Saturday, January 03, 2009

Killing a Toyota

The Top Gear team attempts to destroy a Toyota pick up truck. Are they successful? Find out in these amazing videos from the BBC Worldwide.

Killing a Toyota, Part 1, click here

Killing a Toyota, Part 2 below, click arrow:

HT: Sanil Kori

Friday, January 02, 2009

Markets In Everything: One Joke for Sale

On Ebay, current bid is $365.

HT: Ben Cunningham

Google's Advanced Search

To clarify some discussion in the comments section of a previous post, you can go to Google's Advanced Search here, and use the "Search within a site or domain" option to conduct a comprehensive Google search of Carpe Diem or any other blog or website. It has been my experience that Blogger's "Search Blog" function (top left corner of the blog) will only return the most recent 20 postings with a keyword. The Google Advanced search (available on the right side of the Google home page) will do a comprehensive search of all posts with a keyword.

Thursday, January 01, 2009

No Bailout Necessary, Just Reduce Punitive Tariffs to Save and Create More U.S. Jobs

Tariffs are usually used to protect domestic industries from more efficient foreign competitors. But domestic firms also buy inputs, raw materials, supplies, parts and inventory FROM foreign producers, and in fact more than half of U.S. imports are industrial supplies and parts, and NOT finished consumer goods. In that case, tariffs are a tax on the inputs of domestic businesses and can put them at a significant competitive disadvantage.

Case in point: There is a punitive tariff of up to 17.2% on an imported specific micro-denier suede fabric used extensively by Mississippi furniture manufacturers Lane, Bauhaus, and H.M. Richards. This tariff is about to be removed, saving each of these three firms more than $1 million annually, and saving close to 1,000 jobs in NE Mississippi.

Read about it here, here and here.

HT: Taxing Tennessee

Mortgage Rates Fall to Record Low Level

30-year fixed rate mortgages closed out the year at 5.14% (data here, see graph above), the lowest rate on record (data back to 1964 here). Falling mortgage rates and falling home prices will be important factors in the real estate market's recovery in 2009.

Top Earners Are the Vital, Economic Activists

It’s not Obama’s middle-class tax cut that’s going to get us out of this economic jam. At best his vision is incomplete. But at worst his aversion to successful earners and investors is a real obstacle to full economic recovery.

Social historian and early supply-side activist Irving Kristol taught us three decades ago that the top earners are the economic activists. They’re the ones with the highest propensity to consume and invest. They’re the ones who buy the yachts, which are built by blue-collar workers. And they’re the ones who run the small businesses and provide the capital for the new entrepreneurial start-ups that are the lifeblood of the economy. It is they who energize free-market capitalism.

If we had an economy without rich people we wouldn’t have much of an economy. That’s why lower tax rates to reward the economic activists — the most prominent capitalists — are so essential.

~Larry Kudlow

MP: The economic activists who energize the economy also pay most of our income taxes: the top 1% pay about 40% of all income taxes paid, the top 10% pay about 71%, and the top 25% pay more than 86% (2006 data here).

Wednesday, December 31, 2008

Capitalists On The Way Up; Socialists on Way Down. During Crises, Balance Always Tilts Toward Gov't.

Many are finding it hard to make merry in the aftermath of this year’s financial crisis. Collateral damage from the crisis is extensive—unemployment is rising in the US, exporters are hurting in emerging markets, global stock markets are depressed, and each day seemingly brings new cries for government help from struggling industries.

Some see these effects as proof of capitalism’s failure. After all, this year saw the crumbling of a financial nucleus under its own weight, necessitating the US government to rescue the few straggling survivors. Capitalism, it’s argued, encourages greed and self-interests above the public good (Madoff is a “shining” example), and the solution is government and regulation.

But will larger government and more regulation help? History shows regulation does little to curb excesses. This is because excesses exist not because of the capitalist system, but because they are perpetuated by the participants. No amount of tinkering can regulate innate human characteristics.

There’s an old saying: “Everyone’s a capitalist on the way up and a socialist on the way down.” People want it all—to reap the benefits of free markets, but be protected against any downside. Capitalism won’t abide. And that’s a good thing. It’s a system of inherent checks and balances, which can be swift and brutal during the pruning process. In rough times, we seem willing to sacrifice free markets’ benefits for perceived security from this process (investors accepting 0% return on Treasuries is a recent example). Still, if free markets were restricted, what would happen to those checks? Subprime problems (or Madoff’s) were not revealed by regulators, but by markets. Note, politicians are human, too.

Capitalism and free markets are not ever-stable. They work precisely because they compel folks to take risks and seek to create excess value out of existing capital, in whatever form that might be. They’re examples of constant change and innovation. Change isn’t always comfortable—and much of it will fail—but when it moves society in a more efficient direction, society certainly becomes more profitable.

During crises, the balance always tilts toward government and away from capitalism. This doesn’t mean capitalism is done. But such things are always said in times like these. For months now we’ve applauded coordinated government efforts to provide monetary and fiscal liquidity and stimulus to the shocked financial system and to provide much-needed confidence. We tend to draw the line, however, at government “ownership” of assets and/or direction of those funds. Government “solutions” can only carry the economy so far—it’s up to capitalism to drive real, sustained growth. That is, it’s up to the people who make an economy, not its turgid overseers.

~Fisher Investments

Economically Possible? No. Politically Possible? Yes

Q: Is it economically possible to simultaneously demand low electricity prices but no new generating plants, while using ever increasing amounts of electricity.

Q: Is it economically possible to simultaneously have "open space" laws forbidding building while increasing "affordable housing"?

Q: Is it economically possible to add the costs of government bureaucracies to the costs of medications and medical treatment have the the total cost of medical care go down?

Q: Is it economically possible to have lower costs for medical care, or anything else, without sacrificing quality?

Although the answer to all of these questions is "No," because these tradeoffs are economically impossible to achieve simultaneously, Thomas Sowell explains in his latest column "The Art of the Impossible" why they are all politically possible:

"You want the impossible? You got it. Politicians don't get elected by saying "No" to voters. People can get the possible on their own. Politicians have to be able to offer the voters something that they cannot get on their own. The impossible fills that bill perfectly."

As Thomas Sowell reminds us: "The first lesson of economics is that we live in a universe of scarcity, and we face tradeoffs. The first lesson of politics is to ignore the first lesson of economics."

The 2012 Pelosi GTxi SS/RT Sport Edition

From Congressional Motors: All new for 2012, the Pelosi GTxi SS/Rt Sport Edition is the mandatory American car so advanced it took $100 billion and an entire Congress to design it.

HT: KauaiMark AND Anonymous (sorry I left this out before)

Tuesday, December 30, 2008

Why Detroit Has a Bad Union Problem; Entrenched Bargaining Structure Causes Many Inefficiencies

How is it that successful executives become so unsuccessful as soon as they move to Detroit? Also, how can we explain that whenever GM, Ford and Chrysler leave our shores, they compete well in Europe, South America and China? What makes them viable competitors as soon as they cross the border?

The most striking difference appears to be that the Detroit Three are unionized, and the foreign transplants are, overwhelmingly, not. Yet the issue can't just be about wage rates. The foreign transplants pay well, and the UAW has given significant concessions in recent bargaining.

It is perhaps the mode of doing business in a unionized company that remains a crippling disadvantage. The UAW is arguably the most successful industrial union of all time. But its very strength has allowed it to permeate into every aspect of manufacturing in the Detroit Three.

The collective bargaining agreement with the UAW is a heavily negotiated document the size of a small telephone book (see the Ford-UAW 2007 contract pictured above). It is virtually identical for each of the Detroit Three, but it doesn't exist at all in their U.S. competition, the nonunionized transplants.

Not only work rules, but fundamental business decisions to sell, close or spin-off plants are forbidden without permission. That permission may come, but only at a price, since everything that affects the workplace must be negotiated. Both the UAW and the Detroit Three maintain large staffs of lawyers, contract administrators, and financial and human-resources representatives whose principal job is to negotiate with the other side. These staffs are at all levels, from the factory floor to corporate headquarters and the UAW's "Solidarity House" in downtown Detroit.

The collective bargaining agreements are now renegotiated every four years; in each negotiation the power and penetration of the union grows. If the company asks to change the flow of work for any reason, from cost-savings to vehicle improvements, the local union president will listen politely, and then say something like, "We can help you with this, but what's in it for my guys?"

Typically, he will have a list of things he wants, some understandable (better cafeterias) some questionable (hire my nephew), but there is always a quid pro quo. These mutually sustaining bureaucracies exist to negotiate with each other.

In an environment of downsizing, the problem is exacerbated, as the entrenched bargaining structure causes innumerable inefficiencies. Typically each plant or warehouse is a "bargaining unit" and has a union president, who has a staff. If the company consolidates facilities, there will be no need for two presidents and two staffs. Since neither president wants to play musical chairs, they will both point to the bargaining agreement and resist consolidation. As a result, unnecessary facilities are not sold, but kept open, lit and heated, just to preserve a redundant bargaining-unit president and his team.

As the Obama administration takes the helm, the key political question is whether the Democratic Party, which has so benefited from union support, will have the courage to push the UAW into a more reasonable relationship with the Detroit Three. Namely, a relationship in which employee relations and entitlements approximate those found in the "financially viable" sector of the U.S. automotive industry -- i.e., the foreign transplants. If the Obama administration does not force the UAW to make further concessions, it will not be able to save the Detroit Three.

~Logan Robinson in today's Wall Street Journal

Markets In Everything: Sell/Exchange Gift Cards

Many consumers face a dilemma on what to do with unused gift cards. If you’ve ever received a gift card to a store you don’t particularly care for, you know this feeling. While there are options on the internet to sell or exchange gift cards with other gift card holders, many consumers are not comfortable with selling, exchanging, or buying gift cards from someone they don’t know. That is where comes in.

You can sell or exchange your unused gift card directly with us. What’s more, when you exchange your gift card with us, we will send you a brand new gift card of your choice (which you select from our list of popular gift cards). This makes re-gifting of gift cards easy and more exciting. We also sell gift cards at discounts of up to 20% off.

HT: Ben Cunningham

Volatility Index Coming Down From Oct-Nov Peaks

One of the most important but underreported financial indicators is the CBOE’s Volatility Index (^VIX), which measures the market’s expectation of future volatility in stock prices. (The CBOE has written a nice technical paper describing how it is calculated here.) Traditionally, the annualized volatility of the S&P 500 has been 20%, but in both October and November the VIX reached an apocalyptic 80%. The huge drop in stock prices is bad, but it would be a lot better if the market thought that the major gyrations were mostly in our past. So the good news is that the volatility index has retreated to 45% (see chart above).

Now, 45% is still more than twice what it “should” be. But it’s at least moving in the right direction. When it drops below 30%, it will be a strong indication that the market correction is complete and we’re back to business as usual.

From Ian Ayres at the
Freakonomics Blog

Markets In Everything: Wearing A T-Shirt for Profit or "Selling the Shirt Right Off Your Back"

Hi, my name is Jason. In this up and down economy I’m outsourcing my wardrobe (namely shirts) to corporate america and you! I’m going to wear a different shirt for 365 days straight in 2009, take multiple pictures throughout my day and blog about it. Days are sold at “face value” so January 1 is $1 and December 31 is $365. Check it out at

HT: Kevin Ellington

Monday, December 29, 2008

Real Gas Prices Approach 7-Year Low, Saving U.S. Consumers and Businesses $1 Billion Per Day

Gas prices reached a new 2008 low of $1.61 per gallon, which is the lowest inflation-adjusted price since March 2002 (using EIA data), as real gas prices approach a 7-year low. From the $4.12 per gallon peak in July, American consumers and businesses are now saving $357 billion on an annual basis from the cost savings of lower gas prices, or almost $1 billion per day.

Sunday, December 28, 2008

Notebook Computer Sales Beat Desktops in 2008:Q3, And Will Increase By +15.2% in 2009

NEW YORK (AP)Shipments of notebook computers edged past desktop sales in the third quarter for the first time, according to data from the research firm iSupply. Preliminary figures for the quarter show notebook PC shipments shot up 40% from the same period a year ago to 38.6 million. Meanwhile desktop shipments fell 1.3% to 38.5 million.

The numbers underscore a broader shift toward portable computing as more functions like e-mail and Web surfing migrate to mobile phones and the popularity of inexpensive "netbooks" used mainly for Internet access grows.

The research firm IDC also predicted this month that sales of laptops would fair better amid a deepening recession - portable PC shipments will grow by 15.2% in 2009, while expecting a 6.7% decline for desktops and servers using PC microprocessors.

Darwinian Effect of Recessions: Weak Companies Fail, Leaving The Survivors Bigger and Stronger

NEW YORK - Economic cycles are Darwinian, picking off weak companies and leaving survivors stronger. A year into the recession, solid retailers have their pick of mall space. Respected banks are getting an influx of deposits. Tech companies with money to spend are having an easier time hiring.

It has been a year of brutal losses. More than 1.2 million jobs have vanished. The broadest measure of the stock market, the Wilshire 5000, is down more than $7 trillion, a 40% slide. Corporate survivors, however, should benefit as competitors disappear.

Retailer Bed Bath & Beyond will not have to contend with Linens 'n Things, which is in liquidation. Best Buy may not be fighting price wars with Circuit City, which is reorganizing in Chapter 11 bankruptcy. FedEx will not scrap for market share against DHL Express, a German-owned company that is leaving the United States.

Staying in business will not be easy - sales declines are a given and job cuts are likely to continue. But the United States will not remain in the dumps forever, and the companies that will be best positioned when the economy eventually improves may include these examples: Kohl's, Wal-Mart, McDonald's, Wells Fargo, Delta, Google, AT&T, Verizon.

A Christmas Card From the Oil Market

Monthly oil prices in 2007 and 2008.
See alternative version here.

Great Depression II?

Great Depression II? We're still a long, long way away, see chart above of monthly unemployment rates, from 2007.1 to 2008.11 and 1931.12 to 1935.12.