Are you %&*!ing Serious?

California Lawmakers Take Aim At Cussing

The state Assembly is scheduled to vote on a resolution Thursday calling for a statewide "Cuss Free Week," to occur annually during the first week of March. If approved, it would go to the state Senate for a final vote on Monday.

The rest of next week will be officially swear-word free if both houses approve the resolution.

The resolution by Assemblyman Anthony Portantino, D-La Canada Flintridge, was inspired by a South Pasadena teenager, McKay Hatch, who founded a No Cussing Club at his junior high school in 2007. His efforts to stamp out profanity have generated international attention, with 35,000 members joining the No Cussing Club's Web site.

Portantino said the California Legislature -- known for imposing strict clean air and clean water laws -- is the first state legislative body in the nation to consider a statewide profanity-free week.

Hey, um, how's about balancing the budget? And to say nothing of free speech violations etc.

Or try to make the state more business friendly.....

*GAAAH*

Economic Report of the President

This report was just released today.

Chapter 4 is really interesting:

Exports can be expected to rise rapidly as the world economy recovers for a number of reasons. Just as trade typically falls faster than GDP in a recession (discussed in Chapter 3), it typically grows faster during a rebound. Trade-to-GDP ratios have fallen in the last year and can be expected to bounce back as the world economy recovers. This bounce-back alone will lead to rapid export growth. More generally, the crucial driver of exports is always the performance of the world economy. For U.S. goods and services to be bought abroad, demand in other countries must return robustly. This is one reason for the United States to strengthen its ties with fast-growing regions such as emerging East Asia. The faster our trade partners grow and the more we trade with fast-growing economies, the more demand for U.S. exports grows....

And which region would benefit most with increased trade? Since a lot of goods are made or assembled in the LA Basin, increased exports would benefit regional manufacturers, possibly at the expense of regional distributors (assuming that foreign and domestically produced goods were substitutes).

January port numbers were just released. Imports are up 1.8% over last year. Exports are up 31.8% over last year.

I was really expecting imports to be much higher

National Exports Initiative

Prepared remarks from the Secretary of Commerce Gary Locke.

In last week’s State of the Union address, President Obama announced a series of new proposals that will help put Americans back to work and our nation on a path to sustainable economic growth.

A key element in helping to meet that goal is a new National Export Initiative, which aims to double American exports over the next five years and support two million jobs here at home.

There have, of course, been previous endeavors by the government to elevate the importance of exports.

But what sets this effort apart is that this is the first time the United States will have a government-wide export-promotion strategy with focused attention from the president and his Cabinet.

This initiative will correct an economic blind spot that has allowed other countries to chip away at America’s international competitiveness.

Because for all of America's economic strengths, we stand out among developed nations as one of the few whose government does not have a focused, comprehensive and agile export strategy.

At a time when traditional drivers of U.S. economic growth like consumer and business spending are strained, we simply must elevate exports as a key part of our economic recovery efforts.

What the Obama administrations new “export focus” means for industrial real estate:

By the numbers:

Exports account for 11 percent of GDP,

Exports support 10 million jobs in America

Every 1 billion in exports supports 6,250 manufacturing and transportation jobs.

What the Obama Administration is proposing:

Gary Locke, the United States Commerce Secretary outlines a new Export Initiative which seeks to double American exports in the next five years.

What this means:

This would create 2 million jobs here in the U.S.

These 2 million additional workers would require upwards of 500 million SF of industrial space, much of which would be located within the Los Angeles Basin.

The Commerce Department would be advocating more forcibly for exporters, helping firms contract with companies overseas and directly connecting with new consumers.

Why markets and government policy matter

In a move that continually puts North Korea on my list of places never to visit, Kim Jong Il revalued the nation's currency, destroying wealth and inflicting uncertainty and pain on a long suffering people.

From the LA Times.

After the 1990s, when food distribution collapsed and as many as 2 million people died as a result, North Koreans began buying food privately from vendors who sold homegrown produce on the streets and at covered bazaars. By last year, the regime had rolled back many of the liberal reforms, tightening the hours of the markets and the types of Chinese goods available.The new dictates appear designed not only to put the entrepreneurs out of business but to confiscate any accumulated wealth.
...
"People panicked. They had all their savings in cash because nobody trusts the banks. Many committed suicide," said Song Jung-su, a former railroad security official who defected from North Korea in 2006 but is still in touch with relatives.
...
In the days before the old won lost its value and foreign currency was banned, people shopped frantically, snapping up whatever they could find: electronics, rice cookers, shoes, cosmetics, clothing and, most of all, food.
...
The currency reform has had peculiar side effects. North Korea's treasury didn't print enough small-denomination notes, so shops have had to give out candy and gum as change.
...
"It's always been that way. If you went to the main market and nobody was there, you knew the police had come through, so you went and found another market," said defector Kim. "They can close the markets, but they can't stop market activity."

GDP, ISM & WTF is really going on

Well, if you have been asleep all last Friday, or willfully and maliciously avoiding economic news, you probably missed the 4Q GDP numbers that came out last week.

Big mistake but your repentance is here.

4Q GDP blew through projections with a 5.7% annualized increase over the 3rd quarter numbers. In Q3, it was a 2.2% increase over Q2. So it seems that things are getting better at an increasing rate.

While you laziness may be forgiven in that these numbers are likely subject to further revisions and your precious time cannot be wasted on the incomplete speculation of some government bureaucracy, you are wrong.

Most of the increase in GDP (3.4%) came from inventory adjustments with the remainder (2.3%) coming from an increase in consumption, or what we like to call an actual increase in GDP. The 2.3% increase is over and above the change seen from Q2 to Q3, so things were already getting better, but what is with this 3.4% kicker, this bonus that hardly anybody saw coming?

Is this other 3.4% number mere voodoo magic, an accounting abstraction and nothing more?

Well, yes and no. Let me explain how it works.

In Q4, businesses sold $8.5 billion in goods over what was produced, meaning that they drew down inventories. How does this calculate into GDP? GDP = C + I + G + X. The inventory adjustment count as negative investment (-I), -8.5 billion or - 34 billion at an annual rate.

In Q3, inventory drawdowns were $34 billion, meaning that in Q3 we sold 34 billion more than we made, -139 on an annual rate.

This also counts as -I.

Here is where the magic happens.

Last quarter, inventory drawdowns were -139 I, this quarter they were - 34 I.

So the difference between -139 and -34 is +105 billion a change that is reported as positive.

We thought we were losing 139 billion dollars but we only really lost 34 billion, which is counted as positive GDP growth.

Econobrowser does a much better job of explaining it:

If consumers, businesses, foreigners, and the government had all purchased exactly the same quantity of real goods and services in 2009:Q4 as they had in 2009:Q3, more of those sales would have come out of inventory drawdown in Q3 than in Q4, so even without any gain in final sales we would have had to produce more stuff in Q4 than Q3, specifically, 3.4% more stuff at an annual rate. In fact real final sales to consumers, businesses, foreigners, and the government were not stagnant, but grew at a 2.3% annual rate during the fourth quarter, and the two effects combined give us the 5.7% reported GDP growth.

So we sold more stuff in Q4 over Q3, but this stuff came from the inventory adjustment that occurred in Q3. We didn’t see that huge inventory adjustment this quarter, meaning 2 things.
1. we are producing more to make up for the increase in stuff sold.
2. We are not producing more and this was a 1 time occurrence and GDP is likely to be less in the upcoming quarter.

I am inclined to believe #1, since the the ISM came out today as I am sure you are aware of, with inventories contracting at a slower pace in January, with production and new orders remaining on the rise.

This leads me to believe that we are producing more to replace the low inventory levels that we have seen since the recession started.

Hopefully, manufacturers inventories will rise and then customers inventories will rise, but it appears that lean times remain upon us. Eventually the increased production will lead to increased inventories, and these two components are the only ones still remaining underwater on the ISM.