Sunday, March 26, 2006

Guest Worker Program

My brother and I were having an interesting discussion on immigration politics when the topic of the guest worker program came up, and my brother pronounced it dead-on-arrival. That's now new, but his reasoning certainly was. Employers using a guest worker permit would have to pay their workers a minimum wage, and he postulates that real wages are so far below the mandated state limit than a widespread use of a guest worker program would send price shocks through the economy, and many a company or farm would collapse under the burden.

Workers being paid such low wages isn't an indication of a perfect system, but politicians eyeing elections later this year seem unwary of their ability to screw things up big time. Even if a guest worker program does come through, we will need discussion of how we will transition the higher costs into the economy at large. And God forbid, the opponents of immigration succeed, they need to be able to explain where corporations and small businesses and especially farms are going to find labor at the costs they can afford.

Friday, March 24, 2006

The Sound of Popping

Well, the latest piece of evidence in the popping of the real estate bubble is the 10.5% drop in seasonally-adjusted new home sales, and the fourth month of decline in median sale price. All the bullish arguments for why home prices would not fall have been shown to be bullsh*t instead! We should see prices continue to drop in the months to come, especially if the US hits a recession at some point in the near term(you know the GDP can't just keep growing!)

I forecast that even places without local real estate bubbles will see a downturn. Why? Simply because of how prices are set. Price is determined by emotion as much as reality, and if and when stories flood the newspaper of individuals losing their shirts (rather than some abstract economic headline number), sellers will be more pressured to compromise on price, while buyers will be encouraged to bargain harder. That's why a recession or even economic slowdown could be significant - a seller who has either lost his/her job or fears doing so is more likely to try to reduce his/her mortgage liabilities for what he/she can.

Quote of the Day

Senator Hillary Clinton, critizing the new immigration bill on the floor of the House, that would make it a criminal activity to help an illegal immigrant, even at a homeless shelter.
This bill would literally criminalize the Good Samaritan and probably even Jesus himself.

Thursday, March 23, 2006

Can the US Stay Ahead?

I often find tales of the US' reduced dominance to be a little overplayed, but thought this article in USNews to be interesting, despite the hyped title. I'll let you read the article, but I found some numbers at the end of the article very interesting:

Estimated amount U.S. companies spend annually on R&D: $194 Billion

Estimated amount U.S. companies spend annually on tort litigation: $205 Billion

Percent of engineering Ph.D's awarded in the United States that go to foreign-born students: 56

Number of the world's Top 25 information-technology companies based in the U.S.: 6

Number of the world's Top 25 information-technology companies based in Asia: 14

U.S. trade balance in high-tech manufactured goods, 1990: $33 Billion

U.S. trade balance in high-tech manufactured goods, 2004: -24 Billion

Wednesday, March 22, 2006

A Moralizing Government?

Missisipi outlawed sex toys, according to this posting in the Abrams report on MSNBC. Whoa, hold your horses, congressman! Don't you think you're stretching the definition of government a little too far?

I'm an odd person to be arguing for sex toys. I've never seen, much less used, a sex toy in real life. I'm very conservative not only in my personal life but also in public policy. I support the conservative movement in a number of issues, from the value of abstinence education to the role of faith-based charity and religion in our society. But there is such a thing as taking a good point too far.

Government has some valid responsibilities in personal life, but only when they are related to the protection of the vulnerable or the future of society. It is appropriate for people to dictate, through their government, their definition of marriage, for example, in the interests of parental rights or social structure, but they cannot prohibit homosexuality when practiced in the confines of one home, even if they consider it immoral behavior. That's the hallmark of our freedoms - you as consenting adults can do what you like in the privacy of your homes, but the minute an individual who is not a consenting adult is involved, society at large will step in in the interests of that individual, and society at large.

Sex toys and pornography should be protected by the First Amendment, as should the right to have sex outside of marriage. Just because our lawmakers consider them to be abhorant behavior is not reason enough to ban them.

Oh, and while we are at it, do we really need to have as many restrictions on smoking? If the concern is that smokers are at increased risk for lung cancer and may strain the public health system, we can simply argue that co-pays will go up for smokers, or lung cancer will not be covered to the same extent by Medicare. Cruel? Sure - but in an ownership society, individuals have to pay for their actions. But along with that comes the liberty to make those choices. Cigarettes are a legal product that can be enjoyable and yet harmful - no different than that order of fries at McDonald's. When government starts intervening in personal decisions such as these, we threaten the very definition of a free society.

Monday, March 20, 2006

Random Late-Night Funnies

"The FBI is investigating Americans -- just for opposing the war. You know, maybe when we're done establishing a democracy in Iraq, we could try it over here. Stop, I don't want to get investigated, don't applaud!" --Jay Leno

"Former President Bill Clinton is telling people that his gut is saying that America is ready for a woman president. And I would say to President Clinton that's not your gut talking." --David Letterman

"First Lady Laura Bush said she started exercising when she married President Bush because it was already part of his lifestyle. Isn't that nice? Yeah, that also explains why she stopped reading." --Conan O'Brien

"Snap! Censure! A moral condemnation of the president so severe it's only happened once before to President Andrew Jackson, who was never heard from again. Oh, wait [picture of the $20 bill]." --Jon Stewart, on Sen. Russ Feingold's motion to censure President Bush

An Immigration Crisis

I've been recently interacting with a fair number of graduating international students who have complained about the complexity and stress involved with visa transfers that would allow them to switch to a worker visa. The process was relatively simplified (relative being the key word!) during the booming '90s, but in a post-9/11 world, the restrictions are suffocating. A graduating student would, for example, have to guess when visa quotas for a given year might expire, and how long the process may take, and then try to graduate at the right time, assuming of course, that funding was available until that time.

This clearly is out of control. We cannot have a system where students are required to navigate these loopholes or retain a lawyer. In the end, the US will lose, as students will choose easier pastures. In the past, there were few such options, but in the present era of competitive globalization, penalties for excessive regulation will be severe!

Postscript: Looks like Bill Gates is in Washington trying to lobby for support to increase the cap for the number of foreign workers from 65,000, a number that was 3 times as high a few years ago. More on the Gates visit here

Tuesday, March 14, 2006

Inept Legal Team

How on earth can you allow such an inept legal team on possibly the most important legal case in contempory times - the trial of Zacarias Moussaoui, the "20th suicide bomber" on 9/11. Coaching witnesses! Lieing to the defense that certain witnesses were unwilling to talk to the defense, without ever talking to those witnesses. Not conveying to the witnesses the judge's orders against following the news. Discussing testimony with witnesses. No wonder an exasperated Judge Brinkema exclaimed, "I wouldn’t trust anything [Transportation Security Agency prosecutor Carla] Martin had anything to do with at this point"

Yes Virginia, You Are Overvalued!

I have not talked about real estate in a while, in part because it's been all over the mainstream media, more so than it really deserves (most stories have no new content, and rehash the same old crap!) But National City Corp. reported estimates of fair value for real estate in several cities yesterday and found several cities to be vastly overvalued. My own state of Virginia as well as my former state of Arizona are positively bloated - I live in Charlottesville, where houses are 30% overvalued! The most overvalued? Naples, FL - 96% overvalued. The most undervalued? College Station, TX - almost 23% undervalued. Texas accounted for 8 of the 10 most undervalued cities, while California and Florida for 18 of the 20 most overvalued.

Saturday, March 11, 2006

In the Doctor's Backyard

I just watched some of the coverage on MSNBC on the Southern Republican Leadership Conference. Sen Bill Frist, not exactly my favorite man, won the straw poll in his backyard, but the most interesting development, I thought, was Sen John McCain urging people to write in President Bush's name, as a sign of support for him in these tough times. It was an interesting strategy, one emphasized by an interview with his ally, Sen Lindsey Graham. The McCain campaign is obviously investing heavily in the idea that the candidate blessed by the incumbent tends to win the primaries. It is odd that McCain, a greater hawk than Bush, has to embrace the President to appear conservative enough.

I also heard Mitt Romney's speech, and while he struck a chord at a couple of points, for the most part I was not impressed. I didn't get to hear George Allen or Brownback or or Tancredo or others who represent the body of the Republican party that's anti-immigration. Listen, I'm all for talking tough on the topic, but as I have ranted before, illegals come because we in this country have a serious shortage of cheap labor. Anyone who's ever been to a farm will know we couldn't enjoy the good life without the poor illegals willing to work for peanuts!

The other person I heard interviewed was Sen Trent Lott, and I must say I was very impressed. Here's a guy who seemed to be articulate, and at least in the course of the interview, lacked the venom so pervasive in the Beltway.

Oh, and if you can vote, do so for John McCain ... you know it's the right thing to do!

Friday, March 10, 2006

Shame on You, Pols!

US politicians have once again proven that politicians everywhere are more interested in short-term political gains rather than the long-term interests of the country and the world. By interfering with Dubai Ports World's purchase of P&O under the guise of national security, they have raised serious concerns over the rise of protectionism in this country, especially coming after the hoopla over China's CNOOC trying to buy Unocal.

  • "But what about national security?" 80% of US ports are operated by foreign entities. That number is 90% in the UK, incidentally. So why the uproar now?
  • "Because now the entity is a foreign government" There's never been a good reason why there should be an issue with a state-run entity as opposed to a foreign corporate body. But ignore that for a moment. The reality is that we already have foreign state-run operators in this country. Didn't hear that in the soundbites, did you? Well, port terminals in Oakland, LA, Seattle and Alaska are run by a company majority-owned by Singapore. What's that you say, Singapore is a friend? Well, then how about the fact that the Port of Long Beach is OWNED by COSCO, an entity of the People's Republic of China?

    But this deal is bad not just because a company based in an ally country has been wronged. It's bad because it sends a message, after the Unocal deal, that we aren't so sure about allowing foreigners to buy our assets. As one guest on the McLaughlin group, a brilliant journalist with the United Press International (whose comments I intend to post once the transcript is up) pointed out, beggars can't be choosers. Our lifestyle is funded by an incredible trade deficit, which means that the Chinese and Arabs and all those people who we buy things from are stuck with dollars. But the moment they try to buy anything with those dollars, we freak out.

    A great example of the size of our trillion dollar current account deficit was from econoblogger Brad Setser:
    So it is not at all unreasonable to say that financing the US current account deficit requires that the US raise $20 billion a week, whether by selling debt, selling stocks or selling off real US assets. That is equal to selling one Unocal a week to China (CNOOC was willing to pay $20 billion). Or selling three companies the size of P&O to the Emirates a week.

    If Congress were really serious about port security, they would look into the fact that so few containers go through any kind of inspection, including one of its manifests! It would invest in upgrading port systems, where due to unions, many times information has to be manually retyped to keep people employed. But these don't fit in soundbites. It's much easier to come on TV and be outraged that an Arab company is buying our ports.

    I have sometimes felt people in a democracy deserve the pain they get. When voters vote based on emotion and rheoteric, they are stuck with inept populists who do little to improve the lot of their people. I grew up seeing this in India, where pols prefered to promise state-subsidized rice at $0.04/kg than invest in infrastructure. Alas, the beacon of hope in the capitalist world has stumbled a little by falling prey to the same emotional vagaries!
  • Don't Let the Terrorists Win!

    In India this week, we got a stark reminder that with all the good news, the people are still victims of terror, as an explosion in the holiest city of Varanasi killed many worshippers. The opposition leader, Lal Kishan Advani ranted some typical cliches about appeasement of Muslims and terrorism, but it is positive that the blasts have not triggered, as best as I could tell from my limited diet of Indian news, any serious communal clashes. India is in a sweet spot economically and politically (in international terms, that is), and does not have to return to the agenda of the past.

    That's not to say a weak response to the terrorists. I'd like to see Prime Minister Manmohan Singh come on TV and say we're gonna smoke the guys who did this! But aggression against these criminals must not spill over to the streets. If it does, the terrorists will have won ...

    Monday, March 06, 2006

    Let's Raise Our Credit Limit

    What if your credit card company agrees to give you any credit limit you want? If you are like the US government, you'd probably rack up more debt to max even that increased credit limit. A fight is brewing over a proposal to raise the government's credit limit. Gosh, this government's out of control! I like George Bush, but really, as I've been stressing to many friends, he's not conservative. Racking up huge amounts of debt is not conservative philosophy in my book.

    Now, deficits by themselves are not always bad. Think about an individual again. If you are in debt paying for a professional degree (say law school), this might be a good investment as it provides opportunities for better pay down the line. But if you're spending on items that do not boost your future cash flow, this is a recipe for disaster. And yet, the government spends most of its money on non-investment type programs, often pork-barrel spending with no greater purpose than to get congressman reelected, like the horrendous Bridge to Nowhere in Alaska.

    I will pat Democrats on the back for demanding fiscal responsibilty, but I differ with them on the solution. The solution is not to raise taxes, but to cut spending. Think again to the individual who works as a contractor and charges by the hour. If he thinks he can solve his credit card issues by raising his hourly wage rate, he's in for a shock, as he finds the work drying up and his income falling. His only way out of the hole is to cut spending, challenging every expense item - house, food, everything!

    Maybe the government should be run more like a responsible household. You start with what you have and spend from that pot, rather than deciding your spending and then run up a debt!

    What a Deal!

    A while back, I had written about a bank called Everbank that offered CDs that offered you the greater of your principal or the appreciation of the S&P 500 at the end of your term. So for example, if you invested a $1,000 (which in reality you can't - there are pretty steep minimums), and the S&P rose 10% in the time of your CD, you'd get back $1100. But if the S&P fell during that time, you'd still get back your original $1,000 back. Makes you wonder what the catch is, eh?

    Well, there isn't really a catch. This is a win-win - except that the two parties have different goals. I figured out the logic and thought of posting it, but figured it would probably put most of my readers to sleep, but do e-mail me if you are interested in why someone would offer that.

    And here's an offer for you! Hehe, that's right, I'm advertising on my blog ... no, not Viagra pills or free software! I'm offering you the same terms as the Everbank CD - principal or appreciation of the S&P 500. Of course, rather than minimums like Everbank, I have to have maximum ceilings, but if you are interested in this, e-mail me at kewlkarteekatgmaildotcom (the e-mail style is to prevent spam - convert it to a typical e-mail address)

    Sunday, March 05, 2006

    Manufacturing Workers Needed in the US?

    This article in USNews really shocked me - a shortage of skilled manufacturing workers in the US of A ... my first reaction was, you gotta be kidding! But evidently it's true.
    A recent study by Deloitte Consulting for the Manufacturing Institute of the National Association of Manufacturers found that over the next three years, 80 percent of U.S. manufacturing companies expect shortages of skilled production workers–people like machinists, craft workers, and technicians.

    Wow, can you spell surprise? Don't drop of school just yet, though. Here's the kicker:
    Unfortunately for displaced autoworkers and others in the rust belt, demand for certain types of skilled manufacturing workers doesn't necessarily offer a parachute....Many autoworkers come from the traditional mold, doing the same task, day in and day out. Today's factory is not your father's factory, and many of those repetitive jobs are getting shipped to low-cost countries. "The new manufacturing worker has to think, know math, interpret CAD/CAM drawings, be knowledgeable about more than one process, and be a good team problem solver," says Eisen.

    Saturday, March 04, 2006

    Nuclear vs Renewable

    Even as President Bush inked a historic nuclear deal with India, I received an e-mail from the Worldwatch Institute, an environmental think-tank, arguing that the deal was reckless on every score. In the past, I have read with some interest reports put out by the Worldwatch folks, but possibly because of self-interest, I read this e-mail a lot more critically and found it replete with flawed logic and lies. (As an aside, every person should read the 1954 classic book 'How to Lie With Statistics').

    Here is just one instance of this:

    Globally, the nuclear construction business has been in decline for more than two decades. Worldwide, nuclear power is growing at an average rate of less than 1 percent per year. By contrast, renewable energy--wind, solar, and biofuels--is on a growth surge, averaging annual expansion rates of 25-35 percent, as President Bush noted enthusiastically in speeches in Colorado and Michigan last week. Total investment in the world's renewable energy sector reached $30 billion in 2004, according to the 'Renewables 2005: Global Status Report'.

    Well yes, it helps to have a really small number to grow a lot. Nuclear power supplies an estimated 8% of the world's energy needs, 27 quadrillion BTU, according to the US Department of Energy. Geothermal, wind, biomass and solar and other sources supplied about 6 quadrillion BTU. In the US, nuclear power supplies about 8 quadrillion BTU per year, while biomass under 3 quadrillion BTU, and solar and wind about 0.1 quadrillion BTU or less. And let's not forget the pressures put upon the nuclear industry that have essentially killed the industry.

    Look, I'm a environmental engineer and a bit of a tree-hugger myself, but we cannot hope that biofuels and solar and wind sources are going to come close to tackling our energy needs in the near future. Nuclear is an option, one that produces low emissions and can be safe with adequate safeguards, and we need to embrace it, rather than have think-tanks scare people with snake oil science!