http://knowledge.wharton.upenn.edu/article.cfm?articleid=2789
http://www.cnn.com/2011/WORLD/meast/05/29/us.saudi.prince.oil/index.html?eref=mrss_igoogle_cnn
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"The last time anybody made a list of the top 100 character attributes of New Yorkers, common sense snuck in at number 79." (Douglas Adams)
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Since I was born in New York, I feel comfortable with the quote. What I am not comfortable with is the notion that the "market price" for oil is anywhere near what true supply/demand balance would dictate. The Wharton article attached appears to suggest that speculation has less to do with current prices than most of us think: "Although speculation does exist and can affect prices, most of the recent price swings in oil and other commodities are happening for fundamental economic reasons." Really.
The article goes on to "hedge" by defining "bad speculation" and "good speculation" and separating that from market manipulation which is illegal. The Hunt brothers case of buying enough silver to corner the market (and the price) in 1980 is an excellent example of that and they refer to it. Here's the deal: the real price of oil should probably be somewhere between $70 and $80 per barrel. And, the actual supply/demand price should be more like $60 per barrel.
I've attached Fareed Zakaria's interview on Sunday with Prince Al-Waleed bin Talal (the grandson of the founding king of Saudi Arabia) who has his own investment fund and has been rated somewhere between the 14th and 26th richest man in the world. He is a long time stockholder in Citigroup and has participated in bailing out that organization twice in its history.
Talal's perspective is that oil should be somewhere between $70 and $80 per barrel in order to avoid incenting the U.S. and Europe to accelerate efforts to wean themselves off his country's supply.
I would "speculate" that oil could go all the way to $150 (or more) but not for any supply/demand reason. There is plenty of oil. I would hope that oil drops back to $70 or less so that world economies could recover more than they have.
Tuesday, May 31, 2011
The Housing Double-Dip
http://online.wsj.com/article/SB10001424052702303657404576357170425058088.html?mod=WSJ_hp_LEFTTopStories
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"Nothing travels faster than the speed of light with the possible exception of bad news, which obeys its own special laws." (Douglas Adams)
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And, of course, the master of bad news is Nouriel Roubini who predicted a "double-dip" recession brought on by multiple causes one of which was the housing situation that, until foreclosure sales clear the market, will remain bad. The Case-Shiller home-price index (now owned by S&P) confirmed today what many had already concluded: "This month's report is marked by the confirmation of a double-dip in home prices across much of the nation. Home prices continue on their downward spiral with no relief in site." (David M. Blitzer, chairman of the S&P Index Committee)
Twelve of the 20 metropolitan areas tracked in the index posted new lows in March, and prices nationally have fallen 5.1% in the last year, pushing them back to 2002 levels.
The CoreLogic index, which is used by the Federal Reserve, shows that prices in March were down 7.5% from a year earlier. Excluding distressed sales, prices were down 1%.
Sadly, home ownership has dropped from its all time peak of 69.2% (2004) to 66.4% today.
So, overall, nothing's changed in the housing market. Again, at the $500,000 and up level, things are moving but that volume won't move the overall market.
If banks keep pushing foreclosure sales, the market will continue to drop. The light at the end of the tunnel is that, at some point, buyers will come in because prices for homes will get so far below "real value" that purchasers will be attracted back to the market.
We'll see when that is.
***************
"Nothing travels faster than the speed of light with the possible exception of bad news, which obeys its own special laws." (Douglas Adams)
***************
And, of course, the master of bad news is Nouriel Roubini who predicted a "double-dip" recession brought on by multiple causes one of which was the housing situation that, until foreclosure sales clear the market, will remain bad. The Case-Shiller home-price index (now owned by S&P) confirmed today what many had already concluded: "This month's report is marked by the confirmation of a double-dip in home prices across much of the nation. Home prices continue on their downward spiral with no relief in site." (David M. Blitzer, chairman of the S&P Index Committee)
Twelve of the 20 metropolitan areas tracked in the index posted new lows in March, and prices nationally have fallen 5.1% in the last year, pushing them back to 2002 levels.
The CoreLogic index, which is used by the Federal Reserve, shows that prices in March were down 7.5% from a year earlier. Excluding distressed sales, prices were down 1%.
Sadly, home ownership has dropped from its all time peak of 69.2% (2004) to 66.4% today.
So, overall, nothing's changed in the housing market. Again, at the $500,000 and up level, things are moving but that volume won't move the overall market.
If banks keep pushing foreclosure sales, the market will continue to drop. The light at the end of the tunnel is that, at some point, buyers will come in because prices for homes will get so far below "real value" that purchasers will be attracted back to the market.
We'll see when that is.
Wednesday, May 18, 2011
The Speed Limit Recovery
http://www.ft.com/intl/cms/s/0/12b31ef8-80bb-11e0-85a4-00144feabdc0.html#axzz1Mj0Y0quM
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"Human beings, who are almost unique in having the ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so." (Douglas Adams)
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In an FT.com article titled "America: Dallas and Destiny," Robin Harding indicates that one can observe how well an economic recovery is going by looking out the windows of the Dallas Federal Reserve at the "cranes." Her perspective is that crane counting is an economic indicator that works well. So, in 2005-06 you could see 11 of them from the windows of the Dallas Fed. In the recession that followed, they all vanished. The same view today gives us a six crane recovery. The Texas economy is not where it was, but where it is now is better than nothing.
But, there's a contrast here within the U.S. economy that causes some to label its comeback the "speed limit" recovery. First, there is the contrast between Texas and the rest of the U.S. in unemployment, for example: Texas @ 8.1% vs the comparable overall U.S. rate of 8.8%. Some would say the margin is even wider than those numbers. Second, the overall U.S. economy has more problems that pop up as Diane Swonk, a well known economist, outlines below.
To quote Swonk, "The headwinds we are facing - everything from the residual impact of the financial crisis on access to credit to higher prices at the pump - are not enough to derail the recovery, but they do ensure an extended period of sub-par growth."
So, the speed limit recovery has the kind of economic consequences that imply very slow growth at best. Texas is better off because it was less "bad" by any measure before and during the financial crisis. Everybody follows home prices so that's an obvious plus for Texas - it didn't go up that much with the "bubble" so it didn't go down that much with the disaster. From 2000 to 2007, home prices in California rose by 129%, then slide by 25%. And, they have not stopped falling. In Texas, the rise was 44% and since then the "fall" has not been that great - Harding's perspective for this article is that housing here in Dallas is about even or up a little; mine is that the $500,000 and above market is back and moving but below that there is still sluggishness.
The crucial question is how long the speed limit will remain. The main cause for it was the financial crisis but the after effects, as we've said here before, are going to linger. California, Florida, Nevada and Arizona have housing inventory that will linger for years.
Gas at the pump slows down every recovery every time prices get to a pressure point ($3.50/$4.00 per gallon). This round was more based on speculation than any "shortage." And, as opposed to going up this summer, prices at the pump should be going down because the speculators want to take their profits and OPEC continues to insist they they are long on oil.
A rule of thumb for economists is that a sustained $10 rise in the price of a barrel of oil will knock 0.2 percentage points off U.S. growth for each of the next two years. That's reasonable. But, higher oil prices fuel the search for oil, so in Texas there were 329 oil rigs drilling in June of 2009. As of now, the rigs are back up to 816.
So, outside the windows of the Dallas Fed, they've got about half the cranes back that they had before. That's progress. But real progress will be when the unemployment rate for the U.S. overall gets down to 5% with sustainable growth.
***************
"Human beings, who are almost unique in having the ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so." (Douglas Adams)
***************
In an FT.com article titled "America: Dallas and Destiny," Robin Harding indicates that one can observe how well an economic recovery is going by looking out the windows of the Dallas Federal Reserve at the "cranes." Her perspective is that crane counting is an economic indicator that works well. So, in 2005-06 you could see 11 of them from the windows of the Dallas Fed. In the recession that followed, they all vanished. The same view today gives us a six crane recovery. The Texas economy is not where it was, but where it is now is better than nothing.
But, there's a contrast here within the U.S. economy that causes some to label its comeback the "speed limit" recovery. First, there is the contrast between Texas and the rest of the U.S. in unemployment, for example: Texas @ 8.1% vs the comparable overall U.S. rate of 8.8%. Some would say the margin is even wider than those numbers. Second, the overall U.S. economy has more problems that pop up as Diane Swonk, a well known economist, outlines below.
To quote Swonk, "The headwinds we are facing - everything from the residual impact of the financial crisis on access to credit to higher prices at the pump - are not enough to derail the recovery, but they do ensure an extended period of sub-par growth."
So, the speed limit recovery has the kind of economic consequences that imply very slow growth at best. Texas is better off because it was less "bad" by any measure before and during the financial crisis. Everybody follows home prices so that's an obvious plus for Texas - it didn't go up that much with the "bubble" so it didn't go down that much with the disaster. From 2000 to 2007, home prices in California rose by 129%, then slide by 25%. And, they have not stopped falling. In Texas, the rise was 44% and since then the "fall" has not been that great - Harding's perspective for this article is that housing here in Dallas is about even or up a little; mine is that the $500,000 and above market is back and moving but below that there is still sluggishness.
The crucial question is how long the speed limit will remain. The main cause for it was the financial crisis but the after effects, as we've said here before, are going to linger. California, Florida, Nevada and Arizona have housing inventory that will linger for years.
Gas at the pump slows down every recovery every time prices get to a pressure point ($3.50/$4.00 per gallon). This round was more based on speculation than any "shortage." And, as opposed to going up this summer, prices at the pump should be going down because the speculators want to take their profits and OPEC continues to insist they they are long on oil.
A rule of thumb for economists is that a sustained $10 rise in the price of a barrel of oil will knock 0.2 percentage points off U.S. growth for each of the next two years. That's reasonable. But, higher oil prices fuel the search for oil, so in Texas there were 329 oil rigs drilling in June of 2009. As of now, the rigs are back up to 816.
So, outside the windows of the Dallas Fed, they've got about half the cranes back that they had before. That's progress. But real progress will be when the unemployment rate for the U.S. overall gets down to 5% with sustainable growth.
China's Internet Industry
http://www.knowledgeatwharton.com.cn/index.cfm?fa=article&articleid=2407&languageid=1
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"The future belongs to those who see possibilities before they become obvious." (John Sculley)
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When the latest issue of Knowledge @ Wharton came out last night, it included an article from China K@W: "Robin Li of Baidu on Navigating Innovation, Social Networking ... and Google in China." Li is the founder and CEO of Baidu, the country's largest search engine. Baidu has been on the Nasdaq since 2005 and owns 80% of China's search market.
When asked about opportunities for growth, Li pointed out that China is already the largest Internet nation in the world, with 450 million Internet users, but the penetration rate (internet users vs. total population) is only something like 35%.
The issue then is what will get that percentage up? Since Li sees Internet usage over the last 10 to 15 years in China as primarily "consumer-oriented or entertainment-centric," his emphasis is going to be on a business model which emphasizes charging enterprises for advertising or promotional activities: a more basic search revenue approach. This is why, although China's Internet penetration rate of 35% is higher than the world average, the paid search market in China is a lot lower than the world average: 3% of GDP, while the world average is roughly 6%.
What about the Google factor? Google set up an operation in China in 2005, one month before Baidu's IPO on Nasdaq. Over 5 years, Google went from a 30% market share to 20% and backed out of mainland China to its google.com.hk site. But, it's still #2 in China.
About 25% of Baidu's traffic is social search which includes products like "Baidu Knows," which is a question-and-answer service. Li sees this type of product as consistent with China's culture and Baidu's "user-centric" approach vs. Google's more technical approach.
Li sees "box computing" as the future of Internet search, at least in China. Box computing is an open data platform that eliminates all the links that users normally see when they type in something. So, for example, when a searcher types in "weather," Baidu tells you what the weather report is for your city. Baidu will be applying this approach to mobile devices as that market grows in China.
Li's interview was an interesting perspective on the search market in China. His perspective that the current Internet user market in China will double over the next 10 years puts that market's size at almost one billion.
***************
"The future belongs to those who see possibilities before they become obvious." (John Sculley)
***************
When the latest issue of Knowledge @ Wharton came out last night, it included an article from China K@W: "Robin Li of Baidu on Navigating Innovation, Social Networking ... and Google in China." Li is the founder and CEO of Baidu, the country's largest search engine. Baidu has been on the Nasdaq since 2005 and owns 80% of China's search market.
When asked about opportunities for growth, Li pointed out that China is already the largest Internet nation in the world, with 450 million Internet users, but the penetration rate (internet users vs. total population) is only something like 35%.
The issue then is what will get that percentage up? Since Li sees Internet usage over the last 10 to 15 years in China as primarily "consumer-oriented or entertainment-centric," his emphasis is going to be on a business model which emphasizes charging enterprises for advertising or promotional activities: a more basic search revenue approach. This is why, although China's Internet penetration rate of 35% is higher than the world average, the paid search market in China is a lot lower than the world average: 3% of GDP, while the world average is roughly 6%.
What about the Google factor? Google set up an operation in China in 2005, one month before Baidu's IPO on Nasdaq. Over 5 years, Google went from a 30% market share to 20% and backed out of mainland China to its google.com.hk site. But, it's still #2 in China.
About 25% of Baidu's traffic is social search which includes products like "Baidu Knows," which is a question-and-answer service. Li sees this type of product as consistent with China's culture and Baidu's "user-centric" approach vs. Google's more technical approach.
Li sees "box computing" as the future of Internet search, at least in China. Box computing is an open data platform that eliminates all the links that users normally see when they type in something. So, for example, when a searcher types in "weather," Baidu tells you what the weather report is for your city. Baidu will be applying this approach to mobile devices as that market grows in China.
Li's interview was an interesting perspective on the search market in China. His perspective that the current Internet user market in China will double over the next 10 years puts that market's size at almost one billion.
Tuesday, May 17, 2011
Groups & Teams
http://www.nytimes.com/2011/05/17/opinion/17brooks.html?_r=1&nl=todaysheadlines&emc=tha212
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"You can accomplish anything in life, provided that you do not mind who gets the credit." (Harry S. Truman)
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My family told me as I was growing up that we came to America before the American Revolution. We lived on Long Island (NY) which is where I grew up - the north shore of Long Island is considered the "gold coast" to the locals because it's on the sound and commutable to NYC. For those of you familiar with the "turf," I was born in Huntington and grew up in an adjoining suburb Northport, both towns with stunningly beautiful harbors on the sound.
Interestingly, the story of how we survived the American Revolution was a highly pragmatic one: we rendered unto Caesar what was Caesar's and unto God what was God's (an old saying that I like). My family showed me a punch bowl that General Burgoyne gave us for our cooperation with his British forces and at the same time showed me a framed scroll (which is up on the wall in my home) certifying that we are "Sons of the American Revolution." So, we were pragmatic - we did what we had to to survive.
My family later told me that we had a direct lineage that had been traced all the way back to AD 1086 in Sweden (where our name was spelled slightly differently) then moving to England in 1136. For 5 consecutive generations at the end of the 19th and the beginning of the 20th century our family had but one child that was a male that carried on our name.
I have often wondered what is it that can cause a lineage like that to survive. Is it really survival of the fittest in the best physical and mental sense?
And, under the heading of "you're never too old to learn something," David Brooks wrote on this subject ("Nice Guys Finish First", 5/16, NY Times) - hopefully linked to this post - yesterday.
In Brooks' review of the recent literature on the subject, there appears to be a more "nuanced" view of how we've survived that deals with sympathy, empathy, cooperation and collaboration. His perspective on a book I want to read, "SuperCooperators" (Nowak and Highfield), highlights the position that "cooperation and competition are forever entwined in a tight embrace." So, "In pursuing our self-interested goals, we often have an incentive to repay kindness with kindness so others will do us favors when we are in need ... We have an incentive to work in teams, even against our short-term self-interest because cohesive groups survive ... Cooperation is as central to evolution as mutation and selection."
So, when my family "cooperated" with both sides during the American Revolution (secretly, they were pro-revolution), that was simple pragmatic survival. Growing up, I thought that was "two-faced." The older I get, the more pragmatic I think they were.
We study organizational behavior at the college level and try to emphasize what makes effective groups and teams. We talk about the ideal numbers of people (5 or 6 in the average situation) and the ideal "mix" (cosmopolitans and locals on an international team). Brooks refers to new data that will come out in a book to be published early next year that emphasizes two survivals of the fittest: "... natural selection takes place not only when individuals compete with other individuals, but also when groups compete with other groups. Both competitions are examples of survival of the fittest, but when groups compete, it's the cohesive, cooperative internally altruistic groups that win and pass on their genes." This is "group selection."
If, as Brooks points out in his brilliant conclusion, cooperation permeates our nature, then so does morality, and there is no escaping ethics, emotion and religion in our "quest" (his word) to understand who we are and how we got this way.
Going back 1,000 years with one family, I find pragmatic "cooperation" a more realistic ticket to survival than superior genes. I know that my grandfather was a rancher in New Mexico and that his father was a ship's captain who was lost at sea going around Cape Horn. Beyond that, I don't know. I would be fascinated to know what brought us here before the American Revolution ...
***************
"You can accomplish anything in life, provided that you do not mind who gets the credit." (Harry S. Truman)
***************
My family told me as I was growing up that we came to America before the American Revolution. We lived on Long Island (NY) which is where I grew up - the north shore of Long Island is considered the "gold coast" to the locals because it's on the sound and commutable to NYC. For those of you familiar with the "turf," I was born in Huntington and grew up in an adjoining suburb Northport, both towns with stunningly beautiful harbors on the sound.
Interestingly, the story of how we survived the American Revolution was a highly pragmatic one: we rendered unto Caesar what was Caesar's and unto God what was God's (an old saying that I like). My family showed me a punch bowl that General Burgoyne gave us for our cooperation with his British forces and at the same time showed me a framed scroll (which is up on the wall in my home) certifying that we are "Sons of the American Revolution." So, we were pragmatic - we did what we had to to survive.
My family later told me that we had a direct lineage that had been traced all the way back to AD 1086 in Sweden (where our name was spelled slightly differently) then moving to England in 1136. For 5 consecutive generations at the end of the 19th and the beginning of the 20th century our family had but one child that was a male that carried on our name.
I have often wondered what is it that can cause a lineage like that to survive. Is it really survival of the fittest in the best physical and mental sense?
And, under the heading of "you're never too old to learn something," David Brooks wrote on this subject ("Nice Guys Finish First", 5/16, NY Times) - hopefully linked to this post - yesterday.
In Brooks' review of the recent literature on the subject, there appears to be a more "nuanced" view of how we've survived that deals with sympathy, empathy, cooperation and collaboration. His perspective on a book I want to read, "SuperCooperators" (Nowak and Highfield), highlights the position that "cooperation and competition are forever entwined in a tight embrace." So, "In pursuing our self-interested goals, we often have an incentive to repay kindness with kindness so others will do us favors when we are in need ... We have an incentive to work in teams, even against our short-term self-interest because cohesive groups survive ... Cooperation is as central to evolution as mutation and selection."
So, when my family "cooperated" with both sides during the American Revolution (secretly, they were pro-revolution), that was simple pragmatic survival. Growing up, I thought that was "two-faced." The older I get, the more pragmatic I think they were.
We study organizational behavior at the college level and try to emphasize what makes effective groups and teams. We talk about the ideal numbers of people (5 or 6 in the average situation) and the ideal "mix" (cosmopolitans and locals on an international team). Brooks refers to new data that will come out in a book to be published early next year that emphasizes two survivals of the fittest: "... natural selection takes place not only when individuals compete with other individuals, but also when groups compete with other groups. Both competitions are examples of survival of the fittest, but when groups compete, it's the cohesive, cooperative internally altruistic groups that win and pass on their genes." This is "group selection."
If, as Brooks points out in his brilliant conclusion, cooperation permeates our nature, then so does morality, and there is no escaping ethics, emotion and religion in our "quest" (his word) to understand who we are and how we got this way.
Going back 1,000 years with one family, I find pragmatic "cooperation" a more realistic ticket to survival than superior genes. I know that my grandfather was a rancher in New Mexico and that his father was a ship's captain who was lost at sea going around Cape Horn. Beyond that, I don't know. I would be fascinated to know what brought us here before the American Revolution ...
Monday, May 16, 2011
"Your So-Called Education"
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"The first thing a great person does is make us realize the insignificance of circumstance." (Ralph Waldo Emerson) (From Jinson Jose)
***************
The folks here at UT Dallas nominated me for the President's Outstanding Teaching Award (2010-2011) as the best undergraduate teacher for the university: I was the recipient of that award during a pre-graduation ceremony this past Friday. I am humbled by that recognition and I want to thank anyone who may be reading this for having inspired me if they were in any of my classes or worked with me here.
***
Normally, I would attach an article that pertains to what I want to talk about in this post but I can't do that this time because I have been informed by the NY Times that I have reached my 20 article limit for the month so I can't access anything more unless I pay more. Now, I have paid for the NY Times on line for at least the last ten years that I can remember, so I'm already a paying customer but, I guess I'm not paying enough for my use rate. I'm guessing this new approach is part of a creative paradigm that the management of the Times has come up with to squeeze money out of customers who already pay. It's a shame that poor old retired guys like me have to get squeezed so that the Times can continue its work.
So, I will say that the article I am basing this post on is: Your So-Called Education, Arum and Roksa, NY Times, 5/14/2011.
Certainly I would agree with the authors that commencement is a special time on college campuses as it was here on Friday. And, I was glad to get the chance to congratulate those that I could reach out to while I was here on that day.
Sadly, the authors have come up with some data that raises doubts about the quality of undergraduate learning here in the U.S. Over four years, they followed the progress of several thousand students in more than two dozen universities. What they found were lots of "minuses." The one of greatest concern to me was "... no meaningful improvement in skills like writing and reasoning."
Here's some of their data from a typical semester:
(1) 32% of the students did not take a single course with more than 40 pages of reading per week;
(2) 50% did not take any course requiring more than 20 pages of writing over the semester;
(3) The average student spent only about 12 to 13 hours per week studying (that would be about half the time those of us who went thru college and graduate school in the 60s spent).
So, why is the quality of undergraduate learning so poor?
According to Arum and Roksa, the answer lies in football stadiums and other non-academic expenditures. It also lies in a more subtle cultural change around handling the "student as customer" approach. Some colleges know what they're doing in this area and some don't. The ones that don't cater to the student that wants to get the college degree "effortlessly and comfortably." I see the students as customers and I want to see them get their money's worth: that's a good thing and it involves a lot of work. It's also not something a faculty does consistently. Arum and Roksa see life as a half empty glass and say that we are failing because we say "the customer (student) is always right."
They have some suggestions. They say too many institutions, for instance, rely primarily on student course evaluations to assess teaching. This creates "perverse incentives" for professors to demand little and give out good grades (36% of the students in their study who reported spending 5 or fewer hours per week studying alone still had an average GPA of 3.16). To quote Arum and Roksa, "Distributing resources and rewards based on student learning instead of student satisfaction (ie. surveys) would help stop this race to the bottom."
The only problem I have here is that a professor that inspires gets students interested which causes them to learn by participating. What we probably have here is Arum and Roksa missing something: what comes first, the chicken or the egg? How many people teaching at the elementary, middle school, high school and college level are doing anything to inspire anybody? It could be the the dearth of inspiring (or even interesting) teachers is leading the "race to the bottom."
I am the son of a great teacher. And, the great teachers I've had in my life have been people who challenged me and interested me so much that I didn't even realize I was learning as much as I did.
Evidently Arum and Roksa are sociologists (which could explain a lot) so they are used to finding survey data that proves their point. So, as we pause during this commencement season to consider the state of undergraduate learning (as they suggest), why don't we consider the title of their new study: "Academically Adrift: Limited Learning on College Campuses." Maybe the "limited learning" reflects the limited effort of those teaching at every level.
"The first thing a great person does is make us realize the insignificance of circumstance." (Ralph Waldo Emerson) (From Jinson Jose)
***************
The folks here at UT Dallas nominated me for the President's Outstanding Teaching Award (2010-2011) as the best undergraduate teacher for the university: I was the recipient of that award during a pre-graduation ceremony this past Friday. I am humbled by that recognition and I want to thank anyone who may be reading this for having inspired me if they were in any of my classes or worked with me here.
***
Normally, I would attach an article that pertains to what I want to talk about in this post but I can't do that this time because I have been informed by the NY Times that I have reached my 20 article limit for the month so I can't access anything more unless I pay more. Now, I have paid for the NY Times on line for at least the last ten years that I can remember, so I'm already a paying customer but, I guess I'm not paying enough for my use rate. I'm guessing this new approach is part of a creative paradigm that the management of the Times has come up with to squeeze money out of customers who already pay. It's a shame that poor old retired guys like me have to get squeezed so that the Times can continue its work.
So, I will say that the article I am basing this post on is: Your So-Called Education, Arum and Roksa, NY Times, 5/14/2011.
Certainly I would agree with the authors that commencement is a special time on college campuses as it was here on Friday. And, I was glad to get the chance to congratulate those that I could reach out to while I was here on that day.
Sadly, the authors have come up with some data that raises doubts about the quality of undergraduate learning here in the U.S. Over four years, they followed the progress of several thousand students in more than two dozen universities. What they found were lots of "minuses." The one of greatest concern to me was "... no meaningful improvement in skills like writing and reasoning."
Here's some of their data from a typical semester:
(1) 32% of the students did not take a single course with more than 40 pages of reading per week;
(2) 50% did not take any course requiring more than 20 pages of writing over the semester;
(3) The average student spent only about 12 to 13 hours per week studying (that would be about half the time those of us who went thru college and graduate school in the 60s spent).
So, why is the quality of undergraduate learning so poor?
According to Arum and Roksa, the answer lies in football stadiums and other non-academic expenditures. It also lies in a more subtle cultural change around handling the "student as customer" approach. Some colleges know what they're doing in this area and some don't. The ones that don't cater to the student that wants to get the college degree "effortlessly and comfortably." I see the students as customers and I want to see them get their money's worth: that's a good thing and it involves a lot of work. It's also not something a faculty does consistently. Arum and Roksa see life as a half empty glass and say that we are failing because we say "the customer (student) is always right."
They have some suggestions. They say too many institutions, for instance, rely primarily on student course evaluations to assess teaching. This creates "perverse incentives" for professors to demand little and give out good grades (36% of the students in their study who reported spending 5 or fewer hours per week studying alone still had an average GPA of 3.16). To quote Arum and Roksa, "Distributing resources and rewards based on student learning instead of student satisfaction (ie. surveys) would help stop this race to the bottom."
The only problem I have here is that a professor that inspires gets students interested which causes them to learn by participating. What we probably have here is Arum and Roksa missing something: what comes first, the chicken or the egg? How many people teaching at the elementary, middle school, high school and college level are doing anything to inspire anybody? It could be the the dearth of inspiring (or even interesting) teachers is leading the "race to the bottom."
I am the son of a great teacher. And, the great teachers I've had in my life have been people who challenged me and interested me so much that I didn't even realize I was learning as much as I did.
Evidently Arum and Roksa are sociologists (which could explain a lot) so they are used to finding survey data that proves their point. So, as we pause during this commencement season to consider the state of undergraduate learning (as they suggest), why don't we consider the title of their new study: "Academically Adrift: Limited Learning on College Campuses." Maybe the "limited learning" reflects the limited effort of those teaching at every level.
Friday, May 13, 2011
Labor Relations & the NLRB
http://online.wsj.com/article_email/SB10001424052748703730804576317140858893466-lMyQjAxMTAxMDEwMzExNDMyWj.html
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"When I'm getting ready to reason with a man, I spend one-third of my time thinking about myself and what I'm going to say - and two-thirds thinking about him and what he's going to say." (Abraham Lincoln)
***************
What's a government without a little regulation? So, the NLRB has told Boeing where it cannot build a plane. Now, as we see from the WSJ article attached, between 2000 and 2008, 4.8 million Americans moved from forced union states to right-to-work states - that's one person every minute of every day.
The NLRB filed a complaint last month against Boeing to block production of the company's 787 Dreamliner at a new assembly plant in South Carolina - a right-to-work state with a law against compulsory union membership.
The NLRB is looking for nothing less than returning this new production to the Boeing plant in Washington.
This is the first time a federal agency has intervened to tell an American company where it can and cannot operate a plant in the U.S. So, the plane will cost MORE to build (if the decision goes against Boeing). If the decision goes against Boeing, what's to prevent them from building the plane overseas? Then everybody is out of the new jobs! Earth to the NLRB!
Earth to NLRB 2: "Employers that move away from forced-union states mainly do so not to scale back wages and salaries - although sometimes that happens - but to avoid having to deal with intrusive union rules, the threat of costly work stoppages, lawsuits, worker paychecks going to union fat cats, and so on." (WSJ)
So, it's about that "regulation thing." Do we really know what we're doing?
***************
"When I'm getting ready to reason with a man, I spend one-third of my time thinking about myself and what I'm going to say - and two-thirds thinking about him and what he's going to say." (Abraham Lincoln)
***************
What's a government without a little regulation? So, the NLRB has told Boeing where it cannot build a plane. Now, as we see from the WSJ article attached, between 2000 and 2008, 4.8 million Americans moved from forced union states to right-to-work states - that's one person every minute of every day.
The NLRB filed a complaint last month against Boeing to block production of the company's 787 Dreamliner at a new assembly plant in South Carolina - a right-to-work state with a law against compulsory union membership.
The NLRB is looking for nothing less than returning this new production to the Boeing plant in Washington.
This is the first time a federal agency has intervened to tell an American company where it can and cannot operate a plant in the U.S. So, the plane will cost MORE to build (if the decision goes against Boeing). If the decision goes against Boeing, what's to prevent them from building the plane overseas? Then everybody is out of the new jobs! Earth to the NLRB!
Earth to NLRB 2: "Employers that move away from forced-union states mainly do so not to scale back wages and salaries - although sometimes that happens - but to avoid having to deal with intrusive union rules, the threat of costly work stoppages, lawsuits, worker paychecks going to union fat cats, and so on." (WSJ)
So, it's about that "regulation thing." Do we really know what we're doing?
Wednesday, May 11, 2011
The "Job Seeker's Ratio"
http://www.epi.org/publications/entry/continuing_dearth_of_job_opportunities_leaves_many_workers_still_sidelined
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"Everything should be made as simple as possible, but not simpler." (Albert Einstein)
***************
This morning, the BLS (Bureau of Labor Statistics) released its March report from their Job Openings and Labor Turnover Survey ("JOLTS"). The BLS has been highly respected for decades based on the precision and care with which they put together their data. This particular survey is the one that produces the "ratio" figures that are often quoted by economists on job seekers/job openings.
So, the total number of job openings for March was 3.1 million. The total number of unemployed workers was 13.5 million. Thus, the ratio of workers to job openings was 4.3-to-1 for March. The good news here is that the "ratio" has been as bad as 6 or 7-to-1 during the worst days of the worldwide financial crisis.
That's the good news. But, as Heidi Shierholz of the Economic Policy Institute points out, the highest this ratio ever got in the early 2000s downturn was 2.8-to-1 (in the middle of 2003). March marks over two years that the "job seeker's ratio" has been substantially above 4-to-1.
More good news: layoffs are back down to pre-recession levels. In 2006, the layoff rate (layoffs as a percent of total employment) averaged 1.3% versus the first quarter of 2011 where it averaged 1.2%. The bad news: hiring is "abysmal." The average number of hires per month in the first quarter of 2011 is 27% below the average number of hires per month in 2006.
How does all this go together? The looming shortage of 1 million jobs (by 2018) predicted in the NY Times recently was for jobs in fields that those who are currently unemployed are not trained for. As Alan Blinder (Princeton Economist and former Fed Vice Chairman) said when he shifted his position on free trade, the U.S. could lose as many as 40 million jobs to offshore employees who are cheaper: tax lawyers are not safe/divorce lawyers are. It's not the level of education so much as it is: must the job be performed here?
So, is the current "job seeker's ratio" reflective of long term structural unemployment? Stay tuned.
***************
"Everything should be made as simple as possible, but not simpler." (Albert Einstein)
***************
This morning, the BLS (Bureau of Labor Statistics) released its March report from their Job Openings and Labor Turnover Survey ("JOLTS"). The BLS has been highly respected for decades based on the precision and care with which they put together their data. This particular survey is the one that produces the "ratio" figures that are often quoted by economists on job seekers/job openings.
So, the total number of job openings for March was 3.1 million. The total number of unemployed workers was 13.5 million. Thus, the ratio of workers to job openings was 4.3-to-1 for March. The good news here is that the "ratio" has been as bad as 6 or 7-to-1 during the worst days of the worldwide financial crisis.
That's the good news. But, as Heidi Shierholz of the Economic Policy Institute points out, the highest this ratio ever got in the early 2000s downturn was 2.8-to-1 (in the middle of 2003). March marks over two years that the "job seeker's ratio" has been substantially above 4-to-1.
More good news: layoffs are back down to pre-recession levels. In 2006, the layoff rate (layoffs as a percent of total employment) averaged 1.3% versus the first quarter of 2011 where it averaged 1.2%. The bad news: hiring is "abysmal." The average number of hires per month in the first quarter of 2011 is 27% below the average number of hires per month in 2006.
How does all this go together? The looming shortage of 1 million jobs (by 2018) predicted in the NY Times recently was for jobs in fields that those who are currently unemployed are not trained for. As Alan Blinder (Princeton Economist and former Fed Vice Chairman) said when he shifted his position on free trade, the U.S. could lose as many as 40 million jobs to offshore employees who are cheaper: tax lawyers are not safe/divorce lawyers are. It's not the level of education so much as it is: must the job be performed here?
So, is the current "job seeker's ratio" reflective of long term structural unemployment? Stay tuned.
Monday, May 9, 2011
The Housing Market
http://online.wsj.com/article/SB10001424052748704810504576309532810406782.html?mod=WSJ_hp_LEFTTopStories#printMode
***************
"Adversity causes some men to break, others to break records." (William Arthur Ward)
***************
So, the forces of Nouriel Roubini are seeing their perspective reinforced this morning with the Wall Street Journal's article on where housing stands right now. Basically, the "Roubinis" have said quite consistently that a double dip situation could be caused by housing (or the combination of housing and state/local government budgets tanking).
I'm not sure which of the many numbers is worse for housing but I'll go with the 57 consecutive months that prices have dropped!
The data from Zillow.com show median U.S. home values down 8.2% from one year earlier. According to Stan Humphries, Zillow's chief economist, monthly declines for Februaury and March were "... really staggering." Humphries now believes prices won't hit bottom before next year and expects they will fall by another 7% to 9%.
The situation is what it is. Since I hate people (not literally) who quote themselves, I will just mention in passing that our conclusion in one of our classes back in 2008 was that nothing will happen to right the U.S. economy until the housing situation resolves itself. Now that it's 2011, it's interesting to see that the "recovery" is bifurcated (that sounds like a word that an economist would use). It appears that those who want to call "this" a "recovery" are seeing the glass as half full (see our prior post) while those of us who watch the lagging indicators are still waiting for decent unemployment numbers.
Prices are decelerating for housing because of the many foreclosed properties that tend to sell at a discount. And, of course, we have the mortgage titans Fannie Mae and Freddie Mac that have sold more than 94,000 foreclosed properties during the first quarter, a new high that represented a 23% increase over the previous quarter! But wait, there's more: those two entities hold another 218,000 properties as of the end of March.
The widely followed Case-Shiller index shows prices approaching new lows: this is the index that tracks repeat sales of previously owned homes using a three-month moving average.
Markets like Dallas have posted the smallest price declines and the lowest levels of foreclosures. Perhaps markets like Dallas can lead a comeback in the housing sector.
Nationally, Zillow estimates that more than 28% of borrowers owe more than their homes are worth. Sadly, those numbers are much higher in hard-hit markets such as Phoenix, where more than two-thirds of borrowers owe more than their homes are worth.
So, we would like to suggest that those economists who are looking at a two year bull market as part of a "recovery" need to temper their enthusiasm until housing and unemployment catch up. But, how long do bull markets last? Good question.
***************
"Adversity causes some men to break, others to break records." (William Arthur Ward)
***************
So, the forces of Nouriel Roubini are seeing their perspective reinforced this morning with the Wall Street Journal's article on where housing stands right now. Basically, the "Roubinis" have said quite consistently that a double dip situation could be caused by housing (or the combination of housing and state/local government budgets tanking).
I'm not sure which of the many numbers is worse for housing but I'll go with the 57 consecutive months that prices have dropped!
The data from Zillow.com show median U.S. home values down 8.2% from one year earlier. According to Stan Humphries, Zillow's chief economist, monthly declines for Februaury and March were "... really staggering." Humphries now believes prices won't hit bottom before next year and expects they will fall by another 7% to 9%.
The situation is what it is. Since I hate people (not literally) who quote themselves, I will just mention in passing that our conclusion in one of our classes back in 2008 was that nothing will happen to right the U.S. economy until the housing situation resolves itself. Now that it's 2011, it's interesting to see that the "recovery" is bifurcated (that sounds like a word that an economist would use). It appears that those who want to call "this" a "recovery" are seeing the glass as half full (see our prior post) while those of us who watch the lagging indicators are still waiting for decent unemployment numbers.
Prices are decelerating for housing because of the many foreclosed properties that tend to sell at a discount. And, of course, we have the mortgage titans Fannie Mae and Freddie Mac that have sold more than 94,000 foreclosed properties during the first quarter, a new high that represented a 23% increase over the previous quarter! But wait, there's more: those two entities hold another 218,000 properties as of the end of March.
The widely followed Case-Shiller index shows prices approaching new lows: this is the index that tracks repeat sales of previously owned homes using a three-month moving average.
Markets like Dallas have posted the smallest price declines and the lowest levels of foreclosures. Perhaps markets like Dallas can lead a comeback in the housing sector.
Nationally, Zillow estimates that more than 28% of borrowers owe more than their homes are worth. Sadly, those numbers are much higher in hard-hit markets such as Phoenix, where more than two-thirds of borrowers owe more than their homes are worth.
So, we would like to suggest that those economists who are looking at a two year bull market as part of a "recovery" need to temper their enthusiasm until housing and unemployment catch up. But, how long do bull markets last? Good question.
Saturday, May 7, 2011
Recovering In 2011
http://online.wsj.com/article/SB10001424052748703992704576306843829385166.html
***************
"I do not live to play, but I play in order that I may live and return with greater zest to the labors of life." (Plato)
***************
So, we have preached in the past about a "recovery" is not a recovery until people work again. The April jobs report added 244,000 non-farm payroll jobs in the U.S. (up from 221,000 jobs in March). Nearly every sector added jobs: gains were biggest in retail, professional and business services, leisure and hospitality, and manufacturing. Sadly, the losers were state and local governments struggling with budget issues - and that situation does not look to end anytime soon. In addition, if you follow Nouriel Roubini and Meredith Whitney, the state and local government budget crises will lead to a "double dip" or worse. Google Whitney on "60 Minutes."
Setting aside Roubini and Whitney, there are 6,955,000 fewer jobs today than when the recession "officially" began in December, 2007. If the pace of job growth from April (244,000 jobs added) were to continue each month going forward, it would take 29 months before we have the same number of jobs we had before the recession began. And, that assumes a "static" population number (it does not account for new labor force additions since 12/07: high school and college graduates, etc. That number usually adds roughly 125,000, or more, people to the labor force each month).
We'd go into the "Labor Force Participation Rates" for men (which are at their lowest level since 1948) but we don't want my loyal followers to have their eyes glaze over.
According to the press, there's bad news in the good news: the unemployment rate has gone up from 8.8% to 9% simultaneous with the April report. No, that's good news. The last sign of a recession ending is that people who had given up looking for work have seen signs that jobs might be available so they've come back into the job market to look. These are the "new lookers" who haven't been counted in the recent unemployment reports because they'd dropped out.
Comparing the two worst recessions since WW II (Ending: 1975 & Ending: 2009), the stock market has moved up much faster in the current cycle, as have industrial production and durable goods orders. But this recovery has lagged the earlier one in jobs, GDP growth, construction spending and personal income.
Friday's report seems to be in line with the Federal Reserve's view: "The economy is growing fast enough to produce steady but unspectacular job growth that won't bring the unemployment rate down quickly." The Fed plans to end a $600 million bond-buying program (QE2) in June and keep short term interest rates low for a while.
Given all of this, there are still 13.7 million Americans out of work and another 8.6 million who wanted to work full-time but could only find part-time jobs.
Until what we are in now, economically, shows more signs of improvement, it's hard to call it a "recovery."
We'd like to lean on a chart from Moody's Analytics (based on Labor Department data) which is included in the WSJ article attached; "Ticking Up" - Monthly Net Change in Payrolls. The "positive bars" (in green) outnumber the negative bars in payroll growth for 10 of the last 14 months, including the most recent 7. Perhaps a simple thing, but hope transcends.
***************
"I do not live to play, but I play in order that I may live and return with greater zest to the labors of life." (Plato)
***************
So, we have preached in the past about a "recovery" is not a recovery until people work again. The April jobs report added 244,000 non-farm payroll jobs in the U.S. (up from 221,000 jobs in March). Nearly every sector added jobs: gains were biggest in retail, professional and business services, leisure and hospitality, and manufacturing. Sadly, the losers were state and local governments struggling with budget issues - and that situation does not look to end anytime soon. In addition, if you follow Nouriel Roubini and Meredith Whitney, the state and local government budget crises will lead to a "double dip" or worse. Google Whitney on "60 Minutes."
Setting aside Roubini and Whitney, there are 6,955,000 fewer jobs today than when the recession "officially" began in December, 2007. If the pace of job growth from April (244,000 jobs added) were to continue each month going forward, it would take 29 months before we have the same number of jobs we had before the recession began. And, that assumes a "static" population number (it does not account for new labor force additions since 12/07: high school and college graduates, etc. That number usually adds roughly 125,000, or more, people to the labor force each month).
We'd go into the "Labor Force Participation Rates" for men (which are at their lowest level since 1948) but we don't want my loyal followers to have their eyes glaze over.
According to the press, there's bad news in the good news: the unemployment rate has gone up from 8.8% to 9% simultaneous with the April report. No, that's good news. The last sign of a recession ending is that people who had given up looking for work have seen signs that jobs might be available so they've come back into the job market to look. These are the "new lookers" who haven't been counted in the recent unemployment reports because they'd dropped out.
Comparing the two worst recessions since WW II (Ending: 1975 & Ending: 2009), the stock market has moved up much faster in the current cycle, as have industrial production and durable goods orders. But this recovery has lagged the earlier one in jobs, GDP growth, construction spending and personal income.
Friday's report seems to be in line with the Federal Reserve's view: "The economy is growing fast enough to produce steady but unspectacular job growth that won't bring the unemployment rate down quickly." The Fed plans to end a $600 million bond-buying program (QE2) in June and keep short term interest rates low for a while.
Given all of this, there are still 13.7 million Americans out of work and another 8.6 million who wanted to work full-time but could only find part-time jobs.
Until what we are in now, economically, shows more signs of improvement, it's hard to call it a "recovery."
We'd like to lean on a chart from Moody's Analytics (based on Labor Department data) which is included in the WSJ article attached; "Ticking Up" - Monthly Net Change in Payrolls. The "positive bars" (in green) outnumber the negative bars in payroll growth for 10 of the last 14 months, including the most recent 7. Perhaps a simple thing, but hope transcends.
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