Carpe Diem

Bank Stocks Rebound by 2.5%, Keepin’ Hope Alive

In some “Black Friday bargain hunting,” the broader stock market indexes rebounded today by about 1.4% (see chart above, SP=red line, DJ=black and NASDAQ=green), and bank stocks rebounded at almost twice that rate (about 2.5%) as measured by the NASDAQ Bank Index (blue line above).

Maybe there’s hope.

(P.S. I’ll probably retire from intraday prognasticatin’, and wait until the market has closed to do my analyses.)
Carpe Diem

Weak Dollar = Strong Christmas Sales for Europeans

Returning to Iceland After Shopping Bender
at the Mall of America

MINNEAPOLIS Andrea Guðjónsdóttir arrived in Minnesota from Iceland last week with nothing but the clothes on her back. Oh, and two empty suitcases, which she promptly filled to near-bursting with clothes, toys and other gifts during a five-day shopping spree in the Twin Cities.

“Everything’s so cheap,” said Guðjónsdóttir, 35, who lives in Akranes, a seaport city on Iceland’s west coast. “You can pay $30 for Levi’s here; at home, it’d be $200.”

Guðjónsdóttir joins a growing number of shoppers across the world who are coming to the U.S. — and Minnesota — this holiday season to take advantage of good deals against the falling dollar. At a time when the U.S. economy is sagging, retailers say foreign tourists are providing a hedge against a Christmas season that’s expected to be the slowest in five years.

Carpe Diem

The Only Way to Follow People Over Time is To Follow People, Not Income Brackets or Quintiles

There are wild cards that need to be kept in mind when you hear income statistics thrown around. One of these wild cards is that most Americans do not stay in the same income brackets throughout their lives. Millions of people move from one bracket to another in just a few years.

What that means statistically is that comparing the top income bracket with the bottom income bracket over a period of years tells you nothing about what is happening to the actual flesh-and-blood human beings who are moving between brackets during those years.

Following trends among income brackets over the years creates the illusion of following people over time. But the only way to follow people is to follow people.

That is why the IRS data, which are for people 25 years old and older, and which follow the same individuals over time, find those in the bottom 20 percent of income-tax filers almost doubling their income in a decade. That is why they are no longer in the same bracket.

That is also why the share of income going to the bottom 20 percent bracket can be going down, as the Census Bureau data show, while the income going to the people who began the decade in that bracket is going up by large amounts.

~Thomas Sowell in “Income Confusion

Carpe Diem

More Government Control = More Corruption

World Corruption Map

From Transparency International: The 2007 Corruption Perceptions Index (CPI) looks at perceptions of public sector corruption in 180 countries and territories – the greatest country coverage of any CPI to date – and is a composite index that draws on 14 expert opinion surveys. It scores countries on a scale from zero to ten, with zero indicating high levels of perceived corruption and ten indicating low levels of perceived corruption (see world map above, click to enlarge).

A strong correlation between corruption and poverty continues to be evident. Forty percent of those scoring below three, indicating that corruption is perceived as rampant, are classified by the World Bank as low income countries. Somalia and Myanmar share the lowest score of 1.4, while Denmark has edged up to share the top score of 9.4 with perennial high-flyers Finland and New Zealand.

Notice a pattern? The greater the degree of free market capitalism, the greater the income levels and the less corruption (see the yellow and orange areas on the map). The greater the degree of government control over the economy, the lower the income levels and the greater the corruption (see the red and brown areas on the map). In other words, there appears to be a direct and positive relationship between the size of government and the amount corruption in a country.

(HT: Captain Capitalism)

Carpe Diem

Bogleheads: Stock-Picking is Evil; Boring is Good


If John Bogle is the high priest of the Bogleheads, stock-picking fanatic Jim Cramer would have to be Lucifer.

Meet the Bogleheads, devotees of Vanguard Group founder John Bogle, long-time advocate of the passive, low-cost, index approach to investing where you try to “meet, not beat the market.”

Bogleheads adhere to the “boring is good” investment philosophy of index investing, and they are against stock picking, against high fees and against what they say is the mostly self-serving investment industry.

In defense of the Bogleheads, consider the two charts above that compare the Fidelity Magellan Fund, one of the largest and most popular actively managed mutual funds in history, vs. the S&P500 Index. Over the last 25 years (top chart, click to enlarge), the S&P500 Index rose by almost +1200% vs. only about +400% for the Fidelity Magellan fund. In other words, if you have invested in Fidelity Magellan from 1982 to 2007, you would have been paying large fees to professional investment advisors like Peter Lynch to “help” you lose lots of money, compared to a passive investment in Bogle’s low-cost Vanguard S&P500 Index fund.

Lots and lots of money. $100,000 invested in Fidelity Magellan in 1982 would have grown to $500,000 by 2007, compared to $1,200,000 if you had selected the Vanguard S&P500 Index fund.

The bottom chart compares the Fidelity Magellan Fund to the S&P500 during the last 9 years of the period when legendary investment strategist Peter Lynch was managing the fund. Even a brilliant investor like Peter Lynch couldn’t beat the market during the period from 1982-1990.

And consider that a previous CD post reported that the return in 2006 for a portfolio of mostly Vanguard Index funds was +20.6%, compared to a -0.20% loss for a portfolio of “Select Jim Cramer Featured Stocks.”

Call me crazy, but I think the evidence is clear. Consider me a Boglehead.

(HT: Joyce Howe)

Carpe Diem

APROVECHA EL DIA!!

CD Penetrates Cuba’s Digital Iron Curtain

Finally, the first visit to Carpe Diem from the heart of Cuba (see ClustrMap above), maybe from the city of Camaguey?!! As recently as Nov. 1, there hadn’t been a single visit to CD, see my post here.

From this Miami Herald article, “A meager 9 out of every 1,000 Cubans are estimated to be Internet users, most of them linked to the government. Reporters Without Borders last year denounced Cuba as one of a dozen nations with the most controlled and least accessible Internet, grouping the country with Iran and Vietnam.”

From this Reuters news report, “At a downtown Havana post office, Cubans line up for hours for their turn in the “surfing room.”

When users get to one of the four computers, they can send and receive e-mail and surf an Intranet of Cuban Web sites, but access to the global Internet is barred.

Getting online is not easy in communist-run Cuba, where the state strictly controls all Web servers and recently announced plans to crack down on illegal Internet access.”

Aprovecha el dia!

Carpe Diem

Price Controls=Long Lines in Venezuela; Surprised?

Not a lot to be thankful for in Chavez’s Venezuela….

CARACAS, Venezuela The lines formed at dawn and remained long throughout the day — hundreds upon hundreds of Venezuelans waiting to buy scarce milk, chicken and sugar at state-run outdoor markets staffed by soldiers in fatigues (see photo above).

President Chavez’s government is trying to cope with shortages of some foods, and the lines at state-run “Megamercal” street markets show many Venezuelans are willing to wait for hours to snap up a handful of products they seldom find in supermarkets.

The lines for basic foods at subsidized prices are paradoxical for an oil-rich nation that in many ways is a land of plenty. Shopping malls are bustling, new car sales are booming and privately owned supermarkets are stocked with American potato chips, French wines and Swiss Gruyere cheese.

Yet other foods covered by price controls — eggs, chicken — periodically are hard to find in supermarkets. Fresh milk has become a luxury, and even baby formula is scarcer nowadays.

Exhibit A: Goods not covered by price controls are plentiful.

Exhibit B: Goods covered by price controls are hard to find.

Conclusion: Kinda obvious, no?

(HT: Ben Cunningham)

Carpe Diem

Good Old Days Are Now; It Keeps Getting Better

George Mason’s Russ Roberts at Cafe Hayek had this post yesterday about data from the Census Bureau’s annual American Housing Survey that shows significant progress in living standards for Amercian households below the poverty level.

As Russ points out “Supposedly, over the last 20 years, all of the income gains have gone to the rich. Yet, somehow, the poorest households increased their access to appliances that make life more pleasant.”

The chart above is based on data taken from in the 1985 survey and the 2005 survey, and expands on the data provided in Russ’ post.

Bottom Line: Compared to 1985, today’s (2005) poorest households have bigger homes and apartments by 15-20%, they are almost 3 times as likely to have central air conditioning, about two times as likely to have a dishwasher, clothes dryer and garbage disposal, more likely to have a washing machine, and more likely to be in a household with a car, or even 2 or more vehicles.

If those significant improvements happened overnight, it would be considered miraculous and would make headline news; but when they happen gradually over several decades, nobody notices, and the significant progress and advances in everybody’s standard of living (including households below the poverty level) go largely unrecognized and unappreciated.
More evidence that “the good old days are now,” and they keep getting better, see related previous CD posts here, here, here, here, here and here. There is a lot to be thankful for.

Happy Thanksgiving.
Carpe Diem

Taj Mahal Refuses to Accept Dollars for Admission

BOMBAY — The Taj Mahal and other top tourist sites in India are refusing to accept dollars to pay for admission, dealing another blow to the prestige of the weakened American currency. Entry tickets to the world famous Mughal tomb in Agra and about 120 sites run by the Archaeological Survey of India will be available only at a fixed rupee rate after the dollar lost more than 12% of its value against the local currency this year.

The Government had fixed a $5 entrance fee for World Heritage sites such as the Taj Mahal and $2 for other monuments of interest at a time when the dollar was worth about 50 rupees. Buoyed by capital inflows into the surging Bombay stock market, the rupee rose yesterday to 39.28 rupees against the dollar.

The new fixed entry fee of 250 rupees and 100 rupees means that a foreign tourist will pay the equivalent of about $6.40 and $2.50 respectively.

(HT: Sanil Kori)