Facebook stock is a victim of "Short Selling". What the heck is Short Selling? I give a VERY brief example here using FB stock. This is a strange concept...

Another reason people hate Wall Street is this business of "Short Selling" a stock.  Never have done this and only know about it from what I read.  Here is my barely literate take on how it works... 

You buy 1,000 shares of Facebook stock at the opening price of $38 per share. Your investment in FB stock is $38,000.  However, you don't really possess these shares, your brokerage firm actually "holds" them for you.  

I am a BIG customer of the brokerage firm you used as well.  I believe FB stock is overpriced and the price is going to go down.  I am going to enter an agreement with "our" brokerage firm to borrow your shares of stock (for a fee). Here is what I am going to do:

1.  Borrow your 1,000 shares AND immediately sell those shares (assume the price is still $38 per share).  $38,000 is put INTO my account at the brokerage firm. Your account stays the same and YOU have NO idea of what just transpired between me and our brokerage firm.

2.  As I predicted, the market price for FB stock decreased. Perhaps helped by my borrowing and selling YOUR stock! Assume it drops to $35 per share. 

3. Now you see this on the news, freak out, and want to sell your stock.  This is the fun part.  I am now required, per my agreement with the brokerage firm, to buy those 1,000 shares back at a price of $35 so those shares can be returned to you to sell at $35.  So I have to dip into my account and spend $35,000 to buy the stock.  Remember, as a result of the initial transaction I had $38,000 in the account.  After the subtraction of $35,000 I have $3,000 left in my account.  You originally invested $38,000 and now you have $35,000 as a result of selling at the lower price---$3,000 LESS!!

4. This is the best scenario for me but I do take a risk.  If instead the price of the stock increased, to say $41 per share and you wanted to sell to take your profits, then the situation described above would be reversed---I would have to put  $3,000 into my account to cover the purchase of the stock and you would make $3,000 on your sale of the stock. 

4. The question in your mind has to be: Is this legal? Yes, it is.

Short sellers are betting that price of the stock will go down.  The benefit of allowing short selling is that it tends to keep the price from getting artificially high---or form a "bubble". It serves as a counter-weight to "irrational exuberance" investors might have toward a specific stock.

Bottom line for me:  I see the purpose and value (I think, I do anyway) of short selling, but bothers me that my stock can be traded like this without my explicit knowledge.

If you half-way understood the above, then you are more equipped to read and understand THIS article on the Short-Selling of FB stock in the first couple of trading days.  Pretty interesting read

Explore the "Better Life Index" and see how US Men and Women compare to other major developed countries. How does the US rate??

A very nice interactive made available by the Organisation for Economic Co-operation and Development(OECD), a European agency that has an excellent reputation for producing economic and social data.

It is called the "Better Life Index".  It is an altenative way to mearsure national well-being.  You can select the key variable(s) you want to compare across borders with other countries and at the same time the differences between men and women within that country.  Below is one where I isolated Income and Education.  The US is on the far right.  The RED bubble is for Woment and the BLACK one for men.  I encourage you to check it out and fiddle with the variables. Is the US THAT bad a place?

Source: OECD

Donald Trump bashes China, again. If he wants to kill the beast perhaps he should stop feeding it. See photo evidence here...

Donald Trumps own words:

"China is succeeding. They are rebuilding their country off our money. I mean, they're -- we are making so many products in China, paying China so much money for those products, that you go to these Chinese cities, they are rebuilding cities and they're building new cities that are bigger than any of our cities....

...You have such a huge deficit with -- trade deficit with China. Their currency is artificially low. And, see, we have fallen into the Chinese trap. We are now destroying the dollar in order to try and compete with them. We shouldn't be doing that. We should be keeping the dollar strong and stable and we should tax Chinese products.

And the people that talk about free trade, we don't have free -- I am a big free trade believer, by the way -- but we don't have free trade with China.

China is, literally, going to destroy this company -- this country. If we don't get smart quickly, China will destroy our country...."

Pictures of Trump Products:  If you want to starve the beast you have to stop feeding it...

New Electoral College Map correlated with Swing States expected return to pre-recession levels of employment---this one IS important...

I put a yellow star on the State that according to Real Clear Politics is considered a "swing State" by Real Clear Politics.  The colors are coded by when it is expected the State will return to Pre-Recession employment levels in that State.  Of particular interest are the States with a star AND are either green, yellow or red.  All those (except Colorado and Virgina) are passed the Presidential election this November. Pundits suggest people will vote on the economic issues when the election nears and all the other issues will dissipate.  If this is the case, then the President has more of a challenge at this point.

Remember, ignore national popular polls between Romney and Obama. What counts is the Electoral College map.  

Source of Map Carpe Diem. Source for Swing States Real Clear Politics

Nice Infographic regarding the "Youth Vote" and how it tends to play out in National Elections.

Lots of data regarding the "Youth Vote" and how they, as a group, tend to sway.  Interesting stuff.

Add caption

Via: Best Online Colleges

You Have $75 Billion To Save The World---How would you spend it? See here how top economist would spend it.

Asked how they would spend $75 Billion dollars (by the Copenhagen  Consensus Center) to help people in the developing world, five of the worlds top developement economists responded by listing, in order of priority, what they would do. The list is below. Go HERE for a short analysis of this list.  Do you agree with these prescriptions?  Would you add something (or subtract)?

You Have $75 Billion To Save the World:  How would you spend it?

1     1.  Bundled interventions to reduce under-nutrition in preschoolers (to fight hunger and improve education)

2   2.  Expanding the subsidy for malaria combination treatment

3   3.  Expanded childhood immunization coverage

4   4.  Deworming of schoolchildren, to improve educational and health outcomes

         5.  Expanding tuberculosis treatment

6     6.  R&D to increase yield enhancements, to decrease hunger, fight biodiversity destruction, and lessen the effects of climate change

7   7.  Investing in effective early warning systems to protect populations against natural disaster

8    8.  Strengthening surgical capacity

      9.    Hepatitis B immunization

1   10.  Using low‐cost drugs in the case of acute heart attacks in poorer nations (these are already available in developed countries)

1   11.  Salt reduction campaign to reduce chronic disease

1    12.  Geo-engineering R&D into the feasibility of solar radiation management

1   13.  Conditional Cash Transfers for School Attendance

1   14.   Accelerated HIV Vaccine R&D

E  15.  Extended field trial of information campaigns on the benefits of schooling

1   15.  Borehole and public hand-pump intervention

 

1

Nice interactive---Where would YOU cut Defense spending to reduce government spending? See what I did HERE...

Think YOU can cut the military budget in order to reduce deficit spending?  Go to the interactive HERE and try for yourself.  Below this first picture of the interactive is the box on the left and the "cuts" I made--at total of $173 billion over 10 years.  Low hanging fruit and, for me, relatively easy cuts to make.  How did you do?? (HT: to website Chart for the link)

Substituting Capital for Labor down on the Farm---The US way and the Afghani way. I don't know what to say when I see the comparison here...

This video (From NPR) shows a farm tractor cultivating/planting a field without a driver. It is pre-programed to ride a grid and do what it does.  The farmer can now do something else with his time or he does not have to hire a worker. 

The farmer, or more likely, a corporate analyst/accountant, has determined that substituting capital for labor will be more profitable for the business.  Technology has become less expensive relative to labor on the farm. 

The photo below shows a farmer in Afghanistan (guessing he is not a corporate account) tilling his field the old fashion way---by old fashioned, I mean pre-1900's on back. 

In Afganistan, labor is cheap and capital is expensive so more labor is used to produce food.  Quite a difference in productivity outcomes, wouldn't you say? Hard to believe these two situations exist at the same time in today's world. 

Source: Here

Must see graphics on the relationship between education and employment. See how I sliced and diced this one! Literally, I sliced and diced it.

This graphic shows number the of jobs in a particular job/career sector by educational attainment.  The bigger the bubble the larger the number of jobs in that sector for those with that level of education.

For instance in the first line "management" the larger bubble is in the "6-Bachelor's Degree" level of education. The next largest bubble on the line, but much smaller is for "2-High School Diploma or Equivalent". This means to be in management, you don't have to have a degree BUT it helps--that is who most of the jobs go to. 

So, look at the rest of the employment categories keeping in mind what the bubbles mean.  Below this first chart, I made some notes on it and have an observation.  See you again below after looking at this first one...

Source: Bureau of Labor Statistics

Notice what I circled and what I put in the rectangular box.  The circle on the upper right contains the jobs for people with "More Education", specifically with a Bachelors degree or higher. The one on the lower left contains jobs for people with a high school diploma or less.  The RED horizontal line represents the point of significant transition from more educated to less educated in terms of job distribution.  It is not even a transition---it is a drop-off! Of note is the area I labeled "Dead Zone".  The relative number of jobs available for those in between low and high educational attainment are pretty thin. 

Can policy change this?

I see income inequality based on educational outcomes pursued by individuals. What do you see?

What do I have in common with John Coffey (The Green Mile)? We feel the same way about politics lately. I will let him speak for me here...

I think I am following economics and politics too much lately. I find myself feeling like John Coffey in The Green Mile...I will let him speak for me.  :)

A nice, easy to read graphic showing the changes in spending in the Federal Budget over the last 50 years..Pretty eye-opening!

A nice visual showing how the components of the Federal Budget (Discretionary and Non-Discretionary elements) have change over the past 50 years.  Here is how you read this---in 1962 Defense spending was 51.7% of the budget, in 1987 it was 29.7% and in 2011 is was 22.6%. Easy to see that Defense spending, while in total dollars spent has increased dramatically, has decreased by more than half relative to everything else in the Federal budget. 

If you look at the categories in 1962 then look at them in 1987 and 2011 you see a significant shuffling of the categories.  Public transfer payments (money moving from the govt to individuals) has increased dramatically---See Social Security, Medicare, Medicaid, Social Safety Net programs, etc.  Direct Federal government spending on "stuff"--transportation, roads, and "everything else" has decreased in proportion.


Source: NPR viaThe Big Picture

Interesting survey results from former college students as to what they might have done differently. Don't pass up at least a look at this chart

The first one is a tough one and very personal.   Think of the results of this survey as your "future self" traveling back in time to your "present self" and giving you some advice. Current and future college students should ponder this chart and consider it free advice.

Source: The Economix

Objective analysis of the primary reasons health care is expensive in the US. Worth a read if you are interested in something called "facts"...

Healthcare spending is an important political and economic topic today. Economist Tim Taylor has an excellent blog posting analyzing current research as to why the US has higher spending per person on healthcare compared to other major developed countries.

He discusses ALL the major reasons why there might be differences in spending outcomes, but narrows down the most expensive culprits in the conclusion below (I underlined them).  I encourage you to read the WHOLE analysis and become (more) educated on this issue.  These problems ARE solvable with a little political will and common sense on both sides of the political aisle!

"The question of why the U.S. spends more than 50% more per person on health care than the next highest countries (Switzerland and Netherlands), and more than double per person what many other countries spend, may never have a simple answer. Still, the main ingredients of an answer are becoming more clear. The U.S. spends vastly more on hospitalization and acute care, with a substantial share of that going to high-tech procedures like surgery and imaging. The U.S. does a poor job of managing chronic conditions, which then lead to episodes of costly hospitalization. The U.S. also seems to spend vastly more on administration and paperwork, with much of that related to credentialing, documenting, and billing--which is again a particular important issue in hospitals. Any honest effort to come to grips with high and rising U.S. health care costs will have to tackle these factors head-on"

Source: The Conversable Economist

Source: HERE

NICE inforgraphic on gasoline spending around the world. Who do you think is number 1? You might be surprised.

LOL! No, there is no surprise... Interesting statistics on gasoline usage around the world.  I would like to see a graph with the trends in these categories over the last 20 years.  We are a monster consumer of gas but I don't think as much so in recent history.

From: Business Insider

Source: Business Insider

Nice Chart showing showing poverty, income inequality and redistribution in developed countries...See how the US stacks up...

Income inequality and poverty is a hot political and economic topic today.  Below is a chart (from The Economist) that compares, within developed countries, levels of poverty and income inequality BEFORE and AFTER "taxes and cash transfers" (fancy way of saying "income redistribution"). 

The light and dark blue sections of the bar TOGETHER represent the percent of each countries population below the median income level for that country (median income--half of the people are above that level of income, half are below).

Just the light blue part of the bar represents the percentage of the population that is below the median income level AFTER people pay taxes and those taxes are redistributed to the relevant stakeholders-- people below the median.

As an example of how countries use policy to "level income" , I isolated the US ("A") and Sweden ("B"). I used these two because the percentage of the population living below the median is roughly the same--each bar (light and dark sections) settle at around 26%-27% and because they have a significantly different outcomes after redistribution.

After taxes and transfers ("C"), the US has roughly 17% of the population under the median income level and Sweden has 8% under the median.  The US reduced the percentage below the median by 37% and Sweden reduced it by 70%.  (If I did my math right!) 

So, while both countries started out with roughly the same percentage of people below the median, after taxes and transfers, Sweden (percentage-wise) did significantly better than the US in getting its population to/above their median income level.

Good thing, Bad thing, Neither? What do you think?  Keep comments kind, please...