Minimum Wage

Bernie’s lesson in free market economics

Well done Bernie Sanders. Where he couldn’t pay his staffers the $15 minimum wage he bangs on about so much, he just cuts hours so the total costs won’t change. His comments from the DesMoines Register reveal the holes in his socialist thinking. Higher minimum wages don’t create prosperity if people’s hours get cut as a result.

No, ScoMo!

For a Conservative party to push a subsidy of up to 20% of the value of a property for first time home buyers shows how bereft of policy it is. When Vic Premier Daniel Andrews raised a similar plan in March 2017 CM trashed it.

Think about it. Home prices have started to fall in major capitals because of a lack of demand thanks to astronomical prices and tapped out borrowers. This is before the Royal Commission puts the brakes on lending.

Why provide a subsidy to first home buyers toward the top of a bubble? It is not the role of the taxpayer to subsidize nor insure the downside risk in the event of the owner going into negative equity. What happened to free market economics?

What will this 20% subsidy do? If a couple go house hunting with a budget of $800,000, they will be able to shoot for a $1mn property. It might end up being the same property, pushed up by the desperate buyer thanks to the subsidy creating a false sense of security. So the reality is the taxpayer and the homeowner may end up in the red the day they move in. What a policy!!

Has ScoMo just called the top of the property market?

Juncker focuses on the wrong climate

There is an irony to EC President Jean-Claude Juncker promising to spend €1 in €4 of the EU budget on climate mitigation. Worse he used 16yo Swedish climate school strike activist Greta Thunberg as the pawn to justify it. €1 trillion will be spent annually through 2027. It is for their future after all!

Last week CM debated a former client who tried to justify teachers using WMO data in their studies of teenage students on climate. WMO is a part of the U.N. which has been embroiled in so much data manipulation, scandal, lack of governance, unethical conduct and conflicts of interest as to beggar belief. So kids are being indoctrinated if the scholastic standard is the WMO.

Has Juncker considered how his climate plan will alleviate stubborn poverty and anemic economic growth?

EU poverty or risk of exclusion in 2017 stood at 22.4%. So 1 in 4 EU-28 member state citizens are struggling. In Greece it remains high at 35%. In 2007 poverty in the EU-28 was 16%. Even poster child Germany has gone from 16% to 19% in the same period. Macron’s yellow vests are protesting at 17.1% poverty vs 13% in 2007. In 2007 there were 78mn at risk of social exclusion. In 2017 there were 114mn.

The U.N. has called for “no poverty” in 15 years. The EU subscribes to this nonsense. While poverty may have drifted from the post GFC peak of 24.8% in the eurozone, 36mn extra people are unable to afford to heat their homes, afford a colour TV or eat meat, fish or chicken once every two days. These are the EU metrics on poverty. So how does spending €1 trillion per annum to mitigate climate change sit with a growing number of constituents dying to see blazing sunshine bask upon their economic climate?

Retail electricity prices across Europe are up 23% in the last decade. In Germany +39%. Spain +47%, Portugal +50%. Sweden +76%. France +40%. This is what happens when a growing amount of renewables are thrust on the grid. The countries with far lower renewables targets, like Hungary, have seen electricity prices fall. Who’d have thunk?

EU GDP growth has been slowing for the last 5 quarters and expected to slow to 1.1% in the coming quarter.

The EU claimed a 6.6% unemployment rate in Dec 2018. An update is expected on March 1. Is that number realistic if the poverty rate remains so high or is it a reflection of low paying rubbish job opportunities? Greek unemployment is north of 18% and Spain at 15%. Part time employment has grown to 20% from 15% over the last decade. In the Netherlands almost 50% of work is part time.

December 2018 EU industrial production fell 4.2%YoY. Ireland fell back 19.8% and Spain -6.7%. Hardly positive readings.

So instead of promising teenagers a green future, Juncker would find it far more sensible to focus on alleviating the chronic youth unemployment in Europe which remains around 19%. At least Thunberg is likely to skip the unemployment queue by landing a cushy EU job when she graduates unlike her fellow Swedish schoolmates who will face 18% unemployment.

What’s the point of listening to kids pleas to save the planet when the unelected overpaid bureaucracy in Brussels won’t even be able to provide them with a sustainable career to enjoy it? No doubt the kids will realize this folly when they grow up in the real world.

#SpareMe & #ThankYou

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They say pictures speak a thousand words. One wonders whether there are a thousand threads in these pictures at the Cannes Film Festival. For all of the sanctimony we hear from celebrities about how important the #MeToo movement is, what better opportunity to let down the side than to minimize cloth to skin ratios. These ladies know they are walking billboards, overtly flaunting their assets to gain attention in the hope they are short listed on the next blockbuster given the likelihood of widespread media coverage. Why else would they wear the equivalent of postage stamps held together by dental floss? Who can blame them? Where are the male actors strutting in sequin g-strings? Hardly fair that only women get to show off the flesh!

By all means, these ladies who graze on lentils and alfalfa while completing grueling gym sessions 6 hours a day, have every right to dress as they please given they work so hard cultivating those figures. Isn’t objectification the intention? Appreciating beauty is certainly not a crime and it does not border on harassment. Should red-blooded males be shamed for seeing protruding nipples and exposed cleavage fall into their peripheral vision? Can we honestly say hand on heart that some in the Hollywood set didn’t/don’t willingly trade flesh for a $5mn role? It is not to condone the behavior rather to say that if in the end a budding actor/actress is willing to ‘pay in kind’ to nail a big role that is still consensual. Jokes about Weinstein’s sexual antics were made for years at award ceremonies before he was finally outed. If he is convicted of sexual assault/harassment then may the full extent of the law deal with the crime. However #SpareMe the sanctimony about how none of them knew. Staying on the lucrative gravy train and buying more global property was more way addictive than doing the right thing by standing up for the true victims.

It is surprising that the feminists haven’t been up in arms about Cannes. They managed to take down the F-1 grid girls effectively enough. Isn’t it ironic that the people most upset by the ban were the grid girls themselves. They liked what they did, got paid handsomely to flaunt figures they no doubt work so hard to maintain and welcomed the attention. Now they are out of a job! Yet it’s is we who must get in step with the times. Perhaps the F-1 teams could have been asked to pay a grid-girl tax and donate the funds to promote charitable causes that the girls themselves felt passionately about. It will be interesting to see whether the MotoGP franchise owners, Dorna, go the same route as F-1 which will be pretty hypocritical given the web pages dedicated to the brolley dollies at each round.

Maybe the bigger laugh was the Israeli 2018 Eurovision song winner, Netti Barzilai. She said that in the auditioning process that she overheard whispers about whether they could field someone prettier or skinnier. So sex appeal was preferable to ability? When was the last time we truly heard a properly decent song that didn’t have some singer surrounded by scantily clad women twerking?

Still the virtue signaling continues. Cate Blanchett was on the stairs at Cannes demanding equal pay, when she herself is one of the higher paid actresses in town. Her mate Benedict Cumberbatch is refusing to star in movies unless there is equal pay.  Such actions are nothing but self-indulgent attempts to create free publicity. Say he is offered $25mn for a role and his never seen before female sidekick is not granted the same? Will he protest, divide his own pot or star anyway? One wonders.

Here is an idea for celebrities. CM thinks that Hollywood should be run by a government agency which will ensure equality in all outcomes. Movie roles will be distributed evenly. Each movie will have exactly the same budget. It will have equal numbers of men, women, LGBT, races, religious representation and sexual orientation regardless of how factually incorrect a true story may seem. Movie directors will have no say in who is cast for each part. Box office revenues will be evenly distributed at the end of each calendar year to ensure that flops will get subsidized by the hits. The actors who star in blockbusters will receive exactly the same outcome as those whose films end up almost immediately on Netflix.

All actors and actresses will be required to work exactly the same hours, have the same contract terms and be required to attend the awards ceremony in exactly the same garb. No makeup will be permissible, no eyebrow stylists flown around the world at last minute and no speech longer than 10 seconds. As there is to be equality at all costs, there will no longer be gender based awards at the Oscars. Or alternatively Best Actor – male, female and the 63 other gender categories. “The winner of the Best Actor in the hermaphrodite category is….”

So Benedict and Cate, will you join a union which levels the playing field and calls for equality or do you still prefer that your acting skills determine how the free market sets your prices? If you choose the former, just don’t speak to Jack Nicholson. He is still collecting royalties from Batman. Just what I thought.

These are the Oscar stats. A 40% decline over 5 years. Is this a sign of a format that is no longer sustainable? Is the disintermediation/disruption caused by video on demand such that making a ‘date’ to go to the cinema is no longer a priority? Cinema attendance in the domestic US market is back at 1993 levels. In the 1990s Hollywood made 400-500 films annually. It now pumps out more than 700. The average revenue per film continues to head south. The strategy seems to throw more at audiences and hope it sticks. Are the movies the industry rates itself on actually reflected in the box office? Out of touch with the audience? It would seem so. 9 films in the last 13 have failed to breach $75mn. So instead of Hollywood being so preoccupied with espousing politics, perhaps it should look to the audience it ‘preaches’ to and starts ‘reaching’ them instead otherwise many of them will be staring at massive pay cuts. Or will that mean it is every man and woman for themselves again!?

Green bean counters need a solar calculator

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The Greens in Australia would be better off channeling people that can count rather than  put forward policies that want to ensure a basic income package that would bankrupt us. Then again the Greens have a history of putting forward such people who can’t count (two links below) which shows why they’ll never be taken seriously in any policy they put forward. The Greens are great at espousing benefits. They just never get ‘costs’.

Natalie Bennett, former UK Greens leader on public housing

Australian Greens Senator Sarah Hanson Young on Superannuation

Enjoy.

Multiple Job Holders in the US hits a record in Feb-18

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Since the US Bureau of Labor Statistics (BLS) has been keeping score, Americans with more than one job soared in Feb 2018 to the highest level seen in that month for a quarter century. March 2017 was also a record for that month in 24 years. One would expect when the economy is in the groove that people do not need to hold down multiple jobs to get by. On a percentage of the total labour force basis, multiple job holders in Feb 2018 have exceeded the level set in 2007 ahead of the GFC, or 5%.

However since the shake out of GFC, people holding down multiple jobs has continued to rise every year for the last 9. The previous record was only 5 years. Trends in disability payments and food stamps shows eerily similar trends since 2002.

SNAP (food stamp) recipients numbered as follows (working disability recipients in brackets, with cost outlays per annum)

1994: 27.47 million ( 6.381mn, cost $2.621bn)

1997: 22.58 million (6.998mn, cost $3.253bn)

2002: 19.10 million (8.109mn, cost $4.621bn)

2007: 26.32 million (9.858mn, cost $7.127bn)

2013: 47.67 million (12.156mn, cost $10.25bn)

2017: 42.20 million (Dec 2016 fig, 11.832mn, cost $10.316bn)

The Social Security Administration (SSA) highlights that back pain and musculoskeletal problems are 32.3% of disability claims, followed by mental illness at 26.3% (up from 19.2% in 2011) in 2016. This compares to 8.3% and 9.6% respectively in 1961. Half of claims in the 1960s came from heart attack/stroke and ‘other’ categories which made up only 17% of the 2016 figure.

Disabled beneficiaries aged 18–64 in current-payment status accounted for 4.7% of the population aged 18–64 in the United States. The states with the highest rates of disabled beneficiaries – 7%+ -were Alabama (SNAP benefits 17% of population), Arkansas (13%), Kentucky (15%), Maine (14%), Mississippi (18%), and West Virginia (19%). All above the national SNAP average of 13% and only Maine that voted Democrat in the 2016 election. Coincidence?

Could it be that more Americans are sick of living off more and more handouts? Seems plausible that Trump’s delivery to the White House was driven by these immutable trends – they want change to a system which they know can’t sustainably deliver forever like this. That is why tax breaks resonate. Why tariffs strike a chord. None-the-less maybe the uptick in multiple jobs is highlighting that things aren’t moving quickly enough.

Some interesting reading

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John Mauldin has put together a few interesting pieces over the weekend. Some of the select quotes from Thoughts from the frontline:

Money Velocity (which CM wrote about in 2016):

velocity of money, which is continuing to fall, as it has for almost 20 years…So it is somewhat disturbing to see velocity now at its lowest point since 1949, and at levels associated with the Great Depression.”

Income Disparity:

Note that it is the 95th percentile of workers that has received the bulk of the increase in wages. The bottom 50% is either down or basically flat since 1979. Even the 70th percentile didn’t do all that well.

Budget Deficits:

Over the last half-century, higher deficits have been associated with recessions. After recessions end, the deficit shrinks, and occasionally we get a surplus. That’s not happening this time. Deficits are growing even without a recession…but in the next recession tax revenues will fall, and spending will increase enough to not only swell the annual deficit but also to add north of $2 trillion to the national debt each year. We’re using up our breathing room, and that will be a problem – sooner or later.

Monetary Policy:

Ominously, you can see from Grant’s labels (In the above chart) with arrows that peak yields tended to correspond with crises. If the current breakout persists, it is probably going to get its own label, and I bet we won’t like it.

Nothing to see here?