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November 30, 2007

Carnival Midway from The Jerk Welcome to this Friday, November 30, 2007 edition of On the Moneyed Midways, the only weekly recap of the best posts contributed to and collected from the past week's best business and money-related blog carnivals!

Either money is even sexier than we had ever fully considered, or there's a real romantic streak going through the best business and money-related posts of the past week! How else can we explain the connection made between french kissing and debt, the siren song of store gift cards and a "naked conversation" about blogging to better market the business of real estate?

These posts, and the rest of the best of the week that was, await you below....

On the Moneyed Midways for November 30, 2007
Carnival Post Blog Comments
Blogging About ERISA "So now, Exactly What is 'Reasonable Compensation?'" Retirement Planning Blog Jerry Kalish notes that the answer to this question for a business owner depends on whether the business is set up as a C-corporation or an S-corporation.
Carnival of Debt Reduction How Talking About Money Is Like French Kissing Monevator.com Now that Monevation has your attention, you'll find some invaluable advice on how to talk about money with significant others. Absolutely essential reading!
Carnival of Money Stories What the Silicon Valley Startups in My Life Taught Me The Digerati Life The Silicon Valley Blogger talks about a subject very close to her home: the nature of working in Silicon Valley's startup companies!
Carnival of Personal Finance Beware the Siren Song of Gift Cards Five Cent Nickel Store gift cards may seem like an ideal gift, but nickel warns that they often go unused and argues that nothing shows you really care quite like cold, hard cash!
Carnival of the Capitalists Please, Lord, Not Another Trademarked Leadership Concept Wally Bock's Three Star Leadership Blog Wally Bock delivers The Best Post of the Week, Anywhere! - here's a quick sample: "We don't need training on ethereal concepts like 'acting with integrity.' We do need leaders who act with integrity so that their juniors know what integrity looks like."
Festival of Frugality At Home Naturally Innside Montana - Your Home at the Range Montana B&B owner horsewoman shares her money saving recipes for natural cleansers and a 'sounds really mouthwatering' sweet potato corn bread!
Festival of Stocks Why Gold and Oil are Hot and the Dollar and Financials Are Not StockTradingToGo.com Blain Reinkensmeyer provides quick explanations for what's behind the recent trends in gold, oil, dollars, gold and bank stocks!
Odysseus Medal (Real Estate) Naked Conversations: The Lynchpin to Your Real Estate Marketing Blog Proquest Technologies Absolutely essential reading - while focusing on marketing real estate, Gary Elwood discusses the role that having a blog can have for any business if it's done right!
Small Business Issues Why Starbucks Doesn't Franchise StephenBainbridge.com Stephen Bainbridge recaps a 2003 post in which he explored the reasons why, despite being somewhat similar enterprises, Subway franchises its outlets while Starbucks owns its outlets.

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November 29, 2007

Something is definitely up with the latest estimate of 2007's third quarter GDP that was released earlier today. In our view, either the news is fantastic and the three months of July, August and September in 2007 were way better than we had ever previously considered or there's a serious anomaly in the underlying data.

First, let's look at our GDP bullet charts, which show the most recent estimates of one-quarter and two-quarter annualized growth rates for inflation-adjusted GDP against the finalized data for the two previous quarters and the historic backdrop of GDP growth since 1980 (via the "temperature" scale):

One-Quarter and Two Quarter GDP Bullet Charts, 2007Q3 Preliminary Estimate

Unquestionably, the most recent estimates look very good in comparison to the historic data. But here's the thing - we had previously estimated that the third quarter's data would come in at an inflation-adjusted level of 11,583.3 billion (constant 2000 USD). This figure is consistent with a two-quarter annualized growth rate of 3.0% and was estimated using the "modified limo" approach described in this post, which also shows the method's increasingly successful track record. At the time we made this calculation, this predicted growth rate was at the very high end of what was being forecast for the U.S. economy.

Today's inflation-adjusted GDP figure for the third quarter of 2007 came in at 11,653.3 billion in constant year 2000 US dollars, some $70 billion ahead of what we had originally thought was a realistic, but somewhat optimistic forecast. That's a very significant margin above and beyond what we have seen as being the typical error range for the modified limo method for quarterly GDP data going all the way back to 1948.

So much so that we're left wondering if something is up with the underlying data behind the GDP figures released today. And there's a case that can be made for that as Barry Ritholtz has already done (in referring to 2007Q3's estimated one-quarter annualized GDP growth rate of 4.9% below):

This 4.9% number is one of the more "fanciful" government releases you will see in your lifetime, (outside of the state run media that exist only within totalitarian dictatorships).

To begin with, we know that the Q3 prices saw significant increases, yet the price index deflator was a 9 year record low of 0.9%. Rex Nutting observed: "Because of the way in the price index is constructed, it likely understates real-world inflation, and thus overstates real growth."

Residential fixed investment, the GDP component that includes spending on housing, plunged by 19.7% in the third quarter (but Investments in structures increased 14.3%).

Profits for the 3rd quarter flipped negative, dropping 8.5%.

We have seen consumer spending falter, with the crucial opening salvo of the holiday weekend down 3.5%. That's no surprise, given that second-quarter wages were revised lower by $44.8 billion. As a result, real disposable incomes fell 0.8% in the second quarter, instead of rising 0.6% as the Commerce Department had previously reported.

~~~

Question: How can Q3 GDP be 4.9% with corporate earnings, housing and retail sales so awful? Forget Goldilocks, this fairy tale sounds more like Cinderella . . .

Keeping in mind that we're considerably more optimistic about the health of the U.S. economy than Barry is, our new best guess is that this figure will eventually be revised downward, substantially, as the adjustment for inflation in the third quarter of 2007 is itself adjusted as the true inflation picture is filled in.

Unfortunately, it may be months or years before we find out if we were right all along....

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November 28, 2007

... if your girlfriend wouldn't be very happy with you if you did?

Or better yet, let's up the stakes and ask whether you should you go to a bachelor party in Vegas against your girlfriend's wishes?

Our latest Geek Logik-inspired tool is based on the careful considerations that a modern American man has to take into account when choosing between hanging out with his best buds and spending quality relationship-building time with his potential life-long mate! Geek Logik author Garth Sundem describes the modern American man's dilemma:

There's only so long you can stay cooped up in joined-at-the-hip-land before a taste of your old life beckons. Unfortunately, the need to break free of the constraints of a relationship, if only for a weekend, might not be understood in the benign terms you intend. If your friends are gunning for a real hangover-inducing humdinger and your girlfriend knows it, you might be spending too much political capital for one night out.

So what's a guy to do?

You've come to the right place to find out! We've taken the elements that Garth outlined and constructed a tool you can use to help decide whether you should play fast and loose or play it safe! Just enter the indicated data below, and we'll do the math:

Guys vs. Girlfriend Relationship Data
Input Data Values
In the past month, how many nights have you spent with your girlfriend?
In the past month, how many nights have you spent out with the boys?
How important is the occasion to your girlfriend?
(1-10 with 10 being "extremely")
How important is the occasion to the guys?
(1-10 with 10 being "best friend moving to Sri Lanka tomorrow")
How strong is your craving for gossip or news of the outside world?
(1-10 with 10 being "still waiting to hear about that Watergate thing")
How "whipped" do your friends already consider you?
(1-10 with 10 being "friends must apply for tourist visa before stopping by to say 'Hi'")
Level of fun you would have staying home with your significant other
(1-10 with 10 being "dating stand-up comic")
Level of fun you would have going out with your friends
(1-10 with 1 being "eh" and 10 being "yay!")
On a scale of 1-10, how entertained are you by PBS specials, your pet's antics, chat rooms, and Internet poker?
(10 being "very")
Your odds for intimacy should you stay in this evening
(If you have a "3-in-10" chance, select 3/10)
Number of days you foresee your significant other withholding affecton should you choose to go out?


What You Should Do
Calculated Results Values
Going Out Index Score

For those who like to play with the numbers, a Going Out Index Score greater than 5 is needed to go to Vegas without remorse, and a score between 0 and 5 indicates that you should go, but to expect to face consequences when you get back. If your score comes in below 0, well, the tool will tell you what to expect....

Also, having gone through this exercise, you might want to keep your score handy for reference in the not-too-far-off future. We'll be referring back to this tool soon when we take on another, very closely related question of great concern for the modern American man: "Are you whipped?"

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November 27, 2007

Earlier this year, we speculated that with the rate of growth of the U.S.' exports to China consistently growing faster than the rate of China's exports to the United States, we might see the U.S. trade "deficit" with China peak and begin declining.

Since that time, that trend in the relative growth rates of each nation's exports to the other has continued:

Rolling One-Year Trade Growth Rates, U.S. and China, January 1985 to September 2007

And the value of goods and services the U.S. exports to China now appears to have fully doubled for the second time since January 2001:

Doubling Rate of U.S. Exports to China, January 1985 to September 2007

Looking specifically at the U.S.' trade balance with China, it appears very possible that the so-called U.S. trade "deficit" with China may not pass its previous peak of $24.4 billion USD that it reached in October 2006:

U.S. Trade Deficit with China, September 1987 to September 2007

We think this situation is very possible for two main reasons:

  1. The value of the U.S. dollar has been declining steadily. Even though the Chinese yuan has been pegged to the value of the dollar, China has moved to loosen that connection somewhat. As a result the Chinese yuan has slightly increased in value, making U.S. exports to China relatively less expensive by comparison.

  2. The U.S. economy is expected to slow, while China's economy will continue to grow at a faster pace. This state of affairs benefits the U.S. trade balance since a slower economy typically demands fewer imported goods, while a growing economy demands more.

We'll know for sure if this is the case on December 12, 2007, when the U.S. Census Bureau releases the U.S.' trade data for the month of October 2007. As October typically represents the annual peak of China's exports to the U.S., coming ahead of the Christmas shopping season, the data will decide if the so-called U.S. trade deficit has pretty much well peaked for the foreseeable future!

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November 26, 2007

How do you know what you read, see or hear in the news media is trustworthy information upon which you can make real world decisions affecting your life?

Let's begin taking on this question by first looking at just what it is that journalists are supposed to do. Robert Niles, a Pasadena, California-based journalist and website editor, defined what journalism is and who journalists are in an article he prepared for a local elementary school:

Journalism is a form of writing that tells people about things that really happened, but that they might not have known about already.

People who write journalism are called "journalists." They might work at newspapers, magazines, websites or for TV or radio stations.

From here, Niles describes the key elements of how journalists go about their jobs (emphasis ours):

How do you get the facts for your news story? By reporting!

There are three main ways to gather information for a news story or opinion piece:

  • Interviews: Talking with people who know something about the story you are reporting.
  • Observation: Watching and listening where news is taking place.
  • Documents: Reading stories, reports, public records and other printed material.

The people or documents you use when reporting a story are called your "sources." In your story, you always tell your readers what sources you've used. So you must remember to get the exact spelling of all your sources' names. You want everything in your story to be accurate, including the names of the sources you quote.

And there it is, spelled out for elementary school students. Accuracy is the overriding requirement of journalism. The reason why is not hard to understand. As it has been practically defined, accuracy is the degree to which data or information correctly reflects the real world object or event being described.

If a journalist, when reporting upon an event, fails to accurately describe that event and the circumstances around it, they are providing a false picture of that event to their audience.

Often, that may not be a big deal. There can, for example, be an enormous amount of activity going on around an event that can be exceptionally difficult to describe with complete accuracy. In that case, a journalist can simply describe the event as accurately as they are able and they will not risk losing credibility with their audience. The audience has realistic expectations and doesn't expect perfection.

But what if a journalist or news gathering organization knows that they are providing a false picture of an event to their audience? Or what if a journalist's reporting continually contains inaccurate information?

What happens is that they lose their credibility. Consider Dan Rather, the New Republic, and CNN to name just three whose credibility has suffered as they failed to accurately report major aspects of important stories.

What's more, when they lose their credibility by failing to accurately report important aspects of major stories, they also go on to lose their audience or business prospects. Dan Rather lost his job as the anchor of CBS' evening news, which has since seen its television ratings slide. The New Republic's advertisers are threatening to yank their ads as the magazine stonewalls over its demonstrated false reporting of the war in Iraq. Meanwhile, CNN has only recently begun to slow or reverse its credibility-driven television ratings slide that came as a consequence of its trading accuracy for access in pre-war Iraq.

Remarkably, losing their audience hasn't seemed to alert the individuals who run all these organizations that they need to take corrective action to regain their credibility. Instead, they have seemed content to dwindle away as if their lack of commitment to accurately reporting events were a cancer that could not be cured. How else to explain Dan Rather's lawsuit against CBS? Or CNN's "staging" of the November 2007 Democratic Party Presidential Candidate Debate in Las Vegas?

It doesn't have to be this way. This is a cancer that can be cured.

So how can journalists regain their credibility? Let's turn back to Robert Niles' lessons for elementary school students:

Here are the keys to writing good journalism:

  • Get the facts. All the facts you can.
  • Tell your readers where you got every bit of information you put in your story.
  • Be honest about what you do not know.
  • Don't try to write fancy. Keep it clear.

If it can be explained so simply to elementary school students, how come grown up journalists, editors, publishers and managers can't do it?

Previously on Political Calculations

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November 24, 2007

Carnival Midway from The Jerk Welcome to the Saturday, November 24, 2007 Thanksgiving Weekend edition of On the Moneyed Midways, the blogosphere's only weekly recap of the best posts contributed to and collected from the week's best business and money-related blog carnivals!

It's one of those weekends where everyone has food and football more on their minds than anything else (okay, that's what we have on our minds as we get psyched up for the biggest college game of the year), so we'll just go straight into this week's edition, featuring all the best posts from the week that was.

Starting.... now!

On the Moneyed Midways for November 24, 2007
Carnival Post Blog Comments
Carnival of Debt Reduction My Experience Buying a Used Car with Cash beingfrugal.net Did you ever dream of buying a car and not having to have a loan? Better still, have you ever dreamed of making a used car salesman panicky? Absolutely essential reading!
Carnival of Personal Finance Strategy to Contribute More than Roth IRA Limit Allows My Dollar Plan Want to kick up your Roth IRA contribution above the annual limit? Madison describes the process by which you can increase your retirement nest egg!
Carnival of the Capitalists Beware the Death Howl of the Old Media SophistPundit Adam Gurri considers Old Media's options in confronting the economic forces of creative destruction that are bringing it down.
Cavalcade of Risk Sex Insurance Insureblog A great humor post (which continues into the comments) that begins by asking if your insurance pays for sex? And if it doesn't, should it?
Cavalcade of Risk Democratic Debate Reaction: Health Mandates Are a Bug, Not a Feature The Sentinel Effect Richard Eskow says that health care mandates advocated by the Dems' leading candidates for President will fail "if it forces Americans to overpay for their insurance." The Best Post of the Week, Anywhere!
Economics and Social Policy Why $100 Oil Maybe a Good Thing Dax Desai Dax Desai lays out the case that having expensive oil makes it possible for people to gain a lot of other benefits.
Festival of Frugality Have the Courage to Have the Christmas You Can Afford SavingAdvice Jennifer Derrick offers ten suggestions for being able to financially survive, and even enjoy, the holidays!
Festival of Stocks Solar's Eleven: If Solar Stocks Were Cast in a Movie Timothy Sykes Timothy Sykes picks solar energy stocks like the characters in Ocean's 11 - who's cool, who's not cool, who's in it for the money and who's in it for the fun!
Odysseus Medal (Real Estate) Data Portability Ain't Just a Real Estate Problem FBS Blog Michael Wurzer proposes a solution that might solve the real estate industry's monopoly MLS problem: data mobility

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November 21, 2007

Thanksgiving Dinner Turkey As we look at the world around us ahead of this year's Thanksgiving holiday, we find a lot of changes compared to last year. As of Monday, November 19, 2007, the average price of a gallon of regular gasoline in the U.S. costs $0.86 more than it did in 2006, which will affect an increased number of people travelling for the holiday this year. More importantly for the family feasts at the center of the holiday, the typical turkey in the U.S. will cost $0.12 per pound more than it did last year.

So what's behind these price increases in the things Americans seek to consume during the annual Thanksgiving holiday?

Not long ago, Environmental Economics' John Whitehead Tim Haab (as it turns out - we can never tell them apart!) spelled out the economic theory behind the changes in supply and demand that take place that result in changes in the prices of the things people buy, specifically focusing upon identifying the primary driver behind the increase in the price of gasoline, which turned out to be, well, drivers!

We thought that was cool, so much so that we thought it would be fun to distill that entire discussion into a tool that we could use to determine what's behind the increase in the price of turkeys in 2007, which we've created below. To use the tool, you'll need to answer just two questions:

  1. How has the price of the item changed over a given period of time?
  2. How has the available quantity of the item changed over that same time period?

We already know the answer to the first question, so we'll turn to the American Farm Bureau Federation economist Jim Sartwelle for the answer to the second question:

"The inventory of birds in cold storage is relatively small this year."

Which indicates to us that the quantity of turkeys has decreased compared to last year.

We've set the default responses for these questions in our tool below, so now, all that stands between you and the primary, but as yet hidden reason that turkeys cost more in 2007 than they did in 2006 is a click of the "Calculate" button!

Price and Available Quantity Data
Input Data Values
How has the price of the item changed over a given period of time?
How has the available quantity of the item changed over that same time period?


What's Behind the Change in Price?

So, there you have it! The price of turkeys has gone up in 2007 primarily because the supply of turkeys is down from where it was last year! (For an entertaining discussion of the economic dominoes that have fallen to produce this result, see Tim Haab's running series of posts on the topic, also at Environmental Economics!)

Best of all, you can use the tool above to find out what's behind the change in price of any item at any time, not just for gas or for turkeys, or just on Thanksgiving! And that makes for a lot more interesting Thanksgiving dinner discussion than talking about tryptophan. Again.

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November 20, 2007

Now that we've examined the number, weight and average weight per bird for the turkeys produced for consumption in 2006, it's time to turn our attention to the financial health of the U.S. turkey-industrial complex using data from the National Turkey Federation's web site!

In brief, for U.S. turkey producers, 2006 was the best year ever, the best year since 1997, and the best year since 1999!

How is all that possible at the same time? We'll show you! First, we'll begin with the evidence that 2006 was the best year ever for domestic US turkey producers. The following chart shows the total income taken in by U.S. turkey farms from 1990 to 2006:

U.S. TURKEY PRODUCTION NOMINAL FARM INCOME, 1990-2006

Clearly, at 3.55 billion USD in 2006, the total amount of income taken in by U.S. turkey producers has never been greater, as this value is 320 million USD greater than the previous record set in 2005. It's the best year ever, that is, until we take inflation into account. The next chart does just that, converting each of the total income values for each year from 1990 through 2006 into constant 2006 U.S. Dollars: U.S. TURKEY PRODUCTION REAL FARM INCOME, 1990-2006

As the chart confirms, at 3.55 billion USD, 2006 was the best year ever since 1997 came in at 3.62 billion USD! Regardless, 2006 is still well behind the all-time inflation-adjusted record income set in 1996 at 4.02 billion USD.

But how much money is the U.S. consumer giving to the U.S. turkey producer for each pound of Ready-To-Cook (RTC) Inspected turkey they buy? The next chart reveals the U.S. turkey producer's cut from each of a pound of RTC turkey sold in the U.S. from 1990 through 2006:

REAL U.S. AVERAGE FARM INCOME PER RTC-INSPECTED POUND OF TURKEY, 1990-2006

And here, we see that pound for pound, U.S. turkey producers are getting the most they've gotten from U.S. consumers since 1999! Still, the average 62 cents per pound they received in 2006 isn't quite up at the 64 cents per pound they realized back in 1999, but it is definitely trending upward. Then again, it's a far cry from the highway robbery days of 1990 when turkey producers collected an average inflation-adjusted 81 cents per pound from turkey desperate U.S. consumers.

And as you can now see, 2006 was simultaneously the best year ever, the best year since 1997 and the best year since 1999 for U.S. turkey producers. We hope that's all clear now!

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November 19, 2007

U.S. Turkey Before we begin, we're going to flat out admit that all the analysis in our traditional Thanksgiving Week annual report on the state of the U.S. Turkey Industry is at least a year out of date, but what do you expect when we only analyze the economics of turkeys once a year? And we should also note that 2007 isn't over yet!

Previously, we've dug into the nefarious world of the U.S. Turkey-Industrial complex, a shady place that saw turkey production plunge in 2005 and that is having a harder time making a buck in recent years. Beyond that, we also uncovered the real seamy underbelly of U.S. turkey production, where massive amounts of agricultural R&D are being put into what we choose to call the "Super Turkey" project!

The fortunes of the U.S. turkey industry would seem to be on a rebound, at least as of last year. Our first chart shows the bounce back from the deep plunge U.S. turkey production took in 2005:

VOLUME OF US TURKEY PRODUCTION, 1990-2006

In 2006, the number of turkeys produced in the United States rose by 6 million birds to hit a level of 262 million turkeys, the second lowest level since 1989's production of 261 million turkeys. The number of turkeys produced in the U.S. in 2006 is 41 million below the peak year's production of 303 million turkeys in 1996.

Unsurprisingly, the increased number of turkeys produced for the dinner table in 2006 led to increases in both the Total Live Weight of turkeys (7.417 billion pounds) and the Total Ready-To-Cook (RTC) Weight of turkey's processed and inspected for consumer consumption (5.686 billion pounds).

U.S. AGGREGATE TURKEY PRODUCTION BY WEIGHT, 1990-2006

Now that we know how many turkeys were produced in 2006 and how much they collectively weighed, we can now determine how successful the super-secret Super-Turkey project has been in achieving its goal: a single turkey weighing over 7.4 billion pounds that would be capable of fulfilling all U.S. consumption needs for an entire year. The results of our calculations are shown in the next chart:

AVERAGE WEIGHT OF U.S. TURKEY, 1990-2006

The live turkeys of 2006 weighed in at an average of 28.31 pounds each, up just 0.16 pounds from the average 28.15 pounds per bird in 2005. This represents the smallest annual increase since 2002's 0.07 pound increase from the previous year and is down substantially from 2005's year-over-year 0.56 pound increase. This suggests that progress on the Super-Turkey project may be stalling out as U.S. turkey producers focused on producing more birds in 2006 rather than bigger ones.

And even though they focused on producing more birds, with the RTC-Inspected weight of the average bird in 2006 coming in at 21.70 pounds, up 0.20 pounds from 2005's average of 21.50 pounds per bird, these figures once again indicate that U.S. turkey producers are continuing to achieve higher and higher yields.

The bottom line: never underestimate the U.S. turkey producer's productivity!

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November 16, 2007

Carnival Midway from The Jerk Welcome to the Friday, November 16, 2007 edition of On the Moneyed Midways, the blogosphere's only weekly recap of the best posts contributed to and collected from the week's best business and money-related blog carnivals!

We're occasionally asked: "How do you select which posts you include each week?" Usually, the posts we select as being the best of their particular blog carnival, Absolutely essential reading! or The Best Post of the Week, Anywhere! share some common characteristics. By and large, the main thing we look for each week is great writing. Beyond that, we look for great ideas, seeking new ideas that consider things that we've never considered before or that take old ideas and apply them in new and unique ways, and posts that are timely.

Most importantly, we look for the combination of great writing and great ideas. Since our stock in trade here at Political Calculations is based upon answering questions for which we don't already know the answers, we identify the idea behind a post by looking to find what central question the post's author is really asking. Here is a sampling of the kind of ideas (expressed in the form of questions) from the posts we selected for this week's edition of OMM:

  • If you're the Chicago Bulls, would Kobe Bryant be a good fit for the kind of organization you've sought to build over the past five years?
  • If you're a real estate agent in a market that's expected to be bad for some time yet, what can you do to keep earning a living?
  • Why does your company need ethical guidelines? What are the benefits of having them?
  • How can you save money on the things you stock your bathroom with?
  • Whose perspective should you consider in setting the strategic direction of a business: an experienced CEO or young but highly educated Wall Street investment bankers?

The answers to these questions, and more from the week that was, await you below....

On the Moneyed Midways for November 16, 2007
Carnival Post Blog Comments
Carnival of Debt Reduction Risky Business? CollectingMyCash Have you considered using your retirement money to pay off debt? Wealthy_1's husband wants to do it, but what would you do in their situation?
Carnival of HR Would Your Company Trade for Kobe Bryant? The HR Capitalist Kris Dunn considers the potential of the Chicago Bulls bringing Kobe Bryant into the organization they've been building over the last five years from an HR perspective. It's not the way you're used to talking about hoops and that makes it Absolutely essential reading!
Carnival of Personal Finance How to Play the Impending Water Shortages Everyday Finance Everyday Finance looks to keep ahead of the media in targeting water company ETFs as investment opportunities, like PHO, that are built around water supply infrastructure businesses.
Carnival of Real Estate How to Be a Successful Agent in One of the Worst Real Estate Markets Ever Real/diaBlog Danilo Bogdanovic surveys the state of the real estate market and makes the case for agents to strategically reposition themselves to benefit from rising foreclosures and upon real estate investors in the absence of traditional buyers.
Carnival of the Capitalists The CEO vs. the Bankers: Death by Transactions Trusted Advisor Hands down, The Best Post of the Week, Anywhere! and easily one of the best of the year. Charles H. Green on the rise of transactions in place of strategic and ethical thinking and relationships in business.
Carnival of the Capitalists Eight Reasons for Ethics Awareness Programs SOX First Why should a company institute ethics training and guidelines? Leon Gettler provides an invaluable list of eight ways that establishing solid ethics guidelines in a business enhances value.
Festival of Frugality A Bathroom Full of Cash - Top 5 Tips for Saving Philaahzophy What can you do to save big bucks when it comes to your personal grooming? Aahz shows where the savings are for oral health, shaving, water and energy conservation, hair care and deodorant can be found. Absolutely essential reading!
Festival of Stocks How to Make a List of Rules to Invest By The Investor's Journal Adam Freedman declares that every investor needs to create a list of rules they'll follow for their investments and shares his list of do's and don'ts.
Odysseus Medal (Real Estate) HR 3915: Open Letter to Senator Dodd from a Veteran Mortgage Originator Bloodhoundblog Brian Brady pens a letter to Senator Chris Dodd that initially argues against a bill before the Congress that would set new licensing requirements for loan originators, but throws all that out and instead advocates for national licensing requirements that include everyone in the loan origination process.
Small Business Issues Marketing on a Shoe String Budget? Social Media Stretches Those Dollars FunnyBusiness: Everything About Business Except the Bottom Line Dawn Rivers Baker named this the best post of the Small Business Issues carnival, and we find it Absolutely essential reading! Elana Centor tells the story of Michael Paranzino, who got a tremendous bang for his buck by offering a prize for the best YouTube video to support his non-profit organization.
Small Business Issues Preparing Your Business for Impending Disaster Small Business Buzz Michelle Cramer takes on the ultimate in crisis management in business in considering what planning you need to do to ensure you've covered all the bases you can before disaster strikes.

Previous Editions

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November 15, 2007

In preparing the latest update to Political Calculations' signature tool The S&P 500 at Your Fingertips to incorporate the latest price, earnings, dividend and inflation data through October 2007, we noticed that Standard & Poor has now revised the reported earnings (via this Excel spreadsheet) for the S&P 500 in September 2007 significantly downward.

As recently as last month, S&P had put the trailing one year earnings per share for the index at $86.03, an increase of $1.11 over the previous quarter's $84.92 per share. That older figure remains unchanged, however the S&P 500's reported one-year trailing earnings per share has now been set to be 79.16 for the quarter ending in September 2007, with the S&P 500's trailing one-year earnings per share now having decreased by $5.76, a 6.8% decrease from the quarter ending in June 2007.

Going by the spreadsheet linked above, Standard & Poor is now anticipating that the S&P 500's earnings per share will continue to decrease through December 2007, then begin increasing with each quarter in 2008. The trailing one-year earnings per share anticipated in December 2007 is $78.92.

Meanwhile, Standard & Poor has also revised the reported 12-month dividends per share for the S&P 500 for September 2007, with this figure now coming in at $26.97 per share instead of the previously reported $27.06 per share, a nine cent per share decrease. Unlike the revised earnings per share, this is still an 80 cent increase over the trailing one-year dividends per share recorded in the previous quarter ($26.17). At present, S&P anticipates the S&P 500's dividends per share for 2007 will come in at $27.85, just one cent below where they had previously forecast it to be as recently as last month.

In any case, here is our regularly updated table showing the S&P 500's performance in the year-to-date, year-over-year, and since January 1871:

Selected S&P 500 Performance Data Through October 2007
Annualized Rates Nominal Rate of Return (%) Rate of Inflation (%) Real Rate of Return (%)
Since January 1871 9.19 2.08 7.11
Year over Year 14.95 3.54 11.41
Year to Date 12.94 4.32 8.62

Since we're breaking bad news today, which will have the recession hounds flooding and linking this post to gawk at the earnings carnage, we're going to save our historic S&P 500 chart that we had prepared for another day. That's a shame, because it's maybe one of the most remarkable stock market-related charts we've ever seen - and has led to analysis that has nearly completely changed how we view the market. Ah well, maybe in December....

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November 14, 2007

*The* Craig Newmark believes that deficit spending is a phony issue and concludes his well-considered argument by saying:

I believe politicians, journalists, and the public should pay attention to specific spending and taxing proposals and to the total amount of government spending, rather than commentating and thinking almost uselessly about the deficit and the debt.

Why they don’t is a question for political scientists or, maybe, sociologists.

Here's a little different way to look at why they do go on so much about the deficit and national debt. The growth of the national debt in recent years doesn't just track GDP growth, it would also appear to track U.S. population growth as well. We can see this if we factor population into the debt-to-income ratio.

What this shows us is that over time, the primary driver of increases in the national debt is real national crisis - in the chart from the link above showing the Debt per Capita to Income index (DTIP) from 1900 to 2005, we see the largest upward spikes coinciding with World War I, the Great Depression, and especially World War II. Outside these events, we see that the index has tended to hang around an index value of 2. Right now, I believe it's about halfway between 2.1 and 2.2 - pretty much on par with where it's been since 2000, and lower than where it was for much of the 1990s. This pattern goes back much further. Believe it or not, the Civil War spike is nearly identical in magnitude to World War II, but took a lot longer to come down:

U.S. National Debt per Capita to Income Index for 1830 to 2006

We selected this version of our data to display since it best shows the comparison between the Civil War and World War II. Beginning in 1830, the chart above cuts out the much larger impact of the War of 1812 and also the even larger magnitude of the Revolutionary War.

Now, here's where this matters. Outside national crisis, what paces government spending is both economic growth, which drives government revenue, and population growth, which largely drives government spending. While there's nothing that says that the government couldn't maintain the level of debt at a lower level with respect to these figures (say at a DTIP of 1.0 instead of 2.0), maintaining a higher level with wasteful spending would act to help insulate elected officials from the impact of having to raise debt at a rate faster than population and economic growth or taxes to have to deal with lesser national crises.

For lower-level crises, this higher level of debt would allow wasteful spending to be reallocated without having to increase taxes. Or taking on massive amounts of new debt. And, as a bonus in the absence of such crises, politicians can use the excess available funds to support their re-election efforts by rewarding their campaign contributors or buying votes through pork barrel projects in their districts.

The downside is that when a lower-level crisis hits the national stage, a lot of politicians resent having to deal with it since it prevents them from fully pursuing their preferred venues for wasteful spending. Especially if they might otherwise have a physical structure named after themselves or get credit for some 'improvement.' And this is why we hear about deficits so often.

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November 13, 2007

This is so cool! I first posted Ohsfeldt's and Schneider's standardized life data in a dynamic table back on September 13th, pointed to it in a throwaway comment over at Mark Perry's blog, which he turned around and made into a regular post. Mankiw writes his NYT article and later points to Perry's repost of his graphic after his article is published. And today, the data is both here and and here (Market Power), where I left another throwaway comment....

What's my point? None, really. I just wanted to bring the thing full circle in the blogosphere while also illustrating how new information gets spread around....

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November 12, 2007

We just received a neat endorsement from Captain Capitalism: "You Will Visit Political Calculations"! Our favorite excerpt:

... it's one of those web sites where you'll lose yourself for about 3 hours because of all the cool and different things you can calculate based on some models he's programmed

Three hours sounds about right. As a start, that is! If you let us, we might just hook you in for a lot longer than that....

What makes Political Calculations unique in the world of blogs is the majority of our posts are focused on answering questions for which we don't already know the answers. We then do our best to answer those questions using all the problem solving skills we've gained over the years. Along the way, we create tools to help answer them and what's more, we post them here so you can see how we got to the answers we found.

What's really cool is that the tools we build can answer a lot more than just our own questions. You can change the input factors to better agree with how you see things, to update them with the latest data available to make the answers as relevant to the world today as possible, or if you just want to make one of our tools solve a problem that directly affects your life. And they're always capable of answering our favorite question: "What if ...?"

So, in that spirit, here is a list of all our tools to date (or their latest incarnation if we've updated them) and the questions we've attempted answering over our history, all presented in our dynamic table format (click the column headings to sort the table by category, tool title or date.) We hope you have at least a few hours!...

Political Calculations' Tool Index
Category Tool Question/Comment Date Posted
Economics Ahead of the Fed: Setting the Federal Funds Rate Where will the Federal Reserve set interest rates next? 2007-10-30
Life The Moby Quotient Has your favorite musical artist sold out? 2007-10-22
Life Should You Quit Your Job? A "Geek Logik" tool for finding out if you should quit your current job? 2007-10-22
Economics The Business of Bootlegging How much money is there in the black market for cigarettes? 2007-10-16
Health Colon Cancer and Bad Genes If you have colon cancer, what are the odds that its genetic? 2007-10-10
Life Is Your Personal Grooming Adequate? A "Geek Logik" tool for finding out if you need to do something about your hygiene! 2007-10-04
Economics Gains and Losses in the US Job Market What's the overall gain or loss of jobs in the U.S. this month? 2007-10-01
Life Should You Lie? A "Geek Logik" tool for determining when it might be okay to lie. 2007-09-25
Real Estate Austan Goolsbee, Fish Slapping, and Setting the Post Bubble Price of Your House In the after-the-bubble real estate market, where should you set the price of your house to sell it quickly? 2007-09-24
Health Redefining the Health Care Debate - Part 1 How much should a country (or state) expect to spend on health care per person given its national income per person? 2007-09-12
Life Should You Apologize? A "Geek Logik" tool for finding out when (and how) you should say you're sorry! 2007-08-28
Economics Estimating the Natural Rate of Unemployment Given current economic conditions in the U.S., how much natural unemployment should there be? 2007-08-21
Life Should You Start or Stop Procrastinating? A "Geek Logik" tool for finding out if you ought to get something done now or if you can put it off for later! 2007-08-14
Environment Tangerines by the Gallon Does it really make economic (or environmental) sense to buy your produce locally? 2007-08-07
Business Liquidity Does that business have enough cash to stay afloat? 2007-07-31
Life Should You Say It on the Grapevine? A "Geek Logik" tool for working out when you should pass along that bit of juicy office gossip or keep it to yourself. 2007-07-26
Public Policy What If We Bought Cars for the Poor Instead of Light Rail? Which makes more sense: spending money on light rail systems or buying fuel efficient cars for the poor? 2007-07-16
Environment Earth Live: Walk, Bike or Drive? A "Geek Logik" tool to answer the question of how you should get where you need to go! 2007-07-12
Life How Many Beers Should You Have at the Company Picnic? A "Geek Logik" tool to help you know when you should say when around your co-workers! 2007-06-21
Environment Valuing the Lives of Hypermilers How much are those people who drive way too close behind big trucks on the highway really saying their lives are worth? 2007-06-19
Economics Comparing the U.S. Distribution of Income by Age Group How has the distribution of income for different age groups in the U.S. changed between 1995 and 2005? 2007-06-05
Investing Investing and Income Taxes in 2007 Should you invest in a taxable or a tax free investment vehicle in 2007? 2007-05-17
Life How Many Cups of Coffee Should You Drink this Morning? A "Geek Logik" tool for calculating your optimal caffeine consumption. 2007-05-14
Life Should You Buy Something (or Not?) A "Geek Logik" tool to help you decide if you really ought to buy that item that caught your eye. 2007-05-03
Investing How Much Should You Invest in a Stock? How much of your portfolio should you put into a single stock? 2007-04-25
Life Are Your Too Good for Your Job? A "Geek Logik" tool to help decide if you should be looking for something else to do for a living! 2007-04-18
Real Estate The Simple Way to Decide to Rent or Buy Which makes more sense: renting or buying a home? 2007-04-16
Taxes Income Tax: The Original Form 1040 How much would your taxes have been back in 1913? How long would it take you to do them? 2007-04-10
Math Running, Gunning and Weighting for Averages Got a bunch of numbers for which you need to find the average? 2007-04-03
Life Should You Go to the Doctor? A "Geek Logik" tool to decide if it's time to go see your doctor. 2007-03-14
Life Should You Call in Sick? A "Geek Logik" tool for determining when it's okay to call in sick to work! 2007-03-13
Environment The Miracle of Carbon Offsets What percentage of the annual budget of the U.S. government would it take for the U.S. to buy its way into full compliance with the Kyoto Protocol? 2007-03-12
Life The Odds of Winning and the Magic Jackpot What are the odds of winning the lottery? And what does the jackpot need to be to make it worth the cost of a ticket? 2007-03-06
Economics Projections of Poverty Where will the poverty threshold income level to be set this year? And next year? 2007-02-21
Life Picking the Right Date for Valentine's Day A "Geek Logik" tool for choosing who your best date will be for the most romantic holiday of the year! 2007-02-14
Public Policy Approximating Social Security's Rate of Return If Social Security was a real investment, what rate of return would you receive from it? 2007-01-30
Public Policy Presidential Pretensions If you were the President, what would be the impact of raising the minimum wage in the U.S.? 2007-01-25
Life Five More Minutes? A "Geek Logik" tool to find out if you really should hit the snooze button. Again…. 2007-01-23
Economics Estimating the Distribution of U.S. Hourly Wage Earners How many people make at least X amount of dollars per hour in the U.S.? 2007-01-16
Life Should You Keep Your New Year's Resolution? A "Geek Logik" tool for determining how locked in you are to that New Year's resolution! 2007-01-09
Personal Finance Your 2007 Paycheck How much will Uncle Sam be extracting from every one of your paychecks in 2007? 2007-01-02
Personal Finance Chopping Time Off Your Loan If you wanted to pay your loan earlier by a set amount of time, how much would you have to increase your regular payment? 2006-12-18
Health "Fighting Malaria with Math" How public health officials can get the most bang for their buck in fighting the scourge of the third world. 2006-12-07
Investing The S&P 500 at Your Fingertips What rate of return could you have received from an investment in the S&P 500 index between any two months since January 1871? 2006-12-06
Personal Finance Paying Your Loan Off Early If you increased your payment by a certain amount, how much earlier could you pay off your loan? 2006-12-05
Business Converting Amazon Ranks to Book Sales What does a given Amazon ranking mean in terms of number of book sales? 2006-12-04
Economics Odds of Recession and Bond Yield Spreads For a given Federal Funds Rate, what does the bond yield spread have to be for there to be a given probability of recession? 2006-11-29
Economics Mapping Inflation Extremes Since 1913 What's the best, worst and average rate of inflation for any given period of time in the U.S.? 2006-11-13
Investing Lemony Snicket and the S&P 500 If you actually and consistently got the worst recorded rates of return for the S&P 500 throughout your lifetime, how much would the total of your investments be worth? 2006-10-25
Business The Minimum Wage and Small Business If your business relies upon minimum wage workers, what will be the impact of a hike in the minimum wage to your business? 2006-10-07
Life The Lottery Winner's Dilemma If you won the lottery, should you take the payout as a lump sum now, or take a bunch of smaller payments over a long period of time? 2006-09-21
Politics Projecting 2006 U.S. Senate Elections Who will win a senate seat in 2006? 2006-09-12
Real Estate How Much Equity Is in Your Home? If you're thinking about refinancing, it helps to know the answer to this question! 2006-08-14
Real Estate Real Estate Investing: The Capitalization Rate Which loan option and property should you consider when investing in real estate? 2006-07-18
Personal Finance Refinancing: Does Home Loan Consolidation Make Sense? Should you consolidate your home equity loan and your mortgage? 2006-07-10
Personal Finance Refinancing: How Much Will You Save in the Long Run? If you refinance at a higher payment today, will you save money in the long run? 2006-07-06
Economics Consumption vs Income Taxes Which is better for encouraging personal savings - a consumption tax or an income tax? 2006-06-27
Personal Finance Refinancing: Time to Break Even If refinancing your loan costs more money up front but gives you a lower payment, how long will it take to break even? 2006-06-26
Investing Predicting Bankruptcy How likely is it that a publicly traded company is undergoing financial distress? 2006-06-01
Real Estate The Money Factor in Leasing What is the money factor and what does it mean for your lease? 2006-05-22
Investing S&P 500: Best, Average and Worst Returns Since 1871 What is the best, worst and average rate of return ever recorded for the S&P 500? 2006-05-16
Personal Finance Should You Trade in Your Gas Guzzler? Does it finally make sense to trade in that old car for a newer, more fuel-efficient model? 2006-04-26
Public Policy Determining Equivalent Teacher Pay If teachers only work 6 hours a day for 8 months a year, how does their pay compare to someone who works full time 12 months a year? 2006-04-19
Economics Reckoning the Odds of Recession What are the odds that the U.S. will be in a recession 12 months from now? 2006-04-10
Environment Are Compact Fluorescents a Bright Idea? If you swiched your light bulbs from incandescents to compact fluorescents, does it make economic sense? 2006-03-06
Health How Many Cans of Diet Soda Can You Drink Safely? If you can't get enough of that artificially sweetened liquid, this tool can help you find out where to draw the line! 2006-02-21
Public Policy What If the Death Tax Were an Income Tax? How much would your annual income tax change if you effectively paid your estate taxes on the installment plan? 2006-02-13
Math Running Numbers for Reporters Most reporters have no real ability or feeling for what numbers mean - our tool is designed to help! 2006-02-01
Taxes Exploiting the Child Interest Income Credit How much could you save on your tax bill by taking advantage of the child interest income tax credit? 2006-01-25
Investing Predicting the Rate of Return for an I-bond Where will the U.S. Treasury set the I-bond interest rate next? 2006-01-11
Business Guesstimating the Cost of Corporate Credit What does it mean when a business has its debt rating increase from BBB+ to AAA-? 2006-01-09
Personal Finance Employee Stock Purchase Plan Returns Does it make sense to buy your company's stock through an ESPP? 2005-12-23
Investing Calculating Return on Invested Capital What is ROIC, how do you figure it out and why should you use it when choosing your investments? 2005-12-02
Public Policy Estimating the U.S. Population How much will the population of the U.S. be in the future? What was it in the past? 2005-11-18
Investing Changing Value in the Stock Market If your stock went up by a nickel per share, what does that mean to your bottom line? 2005-11-11
Business How Much Is that Idea Really Worth? How much potential does your idea for a new product or service really have? 2005-10-18
Personal Finance Paying Off Your Credit Card Bill How long would it take to pay off your credit card if you only made the minimum payments? 2005-10-14
Personal Finance Is It Worth the Drive? Should you drive further to save a few cents per gallon when it's time to fill you tank? 2005-09-14
Real Estate Projecting U.S. Median Housing Prices A pre-bubble look at the long term trend in U.S. housing prices! 2005-08-30
Investing Mapping Stock Market Extremes What's the best and worst rate of returns for a range of holding periods for an investment in the total stock market? 2005-08-05
Politics Projecting the Growth of Pork How much political pork will be packed into the government budget of the future? 2005-08-03
Personal Finance Your Thrift Savings Plan Portfolio If you work for the government, what can you expect the future value of your TSP portfolio? 2005-08-02
Personal Finance Are You Wealthy? How much wealth do you have to have to be considered wealthy at your age? 2005-07-25
Personal Finance Do Hybrids Really Save Money? Thinking about getting a hybrid car? Will you really save money once you factor in all your costs? 2005-07-08
Personal Finance Your Student Loan What will your student loan payments be? 2005-07-06
Personal Finance Paying Off Your Loan How much will your loan cost you? And how much will it take to pay it off at a certain date? 2005-07-01
Personal Finance Saving for College How much do you need to save to cover the cost of going to college? 2005-06-08
Personal Finance Revisiting the Lottery What does the jackpot need to be to be able to justify buying a ticket? 2005-06-01
Personal Finance Your Education and Your Earnings What path can you expect your earnings to take throughout your life? 2005-05-24
Public Policy Slashing Social Security Benefits How much can you expect your "promised" benefits to be slashed when the Social Security trust fund runs out of money? 2005-05-02
Taxes How Much Do You Pay in Gas Taxes? How much tax money does the government take from you each year when you add up all you pay at the pump? 2005-04-29
Economics Average Wages in the U.S. What was the average wage in the U.S. in the past? And what can we expect in the future? 2005-04-27
Investing Lemony Snicket vs. King Midas What's the absolute best and worst you could get from your investment in the total stock market? 2005-04-26
Health The Cost of Risk vs Benefit When is a medical test with low odds of detecting a condition justifiable? 2005-04-21
Investing Your Investment Portfolio What value will your investment portfolio have in the future? 2005-04-19
Politics Truth and the Time to React Using the math of physics, we fact check an anti-US reporters claims. 2005-04-15
Health Estimating Your Life Expectancy How long can you expect to live? 2005-04-12
Life Will You Be Checking Any Bags Today? How much will it cost for you to bring those oversize or overweight or additional bags with you? 2005-04-11
Investing Annuity Payments What stream of income can you expect in retirement after investing in an annuity? 2005-03-28
Politics Calculating Election Accuracy How accurate is the vote count in the last election? 2005-03-17
Investing Investing: How Long/ How long will it take to make a million dollars? Ten million dollars? 2005-02-25
Politics The President's Plan for Social Security and You Would you have come out ahead with the plan President Bush initially proposed for reforming Social Security? 2005-02-11
Investing Investing: Rate of Return If you initially invested P dollars, which is now worth F dollars, over T years, what rate of return did you get? 2005-02-08
Investing Investing: Future Value How much will your investment be worth in the future? 2005-02-04
Politics Recounting the Odds How likely is it that the results of an election changed by so much during a recount of the votes? 2004-12-29
Politics Simple Majority Win How far away is a political candidate from victory in an election? 2004-12-14
Life MSM versus Blogger Influence How much readership does someone in the MSM have compared to a blogger? 2004-12-10

All in all, not too bad - this past year, we've averaged roughly one new tool per week, which accounts for around 20% of all we do.

But that other 80% is a whole other post altogether - we've tied up enough of your free time as it is!

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Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

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