Political Calculations
Unexpectedly Intriguing!
November 24, 2015

Last Thanksgiving, we presented a chart featuring a spurious correlation between the average live weight of U.S. farm raised turkeys and the MSCI World Stock Market Index, in which we showed how U.S. turkeys predict global stock market crashes. Here's what we wrote at the time....

As you can see in our carefully calibrated chart above, whenever the value of the MSCI World index has exceeded the equivalent live weight of an average farm-raised turkey in the U.S., the index went on to either stagnate or crash. And in 2014, the value of the the MSCI World Stock Market Index has once again exceeded that key threshold, which can only mean one thing.... The climate for investors has changed, and it's time to sell!

And if they try to tell you that doesn't make any real sense, you should hold firm and tell them that the correlation is really strong (the R² is 0.9616), which means that the science is settled and that they really shouldn't want to be some kind of climate change science denier.

Speaking of which, the rising live weight of U.S. farm-raised turkeys also is strongly correlated with global warming. Believe it or not, the correlation between atmospheric carbon dioxide and global temperatures is not very strong at all (other factors do a much more coherent job in explaining actual temperature observations).

Say what you will about the science, but you cannot deny that by using tips like this, you can make the conversation around your Thanksgiving dinner table a lot more lively this year!

The correlation between the live weight of U.S. farm-raised turkeys and global stock prices is still spurious, and yet amazingly, our prediction based upon it has largely come true in the past year, as the worlds' stock markets did indeed go on to either stagnate or crash.

And with those stock prices still above the live weight of U.S. turkeys, we can't as yet say that global markets are finished stagnating or crashing as yet.

Spurious Correlation: Average Live Weight of U.S. Farm-Raised Turkeys and MSCI Global Market Index, 1970-2015 (Year To Date)

If it seems irrational to link the weight of U.S. turkeys and global stock prices, just remember the old saying: the market can remain irrational longer than you can remain solvent. Do you really feel lucky enough to bet against the birds?

U.S. Farm Turkeys - Source: CDC.gov - https://web.archive.org/web/20151124141836/http://www.cdc.gov/flu/

Data Sources

MSCI. MSCI - World Stock Market Index. (End of Day Index Data Search). [Online Database. ]. Accessed 23 November 2015.

National Turkey Federation. Sourcebook. [PDF Document]. October 2013.

U.S. Department of Agriculture. Turkeys Raised. [PDF Document]. 30 September 2015.

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November 23, 2015

Today, we're going to consider the counterargument to the data we presented yesterday, in which we showed that the population of farm-raised turkeys peaked at 302.7 million in 1996 and has fallen steadily since. Or rather, through 2014, as 2015 saw the population fall as a direct result of an outbreak of avian influenza among U.S. farm flocks of turkeys.

While the population of farm-raised turkeys in the U.S. would appear to indicate that's the case, in reality, the truth is somewhat different because today's turkeys are much larger than those of yesteryear. In the chart below, we've graphed the live weight of turkeys raised on U.S. farms for each year from 1970 through 2015 to show just how much the size and weight of U.S. turkeys has changed over time.

Average Live Weight of Each Turkey Produced in U.S., 1970-2015

In this chart, we see that since the 1970's, the average live weight of a turkey raised on a U.S. farm has increased by 61% through 2014, from 18.7 pounds to 30.2 pounds.

In 2015 however, we see that the average live weight of a turkey has dropped by 3% to 29.3 pounds, which is directly attributable to the outbreak of avian influenza at a number of turkey farms early in 2015. Here's how the U.S. Department of Agriculture described how the outbreak affected the average live weight of turkeys it recorded (emphasis ours):

U.S. turkey meat production in third-quarter 2015 was 1.35 billion pounds, down 9 percent from a year earlier. This continued the downward path for turkey production in 2015, with a strong increase in the first quarter, a small decrease in the second quarter, and most recently, a strong decrease in the third quarter. The third-quarter decline was due to both a lower number of turkeys slaughtered and a drop in their average live weight at slaughter. The slaughter number fell to 57.5 million, 6 percent lower than a year earlier, while the average live weight at slaughter declined to 29.3 pounds, a drop of 3 percent from the previous year. Since April the average live weight at slaughter has been lower than the previous year, for a period of 6 consecutive months—reflecting the impact of the HPAI outbreak, which caused processors to slaughter birds somewhat earlier than they normally would in order to maintain supply levels.

We find then that 2015 represents an outlier in the data for the average weight of U.S. farm-raised turkeys.

That's an important fact to consider in considering our next chart, in which we're showing the aggregate weight of all turkeys raised on U.S. farms for each year from 1970 through 2015, which would represent the product of the average weight of farm-raised turkeys and the number of turkeys raised on U.S. farms in each year.

Total Live Weight of Turkeys Produced, 1970-2014, with Estimate for 2015

In this chart, we see that the total weight of all turkeys produced in the U.S. has fallen within a fairly narrow range in each year since 1996, ranging between 6.9 and 7.9 billion pounds in any given year from 1996 through 2014 and varying with the health of the U.S. economy, even though the number of farm-raised turkeys peaked in 1996. Meanwhile, our outlier year, 2015, fell back below the 6.9 million pound mark, but clearly would not have done so if U.S. turkey farms hadn't been forced to cull their flocks to prevent the further spread of the outbreak of avian influenza in early 2015.

With that being the case, what's important to consider in the consumption of turkeys in determining whether the U.S. has passed "peak turkey" is not their number, but their aggregate weight, as turkey meat is consumed by the pound.

A similar phenomenon can be seen elsewhere in the economy when considering the state of oil production in the U.S., where 2015 has seen a declining number of working rigs at U.S. oil fields as oil prices have fallen, but also a much smaller than might otherwise be expected reduction in actual crude oil extraction, as the remaining rigs have been made more productive.

U.S. turkey farms have likewise become much more productive over the years since the total population of farm-raised turkeys peaked in 1996, and really, since the stagnant 1970s.

Which is to say that not only has Peak Turkey not arrived, there is also no great turkey stagnation.

Data Sources

U.S. Department of Agriculture. USDA Livestock, Dairy and Poultry Outlook - November 2015. [PDF Document]. 17 November 2015.

U.S. Department of Agriculture. Poultry - Production and Value, 2014 Summary. [PDF Document]. April 2015.


November 22, 2015

In 2015, the estimated population of turkeys raised on U.S. farms fell to its lowest level in 29 years, dropping nationally by 4% to 228 million. That figure is down by nearly 75 million since the population of U.S. turkeys raised on U.S. farms peaked at 302.7 million in 1996.

Our chart below shows the evolution of annual turkey production at U.S. farms for each year from 1970 through 2015's preliminary estimate by the USDA.

Number of Turkeys Produced on U.S. Farms, 1970-2015

The USDA describes the drop in the number of U.S. farm-raised in 2015:

A combination of six states account for nearly two-thirds of the turkeys produced in the United States during 2015. The largest turkey producing state is Minnesota, at 40.0 million turkeys, down 12 percent from the previous year. North Carolina is up 2 percent from last year, producing 29.0 million turkeys. Arkansas produced 27.0 million turkeys, which is down 10 percent from the previous year. Indiana is up 1 percent from a year ago to 19.1 million turkeys. Missouri is up 6 percent from last year, producing 18.0 million turkeys. Virginia is up compared to the previous year by 4 percent at 17.4 million turkeys.

The big reason for the concentrated declines in Minnesota and Arkansas is that the poultry flocks raised on farms in these states were very negatively impacted by the incidence of avian influenza, which prompted a number of turkey producers to euthanize a large portion of their flocks to prevent the spread of the infectious and deadly disease after detecting its presence on their farms.

But that factor only accounts for the decline in the number of turkeys raised each year on U.S. farms in 2015. It doesn't explain the decline of 65.3 million turkeys that took place in the time from 1996 through 2014, after the population peaked in 1996.

So here's a deeper question to talk about around this year's Thanksgiving dinner: has the U.S. passed "peak turkey"? The hypothetical point in time when maximum turkey production has been reached, but has entered a slow but terminal decline, much like the concept of "peak oil" that has been hypothesized for the production of petroleum.

Otherwise, if you're not prepared with distracting conversation material like that, your Thanksgiving dinner experience could very well turn out like that depicted in the following video.

You can't say you weren't warned - you don't want to go through that kind of pain. Where Thanksgiving dinners are concerned, preparation is everything!...

Data Sources

National Turkey Federation. Sourcebook. [PDF Document]. October 2013.

National Turkey Federation. Statistics. [Online Article]. Accessed 22 November 2015.

U.S. Department of Agriculture. Turkeys Raised. [PDF Document]. 30 September 2015.


November 20, 2015

Prompted by the release of the minutes of the FOMC's October 2015 meeting, investors shifted their forward looking focus back to 2015-Q4, as it now appears the Fed will finally follow through on its previously empty threats to begin hiking short term interest rates in the U.S.

Change in Growth Rates of Expected Future Trailing Year Dividends per Share with Daily and 20-Day Moving Average of S&P 500 Stock Prices, Snapshot on 2015-11-19

For stock prices, the shift in forward-looking focus from 2016-Q1 back to the nearer term future of 2015-Q4, where the Fed will likely announce its now expected action at its next meeting on 16 December 2015, meant that stock prices would rise. And so they have, just as our hypothesis would expect:

Alternative Futures - S&P 500 - 2015Q4 - Standard Model - Snapshot on 2015-11-19

Here's how Reuters reported the story:

Wall St. rallies after Fed minutes solidify December rate hike bets

U.S. stocks closed higher on Wednesday and investors appeared positively inclined toward higher rates after minutes from the Federal Reserve October meeting showed a solid core of officials rallied behind a possible December rate hike.

Central bankers at the October policy meeting also debated evidence the U.S. economy's long-term potential may have permanently shifted lower.

The three major indexes added to earlier gains after the 2:00 PM ET Fed release and buying accelerated ahead of the close.

Now, here's the thing. We're now in a period of time in which investors are myopically focused on the very near term future. That will only last one more month, at most, through the third Friday of December (18 December 2015), which corresponds to when the stock market futures contracts for 2015-Q4 expire, with pretty good odds that investors will shift their forward-looking focus to a more distant point of time in the future after the FOMC meets on 16 December 2015.

Which point in the future they focus upon next will determine the trajectory that stock prices will actually take, as the expectations associated with each point will drive stock prices.

At the same time, we've kept seeing the pattern when when unexpectedly bad news is reported, investors shift their attention to 2016-Q1. What that suggests is that there is a high risk of yet another roughly 10% correction in the market's near term future.

We think that the extent to which that might be avoided will hinge on how the Federal Reserve manages investor expectations after its December 2015 meeting. With the data we have available today, we think that if they set expectations such that investors believe that the next action they take will be after 2016-Q1, the U.S. stock market can avoid a correction event.

But if they indicate that their next action might take place in that first quarter of 2016, or if they otherwise lose the plot in the face of other market driving news, then the kind of focus-shifting correction we've described will become a done deal.

Meanwhile at Political Calculations

We're juggling our posting schedule around as we head into the end of the year's holiday season, which is why we're commenting on the stock market on a Friday when we'd otherwise be turning our attention to more fun-related material.

Speaking of which, we'll be turning our attention next week toward Thanksgiving, where it will be all turkey all week long, as per our annual holiday tradition!

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November 19, 2015

What's the preliminary estimate of the amount of debt that the U.S. government owed to all its creditors as of the end of its 2015 fiscal year on 30 September 2015?

That's not such an easy question to answer, because at the time, the amount of the total public debt outstanding for the U.S. government was locked in at $18.15 trillion - almost exactly the same level it had been when the U.S. Treasury ran into the nation's statutory debt ceiling back on 24 February 2015.

But that doesn't mean that the U.S. Treasury stopped borrowing money. To get around that legal limit, U.S. Treasury Secretary Jack Lew played something of a shell game with accounts controlled by his department - primarily the retirement and disability trust funds for the federal government's civilian employees.

As a result, even though the total U.S. national debt appeared to be frozen at $18.15 trillion, the U.S. federal government was out racking up even more debt.

How much debt it racked up became clear after former U.S. House of Representatives Speaker John Boehner struck a deal with President Obama that allowed the U.S. Treasury Department to ignore the nation's laws regarding how much debt the U.S. government can take on until March 2017. When President Obama signed the deal into law on 2 November 2015, the U.S. government's total public debt outstanding immediately swelled by $339 billion, rising to $18.49 trillion by the end of the day, as the Treasury Secretary's shell game came to an end, along with any consideration that the previous figure of $18.15 trillion was ever anything more than an accounting fiction.

But what would it have been on 30 September 2015 if not for that shell game?

To estimate that figure, we assumed that in the time from 24 February 2015 and 2 November 2015, the amount of money that the U.S. government owes to all its creditors increased steadily. And that assumption put the estimated real amount of the U.S. total public debt outstanding as of the end of the U.S. government's fiscal year somewhere in the ballpark of $18.44 trillion.

And that's the figure we're displaying in the chart below, in which we've also identified how much of that debt is held by the U.S. government's major creditors as of that date.

Preliminary FY2015: To Whom Does the U.S. Government Owe Money?

The rest of the figures shown in the chart above reflect the officially recorded amount of debt held by each entity as of 30 September 2015. Including the percentage share shown for the U.S. government's civilian retirement fund, which was artifically depressed as a result of the Treasury Department's funny money shell game. To keep the accounting simple, whatever that amount might have been is included with the share indicated for U.S. individuals and institutions (which is technically correct).

As of 19 November 2015, the total public debt outstanding stood at $18.66 trillion.

Data Sources

Federal Reserve Statistical Release. H.4.1. Factors Affecting Reserve Balances. Release Date: 1 October 2015. [Online Document]. Accessed 17 November 2015.

U.S. Treasury. Major Foreign Holders of Treasury Securities. Accessed 17 November 2015.

U.S. Treasury. Monthly Treasury Statement of Receipts and Outlays of the United States Government for Fiscal Year 2015 Through September 30, 2015. [PDF Document].


U.S. Bureau of Economic Analysis Logo - Source: U.S. Bureau of Economic Analysis

Just over a decade ago, we discovered the U.S. Bureau of Economic Analysis' resources for digging deeper into GDP, including applications that could break the nation's GDP down by both industry and state.

Back then, the state-level Gross Domestic Product data went by the name of "Gross State Product", or GSP, which had a major deficiency, as updates for the state level data for a given quaqrter were released many quarters after which they actually occurred.

That began to change in 2012, as the BEA began developing more timely updates for state-level GDP data by industry, where they seek to release data within 30 days of the release of the third estimate of national-level GDP after the end of a given quarter.

The BEA is still working toward that goal, with the new state-level GDP data, now identified as "Quarterly Gross Domestic Product By State", coming out within 2-to-3 quarters of the end of the quarter to which it applies. The most recently available data at this writing spans the period from the first quarter of 2005 through the fourth quarter of 2014, with the next data release covering the period through the second quarter of 2015 expected to be released in December 2015.

To show what kind of analysis is possible with GDP data detailed to the state level, we're going to compare the performance of the entire U.S. economy, covering all industries, with that of the state of Kansas for the period from the first quarter of 2006 through the fourth quarter of 2014.

Given the difference in the sizes of the respective economies of the entire U.S. and the state of Kansas, the way we'll do that is to compare the real, inflation-adjusted growth rates of GDP at both levels. Our first chart shows each quarter's annualized growth rate over our chosen period of interest, which allows us to fully cover a period of time spanning two full years before the onset of the so-called "Great Recession" with the available data.

Annualized Quarterly Real GDP Growth Rate, 2006:I through 2014:IV, US (All Industries) and KS (All Industries)

In the chart above, we've indicated the quarters in which Kansas' economy experienced negative real GDP growth with the red-shaded vertical bands. The U.S.' real economic growth is shown as the dotted line, while Kansas' is shown as the solid blue line.

Overall, we see that Kansas' economy generally outperformed the economy of the U.S. in the period preceding the Great recession. Beginning with the Great Recession however, we see that Kansas' economy has generally followed the overall trend of the entire U.S. economy, with some notable exceptions.

The most significant deviation between the two occurred in 2012, where Kansas' real economic growth significantly lagged behind that of the U.S. economy as a whole.

Using the state's GDP data broken down by major industry, we quickly determined that the state's agricultural output was very negatively impacted during this period. A simple search of contemporary news sources quickly confirmed why: a multiyear drought that began in earnest in the fourth quarter of 2010 sharply intensified in 2012.

The chart below shows how Kansas' real economic growth was impacted by the drought, where we calculated the state's real GDP growth rate without the contribution of its agricultural sector, shown as the light blue line.

Annualized Quarterly Real GDP Growth Rate, 2006:I through 2014:IV, US (All Industries), KS (All Industries) and KS (All Industries, Less Agriculture)

The BEA's state-level GDP data confirms that Kansas' economy was negatively impacted by drought in 2012. Believe it or not, the National Weather Service also recognized the drought's negative economic impact contemporaneously:

The drought has had a detrimental impact on agriculture and crops across the region. Due to a very dry fall, the winter wheat crop is already suffering. According to the Kansas Agricultural Statistics Service from late November and early December, 25% of the winter wheat across the state was in poor to very poor condition, 46% in fair condition, and only 28% in good condition; only 1% was rated excellent.

Of course, livestock suffered terribly. Livestock producers were forced to move their animals off of pasture early because the grass was gone and the water supply was depleted. As of September 10th, farmers and ranchers with cow/calf operations had been feeding hay for a couple of months. They were also forced to either deplete part of their herds or purchase high-priced feed. No doubt, the economic ramifications were significant. Cash flows on almost all livestock operations were severely impacted and in many cases operators with cattle were forced to sell livestock early which, in turn, resulted in less income. Those who held on to their cattle had to buy expensive feed which also resulted in lost revenue. Furthermore, the drought has not only had a negative impact on agriculture and crops, but also has greatly reduced water levels on reservoirs and rivers, with many areas reporting very low and in some cases record low stream flows. This has adversely affected recreational boating.

The effects of extreme drought that year would also negatively impact the state's non-durable goods manufacturing sector, as mills in the state would have less grain to process into flour, particularly in the quarters following the main harvest, which is also evident in the detailed state-level GDP data.

But we also noticed that durable goods manufacturing also experienced a downturn in that period. As it happens, Kansas' economy was also negatively affected in 2012 and 2013 by a downturn in its aerospace and defense industrial sector, which resulted in significant layoffs within the state. In our chart below, we've shown what Kansas' real GDP growth rate was for all its other industries, less its agricultural and manufacturing industries:

Annualized Quarterly Real GDP Growth Rate, 2006:I through 2014:IV, US (All Industries), KS (All Industries) and KS (All Industries, Less Agriculture and Manufacturing)

What we find is that after accounting for the negative economic contributions of just these two industrial sectors, the gap between Kansas' real economic growth rate and that of the U.S. as a whole narrows to fall within a range that might be expected from simple statistical noise.

As for what prompted the contraction in Kansas' manufacturing industry, we can directly identify the influence of a significant reduction in aircraft orders from the industry's worldwide customers that disproportionately affected Kansas' aviation industry and also a reduction in defense spending on the part of the U.S. federal government, which came as part of the budget sequester that President Obama proposed for the Budget Control Act of 2011, making the downturn for aerospace and defense industries actually national in scope.

The remainder of the downturn in Kansas' economic growth in 2012 can otherwise be attributed to two very short term factors that took place in the first quarter of 2012. First, the first quarter of 2012 in Kansas was unusually warm, which reduced the contribution of utilities to the state's GDP that quarter, which was confirmed by one of the state's leading power companies in their financial statements.

The other very short term factor was a downturn in the state's real estate sector, which turned down after having peaked in real terms in the fourth quarter of 2011, thanks to the recovery of housing prices in Kansas, which had boosted the contribution of real estate to the state's economy in 2011, but less so afterward, in part because of the negative shocks experienced in the state's agricultural and manufacturing sectors.

In our final chart, we'll consider the counterfactual of how Kansas' state economy would have grown with respect to the overall U.S. economy, in which we'll show how the state's economy would have grown if its overall real economic growth had not been negatively affected by extreme drought and the results of the recession in its aerospace and defense manufacturing industries. In this chart, we've indexed the growth of both the U.S. and Kansas' economies to the fourth quarter of 2010 (2010:IV = 1.00, or 100% if you prefer), which corresponds to the beginning of Kansas' multiyear period of drought. We've also animated the chart to emphasize the difference that the fortunes of the state's agricultural and manufacturing industries make to its economic performance.

Indexed Real GDP (2010:IV = 1.00 or 100%), 2006:I through 2014:IV, US (All Industries), KS (All Industries) and KS (All Industries, Less Agriculture and Manufacturing)

Basically, we've nearly completely accounted for the differences in overall performance between the U.S.' economy and Kansas' economy, substantiating that both severe drought on the state's agriculture and non-durable goods manufacturers and also a national recession for the state's aviation and defense manufacturers negatively impacted the state's actual GDP.

Which we point out because at least one professor at a large public university who claims to be competent in the field of economics was unable to do so. But then, that may be because they are completely unfamiliar with the detailed data on actual state-level GDP that the BEA makes freely available. Then again, based on what we've observed of their analytical ability, we believe that they would be hard pressed to discover their own ass, even if equipped with both hands and a flashlight.

Speaking of which, the only reason we're even discussing this topic today is because of a really bizarre pattern we've observed in our site traffic in recent months, extending back to at least July of this year, with the most recent episode taking place earlier this week, late at night (the timestamps shown below reflect Pacific Standard Time).

Political Calculations Site Traffic 17 November 2015 - Yet Another Search for C****

While we appreciate the repetitive site traffic, we can't help but think that the ongoing visits represent a level of knowing guilt on the part of our frequent site visitor, where the fear of our potential exposure of what could be described as blithering incompetence at best, or perhaps even purposeful deceit at worst, is keeping them from sleeping soundly at night, driving their frequent visits to our site where they hope to still find that we haven't yet addressed the matter.

We will address the matter in greater detail in a future post. When we do, will be at our leisurely convenience....

Data Sources

U.S. Bureau of Economic Analysis. Quarterly Gross Domestic Product by State, 2005-2014 (Prototype Statistics).
Table: Real GDP by Stgate, 2005-2014. Excel Spreadsheet]. 2 September 2015. Accessed 19 November 2015.


General Aviation Manufacturers Association. 2013 General Aviation Statistical Databook & 2014 Industry Outlook. [PDF Document]. 18 February 2014.

Kansas Department of Labor. 2013 Kansas Economic Report. [PDF Document]. 28 August 2013.

Kiser, Becky. "'3rd Worst Drought for Kansas' According to Local Research". Hays Post. [Online Article]. 21 May 2014.

National Weather Service. Wichita, Kansas Record Breaking Heat and Drought in 2012. [Online Article]. Accessed 19 November 2015.

Said, Hashem. Map: US Struggles Through Five years of Drought. Al Jazeera America. [Online Article]. 9 July 2015.

Southwest Farm Press. Kansas October Moisture a Third of Normal. [Online Article]. 11 November 2010.

Strassner, Erich H. and Wasshouser, David B. BEA Briefing: Prototype Quarterly Statistics on U.S. Gross Domestic Product by Industry, 2007-2011. [PDF Document]. June 2012.

Westar Energy. "Westar Energy announces 1st quarter 2012 results; 1st quarter was warmest in more than 50 years." PDF Document]. 9 May 2012.


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