Possibly good, the ever-optimistic Ed Yardeni of Yardeni Research says this morning:

I nearly fell off my chair yesterday morning at 8:30 am when I heard that the latest weekly initial unemployment claims fell below 300,000 for the first time since May. Actually, I was driving to meet with a couple of accounts in New Jersey and heard the news on Bloomberg radio. I don’t get it. Isn’t the labor market supposed to be getting weaker? That’s been the message of every labor market indicator recently with the glaring exception of jobless claims. Perhaps employers aren’t hiring, but they are resisting firing workers because they believe their businesses will be good next year. Or maybe today’s job losers--especially the ones who worked for a subprime mortgage unit on Wall Street--are too proud or too well off to bother filing for unemployment insurance. In any case, the one good thing about August’s 4,000 drop in payroll employment is that any increase above zero would likely be a big positive surprise. Just imagine the reaction if September’s number, which will be released on October 5, is up by let’s say just 50,000. The newspaper headlines would probably hail that the labor market remains surprisingly resilient. There might be dancing in the streets--both Main and Wall--because the economy may not be heading toward a recession, notwithstanding the predictions of Alan Greenspan, Richard Syron (Freddie Mac's CEO), and other gloomy oracles.

Not as good as you think, Merrill Lynch's sober David Rosenberg said yesterday:

Falling jobless claims does not equal labor market strength. No doubt that initial jobless claims surprised to the low side today - dropping 15,000 to 298,000 in the September 22nd week while the consensus was looking for a 316,000 print. This latest data point also dragged the 4-week moving average down to 312k from 321k and the lowest since 4 August 2007. This in turn has prompted comments in some circles that the labor market is actually stronger than the recent nonfarm payroll survey indicated (-4,000 in August). We disagree.

Aggressive seasonal factors yielded sharp drop in claims First, as our bond desk rates strategist John Herrmann pointed out earlier, the previous four years of extremely heavy hurricane activity caused the seasonal adjustment factors for initial claims to be "higher" than they would otherwise be during a period of benign weather patterns as is the case this year. So the seasonal factors were looking for a bump-up in the raw claims data (i.e. the seasonal factors would have attempted to lean against what was supposed to be a sharp rise in the seasonally unadjusted numbers), but that weather-induced runup didn't happen this year. So much of the surprise drop in claims owed to aggressive seasonal factors, not to any incipient strength in the labor market.

Initial jobless claims tell you only about layoffs Even if the claims data had done what the consensus had expected, they still would have been quite low at less than 320,000. In fact, even as job market conditions have slowed in the past year, the claims data have been quite benign. This then begs the question - why are claims so low? Well, initial jobless claims only tell you about layoffs - these are the folks heading to the unemployment insurance line.

Employment changes are about hirings and firings Employment changes are determined not only by the number of firings in any given month but also by the number of new hires. And the jobless claims data do not capture new hirings - and that is why there has been a disconnect between this data series and the official employment surveys. The firing rate is indeed low, but the hiring rate is also is low (in other words, labor market turnover has receded sharply in the past year) - and the latter is actually slowing down faster than the former which is why the NET job creation figures are so anemic.

Posted by Jay Hancock at 11:37 AM | Permalink | Comments (0)
        

With my permission. They picked me to be a guinea pig in a trial program of programmable, Internet-accessible thermostats. I assume I was picked at random but maybe not. The cool thing for the consumer is that you can set the new thermostat from the Internet. The key from BGE's point of view was a feature allowing the company to shut off my air conditioner for a few minutes at a time on very hot days requiring high kilowatt demand. I think they picked like 1,000 households for the pilot program. BGE guys came to the house, removed the old thermostat and installed this one, which I believe is made by Comverge. The setup is similar to a shutoff box that BGE has placed on people's air conditioner compressors for years. But in this case it's Internet based, and the company was shutting the AC on and off pretty frequently.

Not that I noticed. Yesterday I got the results for the summer. They shut the AC off eight times -- four times in June, once in July and three times in August. They didn't say how many minutes my unit was off each time, but nobody in my family could tell the difference. This is a taste of what the future of home electricity will look like. Eventually our meters themselves will be Internet-based and will be tied into all sorts of cool information from the grid involving how much kilowatts are costing at any given minute. You'll be able to program your AC yourself to shut down if kilowatts get too expensive on high-use days, which will save you money and reduce the need to build new, ugly, expensive, polluting generators.

Posted by Jay Hancock at 9:56 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

A paper co-authored by a Penn State professor suggests that critical news coverage of poorly run companies spurs them to to try to improve, which leads to actual improvement. Works for politics, too! From the Penn State press release:

UNIVERSITY PARK, PA (September 27, 2007) – Media coverage of the ineffectiveness of corporate boards of directors forces those boards to take corrective actions and increases shareholder profits in the months after the negative publicity, according to new research co-authored by a professor at Penn State's Smeal College of Business.

In a new paper forthcoming in the Journal of Financial and Quantitative Analysis, Henock Louis, associate professor of accounting at Smeal, and his co-authors look at the impact of the media on managers' and investors' behavior by examining how media exposure of board ineffectiveness affects corporate governance, investor trading behavior, and security prices.

Their study is based on BusinessWeek's past publications of the worst boards of directors.

The authors find that, among the 50 unique firms that appeared on the magazine's worst board lists in 1996, 1997, and 2000, 34 (or 68 percent) took observable steps to improve their governance structures.

Of those 34, 82 percent replaced their chief executive officer, president, or board members, 18 percent increased the number of outside board members, and 12 percent instituted some broad corporate governance changes. Firms that appeared on the worst board lists significantly increased the number of outside directors and were significantly more likely to abandon their staggered board structures after the negative public exposure.

Managers are not the only ones to react to the media publicity, however. Shareholders also take some action, ultimately causing the stock price to rise in the wake of the negative media coverage.

The authors find that individual investors tended to overreact and sell, or at least stop buying, shares of the companies whose boards were called out by BusinessWeek. This activity puts downward price pressure on the stocks, which is quickly countered by trading activity by institutional investors.

These savvier investors, who perhaps already know about the ineffectiveness of various boards prior to the publicity generated by the magazine, buy up the worst-board firms, leading to a price reversal and a profit for shareholders in the months following the list's publication.

"The worst-board firms experience very strong stock performance in the week after and over the four months subsequent to the BusinessWeek publication," Louis and his co-authors write. They suspect that this is because these savvier investors may anticipate that the negative publicity will spur the worst-board firms to take some corrective actions.

Ultimately, they conclude "that media releases of (noisy) information affect the behavior of market participants and that exposing board ineffectiveness forces targeted firms to take corrective actions and enhances shareholder wealth."

"Managers' and Investors' Responses to Media Exposure of Board Ineffectiveness" is co-authored by Louis, Jennifer Joe of Georgia State University, and Dahlia Robinson of Arizona State University.

Posted by Jay Hancock at 1:04 PM | Permalink | Comments (0)
        

UCLA's Edward Leamer presented a bracing paper at the Federal Reserve's annual conference in Jackson Hole, Wyoming, a few weeks ago. The money paragraph:

Only twice have we had this kind of housing collapse without a recession, in 1951 and in 1967, and both times the Department of Defense came to the rescue, because of the Korean War and the Vietnam war. We don't want that kind of rescue this time, do we?

Leamer is saying that housing crunches would have produced recessions in 1951 and 1967 had federal war spending not stimulated the economy and compensated for housing weakness. Recessions, of course are protracted periods (usually at least six months) of shrinking economic output and employment, which are bad all around for the country. Unemployment goes up, tax revenue goes down and people suffer.

A year ago (Aug. 20, 2006) I wrote a "why there won't be a recession" column. Among the reasons I gave:

-- History is strewn with many more recession warnings than recessions.

-- The housing bubble is not the same as the tech-stock bubble.if the nation could survive terrorist attacks and the evaporation of $7 trillion in 1990s stock wealth with only a mild recession in 2001, surely it can get past an orderly softening in home prices without any recession.

-- Consumers, though stretched, are better off than you think. The scary charts of ballooning personal debt neglect to show that interest rates on the debt are lower than they have been in decades. Household debt service - monthly interest and principal payments - has risen much more slowly.

-- Technology efficiencies make recessions less likely. A traditional recession trigger was the inventory glut, which occurred when factory managers overestimated demand. By the time they realized customers weren't buying, they had to lay off employees to work down excess stocks, which converted what might have been a mild slowdown into something worse. Now everything is linked by computers. The cash register at Home Depot talks to the Black & Decker factory, meaning manufacturers can tune production with consumer needs without traumatic jolts. At the same time, service businesses make up a bigger piece of the economy than ever, which also reduces the odds of overproduction. It's hard to have an inventory glut of haircuts.

This is a big reason that the country has had only two recessions since 1982.

-- Banks are fine. Another recession trigger is the credit drought, when bank balance sheets deteriorate, regulators get goosey and loans are hard to get at any rate. A credit drought helped produce the recession of 1990, but there is no sign of one now.

-- Long-term interest rates are still low. According to Bankrate.com, you can get a 30-year mortgage for 6.1 percent. That's only about a percentage point higher than when rates reached their lows in 2003.

-- The world economy is healthier than it has been in years. I'm not sure I agree with Morgan Stanley economist Richard Berner, who wrote last week that global growth could "sustainably boost U.S. net exports for the first time in two decades" and spur a comeback in business investment. But it should bolster exports somewhat and diminish odds of a downturn.

I'm sticking to the "slowdown but no recession" prediction, but more out of stubbornness than conviction. The odds of recession have gone up a lot. The expanding global economy, low interest rates and technology-fine tuning are still working against recession. But there is a credit drought -- not in banks but in the bond and secondary loan market. The consumer is a question mark. And in many parts of the country what's going on in real estate is not "an orderly softening of housing prices."

Posted by Jay Hancock at 9:34 AM | Permalink | Comments (0)
        

When the Greater Baltimore Committee, one of the state's top business groups, calls for a 10-cent increase in the gas tax, you can believe there is political will to get it done. (A few weeks ago I called the GBC "liberal" in a column -- which they objected to. Does their support for a gas-tax increase make them liberal or conservative? Or just sensible? You decide.) The GBC should get kudos for backing a the gas-tax hike, which other business interests will object to. We need the money for transportation. A gas tax is a fair user fee on people who consume highway services, emit pollution etc., and to the extent that it reduces demand, that's a good thing. It will also potentially generate money for badly needed mass transit.

 At the same time, Gov. O'Malley's proposed income-tax increases on high-income households are high enough to spur businesses and well-off families to move to other states. O'Malley's top bracket for the state income tax would be 6.5 percent. Add to this the 3.2 percent "piggyback" tax levied by Maryland's most expensive counties and you get a top marginal rate of 9.7 percent -- higher than in any state except California (10.3 percent rate for every dollar earned over $1 million) and Rhode Island (9.9 percent rate for every dollar earned over $336,550.) Maryland is a small place. Other states with much lower taxes are nearby. Virginia's top marginal rate is only 5.75 percent; West Virginia's is 6.5 percent; and Pennsylvania's is 3.07 percent. Many small businesses are taxed at personal rates, and many businesses large and small are located based on where the CEO wants to live. A better design for the impending tax increases would include a lower tax increase for high earners (make the top state rate 6 percent, not 6.5 percent, and maybe raise the level where it kicks in to $750,000 or $1 million) and a higher gas tax than what O'Malley has proposed.

PS. One thing I forgot to mention: The impact of O'Malley's proposal on high-income households may be higher than immediately meets the eye. Higher state taxes -- and higher state-tax deductions -- will push some households into Alternative Minimum Tax territory, which will increase their federal tax liability as well. increase federal tax liability for households already subject to the Alternative Minimum Tax.

Posted by Jay Hancock at 9:26 AM | Permalink | Comments (29)
        

Reuters quotes Barron's quoting analyst Ben Silver.

NEW YORK, Sept 23 (Reuters) - Mortgage and vehicle fleet company PHH Corp (PHH.N: Quote, Profile, Research) should be a good buy if its troubled buyout goes through, after its shares slid amid concerns about financing, Barron's said in its Sept. 24 edition.

Last week PHH, which agreed in March to be acquired by General Electric Co (GE.N: Quote, Profile, Research) and Blackstone Group LP (BX.N: Quote, Profile, Research) for $1.8 billion, said its takeover could collapse because Blackstone faces a shortfall of up to $750 million in debt financing.

PHH's leasing business is worth about $20 per PHH share, or 14 to 15 times estimated 2007 cash earnings, and the mortgage business has a tangible book value about $19 a share, Ben Silver, a portfolio manager at Pzena Investment Management, told Barron's.

Silver told Barron's PHH is worth at least the buyout price. PHH shareholders are due to receive a total of $31.50 a share, according to the financial newspaper.

Shares of PHH closed on Friday at $24.39, down 2.6 percent, on the New York Stock Exchange.

Posted by Jay Hancock at 12:14 PM | Permalink | Comments (0)
        

From my colleague Eileen Ambrose. This got left out of tax stories we ran over the weekend.

O'Malley's tax plan introduces a marriage penalty that wasn't there in the past, says Andrew Bareham, a certified public accountant with Gross Mendelsohn in Baltimore. That's because the income limits for married couples in the proposed tax table aren't simply double what they are for singles. Singles with taxable income of $2,000 to $15,000 would be taxed at a rate of 4 percent, while for couples the income limit is $4,000 to $22,500, not $30,000. So, a married couple with $150,000 in income would pay a little more in tax than two singles living together who each make $75,000, Bareham says.

Here's Eileen's column on taxes from yesterday.

Posted by Jay Hancock at 11:02 AM | Permalink | Comments (0)
        

If you're thinking about signing with an alternative natural gas company to BGE, don't. As usual, the best choice seems to be to do nothing and stick with BGE's default service, in which the natural-gas price varies with the market from month to month. All the contracts I've been able to find that let you lock in a winter price seem too expensive. Washington Gas Energy Services will charge you a fixed-price of $0.999 per therm for 12 months or $1.02 per therm for 24 months. MXEnergy charges $0.963 per therm for 12 months. Novec Energy Solutions is offering $1.10 per therm for 12 months.

"A fixed gas price for 1 year eliminates the surprise of rising gas costs by providing guaranteed price protection," says WGES. Yeah, and it also eliminates the probabilty that you'll save money when spot nat-gas prices dip under the WGES price.

Check out the price history posted by BGE. You'll see that in the last year BGE's floating prices ranged from 60.4 cents per therm in October 2006 to $1.04 per therm in January 2007. True, two years ago, after Hurricane Katrina, they spiked -- to $1.63 that November and then to around $1.25 for December and January. But the most recent price is 71.59 cents per therm for this month, which is the lowest September price since 2004.

Natural-gas futures prices for this winter are a bit lower now than they were last September for last winter. That suggests that upcoming spot prices won't be much different from last winter. The Energy Department says East-Coast natural-gas stores are still near historical highs, which also portends moderate prices. My rosy little scenario would be upset, however, by a very cold winter, which would drive up nat-gas demand and price. A warm December and January helped keep last winter's gas price down. It would also be upset by a Hurricane Katrina repeat that disrupts Gulf-Coast pipelines, but it's getting late in the year for that.

Posted by Jay Hancock at 10:00 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

He wouldn't just raise rates on the corporate income tax. He announced today that he would ask the legislature to approve a "combined reporting" law that reduces corporations' ability to shift costs and profits across state borders to reduce taxes. The best-known recent example is Wal-Mart. The giant retailer transfers title to its stores to an affiliate in Delaware or some other outside state. Then it pays "rent" to the affiliate landlord, which it deducts from its Maryland income. Which reduces its Maryland income tax. Another well-known example is Toys R Us. The chain transferred trademarks and other intellectual property out of state, then paid "royalties" to the affiliate, which reduced in-state income.

Requiring combined reporting is a no-brainer. More than a dozen states already do. It should have been first on any governor's "to do" list of tax updates. Out-of-state tax shelters circumvent the intent of the law, and they're unfair to smaller Maryland businesses that don't have out-of-state affiliates and can't shelter income.

Here's a good description of combined reporting from Geller & Co., a New York tax firm. New York Gov. Eliot Spitzer has pushed for combined reporting in that state.

Under combined reporting, a corporate family files a single tax return covering income from all subsidiaries. The income gets apportioned among the states based on the locations of all property, payroll and sales, thereby ending income-shifting between subsidiaries. With combined reporting, corporations cannot structure transactions, such as transferring royalty and dividend income and interest expenses, between affiliates in various states to avoid tax. Combined reporting would also level the playing field for small- and medium-sized businesses operating only [in-state] that shoulder a proportionately higher share of corporate taxes because they lack the opportunity to shift income to other jurisdictions.

Posted by Jay Hancock at 12:42 PM | Permalink | Comments (6)
        

Forbes published its annual list. Bill Gates and Warren Buffett are on top, as usual. Here are the Marylanders:

165. Ted Lerner, real estate tycoon and Washington Nationals owner. $2.5 billion.
165. (Tied). David Rubenstein, co-founder of the Carlyle Group buyout firm and Baltimore City College grad. $2.5 billion.
204. Bill Marriott, hotel tycoon. $2.2 billion.
220. Richard Marriott, hotel tycoon. $2.1 billion.
297. Bernard Saul II, Chevy Chase Bank founder, real estate investor. $1.6 billion.
380. Steve Bisciotti. Outsourcing magnate, Baltimore Ravens owner. $1.3 billion.

Posted by Jay Hancock at 11:37 AM | Permalink | Comments (1)
        

I've never seen anything like this.

U.S.-based toy giant Mattel Inc. issued an extraordinary apology to China on Friday over the recall of Chinese-made toys, taking the blame for design flaws and saying it had recalled more lead-tainted toys than justified.

The gesture by Thomas A. Debrowski, Mattel's executive vice president for worldwide operations, came in a meeting with Chinese product safety chief Li Changjiang, at which Li upbraided the company for maintaining weak safety controls.

"Our reputation has been damaged lately by these recalls," Debrowski told Li in a meeting at Li's office at which reporters were allowed to be present.

"And Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the toys," Debrowski said.

The carefully worded apology, delivered with company lawyers present, underscores China's central role in Mattel's business. The world's largest toy maker has been in China for 25 years and about 65 percent of its products are made in China.

The fence-mending call came ahead of an expected visit to China by Mattel's chairman and chief executive, Robert A. Eckert. Following the massive recall, Eckert told U.S. lawmakers he wanted to see Mattel's mainland inspections first hand.

Mattel seems more worried about having offended Chinese politicians than about having offended people potentially harmed by its products. Can you imagine Mattel or anybody else apologizing to the United States for recalling defective products made here? It reminds me of the non-apology apology made by Washington six years ago after an American spy plane made an emergency landing in Chinese territory. A Chinese fighter had flown too close and bumped into the Americans outside Chinese airspace, and China demanded an expression of regret before releasing the U.S. crew. I wonder how much the U.S. State Department was involved in the Mattel business.

Posted by Jay Hancock at 10:07 AM | Permalink | Comments (0)
        

More excerpts from emails & the comments section of yesterday's column:

-- I read your column all the time and really like it, but I thought you gave O'Malley a free pass today. I understand that some taxes may have to increase to cover the budget deficit, but don't you think it would be a good idea for the Governor and General Assembly to look at cutting spending in conjunction with a tax increase? I just wanted you to know what one of your readers is thinking.

-- I wanted to point out a few problems with your editorial in with Mr. O'Malley's plan. Number 1 is that his plan is merely a short-term fix. To fund the $1.5 billion (or $2 billion they now exclaim) you can't rely on a one-time auctioning of slots licenses which is estimated to bring in between $400-600 million, but that is a big part of O'Malley's plan. Do the math:

Sales tax increase: ~$750 million (*note that this number was derived from projects made before the 2% loss in sales tax revenue from last year...should be more like $730 million)
Titling Fees: $170 million (going strictly to the transportation trust fund)
Corporate Taxes: At most we're talking $60million of which they want to split it between the general fund and transportation trust fund.
Service Sales Tax: They keep downplaying this as modest so fair assumption is $100 million.
Income Tax Increases: This is the big question mark
Slots: $400-800 million, but we know O'Malley won't go with Miller's plan so $600 million at best with a one time option.

Towards the General Fund then we have just shy of $1.5 billion assuming the one-time slots auction at $600 million. Now remember our goal is $2 billion and not $1.5 billion meaning we need to raise an additional $500 million from the income tax (hardly doable with the numbers they're discussing). To compound matters is discussion of a property tax cut of .03cents and an increase to the EIC. Property taxes net about $618 million (transfers which arent included in MOM plan, about another 185) so a 27% cut to the $618 million is $166 million less in the budget. Now you're down back to $1.3 billion. I assume MOM will not fund GCEI so that'll shave off $100 million bringing his plan with property tax cut to within $100 million of $1.5 billion and still shy of including EIC #s.

So you raise the cigarette tax... except doing so actually eventually turns a negative impact and they're counting it as a steady revenue stream.Do the math. It's a one-time fix that can't hold up. What's worse is that they're proposing new spending to go with these new measures?
I wholely disagreed with your assessment and find it sad that you're actually agreeing with MOM when YOU HAVEN'T EVEN SEEN HIS NUMBERS!

-- I just received the largest BGE bill in my life. The brain dead democratic general assembly screwed the taxpayers back in 1999 and when we start to pay for their idiocy, the boy mayor wants to increase taxes.

Oh yea, 83% of Marylanders will not be affected! A number brought to us by the guy who believes there was a 40% decrease in crime in Baltimore. The one, on his watch, where $50 million + from the city school system just disappeared. He must believe that all Marylanders "graduated" from Baltimore city schools to believe the 83% lie.

Oh well, the citizens of this state are getting what the wanted... Disgusting

-- I work hard. Every year I get a modest increase in my salary. And every year that extra money is sucked away from me and my family. It's just not fair! I'm tired of being the cash cow for the state. O'Malley - don't you DARE take any more money from my family. Cut services and social programs to get the money you claim you need, and for God's sake STOP adding more services and social programs. Not a single one benefits my family. BGE increase, gasoline prices, phony increased assessment of my home's value, sewer tax, ungodly increase in vehicle registration fees, and now all this that O'Malley proposes? This is robbery. Time for a violent backlash!!

Posted by Jay Hancock at 11:21 AM | Permalink | Comments (22)
        

A selection from my emails & the comments section of yesterday's column:

-- You sir have no clue. Another democratic pawn heard from. Pass this on to your editors; "articles" like this is why I cancelled my Sunpapers'
subscription. Yea, no bias here! Pathetic. Now tell me, did you really pen this or was it sent down the pipeline from Annapolis?

-- I read your columns regularly and they are very helpful. I guess coming out of the gate with this one, I bristle with the first paragraph: 'If it's necessary....." I could be more informed, I understand, but it is the 'necessary' part that I struggle with. Why can't a state and Governor run like your house and mine? You make $100,000 and you budget $100,000 and that is it - spend what you make? Budgeting 101?

You get what you vote for in this world and the people of Maryland should be smiling as O'Malley and his democratic cronies stick it to us at the General Assembly this year - we knew this was coming with all sorts of slick marketing and packaging. I simply don't have any more to give - property tax's, fees, service charges - my cable keeps climbing, BGE - the list is simply exhausting. I guess I get tired of subsidizing everything - that is probably at the heart of concern.

If I see a need and want to help someone, I would like to have a few dollars of disposable income to do so - but with tax's hitting me again higher and higher, well, I become crippled to make decisions to help those whom I choose to help.You probably didn't want to hear all of this today, but I just wanted share a concern over what 'necessary' was all about.....

-- I still feel that more cuts should have been looked at and acted upon first.

-- So if he raises the sales tax how will 83 percent of us be paying less taxes? More like 100 percent will be paying more taxes. I guess thats some of that tax and spend liberal math I didn't have in school. I didn't vote for him, you that did enjoy your "tax break".

-- Do you get paid directly by the O'Malley administration, or is the money "laundered-under the table"?

-- Ehrlich ran on cutting the budget, then turned around and raised fees and tolls to balance the budget. So, it seems there might not be as much waste as you think? OR, maybe we should cut funding to pregnant mothers again...that worked well for Ehrlich. Maybe we should cut healthcare funding to kids and seniors, that way you won't have to pay a penny more for a cheeseburger from McDonalds. Marykland is a great State because fo the taxes we pay. If you don't like it, move to San Fransisco.

-- I noticed that delaware's sales tax was not posted.. And that " an extra penny" that nobody will notice will come as a complete surprise when buying that new car.
Please let us know how much of these increases are to pay for (new) programs.

-- of course it's "realistic." any tax is "realistic" when people have to pay it or they get thrown in jail.
politicians are the worst of humankind... at least a common thief runs away after he's stolen from me... he doesn't come back over and over again, stealing more and more each time, and constantly trying to convince me that it's for my own good and that i should actually be thankful because he takes more from people in other neighborhoods.
if king o'malley wants more tribute, then he should go around the state begging his 'employers.' at the very least he would get his first honest work experience.

-- here we go! Next this idiot will tax golf balls! Hold on to your wallets - The Sun endorsed this charlatan. Here is a unique idea for the Sun and idiots like O'Malley - CUT SPENDING!

-- Jay you sure are willig to pay more taxes. I'm not and PA is looking closer and closer to work. Cut spending further, user fees are fine, cigarette tax fine, gasoline tax fine, but increasing aregressive sales tax and an income tax increase is a bit much.

-- Be prepared for some kind of shenanigan. Governor O'Malley is above all else a politician. He always has his sights on the next higher office. He knows if this plan is implemented as is, he will always be associated with tax increases and would thereby be unelectable as President or Vice President. My guess is that he will feign a compromise and drop the sales tax increase, but still increase income tax and fees. Slots will be his bargaining chip.

-- Anyone who didn't think O'Malley would raise taxes must have just crawled out from under a rock. But raising taxes will hurt MD's economy in more ways than not. Most unfair is the wage earners over $150M or even $200M that will pay higher taxes. Why are these people being penalized for being successful?

Posted by Jay Hancock at 9:56 AM | Permalink | Comments (3)
        

O'Malley's office put out a press release. From two personal-income brackets they want to go to six. Most income will still get taxed at 4.75 percent -- the present rate for everything north of $3,000. For married couples, every dollar earned after $200,000 would be taxed at 6 percent; and every dollar earned after $500,000 would be taxed at 6.5 percent. In the lower brackets (again for couples filing jointly), income from$ 0 to $2,000 would be taxed at 2 percent; $2,000 to $4,000, 3 percent; $4,000 to $22,500, 4 percent.

If enacted, the plan would effectively make Maryland's highest marginal income-tax rate 9.7 percent, when you count the "piggyback" income tax charged by counties. That's quite high -- higher than in every state but Rhode Island and California.

Posted by Jay Hancock at 5:43 PM | Permalink | Comments (6)
        

If more companies do what Hovanian Enterprises did over the weekend, the housing slump would end much more quickly. The company threw a huge sale, cutting prices by as much as 20 percent. From Barry Ritholtz:

[Hovanian] did more than 2100 sales in 3 days, versus 2539 sales in the entire third quarter. That's ~83% of the prior three months of building and selling in just 3 days.

Gee, do you think their homes were previously over-priced? Maybe just a little? Kudos to HOV for finally figuring this out.

There is a lesson in this for Real Estate Agents, home owners, and anyone else who wants/needs to sell their homes: price them realistically, and you can sell them.

It has been more than two years since prices and sales volumes peaked (August 2005), and amazingly, many people are discovering this only now . . .

Posted by Jay Hancock at 12:07 PM | Permalink | Comments (1)
        

Robert Shiller, who wrote the prescient Irrational Exuberance about the stock market bubble, has been predicting similar things for housing for a long time.Today before Congress he said that declining home prices will cause new financial crises and that this housing downturn could be the worst since the Great Depression. That last part is hyperbole. It will almost certainly get worse. But it won't be nearly as bad as in the Depression, or even as in the early 1980s, when mortgage rates hit 17 percent or so and the home market froze solid. Well-qualified borrowers can still get fixed-rate mortgages for 6 percent. At some point, as prices come down (and rates should fall further, too), they'll be buying houses. This home slump will be worse than the one in 1990, not as bad as 1980 and not nearly as bad as 1930.

Posted by Jay Hancock at 11:32 AM | Permalink | Comments (2)
        

Neil Bernstein, past president of the Baltimore City College Alumni Association, calls to say that BCC has inducted yet another impressive name into its Hall of Fame. Economist Robert Hormats is vice chairman of Goldman Sachs International and a former assistant secretary of state and deputy U.S. trade represenative. Hormats, class of 1961, gets his name on a bronze plaque along with an incredibly illustrious list of other inductees from City, which calls itself the third-oldest continuously operating public high school in the country.

BCC Hall of Famers include Carlyle Group co-founder David Rubenstein, McCormick spice's Charles McCormick, one time Mercantile Bank chief John Motz (father of Judge Frederick Motz), Sen. Ben Cardin, former Baltimore Mayor Kurt Schmoke, Rep. Dutch Ruppersberger, former Gov. William Donald Schaefer, former Gov. Marvin Mandel, onetime Baltimore Colts owner Caroll Rosenbloom and so on.

Posted by Jay Hancock at 10:47 AM | Permalink | Comments (0)
        

Hong Kong stocks and India stocks rose 4 percent today in response to the Fed's half-percent rate cut yesterday. That's quite a pop -- the equal of 550 on the Dow. Japanese stocks rose almost as much. The consensus on Wall Street seems to be that the prospects for international stocks are better than for U.S. stocks. The world has been experiencing perhaps its biggest-ever spurt of economic growth. Unlike in previous decades, developing economies have current-account surpluses and gobs of foreign exchange reserves, which provide defense against the kind of currency collapses we saw in the 1990s. If the United States avoids a recession and continues buying foreign goods at a brisk pace, the global boom has a better chance of continuing.

Posted by Jay Hancock at 9:23 AM | Permalink | Comments (0)
        

This morning The Sun's Andy Green has got some of the details of Gov. Martin O'Malley's tax package. He's posted a story on the Web. The highlights so far: a 1-cent sales-tax increase; a 1 percentage-point increase in the corporate income tax; and a $1 per pack cigarette-tax increase. Also, of course, O'Malley will ask for approval of slot machines, which will raise additional revenue. Notable for its absence: a gas-tax increase. In today's paper, Green said there were plans to raise the personal income-tax rate on high-earners. No word of that in this morning's update.

If we assume revenue must be raised -- a big assumption, true -- this is not a bad way to do it. Progressives will complain that a sales-tax increase is regressive (disproportionately hurts low- and moderate-income residents). But in real life few people notice a one-percent difference in the retail price of anything. Heck, that's 4 months of inflation. At 7 percent, Maryland's corporate income tax rate is not especially high. (In Massachusetts the rate is 9.5 percent. In New Jersey it's 9 percent for income over 100K. In Pennsylvania it's 10 percent. In Virginia it's 6 percent.) As a group, Maryland businesses pay a small share in taxes compared with businesses in other states.

The tobacco tax is problematic: Thousands of low-income folks will be forced to pay more for their habit or resort to the black market. Yes, I know the CDC and others show that high tobacco taxes reduce tobacco use. Yes, I know the money will go to expand Medicaid. But tobacco is highly addictive, and there are thousands of people who can't quit no matter what the disincentives. This will be tough on them.

More on this in tomorrow's column. I'll try to find out whether there is any proposal to change Maryland's personal-income tax rates, which are still pretty high despite that fact that they were cut slightly amid much wrangling and effort a decade ago. So far it looks like the only tinkering will be done with the highest income brackets, if that. This seems a wise choice. Maryland's income-tax rates are not competitive with those of its neighbors, and a substantial increase would have been a disincentive to move here and start businesses here. (Most small businesses pay income-tax at the personal rate, not the corporate rate, because they are organized under Subchapter S of the Internal Revenue Code.)

Posted by Jay Hancock at 10:55 AM | Permalink | Comments (2)
        

A number of readers have asked how to cut their BGE bill by buying from an alternative electricity vendor. Last year half a dozen suppliers were selling juice for $10 -- $15 a month less than BGE's standard product. After hurricane season passed last year without a repeat of Hurricane Katrina, energy prices dropped, alternative suppliers passed on the lower prices and households saved a little money.

Not this year. Yes, a relatively benign hurricane season has again led to a drop in natural-gas and electricity prices. (Electricity cost is affected by natural-gas cost because of all the generation plants that burn natural gas.) What's different this year is that the alternative suppliers aren't buying up juice and offering to resell it for less than what BGE charges. Several firms are still selling to BGE customers, but their prices aren't competitive. Everybody's at least half-a-cent per kilowatt hour above BGE's standard price. Even the variable plans, which swing from month to month, are higher than BGE. Maryland's Office of People's Counsel has a nice summary of all the deals in its Web site. A couple companies have implied to me that they're going to cut prices, but it hasn't happened yet. A big reason, I believe, is that they think deregulation will be reversed in Maryland.

If you're interested in wind-powered electricity, it's worth investigating alternatives. BGE doesn't offer a wind option. Washington Gas Energy Services sells wind electricity for 14.2 cents per kilowatt hour. Commerce Energy sells wind for 13.4 cents.

Posted by Jay Hancock at 9:00 AM | Permalink | Comments (2)
        

This won't have much effect on Maryland's debate over adding slots to racetracks or elsewhere. But it over the long term it will probably increase the pressure on Maryland to increase legalized gambling. Deval Patrick is expected today to announce his support for three Massachusetts casinos to help the state out of a budget bind. Interestingly, he will reportedly oppose tracks-based slots. Massachusetts had considered (non-Native American) casinos before, but it looks like this time they'll have a good chance of being approved.

The state-by-state casino debate resembles the agonizing over lotteries in the 1980s. At first lotteries tended to be in relatively liberal states such as New York, New Jersey and Maryland. (New Hampshire's was the first modern state lottery, begun in 1964.) But little by little, budget crisis by budget crisis, states found them to be politically easy ways to raise revenue. Now even Bible Belt states sponsor lotteries. South Carolina's appeared in the late 1990s; Tennessee's, in 2003. Is it a good thing for government to encourage citizens to spend money in such stupid ways? No, but we opened that door and walked through it a long time ago.

Posted by Jay Hancock at 11:26 AM | Permalink | Comments (0)
        

Luxury homebuilder Hovnanian Enterprises reportedly offered up to 20 percent off on thousands of homes over the weekend to get properties off its inventory account. "The Deal of the Century," the company called it. This is smart and will ultimately be good for the company and the economy. It's much better for economic agents of all sizes to deal with pain quickly and move on. With a huge supply of unsold homes and falling demand among buyers, the market clearing price is obviously far lower than what homes were selling for a few months ago. Hovnanian is merely recognizing reality more quickly than some of its competitors. The company says the promotion was a big success but won't report how many contracts were signed until tomorrow.

Posted by Jay Hancock at 10:19 AM | Permalink | Comments (1)
        

Nor am I a fascist. I took the online Political Compass test. You answer a bunch of questions about economics, labor, abortion, religion, crime etc. Then the test turns you into a point on a graph that plots social authoritarianism-libertarianism on the vertical scale and more- traditional left-right sentiment in the horizontal. My score is below: exactly in the center, with libertarian leanings. How utterly boring. However, I'm happy to be on the opposite side of the X axis from Hitler and Stalin.

Posted by Jay Hancock at 9:03 AM | Permalink | Comments (0)
        

Harvard's Greg Mankiw, once chairman of President Bush's Council of Economic Advisers, notes that the Fed funds rate -- the Federal Reserve's most important interest rate -- was well below its stated target last month. The conclusion: the Fed has already cut interest rates; it just hasn't admitted it. I blogged about this two weeks ago.

Posted by Jay Hancock at 11:23 AM | Permalink | Comments (0)
        

More candy from the the latest update of the Census Bureau's American Community Survey, which came out this week.

-- Of the wealthy, non-farming states, Maryland is No. 1 in the percentage of households with children under 6 years old and where both parents work or want to work: 67 percent. Maryland is outranked by Midwest states such as Minnesota, North Dakota, Iowa etc. But in those states both spouses are likely to work on a farm, which means working in or near home. In Maryland being in the workforce often means commuting for 45 minutes each way to Washington or Baltimore, which is a lot more stressful when you've got a toddler. That means daycare, and that means raising the demand and decreasing the supply of daycare workers. Utah and West Virginia are the lowest-ranking states in this category.

-- Maryland ranks 43rd in the nation in the percentage of residents who work for banks, construction firms, stores, distributors and other private companies. (73 percent. Indiana and Nevada are tops at 83 percent.) The reason: The huge government presence and government employment here. This actually understates Maryland's dependence on government. Hundreds of thousands of Marylanders work for private companies who live off government contracts.

-- Of Rust Belt states (those that were well-industrialized in 1950), Maryland has the least amount of manufacturing jobs now. Only 5.4 percent of Maryland civilians work in manufacuturing. This is higher than in states such as Montana, Wyoming, Nevada and Alaska, but they never had much manufacturing to begin with. Maryland did. Indiana has the highest portion of people working in manufacturing: 21 percent.

-- Maryland is tied for 12th-best in the country for having a low poverty level among its elderly. The level is 8.2 percent.

-- Maryland ranks pretty low in the percentage of elderly residents. 22 percent of its households include somebody 65 or over -- 38th in the nation. Blame Maryland's high income tax, which compels retirees to bug out for Florida. Florida (no income tax!) is tops, with 29.4 percent of its households including somebody 65 or older. Alaska is last, with 13 percent. Colorado and Utah are next lowest, with 18 percent.

Posted by Jay Hancock at 10:02 AM | Permalink | Comments (0)
        

August retail sales rose by not much more than the inflation rate. Car sales, however, popped 2.8 percent -- the biggest increase in a year, thanks to end-of-the-model-year discounting. Overall though, the report was pretty weak. Wall Street had expected retail sales to increase 0.5 percent or 0.6 percent for the important back-to-school month of August. Instead they rose by 0.3 percent. It's another reason for the Fed to cut interest rates next week. At 9:50 this morning the Dow is down 70.

Posted by Jay Hancock at 9:33 AM | Permalink | Comments (0)
        

I hope he knows what he's doing! Miller has already gotten burned by the housing slump. He bought housing stocks a year ago, thinking that was the bottom. It wasn't, by a long shot. Now he's adding to his stake, adding another 4.6 million Countrywide shares to the 53 million he already owns, even as other shareholders bail out. Countrywide, of course, is the mortgage company that is reportedly working on its second infusion of emergency capital. Since June, Miller & Legg Mason have bought 9 million Countrywide shares. Since February Countrywide stock has plunged from $45 to $16.

Baltimore, in fact, has swallowed a huge chunk of Countrywide. With 10 percent of the stock, Legg Mason is the company's biggest shareholder. And mutual fund house T. Rowe Price owns another 3 percent. In the last housing slump, in 1990 - 1993, Countrywide stock fell by half and then made up the loss and soared to the moon before the slowdown had really gotten serious. Looks like it'll be different this time.

CORRECTION: I wrote this post yesterday. Since then, Countrywide has lined up the new bailout, and the stock is up a buck this morning to $17 and change.

Posted by Jay Hancock at 10:45 AM | Permalink | Comments (1)
        

The Maryland Association of Mortgage Brokers has adopted a code of ethics. From the press release, quoting MAMB President Charles DiPino:

"As we've studied recent market events we've come to the conclusion that a few bad apples in our business have caused a great deal of trouble for the professional, ethical broker," said DiPino. "Our new standards of membership will at least provide the Association a means by which it can legally disassociate itself from these individuals."

The new code basically enjoins MAMB members to do all the things they should be doing already: not lying in ads; obeying the law; disclosing conflicts of interest; not discriminating based on the race of the borrower; fully disclosing full details of lock-ins, rates and rate resets; and not hitting borrowers with surprise fees at the closing table. The punishments seem pretty weak. There are four levels of discipline before the association will disclose names of brokers not playing by the rules: 1) Letter of warning. 2) Letter of reprimand. 3) Training requirement. 4) Membership probation. Only if a member is suspended or expelled will MAMB notify regulators or publish the name of violator, according to the "Suggested Sanctions" section.

Complaints can be initiated only by association members. For borrower complaints about mortgage professionals, call the Maryland Office of Financial Regulation: (410) 230-6100.

Posted by Jay Hancock at 9:10 AM | Permalink | Comments (0)
        

More from the Census report. Maryland is the No. 1 state in the nation in the percentage of the population with advanced degrees. As reported a couple weeks ago, Maryland is also the No. 1 state in the nation for median household income. Coincidence? No, it's direct cause and effect. People who invest in their own education make more money in their careers. States that invest in education have higher incomes, bigger tax bases, more services and happier, healthier residents. The top states for advanced degrees -- Maryland, Massachusetts, Connecticut and New York -- are all high-income states.
The bottom states for advanced degrees -- Mississippi, Arkansas, North Dakota and West Virginia -- are all low-income states.

Posted by Jay Hancock at 12:47 PM | Permalink | Comments (0)
        

More from the new Census data. Here's one that surprised me: Maryland is the No. 1 state in the nation for having a high ratio of unmarried women to unmarried men. For every 100 unmarried women age 15 -- 44, Maryland had 104 unmarried men. Yes, that's still more unattached men than unattached women, but it's the lowest in the country not counting the District of Columbia. Alaska, a well known destination for women seeking partners, is at the opposite end of the spectrum, with 125 unmarried men in the specified age group for every 100 women. Ladies, you might also check out South Dakota, Nevada and Hawaii, all with huge surpluses of eligible men.

Guys, Rhode Island, Delaware, New York and Louisiana also ranked highly along with Maryland for relative numbers of single women. A statistical puzzle: How can these ratios be so uneven? The answer is that they only cover ages 15 -- 44. Women tend to marry older men. So there are a lot of 35-44-year-old women married to guys 45 or older, which removes them from eligibility.They show up in the Census survey as married; their husbands don't show up at all.

Posted by Jay Hancock at 10:51 AM | Permalink | Comments (1)
        

In keeping with this state's perpetual ranking in the top five or six for household income, we have very few mobile homes. Maryland ranked 45th in the nation for mobile-homes as a percent of the housing stock. (1.7 percent.) Hawaii ranked last for mobile homes: 0.2 percent. South Carolina was first, at 19 percent. New Mexico was second, at 17 percent.

Posted by Jay Hancock at 10:42 AM | Permalink | Comments (0)
        

More census data is out. Last week it was on locality-by-locality incomes. Today it's on commuting, family size, education, immigration and more.

I'll dive deeper into the report, but what jumps out are the figures on immigration. An increase of 38 percent in foreign born metro-Baltimore residents in six years is extraordinary. It means that the lower cost of living in and around Baltimore is drawing new Americans and would-be Americans. Baltimore City, which needs immigrants to reverse its stagnant/falling population, isn't doing great in immigration, but it's holding its own. Six percent of the city's residents were foreign born, the same as Anne Arundel County's. Marylandwide, 12 percent of the population is foreign born. Howard County had 17 percent.

Immigration can be overdone. You can't just open the borders and let everybody in. But immigration is mainly good for America and good for Maryland. Immigrants are adding to Maryland's tax base and cultural richness. The state is well on its way to becoming an international model of tolerance and diversity. Eventually immigrants will reverse Baltimore's population problem. And if that's not enough, immigrants will help hold up housing values in the ongoing real-estate slump.

Posted by Jay Hancock at 9:23 AM | Permalink | Comments (7)
        

This is the silver lining of the mortgage slump, the economic slowdown and declining interest rates: All those factors put downward pressure on the dollar, which makes U.S.-made goods and services cheaper for overseas buyers. July exports grew 2.7 percent to $138 billion, the Commerce Department said this morning. July imports grew, too, largely driven by rising oil prices. But they didn't grow as much as exports, and the trade deficit fell slightly.

The export increase was caused partly by shipments of cars, car parts and industrial supplies. There was still a big trade deficit in July -- $59 billion. But continued overall U.S. economic weakness should serve to reduce it further -- through lower imports, as stressed consumers buy fewer overseas products; and through higher exports, as the weak dollar continues to help manufacturers. Maybe -- maybe! -- that will staunch some of the anti-trade, anti-globalization sentiment in Washington and in the presidential race.

Posted by Jay Hancock at 10:09 AM | Permalink | Comments (0)
        

Sept. 10 (Bloomberg) -- Federal Reserve Bank of San Francisco President Janet Yellen said the U.S. economy is under ``downward pressure'' from the turmoil in credit and housing markets.

``It is critical to take a forward-looking approach -- gauging the effects of recent developments on the outlook, and, importantly, the risks to that outlook,'' Yellen said in a speech to a conference in San Francisco. Declining home prices and rising unemployment may cause ``significant'' risks to consumer spending, she said.

Yellen noted that investors increased bets that the Fed will reduce interest rates next week, with at least 0.75 percentage point of cuts by year-end...

``I see significant downward pressure based on recent data indicating further weakening in the housing sector and the tightening of financial markets,'' Yellen said at the annual meeting of the National Association for Business Economics. Higher interest rates and ``tighter terms'' on home loans may also lead to cutbacks in consumer spending, she said.

Posted by Jay Hancock at 2:02 PM | Permalink | Comments (0)
        

ATLANTA, Sept 10 (Reuters) - Atlanta Federal Reserve Bank President Dennis Lockhart on Monday stepped back from his assertion last week that housing woes had so far not clearly affected the broader economy, but said weak jobs data should be evaluated in tandem with strong retail sales.

"Friday's data ... show employment was beginning to soften back in June. This news should be evaluated with recently positive reports in retail sales," Lockhart told a business group.

On Thursday, Lockhart said data had not provided conclusive signs that housing problems were spilling over into the broader economy.

However, Lockhart amended his remarks on Monday to say he is now processing new information and other timely data as he prepares for the U.S. central bank's Sept. 18 rate-setting meeting.

On Friday, of course, the Labor Department said that the number of jobs in the U.S. economy had fallen by 4,000 in August. How's that for "other timely data"? Economists had expected a gain of 100,000. Lockhart is pointing to strong retail sales last month, but these were driven by heavy discounting by Wal-Mart, Target and others, so they may indicate less strength than he thinks. There'll be a rate cut next week, no doubt.

Posted by Jay Hancock at 1:45 PM | Permalink | Comments (0)
        

Another smart response to the Sunday column on regulating voice-over-Internet phone service. The service this woman got from Vonage, she says, was 1000 percent better than the service she got from Verizon. Her bottom lline: "Please don't ask the FCC to get involved." Vonage, she says, is doing just fine without regulation. (I would, however, take issue with this statement: "The Bell System used to be great before the government interfered." The Bell System, of course, involved heavy government control.)

Just read your article about the FCC finally getting involved in the horrible service provided by Verizon. I went through weeks of telephone calls to simply get my service transferred to a new address in December of 2005. I recorded the names and dates of 15 phone calls before and after the installation trying to get credit for the fact that my number was installed for over a week in a neighbor's condo. It was actually my electrician who finally got the line installed. Nobody ever took care of the problem, even though they promised to on every call.

I finally wrote a long letter to Verizon's customer service department with a record of the calls, and they never replied.

Thank goodness for Vonage. I received a simple to install kit to install 2 phones with all the bells and whistles. They took care of disconnecting my Verizon service. I kept my same phone number. I get an easy to read bill via e-mail every month. The bill is much lower than Verizons was ($18 a month), and the reception is wonderful.

Please don't ask the FCC to get involved. The Bell System used to be great before the government interfered, so let's leave the new competition alone!

Posted by Jay Hancock at 11:36 AM | Permalink | Comments (0)
        

A reader emails with a well-thought reaction to my column yesterday on the disparity between regulation of traditional phone service and voice-over-Internet phone service. There are certainly downsides to regulation and upsides to non-regulation, and he makes some good points:

I really think you were off the mark in your article on regulation VoIP. I've been a Vonage customer for over a year now and I know of about 5 other Vonage customers (I work in IT, so I'm sure it is disproportionately high). The whole point of VoIP is that is free of the constraints (some of them regulation) that keeps POTS so expensive and feature-poor.

The key difference to me between POTS and VoIP is that there is substantial competition in the VoIP market. If I'm unhappy with my POTS service, I really have no one to change my service to and I have to rely on the government for help. Sure there are so-called alternatives, but really Verizon owns the last mile regardless. On the other hand if I get wronged by Vonage there are probably a dozen competitors I could shift my business to. Additionally, since my bill is paid by credit card I have the option of disputing the charge.

Is VoIP as reliable as POTS? No, but I don't think many people go into it believing that it is (although I have to say my sound quality is noticeably better with VoIP than my old copper line). And it certainly isn't like the service is down all the time. I have never not been able to make a phone call and am only aware of two instances in a year where somebody tried calling me and couldn't get through (and it both cases the call was forwarded to my cell phone).

And that brings up another disagreement with your comments. I think in Maryland the vast majority of people have cell phones. Heck, my 71 year old mother does (and she is thrilled with her Vonage service...she got it before me). If not, keep your POTS and strip it down to the bare minimum of service. Of course it will still cost you an arm and a leg because of all the government fees on it. Thanks to regulation...

Posted by Jay Hancock at 9:55 AM | Permalink | Comments (1)
        

A few months ago Fed Chairman Ben Bernanke was saying there was no sign that the meltdown in the subprime mortgage business had spread to the larger economy. A few days ago he conceded that "financial stress" had spread beyond mortgages, but the implication was that so far the "real" economy of hiring and working and selling and delivering products was intact.

This morning's jobs report demolishes that notion. Economists hadn't been expecting a robust creation of jobs in August. But they certainly weren't expecting a decline, which is what they got. The Commerce Department estimated that the nation's payrolls declined by 4,000 jobs. That number will be revised, but it means that the economy -- the WHOLE economy -- probably stalled last month. That suggests companies were relucatant to hire because they see an economic slowdown coming, caused perhaps by declining housing values, slower consumer spending and diminishment of business credit. At some point this becomes a self-fulfilling prophecy. The report substantially raises the odds of a recession this year. And it virtually ensures a short-term interest-rate cut by the Federal Reserve.

Posted by Jay Hancock at 11:50 AM | Permalink | Comments (1)
        

At least through this year's spring quarter, that is. About 1 in 20 homeowners -- 5.12 percent -- missed their mortgage payments in the April-June quarter, the Mortgage Bankers Association said this morning. That's up 0.73 percentage point from the 2nd quarter of 2006 and still below a high of about 5.3 percent reached in the last housing recession, in 1991. MBA blames most of the increase on California, Florida, Nevada and Arizona. Delinquency rates remain high in Ohio, Michigan and other Midwest states, the association says.

Update: AP says the MBA data show an all-time high in mortgage foreclosures.

Posted by Jay Hancock at 10:43 AM | Permalink | Comments (0)
        

In some parts of the country there are reports of weakness in commercial real estate, which, if they portend bigger trouble, are bad news indeed. Strength in commercial construction has cushioned the economy from the slings & arrows of residential real estate. The last real recession the country had, in the early 1990s, was caused by a collapse of commercial real-estate projects and financing. A move now by lenders to start pulling the plug on non-residential building sales the way they have on housing could tip the economy into another recession.

Maryland, especially, has benefitted from a commercial construction boom: Look at all the cranes in and near downtown Baltimore. So I called Mike Henderson, president of the Metro Baltimore chapter of Associated Builders & Contractors, a trade association of non-union shops, to ask about signs of weakness. The answer: So far so good.

“I’m sure there’s some concern out there" about the willingness of lenders to keep financing commercial projects, he says. But at the moment, he says, "Washington and Baltimore, taken together, is the hottest construction market in the country."

The biggest problem, as usual, is finding good workers. "Many contractors are having to put off clients as long as they can so they can fit them into their schedule," says Henderson. The housing slowdown has freed up some workers, easing the shortage. But when federal base realignment prompts new groundbreakings, he says, the construction labor squeeze could get even worse.

For this year through June, the value of non-residential construction permits tracked by the Baltimore Metropolitan Council slightly trailed activity for the same time last year. For both periods, permits were issued for projects worth about $600 million. In a metro-Baltimore economy of perhaps $150 billion, that's real money.

Being the "hottest" in any category is always temporary, sometimes painfully so. At some point, base realignment nothwithstanding, metro Baltimore will be hurt by a slowdown in federal spending, which has supercharged the region's economy. But by the time commercial real estate cools off, residential property, with luck, will be recovering.

Posted by Jay Hancock at 9:00 AM | Permalink | Comments (0)
        

with Chevron's "educational" online game launched this morning. It's called Energyville, and it's supposed to let you build a city's power system in the manner of a Sim City game or Civilization.

From an article on Internetnews.com:

Energyville lets players select different energy sources to power their cities. They can choose from biomass, coal, solar, natural gas, petroleum, nuclear, wind or hydroelectric energy to run factories, light office buildings, and keep transportation and shipping moving along.

The game calculates the economic, security and environmental costs of each choice, and then calculates an energy management score. Next, the game reveals how the choices will impact the city in 2015 and 2030, a time at which Chevron calculates global energy demand will have risen by 50 percent.

Players can see how they scored against others and are then invited to join discussion forums.

From a review in the San Francisco Chronicle:

First the good: Energyville has a nice, clean look and keeps track of player scores globally, so there's motivation to come back and get your name on the high score list. And Chevron gets bonus points for allowing players to name their city whatever they want, even if the name is an ironic jab at the oil industry.

Now the bad: Pretty much no matter what actions you take, you'll reach a point where the screen will inform you that "(YOUR CITY) NEEDS PETROLEUM," offering no option but to add a giant oil derrick on the edge of the city or a few hundred feet off the shore.

That's certainly a realistic view of the future, even if alternative-energy sources develop at a faster-than-expected pace. Nevertheless, suspicions will be raised that Chevron rigged the rules. Chevron says the game was developed by the publishers of The Economist magazine.

Posted by Jay Hancock at 7:21 PM | Permalink | Comments (0)
        

Well, not really. It's an Amazon blog, which means it's a publicity site for his new book, not a real blog. Greenspan's calculated, anodyne utterances on the economy have been replaced by calculated, anodyne utterances designed to sell his book.

The book, called The Age of Turbulence, comes out Sept. 17. Excerpts from the Amazon post:

...in the waning months of my Fed tenure, I started getting excited about having time to stand back and think about all I’d been through – the frightening stock market crash of 1987, the boom of the 1990s, the trauma of 9/11, the climactic end of the Cold War, all told, a cascade of events propelling a new world forward at warp speed.

There was also a personal story to tell. I’d known every president from Richard Nixon to Reagan, Ford, Bill Clinton and George W. Bush. And what about all those other assorted characters from my childhood in New York, my years as a jazz musician, my complete career switch to economics – and my friendship with Ayn Rand? I wanted to make the leap from writing economic analysis to writing in the first person about what I’d experienced. And after years of talking “Fedspeak” in carefully calibrated congressional testimony – I could finally use my own voice!

My bet: Greenspan's "own voice" will sound a lot like his Humphrey-Hawkins testimony voice.
HT: Big Picture.

Posted by Jay Hancock at 10:38 AM | Permalink | Comments (0)
        

Charlottesville, Va., Sept. 4, 2007 – In a recently completed study, the authors of many widely-acclaimed articles on Federal Reserve policy and security returns show that Fed rate changes are associated with strong patterns in equity returns. According to the rotation strategy, a more aggressive posture is advocated following decreases in the Fed discount rate and a more defensive posture is recommended following a rate increase. On the heels of the recent Federal Reserve discount rate cut, this timely study seeks to provide some direction to investors.

For their next trick, they will demonstrate that investors who buy low do better than investors who buy high... From the CFA Institute.

Posted by Jay Hancock at 9:48 AM | Permalink | Comments (0)