Practice Good Theory

The first two measures compare prices to rents and to median income. Doing so, factors out the "nominal" aspect of price-change. Price-to-Rent ratio:   Over a year ago  this measure was almost down to the 1990 average. Since then, it has almost flattened out, falling only slightly. Source: As always the best source for such charts is the Calculated Risk blog . Price-to-Income ratio: A very similar pattern here. (Caveat: Chart only up to 2011) By both these measures, we can see that prices are slightly above their historical average, but only slightly (and way below their boom-time prices). They also seem to be flattening out. Seems a decent enough time to buy a home. Debt Obligation Ratio:  Instead of price, this measure looks at the monthly payments. Since interest rates are low (they've risen in the last month though), by this measure people are spending a historically low percentage of their incomes on mortgages. Other consumer debt is not hig...

Will social security be there for you? It is almost cliche to say "it will be gone by the time I retire".  Yet, almost everyone is relying on it. Are you relying on social-security to be there for you? If you're preparing for the worst, good for you; but, what's the most likely way in which this will unfold? How are "benefits" calculated?   This a very rough calculation:  First, estimate your average annual salary over your lifetime (up to the max. of about $100K, after which payroll taxes are not deducted).  You are promised $90 for each $100 of average earning, but only for the first $9000. Then, for the next "slab" you are promised 30%. Finally, for anything over $55K, it is 15%. ( Benefits are indexed to CPI. These numbers assume 2010-equivalent dollars.) Sample calculation: Suppose you just retired, having started working in the late 1960s. Your peak earning years were probably around 1990. Let's say you earned an average ...

Is the stock market booming? Few people agree that we're in the middle of a terrific boom. Objectively, an average holder of stock (see SPY chart below) is in a position quite similar to the peak of the dot.net boom or the housing boom. Yet, even people with their 401(k) fully in stock funds don't feel it emotionally -- we have the same number, but none of the excitement and enthusiasm. Leading up to the dot.com top, a lot of people were wondering if the ride would end. Yet, the feeling was different from now. Today, it feels like there really has not been that much of a ride. Is the economy booming? I think the main reason for the lack of enthusiasm is that the economy -- in real terms -- has lagged behind the stock-market. This chart overlays Real per-capita GDP on top of the SPY chart. Notice the year 2000. You see a pause, and then GDP started to rise far past the previous peak. Meanwhile, today per-capita real-GDP is not yet back to the last (housing-boom) peak....

JC Penny recently fired its CEO -- Ron Johnson -- because his concept of simplicity was not working. With hindsight, we see that they forgot an important fact: for the typical JC Penny customer --  shopping is a game . Exploration: Imagine a computer maze game. It has twists and turns. Imagine that you had to discover gold and treasure  hidden along the way, by exploring, discovering, and then learning tell-tale signs -- often coming up empty-handed, but finally hitting pay-dirt. Now imagine the game developer decided to simplify things  by removing the maze. Instead, he gives you a straight hallway. And, why hide the gold --- such a waste of time? He simply places it on clearly-visible tables along the way. Perhaps the tables are placed so the gold jumps into your hand as you pass by. You start the game, press the forward key for a while, and you're done. You get through at record speed, and with all the gold. Simple and efficient... great if this was something ...

Add this: David Gilmour sings Shakespeare's Sonnet #18  ( a post about it ) ------------- previously listed ---------------- " Golden Slumbers Kiss your Eyes " by Thomas Dekker sung as Golden slumbers (by the Beatles) ; [I like K.D. Lang's version ] The ballad " Scarborough Fair "., sung by many ( Sarah Brightman , Celtic Woman , Emerson Lake and Palmer, Simon and Garfunkel ) . Words We are the Music Makers , by Arthur O'Shaughnessy (by the Northwest Choral Society ) Poem recitation here . She walks in Beauty (Lord Byron), sung by Sissel , for the movie "Vanity Fair" (Also, a church choir version) [Rehtaeh seems to do the same version.] Invictus, by "The Peter Ray Band" The Highwayman by Alfred Noyes, sung by Loreena McKennitt (One could turn this approach on its head: Instead of putting a poem to music, find a tune and write a poem to it. This has been done with songs like Yankee-Doodle and others. The famili...

Curious about food prices, I checked out the 30-year history of prices for Wheat, Rice and a few other such commodities. (From the indexMundi  web-site). This post shares my findings -- with zero commentary. The top-most chart below is the official CPI-U (from the Federal reserve web-site). Data is shown for 30 years, since 1983. This line is then reproduced as an overlay on each of the other price charts. Consider the chart for Wheat (top-left). For 20 years the trend was flat, even though the price went up and down.  The last decade has seen a climb. After staying flat, the price of Wheat has made up for lost time.  With the exception of Pork, this theme is repeated across the other food commodities. (Sugar is the worst.) I do not expect extreme levels of CPI-U in the next 5 years -- but, I promised zero commentary.

Since my last look in November 2012 , the various measures of employment have remained along their recent  trajectories. A snapshot: Unemployment rate slightly better each quarter (largely because so many people have stopped looking for jobs)  [About 200K jobs were created, but this was plus 400K part-time jobs and minus 200K full-time jobs] Participation rate (how many want jobs) between flat and slightly worse. Employed-to-population ratio , between flat and slightly better The source of all the graphs below is the excellent gallery at "Calculated Risk ". The unemployment rate has been dropping slowly but steadily for over two years. This "headline number" that is reported the most widely. It is also the one that gives the most positive picture. A "naive linear" projection gets us back to a pre-recession rate by the second half of 2014.  As the graphs below show, the "quality" of this rate will be much lower than what ...