For years, Bloomberg Businessweek notes, the American residential dream went something like this: Move to a city, work hard, and eventually you’ll make enough to move out. So perhaps it’s not surprising that today many of America’s largest metropolitan areas house their highest earners on the outskirts of town. Exactly where they live varies from city to city — or rather, from suburb to suburb. Perhaps this is what they mean by 'rotten to the core'?
An analysis by Bloomberg Businessweek of data recently compiled by the U.S. Census Bureau offers a new level of detail in describing how far away — and in what direction — the nation’s top-earning suburbanites live, relative the local urban center.
In the New York metropolitan area, the greatest concentration of top earners live in New Jersey. In Bergen County, for example, the median household income was $84,255 in 2012.
Top earners have vacated Downtown L.A. and the area south of the Civic Center in favor of wide-open spaces closer to the beach.
Here, the highest earners populate Chicago’s North Shore suburbs, including Glencoe, Winnetka, and Highland Park. A commuter rail system leaves Cubs games an hour away.
Here, the wealthiest residents have congregated just west of the city center in the well-to-do River Oaks area and a bit further out in Memorial.
Center City in Philadelphia is surrounded by a local ring of lower-income housing. High-crime areas such as the city’s Kensington neighborhood and Camden, N.J., remain unattractive to the wealthy.
The top earners tend to live outside the city in suburbs to the north and east, such as Glendale and Scottsdale.
In the journalistic/academic circle of life, Milton Friedman
biographer Lanny Ebenstein in a new article available at Economic Journal Watch riffs (at least partially) off
a Reason review written by me of Ebenstein’s own edited
collection of Friedman rarities,
The Indispensable Milton Friedman.
It does a very thorough job demonstrating that as Friedman’s
career and knowledge went on–and especially when he shifted from a
professional active academic to a professional public intellectual
activist–he became more and more libertarian in his views.
From the article’s precis:
This article traces the evolution of Milton Friedman’s
ideological views over the course of his adult life. It finds the
evolution to be from a moderate liberalism to a definite classical
liberalism and then, during the last 50 years of his life, to an
increasingly robust libertarianism. Friedman explicitly
acknowledged a change in his views on a number of policy issues;
also, sometimes even if his opinion on an issue did not change, the
strength with which he held and promoted it did. A significant
point in Friedman’s life was his retirement and relocation to San
Francisco in 1976. There he became almost exclusively a public
policy advocate, and his mode of discourse shifted significantly
away from empirical demonstration and toward invoking and applying
what he considered to be the broad verities and maxims of the
outlook he had established for himself.
It’s worth pointing out that Friedman’s increasing
libertarianism wasn’t just based in shifting away from
empiricism toward maxims. In cases like public education and public
money his increasing libertarianism came from an increasing
recognition of some actual history of public and private education
(as Friedman told
me in my 1995 Reason interview with him), and
recognition of
historical costs of government money.
In the journalistic/academic circle of life, Milton Friedman
biographer Lanny Ebenstein in a new article available at Economic Journal Watch riffs (at least partially) off
a Reason review written by me of Ebenstein’s own edited
collection of Friedman rarities,
The Indispensable Milton Friedman.
It does a very thorough job demonstrating that as Friedman’s
career and knowledge went on–and especially when he shifted from a
professional active academic to a professional public intellectual
activist–he became more and more libertarian in his views.
From the article’s precis:
This article traces the evolution of Milton Friedman’s
ideological views over the course of his adult life. It finds the
evolution to be from a moderate liberalism to a definite classical
liberalism and then, during the last 50 years of his life, to an
increasingly robust libertarianism. Friedman explicitly
acknowledged a change in his views on a number of policy issues;
also, sometimes even if his opinion on an issue did not change, the
strength with which he held and promoted it did. A significant
point in Friedman’s life was his retirement and relocation to San
Francisco in 1976. There he became almost exclusively a public
policy advocate, and his mode of discourse shifted significantly
away from empirical demonstration and toward invoking and applying
what he considered to be the broad verities and maxims of the
outlook he had established for himself.
It’s worth pointing out that Friedman’s increasing
libertarianism wasn’t just based in shifting away from
empiricism toward maxims. In cases like public education and public
money his increasing libertarianism came from an increasing
recognition of some actual history of public and private education
(as Friedman told
me in my 1995 Reason interview with him), and
recognition of
historical costs of government money.
Who says Amazon is only good for putting other retailers out of business with its 1% margins: in the aftermath of Jeff Bezos’ announcement that the online retailer is considering launching drone delivery, one company took the concept from merely the theoretical stage to practical implication. The company in question is a Minnesota Micro Brewery called Lakemaid Brewery and the product it had hoped to deliver by remote control airplane to ice fishermen is beer. However, before beer fans around the country rejoice at the prospect of having a buzzing airborne beer delivery, we have some sad news: less than a week after the company posted a promotional YouTube video showcasing the first test flights across mid-sized lakes, the Federal Aviation Administration called Lakemaid Beer to immediately pull the unmanned beer from the skies.
ABC explains why the FAA took the proposed novel form of delivery as an affront to more traditional forms of alocohol intoxication, and why the bartender lobby may or may not have been behind this move:
“As much as they thought it was a funny idea, it was a violation of all sorts of codes,” Lakemaid Beer Company President Jack Supple told ABC News, adding he’s determined to keep pushing to get his idea off the ground.
“I understand why they had to shut it down, but I would like to do it for our fishermen,” said Supple, lamenting the missed opportunities that the coming Super Bowl weekend could have brought for the business. “The fishermen are going to sit there from Friday 5 p.m. all the way through Sunday. That’s a long time to be out there on a frozen lake.”
This is “barley news,” FAA spokesman Les Door joked this morning to ABC News when asked to comment on why the FAA shut down Lakemaid’s operation. “The media just hops on it. I hope things finally have come to a head.”
Despite the jovial tone, the illegal use of drones for commercial purposes is a serious matter, Door said.
“The FAA’s prime directive is safety and while we are evaluating a lot of different potential uses of unmanned aircraft as we’re moving toward safely integrating them into the national airspace, commercial operations of unmanned aircraft is not allowed,” Door said.
Here one wonders why Amazon which until recently was dazzling investors with one ridiculous idea after another, would get the FAA’s blessing for drone delivery in far more congested and risky environments, if smaller companies, arguably those that can’t afford to bribe the FAA, are denied. So does Lakemaid’s CEO.
Supple concedes the FAA has its work cut out for it, as “there’s going to be a million ideas and I don’t want to get hit in the head with a pair of dress shoes ordered from Amazon.”
But in contrast to Amazon’s proposed drone package delivery operation announced late last year, Supple said Lakemaid’s drones will face less obstacles — namely of the skyscraper and billboard kind.
“Dense urban locations present a host of problems to drone delivery,” Supple said in an earlier statement. But our tests are on vast, wide-open frozen lakes free of trees and power lines.”
His drones would instead be able to “fly as the crow flies, straight to our target based on GPS coordinates. Fish houses are very uniform in height, so we can fly lower than FAA limits, too,” he said.
Of course, there is Jeff Bezos, where the more ridiculous the idea, the higher the PE multiple, and then there is everyone else, even if “everyone else” would still have to figure out how drone deliveries avoid breaking the law by sending booze straight into the hands of a minor.Then again, in Obama’s America where one controlled substance after another is being legalized, perhaps to make the pain more bearable, it is only a matter of time before toddlers are allowed to chug Vodka.
Tonight’s episode of The
Independents (9 pm ET, 6 pm PT on Fox Business Network,
repeats at midnight and throughout the weekend), provides the kind
of Super Bowl coverage that you can probably only find on…The
Independents!
For instance: Executive Director
Allen St. Pierre of the National Organization for the Reform of
Marijuana Laws (NORML)
will talk about what the “Weed Bowl” matchup between two cities
from states where recreational marijuana is legal means to
anti-Drug War activists (as well as to the partiers in Denver and
Seattle). NFL.com analyst Dave Dameshek will describe some
of the bizarre superstitions and rituals practiced by football
players and fans alike. Comedian Sherrod Small and Fox
Business Network reporter
Sandra Smith will play a game of Super Bowl Fact or Fiction,
with questions ranging from domestic violence to 9/11 to a bunch of
other stuff that’s actually funny.
Actress Katie Aselton of the
raucous fantasy-football
FXX show The
League will relay what she’s learned about the world of
online sports and why smack-talking bro-dude shows like hers &
FXX’s
It’s Always Sunny in Philadelphia resonate with viewers.
We’ll also talk hangover cures, including footage from a Reason.tv
feature on a
hangover truck in Las Vegas. And the show’s creme de la
avocado will be an all-pro guacamole-making contest between
myself and the shouty
host-lady.
If you haven’t seen it yet, make sure to check out our interview
with the thoughtful libertarian cornerback Chris Carr. And as
always, send your tweets out to @IndependentsFBN.
It would seem, after 8 years at the helm of the Federal Reserve, that Ben Bernanke’s colleagues were a little too busy fielding calls from Emerging Market bankers to wish him good bye. Just out from the Federal Reserve:
As Ben rides off into the sunset, one wonders whether if the now former Chairsatan at least got a parting watch for his epic effort at making the rich richer beyond their wildest dreams, while dooming the rest of the population to a lifetime of pain and suffering. A gold watch that is…
The California Assembly voted
this week to place restrictions on the use of unmanned aerial
vehicles (UAV), or drones. The bill,
AB-1327, passed on Wednesday with overwhelming bipartisan
support. The state’s official legislative website
reports that the bill passed 63-6. It will now move on to a
state senate for consideration.
Authored by assemblymen Jeff Gorell (R-Camarillo), Steven
Bradford (D-Gardena) and Bill Quirk (D-Hayward), AB-1327 would
require police to obtain a warrant based on probable cause before
operating a drone or contracting others to do so. Though, it does
make an exception for unwarranted use for “emergency situations if
there is an imminent threat to life” and the inspection of state
parks. The bill would also require that any footage or data be
destroyed within six months of collection, as well as prohibit
drones from being weaponized.
Gorell rejected the idea of a moratorium on UAVs like the one in
Virginia. He
clarified to the Los Angeles Times, “I don’t think
that’s the right answer here. The right answer, frankly, is for us
to embrace the new technology because it is the future.”
Additionally, he
told Reuters that he believes that California stands to benefit
from the development of
commercial drone use.
Nevertheless, Gorell, a former Navy Reserve commander, is
knowledgeable and cautious about their capabilities, such as
thermal imaging. As the Electronic Frontier Foundation has
previously
warned, this technology provides law enforcement with a means
to conduct unwarranted searches of homes.
The Tenth Amendment Center’s Michael Maharrey
explains the significance of state-based limitations on
drones:
We know that the Department of Homeland Security (DHS) is using
grant money to get drones in the hands of local law enforcement…
DHS and other federal agencies will never need to fly a single
drone if they can just get all the states doing it for them. Once
they’re in the air, they’ll simply point to information-sharing
provisions of the PATRIOT Act or other federal acts and have a
network of spies everywhere… By passing state laws to restrict
drone use, we can stop this nightmare before it ever takes off.
California isn’t the only state crafting legislation to limit
the use of drones.
Iowa,
Indiana,
Georgia, and
Wisconsin are among states currently considering drone-related
legislation. In 2013, 13
states adopted new laws about drones.
The sharks are circling Chris Christie who just sprung a bloody leak (either that or the population must really need to be distracted from a horrible January for stocks and what may be coming next). Moments ago the NYT reported that the former Port Authority official who personally oversaw the lane closings on the George Washington Bridge said that the governor knew about the lane closings when they were happening, and that he had the evidence to prove it. Of course, if such evidence exists, Christie can call it a career after claiming the opposite on numerous occasions in the past month. Of course, one wonders whether Obama would have been impeached by now had the “independent and impartial media” hounded him with the same fervor for his numerous transgressions and repeated lies to the American public. Alas, we will never know the answer.
In a letter released by his lawyer, the official, David Wildstein, a high school friend of Mr. Christie’s who was appointed with the governor’s blessing at the Port Authority of New York and New Jersey, which controls the bridge, described the order to close the lanes as “the Christie administration’s order” and said “evidence exists as well tying Mr. Christie to having knowledge of the lane closures, during the period when the lanes were closed, contrary to what the governor stated publicly in a two-hour press conference” three weeks ago.
“Mr. Wildstein contests the accuracy of various statements that the governor made about him and he can prove the inaccuracy of some,” the letter added.
The letter marked the first signal that Mr. Christie may have been aware of the closings, something he repeatedly denied during a two-hour press conference earlier this month.
One tangential observation is that if the level of circuses, if not so much bread, is picking up to such extensive levels, and the US public is in such dire need of distraction from their everyday lives, then truly something big is about to hit… or this is simply the traditional pre-election circus act designed to set the stage for the grotesque farce that are the midterm elections.
The sharks are circling Chris Christie who just sprung a bloody leak (either that or the population must really need to be distracted from a horrible January for stocks and what may be coming next). Moments ago the NYT reported that the former Port Authority official who personally oversaw the lane closings on the George Washington Bridge said that the governor knew about the lane closings when they were happening, and that he had the evidence to prove it. Of course, if such evidence exists, Christie can call it a career after claiming the opposite on numerous occasions in the past month. Of course, one wonders whether Obama would have been impeached by now had the “independent and impartial media” hounded him with the same fervor for his numerous transgressions and repeated lies to the American public. Alas, we will never know the answer.
In a letter released by his lawyer, the official, David Wildstein, a high school friend of Mr. Christie’s who was appointed with the governor’s blessing at the Port Authority of New York and New Jersey, which controls the bridge, described the order to close the lanes as “the Christie administration’s order” and said “evidence exists as well tying Mr. Christie to having knowledge of the lane closures, during the period when the lanes were closed, contrary to what the governor stated publicly in a two-hour press conference” three weeks ago.
“Mr. Wildstein contests the accuracy of various statements that the governor made about him and he can prove the inaccuracy of some,” the letter added.
The letter marked the first signal that Mr. Christie may have been aware of the closings, something he repeatedly denied during a two-hour press conference earlier this month.
One tangential observation is that if the level of circuses, if not so much bread, is picking up to such extensive levels, and the US public is in such dire need of distraction from their everyday lives, then truly something big is about to hit… or this is simply the traditional pre-election circus act designed to set the stage for the grotesque farce that are the midterm elections.
This past week I read some very diverse articles that I wanted to share with you. Hopefully, they will stimulate your grey matter over the weekend as you indulge in melted artifical cheese, processed fillers, and copious amounts of artificial colorings and flavors during the Super Bowl showdown (I am assuming you did not order any of the party packs).
In yesterdays missive I discussed the recent selloff and the likelihood that, despite yesterdays bounce, the correction process was likely not complete. However, one thing I did not get to was the "January Barometer."
I spend much of my time analyzing statistical data to help refine a strategic "guess" about the future. I recently reviewed the Decennial and Presidential Cycles which suggested that the current cyclical bull market likely has 18 to 24 months of life left. Over the next 11 months, the the Presidential Cycle suggested that it could be a more difficult year than what we enjoyed in 2013 by experiencing a greater than 10% correction during the summer months. That historical analysis is now being potentially supported by the "January Barometer."
The January Barometer, a theory that was initially postulated by Yale Hirsch in 1972, states that the overall gain or loss of the S&P 500 during the month of January will set the stock market's tone for the rest of the year. If the S&P ends January higher than the first trading day of the year, the market (as represented by the S&P) has generally trended higher for the rest of the year as well and vice versa if January ends in a loss.
"Statistically… In the 75-year history examined last Friday [1/18/2013], there were only 22 full-year declines. So yes, the S&P 500 has posted annual gains 70.7% of the time since 1938. What is missing from this argument is the fact that when January was positive, the full year was also positive 89.4% of the time and when January was down the year was down 60.7% of the time. Also, every down January on the S&P 500 since 1938, without exception, has preceded a new or extended bear market, a 10% correction, or a flat year."
Another interesting tidbit here is that the volatility index (as measured by the VIX) is up 26% this month. Since 1986, when the VIX was launched, there has been only three previous instances when that index gained over 15% in January. In two of those instances, the S&P ended the year down more than -5%. The third instance was 1987 when the market crashed in October, however, the year did manage to close to the positive.
The table below shows the history of the January Barometer via CNBC:
The January Barometer is just the latest in a string of historical statistical evidence that suggests a more significant correction is likely coming. While it is certainly possible that the market could defy the odds, particularly with the Federal Reserve still priming the pump (although less so), "hoping" for such an outcome has never qualified as a valid investment strategy.
With that tucked away here are some random things to ponder this weekend.
I have discussed many times in the past (here and here) about the economic and demographic similarities between Japan and the U.S. However, Mr. Long gives a very good history of Japan and how, at their peak of prosperity, they were not so very different from where the U.S. is today.
"With one-third the population of the United States, Japan was unlikely ever to become the world's preeminent economic superpower. But Japan would close the 30% gap (adjusted for purchasing power parity) between its per capita GDP and that of the US. The prevailing belief was that, by 2015 or so, Japan's per capita GDP would more likely than not be 10% higher than in the US (in PPP terms).
None of that happened. Japan's economy today is some 40% smaller than observers back in the late 1980's confidently predicted. The 70% of per capita US GDP that Japan achieved back then proved to be the high-water mark. Its economy-wide relative productivity level has since declined, with two decades of malaise eliminating the pressures to upgrade in agriculture, distribution, and other services."
It is a very interesting read.
2) Bank Regulator Fears Bubble And Warns Fundsvia Reuters
"The Office of the Comptroller of the Currency has already told banks to avoid some of the riskiest junk loans to companies, but is alarmed that banks may still do such deals by sharing some of the risk with asset managers.
'We do not see any benefit to banks working with alternative asset managers or shadow banks to skirt the regulation and continue to have weak deals flooding markets,' said Martin Pfinsgraff, senior deputy comptroller for large bank supervision at the OCC, in a statement in response to questions from Reuters.
Among the investors in alternative asset managers are pension funds that have funding issues of their own, he said.
'Transferring future losses from banks to pension funds does not aid long-term financial stability for the U.S. economy,' he added.
That may be happening with leveraged loan issuance, which hit a record $1.14 trillion in the U.S. in 2013, up 72 percent from the year before, according to Thomson Reuters Loan Pricing Corp (LPC).
A measure of the riskiness of these loans has also been rising – the average size of the debt for companies taking these loans in 2013 was 6.21 times a form of cash flow known as EBITDA or earnings before interest, tax, depreciation and amortization, up from 5.86 times in 2012 and the highest since 2007, LPC said."
Is it just me, or have we seen this before?
3) Real Disposable Income Collapses In December via Zero Hedge
I have been rather vocal as of late that the "pop" in GDP in the last half of 2013 was not a sign of economic liftoff, as hoped by many economists, but rather an inventory restocking cycle due to post Hurricane Sandy/Fiscal Cliff economic drag in the first half of the year. Considering that 70% of the economy is driven by personal consumption the latest reading on real disposable incomes does not suggest stronger economic growth in the coming quarters.
"We may not know much about "Keynesian economics" (and neither does anyone else: they just plug and pray, literally), but we know one thing: when real disposable personal income drops by 0.2% from a month earlier, and plummets by 2.7% from a year ago, the biggest collapse since the semi-depression in 1974, something is wrong with the US consumer."
Cullen pointed out something very interesting in regards to margin debt.
"Of course, it would be silly to assume that this indicator is going to tell you when the market’s turning and I know a number of people have raised valid concerns about this metric, but I still find it to be a useful indication of broader sentiment. That is, as equities rally and euphoria increases we tend to see increasing levels of debt accumulation. And yes, we know that much of this is long only debt because short interest has actually been declining at the NYSE over the past 5 years. This is all consistent with the idea of a disaggregation of credit and the tendency for herding behavior to lead to increased euphoria as market participants view the bull market as increasingly invulnerable. Classic debt dynamics in an equity market cycle."
He is correct. There are many people that have dismissed the surge in margin debt as it has not immediately caused a market reversion. However, as I stated earlier this week:
"It is important to note that it is not the rise in margin debt that is the problem for the markets – it is the fall. When the ultimate reversal begins, and investors are forced to liquidate to meet margin calls, the market begins to feed upon itself. This forced liquidation quickly accelerates downside reversions in equity markets leaving investors little opportunity to react. The last two peaks in margin debts have had nasty outcomes for this very reason.
Lastly, spikes in margin date on an annualized basis (brought to my attention by my colleague Eric Hull) has typically marked either short term peaks are larger market corrections. This chart below is a log chart of the S&P 500. While this makes the chart easier to read, it also smooths some of the more relevant market reversion like Long Term Capital Management or the Asian Contagion in the late 90's."
As I stated above, there are many "hopes" for stronger economic growth in the 2014 and beyond despite the fact that we are already in one of the longest post-recession economic recoveries on record. While I have my own ideas for how to obtain stronger economic growth (lower tax rates, reduce regulations, etc.); David Malpass laid out some ideas worthy of consideration.
Let interest rates rise.
Rewrite the debt limit so it restrains spending growth.
Yen ceiling
Reduce the size of government
Liberalize trade
He concludes with a most interesting point:
"Most governments plan to stay the course in 2014, hoping growth in other countries picks up enough to keep them in power. That’s possible, but each decision to maintain the status quo means slower job growth than that needed to meet the coming increase in the elderly population."
With everybody hoping that someone else is going to pull them out of the quicksand – who is left to do the pulling?