Archive for the ‘Economic Data’ Category
Most salient economic trends of the decade
What are the most important trends in the last decade? Which ones will continue and which ones will turn? I have taken 7 major trends – gold, US stocks, emerging markets, debt, interest rates, housing and tech.
1. Spectacular rise of Gold.
From early 80s till the end of 90s, gold was a laggard. As inflation fears receded (thanks to China’s low cost exports) and growth fears subdued (due to “unreal” 90s – when growth skyrocketed due to open markets worldwide), gold’s role was really questioned. Most mainstream commentators thought gold bulls were dinosaurs and gold investing was anachronistic.
However, gold would prove its detractors wrong.
S&P Index for 137 years
Here is the regression trend on S&P index. However, take this data with a pinch of salt, as S&P 500 didnt exist back in 1870 (it is just an extrapolation of a trend) and most of the American bluechips came after the Long Depression of 1870s.
Companies came during or end of Long Depression:
Standard Oil (1870) – mother of most oil companies today, including XOM, Goldman Sachs (1882), AT&T (1880-85), J&J (1887), GE (1890), JP Morgan (1895), Ford (1903)
Still, this chart has some insight.
Source: Dshort.com
Can Dow reach 1600 by the end of this crisis?
The title seems scary. Can we really get that bad and fall 3/4 from this point? Hopefully, we won’t. But, economic theories don’t preclude that possibility. This is because of the fundamental relationship between stock market and the economy.
Businesses produce profits and the profits impact both the GDP and stock values. You can have the profits go closer to zero and GDP still non-zero, due to the other components in GDP, but you cannot have GDP going to a toilet and profits keep going up indefinitely. Thus, GDP forms an upperbound for corporate profits. Generally Market capitalization of the entire economy is a product of GDP, corporate profits as a % of GDP and what investors think the future will be (Price to Earnings ratio).
Where do US Universities spend their money?
Have you ever wondered where do the money from your tuition go? How do the universities spend their money? Why does the cost of tuition grow 2X more than the inflation rate? Why are the US universities extremely inefficient and uneconomical? I didn’t find any other study and workable stats on university spending in the net, so I just made a small exploratory study on how universities spend money.
Organization of this essay:
Part 1 concerns endowments, Part 2 contains analysis on a private University (Harvard) and Part 3 contains analysis on a public university (UW) and Part 4 is the initial conclusion. If there is enough audience interest, I will go deeper into this problem in further posts.
I started from this chart from my earlier post and started digging where the universities spend their money in.
21st Century debate: Contribution of Computers and Internet to Economic growth after almost a decade into the new century
How come we see the computer revolution everywhere except in the [aggregate] productivity statistics?
- Robert M. Solow, Winner, 1987 Nobel Prize for Economics (Sveriges Riksbank Prize)
Computers, Internet and mobile phones have fundamentally changed our life the last 2 decades. We could do more efficient shopping, connect to a lot more people and be more productive at work. As an engineer who have been a part in developing an Operating system, a search engine and a social networking tool – the three main products of this revolution, I feel they are great things to both build and to use. They make individuals much more productive looking at the micro level. However, looking from an economic point of view and see the Macro picture I’m bogged down with “Show me the money”. Economists of the 1980s and 90s have debated a lot about this and suggested that they may not have caused a lot of economic growth. As this review shows, the economists of late 80s successfully argued that this paradox is due to “mismeasurement, lags, redistribution and mismanagement”.
However, over a long period of time you should see the effect in economic growth, as the indirect effect of the productivity increases reflect in the macro economy. And things have changed since the original “productivity paradox” came, as PCs came into the living room and internet connected the ordinary people to do their mundane stuff in networks originally designed to survive nuclear attacks.So in this decade, have the powerful PCs, Smartphones, Search engines, Facebook led an explosive economic growth? In reopening the debate and looking at the recent data, there still seems to be dismal evidence for the productivity growth from the modern revolution. It is possible that the economy might have reached a saturation as a $10 trillion economy cannot continue to be sprinting like a $1 trillion economy, but still 1.7% annual growth in per-capita income since WWW came seems less. There might be other small causes too. The article concludes with what might be a possible cause for this.
Take a look at the Oil refining companies
The oil prices are going down and it should be bad for all petroleum related companies, right? Well, have you guys looked at the pump prices for gasoline the last 2 months? I took a month vacation in December and when I returned I was shocked to see the price in my gas station rocketed from 1.58 to 2.18 (a shocking 60% up), while the world oil prices are still going down. And in fact, the trend is seen nationally. The gasoline prices have gone up more than 25% since Christmas. So, who is benefitting from this? The answer is – refiners. Their gross margins have gone up from about 10% in December to as high as 50% in January.
Historic gold, silver, oil prices and their relationships
Here is the result of some data collection on gold, silver and oil. Enjoy the charts 
.
Did you know that the gold price in 1793 is about 20 dollars/ounce (ounce = ~31 grams) and now it is about $800 (about 40X gain in 300 years). http://goldinfo.net/yearly.html
Here is the 600 year history of silver and gold-silver ratio. http://goldinfo.net/silver600.html
Some thoughts on taxation
What is an ideal tax rate? Do you know that the peak tax rate in 1944-45 was 94%? Do you know till 1913 the federal tax rate was below 2%, before the 16th amendment to US constitution gave wide range of powers to congress to tax the citizens? Does tax cuts really inspire growth?
What is happening with oil and how do we hedge against its price rise?
This article appeared in Seeking Alpha
Oil prices have been steadily going down the last couple of months and a few are wondering how long this will last. The price of oil is around $67/barrel (1 barrel of oil approximately equals 42 US gallons or 159 liters) for December 2008 delivery and this is less than half the price we were seeing in the summer. However, the prices of future deliveries have not fallen that low. The prices for December 2013 contracts (to take oil delivery 5 years from now) are about $90 and this indicates that atleast a few traders believe that the price of the oil will go back up at some point. Let’s analyze what is happening, and see how we can take constructive action to protect us from future oil rise. We suggest two ETFs that might help you make constructive investment decisions based on this.
ISM Manufacturing Index Plunges to 26 year low – Analysis & Implications
The Institute for Supply Management’s closely watched Manufacturing Index has dropped to 38.9 the lowest since September 1982. What does this index measure, why is it important and what are its implications?
US GDP growth in the negative
As expected the US GDP growth fell into the negative zone for the third quarter of 2008. GDP (Gross Domestic Product) is the fundamental measurement of economic progress of an economy. It is the sum total of value produced by an economy in a year and usually measured by adding total consumption of the consumers with the net investment made by individuals and corporations, along
The effects of current lower interest rates on Inflation
The US federal reserve has been reducing interest rates for the past 1 year and now it is close to a historic low at 1%. If all other factors are equal inflation grows inversely proportional to interest rates. Thus, a lot people believe easy money policies by itself will cause inflation no matter what
Lectures of Hans Rosling
Hans Rosling has given an amazing presentation that debunks some of the myths about Third World. It is presented so beautifully that even total strangers to economics and public policy can understand every part of it. It should be a bible for all powerpoint presenters and those want to present analysis on the data. Watch the presentation and enjoy.
