Saturday, June 30, 2012

Food purchases at grocery stores

Over at Illusion of Prosperity, Mark has a nice analysis of Grocery Store Purchases.

The gist is that per capita they have been going down for a long time.  Check out his charts.

Walmart moving into groceries in a big way has probably had a measurable effect on the $ per capita. The stuff they stock is going to be at lower price points relative to grocers.

I think to some degree brand name processed foods are pricing themselves out. The shrinkage of package size has been very noticeable, with potato chips, for example. Where I would buy this product occasionally, I now just walk past that aisle. Whatever taste temptation is destroyed by the price.

Tuesday, June 26, 2012

Global slowdown in progress

MaxedOutMama documents it nicely: Die Euroliebe Ist Ein Wildes Tier

"Germany is now going into recession. Manufacturing is too low, and the bad construction PMI means that no internal forces can keep the services sector up.

A relatively minor downshift in the auto production trajectory is showing up pretty strongly as an economic negative (see CFNAI). But this was minor. If car sales fall a bit more, things get rough quickly.

Over the last few months, we have followed a very similar trajectory to 2011, and the reason is somewhat similar. Autos. Auto production. See Philly Fed.

The cause, however, is quite different and should give everyone pause. Extremely easy credit has been sustaining car sales, in part because used-car prices were so high that they sustained bad loans because bad loan losses were very limited. This may have worn itself out based on auto advertising I am hearing. If so, then we are in for a sustained deceleration in sales and auto production will shift toward a minor negative in the next few months.Last month's downward sales surprise hinted at this.

If that does happen, then all the negatives, which include external and internal factors (Euro tragedy and global deceleration, the domestic erosion of real incomes due to inflation, political uncertainty causing caution in business spending) start to pull us steadily down. Even if car sales stay up for the next few months, we probably will see some tax increases next year and therefore will go into frank recession then. "

Thursday, June 21, 2012

Smart Canadian mortgage policy

Flaherty clamps down on mortgage rules to cool overheating market


Acknowledging his concern that Canada’s housing market is overheating, Finance Minister Jim Flaherty is clamping down with four changes to mortgage insurance rules...

...Mr. Flaherty confirmed that Ottawa will reduce the maximum amortization period to 25 years from 30 years. Secondly, the maximum amount of equity homeowners can take out of their homes in a refinancing is being reduced to 80 per cent from 85 per cent...

...the availability of insured mortgages will be limited to homes with a purchase price of less than $1-million...

...there will also be a new rule aimed at ensuring the size of a loan is not too big in comparison to household income. The maximum gross debt service ratio will be fixed at 39 per cent and the maximum total debt service ratio at 44 per cent.
Smart policies that should have been implemented in the US.

Wednesday, June 20, 2012

Friday, June 15, 2012

Japan's holdings of foreign assets a fiscal backstop

Japan Retains Status as Biggest Creditor Nation -

"TOKYO—Japan retained its title as the world's biggest creditor nation in 2011, as the government's currency-market interventions and companies' overseas mergers and acquisitions helped boost the value of the country's foreign-investment holdings.
Japan's net foreign assets—the difference between its holdings of overseas assets, such as currencies and U.S. Treasurys, and its liabilities, such as Japanese government debt held by foreigners—stood at ¥253.01 trillion ($3.19 trillion) at the end of 2011, data from the Ministry of Finance showed Tuesday."

Of course, the flow of funds into Japan from this asset base tends to strengthen the yen.

Tuesday, June 12, 2012

Ratio of corporate profits versus wages

This metric is useful because it illustrates how the benefit of increased productivity is shared between capital and labor.  As the chart shows, the gains have been diverted to capital in recent decades.  A key factor has been the large increase in global labor supply as China, and India entered the global economic system.

I don't think that this metric includes health benefit compensation for workers; if that were included the ratio would be lower as health premiums increase significantly every year.

I also expect corporate profits to plunge in the near term as lack of consumer demand and massive overcapacity in multiple industries take effect, and just based on the chart the ratio appears to be poised for a plunge.  

Monday, June 11, 2012

US private employment the last decade

Essentially net job growth since January 2006 has been zero.  Over the same time period the country added population of roughly 30 million.
Methane hydrate technology fuels a new energy regime - The Globe and Mail

"In a joint announcement two weeks ago, the United States and Japan (along with ConocoPhillips, the U.S.-based multinational oil company) announced the world’s first successful field trial (in Alaska) of a technology that uses carbon dioxide to free natural gas from methane hydrates – the globally abundant hunks of porous ice that trap huge amounts of natural gas in deposits, onshore and offshore, around the world.

Methane hydrates constitute the world’s No. 1 reservoir of fossil fuel. Ubiquitous along vast stretches of Earth’s continental shelves, they hold enough natural gas to fuel the world for a thousand years – and beyond. Who says so? Using the most conservative of assumptions, the U.S. Geological and Geophysical Service says so.
The U.S. now produces 21 trillion cubic feet (tcf) of natural gas a year. But it possesses 330,000 tcf of natural gas in its methane hydrate resource – theoretically enough to supply the country for 3,000 years (give or take). Using less conservative numbers (for example, a methane hydrate resource of 670,000 tcf), the U.S. is good to go for 6,000 years (give or take)."

The resource appears to be reasonably accessible.

Friday, June 08, 2012

Massive overcapacity in multiple sectors

China’s Shipyards Fail to Win Orders as Greek Owners Shun Loans - Bloomberg

"Almost 90 percent of China’s shipyards received no orders this year and about 28 percent have secured none since the end of 2009, Clarkson Plc (CKN), the world’s largest shipbroker, said May 16. " 

"Owners are refraining from new orders after rates plunged and the combined capacity of oil tankers, container ships and commodity carriers reached a record. Earnings from the industry averaged the lowest since 1999 so far this year, according to the ClarkSea Index"