Tag: Income Disparity

March 2, 2018

Perspective

Economist – The hidden cost of congestion – Daily Chart 2/28

  • “In rich countries, city-dwellers lose nearly $1,000 a year while sitting in traffic.”

Tax Foundation – Sources of Personal Income 2015 Update – Erica York 2/27

Visual Capitalist – The World as 100 People over the last two centuries – Jeff Desjardins 2/28

WEF – These will be the world’s most populated countries by 2100 – Rob Smith 2/28

Worthy Insights / Opinion Pieces / Advice

Economist – Black Americans are over-represented in media portrayals of poverty – C.K. 2/20

  • “The poverty rate amongst black Americans, at 22%, is higher than the American average of 13%. But black people make up only 9m of the 41m poor Americans.”

FT – Millennials poorer than previous generations, data show – Sarah O’Conner 2/23

  • “Stagnant wages and rising house prices hit disposable income levels.”

NYT – Is Bitcoin a Waste of Electricity, or Something Worse? – Binyamin Appelbaum 2/28

  • “Money is supposed to be a means of buying things. Now, the nation’s hottest investment is buying money. And the investment rush is raising questions about whether one reason for the slow pace of economic growth in recent years is that the nation is busy distracting itself. While Bitcoin mining may not be labor intensive, it diverts time, energy and capital from other, more productive activities that economists say could fuel faster growth.”
  • “By a wide range of measures, America has a productivity problem. The economy is growing slowly, and almost 20% of adults in their prime working years are neither working nor trying to find work. Americans who do have jobs are less likely to start their own companies. Even the most basic kind of production is in decline. Americans are having less sex and making fewer babies.”

Real Estate

PBN – Hawaii homebuyers top nation with highest mortgage debt-to-income ratio – Janis Magin 2/28

  • “Homebuyers in Honolulu have the highest mortgage debt-to-income ratio in the nation, while homebuyers on Maui have a ratio that’s third-highest in the U.S., topped only by San Jose in California’s Silicon Valley, according to a report by the personal finance company SmartAsset.”
  • “Homebuyers in the Honolulu metropolitan area have mortgages worth 3.959 times their annual income, on average, according to an analysis of data from the Consumer Financial Protection Bureau.” 
  • “The data showed that Honolulu homebuyers have an average income of $131,639 and that the average mortgage is for $521,201.”
  • “Maui homebuyers in the Kahului-Wailuku-Lahaina metro area have an average income of $131,681, and the average mortgage there is $468,597, putting their mortgage-to-income ratio at 3.559.”
  • “By contrast, homebuyers in San Jose have an average income of $207,062 and an average mortgage of $740,693, giving them a ratio of 3.577.”
  • California had 17 of the top 25 cities with the largest mortgage-to-income ratios on the list, while Hawaii had two of the top three.
  • “Nationally, the average mortgage-to-income ratio was 2.119.”

WSJ – Retailers Post Strong Numbers – And Mall Shares Keep Falling – Esther Fung 2/27

  • “Prospect of higher interest rates a worry to shopping mall REIT investors.”
  • “While mall landlords generally have shown they are able to keep occupancy levels buoyant, there are growing concerns about pressure on rents and higher capital expenditures as they look to attract and retain tenants, many of which are shrinking their store footprints.”
  • “Recent comments by Starbucks Corp. Executive Chairman and founder Howard Schultz that he expects rents to fall also weighed on the retail property sector Tuesday.”
  • “’Over the last few weeks I have been in a number of U.S. cities and observed firsthand the abundance of empty storefronts across the country, in prime A1 locations,’ Mr. Schultz said in an email to Starbucks senior leadership team on Sunday.”
  • “’We are at a major inflection point as landlords across the country will be forced (sooner than later) to permanently lower rent rates to adjust to the ‘new norm’ as a result of the acute shift away from traditional brick-and-mortar retailing to e-commerce,’ he added.”

Energy

WSJ – Daily Shot: US Total Crude Oil Production 2/23

Finance

Bloomberg – Investing in Index Funds Is No Longer Passive – Dani Burger 2/27

  • “Passive has gotten so large that it’s killed everything in its path — including itself. Welcome to the ‘Passive Singularity‘.”
  • “There are now so many indexes that putting your money in an index-tracking fund is a move requiring an active decision, according to researchers at Sanford C Bernstein & Co. The industry’s growth has even forced active managers to focus on selecting indexes themselves — be that to invest in, or to benchmark against.”
  • “It’s the latest broadside from Bernstein’s team, which in 2016 labeled passive investing ‘worse than Marxism’. Investors so far aren’t paying heed: passive mutual funds and ETFs absorbed $692 billion last year, compared to $45 billion in outflows for active funds, according to data compiled Bloomberg Intelligence.”
  • “The Bernstein strategists base their conclusions around the millions of indexes in existence, which far surpass the number of single securities. Do a little math and the madness is clear: with 3,000 easily-investable stocks, the number of possible combinations to turn into an index is a Googol (that number, written out, would be 1 followed by 100 zeros.)”
  • “With nearly half of equity assets managed passively in the U.S., there’s no sign that investors will stop gravitating toward cheaper, index-tracking products. Bernstein’s new research wrestles with a world where passive is larger than ever, and active managers have to fight for the trust of their clients. The team concedes that ‘passive investing has been a great force for democratizing access to capital markets and reducing the costs to society of managing assets’.”
  • “But a massive bull market rally across equities and debt markets has left many investors blind to the risks, which smart asset allocation can help to mitigate, Bernstein said.”
  • “In January, investors added $25 billion to active ETFs and mutual funds while allocating $103 billion to passive vehicles, data from Bloomberg Intelligence show.”
  • “’By all means, investors should save money on implementation by using passive vehicles as part of their allocation,’ the strategists wrote. ‘But the myth of purely passive investment will be exposed by a low-return world.’”

Cryptocurrency / ICOs

WSJ – Daily Shot: Bitcoin 2/28

  • “Bitcoin has been much less volatile in the past few days.”

Health / Medicine

Our World in Data – Causes of Death – Hannah Ritchie and Max Roser Feb. 2018

Construction

WSJ – With Lumber in Short Supply, Record Wood Costs Are Set to Juice Home Prices – Benjamin Parkin 3/1

  • “A lumber shortage has pushed prices to record highs as builders stock up for what is expected to be one of the busiest construction seasons in years.”
  • “Builders say the higher lumber costs are making homes more expensive. Lumber prices started rising last year after fires destroyed prime forests and a trade dispute between the U.S. and Canada restricted supplies. Now a shortage of railcars and trucks is forcing builders to pay even more.”

  • “Prices are rising as lumber yards try to stock up ahead of what looks likely to be a busy building season this spring. A strong economy and tight supply of houses are heating up the home-building market. The number of new units under construction in the U.S. rose almost 10% in January, the Commerce Department said, as strong demand kept builders working through the winter. Permits for new homes, a sign of anticipated construction, also rose.”
  • “Material prices now rival labor shortages as builders’ main concerns, a National Association of Home Builders survey showed in January. Prices for common building varieties like spruce and southern pine are at or near records, according to price-tracking publication Random Lengths. March-dated lumber futures at the Chicago Mercantile Exchange hit a record of $532.60 per 1,000 board feet last week after climbing more than 50% in 14 months.”
  • “That run-up began with a trade dispute between the U.S. and Canada, which provides about a third of U.S. timber, leaving many dealers hesitant to restock at elevated prices. The Trump administration eventually instituted tariffs of 20% or more on Canadian sawmills.”
  • “Problems mounted. The worst wildfires on record hit Canada’s Pacific coast. Hurricane Irma temporarily closed mills in the forests of Florida and Georgia. And then came a shortage of railcars and trucks to transport timber from forests in places like the Pacific Northwest. Rates for flatbed trucks rose 24% in January from a year earlier, according to DAT Solutions LLC.”
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October 12, 2017

Perspective

Business Insider – Trump’s net approval rating has dropped dramatically in every state – Allan Smith 10/10

Brookings – White, still: The American upper middle class – Richard Reeves and Nathan Joo 10/4

Economist – A new study details the wealth hidden in tax havens 10/7

  • “…A new study by Annette Alstadsaeter, Niels Johannesen and Gabriel Zucman, three economists, (using Bank for International Settlements data) concludes that tax havens hoard wealth equivalent to about 10% of global GDP. This average masks big variations. Russian assets worth 50% of GDP are held offshore; countries such as Venezuela, Saudi Arabia and the United Arab Emirates climb into the 60-70% range. Britain and continental Europe come in at 15%, but Scandinavia at only a few per cent.”
  • “One conclusion is that high tax rates, like those in Denmark or Sweden, do not drive people offshore. Rather, higher offshore wealth is correlated with factors such as political and economic instability and an abundance of natural resources.”
  • “Accounting for offshore holdings suggests wealth inequality is even greater than was thought. In Britain, France, and Spain the top 0.01% of households stash 30-40% of their wealth in tax havens. In Russia, most of it goes there. In America, the share of wealth held by the richest 0.01% is as high today as in early 20th-century Europe. Including offshore data increases the wealth share of the super-rich.”
  • “Yet plenty of data are still missing. A few big centers, including Panama and Singapore, still do not disclose these statistics. The BIS data also cover only bank deposits, not the securities in which most offshore wealth is held. Researchers made estimates to plug the gap, but their figures are likely to be conservative.”

Worthy Insights / Opinion Pieces / Advice

NYT – How Israel Caught Russian Hackers Scouring the World for U.S. Secrets – Nicole Perlroth and Scott Shane 10/10

Economist – The bull market in everything – Leaders 10/7

Economist – A deathly silence: After the massacre in Las Vegas, nothing is set to change – Leaders 10/5

Economist – Politicians choosing voters: The Supreme Court ponders whether gerrymandering has gone too far 10/7

Economist – Chiang Kai-shek’s former homes are open to tourists 10/5

Markets / Economy

Economist – From Uber to kinder 10/7

Economist – American public pensions suffer from a gaping hole 10/5

  • “Schools in Pennsylvania ought to be celebrating. The state gave them a $125m budget increase for 2017-18—enough for plenty of extra books and equipment. But John Callahan of the Pennsylvania School Boards Association says all the increase and more will be eaten up by pension costs, which will rise by $164m this year. The same happened in each of the previous five years; cumulatively the shortfall adds up to $586m. The pupil-teacher ratio is higher than in 2010. Nearly 85% of the state’s school boards said pensions were their biggest source of budget pressure.”
  • “A similar squeeze is happening all over America. Sarah Anzia, at the University of California, Berkeley, examined 219 cities between 2005 and 2014 and found that the mean increase in their real pension costs was 69%; higher pension costs in those cities were associated with falls in public-sector employment and capital spending.”
  • “The problem is likely to get worse. Moody’s, a rating agency, puts the total shortfall of American public-sector pension plans at around $4trn. That gap does not have to be closed at once, but it does mean that contributions by employers (and hence taxpayers) will increase even more than they already have (see chart).”
  • “Higher costs are the result of improved longevity, poor investment returns and inadequate past contributions.”
  • As to making plans…
  • “Experts can differ, it seems. But small changes in assumptions can make a huge difference to the amount employers need to contribute. According to the National Association of State Retirement Administrators, cutting the return assumption by a quarter of a percentage point increases the required contribution rate (as a proportion of payroll) by two to three points.”
  • “In consequence, it is in no one’s interest to make more realistic assumptions about future returns. Workers (and their unions) fear it might generate calls for their benefits to be cut; states worry it would require them to raise taxes. Don Boyd, the director of fiscal studies at the Rockefeller Institute of Government, a think-tank, reckons that with a 5% assumed rate of return, states would have to stump up an extra $120bn a year just to tread water—i.e., to fund their pensions without making any progress on closing the deficit. So the game of ‘extend and pretend’ continues.”
  • “As years go by, voters and legislators across the country will have to make a trade-off. They can pay more taxes and cut services; or they can reduce the benefits they pay people who teach their children, police their streets and rescue them from fires. There will be no easy answers.”

Real Estate

WSJ – Daily Shot: John Burns RE Consulting – Home Refinancing 10/11

Health / Medicine

FT – Global childhood obesity rises 10-fold in 40 years – Clive Cookson 10/10

  • “The number of obese children and teenagers across the world has increased 10-fold over the past four decades and is about to overtake the number who are underweight, according to the most extensive analysis of body weight ever undertaken.”
  • “The study, led by Imperial College London and the World Health Organization, used data on 31.5m children and adolescents worldwide to estimate trends in body mass index (BMI) from 1975 to 2016. The results are published in the Lancet.” 
  • “Over this period the number of obese girls, aged 5 to 19, rose from 5m to 50m, while the total for boys increased from 6m to 74m.”
  • “The world’s highest childhood obesity levels are in the Pacific islands of Polynesia and Micronesia. Nauru has the highest prevalence for girls and the Cook Islands for boys: both above 33%.”
  • “Among wealthy countries, the US has the highest obesity rates for girls and boys of about 20%. Levels in most of western Europe are in the 7% to 10% range.” 
  • “A further 213m children are overweight but not sufficiently so to meet the WHO’s obesity criteria, which vary by age. Forty years ago, 0.8% of the world’s children were obese; now the prevalence is close to 7%.” 
  • “The study also looked at adult obesity, which increased from 100m people in 1975 to 671m in 2016. A further 1.3bn adults were overweight (with a BMI above 25) but below the threshold for obesity (BMI above 30).” 
  • “But the authors are most concerned about the findings about childhood obesity, because of their implications for public health many decades into the future.”

Construction

WSJ – Daily Shot: NFIB Labor Quality 10/10

  • “Anecdotal evidence suggests that in some areas of the country, finding workers who can pass a drug test has been challenging.”

WSJ – Daily Shot: John Burns RE Consulting – Builder Labor Shortages 10/11

  • “Skilled (and drug-free) worker shortages in construction are especially acute.”

  • This will only get tighter in the continental U.S. as natural disasters continue to rack up, resulting in acute demand for labor in the affected areas. Harvey, Irma, Maria, Nate, and now wildfires in Northern California. Of course, this will have effects on the neighboring regional labor pools.

Shipping

Economist – How protectionism sank America’s entire merchant fleet 10/5

  • “In April 1956 the world’s first container ship—the Ideal X—set sail from New Jersey. A year later in Seattle the world’s first commercially successful airliner, Boeing’s 707, made its maiden flight. Both developments slashed the cost of moving cargo and people. Boeing still makes half the world’s airliners. But America’s shipping fleet, 17% of the global total in 1960, accounts for just 0.4% today.”
  • “Blame a 1920 law known as the Jones Act, which decrees that trade between domestic ports be carried by American-flagged and -built ships, at least 75% owned and crewed by American citizens. After Hurricane Irma, a shortage of Jones-Act ships led President Donald Trump on September 28th to waive the rules for ten days to resupply Puerto Rico. This fueled calls to repeal the law completely.”
  • Like most forms of protectionism, the Jones Act hits consumers hard. A lack of foreign competition drives up the cost of coastal transport. Building a cargo ship in America can cost five times as much as in China or Korea, says Basil Karatzas, a shipping consultant. And the cost of operating an American-flagged and -crewed vessel is double that of foreign ones, reckons America’s Department of Transportation.”
  • “Inflated sea-freight rates push most cargo onto lorries, trains and aircraft, even though these are pricier and produce up to 145 times as many carbon emissions. So whereas 40% of Europe’s domestic freight goes by sea, just 2% does in America. Lacking overland routes, Alaska, Guam, Hawaii and Puerto Rico are hardest hit. Hawaiian cattle ranchers, for instance, regularly fly their animals to mainland America. A recent report by the Government Development Bank for Puerto Rico found that the Jones Act inflated transport costs for imports to twice the level of nearby islands.”
  • “Jones-Act shipowners retort that the rules are to help producers, not consumers. Rail firms lobbied for the 1920 law, out of fear that an excess of foreign ships from the first world war was flooding the market. National security was also cited. German submarine warfare, it was argued, showed the need for a merchant fleet built and crewed by Americans. But the law has virtually wiped out American shipping. Between 2000 and 2016 the fleet of private-sector Jones-Act ships fell from 193 to 91. Britain binned its Jones-Act equivalent in 1849. Its fleet today has over three times the tonnage of America’s. Marc Levinson, an economic historian (and former journalist at The Economist ) notes that the laws also made American container lines less able to compete on international routes. Drawn by profits at home they underinvested in their foreign operations, and fell behind their foreign rivals because they lacked the same scale.”
  • “Recognizing the harm to their domestic fleets, countries from Australia to China are loosening the rules protecting their fleets. Not America.”

Africa

Economist – The birthplaces of African leaders receive an awful lot of aid 10/7

  • “Scholars have long had a hunch that Chinese aid could be more easily manipulated than the Western sort, which often comes with strings attached. A Chinese white paper in 2014 stated that the government would not impose any ‘political conditions’ on countries asking for help. The commerce ministry, China’s lead aid agency, says most projects are initiated by recipient states. This approach makes aid more vulnerable to misuse by local leaders, say critics.”
  • “In a working paper, the pundits show that China’s official transfers to a leader’s birth region nearly triple after he or she assumes power. Even when using a stricter definition of aid provided by the OECD, a club of mostly rich countries, an increase of 75% was found. They got similar results when looking at the birthplaces of presidential spouses. Crucially, they found no such effect with aid doled out by the World Bank, their benchmark for Western assistance. ‘We believe Chinese aid is special,’ says Andreas Fuchs, a co-author of the study.”
  • “China’s approach to aid has other side-effects. In a paper released earlier this year, Diego Hernandez, an economist, showed that China’s rise as a development financier has increased competition between donors. This, in turn, has strengthened recipients’ bargaining power, says Mr Hernandez. Traditional donors have responded by lowering conditionality, or the number of strings attached to aid. Using data from 1980 to 2013, he finds that African countries have received 15% fewer conditions from the World Bank for every 1% increase in Chinese aid.”