Carpe Diem

World Stock Market Boom 2007

According to world stock market capitalization data available from Global Financial Data and the World Federation of Exchanges, more than $9.5 trillion of stock market value was created from January-November 2007, an historical record for that period (see chart above).

Bottom Line: Despite $100 oil, a subprime crisis, a somewhat weak U.S. stock market, and constant worries about a U.S. recession, the $9.5 trillion increase in world stock market capitalization during the first 11 months of 2007 was almost as much stock market value as was added in the global bull market, Dot.com years of 1995, 1996, 1997 and 1998 COMBINED. The global economy and the global stock markets are alive and well.

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2007 Bull Market in the Emerging Markets

Chart above (click to enlarge) is based on 2007 stock returns for the emerging markets, in USD, from MSCI. Note that the return for the US market was 4.1%, measured by MSCI’s US Index, and the S&P500 return with dividends was about 5.4%.

Note also that most returns of these markets, measured in local currency (not displayed here), were less than these returns above measured in US dollars. But the falling dollar (and rising foreign currencies) turned out to be another significant advantage of the weak dollar, at least for U.S. investors holding stocks or mutual funds of emerging markets with appreciating currencies.
Carpe Diem

Santa Claus Front Runner in Economics-Free Zone

Santa Claus may turn out to be the real front-runner in the primaries, judging by the way candidates are vying with one another to give away government goodies to the voters.

We now have a bipartisan tradition of the government stepping in to rescue people who engaged in risky behavior — whether by locating in the known paths of hurricanes in Florida or in areas repeatedly hit by wildfires over the years in California or by gambling in the housing market.

Why not also rescue people who gambled away their life’s savings in Las Vegas? That would at least be consistent.

After the departure of Senator Phil Gramm and House Majority Leader Dick Armey, Congress has been an economics-free zone. There is not one economist among the 535 members of Congress.

But, in an election year, that is not a political handicap. Santa Claus has won far more elections than any economist.

From Thomas Sowell’s article “Santa Claus Politics

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The Coming Oil Glut and $30 Oil, $1.50 Gas?

The tripling of oil prices since the summer of 2003 has unleashed forces that within the next two or three years will bring oil prices tumbling back down to below $50 a barrel. Looking even further ahead, prices could easily fall to $30 a barrel or even lower.

With prices close to the inflation-adjusted record, energy companies and governments are investing heavily in facilities that generate crude and crude substitutes. Consumers of fuel oil and gasoline are starting to economize, and over time, these changes in behavior will shift the balance of power in their favor. When that happens, an oil glut will emerge, and the price will plummet. So before you trade in your Cadillac Escalade for a Toyota Prius, think twice: $1.50-a-gallon gas might not be gone forever.

Read more here.

(HT: Newmark’s Door)

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Giving Birth Latest Job Outsourced to India

The small clinic at Kaival Hospital in Anand, India matches infertile couples with local women, cares for the women during pregnancy and delivery, and counsels them afterward. Anand’s surrogate mothers (pictured above), pioneers in the growing field of outsourced pregnancies, have given birth to roughly 40 babies.
More than 50 women in this city are now pregnant with the children of couples from the United States, Taiwan, and Britain. Suman Dodia, a pregnant, 26-year-old, said she will buy a house with the $4,500 she receives from the British couple whose child she’s carrying. It would have taken her 15 years to earn that on her maid’s monthly salary of $25.

Experts say commercial surrogacy could take off in India for the same reasons outsourcing in other industries has been successful: a wide labor pool working for relatively low rates.

Read more here.

(HT: Sanil Kori)

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Quote of the Day: Good Renters, Bad Homeowners

“Easy credit made bad homeowners out of good renters.”

~Los Angeles manager of rental property, from an article in today’s Mpls.-St. Paul Star Tribune
Fortunately maybe, the homeownership rate in the U.S., after rising by 5 percentage points (from 64% to 69%) between 1994 and 2004, has fallen over the last four years by the biggest amount (.80%) since the mid-1980s (see chart above). Hopefully, many of the bad homeowners of the last few years of easy credit and now rising foreclosures are becoming good renters again.