Rebel Yid on Twitter Rebel Yid on Facebook
Print This Post Print This Post

Economic Thoughts

HKO_A

The stock market sell off may just be an overdue correction. It may be triggered by the ebola scare or the government’s ineptitude, though that is nothing new.

It may be triggered by a slow down in China, weakness in Europe.

I may be at least partially caused by our own slow growth policies and the failure of endless stimulus to get us out of first gear.

The dollar is strengthening even though our interest rates are at record lows.  This is unusual and may indicate that as weak as our economy is we are still the preferred source for investment.

While a collapsing global market hurts many domestic companies in global commerce it may also cause investment funds to come to our shore pushing both earnings multiples and share prices higher.

Lower oil prices certainly improve the spending power of Main Street and every lower income consumer and every small business running even a small fleet of trucks. It is a spending stimulus worth billions of dollars of tax cuts, but not if you are in the oil production business.

It also raises the relative costs and reduces the relative value of alternative energy sources.  Lower oil prices are very bearish for Tesla Automotive.

How will the ebola scare affect the economy.  Consumers may avoid air travel and malls.  They may drive more wearing out tires quicker.  They may accelerate online buying (AMAZON) even more than they were before. The sales of protective gloves and face masks on Amazon are soaring (Johnson and Johnson).

Print This Post Print This Post

Cherry-picking CEO Data

Economist Mark Perry writes in Carpe Diem When we consider all US CEOs and all US workers, the ‘CEO-to-worker pay ratio’ falls from 331:1 to below 4:1

Excerpts:

The AFL-CIO is comparing: a) the average salary of a small sample (350) of the highest paid US CEOs, out of a total CEO population in 2013 of 248,760 CEOs, according to BLS data here, and b) the average worker pay for production and nonsupervisory workers, which represents only 8.5 million factory workers out of a total of 136.3 million payroll employees nationwide. In other words, the AFL-CIO’s reported “CEO-to-worker pay ratio” of 331:1 is calculated by ignoring 99.9% of all US CEOs and 93.8% of all US workers. A more accurate description would be to call it a ratio of the pay for 350 of the highest-paid US CEOs to the pay of only 6.2% of the American labor force, or a ratio of an unrepresentative, infinitesimally small, and statistically insignificant group of CEOs to a small minority and unrepresentative group of US factory workers. It’s a completely bogus and meaningless comparison.

The top chart above shows a more statistically valid comparison of CEO pay to average worker in the US pay by considering: a) the average annual pay of all US CEOs in every year from 2002 to 2013 (data here) and b) the average annual pay of all US workers in a comprehensive, national BLS dataset that includes workers in 22 major occupational groups, 94 minor occupational groups, 458 broad occupations, and 821 detailed occupations (132.6 million workers for 2013). Based on those data, the average CEO earned $178,400 last year, the average worker earned $46,440, and the “CEO-to-worker pay ratio” was 3.84:1, and that’s a LOT different from the AFL-CIO’s ratio of 331:1 by a factor of more than 86 times! Call it a “statistical falsehood-to-truth ratio” of 86:1 for the AFL-CIO’s exaggerated, bogus ratio. The chart also shows that the real CEO-to-worker pay ratio has not been increasing as is frequently reported, but instead has been remarkably constant over the last 12 years, averaging 3.8:1 in a tight range between a maximum of 3.89:1 in 2004 and a minimum of 3.69:1 in both 2005 and 2006. The ratio of 3.84:1 in the most recent year (2013) was actually slightly lower than the ratios in 2004 (3.89:1) and in all years between 2009 and 2012.

Likewise, the bottom chart displays a more statistically valid comparison of average CEO pay to the annual pay of a full-time minimum wage worker. In 2013, a full-time minimum wage worker earned $14,500, and therefore the CEO-to-minimum-wage-worker pay ratio was only 12.3:1 compared to the grossly inflated 774:1 ratio reported by the AFL-CIO. That’s a “statistical falsehood-to-truth ratio” of 63:1 for the AFL-CIO’s exaggerated ratio. Because of the recent increases in the minimum wage between 2007-2009, the CEO-to-minimum-wage-worker pay ratio in recent years has been lower than the most recent 12-year average of 12.76:1.

HKO

They cherry pick data to compare a subgroup of the wealthiest CEOs with a subgroup of the lowest paid production workers.  This is statistical malfeasance of such a high order that any student of statistics can see right through it.  Is this a matter of incompetence or fraud?

This gross misuse of such data is becoming both typical and dangerous.  Is the media too ignorant of basic statistics to see such obvious flaws or are they so monolithically indoctrinated that they refuse to consider that the complete information may shake their poorly founded beliefs about their reality?

A simple Google search will reveal that there are far more articles available that reinforce this falsehood than there are to correct or clarify it.  This is also true in the discussion of inequality,  AGW, and other social issues that require clear information to make correct policies.

“A lie gets halfway around the world before the truth has a chance to get its pants on.” Winston Churchill

 

Print This Post Print This Post

Squandered Opportunities

Bret Stephens writes The Meltdown in the September Commentary.

Excerpts:

If anything, the international situation Obama faced when he assumed the presidency was, in many respects, relatively auspicious. Despite the financial crisis and the recession that followed, never since John F. Kennedy has an American president assumed high office with so much global goodwill. The war in Iraq, which had done so much to bedevil Bush’s presidency, had been won thanks to a military strategy Obama had, as a senator, flatly opposed. For the war in Afghanistan, there was broad bipartisan support for large troop increases. Not even six months into his presidency, Obama was handed a potential strategic game changer when a stolen election in Iran led to a massive popular uprising that, had it succeeded, could have simultaneously ended the Islamic Republic and resolved the nuclear crisis. He was handed another would-be game changer in early 2011, when the initially peaceful uprising in Syria offered an opportunity, at relatively little cost to the U.S., to depose an anti-American dictator and sever the main link between Iran and its terrorist proxies in Lebanon and Gaza.

Incredibly, Obama squandered every single one of these opportunities. An early and telling turning point came in 2009, when, as part of the Russian reset, the administration abruptly cancelled plans—laboriously negotiated by the Bush administration, and agreed to at considerable political risk by governments in Warsaw and Prague—to deploy ballistic-missile defenses to Poland and the Czech Republic. “We heard through the media,” was how Witold Waszczykowski, the deputy head of Poland’s national-security team, described the administration’s consultation process. Adding unwitting insult to gratuitous injury, the announcement came on the 70th anniversary of the Nazi-Soviet pact, a stark reminder that Poland could never entrust its security to the guarantees of great powers.

Print This Post Print This Post

Irrational Foundations

trainwreck

From The Weekly Standard, The Party of Reason, by Jeff Bergner

Excerpt:

We will see a pattern. In each case, Democratic thinking will unfold in three stages: (1) Policy is predicated on reality as one wishes it to be, not as it is. (2) That policy fails. And (3) its advocates explain the failure by demonizing their opponents. The demonization of political opponents to cover policy failures is an all too reliable indicator that the policies rest on unsound, anti-scientific, irrational foundations.

Print This Post Print This Post

Yiddish