Kamis, 31 Mei 2012

New Jobless Claims Continue Rising

It has been several weeks since we last looked at the trend in the number of new jobless claims being filed in the U.S. each week. Our chart below shows how things stand through the initial report for 19 May 2012, which has about a 98% chance of being revised upward later today:

The good news is that the number of initial unemployment insurance benefit claim filings since 11 February 2012 is rising at an average rate of 1,005 per week, but really, that's only good news in contrast to the average increase of 2,497 per week it was clocking just over one month ago!

As we've noted before, gasoline prices appear to have the ability to shift the trajectory of the trend in the number of new jobless claims filed each week once they rise above an inflation-adjusted $3.50 per gallon. Above this level, it would seem, the combination of the increased costs of doing business and the reduction in revenues as consumers are forced to use their limited dollars to buy gasoline instead of other things they might rather have can affect the bottom line of businesses by enough to affect their employee retention decisions.

If we're lucky in the short term, we'll see if the rate of layoffs that prompt new unemployment insurance claim filings shifts to a new, more positive trajectory if gasoline prices fall back below the $3.50 per gallon mark in the weeks ahead.

But then, we'll be unlucky in the longer term because that will mean that the world demand for oil will have dropped enough to make that possible, as much of the world appears headed for recession. That of course will have consequences for the U.S. economy.

In the meantime though, we continue to expect the U.S. economy will rebound a bit in the third and fourth quarters of 2012, after passing through the equivalent of a microrecession during the current second quarter. The story for 2013 will be very different, we're afraid....

Rabu, 30 Mei 2012

Why California​n Rabbits Are So Popular

Californian rabbits are a medium-sized rabbit breed (adults weigh 7-10 pounds or 3.5-4.75 kilos, with the does being heavier) that was specifically developed for meat and fur production by US breeders in the 1920's. The breed was developed by crossing Himalayan, Standard Chinchilla and New Zealand white rabbits.

As of now, it is the second most popular meat producing rabbit breed in the world, with only the New Zealand breed ahead of them.  Californian rabbits still look very similar to the Himalayan rabbit with a predominantly white body and black on the feet, nose, ears and tail. They have pink eyes.

The body of a Californian rabbit is plump but fine-boned, giving it a high meat-to-bone ratio which is essential for good meat rabbit breeds. Californians are so popular as a meat breed because they are truly an excellent meat rabbit breed. They usually produce large litters of 8-12 kits, which have a fast growth rate to fryer size (4-5lbs) in 8-12 weeks. They are also usually good mothers.

But, Californians may not be so suitable for children to assist with because they can be difficult to handle by an inexperienced person due to their size. And they are sometimes very moody and aggressive.

The average life span of a breeding Californian rabbit is 5 to 6 years.

To learn more about Californian rabbits, find breeders or learn about rabbit shows, visit http://www.nationalcalclub.com/

All the best,

Exotic Sausages

Exotic sausage is a term used to describe sausages made from exotic game meats and/or ingredients not normally found in traditional sausages. For hundreds of years, old world sausage makers have dominated the market serving common varieties of links such as hot or sweet Italian, bratwurst, kielbasa, salami and more. More recently though, a wave of haute sausage varieties have appeared on the market.


Exotic Sausage Types
Some of the more inventive sausages include meats such as:
  1. Emu Sausage
  2. Ostrich Sausage
  3. Elk Sausage
  4. Yak Sausage
  5. Rattlesnake Sausage
Other varieties which seemed unique 10 years ago like Wild Boar Sausage or Rabbit Sausage have become almost mainstream choices in some larger metropolitan areas.

Rabbit Sausage Recipe

Sausage are a diverse and delicious breakfast accompaniment, and they're not all that hard to make. You do need a few pieces of equipment, though, to get the job done right. But, if you don't have all the extra stuff to make sausage, you can also make this recipe into patties and fry them up.

  • 5 pounds rabbit meat
  • 1-2 pounds pork fat
  • 1 tablespoon coarse salt
  • 2 tablespoons coarsely ground black pepper
  • 3 tablespoons fennel seeds
  • 1 tablespoons crushed red pepper flakes (can be adjusted if you prefer it milder/hotter)
  • natural hog casings
  1. In a large bowl, combine the meat and all the seasonings. Mix well. Test for seasoning by frying a small patty - taste and correct seasoning. (This frying and tasting is very important).
  2. For those of you who butcher a pig - use the fresh side meat for the fat portion. If you don't have access to this meat source, ask a butcher to save you some fat from around the kidneys of a hog. This is the best fat if you don't have side meat. Don't use bacon for the fat!
  3. Stuff the casings with the sausage mixture.  
For more information on rabbit sausages in Kenya, click on Chester Rabbit Farm. 



It would be something unfair if i wouldn't have mentioned the training that took place at Ngong Multiplication Center(Ministry of Agriculture,Kenya) in August last year, where 60 rabbit farmers were certified by the ministry after a 2 weeks long training on commercial rabbit enterprise. They were trained on key areas such as:
1. Types of rabbit Breeds and Breeding
2. Proper Record Keeping
3. Slaughtering and cooking of rabbit meat
4. Rabbit diseases and Treatment
5. Marketing

The training was well organized,and many of the farmers are doing well by applying skills acquired through the training. For more information on rabbit rearing at the ministry, contact madam Komen who works at the multiplication center (0720899299)

If you wish to place orders, you are most welcome to check our commercial website: www.kerayicch.co.ke

Don’t even think about starting to raise meat rabbits before you read this!

Do you want to eat healthier, keep more hard-earned money in your own pocket and grow organic meat in you own backyard?

Did you ever decide you wanted to start raising your own small livestock like chickens, geese or goats but a little research brought you to the conclusion that it was too difficult, costly and time consuming? I’m here to tell you that I’ve done all the research for you about raising meat rabbits and I know you will not disappointed by just how easy it is.
Food prices are constantly climbing skyward and the production chain seems to be getting worse; but YOU can control all of that by raising your own meat and other food at home.

You’ve considered chickens, geese, goats, pigs, mini-livestock and more, but in the end you find yourself worried that they require too much time, space, money and other know-how in order to successfully raise them to regularly feed your family. Maybe you think hunting is your answer, but wouldn’t it be more reassuring to know that you can just open your back door, pull a rabbit out of the cage and have it ready for cooking a few minutes later? Raising meat rabbits not only will produce a healthy food source for you and your family, but it is also easy and you might even find it fun.

The price of raising chickens, pigs, cows and other livestock continues to rise because most of their own food source (corn) is now going into ethanol production. Rabbits eat hay, oats and other grains – nothing used for ethanol. Plus you can grow all of these elements yourself to make your own completely organic rabbit feed. I’ll tell you how it’s done.

Rabbits can also survive on table scraps, lawn clippings and tree branches – people who lived through the Great Depression and in third world countries can confirm it.

The U.S. Agricultural Department expected food prices to have been rising 4 – 5% every year. The average price for one pound of chicken has tripled since 1998 and the average price for beef is also up almost 50% since 1996. Do want to keep giving your money to big business for their sub-par foods grown on factory farms or would you rather keep your cash at home where it belongs? If you grow your food yourself you’ll never have to worry about the next bacterial outbreak that streams through the news headlines because you already know your food source is safe.

Pound-for-pound, rabbit meat has FAR MORE protein and LESS fat than other meats. This means you’ll not only be spending less for food, but you’ll have the extra health benefit too!
Calories, Protein & Fat Values for Meat per 100 grams (3.5 oz)

Fat (g)
Beef (lean)
Pork chops (grilled)
Pork leg (roast)
Lamb breast (roast)
Lamb chops (grilled)
Lamb cutlets (grilled)
Turkey (roast)
Duck (roast)
Goose (roast)
Pheasant (roast)
Do you wish to make orders!!! This is the place to be, you are just one step close by clicking on this link: www.kerayicch.co.ke

Economic Growth and the Chains of Debt

Does the size of a country's national debt with respect to the size of its economy affect its economic growth prospects?

To find out, we created the following chart showing a relationship between the inflation-adjusted economic growth rates for the member nations of the Organization of Economic Cooperation and Development (OECD) against their "publically-held" debt-to-GDP ratios in 2011:

OECD Nations: Real Growth Rate of GDP vs 'Publically-Held' Portion of National Debt to GDP Ratio, 2011

What we see is that high levels of national debt with respect to the size of a nation's economy, would appear to have a medium-strength effect upon its real rate of economic growth. For every 10% increase in a country's national debt with respect to its GDP, it would appear that its real economic growth rate is reduced on average by roughly 3/8th of a percent. A 26% increase in a nation's debt-to-GDP ratio then would coincide with the shaving of a full percent off its real GDP growth rate.

That matters because economic growth is exponential. A nation whose economy grows at an average rate of 3% per year will double in size in roughly 24 years. A nation whose economy grows a full percent less than that at an average rate of 2% per year will take 36 years to double in size. The difference between the two growth rates is very noticeable.

Looking at the United States' position on the chart, we note that the debt indicated in the chart applies only to the "publically-held" portion of its national debt - if we included the "intragovernmental" portion of its national debt, as would represent a more correct accounting of how much money the U.S. government has really borrowed, it would be over 100% of GDP in 2011.

Data Sources

CIA World Factbook. Country Comparison: Public Debt. Accessed 27 May 2012.

CIA World Factbook. Country Comparison: GDP - Real Growth Rate. Accessed 27 May 2012.

Less than 48 Hours Left in Young Farmers Idea Contest


We appeal to our followers and bloggers to endorse the KERAYI PROJECT in the ongoing Africa Rural Connect Competition.

Click on the above link for more direction.

Selasa, 29 Mei 2012

Rabbit Meat Salad

spicy rabbit meat salad
Do you rear rabbits? How about turning it into dinner meal. Rabbit meat salad, a bit like the classic tuna or chicken salad is a delicious way to give leftover rabbit meat a new life. Spread this on your favorite homemade bread slices or hoagie rolls. You can even add it to a fresh bed of lettuce for a nice little protein kick.





  • 2 cups coarsely chopped cooked rabbit meat
  • 1/4 cup chopped sweet pickles
  • 1/2 cup chopped celery
  • 1 tablespoon chopped onion
  • 1/2 cup diced cooked potatoes
  • 1/2 teaspoon salt
  • 1 tablespoon liquid from sweet pickles
  • 1/2 tablespoon lemon juice
  • 1/4 cup mayonnaise or other thick salad dressing


  1. Mix first six ingredients lightly but thoroughly.
  2. Blend pickle liquid and lemon juice into dressing and mix with other ingredients.
  3. Chill for an hour to blend flavors.
Makes 4 servings, 3/4 cup each. 
You dont know where to get rabbit meat? Then click on this link: Make Rabbit a Habit


Welcome to Kerayi-cch blog. Here we provide resourceful information about commercial rabbit keeping in Kenya. Those willing to get regular updates are encouraged to join as blog members.

Apart from this, we have our commercial site: www.kerayicch.co.ke where you can place orders after which you shall be contacted to satisfy you as a customer. Our product line is as follows. Kindly click the links to direct you to our commercial site.
Rabbit Pelts
Live Hybrid Rabbits

Low Cholesterol Rabbit Meat

 Thank you and looking forward to serve you better.

S&P 500 Stock Prices, Dividends per Share Converging As Expected

In case you're coming back from the Memorial Day holiday weekend in the U.S. with the question "Hey, are stock prices about where they should be right now?", we're happy to answer your question as follows: "Why, yes, stock prices are indeed about where they should be right now!"

As proof, here's the chart that says so, where we observe that the average change in the growth rate of stock prices as measured by the S&P 500 in May 2012 has just about converged with the long-established expected change in the growth rate of the index' underlying dividends per share that coincides with investor expectations for the fourth quarter of 2012:

Accelerations of S&P 500 Average Monthly Index Value and Trailing Year Dividends per Share (and Futures as of 29 May 2012)

We'll leave it as an exercise to our readers to divine where stock prices will go on average in June 2012. Nearly all the information you need is presented in the chart above - you just need to make an assumption about how much noise there will be in the stock market during that month!...


Meat Rabbits News
Teaching you everything you need to know about raising rabbits to survive  

Am an ardent follower of Tifanny's raising rabbit site, a killer site that provides  up to date information on all maters about rabbits. Here are some leads for making rabbit cages:

Homemade Rabbit Cages
Plans for conventional and Quonset-style wire rabbit cages with the dimensions 30-inches deep, 36-inches long and 18-inches deep.

Rabbit Houses

Six or Twelve Cage Rabbit House - North Dakota State University
8' x 8' Rabbit House for 6 cages in single rows or 12 cages in double rows
Expandable Eight Cage Rabbit House with Pole Construction - North Dakota State University
8' x 8' Rabbit House for 6 cages in single rows or 12 cages in double rows

Commercial-Scale Rabbitries

Four-Row Caged Rabbit House Plans - Mississippi State University 
An equivalent of 64 - 30"x30" or 52 - 36"x30" cages for does and young plus 2 - 24"x30" cages for bucks can be installed.
Six-Row Caged Rabbit House Plans - Mississippi State University 
An equivalent of 108 - 30"x30" or 90 - 36"x30" cages for does and young plus 12 - 24"x30" cages for bucks can be installed.

Rabbit Hutches

Pequoda's Rabbit Hutch  -Mother Earth  News
Plans to simply build a two-cage rabbit hutch which sits on blocks. Complete diagrams of the hutch found in the Image Gallery.
Single-Row Rabbit Hutch  - LSU AG
Two -cage rabbit hutches.
Single and Double Deck Rabbit Houses - North Dakota State University
Two and four cage rabbit hutches. Includes plans for a nest drawer as opposed to a nest box.

To make orders on either live rabbits or rabbit meat, check our main commercial site: www.kerayicch.co.ke 
All the best,

Senin, 28 Mei 2012


Kerayi rabbit Processing Limited is proud to announce that it has been shortlisted to participate in the tandaa digital content grant, under the ministry of Information and Technology. We are supposed to come up with a system to address the rabbit value chain. i believe that through support from the project members we are capable of doing this. I therefore encourage you to identify the challenges you are facing, which you feel the system should address.

Time to make serve rabbit meat in our dinning tables,place an order in our commercial link:


A picture is worth a thousand words. One farmer, Mr. Onyango in the rural Siaya county is making a bounty on rabbit rearing. He says he sells his rabbits and carvies to the villagers who wish to purchase for meat or to rear. He says he makes enough money to cater for some of his basic needs.

"Most people here have always like rabbit meat, but it has been hard to find them nowadays," says Mr. Onyango,"I sell to them the rabbits for meat since they take it as game meat"

To make an order of rabbit meat within Nairibi follow us on our commercial link: www.kerayicch.co.ke

We need more of rabbit meat in our dinning tables: Know the reasons why...

Kenyans need to embrace the high nutritional value rabbit meat has, taking in to consideration the current surge in lifestyle diseases in the urban and suburban towns of Kenya.

Lifestyle diseases generally kill more men than women, and at a younger age, while women pay the balance through high rates of maternal deaths.
Obesity, long established as a major health risk factor, is also not shared proportionally among Kenya with women carrying more weight than men. Among other things, poor eating habits is key to this alrming surge.

More rabbit meat need to be served in our dinning tables, considering the health risks associated with red meat that contributes to a larger percentage as the major contributor to terminal diseases such as cancer, diabetes etc.

rabbit is an all white white with low fat and low cholesterol levels. Did you know rabbit meat is number one followed by chicken in terms of protein content. We also have to consider the current system of chicken rearing which actually raises many questions on whether we are consuming Genetically Modified Chicken meat in most part of Kenya. The birds are not allowed to grow naturally.

To make an order on rabbit meat within Nairobi, follow us on our commercial link: www.kerayicch.co.ke

For information on lifestyle diseases as the leading cause of death in Kenya, click here.

Kerayi Rabbit Processing is Finally incubated at the Chandaria-Business Incubation and Innovation Center(C-BIIC): Kenyatta University

Many Kenyans have heard about the name Chandaria. The name carries with it a special and strong brand of one Mr. Manu chandaria who runs and owns successful businesses in the country. Well if you would wish to know more about Chandaria, kindly click here.

Thanks to the Chandaria Foundation, Kenyatta University managed to start an incubation center that hosts students with business ideas that could be incubated until they break even. the main objective of the center is to impart students to embrace entrepreneurship rather than job seeking, as guided by the center's motto: FROM JOB SEEKERS TO JOB CREATORS.

We are barely two months in the center and greatly feeling the positive impact the center has in the Kerayi project, while riding on the good image created by the University and the Chandaria Foundation.

The university is currently constructing the main C-BIIC, which would even accommodate more students not only from university but also from the public domain. My advise is to encourage students with good ideas to walk at the KU business and Incubation Center for more information or go to the site: CHANDARIA-BUSINESS INCUBATION AND INNOVATION CENTER

You can also visit us on our website to place an order of our rabbit meat and by-products.

Jumat, 25 Mei 2012


It is with much pleasure that I write this content. To our readers, we apologise for the long silence. However, fortunately much has been happening on the ground and we therefore still have the spirit of improving and promotig the rabbit sector in Kenya.

First and foremost i have to state that many activities have been taking place in Kenya's rabbit sector. This is the year that brought many rabbit farmers under the umbrell of KENYA COMMERCIAL RABBIT COUNCIL(KCRC) with the opening of the thier first processing plant at Nakuru town.

We have also grown as a company and are putting all the available resources to do large scale value addition. Our idea is currently incubated at CHANDARIA-BUSINESS INCUBATION AND INNOVATION CENTRE in KENYATTA UNIVERSITY.

We have managed to participate in various events including THE SECOND ROUND OF TANDAA DIGITAL CONTENT, as shortlisted candidates for the Kerayi project. We are also working closely with key stakeholders to ensure sustainability of the rabbit industry in Kenya.

To make orders, kindly follow our company link: Kerayi Rabbit Processing Limited

Keep following the blog for more information.

Which Power Towers Would You Rather See Dot the Landscape?

The electrical pylons shown in the image below haven't been built, yet, but wouldn't it be totally cool if they were?

Design Depot Sochi Winter Olympics Power Pylons

Source: DesignDepot (HT: Core77)

Kamis, 24 Mei 2012

Measure Your Happiness Level!

Smiley Face - Source: supercomputing.fnal.gov
We're not sure how we missed this bit of math previously, but scientists have worked out a math equation that may be used to quantify how happy you are!

No, we're not making this up! In fact, we've built a tool so you can calculate your current personal happiness level. Just answer the following questions by ranking yourself from 1 (not at all) to 10 (to a very large extent), and we'll do the rest....

The Factors of Happiness
Input Data [Rank Yourself for Each Question from 1 to 10] Values
Are you outgoing, energetic, flexible and open to change?
Do you have a positive outlook, bounce back quickly from setbacks and feel that you are in control of your life?
Are your basic life needs met, in relation to personal health, finance, safety, freedom of choice and sense of community?
Can you call on the support of people close to you, immerse yourself in what you are doing, meet your expectations and engage in activities that give you a sense of purpose?

How Happy Are You?
Calculated Results Values
Your Personal Happiness Level

And now you know exactly how happy you are right now, a least as might be quantified by some sort of a scientist on a scale from 1 to 100. If you'd like to adjust your happiness to a different level, you'll likely need to make some changes. The BBC's article suggests how that might work based upon your sex:

The researchers found that different factors were important for the different sexes.

Four in ten men said sex made them happy, and three in ten said a victory by a favourite sports team.

For seven in ten women happiness was related to being with family, and one in four said losing weight.

Romance featured higher for men than women. So did a pay rise and a hobby they enjoyed.

Women were more likely to cite sunny weather.

Ultimately though, it turns out to really be a matter of choice:

Ingrid Collins, a consultant psychologist at the London Medical Centre, told BBC News Online: "I would be very surprised if people sat down and had to work out whether they were happy or not.

"We can all be happy in a heartbeat if we make the decision to be so."

Indeed. And thank you for taking the time to sit down and work out whether you are happy or not with our tool!

Rabu, 23 Mei 2012

The Spring 2012 Snapshot of Expected S&P 500 Earnings

Now that we're halfway through the second quarter of 2012, how has the expected future changed for the U.S. stock market earnings changed from the beginning of the year?

Our chart below reveals the answer!

Snapshots of Expected Future S&P 500 Trailing Year Earnings per Share, 2009-2012

In this chart, we see that compared to our snapshot from 19 January 2012, investor expectations for earnings in 2012 have dimmed, especially for the first three quarters of the year.

Meanwhile, they appear to expect that 2013 will provide a much better environment for the S&P 500's earnings per share.

As for why they expect that the future will play out this way is something that we'll leave up to your imagination!

Selasa, 22 Mei 2012

Spain: A Very Different Fiscal Crisis

Having looked at how Greece arrived at its current crisis, we thought we'd turn to the next country that is coming to dominate the bad economic news in Europe: Spain.

Here's our chart showing the relationship between Spain's GDP per capita and its annual government tax collections and expenditures per capita for each year from 2000 through 2011:

Spain Government Spending and Tax Revenue per Capita vs GDP per Capita, 2000-2011

Unlike Greece, we find that the Spanish government's expenditures throughout much of the period appeared to be stable, with the government running significant surpluses in 2005 through 2007.

Unfortunately for Spain however, those surpluses were based on that country's large housing bubble, which greatly increased the numbers of people paying the nation's highest income tax rates as their incomes were highly inflated during this period of time. We know this is the case because Spain's tax rates throughout nearly all of this period were very stable, and essentially unchanged from 2000 through 2010. The only way we would see this pattern then is if the distribution of income in Spain during this time shifted to increase the numbers and incomes of upper income earners, who were benefiting from the bubble economy.

Instead, we find that Spain's financial crisis came about because it also increased its spending to keep pace with its bubble economy, which simply could not be sustained. Once the bubble burst in 2008, the Spanish government found itself in a very precarious position as it was spending far more money than it could ever count upon sustainably collecting. And as the Spanish economy worsened from 2008 through 2011, it created even greater strains upon the nation's finances as the economy plummeted into deep recession, given the large scope of the malinvestments weighing it down.

That brings us to today, where the fiscal situation of Spain threatens to become even worse because of the deteriorating health of its banking system. Here, because Spanish banks were exposed to so much of the fallout from the bursting of the Spanish real estate bubble, whether or not they can continue now depends upon whether or not they can secure a massive bailout from the government and the European Union, as the threat of a national financial system collapse is becoming an almost inevitable possibility.

Senin, 21 Mei 2012

A Short-Lived Order in the S&P 500

On Friday, 18 May 2012, the state of order that had existed in the stock market since 4 August 2011 came to an end.

You can see that is the case in our highly refined chart below, which is based upon the daily values for both the value of the S&P 500 index and its trailing year dividends per share, rather than the average monthly values for both that we typically feature at Political Calculations.

S&P 500 Index Value vs Trailing Year Dividends per Share, 30 June 2011 through 18 May 2012

What we see is that the daily closing value of the index broke below its lower 3-Sigma "statistical equilibrium limit" curve that defines the bottom of the range where we could have reasonably expected stock prices to be found at least 99.7% of the time during this relative period of order in the stock market. The very low probability that we would see such an outcome if the statistical equilibrium defining the period of relative order was still in effect leads us to make the determination that the existing state of order in the market has broken down.

For us, "order" in the stock market can be said to exist whenever stock prices and their underlying dividends per share are closely coupled. When order exists in the stock market, the basic relationship between the two may be described in mathematical terms by a power law relationship, where the exponent is the ratio of the exponential growth rate of stock prices with respect to the exponential growth rate of dividends per share over time.

The basic variation of stock prices with respect to the mean trend curve defined by that power law relationship then may be reasonably described by a normal distribution, with the standard deviation in the data being measured by the difference between actual stock prices and the value of the mean trend curve for the corresponding level of dividends per share. Technically, this is the residual distribution of the data, which allows us to take the rising or falling value of stock prices and dividends per share into account, which would otherwise inflate the value of the standard deviation.

With that being the case, when order exists in the stock market as we have defined it, we have a potentially powerful method for forecasting where stock prices will go in the future. Under those conditions, stock prices will, 68.2% of the time, fall in the range between one standard deviation above or below the mean trend curve and will, 95% of the time, fall in the range between two standard deviations above or below the mean trend curve. As we have already noted, they will fall within three standard deviations above or below the mean trend curve 99.7% of the time when such order exists. All we need to know to successfully forecast stock prices when order exists is what the expected value of dividends per share is at a given future point of time.

That works up until order breaks down in the stock market, as it did on 18 May 2012. In which case, we have invented entirely other methods for dealing with that situation, which is really simply when chaos is in the driver's seat for determining stock prices, which we can do pretty well in the relative absence of noise.

If only we hadn't chosen to stop making these kinds of forecasts public, rather than simply offering timely observations. Again, and again and again.

Maybe then, people like Cantor Fitzgerald's Peter Cecchini wouldn't be so surprised about what's changed since April....

But then, what we're doing just isn't possible, is it? Just ask the guys over at Seeking Alpha....

Jumat, 18 Mei 2012

Three Charts for the S&P 500

Good morning, Kremlinologists! For some seemingly inexplicable reason, we're breaking our pattern of recent weeks where we would only look at the recent performance of the S&P 500 or its dividend futures just once during a week, if that, with our third post on the topic this week! Even more curiously, it comes after one of those posts, with the cryptic title of "The Ultimate Sell Signal", where we looked at Great Crash of 1929, went viral.

But we're really taking a breather today. And perhaps for the next several days, before we'll resume posting on the topic again [3]. In the meantime, here are our three favorite charts showing the relationship between stock prices as represented by the S&P 500 and their underlying dividends per share. First up, let's look at the recent history of how the future for the S&P 500's trailing year dividends per share has changed over the past two months [1][4]:

Expected Trailing Year Dividends per Share for the S&P 500, with Futures as of 18 May 2012

Next, let's see how the chart we featured at the end of "The Ultimate Sell Signal" changed from 11 May 2012:

S&P 500 Average Monthly Index Value vs Trailing Year Dividends per Share, August 2011 through 17 May 2012

Finally, let's see why we might be okay in taking a breather for a short span, with our third chart showing how closely the change in the growth rate for stock prices is pacing the expected amplified change in the growth rate for trailing year dividends per share in the fourth quarter of 2012, where investors would seem to currently be focused [2]:

Accelerations of S&P 500 Average Monthly Index Value and Trailing Year Dividends per Share, with Futures as of 18 May 2012

Have a good weekend!


[1] Yes, we know sentences like that are difficult for many to follow. But as those of us who navigate through the time vortex that is the stock market well know, "tenses are difficult, aren't they?"

[2] See what we mean?!

[3] Update 18 May 2012, 6:40 PM EDT: Make that "hours" instead of "days".... See you next week!

[4] Chart commentary corrected to fully apply for the fourth quarter of 2012 - a portion of the comments for the original version applied to the third quarter of 2012. Our apologies for missing the error!

Kamis, 17 Mei 2012

The Greek Budget Identity

How much money is the government of Greece capable of collecting?

That's the basic question behind economist Michael Rizzo's recent exploration of what he called the "Government Budget Identity" for Greece:

The "government budget identity" is simply a way to think about how a government can finance its expenditures. Suppose a government is required to help us build bridges and defend our borders – it requires funds to do this. A typical sovereign government can secure funds from three "legitimate" places. What are these sources?

  1. Taxes today.

  2. Taxes tomorrow. In other words we can borrow money today in order to build our bridge and then use future tax revenues to pay for the debt tomorrow. By the way, if the government is in the business of actually producing valuable "public goods" then you can easily think of this as value enhancing.

  3. Printing money. It's not generally done this way, but in effect the monetary authorities can monetize the borrowing of a sovereign entity (how they do it is beyond the scope of this post). For simplicity, imagine instead that a central bank prints new bank notes from scratch, hands them to the Treasury, and then the Treasury spends them on goods and services. This is just another form of a tax, again beyond the scope of this post.

So, this is what the government budget identity looks like for "normal" countries:

G = T + the change in debt + the change in base money

He then goes on to consider how that identity has come to only mean "G = T", where the amount of money Greece has available to spend is only what it collects in taxes today.

With that as the basic background then, Warren Meyer extended the discussion into what the math for Greece really looks like:

I think this is a useful simplification, but I wanted to add a couple other refinements (refinements by the way he did not neglect in his text, just did not put in the formula). One other source of funds we have seen in Greece is what I would call Aid, which used to be humanitarian aid (think India in the 1970s) but today tends to be bailout money and debt forgiveness. So we will write the equation

G = Taxes + ΔDebt + Money Printing + Aid

But due to the Keynesian orientation of many commenters on the Greek and European situation, it becomes useful to expand the "taxes" term into some sort of base income, which I will just call GDP for simplicity, and some sort of tax rate t. So then we get:

G = GDP * t + ΔDebt + Money Printing + Aid

The Greeks can't print money (unless the EU does it for them) and at the moment no one in their right mind will lend to them without guarantees from stronger European countries (e.g. Germany). If we call EU money printing for Greece or EU loan guarantee programs Aid, we get

G = GDP * t + Aid

As Rizzo noted, aid is drying up and Greek tax revenues are going down rather than up, so basically they are screwed. The only out seems to be for Greece to exit the Euro and then, once on the drachma again, print money like crazy and inflate their way out of the debt.

It just so happens that we've been working on a different project where we've been playing with the OECD's, Eurostat's and Knoema's available data for Greece's GDP, total tax collections and total government spending for the years from 2000 through 2011. Putting those numbers together, and then putting them into a more human-oriented, "per Capita" scale by dividing them by Greece's population, allows us to produce the following chart:

Greece: Government Spending and Tax Collections per Capita vs GDP per Capita, 2000-2011

In this chart, we find that the Greek government is successfully taxing 39.2% of its GDP, while also taking in approximately $135.41 for each member of its population in the form of "aid", to reference Warren Meyer's "G = GDP * t + Aid" variation of Greece's "Government Budget Identity".

Now, notice how steady the data with respect to the Tax Revenue Trendline is throughout all these years. There is very little deviation from it in any given year. Now consider all that the Greek government has been doing to try to boost its tax collections over all this time, starting with its marginal "All-In" income tax rates, which are the income tax rates, plus Social Security-style taxes, less the money it hands back out to its people through its welfare-type programs:

Greece: Marginal All-In Income Tax Rates, 2000-2011

Here, we observe that significant tax rate hikes occurred in 2002, affecting people earning 133% of Greece's average annual wage, and upon middle-income earners after 2006. Although those tax rates have fallen somewhat since, all tax rates for the middle-to-upper income earners in Greece are higher than in 2006, supposedly three years *before* Greece's debt problems exploded.

In reality, and going back to our first chart, we see that a gigantic increase in annual government spending for each year from 2007 through 2009 is really what did Greece in.

Next, let's consider that tax that really hits home: Greece's Value Added Tax (VAT):

Greece: Value Added Tax Rate, 2000-2011

In this chart, we see that the Greek government has implemented two hikes in its value added tax, a 1% increase in the tax rate from 2005's 18% to 2006's 19%, before really turning the screws with a 4% increase to the current 23% in 2011.

We're not kidding when we say that Greece's government really turned the screws on its people with its VAT in 2011. That 4% increase in the rate of taxation should have increased its revenue from the tax by more than 21%.

And yet, it's not, as even that massive tax rate increase has had little effect upon the Greek government's ability to actually collect more taxes from its people. For that matter, neither has its increased income taxes. It's as if Hauser's Law is alive and well on the Peloponnesian peninsula!

If only the people responsible for Greece's government's spending would learn to live within that limit....

Rabu, 16 Mei 2012

Enabling Disability Fraud

We were inspired by Climateer Investing's summary of the econoblogosphere's ongoing analysis of the increasing level of disability fraud in the U.S., where hundreds of thousands of people would appear to be ending up after their extended unemployment insurance benefits expire, to ask two new questions: which Americans are benefiting from the fraud and how are they getting away with it?

To answer the first question, we started with the annual age distribution data that the Social Security Administration publishes on the number and age of that agency's disability benefit recipients. Starting with the pre-recession years of 2006 and 2007, the recession years of 2008 and 2009, as well as the post-recession years of 2010 and 2011, we created the following chart showing the number of people for each age recorded by Social Security for each year:

Age Distribution of Social Security Disability Benefit Recipients, 2006-2011

We see that nearly 90% of the increase in the number of people claiming disability benefits from Social Security has taken place for people Age 46 or older, with that increase outnumbering the increase in younger individuals by a factor of nearly 10 to 1.

Next, we compared a given year's number of disability benefit recipients to the previous year's number of disability benefit recipients who were one year younger. Doing this allows us to see the net number of people added to Social Security's disability rolls in each year:

Increase in Number of Social Security Disability Benefit Recipients from Previous Year's One Year Younger Age Group, 2006-2011

Here, we see once again that it is mainly older Americans who have cashed in on Social Security's disability benefits. But this time, we see something we didn't expect - there is a very pronounced spike in the number of disability claims being awarded in each year, regardless of the condition of the U.S. economy, coinciding with Age 50.

That didn't make much sense - why would 50 year old people have such a surge in enrollment for Social Security disability benefits? Do people just suddenly break down at Age 50?

We found the answer in a blog post for a law firm that specializes in disability claims from 31 October 2005 - it's because the federal government gives people Age 50 or older a free pass for being able to claim disability benefits:

Why is age 50 so important in a SSDI case?

It goes without saying, the older you are, the better chance you have of being awarded disability. Age 50 is the “cut off” point for claimants filing for social security disability. If you had two claimants with nearly identical disabilities and backgrounds and only one of them is older than 50, the older claimant is more likely to receive benefits than the younger claimant. Claimants younger than 50 simply have a harder burden to overcome, although it is not impossible.

Why is it harder for younger claimants to receive disability benefits? If you are disabled it does not matter how old you are, right? Well not exactly. The social security administration has stated that even if a claimant cannot perform substantially all sedentary work, it does not mean that they are entitled to receive benefits. The reason being your background may dictate you working in another field. The SSA will look at your age, education, work experience, etc and determine if you have any transferable work skills that enable you to work despite your disability. This becomes important when you have a disability that prohibits you from doing substantially all sedentary work and you are below age 50. The SSA believes that claimants under age 50 have not yet reached an age that is old enough to limit their ability to adjust to other work. Is it fair, probably not especially if you are 47 and have the same disability as a claimant who is 51. But in defense of the SSA policy, there has to be some point where advanced age significantly becomes a factor.

Claimants under age 50 are put up against the task of having to rebut the testimony of a vocational expert at their hearing. This is a difficult task for many claimants. Vocational experts have often times heard several cases and have years of experience. Social security disability attorneys deal with vocational experts on a daily basis. If you find yourself in this situation, you are better off having counsel on your side to handle the cross examination of a vocational expert.

Before Age 50, the federal government puts obstacles in the way of those who might falsely claim disability benefits by actively challenging their claims. But once an individual reaches Age 50, it removes that barrier to preventing fraud.

We therefore find that the government's bureaucratic policies are enabling large scale disability fraud by not challenging all claims made by those applying to receive disability benefits. What's more, because individuals on disability status are no longer counted as being part of the U.S. labor force, the federal government is also guilty of falsifying employment situation reports, which are providing a false picture of the health of the U.S. job market.

That in turn is keeping resources that might otherwise improve that situation from being used for doing so. Because why would a policy maker take action to change the current policies of the federal government if the numbers say no action is needed?

Selasa, 15 Mei 2012

The Ultimate Sell Signal

Just for fun, we've adapted one of our analytical methods for forecasting stock prices and applied it to the stock market of the Roaring Twenties, which really ran from October 1925 up through September 1929:

S&P 500 Average Monthly Index Value vs Trailing Year Dividends per Share, October 1925 through August 1929, with September 1929

Keeping with our yesteryear analysis by taking only what someone in the 1920s might have known about our statistical control chart-inspired analytical methods into account (statistical control charts were invented by Walter Shewhart in the 1920s, it would still be years before Western Electric's rules for detecting breaks in trends would be well developed), the value of the S&P 500, or really, its predecessor index, in September 1929 would mark a very strong sell signal, indicating that stock prices were no longer "normal", while also being far above the mean.

What followed next in October 1929 is, as they say, history!...

S&P 500 Average Monthly Index Value vs Trailing Year Dividends per Share, October 1925 through June 1932

The difference between the upward trajectory for stock prices in the late 1920s and the downward one in the early 1930s is most likely the expectations that investors had for inflation. That difference in trajectory is very similar in many respects to recent stock market history, where the Fed influenced inflationary expectations with its quantitative easing programs. If those expectations had been largely constant throughout this period, the vertical separation between the upward and downward trajectories would likely have been minimal.

And for a different perspective on the history of the Great Crash:

Finally, also just for fun, here's what the present period of comparative order in the stock market looks like today:

Make your own determinations.

Senin, 14 Mei 2012

Kremlinology, Political Calculations and the S&P 500

Back in the days of the Soviet Union, there was a whole field within political science known as "Kremlinology", where people outside the ruling circle within the Kremlin would attempt to divine what was really going on in that nation from what little information the country's bosses made public in the media they controlled.

It occurs to us that since we've stopped publicly forecasting where the S&P 500 will go next that many of our readers may be in the same boat. Especially since our last post on the topic, where we posted the following chart and offered this cryptic observation:

Accelerations of the S&P 500 Average Monthly Index Value and Trailing Year Dividends per Share, 2003 to Present, with Futures as of 30 April 2012

An objective reading of the chart indicates two changes affecting stock prices in the relative absence of noise: one in the very near short term as investors adapt to their just changed expectations for dividend payments that has shifted the future from where it was, and the other playing out in the longer term given their overall expectations for the future.

Wow! What the hell did *that* mean?

If you're one of our savvier readers, you would have taken the context of that post into account, where we had begun by noting ExxonMobil's recent increase of their cash dividend payments to become the largest dividend payer in the S&P 500.

Knowing our discovery that changes in the growth rate of stock prices closely track changes in the expected future growth rate of their underlying dividends per share when the stock market in operating in a low-noise environment, you might take our "very near short term" comment as suggesting that with the sudden improvement in the future for dividends, that stock prices would rise in the very near short term.

And you would have been right, although in reality, the S&P 500 had already risen because we were catching up to events that happened on 25 April 2012, when both ExxonMobil and Chevron, both major companies within the market capitalization weighted S&P 500 index, both boosted their dividend payments. From 24 April 2012, the day before the two oil giants' announcements that they would hike their dividends, the S&P 500 had risen from 1371.97 to be 20-35 points higher, peaking at 1405.82 by the end of the trading day following our post.

That's the "very near short term", don't you agree?

But then we went on to consider what would play out with stock prices in the longer term, given the "overall expectations" of investors for the future.

Here, in the "relative absence of noise", which for us, means investor reactions to major news events or say a new round of quantitative easing by the Fed, which are really noisy events that can cause stock prices to greatly deviate from where their dividends per share might otherwise place them, you probably can't help but observe that the expected change in the growth rate for dividends per share in the future is negative. And that's even after the effects of the major dividend increases that had just been announced.

Our sharpest readers then would be able to reasonably see the same future for stock prices that we did, but did not publicly state: after rising in the immediate reaction to the improvement in the future outlook for dividends, stock prices would resume falling, because the improvement in that future outlook wasn't enough to make it positive. Which they have, now having fallen to 1353.39 as of the close of trading on 11 May 2012, well below where they were when the last big dividend increases were announced as part of the first quarter's earnings season!

We'll close our post by showing you exactly what wee see for the future for the S&P 500 today:

S&P 500 Accelerations of Average Monthly Index Value and Trailing Year Dividends per Share, with Futures as of 14 May 2012

It's up to you now to determine what that means for stock prices. Just remember that as the future changes, so will they!

Jumat, 11 Mei 2012

An Invention for the True Wine Connoisseur

Haven't you ever wished, while you were drinking wine, that there was some way you might be able to improve its aroma and taste right out of the bottle? Without having to use those aerator attachments that are designed to serve that purpose?

If so, then perhaps the just recently patented Drink Swinging Apparatus might be right up your alley! Here is inventor Min Zhuang's own description of the problem he seeks to solve with his U.S. patent 8,132,960, which was issued on 13 March 2012:

Some people like drinking, especially in a festival. Drinking will enhance festive atmosphere. In addition, drinking manners vary depending upon wines. Generally, fragrance can apparently emanate from dry wine after breathing (commonly called wine breathing) by contact with air for a period of time. The breathing is carried out for wine with lower aging so as to release undesired smell and foreign substance and so as to make strong fragrance of the wine prominent. The breathing is carried out for aged wine so that fragrance can emanate from the sealed wine which is aged by means of oxidation. Therefore, before drinking, a bottle cap of grape wine or other fruit wines often needs to be opened and to be swung so that the wine at a bottom within the bottle is alternatively turned up to a surface of the wine where it sufficiently and fully contacts with air, and the undesired smell volatilizes. As a result, the breathing of the wine is accomplished, and a pure and nice taste of the wine is obtained. However, in order to make some wines pure and smooth in taste, the wines should be warmed or iced. For example, people like drinking Shao-Hsing rice wine (Chinese yellow wine) or Japanese sake at a high temperature, and beer or aquavit at a low temperature.

Accordingly, the people will prepare wines in such a manner that varies depending upon wines. Some people may pour wine in a bottle into another container so that the wine can be laid aside or a period of time so as to sufficiently and fully contact with air and to volatilize undesired smell. In other words, breathing process is performed for the wine. Some people may place a bottle with wine therein into a barrel with ice therein to be cooled. Other people may warm the bottle with wine therein in a container. Not only the undesired smell is difficult to be volatilized, but also it is difficult for the wine to be uniformly warmed or cooled in all the manners. In addition, the above manners lack inspiration, and can not add inspiration and joy into the drinking atmosphere.

So what can truly add inspiration and joy into the drinking atmosphere? Why not some sort of Drink Swinging Apparatus?! Here is inventor Zhuang's description of how his invention solves the problems he has identified:

The present invention is made to solve at least one aspect of the problem existing in the prior art.

It is an object of the present invention to provide a shaker which swings a wine bottle in a reciprocation manner so as to speed up breathing of wine, and can move to excite appetite for drinking.

It is another object of the present invention to provide a shaker which can cool or warm wine and speed up a process of cooling or warming the wine by mixing a cooling or warming liquid contained in a container by swinging the wine bottle with less energy consumption during a process of breathing.

It is still another object of the present application to provide a shaker which has less friction force and can effectively reduce noise, which is generated by components of the shaker, in use,

Here's what it looks like, in patent sketch format:

Patent 8,132,960, Figure 1

And here is how it works:

In operation, a wine bottle is placed on the bottle seat 4, and mixture of ice and water, or warm water is poured into the container 2. When the electrical motor 6 is started, the motor 6 drives the tray 5 through the crank 8 to swing rightward and leftward. The tray 5 drives a center portion of the seal sheet 3 and the bottle seat 4 to swing. While the wine bottle swings with the bottle seat 4, the water in the container is agitated, and at the same time, wine in the bottle is continuously mixed and sufficiently contacted with air so as to be oxidized by means of the swinging. Furthermore, the water in the container is agitated to be uniform in temperature by means of the swinging of the wine bottle, thereby cooling or warming the wine quickly.

But that doesn't really do justice to how Zhuang proposes to really add joy and inspiration into the drinking atmosphere with his Drink Swinging Apparatus. For that, we must consider the additional embodiments that might be used to solve this problem:

In another embodiment, a water jetting device or a mist spraying device (not shown) is disposed in the container 20. This will improve visual sense of the wine shaker, and adds interests and joyness to the people during the swinging of the bottle. Also, it achieves the flowablity of the water in the wine shaker. In a further embodiment, a decorative lamp (not shown) is disposed to the container 20. Light from the lamp can make jetting and spraying of water, and the swinging of the bottle prominent to the observers.

Although a drink shaker of the present invention is described with respect to a wine bottle as an example, it apparently can be used to other drinks, such as carbonated drinks, coffee drinks, tee drinks, contained in bottles or those similar to the bottles.

Ah yes! We look forward to the Drink Swinging Apparatus' use with carbonated drinks, especially with that water jetting or mist spraying device. What could possibly go wrong?

Alas, we must wait to find out as the invention has yet to make it to the market. In the meantime, while it may not be what you might have visualized from its name, we hope that knowing that Patent 8,132,960 has been issued adds both inspiration and joy to your drinking atmosphere this weekend!