The WaPo is today reporting a study by the California Legislative Analyst Office (LAO) that reports the apparently astonishing fact that increasing the supply of a good tends to lower its price. The study concluded, “Encouraging additional private housing construction can help the many low–income Californians who do not receive [low-income housing] assistance. Considerable evidence suggests that construction of market–rate housing reduces housing costs for low–income households and, consequently, helps to mitigate displacement in many cases.”
To low-income residents and the groups that fight for them in expensive cities, new market-rate housing often feels like part of the problem. If San Francisco and Washington are becoming rapidly unaffordable to the poor, why build more apartments for the rich?
New housing, these voices fear, will only turn affordable neighborhoods into unaffordable ones, attracting yet more wealth and accelerating the displacement of the poor.
Then come along those pesky economists:
Economists typically counter with a lesson about supply and demand: Increase the sheer amount of housing, and competition for it will fall, bringing down rents along the way to the benefit of everyone.
It is understandable that skeptics raise their eyebrows at this argument. It’s theoretical, based on math models and not peoples’ lives. It seems counterintuitive — that building for people who are not poor will help the poor.
Not based on people’s lives? Counterintuitive for whom? Never mind. The WaPo article goes on to observe:
In tight markets, poor and middle-class households are forced to compete with one another for scarce homes. So new market-rate housing eases that competition, even if the poor are not the ones living in it. Over time, new housing also filters down to the more affordable supply, because housing becomes less desirable as it ages. That means the luxury housing being built today will contribute to the middle-class supply 30 years from now; it means today’s middle-class housing was luxury housing 30 years ago.
Well, yes. In addition, the LAO report points out that low-income housing set-asides and vouchers utterly fail to fix the shortage for housing that government policies, e.g., zoning and rent control, have produced. The only way to end shortages is to permit entrepreneurs operating in markets to increase supply of the good that is being demanded.
In any case, kudos to the WaPo for teaching its readers this elementary lesson in economics.
If you were looking for signs that US trade may be collapsing on itself, a good place to start would be Class 8 truck orders which, as we first documented in early December, have posted sharp y/y declines of late.
In November for instance, orders collapsed 59% y/y. In December, the drop was 37%, and in January, Class 8 orders dove 48% from the year ago period.
This is all consistent with the trend towards broadly lower global growth and trade, something which at this point looks to be structural and endemic rather than transient and cyclical.
To be sure, the writing has been on the wall for quite a while. Have a look, for instance, at Morgan Stanley’s Dry Van TLFI:
As you can see, things haven’t been this bad since the crisis. And expectations aren’t looking so hot either:
Speaking of trucking and expectations, Daimler pretty clearly shares the rather dour outlook expressed by Morgan Stanley’s survey respondents because on Monday, the company laid off 1,250 people in North Carolina.
“We see a fall in demand of about 10 percent for heavy trucks in North America this year,” a spokeswoman said. “This is a response to lower demand,” she added, flatly.
“Workers at Daimler’s truck manufacturing plants in Mount Holly and Cleveland, North Carolina, said they were told Monday morning that the company is cutting hundreds of jobs at each plant at the end of the week,” the local WSOCTV wrote yesterday, adding that “Daimler has taken over the plants that were run by Freightliner in Rowan and Gaston counties, and workers at the plant in Cleveland told Eyewitness News the announcement of job cuts came as a shock to many.”
“I know that I’m one of the ones that’s going to be laid off, so it’s going to affect me,” said Andre Tucker, who has worked at the plant since May 2014. “Right now probably the biggest thing is to figure out the next step as far as trying to find a new job,” he laments. Tucker has a wife and two children.
Daimler also laid off 900 employees in Rowan County last month. “Everybody around here’s been hurting, and it’s going to hurt even more,” a convenience store clerk told WSOCTV.
Yes, it most assuredly is “going to hurt even more,” because as we’ve said time and again as it relates the collapsing Baltic Dry, central banks can’t print trade. The US economy is bumping along at a barely positive 0.69% growth rate, and that’s according to the BEA who, as we saw last summer, is prone to doing all sorts of things to make the data look better than it actually is.
Quick, someone tell the executives at Diamler that the industry forecasters who see a double-digit decline in Class 6-8 demand this year are merely “peddling fiction.”
Full statement from Daimler
Pursuant to the notification requirements of the Worker Adjustment and Retraining Notification Act of 1988 (“WARN”), Daimler Trucks North America (DTNA) has announced that it will implement a reduction in force of approximately 700 employees at its Mt. Holly Truck Manufacturing Plant and approximately 550 employees at its Cleveland Truck Manufacturing Plant, effective April 16, 2016. Employees at the Mt. Holly and Cleveland plants were notified in Town Hall meetings yesterday and today.
The last day of work for employees affected by this announcement will be Friday, February 19, 2016 in both facilities. Impacted employees will receive payment in lieu of the notice period at each employee’s regular rate of pay, and employees are free to seek and accept other employment during the notice period without jeopardizing their entitlement to the WARN period payment or benefits.
As of February 22, the workforce at the Mt. Holly Truck Manufacturing Plant will be reduced from approximately 2,150 to approximately 1,450 employees, with plant operations scaled back to two full shifts per day. The workforce at the Cleveland Truck Manufacturing Plant will be reduced from approximately 2,150 to approximately 1,600, with plant production scheduled at one full shift per day. The Cleveland reduction in force is in addition to a previous workforce adjustment announced in January affecting approximately 936 employees at the Cleveland Truck Manufacturing Plant, effective March 5, 2016.
These workforce adjustments are in response to a sustained reduction in orders and a diminished build rate, and are expected to be temporary, based on future market developments. 2015 was an extraordinarily strong market for trucks in NAFTA. DTNA anticipates the North American truck market Class 6 to 8 to be down around minus 10 percent in 2016. This is still expected to be above the 2014 Class 6 to 8 market.
The Mt. Holly Truck Manufacturing Plant is located in Mt. Holly, North Carolina and manufactures medium-duty Freightliner trucks. The Cleveland Truck Manufacturing Plant is located in Cleveland, North Carolina and manufactures heavy-duty Freightliner and Western Star trucks.
The company has no further comment pertaining to the announcement.
One of the more-interesting elements of Election 2016 is the genuinely weak rapport Hillary Clinton has with young, liberal, feminists voters of either sex (let’s assume that most Democratic voters are feminists for the moment).
The former senator and secretary of state got walloped in Iowa and New Hampshire among folks south of 50 years old. In Iowa, for instance, Bernie Sanders won a whopping 84 percent of the vote in the 18 to 29 year-old range. In New Hampshire, the same thing happened. In fact, she only grabbed 24 percent of the under-44 vote! When it comes to women only, Hillary barely won the female vote in Iowa (53 percent) and lost it badly in New Hampshire (44 percent). No wonder there’s a bunch of stories out there about Clinton’s failing support among lady voters, even after Madeleine Albright threatened eternal damnation to women who didn’t vote for Clinton.
Why aren’t women en masse—or at least in Democratic primaries and polls—flocking in support of the first female president in U.S. history? Is it that “intersectionality” (the idea that race, class, and gender are so intertwined that even self-identified feminists no longer care first and foremost about gender) now reigns supreme in terms of cultural and political identity? Is it that women have achieved enough equality that the lure of voting for the first female president isn’t as big a deal as it would have been even 10 years ago? Is it ageism? Or lack of gratitude by younger women for the struggles their mothers and grandmothers went through?
Or is it, as Maureen Dowd argues in The New York Times, a result of the leading role that Hillary Clinton played in revealing “feminism” to be a cyncial cover for more-important Democratic Party interests?
Hillary and Bill killed the integrity of institutional feminism back in the ’90s — with the help of Albright and [NOW co-founder Gloria] Steinem.
Instead of just admitting that he had had an affair with Monica Lewinsky and taking his lumps, Bill lied and hid behind the skirts of his wife and female cabinet members, who had to go out before the cameras and vouch for his veracity, even when it was apparent he was lying.
Seeing Albright, the first female secretary of state, give cover to President Clinton was a low point in women’s rights. As was the New York Times op-ed by Steinem, arguing that Lewinsky’s will was not violated, so no feminist principles were violated. What about Clinton humiliating his wife and daughter and female cabinet members? What about a president taking advantage of a gargantuan power imbalance with a 22-year-old intern? What about imperiling his party with reckless behavior that put their feminist agenda at risk?
To be sure, Dowd, who made her bones as a national columnist skewering the Clintons during the 1990s, goes easy on herself (she was hardly above slut-shaming and even fat-shaming Monica Lewinsky back in the day). But she is rightly unsparing when it comes to Clinton, Albright, and the rest:
Hillary knew that she could count on the complicity of feminist leaders and Democratic women in Congress who liked Bill’s progressive policies on women. And that’s always the ugly Faustian bargain with the Clintons, not only on the sex cover-ups but the money grabs: You can have our bright public service side as long as you accept our dark sketchy side.
Young women today, though, are playing by a different set of rules. And they don’t like the Clintons setting themselves above the rules.
In Dowd’s telling, then, Hillary Clinton is not pulling stronger support from women (especially younger women) not because they are ungrateful but because they choose not to be the tool of a candidate who quickly tossed feminist concerns overboard when it mattered most.
That’s a rare and flattering depiction of part of the American electorate (which reporters usually chide for being dumber than a bag of rocks). And it rings pretty true, too. None of it means that Clinton won’t win among women in the general election or that she is somehow less suited to be president than various other candidates for various other reasons. But it suggests that past actions can’t simply be willed away, which is a lesson all politicians should take to heart.
"[Central Banks] think they are smarter than the market," exclaims billionaire investor Jim Rogers, "they are not!"
Warning CNN in this brief but disturbing reality check that "we are all going to get hurt by a global recession," Rogers takes aim at the incompetence of the "academic and bureaucrats who don't know what they are doing," raging that "this is going to be a disaster in the end."
Rogers concludes:
"You Should Be Very Worried, You Should Be Prepared"
200 Seconds of awful truth…
And if you are not concerned enough, Rogers did an extended radio interview, explaining that the inevitable consequence of disastrous easy-money policy from central planners is war…
Highlights:
39:35 – Jim discusses inevitable consequences of disastrous easy-money policy from central planners is war.
40:00 – Jim discusses heightened xenophobia during difficult economic times and how it can lead to conflict.
40:57 – Jim discusses how the coexistence of a rising world power and a stagnant or in-decline world power leads to conflict.
42:26 – Jim discusses precious metals.
45:30 – Jim discusses a history of poor leadership from US Presidents will continue, money printing and currency debasement will continue, no matter who gets elected this year.
47:49 – Jim discusses coming sovereign debt crises, loss of confidence in government, and how it can lead to war.
48:35 – Jim says "read your history," politicians will continue to make things worse, capital controls will intensify, economic conditions will continue to deteriorate and war is likely.
52:05 – Jim says that by plot of pure circumstance, the USD will fall from its place as world's reserve currency. Dollar will destroy itself and a replacement will come along.
Due up at 1635ET, President Obama holds his first post-Scalia press conference. We assume the propaganda du jour will be the imminent need to appoint a new SCOTUS justice… and why anyone who blocks that plan is "peddling fiction." While he is up there, we assume some comments regarding the escalations in Syria will be discussed… and why Russia (and Putin most clearly) are to blame.
Live Feed…
One wonders if the next justice will break the records…
Paper money, ‘the Heaven-sent leaf’, is nothing new, but it has not always been held in high regard nor previously attained its unquestioned position as the lubricant of trade, financial markets and the road to wealth.
In fact, for most of the last 2,500 years, since Croesus brought scalable coinage to the world, paper money has been considered a temporary, even flaky, alternative to real money – hard money – gold and silver specie. Indeed, even in recent memory, the road to the Emerald City was paved with ounces of gold, hence the Yellow Brick Road in the Land of Oz
If you are an investor, this may be the time to have a serious talk with the face you see in the mirror and ask: Have we really moved on from the ‘barbarous relic’? Can paper money keep its value when all the Central Bankers and planners in the world are intent upon printing as much of it as they possibly can? Is it different this time?
Who needs paper, you say? Now we have electronic money, bits and photons flashing across our screens, capable of leaping vast oceans at a single bound. That is different. What isn’t different is that those bits, and that paper have to represent something of value, and in a world where the ability to produce anything and everything – from the paper itself, to copper, aluminum, iron ore, oil and the ships to move them around the world – has reached a point that there seems to be more stuff available than demand from those who put that stuff to work, or even on the shelf expecting to sell it in the not too distant future.
In the process, driven by animal spirits that have always taken markets to new heights, another summit has been reached – peak debt. From the pages of The New York Times we read: “Beneath the surface of the global financial system lurks a multitrillion-dollar problem that could sap the strength of large economies for years to come.”
One sure way to know that the world’s economy is in a pickle is the arrival, and continuation, of low, even zero or negative rates of interest around the world. What does that even mean? It means that investors are so concerned they would rather pay a government or institution for the privilege of lending them money than keep it in a local bank or under the mattress. It happened in 1932, just before the wheels fell off the U.S. banking system. It is happening now.
David Stockman, the Reagan Administration’s boy wonder when it came to financing ‘supply-side’ economics, a policy that Mr. Reagan’s presidential rival in 1980 (George Bush Sr.) called ‘Voodoo economics’, has seen the light.
“I think it’s the end of an era . . . [Central Banks] create[d] a massive credit expansion in the world that’s stopping . . . Everywhere is at peak debt . . . Secondly, the Central Banks are all out of powder. The Fed has painted itself into a corner . . . They can’t see what’s coming right at us which is a global deflation . . . We’re gonna have a Capex depression,” he told Bloomberg on February 9.
What a pity it wasn’t gold paint.
Chart of Gold Prices
A move from 1,100 to 1,900 — 2011 peak — is a gain of 72 percent, roughly the gain mandated in the Gold Reserve Act of 1934.
Even if the thought of buying or owning gold is sacrilege to your ears, and you just cannot bring yourself to do it, you ought to be asking yourself if more paper money makes sense now. When you had that chat with the face in the mirror did you ask: “How much faith do you have in paper money? How much faith do you have in Central Banks? How much faith do you have in the fiscal probity of the government?”
“Attention K-Mart shoppers, shares that could be bought in 2009 at the devilishly low price of 666 on the S&P 500 are now going for 2,000. Get ‘em while they last. Don’t wait for 3,000.” In other words, shares that were ‘too risky’ at 666 became ‘prudent’ investments at 2,000. At 3,000 they should be risk free. Am I missing something?
If you cannot help yourself and still believe that the road to wealth and security lies along the paper trail (and not a trail of tears), you won’t be alone:
We few, we happy few, we band of buyers . . . . . . Be he ne’er so vile, This trade shall gentle his condition; And gentlemen in T-Bills now instead Shall think themselves accurs’d they were not here, And hold their net worth’s cheap whiles any speaks That bought with us upon St. Greenspan’s Day.
Stocks are up – just ignore everything else… "all is well"
One of these things is not like the other… Stocks were panic-bought once Europe closed but Crude, Credit, and Carry crumbled…
From the moment a UAE minister opened his mouth last Thursday afternoon, US equities have soared…
This is the best 2-day gain for the S&P since August!
Small Caps & Trannies were best as the squeeze came on… panic-buy8ing into the close…
As "Most Shorted" have soared 7% off Thursday lows with a big squeeze at the open today…
The last 2 days are the biggest short-squeeze in over 4 months…
US equities decoupled from Oil and USDJPY as Europe closed…
US credit markets – having had the day off yesterday – are not buying the euphoria…
Financials and Energy stocks both showed gains on the day despite credit weakness (and underlying weakness in crude)…
Don't show Jamie Dimon this chart…
While many European banks gave up their early equity gains – including CS and DB – US Financial stocks enjoyed another day of exuberance following Jamie Dimon' "Big Buy" – the only trouble is… credit risk for these names actually rose 1bp to 171bps… are you really going to fall for this again?
Once again VIX was extremely noisy with spikes (all lower) all morning..
Treasury yields traded in a narrow range with the long-end underperforming as they extended their surge off last week's V-shaped bottom, not helped by AAPL and IBM issuance likely weighed on the complex…
The dollar rose for the 3rd day in a row (something it has not done for a month) for the best run in 2 months…
Between dollar strength, Goldman warnings, and the magic in stocks, commodities all weakened as hope disappeared from Crude..
As crude plunged off the hope highs back to a $28 handle…
Notably, the front-second month roll spread has narrowed back to pre-Phillips 66 dump levels…
A 2012 lawsuit from the Illinois Libertarian Party (L.P.) has been resolved in their favor, with a decision for summary judgement on their behalf, reports Peoria Public Radio, making it easier for the L.P. to get on ballots without having to find candidates to run for a full slate of state offices or even county offices.
Existing Illinois law required third parties who hadn’t achieved full legal ballot access, but not Democrats or Republicans, to run a full slate to get any state or country candidates on the ballot.
Illinoise Libertarian Party Chair Lex Green said that:
defenders of the law use “high-minded language, to say ‘We’re trying to keep whackos and nut jobs from getting on the ballot.’
“Which I would argue that just because they have an R or D after their name doesn’t mean they’re any more sane or less so than the Libertarians,” he says. “To me you can say whatever you want but it hides a political agenda. Because if you make the burden of getting on the ballot higher for somebody than for somebody else, then this is obviously unequal treatment under the law, which in my book is wrong … I personally think that it is all political maneuvering to keep the Democrats and Republicans in power in Illinois.”
The order issued Friday by Judge Andrea R. Wood of the Northern District U.S. Court finds the full slate law unconstitutional. Her reasoning isn’t yet known; a decision hasn’t been published.
Richard Winger at the irreplaceable Ballot Access News site has more context on the history of Illinois’ requirements, which came about to stymie the Communist Party back in 1931 when Illinois still had “cumulative voting” in state House races where voters had three votes they could distribute or concentrate among candidates as they pleased. They wanted to make sure that one Commie couldn’t benefit unduly from concentrated votes.
Remember when The Onion was purchased by a major Hillary Clinton backer? Well…
Uh oh, a comedian told a non-PC joke at the BAFTA Awards.
The International Students for Liberty Conference is next week. Members of the Alumni for Liberty can vote for the 2016 Alumnus of the Year. Go here to check out the nominees and cast a vote. (Yes, I was nominated. As a friend said, “The only time I thought I’d see Robby Soave listed next to Ross Ulbricht would be on an FBI Most Wanted poster.”)
There are two simple words, according to Grant Williams, which, when uttered in the ears of the high priests (and priestesses) at The Fed, equates you to 'Simple Jack' and worthy of no attention…
"Business Cycle"
These are the people we are dealing with and expecting to 'run' the economy?