Welcome to the Friday, September 3, 2010 edition of On the Moneyed Midways, where each week, we bring you the best posts we found among the best of the week's money and business-related blog carnivals!

It was a slow, but great week for one big reason: the Carnival of Real Estate is back!

You can say a lot of things about people in the real estate industry, but one thing we've learned in our years of producing OMM is that a lot of real estate people have the time and the talent to write really well - and they can put out one heck of a top notch blog carnival!

So let's get right to it then! The best posts of the week that was await you below....

On the Moneyed Midways for September 3, 2010
Carnival	Post	Blog	Comments
Best of Money	How I Run My Home Based Business	Christian PF	Bob describes how he manages his time and how he set up shop as an LLC, discusses what tools and software he uses, and also how he banks.
Carnival of Debt Reduction	How to Discharge Debt and Is It Worth It?	Wealth Pilgrim	Neal identifies the best way to legally discharge debts ever devised, then explains how you can discharge debt without using that method.
Carnival of Personal Finance	Can't Stand the Heat? Get Into the Kitchen - But Only Long Enough to Make Iced Tea	Surviving and Thriving	Absolutely essential reading! Donna Freedman is working from home, in her underpants, where she is making due without air-conditioning this summer. Which is all a launching point for sharing her recipe for making tea….
Carnival of Personal Finance	Motley Fool Retirement Calculator: Try Again	Oblivious Investor	What's wrong with using the Motley Fool's Retirement Calculator to help plan your retirement? Mike Piper says that one of it's key assumptions is faulty!
Carnival of Real Estate	5 Fun Facts About Short Sales and REOs	The Real Estate Novelist	Rob LeRoy's five points are: 1. Short sales aren't short, 2. There's no guarantee, 3. Banks don't care, 4. You don't know what you're getting, and 5. The Sellers are real people. Of course, there's far more to it than that, which is why you need to click through!
Festival of Frugality	Money Mistakes That (Mostly) Women Make	Money Ning	Vered Deleeuw points out the mistakes that women make with money and offers suggestions for how to avoid them. The Best Post of the Week, Anywhere!, and don't forget to read through the comments!

OMM's Running Index for 2010

Presented in reverse chronological order....

• On the Moneyed Midways - September 3, 2010
• On the Moneyed Midways - August 27, 2010
• On the Moneyed Midways - August 20, 2010
• On the Moneyed Midways - August 13, 2010
• On the Moneyed Midways - August 6, 2010
• On the Moneyed Midways - July 30, 2010
• On the Moneyed Midways - July 23, 2010
• On the Moneyed Midways - July 16, 2010
• On the Moneyed Midways - July 9, 2010
• On the Moneyed Midways - July 3, 2010
• On the Moneyed Midways - June 25, 2010
• On the Moneyed Midways - June 18, 2010
• On the Moneyed Midways - June 11, 2010
• On the Moneyed Midways - June 4, 2010
• On the Moneyed Midways - May 28, 2010
• On the Moneyed Midways - May 21, 2010
• On the Moneyed Midways - May 14, 2010
• On the Moneyed Midways - May 7, 2010
• On the Moneyed Midways - April 30, 2010
• On the Moneyed Midways - April 23, 2010
• On the Moneyed Midways - April 16, 2010
• On the Moneyed Midways - April 9, 2010
• On the Moneyed Midways - April 2, 2010
• On the Moneyed Midways - March 26, 2010
• On the Moneyed Midways - March 19, 2010
• On the Moneyed Midways - March 12, 2010
• On the Moneyed Midways - March 5, 2010
• On the Moneyed Midways - February 26, 2010
• On the Moneyed Midways - February 19, 2010
• On the Moneyed Midways - February 13, 2010
• On the Moneyed Midways - February 5, 2010
• On the Moneyed Midways - January 29, 2010
• On the Moneyed Midways - January 23, 2010
• On the Moneyed Midways - January 15, 2010

Older Editions

• OMM: The Best Posts of 2009 and our full index for the year!
• OMM's Running Index for 2008
• OMM's Running Index for 2007
• The Best Blogs Found in 2006 (and our full 2006 index)!

Labels: carnival

- posted by Ironman at 5:08 AM | Permalink | Share | |

Seasonally-adjusted first time jobless claims were announced on 2 September 2010 to be 472,000. Which was down some 6,000 from the previous week's revised total of new initial unemployment insurance claims of 478,000, which itself was down from the 504,000 filings of two weeks ago.

You might think those numbers represent a positive trend, as it would seem that the number of people filing unemployment insurance claims for the first time after having been laid off from their jobs seems to be falling. You would be wrong.

We find that's the case when we look at the overall trend in first time jobless claims since 21 November 2009, when the current trend was first established. What we find is that overall the overall trend in the number of initial unemployment insurance claims filed each week is flattening out, and has nearly become flat.

The problem is that the number of new unemployment claims is becoming flat at a level far higher than the average 318,000 level that was typical during the full-employment, low-unemployment years of 2006 and 2007. Instead, we find the level of new jobless claims would appear to be stabilizing around a level of 465,000 weekly claims, some 147,000 claims higher than would be consistent with a growing U.S. economy.

Using the standard deviation of the data for initial unemployment insurance claims filed since 21 November 2009, and assuming a normal bell-curve type distribution, we can now reasonably expect new weekly jobless claims filings will range between 415,000 and 515,000. A data figure falling outside of this range would be unexpected.

We would estimate a 68% probability that any future weekly jobless claims figure will fall between 448,000 and 482,000.

At least, until something happens to break the current trend, must as the introduction of health care reform legislation did to change the trend for the employee retention decisions of U.S. businesses back in November 2009. Prior to the introduction of the HR 3962 bill, the situation for new jobless claims was actually improving at a rapid rate, but the strong likelihood that health care reform that would impose higher costs on businesses would pass into law derailed it.

We had thought as recently as two weeks ago that a new negative trend might be in the process of being established, however the data of the last two weeks suggests that the current trend remains in effect, as the rules we follow for determining when an existing trend is broken weren't tripped.

Labels: jobs

- posted by Ironman at 6:08 AM | Permalink | Share | |

At the beginning of August 2010, we used our model of the S&P 500 to make three predictions of where stock prices would go during the month. We predicted:

1. The level the S&P 500 would average in the early part of the month (1123-1175).
2. The average level of stock prices to which the S&P 500 would go next (1074-1127).
3. The change in the year-over-year growth rate of stock prices that would be observed during the month (-0.175 to -1.979).

The outcomes were:

1. The average of the S&P 500's daily closing prices ranged between 1,123.16 and 1,125.86 from 2 August 2010 through 10 August 2010.
2. Measured from when the S&P 500 peaked at 1027.79 on 9 August 2010, the average daily closing stock price for the S&P 500 through the remainder of August was 1076.42. The entire month of August saw the average of daily closing prices for the S&P 500 clock in at 1087.28.
3. The change in the year-over-year growth rate of stock prices that would be observed during the month was -0.924.

For September 2010, we're once again inferring from stock prices that investors expect that the stock market will return lower dividends in the future, which for stock prices in September mainly means flat-to-lower stock prices. Our model would place the likely range for the average of the S&P 500's daily closing stock prices during the month to be between 1017 and 1071.

We're not going to offer a "where stock prices would go next" forecast since it's not much different (that forecast, tentatively labeled as "October" in our notes is slightly lower.)

We're also coming up on when companies will be most likely to be revising their forward-looking guidance for the end of the year and when we should start getting dividend futures data extending into September 2011.

Speaking of which, S&P's Howard Silverblatt has picked up on a change in momentum where stock market earnings are concerned, which he currently has noted in the S&P 500 Monthly Performance Data (free, registration required) in the S&P 500 Earnings and Estimates spreadsheet:

Q3, Q4 and 2011 have started to decline.

Second half economic reports and corporate guidance pointing to a slowdown; top-down still pessimistic, with bottom-up slightly down over the last week

No Sales Means No Jobs Means No Recovery http://tinyurl.com/347zy98

And on that cheery note, we'll borrow a line from Captain Capitalism and say "enjoy the decline!" We're really not that pessimistic (and honestly, only Captain Capitalism could be), but as long as we're there, we figure we might as well go all out!

Labels: forecasting, SP 500

- posted by Ironman at 6:41 AM | Permalink | Share | |

In 2006, the taxes that support workers compensation insurance in a number of states were skyrocketing out of control. So much so that many businesses were seriously looking at uprooting their operations and moving cross country to where they could operate less expensively. The state of New York was no different from many stories being told by many business owners across the nation:

In Buffalo, Curtis Screw Co. LLC pays more than $4,000 per employee – a total of $1 million a year – for workers’ compensation. At the company’s virtually identical facility in North Carolina, the cost is $550 per worker.

In the Hudson Valley, the Pawling Corp. saw comp costs jump 26 percent in 2006, even though worker injuries were declining. In most states, the manufacturer of architectural and engineered products calculates, workers’ comp expenses would be half the cost in New York.

Across the Empire State, employers tell similarly troubling stories. The Business Council’s recent survey of members found business leaders ranking workers’ comp second only to health-care costs as a threat to New York’s competitive position.

Today, we're going to show you what happened to workers compensation tax rates from that distressing point in 2006 to 2008 in pictures, taking advantage of some of the data visualization tools available at IBM's ManyEyes site. First, let's look at a treemap of average workers compensation tax rates on a state-by-state basis for 2006 - we've made the data available, along with an interactive version of the two maps below:

In the treemap above, the states with the highest average workers comp taxes appear in the upper left hand corner (indicated by the largest squares with the darkest coloring), with states with lower workers comp taxes appearing in descending order lower in the column and progressively lower in the columns to the right. The state with the lowest average workers compensation taxes in 2006 appears in the lower right hand corner of the treemap as the smallest rectangle with the lightest color tinting.

Next, let's repeat that exercise again, but this time, with the date for 2008:

In the 2008 chart, we see that many states reacted to the pressure placed upon them by their business communities to change their workers compensation taxes in such a way to become more equal to those rates of other states, which we observe in the relative size of each state's average workers comp tax rates represented in the treemap have become more equal across all the states.

But which states made the biggest changes? It would take a lot of back and forth review of the two treemaps above to be able to pick out which states significantly reduced their workers comp tax rates, which ones may have increased them, and which didn't alter them at all.

And that's where the last treemap we'll show comes into play! ManyEyes also offers a data visualization tool where you can compare changes over time in treemap charts. Here, we show the treemap that applies to where average workers comp tax rates were set in 2008, but use color to indicate the magnitude and direction of how each state changed their workers compensation tax rates from 2006 to 2008:

Here, we see that most states reduced their workers comp tax rates between 2006 and 2008, which is indicated by the number of states with a blue-tint, but that states like California, Nebraska and Florida reduced them by the greatest percentage amount, which has the bluest tint.

Meanwhile, we find that a handful of states went in the opposite direction, indicated by the orange-tints, sharply increasing their workers comp tax rates, such as Georgia, South Dakota and Ohio, who are indicated with the deepest orange tint.

We also see that the workers compensation tax rates for the two states mentioned in the excerpt above, New York and North Carolina, actually converged toward each other, with New York's workers comp tax rates falling and North Carolina's tax rates rising sharply!

But the most remarkable thing we observe is the evidence supporting the idea that tax rates will tend to converge toward an equilibrium level over time thanks to competition between the states. The real winners in this process are both the businesses, who benefit from lower taxes, and the states, which succeed by avoiding driving business activity out of their jurisdictions through excessively high taxes!

Labels: data visualization, taxes

- posted by Ironman at 4:20 AM | Permalink | Share | |

Last Friday, Fox Business Network's Charlie Gasparino caught our attention with a story reporting that a well-known securities analyst is actively suggesting that Citibank (NYSE: C) may be inflating its earnings through accounting manipulations, with an unusual level of animosity growing between the analyst and Citibank's senior leadership:

An all-out war has broken out between Citigroup CEO Vikram Pandit and a prominent securities analyst who is saying that the big bank may be cooking the books by inflating its earnings through an accounting gimmick, FOX Business Network has learned.

The analyst, Mike Mayo, of the securities firm CLSA, has been telling investors that Citigroup (C: 3.74 ,+0.08 ,+2.32%) should take a writedown, or a loss on some $50 billion of “deferred-tax assets,” or DTAs. That is a tax credit the firm has on its financial statement that Mayo says is inflating profits at the big bank by as much as $10 billion.

For a large institution like Citibank that has trillions of assets on its books, $50 billion may not seem like a lot of money. A writedown of this amount of money would have a significant impact however:

Since then Citigroup has been profitable, albeit marginally. Though it posted a loss for the full year of 2009, after it repaid a government bailout loan during the fourth quarter and began to unwind Uncle Sam's ownership stake. One reason Citigroup may be unwilling to write off its DTAs: to do so may sink the troubled bank back into unprofitability.

To find out if Citi's accounting practices should be suspect, we applied the tool we developed specifically to answer the question "Are They Cooking the Books?", which may be used to find a company's F-Score (or "fraud score"). The F-score provides an indication of the likelihood that a company's financial reports have been manipulated in inappropriate ways.

The F-score was developed by Patricia M. DeChow, Weili Ge, Chad R. Larson and Richard G. Sloan in a 2007 paper, in which they developed a statistical model using data from the late 1970s through the early 2000s to determine if a company's books have been subjected to potentially illegitimate accounting manipulations.

We populated our tool with data we found in Citibank's annual report for 2009 and reposted it below. Just click the "Calculate" button to find Citibank's F-Score.

In the tool above, a positive indication of potential fraud for the F-Score is a value greater than 1.00, but that doesn't necessarily mean that the firm in question is cooking their books. Rather, the inventors of the F-Score suggest that it's an indication that a further, more detailed investigation into the particular company's finances is warranted.

When we ran the tool however, we found that Citibank has an F-Score of 0.90. In a sense, that suggests that Citibank is potentially skirting the edge of accounting manipulations, as a solid financial institution would be much more likely to have a very low F-score.

So we're on the fence in making the call one way or another with respect to Citibank's potential for having committed accounting fraud. Consequently, we believe that only a much more detailed audit of Citi's accounting procedures and records would be capable of resolving the issue.

If the SEC wants to give the impression that it actually has any teeth when it comes to investigating potential accounting fraud among publicly traded companies, a thorough review of Citibank's accounting going back to 2005 would be a good place to begin demonstrating it.

Labels: business, quality

- posted by Ironman at 3:55 AM | Permalink | Share | |