think of how to simplify ten years of lessons as if there were one root cause. And I think I finally have it.

Two friends were claiming that Democratic politicians have to be nice, noting that otherwise Republicans will obstruct anything they try to do if there is ever a free election in the United States again. My response of “So what?” (a more direct version of my usual “Ma nishta ha’lailah hazim?“) was met with reminiscence from them of the Good Old Days when the Democrats had a fighter in the mix: James Carville.

So I have been thinking about Carville today, and especially his most famous quote:

I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.*

And therein lies the problem. He said this in the early 1990s. By the time fifteen years had passed and the world economy went over a securitization cliff abetted by “Weapons of Mass Destruction” that are used in ways so obviously non-economic that an economist looking at the market for the first time called them out ten years ago—and virtually nothing (on net) has been done to ameliorate the situation since.

But back to the bond market. If there is one lesson from basically Hallowe’en of 2006 to September of 2008 should have taught everyone, that should have been that the problem isn’t that the bond market is feared; the problem is “What if the bond market is correct?”

Select for full-size view

To be continued…

*His most accurate quote may well be “What I’m suggesting is, stand for yourself, be for something and the hell with it. Because the hand-wringers and the editorialists and the sigh-and-pontificate crowd will be against you, whatever you do.”

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