Thursday, July 31, 2008


chart from Carpe Diem

Exxon: Record Profits and Taxes

chart from Carpe Diem

From 2003 to 2007, Exxon's earnings grew by 89%, while income taxes grew by 170%. Much of that growth was overseas...

Defenders of oil company profits also point out that their profit margin, at around 8%, is slightly below average for S&P 500 companies, and far below the 20%-plus margins seen at companies such as Microsoft or Pfizer.


Exxon's Record Profit: $11.68 Billion

Exxon Mobil once again reported the largest quarterly profit in U.S. history Thursday, posting net income of $11.68 billion on revenue of $138 billion in the second quarter.

That profit works out to $1,485.55 a second.

That barely beat the previous corporate record of $11.66 billion, also set by Exxon in the fourth quarter of 2007....

In addition to making hefty profits, Exxon also had a hefty tax bill. Worldwide, the company paid $10.5 billion in income taxes in the second quarter, $9.5 billion in sales taxes, and over $12 billion in what it called "other taxes."

Wednesday, July 30, 2008

Cartoon: Housing Crisis

Housing Bill Signed into Law

President Bush on Wednesday signed into law a sweeping housing bill that aims to boost the struggling housing market and bolster mortgage finance giants Fannie Mae and Freddie Mac.

The Senate voted 72-13 in favor of the bill on Saturday, after the House passed it three days earlier.

"We look forward to put in place new authorities to improve confidence and stability in markets, and to provide better oversight for Fannie Mae and Freddie Mac," said White House spokesman Tony Fratto. "The Federal Housing Administration will begin to implement new policies intended to keep more deserving American families in their homes."

The legislation has two principal objectives: to offer affordable government-backed mortgages to homeowners at risk of foreclosure, and to bolster Fannie and Freddie with a temporary rescue plan and a new, more stringent regulator...

The Congressional Budget Office last week estimated the potential cost of a rescue could be $25 billion. CBO said there is probably a better than 50% chance that Treasury would not need to step in. It also said there is a 5% chance that Freddie's and Fannie's losses could cost the government $100 billion

Zimbabwe Attempts to Fight Inflation

Zimbabwe's central bank governor says he is knocking 10 zeros off the country's hyper-inflated currency to make 10 billion dollars become one dollar...

Just last week Gono introduced a new 100 billion-dollar note that is not enough to buy a loaf of bread.

Gono said on Aug. 1 the bank will issue a 500-dollar bill equivalent to 5 trillion dollars at the current rate.

read the CNN story

Monday, July 28, 2008

Cartoon: Fannie Mae and Freddie Mac

$482 Billion Budget Deficit Projected

President Bush's budget chief blamed the faltering economy and the bipartisan stimulus package for the record $482 billion deficit the White House predicted for the 2009 budget year.

Jim Nussle, the director of the Office of Management and Budget, said the deficit would be about 3.3 percent of the nation's gross domestic product, the measure of the nation's total economy...

While the deficit would be a record in absolute dollar terms, Nussle said it would be below the 2004 deficit, 3.6 percent of GDP, and the record deficit of 1983, 6 percent of GDP, when compared with the size of the overall U.S. economy.

White House spokeswoman Dana Perino said the stimulus package was necessary, even if it increased the deficit...

He said the OMB projects that the deficit would fall after the 2009 budget year, and he predicted that the government would have a surplus in budget year 2012, if the president's budget blueprint is followed.

read the CNN story

Saturday, July 26, 2008

Gas Prices: Below $4.00

Gas prices declined for the 9th straight day, falling below $4 a gallon for the first time in seven weeks, according to a nationwide survey Saturday by motorist group AAA.

The price of regular unleaded gasoline dropped 2 cents to $3.983 a gallon on average, according to AAA's daily survey of credit card swipes at filling stations.

Americans have seen their pocketbooks stretched thin on the back of record high fuel prices and the churning economy.

Average gasoline prices first crossed the $4 mark on June 7 when they hit $4.005 a gallon. Surging oil prices kept gas on an upward trajectory, with prices hitting a record high of $4.114 on July 16. Prices stayed there for two days before starting to retreat.

read the CNN story

Wow: Crocodile v. Leopard

more pictures and story

Thursday, July 24, 2008

Cartoon: The Economy

New Minimum Wage: $6.55

The national minimum wage went up 70 cents on Thursday as the second of three planned increases mandated by Congress took effect.

The national minimum wage will increase to $6.55 per hour as part of the Fair Minimum Wage Act of 2007.

Before last year's legislation, the national minimum wage had been left unchanged at $5.15 an hour since 1997.

The act calls for a third and final increase, scheduled to take place on July 24, 2009, that will raise the minimum wage to $7.25 per hour...

With labor costs accounting for 70%-80% of business costs, raising the minimum wage will force producers to pass on the added expense to consumers, Dunkelberg said.

What's more, lifting the minimum wage deters employers from hiring young and unskilled workers, since they become more expensive, according to the NFIB.

"So, the increased minimum wage makes it more difficult to hire those who are most adversely affected by the economic slowdown," Dunkelberg said.

read the CNN story


Wednesday, July 23, 2008

Misey Index Update

from Carpe Diem

Remember: The Misery Index in inflation rate plus the unemployment rate.

Tuesday, July 22, 2008

Cartoon: Infaltion and Interest Rates

Daily Show: It is the Stupid Economy

Philadelphia Fed President: Raise Rates

To fend off inflation, the Federal Reserve probably will need to boost interest rates "sooner rather than later" even if employment and financial conditions haven't revived, the president of the Federal Reserve Bank of Philadelphia said Tuesday.

Charles Plosser is a voting member of the Federal Open Market Committee, the group including Fed Chairman Ben Bernanke that determines the direction interest rates should go to influence national economic activity...

Possessing a reputation for being extra-vigilant about inflation dangers, Plosser was one of two members who dissented from the Fed's decision in late April to slice its key rate. That turned out to be the Fed's last rate reduction, in one of its most aggressive campaigns that started last September.

"Inflation is already too high and inconsistent with our goal of - and responsibility to ensure - price stability," Plosser said in a speech to a group assembled by the Philadelphia Business Journal.

read the article

Fannie Mae and Freddie Mac Bailout $25 Billion

The Congressional Budget Office on Tuesday estimated Tuesday that a government plan to stabilize mortgage giants Fannie Mae and Freddie Mac could cost government coffers an average of $25 billion.

CBO's estimate is an average based on "the path of housing prices in the next several months." They considered three scenarios: prices stabilize, grow modestly or decline steeply.

The CBO said it thinks there is probably a better than 50% chance that the Treasury would not need to step in. In addition, it said there is nearly a 5% chance that Freddie and Fannie's losses would cost the government $100 billion...

Paulson asked Congress to give the Treasury broad, but temporary powers intended to provide a liquidity and capital "backstop" for the two government-sponsored enterprises (GSEs).

Paulson requested that the Treasury be allowed to offer Fannie and Freddie an unlimited line of credit for 18 months and be given authority to buy stock in the companies if necessary.

Both critics and supporters of the Paulson plan have expressed concern that loaning or investing money in the GSEs could leave taxpayers with a fat bill to pay.

read the article

My thoughts: $100 billion is being too optimistic

Cartoon: Another Bailout

Monday, July 21, 2008

Rich People Pay Taxes

The nearby chart shows that the top 1% of taxpayers, those who earn above $388,806, paid 40% of all income taxes in 2006, the highest share in at least 40 years. The top 10% in income, those earning more than $108,904, paid 71%. Barack Obama says he's going to cut taxes for those at the bottom, but that's also going to be a challenge because Americans with an income below the median paid a record low 2.9% of all income taxes, while the top 50% paid 97.1%. Perhaps he thinks half the country should pay all the taxes to support the other half.


Zimbabwe $100 Billion Banknote

Zimbabwe's troubled central bank introduced $100 billion banknotes Saturday in a desperate bid to ease the recurrent cash shortages plaguing the inflation-ravaged economy.

The bills officially come into circulation Monday, although they were on the foreign currency dealers market Saturday.

As high as they are, though, the bills still aren't enough to buy a loaf of bread. They can buy only four oranges.

The new note is equal to just one U.S. dollar.

Once-prosperous Zimbabwe has seen an unprecedented economic meltdown since it gained independence in 1980, with the official inflation rate now at 2.2 million percent.


My thoughts: Remember inflation is an increase in the money supply.

Thursday, July 17, 2008

Oil Prices Down $15.89 over Past 3 Days

Oil prices fell steeply on Thursday, extending a decline to a three-day record $15.89 a barrel, as natural gas prices tumbled and investors anticipated declining demand.

Light, sweet crude for August delivery fell $5.31 to settle at $129.29 a barrel on the New York Mercantile Exchange. The last time oil settled below $130 was June 5, when it settled at $127.79.

The decrease may mean that the market has finally realized that the fundamentals cannot sustain such large prices, said Peter Beutel, an oil analyst with Cameron Hanover.

"I think the days of seeing record prices every other day for 60 days running are behind us," Beutel said. "But that doesn't mean we won't see a few more highs."

Beutel said that uncertainty over the economy, the Middle East and hurricane season mean oil prices will remain volatile in the short run.

read the CNN story

Tuesday, July 15, 2008

Cartoon: Phil Gramm Remarks

Cartoon: iPhone

Peter Gordon on Speculation

Price adjustments are essential and the key to market magic. That's what we teach. We probably do not spend enough time teaching that all hell breaks loose when prices adjust and that politicians (and many others) say (and often do) the dumbest things...

All humans with a pulse plan beyond today and are, therefore, speculators.

read the entire post

The Fed is Shooting Blanks

from the WSJ

Mortgage Crisis: Fannie Mae and Freddie Mac

The government is opening the purse strings to prop up Fannie Mae and Freddie Mac, but obituaries may still be in order for the mortgage giants.

Sunday's announcement by Treasury Secretary Hank Paulson that the feds would make easy money available to the companies and may buy a big chunk of their stock made it clear that, for now, the feds consider the housing market too fragile and Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) too important to permit them to fail. The two own or guarantee about $5 trillion in mortgages - half the U.S. market.

It's hard to argue that the companies could go under tomorrow without a major disruption in the economy. But that doesn't mean they can continue doing business as usual. Major problems, like risk-filled books and tiny capital cushions, are symptomatic of Fannie and Freddie's structure: They're both government-sponsored and publicly-traded. And that model looks broken, possibly beyond repair.

read the CNN story

Free Market Analysis

"Too Big to Fail"
I want to stress that the “too-big-to-fail” doctrine is part and parcel of a wider system of central banking that undermines the financial condition of the banking system. The sooner we phase out this system in favor of free banking and the rule of law, the better off we will be. In other words, repealing the “too-big-to-fail” doctrine will be a good start, but it won’t go far enough in curing what really ails the banks.

read the article

Oil Prices Drop over 6 Dollars

Oil prices plummeted by the second-largest margin on record Tuesday as investors feared a further decline in U.S. demand after hearing comments from Federal Reserve Chairman Ben Bernanke.

Light, sweet crude fell $6.44 to settle at $138.74 a barrel in trading on the New York Mercantile Exchange.

The drop in oil was the largest single-day slide in dollar terms since Jan. 17, 1991, when oil fell by $10.56. On that day, President George H.W. Bush withdrew oil from the Strategic Petroleum Reserve ahead of the first Gulf War.

But in 1991, oil was trading at just $32 a barrel, so the more than $10 slide in dollar terms represented a record 33% drop. Oil fell 4.4% Tuesday, which does not even crack the top 100 price declines in percentage terms.

read the CNN story

Robert Higgs on Fannie Mae/Freddie Mac Bailout

Yes, what is a government for, if not to save us from the impending disaster that its own policies have produced? Thank heavens for the government!...

Ah, equity investment! Now we’re looking at overt government takeover. For laggard students, let us define socialism: government ownership and control of the major means of production (including production of financial services). In a pinch, we can always resort to socialism—after all, we are doing so only in order to save capitalism!

read the entire analysis

Jim Rogers on Fannie Mae/Freddie Mac

Don't Bail Them Out

Zimbabwe Hyperinflation

It has come to this: Zimbabwe is about to run out of the paper to print money on.

Fidelity Printers & Refiners, the state-owned company that tirelessly churns out bank notes for the Robert Mugabe regime, was thrown into a crisis early this month after a German company stopped supplying bank note paper because of concerns over Zimbabwe's recent violent presidential election, widely seen as fraudulent by international observers.

The printing operation drastically slowed. Two-thirds of the 1,000-strong workforce was ordered to go on leave, and two of the three money-printing shifts were canceled.

The result on the streets was an immediate cash crunch.

"If you think this currency shortage is bad, wait two weeks. By then it will be a disaster," said a senior Fidelity staffer, who spoke to The Times on condition of anonymity because he would face dismissal and possible violence for talking to a Western journalist. The paper will run out in two weeks, he said...

As hyperinflation spiraled last year, Fidelity printed million-dollar notes, then 5-million, 10-million, 25-million, 50-million. This year, it has been forced to print 100-million, 250-million and 500-million notes in rapid succession, all now practically worthless. The highest denomination is now 50 billion Zimbabwean dollars (worth a U.S. dollar on the street).

Despite the recent currency shortage, the Zimbabwean dollar has continued to slide against the U.S. dollar and shopkeepers are still increasing their prices steeply. The price of the state-owned Herald newspaper has leaped from 200,000 Zimbabwean dollars early this month to 25 billion now. Before the crunch, a beer at a bar in Harare, the capital, cost 15 billion Zimbabwean dollars. At 5 p.m. July 4, it cost 100 billion ($4 at the time) in the same bar.

read the article

Monday, July 14, 2008

InBev to buy Anheuser-Busch for $52B

Belgian brewer InBev has announced it will buy its U.S. rival Anheuser-Busch for $52 billion to create the world's largest brewer.

The acquisition means control over America's largest brewer, the No. 2 worldwide, moves overseas. Based in St. Louis, Missouri, Anheuser-Busch has more than 48 percent of American market share with brands that include Bud Light.

InBev confirmed the details of the purchase of Anheuser-Busch early Monday. It first bid for Anheuser-Busch on June 11.

InBev is the world's second largest beer maker, with brands that include Stella Artois and Becks.

The deal must be approved by shareholders and European and U.S. antitrust regulators.

read the CNN story

College Major and Salary


Thursday, July 10, 2008

Oil Prices and Iran

Iranian missile tests. Reports of covert U.S. operations inside the country. Israeli military exercises designed to simulate an attack on Iran.

The signs are unmistakable: Tensions in the oil-rich Persian Gulf are heating up.

And that matters to oil markets.

Iran sits atop the Persian Gulf, through which pass 20% of all the world's oil. Its missiles are also within easy striking distance of the giant oil fields of Iraq, Kuwait and Saudi Arabia. Together, the Middle East produces 25 million barrels of oil a day, or 30% of the world's total daily production of 86 million barrels...

A successful attack on Abqaiq, he said, would cause sustained oil prices of $200 to $250 a barrel.

read the CNN story

Biofuels and Rising Food Costs

Demand for biofuels in Europe and the United States has forced up food prices 75 percent around the world, according to a World Bank report that was leaked and published in The Guardian newspaper on Friday.

The number stands in sharp contrast to the 3 percent contribution to higher food pricing estimated by the United States Department of Agriculture.

Meanwhile, a study commissioned by food manufacturers pegs the contribution of biofuels on food prices at between 25 percent and 35 percent.

read the article

Tuesday, July 8, 2008

Warren Buffett Gives Away $2 Billion

Billionaire Warren Buffett has given away 512,169 Class B shares of Berkshire Hathaway Inc. stock to three charitable foundations in keeping with his plan to give away the bulk of his fortune.

The gifts were revealed in paperwork filed Monday with the Securities and Exchange Commission. Those shares were worth $3,999 each, more than $2.05 billion total, at the close of trading July 1, the day Buffett transferred their ownership.

Most of the shares - 451,250 - went to the Bill & Melinda Gates Foundation.

Buffett said in 2006 that he planned to give 10 million B shares to the Gates Foundation over time, 1 million B shares for the Susan Thompson Buffett Foundation named in honor of his first wife, and 350,000 shares for each of the three foundations run by his three children.

read the CNN story

Car Payments and Gas Costs

from the New York Times

Friday, July 4, 2008

Cartoon: Gas Prices

Return of a Bad Idea: National Speed Limit

An influential Republican senator suggested Thursday that Congress might want to consider reimposing a national speed limit to save gasoline and possibly ease fuel prices.

Sen. John Warner, R-Virginia, asked Energy Secretary Samuel Bodman to look into what speed limit would provide optimum gasoline efficiency given current technology. He said he wants to know if the administration might support efforts in Congress to require a lower speed limit.

Congress in 1974 set a national 55 mph speed limit because of energy shortages caused by the Arab oil embargo. The speed limit was repealed in 1995 when crude oil dipped to $17 a barrel and gasoline cost $1.10 a gallon.

read the CNN story

My thoughts: Yet another unnecessay government intrusion. If you want to drive at a mpg maximizing speed you are free to do so. Also remember it was a temporary "1 year measure" that ended up lasting 21 years.

Starbucks Closing 600 Stores

As many as 12,000 Starbucks workers will lose their jobs when the company begins closing 600 U.S. stores this summer.

The Seattle coffee company is cutting 5 percent of its U.S. locations as part of a wide-ranging effort to boost its bottom line and its stock price. The chain is accelerating international growth.

Most customers whose Starbucks stores close will be a short walk from a caffeine fix, the company said, because many of the unprofitable stores were being cannibalized by nearby Starbucks locations.

The company will try to find jobs for people within Starbucks, but that could be difficult with fewer than 350 new U.S. stores expected to open in the fiscal year beginning Oct. 1.

Cartoon: Recession?

My Thoughts: Remember a recession is a period of 2 quarters of decling GDP. We have yet to have 1 quarter of declining GDP.