Analysis of home prices in terms of weeks of work

This Wall Street Journal article has an interesting analysis of U.S. home prices in terms of how many weeks an average American would have to work to pay for the mortgage on a house or for the house itself. The conclusion is that houses are cheap and therefore should not fall further in value. Nowhere in this analysis does the author, Brett Arends, consider the employment situation. If median earnings for those who continue to be in the workforce remain the same but 2 million more Americans lose their jobs, that’s approximately 1 million mortgages that won’t be paid. There isn’t a lot of demand for new or upgraded housing from unemployed people, who ultimately will have to move in with relatives.

[Note that stable wages for those with political power, but an ever-larger group of potential workers thrown under the bus is exactly what Mancur Olson predicted.]

The author treats Boston and New York City as anomalies, saying that because housing prices haven’t fallen as much they still might fall farther. To me, however, what distinguishes New York City from Miami or Las Vegas is that nearly $1 trillion of tax dollars have been sent to New York, a percentage of which turned into Wall Street bonuses, a percentage of which turned into demand for housing. Boston has an unusual number of industries that can survive the collapse of the rest of the U.S. economy, e.g., universities that can admit foreign students, biotech firms that develop drugs for world markets, and multinational high-tech firms such as EMC.

Is a house in Michigan cheap? Not if the number of houses exceeds the number of jobs. In that case, the value of an extra house is $0.

Full post, including comments

Washington, D.C. is the most productive area of the U.S.

One of my Berkeley friends, apparently having forgiven me for my less than flattering portrait of his town, sent me http://super-economy.blogspot.com/2010/01/dynamic-america-poor-europe.html . What struck me about this page is the second table, in which the GDP per capita of various U.S. states are presented. It turns out the citizens of Washington, D.C. are more than three times as productive as the average American. This despite the fact that Washington has a lot of poor and/or unemployed people.

Perhaps we have to reevaluate our view of government workers and lobbyists as parasites. These people are actually the nation’s most productive people! Alternatively, we might need to find a better measure of economic well-being than GDP.

Full post, including comments

Happy New Year from Blue Cross Blue Shield

A cardiologist friend just got a New Year’s greeting from Blue Cross Blue Shield of DC/Maryland/Virginia. She’s a healthy woman in her 40s. They are raising her personal health insurance rates by 30 percent. Can she recover this from the reimbursements that they will pay her for the work that she does on patients’ hearts? Maybe not; they are simultaneously cutting payments to cardiologists by 35 percent. Her explanation: “insurance companies are crooks and the healthcare reform/debacle will only make it worse”.

Full post, including comments

Heated Furniture to Save Energy?

A lot of cars have heated seats. When the seat heater is on, most drivers will set the interior temperature 3-7 degrees lower than with the seat heater off. Why not apply the same technology to houses?

Imagine being at home in a 65-degree house. Even in a T-shirt and jeans, it would probably be comfortable to walk around, stir a pot on the stove, carry laundry, scrub and clean, walk on a treadmill while typing on a computer (as I’m doing now!). However, if one were to sit down and read a book, it would begin to seem cold. Why not install heat in all of the seats and beds of the house? And sensors to turn the heat on and off automatically? In a lot of ways, this would be more comfortable than a current house because the air temperature would be set for actively moving around while the seat temperature would be set for sedentary activities.

The cost? Let’s say $50 per seat or single bed. Assume that a typical house has 6 rooms, each of which has an average of 6 seats or beds. Round up to 40 and multiple by $50 and we’ve added $2000 to the capital cost of the house. If an average house costs $2000 per year to heat and lowering the thermostat by 5 degrees cuts the cost by 15 percent, it will take roughly 7 years to pay back our investment (assuming nominal cost of electricity). Maybe not the most dramatic way to cut down on our burning of fossil fuels, but it is one that would increase our comfort level rather than reducing it.

What am I missing?

Full post, including comments

Reverse job fair for computer programmers

When I started programming, in 1976, all that an individual programmer needed to demonstrate her or her work was a room-sized mainframe computer, a card reader, and a line printer. So it made sense to have job fairs where employers sat at desks with posters and candidates walked around. Today most software can be demonstrated from a laptop or a smartphone, so why not have the programmers sit at desks and let the employers walk around and browse among the achievements?

That’s exactly what is happening in Mountain View this weekend at The Hacker Fair. Does anyone else know of similar events past or future?

Full post, including comments

TSA Workers Hospitalized…

… after sniffing honey. They also spent most of the day hassling “gardener Francisco Ramirez”:

The TSA shut down Meadows Field airport (BFL) in Bakersfield, CA, on Wednesday after several bottles of honey set off explosive detection monitors. Two TSA agents were also taken to the hospital after smelling the then-unknown substance and feeling nauseated.

Hard to know whether to file this under excessive government spending, loss of civil liberties (nearly full day detention due to carrying honey), or runaway health care costs (I’m still sad that nobody likes my health care reform plan).

More: aero-news.net.

Related: older posting on how we’re spending $6 billion per year on airport security.

Full post, including comments

Visit to Berkeley, California

Here’s a trip report on four days spent in the East Bay (Berkeley, Oakland, Piedmont), primarily with people who work or study at the University of California, Berkeley and people who have high-tech jobs.

Bitterness against Republicans in general and King Bush II in particular is commonly expressed. We tried to go over to the Berkeley Art Museum to see paintings recently given to the museum by Fernando Botero: The Abu Ghraib series. Unfortunately the museum was closed along with every other University of California building, due to lack of funds. Whose fault is that? According to all of the East Bayers with whom I spoke, the Republican-sponsored Proposition 13 is to blame. Ever since this initiative passed in 1978, the state has been starved for funds. I pointed out that California collects a larger percentage of its citizens’ income than all but five other states (10.5 percent; source). Shouldn’t it be possible to run the state on 10.5 percent of income?

Despite the fact that all of my interlocutors had university educations, sometimes including PhDs, all were so deeply invested in the idea that their insolvent state government is starved for revenue that they were unable to parse the information. They all replied that of course California needed more money than the average state because it had a larger population, thinking that I had said California collected more total dollars than all but five other states. None could accept the idea that their state had a spending problem rather than a revenue problem and everyone thought that more money should be collected “from rich people” (these folks, if only by virtue of owning houses in Berkeley, were rich by American standards, but they defined “rich” as “more than $50 million in assets”; nobody considered the idea that wealthy people could easily pick up and move to states with lower taxes). None would accept the idea that their state and local government were no longer there to serve current citizens, that they existed primarily to pay pension obligations incurred decades earlier (more).

For roughly 60 years, Berkeley has offered more services to its residents than virtually any other city in the U.S. The schools are expensively funded. Welfare programs have been lavish. People can borrow a full set of tools from the public library. There is a non-profit organization on every block. Yet Berkeley has a poverty rate of 21 percent, higher than the state average of 12 percent (source). The school system tracks student performance by race and ethnicity so that they can reveal to local employers that “white students are doing far better than the state average while black and Latino students are doing worse” (source). Anywhere else in the country one would be considered a vicious racist for claiming that black and Latino high school students are intellectually inferior to white and Asian students, but in Berkeley broadcasting this information marks one as a concerned humanitarian. Sixty years of failure had not daunted any of the East Bayers with whom I spoke; all were in favor of even bigger and more expensive government.

Given the cheerleading for government expansion, I would have thought that the latest $1 trillion health care spending initiative in Congress would have delighted Berkeleyites. “The Republicans gutted the bill,” one woman said, “by removing the public option. So it isn’t a fair test of what government could do.” How about the ascendancy of Barack Obama, which should give the U.S. eight years of the kind of political philosophy that Berkeley folks have espoused for decades. “He’s a moderate, not a liberal,” was the response. Thus if the extra trillions of dollars in borrowing and spending and eight years of Barack Obama does not usher in prosperity, the fault is that Obama and Congress did not grow the government’s share of GDP sufficiently.

Big government is working reasonably well for a U.C. Berkeley scientist who received $250,000 in stimulus money for scientific research. He explained “I’m going to spend all of it in Europe and Japan; I’m stimulating the global economy.”

When not pointing out the evilness of Republicans and the idiocy of Americans who vote for them, my Berkeley friends turned their attention to denouncing the second largest force for evil in the world: Israel. Due to the state-wide out-of-money shutdown, there was no chance of a West Bank checkpoint on the U.C. campus (http://calsjp.org/ has the schedule for these), but the rest of the anti-Israel industry was up and running. I asked folks whether they couldn’t at least admire the Israeli health care system, which provides universal coverage (not leaving millions of people out, like our new one) and superb results, all at a cost close to what a Golden Retriever owner would pay here for high quality vet care. The response was that apparent Israeli achievements are not due to hard work by Israelis, but are a result of rich Jews in the U.S. sending so much money to Israel (this study reveals that the total amounts to roughly 0.4 percent of Israel’s GDP; if withdrawn, each employed Israeli would have to work one additional day per year). I wondered aloud whether Americans didn’t have it even easier, with our near-infinite supply of natural resources. We’ve had free land, free water, oil, minerals, etc., all from the big plot of land that we stole from the Indians. Aren’t we Americans the ones who have been enjoying a 400-year tailwind? (A tailwind that is a lot less powerful now that we’ve expanded the population to 300 million and sucked many of the resources dry.) Nope. It was the Jews who got the unfairly good deal.

Berkeley students and faculty have recently been protesting tuition and fee hikes, but there haven’t been any protests about government borrowing and spending. Depending on your assumptions about how long pensioned government employees will live, wages in the U.S., and investment returns, it is quite possible that a Berkeley graduate who stays in California will find that local, state, and federal governments have already spent 80 percent of his lifetime earnings. Students aren’t protesting increased government spending or advocating any cuts, however, but only demanding more spending on their parochial concerns. Neither are East Bay parents complaining about government spending; they are dealing with the risk of a future U.S. economic collapse by getting foreign passports for their children. [Parenting in Berkeley can be a little more creative than in the rest of the U.S. One family invited me to share a meal with their “dinner co-op” partners, another family with a kid about the same age. They trade off cooking dinner every Monday evening. “By the way,” my friend noted, “there are two mommies in this other family.”]

I had breakfast with two white males. One founded a mobile phone tech company and mentioned that they are soon to go public. He is already pretty rich but stands to make tens of millions of dollars in the IPO. Our entrepreneur grew up in the U.S., attended the best private schools, and then went on to the most elite universities. His family happens to come from Argentina. I asked the other white male at the table, a wage slave for a big company, how he would feel if his own daughter were rejected from college in favor of the rich entrepreneur’s kid, due to that child’s Hispanic status. This turned out not to be a tough question. Of course he wanted his daughter to go to the most prestigious school, but Affirmative Action was important and his own daughter would surely get into at least some college somewhere. So on balance he thought it would be fair for his daughter to be rejected.

I met a friend picking up his laptop from an independent Macintosh repair store, with lower prices than the official sleek Apple stores. A minor whack had caused the power connector to fail internally. His love for the Mac was not diminished when I pointed out that the repair bill was about the same as what Dell charged for a brand new computer. The other Macintosh experience that I had was trying to use a Flip video camera with an iMac (vastly inferior user experience) and listening to the owner talk about how much easier to use and more reliable the Macintosh was than Windows. The only problem that he’d had with his machine recently was the loss of three months of data: all writing, photos, and video.

After the Macintosh repair shop, we stopped into the Brower Center, which calls itself “Berkeley’s greenest building” and is packed with non-profit organizations that are determined to stop stupid people in the rest of the U.S. from trashing the planet. The building is named for David Brower, famous for being pushed out of the Sierra Club when he pointed out that immigration was going to ruin the environment of the U.S. (more). In 2000, Brower thought that the U.S. would be a pleasant place to live with 150 million people (what we had around 1950) and an unpleasant place with the 600 million that we were forecast to have by 2100. As of 2008, the experts were forecasting a 2100 population closer to 1 billion (source). Brower’s legacy is a building featuring a cavernous two-story atrium and high ceilings everywhere. On a day with temperatures of about 55 degrees outside, the environmentalists’ building was heated to more than 80 degrees. We stripped off all of the clothes that we could.

At a CVS in Oakland, we bought sundries from a 70-year-old working as a cashier. I asked my local companion if he thought it was moral for the government to tax this poor old working person and hand the money over to a comfortable 50-year-old retired former public employee, which is essentially how California is now set up. He had not thought about the question.

A white man told me how proud he was of his year-long dialog with an angry young black student back when he was an undergraduate at an Ivy League university. “When we first met,” he said, “I said that he should admit that we were mostly alike, despite our difference in skin color. He replied that there was no way that I could understand the rage of a black man. We spent a whole year working this out and I came to understand his point of view.” My response was that perhaps his first idea was correct. Could it be that black and white Americans are mostly alike? We spend our time talking about skin tone while the Chinese grow their economy at 9 percent per year.

One nice thing about living in Berkeley is that you can be sure that God agrees with whatever you’re thinking. If God didn’t agree with and love you, why would would He pour down good weather and sunshine on Berkeley almost every day?

Full post, including comments

Next on my reading list: It Takes a Pillage

I’m starting It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street by Nomi Prins. I hope to write up a review when I’m finished, but in the meantime perhaps we can get a virtual book club going with comments on this post. If you’ve got a favorite section of the book or you can relate it to a more recent news event, please add a comment here.

Full post, including comments

Whole Foods in the New Yorker

If you’ve spent way too much money on free-range carrots at Whole Paycheck, you’ll be interested to read this New Yorker article on John Mackey, the co-founder and CEO. Mackey was last in the news for opposing Congress’s $1 trillion health care bonfire, leading off a Wall Street Journal op-ed with “The problem with socialism is that eventually you run out of other people’s money.” Despite Mackey’s lack of fondness for socialism, he does not practice modern American-style corporate capitalism, i.e., paying all of the profits to executives rather than public shareholders. The company is run with a 19:1 maximum ratio in salary between the highest paid employees and the average.

Whole Foods is strictly non-union, according to the article: “Unions have picketed store openings and, as activist investors in Whole Foods stock, have called for Mackey’s firing.” Mackey is famous for having said “The union is like having herpes. It doesn’t kill you, but it’s unpleasant and inconvenient, and it stops a lot of people from becoming your lover.”

Though rich, Mackey does not have an Al Gore-size energy footprint. He eats vegan, “flies commercial and drives a Honda Civic hybrid”. The article describes various spiritual movements to which he has subscribed; his wife of eighteen years is currently a Sufi Muslim (Sufism is very important in Afghanistan as well). They have no children. Mackey is an expert on ultralight backpacking, having reduced his non-food kit to 7 lbs. and hiked the entire Appalachian Trail during a 5-month sabbatical in 2001.

More: read the article.

Disclaimer: I deleted Whole Foods from my car GPS during the Crash of 2008; now I shop at Costco.

Full post, including comments