Major CD Announcement

Dear Carpe Diem Regulars

Over the next several days, there will be some major changes taking place for the Carpe Diem blog. After six years, almost 10,000 posts, and more than 8 million visits and almost 12 million page views using the Blogger platform, Carpe Diem will become a WordPress blog at a new website. 

Starting within the next few days, Carpe Diem will be exclusively hosted by The American Enterprise Institutes’s new AEIdeas website, which also features Jimmy Pethokoukis’s blog as well as other AEI blog “channels” by topic (Economics, Foreign and Defense Policy, Politics and Public Opinion and Society and Culture). Many of the AEI scholars and fellows now regularly blog in the topic areas of the AEIdeas blog including Charles Murray, Andrew Biggs, Marc Thiessen, Michael Auslin, Mackenzie Eaglen, Dani Pletka, Nick Schulz, Karlyn Bowman, Alex Pollock, Ken Green and Arthur Brooks, among others.  

Here’s how the relocation of Carpe Diem will affect you: 

1. If you have the current Carpe Diem website bookmarked, you’ll be automatically re-directed to the new website and you won’t need to do anything.  (Here’s a direct link to the new Carpe Diem website.)

2. If you subscribe to the daily email updates of Carpe Diem posts, you should still receive those emails with a summary of posts over the last 24 hours from the new AEIdeas website. 

3. If you regularly (or occasionally) leave comments on Carpe Diem, you can still easily make comments at the new AEI website, by providing a name and email address (the email address won’t be published). The comments at the AEIdeas website are moderated before appearing on the AEI website, and I’ll do my best to help with the moderation process to be sure your comments appear as quickly as possible. 

4. All of the 9,000 posts in the Carpe Diem archives have been moved to the new AEIdeas website, so they will still be available and searchable by key word.   

5. If you follow Carpe Diem by RSS feed, here’s the link to the new Carpe Diem RSS feed

Thanks for your loyal readership and I hope you continue to follow Carpe Diem at its new home!

Wednesday Afternoon Links

1. Markets in everything: WiFi enabled, multi-color, energy efficient LED light bulb that you control with your iPhone.

2. “Patchwriting” is more common than plagiarism, and just as dishonest.  I guess that’s what happened to me, see recent CD post

3. Almost half (46.3%) of Irish residents buy private health insurance, despite “free” national health insurance.

4. Thanks to the commodity boom, 2012 graduates from the South Dakota School of Mines make more on average than Harvard grads, $56.7k vs. $54.1k.

5. New website archives every TV news program since 2009, and it’s now online and searchable for free.

6. Russia has vast new diamond field containing “trillions of carats,” enough to supply global markets for next 3,000 years.

7. Airlines add service in North Dakota’s oil patch:  Delta to add two daily Minneapolis-Williston flights, United to add three flights from Denver to Williston.  

Builder Confidence Index Rises in September to 6-Yr. High, With Largest 12-Month Gain in History

From today’s report from the National Association of Home Builders:

September 18, 2012 – Builder confidence in the market for newly built, single-family homes rose for a fifth consecutive month in September to a level of 40 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).  This latest three-point gain brings the index to its highest reading since June of 2006 (see chart above).

“This fifth consecutive month of improvement in builder confidence provides further assurance that the housing market is moving in a positive direction, but there’s still a long way to go on the road to recovery and several obstacles are slowing our progress,” said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “In particular, unnecessarily tight credit conditions are preventing many builders from putting crews back to work – which would create needed jobs — and discouraging consumers from pursuing a new-home purchase.”

“Builders across the country are expressing a more positive outlook on current sales conditions, future sales prospects and the amount of consumer traffic they are seeing through model homes than they have in more than five years,” noted NAHB Chief Economist David Crowe. “However, against the improving demand for new homes, concerns are now rising about the lack of building lots in certain markets and the rising cost of building materials. Given the fragile nature of the housing and economic recovery, these are significant red flags.”

MP: The increase in the builder confidence index in September to a six-year high of 40 is a remarkable recovery from a reading of only 14 a year ago.  The 24-point improvement in builder confidence over the last year is the largest 12-month gain in the history of the HMI going back to 1985, and surpasses the previous record of a 24-point annual gain in early 1992.

Classic 1978 Milton Friedman Lecture on Trade

 
In the above 1978 lecture at Kansas State University, Milton Friedman discusses free trade, and explains why trade protection and interference in international trade are so widespread, despite the almost universal condemnation of such measures by the economics profession.

Professor Friedman also addresses the political obsessions with: a) increasing exports (e.g. President Obama’s goal to double exports by 2015) and b) achieving a “favorable balance of trade.” 

Here’s a quote from Friedman’s lecture, demonstrating the timeless nature of his economic wisdom, which is as relevant today as it was in 1978:

In the international trade area, the language is almost always about how we must export, and what’s really good is an industry that produces exports. And if we buy from abroad and import, that’s bad. But surely that’s upside-down. What we send abroad we can’t eat, we can’t wear, we can’t use for our houses. The goods and services we send abroad, are goods and services not available to us. On the other hand, the goods and services we import, they provide us with TV sets we can watch, automobiles we can drive, with all sorts of nice things for us to use. The gain from foreign trade is what we import. What we export is the cost of getting those imports. And the proper objective for a nation as Adam Smith put it, is to arrange things, so we get as large a volume of imports as possible, for as small a volume of exports as possible. 

This carries over to the terminology we use. When people talk about a favorable balance of trade, what is that term taken to mean? It’s taken to mean that we export more than we import. But from the point of view of our well-being, that’s an unfavorable balance. That means we’re sending out more goods and getting fewer in. Each of you in your private household would know better than that. You don’t regard it as a favorable balance when you have to send out more goods to get less coming in. It’s favorable when you can get more by sending out less.

MP: Here’s a formula summarizing Milton Friedman’s insights:

1. The stuff we import

MINUS

2. The stuff we export =

3. Our standard of living

In other words, in economic terms, our standard of living is highest when we maximize imports and minimize exports, which is exactly the opposite of the political thinking and policies, which generally seek to maximize exports and minimize imports.

Quotation of the Day: A Duty Is a TAX on Imports

From Don Boudreaux’s open letter to Mitt Romney:

Your wish to “label China a currency manipulator” means that you seek a pretext to impose (as your website says) “countervailing duties” on imports from China – which is to say, you seek a pretext for raising taxes on Americans who buy goods and services from China. Yet in other episodes of your campaign you promise (as you did here* last month) “I will not raise taxes on the American people. I will not raise taxes on middle-income Americans.” 

If you keep your promise to impose countervailing duties on imports from China you will thereby break your promise to not raise taxes on the American people. (Americans who buy imports from China are, after all, American people.) But if you keep your promise to not raise taxes on the American people, you must – as I hope you will – break your promise to punitively tax those many Americans who buy imports from China.  

MP: It’s a simple, but often neglected point that a tariff or duty on imports is just another word for a sales-type tax on imported goods, and those tariffs/taxes/duties are not imposed on China or other U.S. trade partners, they are imposed on, and paid for by, Americans (consumers and businesses) who purchase foreign-produced goods.   

Grisly Drug War Fact of the Day

“The American news media continues to report the body count in Mexico’s “War on Drugs” at more than 50,000 dead. But Molly Molloy, a researcher at New Mexico State University, tallies more than 100,000 Mexicans killed to wage a war financed and mandated by American authorities and led by Mexican president Felipe Calderón.”

From the article “Mexicans Pay in Blood for America’s War on Drugs.”  

Note: That would be a casualty count that approaches the U.S. body count during WWI (116,500 deaths) and more than the combined American casualties during the Korean War (36,500 deaths) and the Vietnam War (58,000 deaths).

Buying a Home Is Now 45% Cheaper Than Renting

Here’s another reason that the U.S. housing recovery is real and sustainable – buying a home is now 45% cheaper than renting, according to an analysis done by Trulia and reported here by its chief economist Jed Kalko:

Methodology: Trulia looks at homes listed for sale and for rent on its website, and compares the average rent and asking price for an identical set of properties in a metro area, for a direct apples-to-apples comparison. Then, Trulia factors in the total costs of homeownership (e.g., closing costs, maintenance, insurance, taxes, etc) and total cost of renting (e.g., renter’s insurance and security deposit). 

The starting assumptions are that a prospective homebuyer can get a low mortgage rate of 3.5 percent, itemizes their federal tax deductions, is in the 25 percent tax bracket, and will stay in their home for seven years. To account for the opportunity costs, Trulia calculates the net present value of the payment streams for renting and owning.

Conclusion: With a 20% down payment, a 30-year fixed mortgage rate at 3.5% and at the 25% federal tax bracket, Trulia finds that homeownership is cheaper than renting in all of the 100 largest metros by a wide margin. There is no market where the financial decision is even close, so long as you plan to stay in the home for at least seven years, finance with a 3.5% mortgage, and itemize your tax deductions.  

Based on asking prices and rents during the summer of 2012, buying is now 45% cheaper than renting in the 100 largest U.S. metros, on average – that’s a monthly savings of $771. If you plan to stay in a home for 7 years, which is the average time that Americans traditionally live in a home before moving again, it is more affordable to buy than to rent in ALL of the 100 largest metros in the U.S.

MP: Trulia’s analysis would indicate that the incredible affordability of buying a home today compared to renting will provide some support to the ongoing housing recovery over the next few years.  Of course, rising home prices and mortgage rates could eventually reduce some the current huge advantage of buying versus renting, depending on how fast rents rise compared to home prices.  And as Trulia’s economist points out, many would-be homebuyers don’t have the 20% down payment assumed in this analysis, and might not be able to save up that amount in the short run to take advantage of the historical affordability of homeownership.  But on the other hand, FHA is providing mortgages with only a 3-5% down payment, so the lack of a 20% down payment might not be much of a constraint.    

Also, the 45% advantage for homeownership versus renting is the average.  In metro areas like Oklahoma City, the monthly cost of owning a home ($590) is as much as 63% lower than renting a comparable home ($1,576).  It make sense that such a huge cost difference would have to start translating into increased demand for home purchases, and that’s probably one of the factors contributing to increased home sales around the country.  Another example is Minneapolis – the monthly cost of buying a home there ($751) is 52% cheaper than renting ($1,558), which translates into monthly savings of $807 for homebuyers compared to renters (of a comparable house), and that huge savings is likely what is driving home sales higher in the Twin Cities (see CD post below).    

CD Post Re-Written by a Montana TV Station?

Read this CD post from last Wednesday on North Dakota oil output in July, and then read this news report posted yesterday by TV station KTVQ in Billings, Montana, and notice these similarities (especially the last comparison):

CD: North Dakota pumped another record amount of crude oil during the month of July at a rate of more than 674,000 barrels per day.

KTVQ: In July, North Dakota pumped a record amount of crude, at a rate of more than 674,000 barrels a day.

CD: The state’s oil production in July was 59% above a year ago.

KTVQ: Compared to a year ago, July’s production level was up 59%.

CD:  North Dakota produced 62% more oil than Alaska in July, marking the fifth consecutive month that North Dakota has out-produced Alaska. The Peace Garden State surpassed Alaska’s oil production for the first time in March to become the country’s new No. 2 oil state, behind only Texas now.

KTVQ: July marked the fifth month in a row that the state of North Dakota produced more oil than Alaska. It was back in March that North Dakota surpassed Alaska’s in oil production for the first time to become America’s second biggest oil state.

CD: North Dakota continues to lead the nation with the lowest state unemployment rate at 3 percent in July, and more than five percentage points below the national average. 

KTVQ: North Dakota also continues to lead the nation with the lowest unemployment rate at just 3 percent – more than five percentage points below the national average.

Coincidence?

Great Moments in Government Regulation: Massage a Horse in Nebraska, Go to Jail for Up to 20 Years

The Institute for Justice is reporting that a woman in Nebraska could face up to 20 years in prison for massaging horses without a license.

“That’s the absurd fate Karen Hough could face if she wants to continue her business in Nebraska. A certified instructor, Karen has been massaging horses for years. Massaging a horse is believed to deliver many health benefits, including relieving tension, improving circulation, and alleviating muscle fatigue.”

“Earlier this year, she applied for a license in equine massage but was told only veterinarians can become licensed. A 2007 memo from Nebraska’s Board of Veterinary Medicine and Surgery asserted that “no health professional other than licensed veterinarians and licensed veterinary technicians may perform services/therapies on animals.” This means Karen would need to spend thousands of dollars and seven years of her life just to acquire a government permission slip to do what she’s been doing for years.”

Read more here.

Upcoming Documentary on America’s Longest War: The War on Drugs, "A Holocaust in Slow Motion"

 
The soon-to-be-released documentary “The House I Live In” is an inside look at America’s longest war, The War on Drugs, from executive producers Danny Glover, John Legend, Russell Simons. From the film’s website:

“Filmed in more than twenty states, THE HOUSE I LIVE IN tells the stories of individuals at all levels of America’s War on Drugs. From the dealer to the narcotics officer, the inmate to the federal judge, the film offers a penetrating look inside America’s criminal justice system, revealing the profound human rights implications of U.S. drug policy.”
 
Here are some quotes from the trailer above: 

“The Drug War is a holocaust in slow motion.” 

“The Drug War is a war on all Americans.” 

“You have to understand that the War on Drugs has never been about drugs.”

From a review by US News:

Two years after he was elected president in 1969, Richard Nixon first used the phrase “war on drugs,” in a tough speech on drug policy. Four decades and more than 40 million drug-related crimes later, the war on drugs is still simmering.

And now, just months before the presidential election, a new documentary “The House I Live In” explores the ways in which that war could be rethought. The film also implicates President Barack Obama, who promised a compassionate drug policy while running for president but requested $25.6 billion for drug enforcement in 2013—the highest yearly total ever.


A reviewer from The Boston Globe says “I’d hate to imply that it’s your civic duty to see “The House I Live In” but guess what – it is.”   

The movie will be in theaters on October 5.  

2012: The Year of the Housing Recovery, Updated

1. “The number of improving housing markets across the country rose to 99 in September, according to the National Association of Home Builders/First American Improving Markets Index (IMI), released this week. This is up from 80 metros that were listed as improving in August and includes representatives from 33 states as well as the District of Columbia. The IMI identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months.”

Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. said, “This solid growth is an encouraging sign that housing continues on a slow but steady recovery path that is gradually advancing from one local market to the next.”

“More metros across the country are experiencing a sustained uptick in house prices, employment and new building activity as rising consumer confidence in local market conditions pushes more people to consider a new-home purchase,” observed NAHB Chief Economist David Crowe.

“Combined with recent positive reports on builder confidence, housing starts and new-home sales, the September IMI adds to the growing consensus that housing is finally moving in the right direction, which in turn is spurring more potential buyers to get off the fence,” added Kurt Pfotenhauer, vice chairman at First American Title Insurance Company.

2. “Des Moines area home sales spiked 27% in August over a year earlier and climbed nearly 11% over July, a report from the Des Moines Association of Realtors today shows. The average sale price pushed 3.3% higher to $172,839 in August over a year earlier. Pending sales climbed 13.1% to 897 in August over a year ago.  In August, homes were on the market an average of 98 days, 14 days fewer than 112 days in August 2011. Homes were on the market five days fewer than in July.”

3. The S&P Homebuilders ETF (XHB) tracks the “S&P Homebuilders Select Industry Index” and includes holdings of Pulte Homes, Standard Pacific, Toll Brothers, MDC Holdings, USG and other homebuilders, construction companies, and companies that supply products to homebuilders or home buyers. The XHB closed Wednesday at 24.87, the highest level since August 2007 more than five years ago.  Over the last year the XHB is up by 74%, or more than three times the 23.3% increase in the S&P 500 Index.  

Update 1

4.  “CoreLogic today released a new analysis showing that 10.8 million, or 22.3%, of all residential properties with a mortgage were in negative equity at the end of the second quarter of 2012. This is down from 11.4 million properties, or 23.7%, at the end of the first quarter of 2012. Approximately 600,000 borrowers reached a state of positive equity at the end of the second quarter of 2012, adding to the more than 700,000 borrowers that moved into positive equity in the first quarter of this year.”

“Most borrowers in negative equity are continuing to pay their mortgages. The share of borrowers that were underwater and current on their payments was 84.9% at the end of the second quarter in 2012. This is up from 84.8% at the end of the first quarter in 2012.”

“The level of negative equity continues to improve with more than 1.3 million households regaining a positive equity position since the beginning of the year,” said Mark Fleming, chief economist for CoreLogic. “Surging home prices this spring and summer, lower levels of inventory, and declining REO sale shares are all contributing to the nascent housing recovery and declining negative equity.”

“Nearly 2 million more borrowers in negative equity would be above water if house prices nationally increased by 5 percent,” said Anand Nallathambi, president and CEO of CoreLogic. “We currently expect home prices to continue to trend up in August. Were this trend to be sustained, we could see significant reductions in the number of borrowers in negative equity by next year.”

Update 2:

5. DQNews updated its National Home Sales Snapshot today and reports that national homes sales for the most recent 30 days of home sales increased 11.3% compared to the comparable period last year, and the median sales price increased by 7.5%.  DQNews’ home sales snapshot is based on 98 of the Top 100 U.S. metro areas, and covers about two-thirds of the nation’s home sales. 

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