Economics Entries
Wednesday, 13 February 2008
I’m back in the Bay Area for work, and out of curiosity I thought I’d check in on the housing market here. After updating my super-secret source of housing sales, I tried something new; charting price paid for square foot by county. This was on a tip from Mark Mansour, a fellow recent Melbourne homebuyer; although it’s not perfect, valuing just by land size is a simple, frank and easy-to-calculate assessment of price. Here are the results; I filtered...
Monday, 16 October 2006
I’ve been playing with sales data for houses in the Bay area for a while, and have always wanted to come up with an index of same-home sales — reputed to be one of the more accurate ways to do an index, because you’re not having to compensate for differences in intrinsic value between different houses. I’m kind of stuck on that*, but in the meantime, the Flipperdex is a list of same-house sales in the Bay area, sorted...
Sunday, 23 April 2006
The Economist gives a heads-up [subscription required] about the Chicago Mercantile Exchange’s plans for housing derivatives; In the next few weeks, the CME is likely to open trading in financial futures and options linked to American house prices. Investors who want to hedge the risks of residential property—or merely to speculate on the market’s direction—will be able to bet on a rise or drop in a house-price index, without having to buy or sell bricks and mortar. They’re starting...
Sunday, 9 April 2006
Most discussion you see about the housing market these days tends to focus on a) whether there’s a bubble (reliable sources say yes, at least in many places) and b) when and how it will pop (it already is, and agonisingly slowly). This little nugget from The Australian makes me wonder; PLANS by one in five Australians to downsize the family home to fund their retirement may be risky and could cause a market glut. The report by Citibank...
Sunday, 26 March 2006
A few snippets from the day; 1) The Wall Street Journal reports on the divergence between productivity and wages; Since the end of 2000, gross domestic product per person in the U.S. has expanded 8.4%, adjusted for inflation, but the average weekly wage has edged down 0.3%… Since the end of the recession of 2001, a lot of the growth in GDP per person — that is, productivity — has gone to profits, not wages. This reflects workers’ lack...
Wednesday, 15 February 2006
So, a few weeks ago, I was sitting in the Galleria with Pete and Brian, having a coffee and talking about work. When, up comes two women with clipboards, asking us to take a survey. We’re bored, and want distraction, so why not? Turns out they’re trying to figure out the best name for their Web site that allows people to loan each other directly, bypassing banks, and creating a true market. We got excited about the possibilities; I...
Wednesday, 21 December 2005
Every parent should take a flip through the OECD’s Education at a Glance*, their annual look at the state of learning in most industrialised countries. Why? First of all, it’s a wonderful way to cut through a lot of FUD and local politics when you’re trying to figure out how well your kids are being educated. While no statistics are perfect (or often even close), it’s a whole lot better to make measurable comparisons between systems than it is...
Tuesday, 6 December 2005
Bloomberg calls it; In the U.S. bond market, the housing bubble has burst. Bonds backed by home loans to the riskiest borrowers, the fastest growing part of the $7.6 trillion mortgage market, have lost about 2.5 percent since September on concern an 18-month rise in interest rates may force more than 150,000 consumers to default. “We’ve been hearing about risks of a house price bubble, easy credit and loans to borrowers that really don’t qualify, and now in the last...
Thursday, 25 August 2005
It seems that the debate has switched from if there’s a housing bubble to when and where it will pop. “Americans pay for their houses with money they borrowed from the Chinese.” — Paul Krugman...
Thursday, 25 August 2005
Does anybody know of a mutual fund manager who also has a blog? I’d be interested if someone in the financial industry had such a rich channel to their customers (and potential customers). It probably won’t happen due to SEC rules, etc. — but it sure would be nice....
Saturday, 23 July 2005
The FT Global 500 is pretty much what you see when you look up “capitalistic orgy” in the dictionary. It’s a compilation of the largest 500 mega-corporations in the world, as measured by the market. So, when I picked up the print edition while overseas last month, I was frankly a bit surprised to see an openly soul-searching article entitled “Fair shares?” by FT’s management editor, Michael Skapinker. It relates the concerns of those who criticize unbridled capitalism; Every...
Thursday, 23 June 2005
As you might guess, I’m not too keen on buying a house at the moment, due to what I (and others) perceive to be a bubble in prices. That’s a situation that will undoubtedly correct itself in the long term. However, the Supreme Court has just made buying a house in the US a much more risky proposition, and because of the way that the legal system works here, there isn’t much recourse. In a nutshell, they’ve decided that...
Monday, 20 June 2005
This week the Economist continues casting doubt upon the notion that housing prices will continue going up, up, up: This boom is unprecedented in terms of both the number of countries involved and the record size of house-price gains. Measured by the increase in asset values over the past five years, the global housing boom is the biggest financial bubble in history. The bigger the boom, the bigger the eventual bust. They then continue to meticulously rip through the...
Sunday, 22 May 2005
After hearing a review on NPR and reading the Economist’s, I was (as was once said) with child to read Freakonomics. After finding myself in a queue of 411 other people putting it on hold in the Peninsula Library System, I broke and bought it. This book spells out perfectly why I’m so interested in economics; it’s not the numbers or the money, it’s the interplay of incentive and action. From the introduction; Morality, it could be argued, represents...
Sunday, 15 May 2005
Last week, the Australian government announced a new budget. It included a number of tax cuts that were even more ambitious than expected. To help figure out who these cuts benefit, I’ve fed the rates that will take effect in the 2006-2007 tax year, along with the old ones for the 2004-2005 tax year (i.e., those with the $70,000 phase-in for the 47% rate), into an Excel spreadsheet. The results for a single-earner family (which, for these purposes, are...
Tuesday, 10 May 2005
Social Security represents a pact between generations—a financial and social commitment among people of all ages. — US Social Security Administration Although George Bush has caused a brouhaha with his ill-defined plans to reform Social Security, it’s actually part of a larger problem that’s been known about for some time. In a nutshell, demographic shifts (Americans are retiring earlier, living longer and having fewer children) and the rising costs of health and aged care mean that the pact between...
Sunday, 1 May 2005
In the interest of equal time, two quotes attributed to Keynes; If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has. The market can stay irrational longer than you can stay solvent. P.S. That’s not to say he’d plop down a cool million for a 1,300 square foot two-bedder....
Saturday, 5 March 2005
Carlos sent me an interesting summary page about the Bay area housing bubble. I wish there were more links substantiating the assertions there (a few ring false), but it is thought-provoking. I happen to have a bit more specific data; namely, the sales figures for houses in the Bay area over the past few years. I’m interested in the affordability of a 3-bedroom house (or condo, or apartment) in San Mateo county, and this is what a little Python scripting...
Saturday, 5 February 2005
Listening to people talk about the economy -- and the housing bubble in particular -- made me wonder; what happens after it bursts?
Friday, 26 November 2004
Stephen Roach, the chief economist at investment banking giant Morgan Stanley, has a public reputation for being bearish. But you should hear what he’s saying in private. Roach met select groups of fund managers downtown last week, including a group at Fidelity. His prediction: America has no better than a 10 percent chance of avoiding economic “armageddon.” Press were not allowed into the meetings. But the Herald has obtained a copy of Roach’s presentation. A stunned source who was...
Monday, 6 September 2004
In BusinessWeek, Chris Kenton brings us a thoughtful piece about the Faustian bargains that localities are making in the name of progress; [A]t the end of the day, we are giving up a society in favor of an economy. When every decision — even decisions that cut to the core of our community — are dictated by the most immediate profit opportunity, it makes sense to tear down a city in order to build a mall. It makes sense...
Thursday, 2 September 2004
...I have learned that to be right and useful, one must accept a continuing divergence between approved belief -- what I have elsewhere called conventional wisdom -- and the reality. And in the end, not surprisingly, it is the reality that counts.-- John Kenneth Galbraith, "The Economics of Innocent Fraud"I'm just starting this book, but it's pretty thought-provoking so far.
Wednesday, 25 August 2004
Today’s Wall Street Journal has an article, “Hot Housing Market Simmers Down.” I can’t reference it directly because I’m not a subscriber, but it basically notes that, according to the Association of Realtors, existing single-family home sales declined 2.9% in July, while in California the housing inventory has increased to 3.3 months, surpassing three months for the first time since February 2003. Of course, the Realtors are trying to spin this like crazy (hint: just because “inventories are depleted” doesn’t...
Thursday, 19 August 2004
Alfred Marshall, who is credited with turning economics from a sideline to a proper discipline of its own, had this to say: (1) Use mathematics as a shorthand language, rather than as an engine of inquiry. (2) Keep to them till you have done.... (4) Then illustrate by examples that are important in real life.
Friday, 2 July 2004
To develop a previous theme; As markets become more transparent and liquid, it becomes more easy to see opportunities for arbitrage. A wide-scale example of this (to stretch the definition of “arbitrage” a bit) can be seen if you consider the growing ease of moving between countries, and therefore taxation regimes, due in part to globalisation. In other words, free trade affects jobs not only by moving jobs, but also by moving people, and when people have a choice about...
Wednesday, 30 June 2004
HSBC has apparently been indiscreet enough to call it a bubble, but I can’t find the actual report (“The U.S. Housing Bubble — The case for a home-brewed hangover.”). Anyone have a link? Prices are 10 to 20 percent too high and can overshoot on the way down. […] We think the party stops by mid-2005. A series of rate hikes will cause a reassessment of likely future house price risks and its associated debt, thereby triggering housing’s fall. Morgan...
Monday, 28 June 2004
If you work in the United States or intend to retire there, grab yourself a copy of today’s Wall Street Journal, which contains a special section that covers this topic with unusual lucidity....
Monday, 31 May 2004
Benjamin Wallace-Wells’ “There Goes the Neighborhood” captures what many have been saying for a while now; it’s a bubble, a bubble, a bubble....
Sunday, 2 May 2004
I probably shouldn’t go around interpreting OECD statistics, as I’m not an economist (I just play one on the Web). However, the OECD’s Centre for Tax Policy and Administration has made some excerpts of its 2002/2003 edition of “Taxing Wages” available, and there’s some interesting reading therein. The Man Giveth, The Man Taketh Away Let’s start by comparing taxation and wages in developed countries. The average production worker in the United states will pay 16% of their gross wages in...
Sunday, 2 May 2004
An idea for the LazyWeb: Purchasing Power Parity (PPP) is a measure of how much goods and services cost in different countries, irrespective of exchange rate; it’s a way to compare the true cost of living in different countries. The Economist popularised this concept with its Big Mac Index. Why not use the Web to get a faster and more fine-grained indicator? Cost comparison purposes like Froogle could be used to automatically index the cost of goods in different countries...
Sunday, 15 February 2004
SPF is getting a lot of attention, but it’s got some pretty fundamental limitations, as well as some shorter-term practical problems. What else is there? An approach that makes sense is to acknowledge that spam is in the eye of the beholder; rather than finding technical ways to identify unsolicited mail, just charge spammers when you don’t want their mail; economics takes care of the rest. The Economist discusses this type of approach in its latest edition (subscription required). In...
Saturday, 14 February 2004
I know little about the politics or economy of Canada, but a proposal by Tony Clement (Conservative) is interesting. Mike Moffatt explains; The innovative “JumpStart” program he’s proposed would tie the income tax rate that someone pays to their lifetime earnings. A person, let’s call him “Mike”, who has just entered the workforce is likely to have very little savings. If JumpStart were enacted, Mike would not pay any income taxes until he reaches $250,000 of lifetime earnings. This would...
Tuesday, 13 January 2004
This week’s Economist has an interesting article about parental leave in Sweden (alas, the Web version requires a subscription), a long-standing and generous benefit; they can take up to 13 months of leave, paid at 80%. Furthermore, it’s possible to divide this time between both parents, and it can be taken until the child is eight. In combination with the Swedes’ excellent child and health care options, this provides a good foundation for a society; if nothing else, The Economist...
Saturday, 20 September 2003
Concise and witty, as always....
Tuesday, 3 September 2002
I've been following the Economist's new Global Housing Index with some interest. They seem to have softened their view somewhat, but I'm hearing more about a global housing bubble recently - first, in a WSJ article about the author of "Manias, Panics and Crashes" (which I'm now reading, alas, too late) and later in a story on NPR. It is interesting that there aren't good tools for tracking the state of real estate, even though there's more money there than...
