Political Calculations Unexpectedly Intriguing! http://so-l.ru/news/source/political_calculations Mon, 18 Feb 2019 08:14:59 +0300 <![CDATA[Hits Keep Piling Up Against Philadelphia Soda Tax]]>

Two years after it first went into effect, the negative fallout from Philadelphia's controversial soda tax continues to pile up. Here's a short summary of the news that has broken since we last reviewed what has perhaps become the most unpopular tax in the City of Brotherly Love.

Unsplash - Ashkan Forouzani: Cans of soda displayed in refrigerated cases

A Philadelphia ShopRite convenience store will close, with the owner citing lost business related to the city's soda tax as the primary reason for its closure. The store is located near Philadelphia's city limits, where local residents appear to have taken a good portion of their business across the border to avoid paying the tax. Jeff Brown, the store's owner, whose efforts in bringing supermarkets into impoverished areas of Philadelphia was lauded by President Obama in his 2010 State of the Union address, indicated that reduced sales at all his stores since the soda tax went into effect has cumulatively reduced his total payroll by about 200 jobs, which he has achieved through attrition rather than through layoffs. The store closure is expected to add another 100 jobs to that running total of attrition.

A second independent study has confirmed that net soda consumption among Philadelphia's total population has not meaningfully declined, where "the tax did not improve nutritional intake by encouraging consumers to substitute to healthier beverages". The study's authors, Stephan Seiler, Anna Tuchman, and Song Yao, also found that nearly 100% of the tax is being passed through to Philadelphia consumers, confirmed that many of these shoppers are avoiding the tax by shifting their grocery shopping to stores outside of the city's limits, and that the tax is achieving a disproportionately negative impact by imposing "a relatively larger financial burden on low income/high obesity households that are less likely to engage in cross-shopping at stores outside of the city."

A 116-count federal indictment against International Brotherhood of Electrical Workers president John J. Dougherty (aka "Johnny Doc") and Philadelphia city councilman Robert "Bobby" Henon, among others. In a city like Philadelphia where political corruption scandals are common, that news itself might not stand out, except in this case, because it says quite a lot about the true motivation behind Philadelphia's soda tax.

According to a federal indictment unsealed Wednesday, corrupt Democratic city officials and electricians’ union leaders pushed through the soda tax in 2016 in a revenge feud against the Teamsters union, instead of a motivation to affect public health.

The Justice Department’s indictment reveals how Philadelphia Councilman Robert Henon, who was on the payroll of Mr. Dougherty’s union, introduced the soda-tax proposal as payback against the Teamsters for criticizing Mr. Dougherty in a political advertisement a year earlier.

The Teamsters opposed the soda tax because they believed it would cost them jobs by reducing demand for soft drinks.

When aides to Democratic Mayor Jim Kenney tried to explain to Mr. Dougherty the public health benefits of the soda tax, the indictment alleges, the union leader replied, “You don’t have to explain to me. I don’t give a f–.” He predicted it would “cost the Teamsters 100 jobs in Philly.”

A very predictable negative outcome that Philadelphia Mayor Jim Kenney neither disputed at the time nor sought to diminish in the time since, all while Kenney's claims that positive public health benefits would be achieved from imposing the city's soda tax are proving to be unfounded in practice.

Dougherty's support for the controversial tax was essential because of the IBEW Local 98's money and political influence within the city, where the union's backing often made the difference between candidates winning elections or not. In addition, Johnny Doc's influence extends to appointed positions, including gifts to judges, who might then be counted upon to back the union-supported positions such as on the soda tax when its legality was challenged in court. The full magnitude of the unfurling political scandal as it relates to how the Philadelphia's soda tax was passed and survived legal challenge is not yet known.

Finally, with eleven months of Philadelphia Beverage Tax revenue now counted for 2018 (taxes assessed in December 2018 and collected in January 2019 will be reported either later this month or early in March 2019), we anticipate that the full year's tax collections will fall short of its second year target.

Desired vs Actual Estimates of Philadelphia's Monthly Soda Tax Collections, January 2017 through November 2018

From January through November 2018, Philadelphia's Beverage Tax has accumulated $70,348,376 in the city's coffers, which is nearly $8.5 million short of the city's $78.8 million target. The most the city has ever collected from its soda tax in a single month was $7,567,159 in September 2017, so if it were to collect that much once again, it still would fall about one million dollars short.

Meanwhile, Philadelphia's original revenue target for its controversial tax on the distribution of sweetened beverages for retail sale in the city was $92.4 million, where actual revenues of $77.8 million would be 84% of that figure. In 2017, Wharton Business School Professor of Finance and Public Policy Robert Inman indicated the Philadelphia Beverage Tax could be considered a success if it collected 85% to 90% of the city's original revenue target.

It will almost certainly miss clearing that low bar needed to be considered successful in 2018. The only question now is by how much will it fall short?

Previously on Political Calculations

We've been covering the story of Philadelphia's flawed soda tax on roughly a monthly basis from almost the very beginning, where our coverage began as something of a natural extension from one of the stories we featured as part of our Examples of Junk Science Series. The linked list below will take you through all our in-near-real-time analysis of the impact of the tax, which at this writing, has still to reach its end.

Image Credit: unsplash-logoAshkan Forouzani

http://so-l.ru/news/y/2019_02_15_hits_keep_piling_up_against_philadelphia Fri, 15 Feb 2019 11:31:00 +0300
<![CDATA[The Maths of Love]]>

Happy Valentine's Day to all lovers of math!

y=1/x x^2 + y^2 = 1 y = |2x| x = -|sin(y)|

We used Microsoft Excel to generate the charts to go along with each equation, where convincing it to draw a proper circle on an x-y scatter plot for the "O" was especially challenging. If you ever want to attempt it yourself, we found Tushar Mehta's instructions to be invaluable!

Meanwhile, if you haven't yet geeked out enough, do check out Hannah Fry's discussion of the Mathematics of Love from 2014....

P.S. If you're accessing this article on a site that republishes our RSS news feed, you might be seeing the charts at the top of the post in reverse order. If you would like to see them in their proper order, please click through to our site!...

http://so-l.ru/news/y/2019_02_14_the_maths_of_love Thu, 14 Feb 2019 11:37:00 +0300
<![CDATA[A Tale of Teens in Two States]]>

Together, Texas and California are home to over one out of five teens between the ages of 16 and 19 in the United States. Of the two states, California's teen population is larger than that of Texas, although its population has been slowly declining in recent years while Texas' teen population has been growing. The following chart shows the population trends for working-age teens in both states from 2003 through 2018, where we find that Texas has grown from having three-fifths of California's teen population to nearly four-fifths.

Age 16-19 Civilian Noninstitutional Population in California and Texas, 2003-2017, with Preliminary Data for 2018

Since we're focusing on working-age teens in both states, let's next look at teen employment levels in both states from 2003 through 2018.

Age 16-19 Employment in California and Texas, 2003-2017, with Preliminary Data for 2018

In this chart, we see that California's working teen population plummeted by 40% from 2007 through 2011, before flattening out through 2014. It went on to rebound somewhat in 2015, but has stagnated at roughly 27% below its 2007 peak in all the years since.

By contrast, Texas saw a 29% decline in working teens from 2006 to 2011, but has since largely recovered. More remarkably, the number of working teens in Texas has periodically surpassed the number in California, in 2014 and again in 2017, despite having a teen population that is considerable smaller than that of California.

That's a pretty remarkable observation, so we've calculated the employment-to-population ratio for working-age teens in California and Texas from 2003 through 2018, showing the results in the next chart.

Age 16-19 Employment to Population Ratio in California and Texas, 2003-2017, with Preliminary Data for 2018

Here, we see that both states start out in a similar place, where from 2003 to 2005, the share of the teen population with jobs in California and Texas was about the same.

Since 2006 however, a persistent gap has opened up, with a larger share of Texas' teen population working as compared to California. In 2018, 28.1% of Texas' working-age teen population were earning paychecks, while only 22.7% of California's Age 16-19 population had jobs.

How big is that difference? If the same share of its teen population were working as in Texas, over 108,000 more Californian teens would have had jobs in 2018. At the same time, if the same share of its teen population were working as in California, over 84,000 fewer Texan teens would have jobs in the same year.

According to the BLS' preliminary data for 2018, California had 457,000 employed teens while Texas had 440,000.

There is, of course, one big difference between the two states that affects whether employers in each state even consider hiring teens to work for them.

California and Texas Average Minimum Wage, 2003-2018

That's far from the only difference between the two states however, where things like the composition of the two states' economies and the rates at which different industries in each state are growing also play a role in determining whether there are sufficient jobs that teens can land.

Teen employment is a positive factor that help boost household incomes, help the teens gain experience that will translate into higher incomes later in life, and can even reduce the amount of student loan debt that a college bound teen might otherwise have to take on. Which state's teens do you suppose are coming out ahead?


Bureau of Labor Statistics. Local Area Unemployment Statistics: Expanded State Employment Demographic Data. [PDF Documents: 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018 (Preliminary)]. Accessed 8 February 2019. [Note: The BLS has data that goes back to 1999, but it changed its survey methodology in 2003, making it difficult to make valid comparisons with data collected in earlier years.]

Bureau of Labor Statistics Wage and Hour Division. History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938-2009. [Online Article]. Accessed 8 February 2019.

State of California Department of Industrial Relations. History of California Minimum Wage. [Online Articel]. Accessed 8 February 2019.

Texas Workforce Commission. Texas Minimum Wage Law. [Online Article]. Accessed 8 February 2019.

http://so-l.ru/news/y/2019_02_13_a_tale_of_teens_in_two_states Wed, 13 Feb 2019 12:07:00 +0300
<![CDATA[Total Value of Trade Between U.S. and China Begins Shrinking]]>

In November 2018, the year-over-year growth rate of the value of goods imported by the U.S. from China dropped into negative territory.

That observation comes from our analysis of the U.S. Census Bureau's report on the U.S.' trade in goods with China, which had been delayed for over a month due to the partial U.S. government shut down. It marks the first month since the U.S.-China trade war began on 22 March 2018 where we can point to a month where the total value of goods that the U.S. imported from China dropped below the value reported a year earlier, where the U.S. had largely been able to avoid following China's fate in that respect. Until November 2018.

The following chart shows that development and also reveals that the year-over-year growth rate of the value of U.S. exports to China became more negative in November 2018. That outcome largely occurred as a consequence of China's retaliatory tariffs on U.S.-produced soybeans, which has prompted China's soybean buyers to effectively boycott the 2018 U.S. crop (until they began making some relatively small buys in December 2018).

Year Over Year Growth Rate of Exchange Rate Adjusted U.S.-China Trade in Goods and Services, January 1986 - November 2018

Taking a step back to look at the combined value of goods and services directly traded between the U.S. and China, we find the size of the gap between where that level of trade is today with respect to where it would likely be in the absence of the trade war between the two nations opened up in November 2018, increasing by over 50% from $1.6 billion in the previous month to $2.5 billion.

Combined Value of U.S. Exports to China and Imports from China, January 2008 - November 2018

In percentage terms, November 2018's level of direct trade between the two nations is a little over 4% below where we estimate it might otherwise be based on the pre-trade war trend for this data.


Board of Governors of the Federal Reserve System. China / U.S. Foreign Exchange Rate. G.5 Foreign Exchange Rates. Accessed 7 February 2019.

U.S. Census Bureau. Trade in Goods with China. Accessed 7 February 2019.

U.S. Census Bureau. U.S. Trade Online. Accessed 7 February 2019. 

http://so-l.ru/news/y/2019_02_12_total_value_of_trade_between_u_s_and_ch Tue, 12 Feb 2019 11:11:00 +0300
<![CDATA[A Failed Break Out for the S&P 500]]>

For a moment during the first week of February 2019, the S&P 500 (Index: SPX) looked like it might fully break out of the range described by our redzone forecast, but alas, it only poked just above the upper end of the range for a few days before dropping back into it.

Alternative Futures - S&P 500 - 2019Q1 - Standard Model with Annotated Redzone Forecast - Snapshot on 8 Feb 2019

Had the S&P 500 stayed above that level, it would have been an indication that investors were starting to look further forward to 2019-Q2 according to our dividend futures-based model of how stock prices work. Since they subsequently dropped back within the redzone forecast range, which is based on the assumption that investors would remain focused on the current quarter of 2019-Q1, it's more likely these data points were just temporary outliers.

Perhaps a better question is: why didn't the S&P 500 drop further? We could argue that if investors are more focused on 2019-Q1 in setting stock prices, we should see more of a reversion to the mean that corresponds with that assessment, where the mean would be vertically located in the middle of the redzone forecast range.

We haven't seen a good answer for that question as yet, where none of the market-moving headlines we noted during the past week stood out as potential explanations for why not.

Monday, 4 February 2019
Tuesday, 5 February 2019
Wednesday, 6 February 2019
Thursday, 7 February 2019
Friday, 8 February 2019

Barry Ritholtz listed each of the positives and negatives he found in the week's markets and economy-related news.

We'll see if the market provides any more clarity in the second week of February 2019, which will be noteworthy because China returns from its week-long Spring Festival/Lunar New Year holiday, where the output of data from that troubled economy will resume.

http://so-l.ru/news/y/2019_02_11_a_failed_break_out_for_the_s_p_500 Mon, 11 Feb 2019 11:28:00 +0300
<![CDATA[Median Household Income in December 2018]]>

Sentier Research has issued their estimate of median household income in the United States for December 2018, finding the typical income earned by an American household was $63,517 for the month, slightly down from the firm's initial estimate of $63,554 for November 2018. Sentier's revised, inflation-adjusted estimate for November 2018 is $63,518, where they describe their initial estimate for December's median household income as unchanged.

The following chart shows the nominal (red) and inflation-adjusted (blue) trends for median household income in the United States from January 2000 through December 2018, where the newest nominal data point shows up as the first month-over-month dip after a long uninterrupted upward trend that began in December 2017. The inflation-adjusted figures are presented in terms of constant December 2018 U.S. dollars.

Median Household Income in the 21st Century: Nominal and Real Estimates, January 2000 to December 2018

Meanwhile, the year-over-year growth rate of median household income has continued at near record-highs.

Median Household Income in the 21st Century: Year Over Year Growth Rate, January 2001 to December 2018

With that final estimate, 2018 proved to be one the best years ever for income gains for typical American households.

Analyst's Notes

The partial government shutdown has impacted our ability to develop an estimate of median household income using our alternate methodology, where the data we use won't be available until 28 February 2019.

In generating inflation-adjusted portion of the Median Household Income in the 21st Century chart and the corresponding year-over-year growth rate chart above, we've used the Consumer Price Index for All Urban Consumers (CPI-U) to adjust the nominal median household income estimates for inflation, so that they are expressed in terms of the U.S. dollars for the month for which we're reporting the newest income data.


Sentier Research. Household Income Trends: January 2000 through May 2017, March 2018 through December 2018. [Excel Spreadsheet with Nominal Median Household Incomes for January 2000 through January 2013 courtesy of Doug Short]. [PDF Document]. Accessed 5 February 2019. [Note: We've converted all data to be in terms of current (nominal) U.S. dollars to develop the analysis presented in this series.]

U.S. Department of Labor Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 11 January 2019.

http://so-l.ru/news/y/2019_02_08_median_household_income_in_december_2018 Fri, 08 Feb 2019 10:57:00 +0300
<![CDATA[Growth of U.S. New Home Market Turns Negative]]>

Following our first ever analysis of the total transaction value for existing home sales in the U.S., we're returning to more familiar territory in calculating the equivalent market capitalization for new homes sold in the U.S., where we find that it too appears to have peaked in March 2018.

Trailing Twelve Month Average New Home Sales Market Capitalization, Not Adjusted for Inflation [Current U.S. Dollars] and Adjusted for Inflation [Constant November 2018 U.S. Dollars], January 1976 - November 2018

In March 2018, the trailing twelve month average of the market capitalization of new homes sold in the U.S. peaked a bit over $20.3 billion. The trailing year average market cap went on to decline to $19.9 billion in June and to rebound to a high just shy of $20.3 billion in September. It has declined sharply in the months since, falling to an initial estimate of $19.2 billion for November 2018, the most recent month for which national data is available.

These significance of these changes are easier to see when we calculate the year-over-year growth rate of our trailing twelve month average for the new home market cap. The following chart reveals that the initial estimates for November 2018 have fallen into negative territory, which suggests that the new home market is experiencing some degree of contraction.

Inflation Adjusted Growth Rate of U.S. Trailing Year Average New Home Market Capitalization, January 2000 - November 2018

The initial year-over-year growth rate estimate for November 2018 is -3.3%, which if we re-do the growth rate math after adjusting all the market cap data for inflation to be in terms of constant November 2018 U.S. dollars, we find corresponds to an inflation-adjusted growth rate of -5.3%.

This deceleration parallels the trend we've seen in existing home sales since March 2018, but unlike that portion of the U.S. real estate market, the new homes market has greater economic impact, both for the businesses of U.S. homebuilders (Indices: ITB, PKB, XHB) and for the U.S. economy, where negative year-over-year growth rates indicate the industry has become an economic headwind.

On that count, Calculated Risk recently featured economist Tom Lawler's characterization of recent earnings calls for several firms in the industry, notably D.R. Horton (NYSE: DRH), the largest U.S. home builder, which has benefited in recent years by focusing on lower-priced, entry-level homes:

Here are a few observations based on press releases and conference calls (note that NVR provides no “color” in its press release and does not do an earnings conference.)

First (and trivially), D.R. Horton’s YOY increase in net orders was boosted slightly by acquisitions of a few smaller builders, and “pro forma” net orders would have been up by close to 2% YOY.

Second, all builders noted that they experienced slower demand last quarter, and most attributed the slowdown to “affordability” concerns, partly but not even mainly association with the increase in mortgage rates during the third and early fourth quarter, but also to the rapid price increases of the past few years in many markets. There appeared to be greater weakness at “higher” price points, and several markets where home prices had risen sharply over the past few years – especially much of California and Colorado – were “especially soft”.

Most builders were peppered with questions about sales incentives, and while those reporting incentives on closings said that there was just a “modest” increase from a year ago, many also implied that a further increase in sales incentives in the first part of this year was a distinct possibility. Most builders also seemed to feel that in aggregate home prices, after outpacing income growth for the last seven years, would likely grow by less than income growth in 2019. That is also the consensus among competent housing economists.

Aggregate home prices growing slower than income would continue the pattern we've observed for median new home sale prices and median household incomes since February 2018.


U.S. Census Bureau. Median and Average Sales Prices of New Homes Sold in the United States. [Excel Spreadsheet]. Accessed 31 January 2019.

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 31 January 2019.

U.S. Department of Labor Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100. [Text Document]. Accessed 11 January 2019.

http://so-l.ru/news/y/2019_02_07_growth_of_u_s_new_home_market_turns_neg Thu, 07 Feb 2019 11:17:00 +0300
<![CDATA[Dividends By The Numbers in January 2019]]>

January 2019 was an average-to-below average month for dividend paying firms in the U.S. stock market. Whether we're counting the number of declarations, special dividend announcements, rises, reductions, or omissions, the month registered either close to or below the average levels recorded over the previous 15 years worth of January data that Standard and Poor makes available.

Let's run through the numbers for these categories and compare them to the previous month's figures and the same month from a year ago....

  • In January 2019, 2,476 U.S. firms declared dividends, a decrease of 3,458 from the record number recorded in December 2018. That figure is also down by 258 from January 2018's total.
  • 37 U.S. firms announced they would pay an extra, or special, dividend to their shareholders in January 2019, a decrease of 142 from the number recorded in December 2018, and also a a decrease of 14 from the total recorded a year earlier in January 2018.
  • A total of 217 U.S. firms announced they would increase their dividend payments to shareholders in January 2019, an increase of 79 over the number recorded in December 2018, and a decrease of 101 from the 318 dividend rises declared back in January 2018.
  • 27 publicly traded companies cut their dividends in January 2019, a decline of 13 from the number recorded in December 2018 and also a decrease of 9 from the 36 recorded in January 2018.
  • Just 2 U.S. firms omitted paying their dividends in January 2019, an increase of 1 over the number recorded in December 2018. That figure is also an increase of 1 over the total recorded in January 2018.

The following chart shows just the increases and decreases that have been recorded by S&P for each month from January 2004 through January 2019.

Number of Public U.S. Firms Increasing or Decreasing Their Dividends Each Month, January 2004 through January 2019

We've already covered the dividend cutters for the month from our near real-time sampling, which captured 18 of the 27 reductions recorded during the month. If you want to see the list, which we've expanded since we published it on 29 January 2019, please follow this link.


Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. 31 January 2019.

http://so-l.ru/news/y/2019_02_06_dividends_by_the_numbers_in_january_2019 Wed, 06 Feb 2019 11:06:00 +0300
<![CDATA[Median New Home Sale Prices Falling]]>

Since peaking in February 2018, the relative affordability of new homes being sold in the United States has continued to improve through November 2018, the last month for which the data is available, where rising mortgage rates, falling new home sale prices, and rising incomes has combined to produce that outcome in the national level data.

The following chart shows the history of interest rates for 30-year conventional fixed rate mortgages in the U.S. from April 1971 through November 2018.

30-Year Conventional Fixed Mortgage Rates in U.S., April 1971 through November 2018

In November 2018, 30-year conventional mortgage rates peaked at 4.87%, the highest they've been since February 2011, nearly a full percentage point higher than the 3.92% recorded in November 2017. Mortgage rates began falling in December 2018, pacing the decline in the yields of the 10-Year U.S. Treasury that began in mid-November as global economic growth began visibly deteriorating.

Although U.S. economic growth has been stronger than the global economy, rising mortgage rates have made it more costly to afford the monthly payments for high-priced homes in the regions of the U.S. that have been experiencing shortage conditions, particularly in the western region states of California, Oregon, and Washington, causing those markets to sharply slow, sending both sale prices and the number of sales lower.

Nationally, November 2018 saw the initial estimate for the median sale price of new homes sold in the U.S. drop to $302,400, the lowest level recorded since February 2017 and 12.5% below the peak value of $343,400 recorded in November 2017.

Smoothing the month-to-month volatility in median new home sale prices out by calculating their trailing twelve month moving average, we find the initial estimate for November 2018 marks a downward turn in what had been a relatively flat trend since April 2018. At the same time, median household incomes in the U.S. have continued to rise. In the following chart, we've shown the trajectory of the trailing year averages of median new home sale prices against median household incomes from December 2000 through November 2018.

U.S. Median New Home Sale Price vs Median Household Income, Annual: 1999 - 2017 | Monthly: December 2000 - November 2018

Falling median new home prices and rising median household incomes are combining to improve the relative affordability of new homes sold in the U.S. The following chart shows the ratio of median new home sale prices to median household incomes since 1967.

U.S. Median New Home Sale Price vs Median Household Income, Annual: 1999 - 2017 | Monthly: December 2000 - November 2018

After peaking at 5.45 times median household income in February 2018, the ratio of median new home sale prices to median household income has fallen to a preliminary value of 5.22 in November 2018. Although this figure is still historically elevated, it does mark an improvement in the relative affordability of new homes sold in the U.S. to levels last seen in late 2014.

This trend can be considered to be the silver lining in an otherwise cloudy environment for the new home market in the United States. We'll take a closer look at what falling prices means for the real estate industry later this week.


Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 1 February 2019.

Sentier Research. Household Income Trends: November 2018. [PDF Document]. Accessed 28 December 2018. [Note: We've converted all data to be in terms of current (nominal) U.S. dollars.]

U.S. Census Bureau. Median and Average Sales Prices of New Homes Sold in the United States. [Excel Spreadsheet]. Accessed 31 January 2019.

http://so-l.ru/news/y/2019_02_05_median_new_home_sale_prices_falling Tue, 05 Feb 2019 11:33:00 +0300
<![CDATA[S&P 500 Wins As Fed Officially Capitulates]]>

The biggest news for S&P 500 (Index: SPX) investors in the final week of January 2019 was the Fed's announcement that it would pause both its series of interest rate hikes and its quantitative tightening program aimed at reducing its holdings of U.S. Treasuries and Mortgage-Backed Securities (MBS) on its balance sheet.

Investors responded positively to the Fed's official capitulation in the face of market reality, boosting stock prices up to the top of the range indicated by the redzone forecast in our alternative futures spaghetti forecast chart, which assumes that investors are maintaining their forward looking focus on the current quarter of 2019-Q1.

Alternative Futures - S&P 500 - 2019Q1 - Standard Model - Snapshot on 1 Feb 2019

Should stock prices break above their current level, it would indicate that investors are shifting at least part of their forward-looking attention toward 2019-Q2, which is a real possibility since the expectations for dividends to be paid out in this more distant future quarter rose from $14.65 per share to $14.75 per share during the past week.

The danger for investors continues to lie in what is expected to happen after 2019-Q2, as the rate of dividend growth appears set to considerably slow. If and when investors turn their attention to 2019-Q3 or 2019-Q4, the likely impact to stock prices will be to drop considerably. Just like what happened in December 2018.

Here are the major headlines that affected the outlook of investors during the final week of January 2019.

Monday, 28 January 2019
Tuesday, 29 January 2019
Wednesday, 30 January 2019
Thursday, 31 January 2019
Friday, 1 February 2019

Elsewhere, Barry Ritholtz outlined the positives and negatives he found in the week's markets and economy-related news.

http://so-l.ru/news/y/2019_02_04_s_p_500_wins_as_fed_officially_capitulat Mon, 04 Feb 2019 10:55:00 +0300
<![CDATA[Accidental Beauty]]>

Technology can be an amazing thing. Just consider today's cameras, which have become so small that they can fit inside spaces that would have been inconceivable even a few decades ago.

But that also means that they don't necessarily work the way we expect. How many times, for instance, have you accidentally taken a picture of something while fidgeting with your mobile? Better still, how many times has it turned out to be a picture worth keeping? Or something that you couldn't ever duplicate, no matter how hard you might try.

We imagine that's how the following image came to be, where we're not even sure that this is the right orientation to display it....

Spilling Light

More food for thought: When Accidental Art Is Better Than Your Actual Art

http://so-l.ru/news/y/2019_02_01_accidental_beauty Fri, 01 Feb 2019 10:46:00 +0300
<![CDATA[1 in 25 Chance of U.S. Recession Starting Before February 2020]]>

The U.S. Federal Reserve finally backed off from hiking short term interest rates in the U.S., choosing to keep the target range of 2.25%-2.50% for the Federal Funds Rate.

The risk that the U.S. economy will enter into a national recession at some time in the next twelve months now stands at 3.9%, which is up by roughly one-and-a-half percentage points since our last snapshot of the U.S. recession probability from late December 2018. The current 3.9% probability works out to be nearly a 1-in-25 chance that a recession will eventually be found by the National Bureau of Economic Research to have begun at some point between 30 January 2019 and 30 January 2020, according to a model developed by Jonathan Wright of the Federal Reserve Board back in 2006.

The Fed's decision to hold the Federal Funds Rate steady comes as the bond market has been responding to deteriorating conditions in the global economy, particularly in China and in the Eurozone. The U.S. Treasury yield curve, as measured by the spread between the 10-Year and 3-Month constant maturity U.S. Treasuries, has been flattening in response to those global conditions as bond investors would appear to pursue a flight to relative quality investing strategy.

The Recession Probability Track shows where these two factors have set the probability of a recession starting in the U.S. during the next 12 months.

U.S. Recession Probability Track Starting 2 January 2014, Ending 30 January 2019

We anticipate that the probability of recession will continue to rise in 2019, with the Fed bowing to reality and putting its previously planned series of quarter-point rate hikes on hold. The Fed has also indicated that it is weighing an early end to its plans to shrink its balance sheet, where their decision to do so will remove the additional pressure it has been generating toward flattening the yield curve through quantitative tightening.

The questions now are whether they put the brakes on fast enough to avoid having the U.S. economy fall into recession, and whether the recession forecasting model we're using is accurately reflecting the nation's risk of recession.

On that second point, Wright's model is based on historic data where recessions have generally started at much higher interest rates than they are today, and which also doesn't consider the additional quantitative tightening that the Fed might achieve through reducing its holdings of U.S. Treasuries, where we're stretching the model's capability to assess the probability of recession in today's economic environment. It is quite possible that the model is understating the probability of recession starting in the U.S. when the Federal Funds Rate is as low as it is today.

Analysts at financial services firm Société Générale (SocGen) have estimated that the Fed's balance sheet shrinking has added the equivalent of 3% to the Federal Funds Rate, making the Fed's "Shadow Federal Funds Rate" as high as 5.45%.

We re-did the recession forecast math with the same Treasury yield spread and SocGen's shadow rate estimate and found that Wright's model would project a probability of recession starting between 30 January 2019 and 30 January 2020 of 23.2%, or nearly 1-in-4 odds if the shadow rate should turn out to be a real thing.

If you would like to also get in on the game of predicting the odds of recession starting in the U.S., please take advantage of our recession odds reckoning tool, which like our Recession Probability Track chart, is also based on Jonathan Wright's 2006 paper describing a recession forecasting method using the level of the effective Federal Funds Rate and the spread between the yields of the 10-Year and 3-Month Constant Maturity U.S. Treasuries.

It's really easy. Plug in the most recent data available, or the data that would apply for a future scenario that you would like to consider, and compare the result you get in our tool with what we've shown in the most recent chart we've presented. The links below present each of the posts in the current series since we restarted it in June 2017.

Previously on Political Calculations

http://so-l.ru/news/y/2019_01_31_1_in_25_chance_of_u_s_recession_startin Thu, 31 Jan 2019 11:00:00 +0300
<![CDATA[Oil and Gas Industry Dominate January 2019 Dividend Cuts]]>

The near-real time sources that we track for dividend cut announcements is signaling that something wicked is happening within the U.S. oil and gas industry.

Setting the scene for context, the fourth quarter of 2018 ended with an ominous undertone in an otherwise positive year for dividend paying stocks in the United States:

By far and away, the oil and gas industry saw the greatest amount of distress during the fourth quarter of 2018, accounting for 63% of our sample and coinciding with a significant decline in oil prices during the quarter as global demand diminished. The financial sector, including Real Estate Investment Trusts (REITs), came in second with 17.4% of the dividend cuts in our sample, where the Fed's rate hikes negatively impacted eight of these interest rate-sensitive firms. Food producer and the manufacturing sector each recorded 2 dividend cutting firms each (manufacturing included the highly distressed GE), while the technology, mining, consumer goods and utility industries rounded out our sample with just one dividend cut recorded in each.

Now that January 2019 is nearly complete, we thought it might be worthwhile to check our two main sources for near-real time sample of dividend cut announcements to see how things are faring so far in the first quarter of 2019.

Compared to the first quarter of 2018, we find that the pace of dividend cut announcements is coming in above the level we recorded through the same point of time of the current quarter.

Cumulative Dividend Cuts Announced in U.S. by Day of Quarter, 2018Q1 vs 2019Q1 Year to Date, Snapshot 29 January 2019

What really stands out in the underlying data however is that all of the firms in our sample that have declared dividend reductions in January 2019 are in the oil and gas sector of the U.S. economy. Here's the list of firms and links to their announcements.

This concentration of dividend cuts within the oil and gas industry is largely a result of an economic situation that has been developing in the global economy since late 2017, where several large economies have been experiencing a marked deceleration in economic growth, such as China and the Eurozone, which noticeably deepened in the last quarter of 2018.

Stimulated by tax cuts passed in late 2017, the U.S. economy was generally able to avoid a similar economic deterioration throughout much of 2018, but not entirely. The global economic deceleration has reduced the demand for oil and gas, which in turn, has lead to a steep decline in the price of U.S.-produced oil and gas products. Lower revenues have shrunk profits and cash flow in the industry, prompting the elevated level of dividend cuts we've seen in both the fourth quarter of 2018 and in January 2019.

Pointing to potential ripple effects from the intrusion of the global economy's distress into U.S. oil-producing states, the increased level of distress in the industry also helps explain something we've observed in state-level housing markets in the U.S., where the oil-producing states of Texas, North Dakota, and Louisiana have seen particularly sharp declines in existing home sales since September 2018, coinciding with the downturn in the health of the oil and gas industry in the last quarter of the year.

Do you suppose the Fed is taking these recent developments into consideration at its meeting today?

We'll follow up with our regular Dividends by the Numbers series when the data for the entire U.S. stock market sometime next week.

Update 1 February 2019: Expanding the list to include some late additions for the month....

Finally tally for our sample of dividend cutters for January 2019: 18 firms, 16 in the oil and gas sector, 1 in the finance sector, and 1 in consumer goods.


Seeking Alpha Market Currents. Filtered for Dividends. [Online Database]. Accessed 29 January 2019.

Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 29 January 2019.

http://so-l.ru/news/y/2019_01_30_oil_and_gas_industry_dominate_january_20 Wed, 30 Jan 2019 10:53:00 +0300
<![CDATA[U.S. Residential Real Estate Market Peaked in March 2018]]>

As best as we can tell, the residential real estate market in the U.S. peaked in March 2018, where since that month, it has declined in 33 of 40 states for which we have recent price and sales data.

That's going by our estimate for the total aggregate value of transactions for existing home sales, which covers somewhere around 87-90% of all home sales in the U.S. economy. Using monthly sales and price data from Zillow, we estimate that this figure has fallen from $129.8 billion in March 2018 to $120.4 billion in November 2018, the last month for which estimates for 40 states and the District of Columbia are covered by Zillow's database is available. That change would mark a decline of 7% nationally.

Estimated Aggregate Transaction Values for Existing Home Sales, 40 States and District of Columbia, January 2009 to November 2018

The following chart shows our estimates of the total aggregate value of transactions for existing home sales for the Top 5 states for this measure from January 2009 through December 2018.

Estimated Aggregate Transaction Values for Existing Home Sales, Top Five States, January 2009 to December 2018

Three of these states marked a peak in March 2018, with the following declines through December 2018's initial estimates: California (-13%), Florida (-7%), and Texas (-13%). New Jersey peaked in April 2018, having since declined by 9% through November 2018, the last month for which its data was available. New York appears to have set a new peak in November 2018, following a shallow dip after having previously peaked in February 2018.

Looking closer at California, the total value of existing home transactions in that state fell from $24.4 billion in March 2018 to $21.6 billion in November 2018, accounting for nearly 30% of the national decline through those months. This large share is mainly attributable to the very large size of California's real estate market. The initial estimate for California's aggregate existing home sales for December 2018 is $21.2 billion.

Getting under the hood for California's existing home sales, Zillow's seasonally adjusted data indicates that the number of sales in the state has been declining since peaking over 43,000 in January 2017, falling to 41,000 in January 2018, and down more significantly to 36,000 through the end of 2018. The seasonally adjusted median sale price of existing homes in the state over that time went from $425,000 in January 2017, up to $471,000 in January 2018, which continued to rise until peaking at $491,000 in November 2018. Compared to 2017, prices were no longer rising fast enough to cover the decline in sales that drove down the aggregate valuation of the state's real estate market in 2018.

The combination of rising prices and falling sales numbers indicates that a relative decrease in the supply of affordable homes is behind the change. Contributing to the increased cost of home ownership in the U.S, particularly after March 2018, was the increase in mortgage interest rates from an average of 3.99% in 2017 to 4.54% in 2018, the highest 30-year conventional mortgage rates have been since 2010. The increase in mortgage rates has been heavily influenced by the Federal Reserve's quantitative tightening policies, where the central bank has been seeking to increase the cost of borrowing for Americans directly by boosting short term interest rates and indirectly by shrinking its holdings of U.S. Treasuries and Mortgage Backed Securities.

On the demand side, other contributing factors may be related to more global concerns, where 2018 saw a considerable slowdown in China's economy. That kind of economic deceleration would reduce the number of Chinese citizens seeking to acquire U.S. real estate, which could represent up to 25% of some local market real estate transactions.

Other states have seen bigger percentage declines in sales than California and Texas, where Zillow's data identifies the real estate markets of Arizona, Colorado, Connecticut, Illinois, Louisiana, North Dakota, Oregon, and Washington as heavily hit.

Elsewhere on the Interwebs


Zillow Research. Home Listings and Sales: Median Sale Price, Seasonally Adjusted, State. [CSV Data]. Accessed 25 January 2019.

Zillow Research. Home Listings and Sales: Monthly Home Sales, Number, Seasonally Adjusted, State. [CSV Data]. Accessed 25 January 2019.

Political Calculations. Median and Average New Home Sale Prices. [Online Article]. 18 January 2019.

http://so-l.ru/news/y/2019_01_29_u_s_residential_real_estate_market_peak Tue, 29 Jan 2019 10:53:00 +0300
<![CDATA[U.S. Government Shutdown Ends, S&P 500 Up Less Than 1%]]>

For the S&P 500 (Index: SPX), perhaps the biggest market-moving news of the fourth week of January 2019 came on Friday, 25 January 2019 with the announcement that the latest partial U.S. government shutdown would come to an end. Investors reacted to the news of the end of the 21st federal government shutdown since the 1974 Congressional Budget and Impoundment Control Act first set up the modern budget rules the U.S. government follows by bidding up stock prices, with the index rising 0.85% on the day.

In other words, the federal government shutdown was very nearly a complete non-event where investors were concerned. The standard deviation of the daily change in the S&P 500 and its predecessor indices since 3 January 1950 is 0.96%, where the change in stock prices in response to the news the U.S. government would fully reopen is nearly indistinguishable from the market's daily random noise.

It was however enough to move the level of the S&P 500 closer to the top of the redzone forecast range on our spaghetti forecast chart, which if the index rises above that level, would be a signal that something more interesting is happening in the U.S. stock market.

Alternative Futures - S&P 500 - 2019Q1 - Standard Model - Snapshot on 25 Jan 2019

But will it? That will depend upon the random onset of new information that investors learn next week, with the biggest event likely to come on Wednesday, 30 January 2019 when the Fed concludes its next Open Market Committee meeting, when they might provide guidance to investors on what to expect from them with respect to U.S. monetary policies in the upcoming future.

As for what happened last week, there really wasn't much news to influence U.S. stock prices in the holiday-shortened fourth week of January 2019.

Tuesday, 22 January 2019
Wednesday, 23 January 2019
Thursday, 24 January 2019
Friday, 25 January 2019

Looking to get a bigger picture of the week's events? Barry Ritholtz summarized the positives and negatives from the week's markets and economy-related news.

http://so-l.ru/news/y/2019_01_28_u_s_government_shutdown_ends_s_p_500_u Mon, 28 Jan 2019 10:54:00 +0300
<![CDATA[Another Kind of Math Relationship Problem...]]>

As seen on Reddit....

Math problem from r/funny

The answer is 5.099 feet per second, or if you want to reference a more precise mathematical representation for the answer, they are moving apart at exactly √26 feet per second. Assuming, of course, that they're moving on a flat plane, which means we're neglecting the curvature of the Earth's surface in calculating their relative separation speed.

http://so-l.ru/news/y/2019_01_25_another_kind_of_math_relationship_proble Fri, 25 Jan 2019 10:47:00 +0300
<![CDATA[The World Economy and Atmospheric Carbon Dioxide]]>

It has been a while since we last visited the NOAA's atmospheric carbon dioxide concentration data, which we're interested in as a unique indicator of the relative health of the Earth's global economy. The following chart illustrates the trailing twelve month average of year-over-year changes in the level of CO2 from January 1960 through November 2018, the last month for which the data is available at this writing.

Trailing Twelve Month Average of Year-Over-Year Change in Parts per Million of Atmospheric Carbon Dioxide, January 1960 - November 2018

Following the very strong El Nino event of 2015-2016, which spurred a spike in atmospheric carbon dioxide levels well into 2017, the rate at which CO2 is increasing in the Earth's air has plunged to levels last seen during the Great Recession from 2008 through 2009 and during a subsequent global economic slowdown in 2011-2012, which was particularly notable in China, the world's largest national emitter of carbon dioxide, whose economy has shown signs of another significant slowdown in 2018.

For its part, the world's second-largest national emitter of carbon dioxide, the United States, whose total emissions are a little over half of China's, likely experienced a year-over-year increase in its total CO2 output.

America’s carbon dioxide emissions rose by 3.4 percent in 2018, the biggest increase in eight years, according to a preliminary estimate published Tuesday.

Strikingly, the sharp uptick in emissions occurred even as a near-record number of coal plants around the United States retired last year, illustrating how difficult it could be for the country to make further progress on climate change in the years to come, particularly as the Trump administration pushes to roll back federal regulations that limit greenhouse gas emissions.

The estimate, by the research firm Rhodium Group, pointed to a stark reversal. Fossil fuel emissions in the United States have fallen significantly since 2005 and declined each of the previous three years, in part because of a boom in cheap natural gas and renewable energy, which have been rapidly displacing dirtier coal-fired power.

Yet even a steep drop in coal use last year wasn’t enough to offset rising emissions in other parts of the economy. Some of that increase was weather-related: A relatively cold winter led to a spike in the use of oil and gas for heating in areas like New England.

But, just as important, as the United States economy grew at a strong pace last year, emissions from factories, planes and trucks soared. And there are few policies in place to clean those sectors up.

“The big takeaway for me is that we haven’t yet successfully decoupled U.S. emissions growth from economic growth,” said Trevor Houser, a climate and energy analyst at the Rhodium Group.

Indeed, the lack of such decoupling almost everywhere in the world is why we're able to use atmospheric carbon dioxide data to assess the relative health of the world's economy. Meanwhile, the U.S.' apparent increase in CO2 emissions as its economy has grown in 2018 stands in contrast to the negative economic situation developing elsewhere in the world, which could soon contribute to dragging the U.S. economy down now that the main period of benefit from the stimulus of its December 2017 tax cuts has passed. John Whitehead puts the apparent spike in U.S. carbon dioxide emissions into a longer term context:

The headline is likely an overstatement. Did emissions spike? Emissions in 2018 are still below the pre-Great Recession peak and below several years since the decline began (again, due to the Great Recession). There may be some sort of cyclical pattern here too. In other words, there have been three "spikes" since the peak. The most recent may be related to the 2018 tax cut. As that wears off we might get closer to the Copenhagen Accord target in 2019 and a recession in 2020 might really nail it.

Like it or not, the health of the world's economy will be correlated with atmospheric carbon dioxide levels for quite some time to come.


National Oceanographic and Atmospheric Administration. Earth System Research Laboratory. Mauna Loa Observatory CO2 Data. [File Transfer Protocol Text File]. 6 December 2018.

http://so-l.ru/news/y/2019_01_24_the_world_economy_and_atmospheric_carbon Thu, 24 Jan 2019 11:07:00 +0300
<![CDATA[To Whom Does the U.S. Government Owe Money?]]>

From the end of its 2017 fiscal year to the end of its 2018 fiscal year, the U.S. government's total public debt outstanding increased by $1,271 billion, or $1.3 trillion, to reach a total of $21,516 billion, or $21.5 trillion. Put a little bit differently, the U.S. national debt grew at an average rate of nearly $3.5 billion per day on every day of the government's 2018 fiscal year.

That's a very large number, but 2018 was only the sixth largest annual increase for the U.S. national debt in terms of nominal U.S. dollars. Larger increases were recorded during President Obama's tenure in office in 2012 ($1,276 billion), 2010 ($1,294 billion), 2011 ($1,300 billion), 2009 ($1,413 billion), and 2016 ($1,423 billion).

So it's not an accident that the U.S. national debt has risen to $21.5 trillion, where these six years combined account for 37% of the official U.S. national debt. But to whom does the U.S. government all that money?

The following chart breaks down who the U.S. government's major creditors were at the end of its 2018 fiscal year, which is based on preliminary data that will be revised in upcoming months.

FY 2018 (Preliminary): To Whom Does the U.S. Government Owe Money?

According to the U.S. Treasury Department, the U.S. government spent some $779 billion more than it collected in taxes during its 2017 fiscal year. The difference between this figure and the $1,271 billion that the total national debt officially rose can be attributed to the government's net borrowing to fund things like Federal Direct Student Loans, which have combined to account for over $1.2 trillion of the government's $21.5 trillion debt, or 5.7% of the total public debt outstanding since 2010.

Overall, 71% of the U.S. government's total public debt outstanding is held by U.S. individuals and institutions, while 29% is held by foreign entities. For FY2018, China has retained its position as the top foreign holder of U.S. government-issued debt, with directly accounting for 6.2% between institutions on the Chinese mainland and Hong Kong, even though the country has been reducing its holdings of U.S. government-issued debt.

Japan ranks as the second largest foreign holder of the U.S. national debt, with the U.S. owing Japanese institutions 4.8% of its total debt. After that, the European international banking centers of Belgium, Ireland, and Luxembourg combine to account for 3.2% of the U.S. national debt, followed by Brazil at 1.5% and the United Kingdom with 1.3%.

The largest single institution holding U.S. government-issued debt is Social Security's Old Age and Survivors Insurance Trust Fund, which is considered to be an "Intragovernmental" holder of the U.S. national debt, and which holds 13.0% of the nation's total public debt outstanding. The share of the national debt held by Social Security's main trust fund has begun to decline as that government agency cashes out its holdings to pay promised levels of Social Security benefits, where its account is expected to be fully depleted in just 16 years. Under current law, after Social Security's trust fund runs out of money in 2034, all Social Security benefits would be reduced by 23% according to the agency's projections.

The largest single "private" institution that has loaned money to the U.S. government is the U.S. Federal Reserve which, like China, has been reducing its holdings of U.S. government-issued debt. At the end of September 2018, the Fed held just under 11% of the U.S. government's total public debt outstanding. In FY2018, other U.S. institutions such as pension funds and insurance companies have significantly increased their holdings of U.S. government-issued debt as interest rates have risen.

Data Sources

U.S. Treasury. The Debt To the Penny and Who Holds It. [Online Application]. 28 September 2018.

Federal Reserve Statistical Release. H.4.1. Factors Affecting Reserve Balances. Release Date: 26 September 2018. [Online Document].

U.S. Treasury. Major Foreign Holders of Treasury Securities. Accessed 17 December 2018.

U.S. Treasury. Monthly Treasury Statement of Receipts and Outlays of the United States Government for Fiscal Year 2018 Through September 30, 2018. [PDF Document].

http://so-l.ru/news/y/2019_01_23_to_whom_does_the_u_s_government_owe_mon Wed, 23 Jan 2019 11:00:00 +0300
<![CDATA[Fed Hawks Capitulation, China Stimulus Optimism Drive the S&P 500]]>

The third week of January 2019 saw the S&P 500 (Index: SPX) rise sharply, buoyed by the capitulation of the Fed's interest rate hike-loving hawks and the actions the Chinese government is taking to stimulate its economy.

The following chart shows the trajectory of the S&P 500 during the week that was....

Alternative Futures - S&P 500 - 2019Q1 - Standard Model - Snapshot on 18 Jan 2019

In Week 3 of January 2019, the S&P 500 generally tracked upward within the range indicated by the redzone forecast shown on the chart, which assumes that investors will largely maintain their forward-looking focus on the current quarter of 2019-Q1 through much of the quarter.

But what if that changes? We've already completed one Lévy flight event in 2019, which coincided with investors shifting their attention from the distant future quarters of 2019-Q3/Q4 back to the present quarter of 2019-Q1, so what would it mean if investors collectively refocus their attention toward a different point of time in the future and cause a new Lévy flight event to take place?

The dividend futures-based model we use to develop the alternate futures forecast chart gives us an idea of where the ceiling and the floor for the S&P 500 are at this time, assuming no major changes in expectations for future dividends in 2019 and no market-disrupting noise events.

  • If investors shift their focus toward 2019-Q2, the S&P 500 has a potential upside of roughly 7% from where it closed on 18 January 2019, give or take 3%. Based on previous Lévy flight rallies, the rise would most likely be powered by a significant short squeeze.
  • If investors instead shift their attention toward 2019-Q3 or 2019-Q4, the S&P 500 could see a relatively rapid 10% decline, again give or take a few percent, in a Lévy flight correction. Should this happen, it would likely come through a cascade of sell orders, enabled by buy orders at much lower stock prices placed as hedging strategies.
  • If investors remain focused on the current quarter of 2019-Q1, then stock prices are likely to mostly move sideways, tracking with the redzone forecast indicated on the chart above.
  • Finally, there's a fourth option, where investors split their focus between two different points of time in the future, in which case, the level of the S&P 500 will fall somewhere in between the three main alternate future trajectories we've described.

What events could prompt investors to shift their forward-looking focus to any of these points of time? The list could be as long as your imagination, but news events regarding more Chinese government stimulus actions, a trade deal between the U.S. and China, upside surprises for future earnings, et cetera. The random onset of market-moving news events is what gives the stock market its quantum random walk characteristics.

Speaking of which, here are the bigger headlines that we noted for the trading week ending 18 January 2019, where next week's list should be shorter because of the market's closure for the Martin Luther King Day holiday.

Monday, 14 January 2019
Tuesday, 15 January 2019
Wednesday, 16 January 2019
Thursday, 17 January 2019
Friday, 18 January 2019

Elsewhere, Barry Ritholtz identified the week's positives and negatives for markets and the economy.

Sharp-eyed readers will recognize that we've adjusted the range of the vertical scale on the alternate futures chart and that the redzone forecast, along with several of the other trajectories, has been angled upward with respect to last week's version. This change has occurred because there was a positive change in the S&P 500's quarterly dividends expected for 2019-Q2, which increased from $14.40 per share to $14.65 per share on 17 January 2019. Let's not forget that the level of stock prices are still primarily driven by basic fundamentals!

http://so-l.ru/news/y/2019_01_22_fed_hawks_capitulation_china_stimulus_o Tue, 22 Jan 2019 10:30:00 +0300
<![CDATA[Median and Average New Home Sales Prices]]>

There is a remarkably linear relationship between median and average new home sales prices in the United States. The following chart reveals that pattern for annual data reported by the U.S. Census Bureau for new home sales from 1963 through 2017 on a logarithmic scale.

U.S. Average Versus Median New Home Sale Prices, 1963-2017 (Log-Log Scale)

The amazing thing about this relationship is that it has held very consistently even as home prices in the U.S. have experienced both rising and falling trends through these years, where median and average home sale prices have generally increased and decreased in sync with each other. So much so that if we only had the median sale price data for a given period, we could reasonably estimate the average sale price for the same period within 2.7 percent of its recorded value about 68 percent of the time, and within 8.2 percent of its recorded value about 99% of the time.

While the relationship behind this math was developed using new home sales price data, it appears to also hold for existing home sales data with a similar margin of error.

Try it for yourself! Just enter the median new home sales prices for your period of interest in the following tool, and we'll take care of the rest! [If you're reading this article on a site that republishes our RSS news feed, please click here to access a working version of the tool on our site.]

Median U.S. Home Sale Price Data
Input Data Values
Median Sale Price

Average U.S. Home Sale Price
Calculated Results Values
Estimated Average Sale Price

For the default data, for a median home sale price of $220,000, we would expect the average home sale price in the U.S. in the same period of time to fall within several percent of $267,100, the value our tool finds after rounding to the nearest $100 increment.

Altogether, the relationship we've now established between median and average home sale prices in the United States enables a particular line of analysis that we've been seeking to do for some time, which hasn't been possible because the relative lack of availability of data for average home sale prices. Which is a strange thing to say because usually when we're looking for data that many reporting agencies don't realize may involve lognormal distributions, it's a lot easier to find averages than it is to get medians. It's a real credit to the outfits that do recognize this pattern in real estate prices that they properly report median sale price data as being representative of the prices that most home buyers are paying, where we hope they come to recognize that mean sale prices provide additional valuable information about these markets that should also be tracked and reported.


U.S. Census Bureau. Median and Average Sales Prices of New Homes Sold in United States. [PDF Document]. 23 April 2018. Accessed 12 January 2019.

http://so-l.ru/news/y/2019_01_18_median_and_average_new_home_sales_prices Fri, 18 Jan 2019 11:25:00 +0300