Tuesday, May 27, 2008

Paid to Quit

Deal or no-deal:

[When shoe company] Zappos hires new employees, it provides a four-week training period that immerses them in the company’s strategy, culture, and obsession with customers…After a week or so in this immersive experience…[Zappos] says to its newest employees: “If you quit today, we will pay you for the amount of time you’ve worked, plus we will offer you a $1,000 bonus.” [Because]…if you’re willing to take the company up on the offer, you obviously don’t have the sense of commitment they are looking for.

— William C. Taylor, Why Zappos Pays New Employees to Quit—And You Should Too

It's always a bad idea to leave a job without another, most job experts advise...

Monday, May 26, 2008

Dollar and Oil Cost


Here are a couple of tables that look at the price of oil in non-dollars.

Mexico has had a weaker currency than the US, on these figures. Japan has only done slightly worse. CAD, AUS, and Euro have been quite strong, with India and China in the middle.

$Oil-Rebased, 2000100201217423

South Korea100182178369


Here is the same table, but with the increase/(decrease) shown in relation to the change in dollars each year (i.e. if oil is up 100% and the price is up only 50% in local currency, the table shows -50%, or 50% below the price in dollars).

$Oil-Rebased, 2000100101%117%323%

above/below base change
South Korea100-19%-39%-54%


REER is the real, effective exchange rate against major currencies. REER-Other is the real, effective exchange rate against other trading partners. (src: FRB)

Sunday, May 25, 2008

Oil Demand Growth

This chart is the best top-level summary of what is going on in physical demand for oil:

Change in Oil Demand (Mbpd) 2004 2005 2006 2007
Total OECD 0.75 0.30 -0.32 -0.37
Total Non-OECD 1.97 1.02 1.30 1.11
Total World Demand 2.72 1.32 0.97 0.73

Organization for Economic Cooperation and Development (OECD) countries are: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, South Korea, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States.

These two give info about the marginal demand equation, worldwide:

Change in Oil Demand (Mpbd)
2004 2005 2006 2007
Other Non-OECD 0.50 0.53 0.54 0.52
China 0.86 0.28 0.48 0.38
Other Asia 0.45 0.15 0.13 0.13
Former U.S.S.R. 0.13 0.03 0.13 0.07
Other OECD Europe 0.08 0.16 0.06 -0.01
South Korea -0.02 0.04 -0.02 0.03
Mexico 0.05 0.05 -0.05 0.05
Non-OECD Europe 0.02 0.02 0.01 0.01
Canada 0.09 0.00 -0.03 0.08
Australia & New Zealand 0.02 0.02 0.00 0.02
U. S. Territories 0.00 0.00 0.01 -0.03
United States 0.70 0.07 -0.11 0.01
United Kingdom 0.04 0.04 0.00 -0.07
France 0.01 -0.02 -0.03 -0.02
Italy -0.08 -0.04 -0.02 -0.05
Germany -0.01 -0.02 0.02 -0.20
Japan -0.13 0.01 -0.15 -0.19

Growth in
Oil Demand
2004 2005 2006 2007 Avg
China 15.4% 4.4% 7.2% 5.2% 8.0%
Other Non-OECD 3.9% 3.9% 3.9% 3.6% 3.8%
Other Asia 5.7% 1.8% 1.5% 1.5% 2.6%
Non-OECD Europe 3.0% 3.2% 2.0% 1.4% 2.4%
Former U.S.S.R. 3.3% 0.8% 3.3% 1.7% 2.3%
Canada 4.2% -0.1% -1.4% 3.7% 1.6%
Australia & New Zealand 1.6% 1.6% 0.0% 1.9% 1.3%
Mexico 2.4% 2.5% -2.4% 2.5% 1.2%
Other OECD Europe 1.2% 2.2% 0.9% -0.1% 1.0%
United States 3.5% 0.3% -0.6% 0.0% 0.8%
South Korea -0.9% 1.7% -0.8% 1.5% 0.4%
United Kingdom 2.3% 2.0% -0.2% -3.6% 0.1%
France 0.4% -0.9% -1.4% -1.2% -0.8%
U. S. Territories 1.3% -1.4% 2.6% -8.8% -1.6%
Germany -0.5% -0.7% 0.7% -7.4% -2.0%
Japan -2.3% 0.3% -2.7% -3.6% -2.1%
Italy -4.2% -2.2% -1.3% -3.1% -2.7%

Friday, May 23, 2008

Housing Storm

Expectations for home price declines are notably worse than where they stood last December.

The latest expectations set (as of May 22nd), with the one-year outlook (approximately) highlighted.

Las Vegas-4%-10%-20%-18%-20%-20%-22%
Los Angeles-4%-9%-19%-21%-25%-8%-27%
New York-1%-3%-5%-8%-10%-13%-17%
San Diego-3%-7%-13%-17%-18%-11%-18%
San Francisco-3%-8%-14%-18%-20%3%-22%
Here's the set on file from December 19th, with the one-year outlook (approximately) highlighted.

Las Vegas-3%-5%-7%-8%-10%-12%-13%
Los Angeles-2%-4%-6%-7%-8%-9%-11%
New York-3%-5%-7%-8%-9%-11%-12%
San Diego-2%-4%-5%-6%-8%-10%-12%
San Francisco-2%-4%-6%-8%-10%-13%-15%
These are the changes. As you can see, expectations have mostly worsened in the one-year outlook, as it stood last December.

since Dec-19
Las Vegas
Los Angeles
New York
San Diego
San Francisco

How did you do if you hedged by selling the futures contracts? Well, the calcs are imperfect (no spot prices available), but using the month C-S index values, here is an approximation (below). So far, these have been pretty good hedges, with the futures prices actually falling more than the estimated fall in spot prices in most cases.

For people in Las Vegas and Los Angeles, where spot prices have fallen by an estimated 17% and 16% since the last read in December, that would be a ton of good news.

Hedge Perf
since Dec-19
Las Vegas
Los Angeles
New York
San Diego
San Francisco

Where the Pain Is

Worst in red (highest foreclosure filing rate).

src: realtytrac

Top 12 (baker's dozen):
There appears to be an steady flow at a higher level. There is a slight deterioration in the most recent numbers - seven states hit their worst rate simultaneously, the largest number in the recent downturn.

Pace so far this year suggests about 2.8 million foreclosures for 2008 (up to a high of 4.3, with 'normal' volatility). That's up 28%, but not near the tens of millions some feared. Still, figures are volatile. Filings can double, month-to-month, in individual markets.

This gives a little comfort to my fledgling housing model, which shows a long, gradual adjustment in housing, which is as much a hope as an odds-on forecast.

Baker's Dozen
District of Columbia
South Carolina
South Dakota
Rhode Island
A lot of the states where things have deteriorated the most on a relative basis over the past six months still have very low levels.

Notable among them are the D.C., Maryland, and perhaps Arizona. Other states, like California, moved up near to their current high level and have remained there...

Thursday, May 22, 2008

Is cap-and-trade a stitch-in-time?


The cost of meeting an emission target with a cap-and-trade program could be reduced, potentially quite substantially, by providing firms flexibility in the timing of their efforts to reduce emissions.

On the basis of an analysis of the results of several economic models, CBO estimates that if the legislation was enacted, the auction price of emission allowances for those gases would rise from about $23 per metric ton of carbon-dioxide-equivalent (mt CO2e) emissions in 2009 to about $44 per mt CO2e in 2018.

Enacting S. 2191 as it was ordered reported would increase revenues by about $1.19 trillion over the 2009–2018 period, CBO estimates. Direct spending from distributing those proceeds would total about $1.21 trillion over the period. The net effect of the original legislation (as ordered reported) would be to increase the deficit (excluding any effects on future discretionary spending) by an estimated $15 billion over the next 10 years.

-CBO Economist in Chief, Testimony

I sadly have to admit that I haven't followed the debate on cap-and-trade closely enough to understand it as a way to ration energy use or to improve plant efficiency.

The first (and big) problem is plant efficiency, in many cases. I fail to see how a cap "incents" an upgrade from dirty technology to the best-available technology. Statewide "clean stacks" programs have had some effectiveness, so cap-and-trade looks ... too sophisticated by half.

As a way to ration energy production (the axiom of emissions reduction), it does seem to provide some incentives to always operate at maximum efficiency in order to achieve maximum profitability. It does seem to assume that there is a set of companies who will choose not to do so (who else will be on the "losing" side of "trades"?). This could accentuate regional disparities, quickly creating a binary distribution of "haves" and "have nots". Meanwhile, some states have had regulatory success in rewarding energy companies not on output, but on efficiency measures (and some indication that there could still be much left to be gained, even now).

I'll keep reading, but cap-and-trade looks like a fancy way to appear to be doing something...

How to make money in court


Living in court:

Under this approach, private investment firms, backed by large banks, purchase buildings in working-class neighborhoods and then aggressively challenge the identity of as many [rent-controlled/stabilized] tenants as possible. The apparent aim here is to replace as many people as possible with higher-paying residents [until the building no longer qualifies], while taking advantage of the lax enforcement of rental-housing laws.

So far, it appears to be working. The Association for Neighborhood and Housing Development reports that the turnover in many buildings purchased by these private-equity firms has been as high as 25 percent. Conveniently, this is the same vacancy goal cited in financing documents filed by one of the new firms, Vantage Properties, a company that has bought more than 9,200 units in the city in the last two years.

Wednesday, May 21, 2008


Apparently, it's the American way ...:

The House OPEC measure was approved 324 to 84. A similar measure, dubbed NOPEC for the No Oil Producing and Exporting Cartels Act, passed the Senate last year by a 70 to 23 vote, but was set aside after a White House veto threat.

Friday, May 16, 2008

Oil Markets do Fandango, not Contango


There was a lot of very interesting testimony at hearings over a year ago. With the oil industry going through tribulations on the Hill and in the press, I thought I'd do an update, of sorts.

  • The oil market is not in contango any longer. Prices here.
  • There is a new survey of oil industry execs out with their view that oil prices will fall this year. Obviously, the futures markets disagree - see above.

  • From a recent conference of those in the know, it's nat gas we should be worried about:
    influential and knowledgeable CEOs reached the consensus that "oil prices will likely soon drop dramatically and the long-term price increases will be in natural gas."
  • There is a PR firm that has been hired to make oil industry execs more likable. This is not related to the recent collection of execs at one company (in Canada) who lied about oil production and got caught. The API is in the media business, now. (This is not related to Slick it up! ads, though). Wait. Everyone has the same idea now, so buy ad companies

    Coal companies, and the users and transporters of the commodity, are also trying to improve coal's image with a $45 million-a-year campaign, and Oklahoma billionaire Aubrey K. McClendon is spending millions through a foundation to promote natural gas.
  • The strategic oil petroleum reserve will stop being filled (and Bush won't veto the bill).
  • Despite global warming likely to dramatically affect it, ANWR will continue to be off limits. But "section 526" environmental standards remain a target as do permitting timelines for refinery expansion.

  • McCain is greener than his neighbor (McCain’s campaign sold eco-friendly polo and t-shirts made from bio-degradeable fabric)

  • C-span opens up an "Energy" page.

  • The short-term refining equation is - screwy, with distillate prices and stocks rising and demand falling (it does seem a little more screwy than usual, at least):

    At the same time, MasterCard's (MA) May 7 gasoline report showed that gas demand has fallen by 5.8%, while the government suggested that gasoline consumption might have fallen by slightly over 6%.

    We do know that refineries in the U.S. again cut back their utilization to 85%. That's down from 89% a year ago, in a season when production is normally 95%, only because they're trying to draw down gasoline inventories to bid gasoline prices up. Yet despite the reduced refinery runs, the EIA said, the U.S. managed to put another 800,000 barrels of gasoline in stock. The American Petroleum Institute put the gas gain at 1.4 million barrels. The point is that neither organization is in disagreement that gasoline was added into our active stocks; it's just a question of exactly how much.

  • When governments aren't fixing things, they are mucking them up (just like companies?), by insulating the poor and rich alike:

  • Never mind the flat domestic output; never mind the doubling of crude oil prices; retail prices of petrol and diesel in India have been put up by only 3.2 per cent and 4.4 per cent over the year. The rest of the inflation in crude oil prices has been absorbed by government through a lowering of taxes or by the oil marketing companies through a paring of profit. There has therefore been little financial pressure on consumers to reduce consumption.

Those Crazy State-Owned Companies!

Leaving work undone. Always behind the curve. Inefficient and hobbled by corruption.

Turns out Petro-Brazil has kinda cornered the market on deep water drilling.

Also, I thought there were something like 60+ deep water rigs, worldwide. Turns out that there are just 21:

May 15 (Bloomberg) -- Petroleo Brasileiro SA, Brazil's state-controlled oil company, leased about 80 percent of the world's deepest-drilling offshore rigs to explore prospects including the Western Hemisphere's biggest discovery in decades.

Petrobras, as the Rio de Janeiro-based company is known, is hiring rigs that can drill in at least 3,000 meters (9,800 feet) of water, Chief Executive Officer Jose Sergio Gabrielli said in an interview last week. The world has 21 such vessels, according to Rigzone.com, which tracks the offshore drilling industry.

Hog Heaven or Vice

For the record, mostly.

20/20 covers prediction markets

Tuesday, May 6, 2008

Beyond Pareto Optimal - Indiana Jones of Economics

From Freakenomics blog, worth remarking:

A few years back the Wall Street Journal dubbed me the Indiana Jones of economics.

In reality, that title more rightfully belongs to Robert Jensen, an economist at Brown University who is doing some of the most interesting and adventurous economics studies these days. Jensen has documented how cell phones revolutionized fish markets in India, how simply telling students in the Dominican Republic once about the high value of an additional year of school can impact their choices years later, and how introducing T.V. into rural India affects the position of women.