Not in my area of expertise but here is what I think happened to Malaysian Flight 370.

I want to go on record with my theory of what happened to Malaysian Flight 370.

I just saw a profile of the pilots on CNN.  The co-pilot is a young-ish man and has been photographed smoking AND carousing with ladies in the cockpit.

The plane seems to have exhibited a pattern of flying that is intentional (sharp turns and a gain/loss/gain/loss in elevation) and under the control of SOMEONE.

In a 777 flight simulator, CNN reporter Martin Savidge sitting in the co-pilot chair, easily turned off  the transponder beacon.  Could do it with little notice from the pilot. 

I think the co-pilot was under pressure (real or imagined) and in fear for his job/career as a result of "indiscretions".  He cracked, folded, went crazy, choose your descriptor.

Well, that is what I think at 6:07pm Eastern on March 14.  

TurboTax e-mails price increase threat without giving ANY details. Not cool, Turbo Tax, not cool...

Just received this e-mail a few minutes ago from TurboTax, which I use for doing my Federal and State tax returns.

The yellow highlight is mine.

If I don't finish my return by March 21st they are going to increase the price for their so-called "Valued Customers".

Checked their website and could not find any pricing information in regards to this specific e-mail.  The message itself does not provide a clue as to how much it will increase.

Bad marketing move, Turbo Tax, in the middle of tax season.  Why make this "threat" on your customers at this point?

Did I say bad marketing move yet?

Give me a break...

More evidence the Federal government is a book-keeper and not a doer.

Here is some isolated data from the just released 2015 Budget Outlook by the White House.

Once again I find myself staring at numbers that demonstrate the Federal Government has become more of an entity that writes checks ("Transfer Payments") to people and less of one that "does things".

Below you see blocks of decades and a high lighted portion that shows transfer payments as a percent of ALL Federal government outlays for that last year of the decade (it is NOT an average for the decade).

Less of the budget spent on transfers, more available for "fun stuff" like defense, roads, bridges, education, space program, etc ad infinitum...sort of.

In 1950 we could spend 68% of the budget on all those fun things.  In 2014 we have only 30% to spend.

I am not saying this is a good thing or a bad thing, but it IS a thing.

I think most people don't give this much consideration on either side of the political spectrum when debates about the Federal budget take place.  Did I say "debates"?  Oh, I meant shouting matches. My bad.

One observation.  I do not know what happened in the 1950's that almost doubled private transfer payments (before dipping again in the 60's) but if I had to guess I would say it was a result of the GI Bill and the various benefits conferred on WWII vets.

Anyone else have any idea(s)???

If you are a "salaried manager" making MORE than $455 per week but LESS than ??, you will want to read this. Your paycheck may be changing in the near future.

Today the Obama Administration will direct the Department of Labor to revise an important regulation on the payment for overtime as it pertains to workers classified as "managers/supervisors" who are paid a fixed salary instead of an hourly wage, regardless of the number of hours worked.

There is a VERY low threshold under the Department of Labor regulations that allows employers to classify someone as a manager. It can be as few as TWO workers that the manager manages or if they have some day to day control over functions of a business. See HERE for more on that.

Right now, a business is required to pay someone in a management position at least $455.00 per week in salary to avoid paying over-time.  The Department of Labor has some defined parameters for who is considered a manager HERE.

At this point, it is not known exactly what the Administration will propose as a new threshold BUT with a tiny bit of research it seems like there is a consensus that it will be around $650.

This means if you are now paid somewhere BETWEEN $455.00 and $650.00 (tentative!) for your management expertise, then your employer will have to consider ANY overtime hours you work and pay you accordingly for them OR they can bump you up to at least $650.00 per week.

Or they could decide you are not worth that much at that pay level and cut your position and consolidate your duties with a manager already making over $650.00 per week.  Ouch.

Implementation of this won't happen any time soon, though.  It has to go though regulatory approval.

I will provide more details when they are released.

A single mom with two kids will get a 39% pay increase if the minimum wage goes to $10.10, right? She will be the first one to tell you NO, not even close! See the numbers here.

Here is a table (I modified it a little) from The Economix that shows how an increase in the minimum wage from $7.25 to $10.10 per hour will affect different peoples NET INCOME. That is income after taxes are subtracted and benefits are added in.

Two things (at least 2) happen when your income increases: (1) the payroll taxes owed increases and (2) government benefits tend to decrease because they are "means tested". This means the amount a person receives depends on the level of income earned AND the benefit decreases as income increases.

I high-lighted the "Single Mother with Two Children" category because these families tend to have higher poverty rates than the other categories.  And we care about the poor, right?

The first table shows the minimum wage at its current level of $7.25. The wage earner would pay no income tax on that level of income, but pay $1,154 in mandatory payroll taxes (6.2% in Social Security and 1.45% in Medicare tax(es)).  They would receive tax credits (a "refundable tax credit") in the amounts of $5,460 and $1,812.  They would also be eligible for $2,898 in a food stamp (SNAP) benefit.

If you take the persons total income, subtract payroll taxes, then add in the tax credits and the SNAP benefit, their effective "take home pay" is $24,069.

Using this number we can calculate the "effective hourly wage rate" ($24,069/2,080 hours (40 hours per week times 52 weeks) or $11.57 per hour in wages/tax credits and benefits. Remember that number.

Source: Economix at The New York Times

But what happens to the single mother's effective wage rate when the minimum wage increases to $10.10 per hour (a 39% increase)?  Will here total compensation rise by that much?  See the 2nd table.

Wage income increases.  Payroll taxes increase (the more you earn, the more you pay).  Income tax at that level of income is still $0.  However, there are changes in the mix of tax credits and SNAP benefits. On net, those are LOWER than they were before.

When all totaled together NET INCOME is now $28,200.  Certainly higher than it was before, but how much higher? As much as the minimum wage increase, as I think most people would believe?

If we divide $28,200 by 2080 hours worked in a year we get an effective wage of $13.56.

If we compare the change AFTER we include all the relevant numbers we can see that the single mom with two kids is making $13.56 per hour instead of $11.57.

That is an increase of 17%.  Far cry from the 39% increase in the minimum wage.

So, when discussing the minimum wage and the magnitude of help it will give a single mother, we need to include more than the nominal increase in it.

It tells only half the story.  BUT a hardworking single mother will probably already be able to tell you that things are not always as they seem.

Nice graphic on how much it costs to manufacture US coins. Time for the penny AND Nickel to go???

The Washington Post has an excellent story and a few graphs on the cost of making money. Not earning money but the actual manufacture of currency and coinage.

Making a dollar bill is pretty profitable but making pennies and nickels is a money losing proposition.  

Isn't is really time to let the penny go and become a historical footnote?

The cost of the metal bares much of the blame for the increased production costs.

The graph below shows how much it costs to produce $1.00 worth of each bill and coin.

Made a graphic to show why Chipotle is concerned about the supply of avocados. Maybe we DO need to be worried after you see this.

I pieced together two maps (sources cited below) to show why the Chipotle restaurant chain has expressed some concern about its supply chain in regards to avocados.

California produces 86% of the avocado crop in the US. Roughly 390 million pounds.

Chipotle uses about 35 million pounds of Avocados per year, or 9% of the total crop by itself.

Any reduction in the crop due to drought loss would have a negative impact on the over-all supply.  Hence rationing by price would be the order of the day.

Might be a good time to get into the futures market for Avocados....IF there is one!?!?!

Drought Map from Washington Post.  The avocado map from Mission Avacado

All the nuts are in California. No, really, they are. Nice graphic on nut production (and veggies and fruits) in the Bay State.

This from Mother Jones via Big Agriculture.

I was very surprised by the percentages here.  I am guessing you might be as well.

They include a nice reference map of the drought areas so you can see how it may affect food stuff production, hence the price of food in the chain.

Why did the unemployment rate INCREASE in February when more jobs were created than expected? You know what they say about Statistics. See here the what for's...

Lately the pace of job creating has been tepid, to say the least, BUT the unemployment rate has been going DOWN.  How does that happen?

This month (Feb 2014) the number of jobs created has been far better than in past months BUT the unemployment went UP.  How does that happen?

Mostly has to do with the movement of people in and out of the labor force.

I pluck the following data from the latest Household Survey on Employment (Feb 2014).  I highlighted the "Civilian Labor Force" in yellow.  This shows the number of people employed and unemployed added together.

I highlighted in brownish the numbers for the past two months and for one year ago (Feb 2013).  Notice the Civilian Labor Force DECREASED on net last year.  From January 2013 to December 2013 there was a net DECLINE in the Labor Force of 51,000.  This will tend to LOWER the unemployment rate as people exit the labor force for various reasons (retirement, giving up looking for work).

So, a decrease in the unemployment rate in the short run can be a bad sign.

However, in February there was a BIG bump UP in the Labor Force by 264,000.  This will tend to INCREASE the unemployment rate as more people jump back in (or enter for the first time) to the Labor Force.

This can be a GOOD thing!  If people are more confident about job prospects then initially more people who were not looking for jobs are not looking.

So, an increase in the unemployment rate in the short run can be a positive sign.

Don't you just love economics and statistics?

First look at the latest jobs report out today. Some good, some bad, but not necessarily ugly.

Here is your first look at the BLS's "Establishment Survey" of employment in the US for Feb 2014.  This is a survey of US businesses (big and small) to determine how many jobs have been created in the economy.

I highlight in YELLOW the positives and in RED the lukewarm-to-negatives.

A total of 175,000 new jobs were created in February.  Of that total, 162,000 were private industry jobs and 13,000 were public sector government jobs.  Of those 13,000 government jobs, 11,000 were at the State level, 8,000 were at the Local level and there was a net LOSS of Federal government jobs of 6,000.  I have not looked but guessing a good chunk of those were post office jobs.

"Professional and Businesses Services" was a big gainer at +79,000.  This represents 45% of all the new jobs.  Within the category, 24,400 were Temp jobs.  This represents 31% of the Business and Services jobs created.  So, Professional and Business Service jobs minus Temp jobs was 54,600, which is 31% of all the jobs created.  It has not performed so well the last couple of months, so it picked up the slack somewhat from other sectors that faltered.

We want all job sector boats to rise in the tide.  Seems like job creation lately has been more displacement from one sector to the other as opposed to consistent growth overall.  And THAT latter thing is what we need!

Maps of India, South Africa and the Korean Peninsula at night. One has more light, one has the same, and one has none. Economic progress in one blog posting...

One of my favorite maps is "The World at Night". It is composite map that shows the presence of artificial light or more specifically the presence of electricity to create that light.  It is an indicator of modern economic and social activity.

It makes a great lesson for an economics and/or geography class.




I came across these two maps below that show to specific countries and the difference in the presence of artificial light.  It is suggested that this tells a story of differing paces of economic progress.

The first is of India in 1994 (left) and 2010 (right).  A very noticeable difference.



The one below is of South Africa from 2000 to 2009.  I can't see an appreciable difference.  To be fair it is only a period of 9-10 years.



Here is another one that NEVER changes.  The Korean Peninsula.  Lights out for the North...

Conserve Water, Eat Less Broccoli. Nice infographic on amount of water needed for various food staples.

How much water does it take to grow your favorite veggie?

Conserve water.  Eat LESS Broccoli...Done.  :)

Found HERE

My take-down of a Wall Street Journal article. It helps with understanding the difference between a Giffen and a Veblen Good AND a market reaction. They confuse ALL three!

In today's Wall Street Journal there is an article on the state of the world wide luxury goods market.

In my opinion they make LOTS of Microeconomics 101 (or AP Microeconomics) mistakes in their analysis. Read for yourself but I want to focus on how they use, or misuse, the term "Giffen Good".  Here is the relevant excerpt:

"...An economic theory holds that for certain goods, higher prices increase desirability and drive sales, rather than suppress demand as they would for ordinary products. Economists refer to such luxury products as Giffen goods, named for Scottish economist Robert Giffen, who described the phenomenon...."

First, they REALLY should have used the term Veblen Good instead of a Giffen Good.  A Veblen Good refers to luxuries ("status or pretige goods") and a Giffen Good is used generally in the context of inferior goods.

Here is a definition I found that I REALLY like and makes the concept easier for me to understand:

 "We use the term “Giffen behavior” rather than “Giffen good” to emphasize that the Giffen property is one that holds for particular consumers in a particular situation and therefore depends on, among other things, prices and wealth. Thus, it is not the good that is Giffen, but the consumers’ behavior. The Giffen phenomenon should also not be confused with prestige or Veblen goods, where consumers desire the goods precisely because the price is high, “snob appeal,” where consumers desire the good because it is rare, or situations where consumers interpret a high price as a signal of high quality. In all three cases, the goods in question are normal. Giffen behavior is a phenomenon that arises entirely within the neoclassical framework where consumers care about price only inasmuch as it affects their budget sets. If demand is Giffen the good in question must also be inferior, which rules out Veblen, snob and signaling effects". ---LINK HERE to where I got this definition.

In both cases it suggests the Market Demand Curve is UPWARD sloping, indicating there is a DIRECT relationship between Price and Quantity Demanded of a good.  In other words, we only buy MORE when the price increases (or buy less when the price decreases).  This graph illustrates this phenomena:

This is counter to the Law of Demand that indicates we buy more only when the price decreases (or less when the price decreases).

So, what is really going on in the Market for Luxury Goods that I believe maintains the integrity of the Law of Demand?  Let's go to the graphs!

Here is a downward sloping Demand Curve for Luxury Goods. I just made up some random numbers for illustration purposes and to make the math easy.

At a price of $100 assume the market quantity demanded is 100.  Total Revenue would be $10,000

Assume the price of the Luxury Good increased to $125 and following the Law of Demand the Quantity Demanded decreases to 80.  Even though price increased and quantity demanded decreases, Total Revenues stayed the same.  This could or could not happen. It depends on "Elasticity of Demand", but I am not going to include that analysis here to keep it simple and short. :)

Why do I believe this is true in "Real Life".  Well, because the article told me so, in TWO places:

(1)---One reason ultra luxury brands are raising prices is to distinguish their products from entry-level luxury goods that are fast picking up market share. 

"The more Tory Burches and Michael Kors there are, the more the Chanels and Louis Vuittons will try to price up," said Milton Pedraza, the chief executive of the Luxury Institute, a research and consulting firm. 

The unintended consequence could be that the luxury brands drive even more customers toward less-expensive rivals....

...(2)---Jamie Moore, a homemaker in Cleveland, Tenn., said that on her annual shopping sojourn to New York, she usually splurged on a Prada handbag, for which even a basic nylon model can cost $1,230. Not this year. 

"The prices have gotten so expensive that I'm not buying one," she said.

So, a switch to an less expensive brand because of a viable substitute (1) AND because it is no longer affordable (2).  Nice example of BOTH the "Substitution AND Income Effects" that explain the DOWNWARD sloping nature of a demand curve...Hmmmm...

The article introduces two variables into the equation---rising income from China which creates new entrants into the market for Luxury Goods.

"A change in Income"  and "A change in the Number of Buyers" are two determinants of demand that will shift our demand curve, either left or right.

If at the SAME TIME there is a decrease in quantity demanded (20 units) from "the West" because of an increase in price, rising incomes and more Chinese wanting Luxury Goods can off-set this decrease in quantity demanded at $125.

Point "C" represents a new Price ($125) and Quantity Demanded (100) that lies to the RIGHT of the original Demand Curve "D*" (Price $125, Quantity Demanded 80).

We can assume (Ceterus Paribus) what happened between Point "B" and Point "C" will happen at 
every other point along Demand Curve "D*.  The Demand Curve will shift to Right:

Bottom line: I THINK  I maintained the integrity of the Law of Demand within the context of the Wall Street Journal article and its suggestion there is a case of Giffen/Veblen Goods going on in the luxury goods market.

This is just one inconsistency I found in the article. I believe there are many more.  

Extra Credit if you can find them!!  :)

Interesting data on New Home sales in the past 2 years. Evidence of economic recovery or income inequality? I report, you decide...

Below is some new housing data I took from the US Census report on New Housing in the US(January 2013).

It shows the number of New Houses sold and a price range for those houses in the years 2012 and 2013. The numbers are in "thousands" so add 3 zeroes to the end of the numbers you see below.

In nominal numbers, the lions share of new houses are in the $200-$300,000 dollar range (141,000 built and sold in 2013).

I calculated the year over year percentage change in the number of houses in each price band.

The lower end of the market, the under $150,000 up to $200,000, had a net decline of 5%. 

The upper end of the market, $500,000 and over, had a net increase of 56.25%.

Evidence of an income inequality gap? I report, you decide.

Not sure how this compares to prior years and if this is an anomaly. Guess that is for another blog posting.

Population trends and the Federal Budget. One captures the other by the tail.

Demographics---I harp on this a lot, I know.  My prior posting HERE you can see a graph that gives me hope regarding the economic future. Started me thinking about the present and the bind our politicians have put us in, in terms of how we view the Federal budget and entitlements.  I think it is important to consider when we talk about Federal Budget priorities and resource allocation in the US.

The first graph shows in index form, the change in the general population in the US  (RED LINE) and the percentage change in a subset of the whole population---the 25 to 55 age group (BLUE LINE). This age group is considered to be the heart of the labor force in terms of productivity and consumption of consumer goods.  (To calculate the percent take whatever the current Index is at any point on a line and subtract 100. That will give you the percentage change from 1990).

You can see in about the middle of 2003 we had a break in terms of this age group trending with the rest of the population.   The divergence is remarkable.  The general population continued to grow at a steady rate but the 25 to 55 age group pretty much stagnated and even declined.

Where did the other folks go?

Oh, I found them! The got older.  A few years prior to 2003 you can see (GREEN LINE) the percentage of people 55 and older increased at a rate higher than the the general population and the subgroup of 25 to 55 year old's.

In terms of the changing mix of spending the Federal Government does can you see how we moved from "doing things" to a system that predominately is a "check writer" for transfer payments?

Not that there is anything wrong with that but it does create, on a large scale, a different allocation of societal resources.  This is assuming a relatively fixed amount of government spending relative to national income. Spend more on one, spend less on the other (less "physical infrastructure" and more health spending on Medicare, for instance). In terms of the way politicians and policymakers perceive money and the budget this is not going to change any time soon.