Tuesday, September 20, 2011

Gold vs. The Adjusted Monetary Base

Created this using data obtained from Kitco regarding the yearly gold price, and the Adjusted Monetary Base from the St. Louis Fed.  Unfortunately I don't have longer term data to work with, but the general point is that the historical average ratio implies a gold price at $2,000 per once, and a parity price implies ~$2,700 per ounce.  It is currently hovering around $1,800 per ounce, implying that gold is still trading at a discount in US dollar terms.  

Thursday, August 18, 2011

The True Profit of College Football and Basketball

I'll get right to it.  Source data:  http://ope.ed.gov/athletics/

Average Net Revenue:  $9.35 million
Average Net/Player:  $81,126.27
Net Margin:  42.8%

Average Net Revenue:  $2.57 million
Average Net/Player:  $167,233.81
Net Margin:  38.6%

If we're ever going to get to a system where corruption scandals like what we've seen with the University of Miami football program are a thing of the past, we have to get real about fairly compensating players for their efforts.  I am of the mindset that players should be getting any revenue in excess of cost + 10% (ie., 10% net margin).

Average Player Compensation (Proposed Model):

Basketball:  $140,603.28
Football:  $70,304.51

Given that the expenses column referenced above already included the cost of education for the players, I think these compensation numbers should be in addition to the cost of education.

Tuesday, July 12, 2011

Net Revenues

Just wanted to post up a relatively simple chart with the following parameters:

1.  Chained 2005 dollars, in order to show a neutral comparison across time.
2.  Net revenues, which is simply total federal tax revenue minus total federal spending for that fiscal year.

The purpose of this is primarily to cut through the noise and show a yearly measure of just how much debt we've taken on in the 2008 - 2011 (annualized) time period.  It is truly unprecedented.  Some like to point out that we've taken on more debt as a percent of GDP during WWII, which is true, but GDP is entirely different from revenue.  While the two have historically been highly correlated, that correlation broke down dramatically in the 2000-2010 decade  (going from 95%+ correlation down to 37%).  As we continue to listen to people in the news talk about this issue, and focus tremendously on the GDP and efforts to juice it, please keep the important fact in mind that juicing the GDP doesn't mean anything if it doesn't increase actual revenue, nor does it imply that any revenue increase necessarily will keep pace with spending.

(click on the image to see the full chart)

Tuesday, June 7, 2011

The Real S&P 500 Story

There is a common though that the market peak occured in October of 2007, which is true from a nominal perspective.  The odd thing to me is that, unlike bond investing, people seem to magically forget that inflation exists and is constantly eroding their dollar value, hence the need for a yield in excess of inflation in order to increase net worth expressed in real terms.  The financial media focuses a great deal on bond investments having "significant risk" due to the possibility that their fixed rate securities may not keep pace with inflation, yet, this issue tends not to be brought up in regards to stocks.  In fact, many point to stocks as being an "inflation hedge", with the idea that, as the value of the dollar erodes, nominal earnings go up at an equal or greater pace.  This would be great if it was actually true, but it is unfortunately not, as demonstrated below:

In order to hit the market peak in real terms, the S&P would nominally need to go to ~2425.  It's currently hovering at around 1300.

Friday, March 4, 2011

Full-Time Workers: We're $100 Billion Dollars Poorer.


Chart I did using BLS data combining total full time wage and salary workers * average weekly earnings.  CPI adjusted to 1982-1984 chained dollars.  From the 2007 peak, the total basket of people in full-time jobs are making exactly $100 billion dollars less, in real terms, than in 2007.  They are making $20 billion less than last year.

May help explain in part why we're having budget issues.  Less income = less income tax and less income available for expenditures = less sales tax.

Monday, February 21, 2011

Why $137 Million is Peanuts.


Obviously it's been in the news lately, and the wrangling over the $137 million dollar deficit facing the state has been pretty epic, as it should be.  However, it's important to realize just what this money really means from a budgetary perspective.


Budget surplus fiscal 2010:  $70,980,000
Debt service fiscal 2010:  $652,063,000

The thought would naturally arise:  "Why in the hell is Wisconsin paying that much in debt servicing?"

Great question, reader.  After all, per this:

The ratio of principal to interest + expenses is greater than 1:4.  Pretty dumb to be throwing $488 million right out the window for no good reason, right?  So what is the reason then?

Back to this one:

Interest and Investment income:
Fiscal 2008:  -$4.4 bln (total $28.7 bln revenues)
Fiscal 2009:  -$14.9 bln (total $20.3 bln revenues)
Fiscal 2010:  +$8.6 bln (total $46.2 bln revenues)

Three year return:  -$10.7 bln

Yes friends, as a result of the stock market crash, a gigantic bazooka was leveled into the state budget, and because those budget items are mostly non-discretionary (and the state workers already took a hit through salary freezes, reductions, and hiring freezes meaning more work for the remaining workers), the state had to borrow so much money that, coming full circle, came to $652 million in borrowing expenses in one year.

So, the next time you hear somebody complain about state workers not being particularly happy about cuts to their already frugal compensation, point out that the reason the state is in this mess is because of Wall Street and their aforementioned $194 million in external management fees.

Wednesday, January 19, 2011

Annual Housing Completions

The other component of housing data that often gets overlooked is the number of actual housing completions.  While this is not a forward indicator, it gives a better retrospective look at the housing market as it relates to valuation of the home construction sector.  Since data began being collected on this back in 1968, we just posted the worst home completions number ever, coming in at 653,500 total homes completed.  The previous worst number was last year, coming in at 794,400 total homes.  In other words, the home construction market came in at 18% below last year.  The recent peak number was in 2006, coming in at 1,979,400.  The all time peak was in 1973, coming in at 2,100,500.  We are 67% off the 2006 high.