Sunday, August 26, 2012

CA UI Trust Fund Balance

The California Unemployment Trust Fund Balance in June, 2012 was -$8.904 billion. The YoY numbers from February, 2012 through May, 2012 showed small improvements, and May showed the largest monthly improvement in the fund balance since 2007. However, June slipped below the June, 2011 number. It's too soon to tell if this is a bottom or a pause before a renewed plunge.

The Fund continues to operate on Federal loans which began accruing interest on January 1, 2011. Unemployment insurance rates, both state and federal have gone up significantly in recent years to begin to return the system to solvency.

Saturday, August 25, 2012

Bananas vs. Silver: Purchasing Power

I love bananas. My family usually buys some every week. I especially like the potassium to help me minimize muscle cramps. How do bananas compare with silver as an investment, and how do well do they hold their purchasing power over time?

The video above shows a time lapse of 24 days wherein a bunch of delicious bananas rot into a lumps of black mush. Not very good at maintaining purchasing power over time.

For comparison, a silver dollar minted in 1921 with a face value of $1.00 would have an inflation adjusted purchasing power of $12.80 today, according to the BLS inflation calculator. Here is a 1921 beat up silver dollar that sold for $28.39 on ebay today. There are certainly no guarantees that silver or silver dollars will keep up with inflation in the future, but it is highly likely they will retain some purchasing power.

I would invest in bananas over silver any day, as long as I planned to eat them in either the food zone or banana bread zone. If I wanted to keep some purchasing power so I could eat something on day 14+, I would invest in silver.

(disclaimer: this is not investment advice, I currently have long positions in both bananas and silver)

Thursday, August 23, 2012

Mean vs Median unemployment divergence

The median duration of unemployment appears to be rapidly improving, while the mean appears to be stuck at historic highs. While the median is still high, the improvement may be the result of people that have either had their benefits expire (99ers) or chose to drop out of the work force, retire early. The mean may reflect the ongoing, grinding, struggle of the long term unemployed that absolutely must work to survive.

It looks like there are two distinctly different groups of unemployed persons left. Those that have employable skills and those that are work force detritus, still trying but have little hope at this point.

This is all just speculation and opinion, but the divergence is sharp and growing.

Thursday, August 16, 2012

Marketable Skills vs Retail Investing

I was going to write a long post about all the time I spent over the last 4 years learning about the economy, investing, and speculating. Then, comparing the annual returns from investing/speculating to selling my skills to employers.

I decided a better way was to directly compare my percentage income from each activity (net of expenses, before taxes).

Income from work: 98.6%
Income from investing/speculating: 1.4%

This became crystal clear to me late last year. The only way I could make a living as an investor is if I started with $100 million. I guess that qualifies me to run a hedge fund, but I'll stick with selling my marketable skills.

Saturday, August 11, 2012

Consumer Credit minus Federal Student Loans

The headlines on Consumer Credit releases the last few years have been misleading, since they are mostly reported using seasonally adjusted numbers and expressed as a percentage change from the previous period. Here are some examples...

June consumer credit up for tenth straight month
Consumer credit at highest in nearly three years
U.S. Consumer Credit Expands by $6.46 Billion

At least some of the stories are starting to catch on that almost all growth has been directly due to Federal government student loans.

source: FRB G.19 consumer credit outstanding NSA (

Total consumer credit has mostly flat lined since 2007. When you remove student loans, it has shrunk by wide margin. The next chart shows the inflation adjusted consumer credit levels in 2007 dollars. In real terms, consumer credit has declined significantly over the last 5 years, and if you remove student loans, it has declined by more than 20%. That is the real story on consumer credit. I am not even adjusting for population growth over the last 5 years.

I can understand the argument that the government should ramp up student loans at a time when segments of the population need new skills. It would have helped, though, to not make the student loan laws more harsh and loans not dischargable with the 2005 bankruptcy law changes. It's almost like lenders set a trap for students in 2005 in anticipation of the crash in 2008. Almost.

Thursday, August 2, 2012

Postal Service Defaults on Retiree Health Payment

The Postal Service skipped a $5.5 billion payment due to the Treasury for Retiree Health benefits that was due on August 1, 2012.

They plan to skip another $5.6 billion payment due September 30 unless Congress either gives them the money or changes the law.

From my limited understanding, the Postal Service Retiree health plan is over funded, so this won't have any immediate impact on either services or retiree benefits. There is plenty of trouble down the road for both unless the service is restructured to account for the lower volume of mail being sent.

Skipping this payment mirrors what a lot of corporations do by skipping pension fund contributions, and eventually defaulting on their pensions. Unless health care costs reverse trend and start dropping, the retiree health plan will some day run out of funds. Who knows how long it will last.

With all the other fiscal cliff issues dead ahead in this election year, it seems like Congress wants to delay doing anything with the Postal Service until at least next year.