Tuesday, April 30, 2013

The New, Bigger Housing Bubble In 4 Charts

Seth Mason Charleston SC blog 22
Federal Reserve Chairman Ben Bernanke's "solution" to the country's economic woes, a new, even larger asset bubble, is becoming evident in several sectors of the economy, from equities to real estate. The following charts suggest that the bubble the Fed is inflating in the housing market will eclipse the last one, which was big enough to plunge the country into an economic depression when it burst.

First, the year-over-year increase in home prices since 2008 has been steeper than the YoY during the last housing bubble:

The New, Bigger Housing Bubble In 4 Charts - Home Prices Chart


Second, the inversely proportional decrease in mortgage standards and increase in demand for mortgages has been starker than it was during the last bubble:

The New, Bigger Housing Bubble In 4 Charts - Mortgage Demand Chart


Third, apartment and condo starts have been skyrocketing at a rate far eclipsing that of the last bubble:

The New, Bigger Housing Bubble In 4 Charts - Multifamily Construction Chart


Fourth, investors are throwing cheap, Fed-provided money at housing at a rate far exceeding that of the last bubble:

The New, Bigger Housing Bubble In 4 Charts - Residential Investment Chart

Monday, April 29, 2013

Libertarian Talk Radio: It's A Matter Of Differentiation

Seth Mason Charleston SC blog 23I recently wrote about how libertarianism is growing and how conservatives, terrestrial talk radio's bread-and-butter demographic, are becoming more libertarian. In the article, I argued that there's a growing under-served demand for libertarian terrestrial talk radio. Today, I'd like to add to that argument from another perspective, that of differentiation.

Fox News, the only television news provider gearing to those on the right side of the political spectrum, enjoys strong ratings for the simple fact that it's the only conservative news alternative. (Fox Business is a business news--not "news news" network.) As you can see in the following graphic, most television news clusters around the left side of the political spectrum. Fox News, on the other hand, enjoys a monopoly on the right.

Libertarian Talk Radio: It's A Matter Of Differentiation - Television News Bias

The same principal applies to political talk show hosts on terrestrial radio. As you can see in this graphic, most hosts cluster around the social conservative/neoconservative side of the conservative political spectrum. There's only one prominent host on the libertarian side of the spectrum, Dennis Miller, and his show doesn't get particularly good ratings.

Libertarian Talk Radio: It's A Matter Of Differentiation

The previous 2 graphics, combined with the changing political landscape on the Right, suggest that it's time for program directors to put more libertarians on the air.

Seth Mason, Charleston SC

Thursday, April 25, 2013

Libertarian Talk Radio: If You Build It, Ratings Will Come

Seth Mason Charleston SC blog 24
Terrestrial talk radio's key demographic, conservatives, are becoming more libertarian. However, there are few libertarian hosts in terrestrial talk radio. Program directors would be wise to air more of them.

According to Gallup, an increasing number of Americans describe themselves as "conservative", terrestrial talk radio's bread-and-butter political ideology:

Libertarian Talk Radio: If You Build It, Ratings Will Come - US Political Ideology


However, a decreasing number of conservatives identify with "traditional values":

Libertarian Talk Radio: If You Build It, Ratings Will Come - Conservatives' Values


On the other hand, also according to Gallup, an increasing number of Americans consider themselves "libertarian":

Libertarian Talk Radio: If You Build It, Ratings Will Come - Libertarians In The Electorate


And, today, nearly 60% of Americans share some libertarian views:

Libertarian Talk Radio: If You Build It, Ratings Will Come - Number Of Libertarians

However, there are only a handful of libertarian hosts in terrestrial talk radio. This suggests there's a growing under-served demand.

Libertarian Talk Radio: If You Build It, Ratings Will Come - Talk Radio Ratings

Tuesday, April 23, 2013

Fed Liquidity Pumping Good For Wealthy, Bad For Rest

Seth Mason Charleston SC blog 25The premise is simple: the wealthy have a disproportionate amount of their net worth in investments, and the Fed has been propping up the stock market and inflating asset bubbles. Therefore, the price inflation-driven economic recovery has been robust for the richest 7% and weak to non-existent for everyone else. And never forget, wealth and exposure to inflation are inversely-proportional. In other words, those with less money spend a greater percentage of their incomes on essentials--food, energy, etc.--whose prices have been rising as a result of the asset bubble. From Pew Research:
During the first two years of the nation’s economic recovery, the mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4%, according to a Pew Research Center analysis of newly released Census Bureau data.

Fed Liquidity Pumping Good For Wealthy, Bad For Rest- Change In Net WorthFrom 2009 to 2011, the mean wealth of the 8 million households in the more affluent group rose to an estimated $3,173,895 from an estimated $2,476,244, while the mean wealth of the 111 million households in the less affluent group fell to an estimated $133,817 from an estimated $139,896.

These wide variances were driven by the fact that the stock and bond market rallied during the 2009 to 2011 period while the housing market remained flat.

Affluent households typically have their assets concentrated in stocks and other financial holdings, while less affluent households typically have their wealth more heavily concentrated in the value of their home.

From the end of the recession in 2009 through 2011 (the last year for which Census Bureau wealth data are available), the 8 million households in the U.S. with a net worth above $836,033 saw their aggregate wealth rise by an estimated $5.6 trillion, while the 111 million households with a net worth at or below that level saw their aggregate wealth decline by an estimated $0.6 trillion.1
Fed Liquidity Pumping Good For Wealthy, Bad For Rest - Household Net Worth
Because of these differences, wealth inequality increased during the first two years of the recovery. The upper 7% of households saw their aggregate share of the nation’s overall household wealth pie rise to 63% in 2011, up from 56% in 2009. On an individual household basis, the mean wealth of households in this more affluent group was almost 24 times that of those in the less affluent group in 2011. At the start of the recovery in 2009, that ratio had been less than 18-to-1.
(The focus in this report on the upper 7% of households rather than some other share of high wealth households reflects the limits of the tabulations published by the Census Bureau. The boundaries of its wealth categories dictated the split of households analyzed in this report.)

Overall, the wealth of America’s households rose by $5 trillion, or 14%, during this period, from $35.2 trillion in 2009 to $40.2 trillion in 2011.2 Household wealth is the sum of all assets, such as a home, car, real property, a 401(k), stocks and other financial holdings, minus the sum of all debts, such as a mortgage, car loan, credit card debt and student loans.

During the period under study, the S&P 500 rose by 34% (and has since risen by an additional 26%), while the S&P/Case-Shiller home price index fell by 5%, continuing a steep slide that began with the crash of the housing market in 2006. (Housing prices have slowly started to rebound in the past year but remain 29% below their 2006 peak.)
The different performance of financial asset and housing markets from 2009 to 2011 explains virtually all of the variances in the trajectories of wealth holdings among affluent and less affluent households during this period. Among households with net worth of $500,000 or more, 65% of their wealth comes from financial holdings, such as stocks, bonds and 401(k) accounts, and 17% comes from their home. Among households with net worth of less than $500,000, just 33% of their wealth comes from financial assets and 50% comes from their home.

Fed Liquidity Pumping Good For Wealthy, Bad For Rest - Change In Assets

The Census Bureau data also indicate that among less affluent households, fewer directly owned stocks and mutual fund shares in 2011 (13%) than in 2009 (16%), meaning a smaller share enjoyed the fruits of the stock market rally. Likewise, fewer had individual retirement accounts (IRAs) or Keogh accounts (22% in 2011 versus 24% in 2009) and the same share had 401(k) or Thrift Savings Plan accounts (39% in both years). Among affluent households, there was also a decline in the share directly owning stock and mutual fund shares during this period (59% in 2011 versus 62% in 2009), but a slight increase in the share with IRAs or Keogh accounts (70% versus 68%) and a larger increase in the share with 401(k) or Thrift Savings Plan accounts (65% versus 61%).

Overall, net worth per household in the U.S. in 2011 made up nearly all the ground it had lost since 2005—$338,950 versus $340,252 in 2005, the latest pre-recession data published by the Census Bureau. (Total household wealth doubtless rose for a period after 2005 before falling precipitously during the Great Recession of 2007-2009 and rebounding since then. However, no household wealth data are available from the Census Bureau for the years between 2005 and 2009, so it is not possible to pinpoint when, or at what level, the peak in wealth per household occurred.)

Looking at the period from 2005 to 2009, Census Bureau data show that mean net worth declined by 12% for households as a whole but remained unchanged for households with a net worth of $500,000 and over. Households in that top wealth category had a mean of $1,590,075 in wealth in 2005, $1,585,441 in 2009 and $1,920,956 in 2011.3

Seth Mason, Charleston SC

Sunday, April 21, 2013

Economy Creating Lost Generation

Seth Mason Charleston SC blog 26
I don't seek out bad economic data; bad economic data find me. I gather data from numerous reputable sources, and, sometimes, reputable sources send them to me. One of these reputable sources is John Lounsbury, Founding Partner and Managing Editor at Econintersect LLC. This morning, John sent me the following article about the lost generation that the current economic depression has been creating:
The inordinate growth of student loans – and its effect on the economy – is killing consumption (autos) and the housing sector.  This is no short term dynamic, but will effect the economy for decades.
Economy Creating Lost Generation - Consumer Credit Outstanding
The USA is a consumer driven economy.  A study released this week authored by Meta Brown and Sydnee Caldwell stated:
As a result of tighter underwriting standards, higher delinquency rates, and lower credit scores, consumers with educational debt may have more limited access to housing and auto debt and, as a result, more limited options in the housing and vehicle markets, despite their comparatively high earning potential.
Economy Creating Lost Generation - Credit Risk Scores
Both these factors—lowered expectations of future earnings and more limited access to credit—may have broad implications for the ongoing recovery of the housing and vehicle markets, and of U.S. consumer spending more generally. While highly skilled young workers have traditionally provided a vital influx of new, affluent consumers to U.S. housing and auto markets, unprecedented student debt may dampen their influence in today’s marketplace.
Some believe the lack of jobs is causing a higher than normal attendance in schools – but historical data from the BLS shows attendance appears moderating.
Economy Creating Lost Generation - College/University Attendance
And there seems little correlation between the ability of the young to get jobs and enrollment in colleges / universities.
Economy Creating Lost Generation - Labor Force Participation
The student loan growth phenomenon seems to be directly related to cost inflation of education outstripping the general rate of inflation by significant multiples.  The following table is from a study by Jordan Bowersox and Jonathan Breazeale.

Yearly Cost of Colleges / Universities

Economy Creating Lost Generation - Cost Of College
This study appears to correlate well with the associated BLS education cost index.
Economy Creating Lost Generation - Tuition Inflation
It is interesting to this author that economists talk about the economic drag by the baby boomers on the economy, but yet ignore the built in drag of higher education on the economy.  The young are historically higher consumers than the old – yet the cost of education is weakening the ability of the young to consume.
It's important to note that ever-expensive higher education not leading to good-paying jobs not only prevents younger people from contributing to the economy as consumers; it impedes their ability to achieve life milestones that contribute to the economy: getting married, having children, etc.

Seth Mason, Charleston SC

Saturday, April 20, 2013

Thursday, April 4, 2013

It's GOP Vs. America On Social Issues, War

Seth Mason Charleston SC blog 28America's economic future is uncertain. But one thing this country has going for it is its burgeoning liberty movement. A great many Americans have become weary of the nanny state and the prospect of endless war. Today, a majority of Americans support the legalization of marijuana, marriage equality, believe the war in Iraq was a mistake, and believe we shouldn't still be in Afghanistan. Most Republicans, on the other hand, are on the wrong side of each of these issues:

On the legalization of marijuana:

America:

It's GOP Vs. America On Social Issues, War - Legalization Of Marijuana Poll - America

GOP:

It's GOP Vs. America On Social Issues, War - Legalization Of Marijuana Poll - GOP

On marriage equality:

America:

It's GOP Vs. America On Social Issues, War - Gay Marriage Poll - America

GOP:

It's GOP Vs. America On Social Issues, War - Gay Marriage Poll - GOP

On war:

America on Iraq:

It's GOP Vs. America On Social Issues, War - Iraq War Poll - America

GOP on Iraq:

It's GOP Vs. America On Social Issues, War - Iraq War Poll - GOP

America vs. GOP on Afghanistan:

It's GOP Vs. America On Social Issues, War - Afghanistan War Poll - America vs. GOP

Wake up and smell the liberty, GOP. Lest you become a dinosaur party.

Seth Mason, Charleston SC

Monday, April 1, 2013

America's Economic Depression In 5 Charts

Seth Mason Charleston SC blog 29This is not what economic recovery looks like. This is, however, what an economic depression looks like:

First, the American workforce is far smaller than it was before the 2008 economic collapse, even though the number of Americans of working age has increased by several million:

America's Economic Depression In 5 Charts - Labor Force Participation Rate

 Second, the people who are lucky enough to be gainfully employed are earning less, adjusted for inflation:

America's Economic Depression In 5 Charts - Real Household Income

Third, with far fewer people employed, those who are employed earning less, and the long-term unemployed and underemployed depleting their savings, the number of Americans living in poverty continues to grow:

America's Economic Depression In 5 Charts - US Households In Poverty

Fourth, with the employed earning less, millions of unemployed and underemployed depleting their savings, and interest rates at record lows, Americans are saving less:

America's Economic Depression In 5 Charts - US Personal Savings Rate

Finally, the number of Americans dependent on the government for basic survival has grown by tens of millions:

America's Economic Depression In 5 Charts - Number Of Americans On Food Stamps

Only 2 words adequately describe the past 5 years: economic depression. 

Seth Mason, Charleston SC