Thursday, August 28, 2008

Growth of Productivity in the US Economy 1870 - 1995

This graph was used by Louis Uchitelle of the New York Times to illustrate the "missing productivity" that the information revolution was supposed to bring to business. It cleverly shows the increase in productivity in the US economy from 1870 to the mid-'90s with major technological revolutions highlighted along the way. The Internet Revolution was just getting underway when Mr. Uchitelle first penned his thoughts and would later make visible the pent-up productivity that the computer was about to unleash.

Growth of the US economy 1870 - 1995 tied to major industrial innovations

Here is one of Mr. Uchitelle's essays on the subject from December 1996.

December 8, 1996

Measured in Productivity Gains,
The Computer Is a Disappointment



t the end of the 19th century, railroads and electric motors were expected to transform America, making a young industrial economy far more productive than any seen before. And they did.

At the end of the 20th century, computers were supposed to perform the same miracle. They haven't.

Computers do wonderful things. But in purely economic terms, their contribution has been less than a transforming force: they have failed to bring back the strong growth that characterized so many decades of the American Century. By that standard, they have been a disappointment.

"It is a pipe dream to think that computers will lead us back to a promised land," said Alan Krueger, a Princeton University economist.

The issue is productivity. Those who look to computers for economic miracles, and there are many, insist that measuring their contribution only in dollars misses the less tangible improvement in quality that computers have made possible. But quality is often in the eyes of the beholders rather than in their wallets.

Through decades of invention and change, productivity has been measured as the amount of "output," in dollars, that comes from an hour of labor.

A worker who makes 100 pencils in an hour, each valued at 50 cents, produces $50 of output. And the more output from each of the nation's workers, the greater the national wealth.

Or, put more broadly, productivity is the amount of output in dollars that comes from various "inputs," not only a worker's labor, but the tools he or she uses to carry out that labor: a machine or a computer or a wrench or an air conditioner that makes work more comfortable in summer.

People work faster or concentrate better, and that shows up quickly in tangible output.

By this definition, the output resulting from the computer revolution of the last 25 years has been disappointing.

Computers have, of course, contributed to productivity and economic growth. But that contribution has failed to register in government statistics as the kind of robust catalyst that made the 1950s and 1960s such prosperous years.

If computers have fallen short of expectations, that would help explain an apparent paradox that has puzzled economists and policy makers for two decades: how rapid technological progress and a booming stock market took place during a period of sluggish economic performance -- sluggish, that is, relative to earlier decades.

One possibility is that the statistics are wrong. A panel of economists came to this conclusion in a report to Congress last week, suggesting that growth has actually been quite robust but that this fact has been obscured by overstating the amount of output lost to inflation.

This happened, the panel hinted, partly because the beneficial economic role of computers was not correctly taken into account. Some price increases that registered as inflation should really have registered as increases in output from computers.

But there is another explanation. Perhaps the computer is one of those inventions, like the light bulb early in the century, that makes life much better without adding as much to tangible national wealth as appearances might suggest.

That is because, while the light bulb allowed factories to operate night shifts and students to study more easily, the measurable result was less impressive than the great improvement in the quality of life that the electric light bulb made possible.

Given the computer's ubiquity and convenience, should the calculation of productivity and wealth be changed to give more dollar value to the conveniences the computer has wrought?

That kind of recalculation has not been done over generations of technological change, largely because convenience is too hard to quantify and translate into dollars. Too often, convenience increases consumption more than production. With computers, "most of the recent use has been on the consumption side," said Zvi Griliches, a Harvard economist. "The time you waste surfing the Internet is not an output."

Others take a broader view. Children using home computers for schoolwork -- gathering data from the Internet, for example -- become better students, they say.

In time, that will translate into rising workplace skills and greater measurable output. But it hasn't yet, and standard practice dictates that the nation wait until it shows up in the numbers before proclaiming the computer's great contribution to productivity.

"People have high expectations of this happening overnight," said Nathan Rosenberg, an economic historian at Stanford University. "Computers are a major innovation, but absorbing so great an innovation involves many changes in work practices and behavior."

Right now, much of a personal computer's power goes untapped, or is employed in low-output tasks like sending and sorting through junk E-mail, compiling electronic Rolodexes and playing solitaire in the office.

Harnessing a computer's spectacular ability to deliver and manipulate information is not easy. Edward McKelvey, a senior economist at Goldman Sachs, offers a hypothetical illustration:

A consultant who charged $50 an hour 10 years ago to forecast trends in the economy now has a powerful desktop computer at his fingertips, feeding him information that in theory should make his forecasts more accurate. But he still charges clients $50 an hour because the forecasts, despite the computer, are not more accurate.

Perhaps the consultant might never get that good at forecasting, even with a computer, or perhaps he will become so adept at extracting data from its depths that his forecasts will begin to hit the bull's eye. And that accuracy would allow him to raise his hourly fee, or "output," to $70 an hour, a handsome improvement in his productivity.

There are other problems. The automated teller machine, for example, illustrates how measurable productivity has failed to respond fully to computer investment. A half-dozen machines installed in a bank's lobby permit the bank to cut its teller staff by half. That is clearly measurable productivity.

The bank's income, or output, from bank transactions remains unchanged, but the input in teller hours goes down. The idled tellers can shift to other income-producing activities, perhaps becoming loan officers.

To make the productivity rate continue rising, however, the bank must continue cutting teller hours as it installs more ATMs. Instead, the next machines go to a dozen outlying neighborhoods, so that customers can bank at odd hours, almost at their doorsteps, or verify the balances in their checking accounts, something they did not bother to do very often before ATMs.

That is convenience. Most banks don't charge extra fees for this convenience. If they had no neighborhood ATMs, then customers would have found themselves forced to use the machines already installed in the lobbies of their banks.

"The question is, how much would you have been willing to pay in fees for the convenience of having that neighborhood ATM if the banks refused to furnish them otherwise?" said Erich Brynjolfsson, an economist at the Massachusetts Institute of Technology's Sloan School of Business. "That would then enter into measurable output."

Through a survey, Brynjolfsson tried to calculate what additional amounts Americans would pay for hundreds of conveniences that computers make possible. He came up with a total of $70 billion in additional output.

That would add only one-tenth of one percent to the national wealth, which is the value of all the goods and services produced in the United States in a year -- hardly enough to get economic growth back to the rates (at least 3 percent a year) that were characteristic of the 1950s and 1960s.

Still, computers and software in all their various forms make an important contribution. The national wealth -- also known as the gross domestic product -- has risen at an annual rate of less than 2.5 percent, on average, in recent years.

That includes a contribution of roughly four-tenths of a percentage point from computers and their trappings, according to the calculations of two Federal Reserve economists, Stephen D. Oliner and Daniel E. Sichel. Manufacturing and the telecommunications industry have benefited especially from computerization.

But why haven't computers lifted the overall economy the rest of the way back to 3 percent growth? One reason is that they represent only 2 percent of the nation's capital stock, which is all the existing machinery, equipment, factories and buildings that business uses to produce goods and services.

By comparison, railroads in their heyday represented more than 12 percent. And they became the tool for opening up frontier lands to agriculture, and to new cities and industries.

At the same time, electric motors, replacing steam, gave the nation a much more flexible and efficient source of power, and made possible the assembly line. The output resulting from railroads and electric motors became enormous.

Perhaps there is some set of conditions, having no direct connection to computers, that must develop before American productivity and economic growth can return to the old levels -- conditions like greater demand for the potential output from computers, or hegemony again in the global economy.

Or perhaps, as some economists say, we should lower our expectations.

Trends in Alzheimer's Disease

Nearly 30 million people worldwide suffer from Alzheimer's disease today. By 2050 that is expected to grow over 3 fold to top 100 million people.

Worldwide Prevalence of Alzheimer's Disease
2008 - 2050

Update: The percentage of Americans over the age 85 with Alzheimer's is 42%, an astoundingly large figure.

Age of Onset of Alzheimer's in the US

Wednesday, August 27, 2008

TiVo Market Share

TiVo is one of my favorite pieces of home electronics gear. If not for it, I would probably not be watching television any more. Despite having invented the category about a decade ago, Tivo has only a 6.54% market share, 1.7 million units out of a total of 26 million. The rest belongs to cable company DVRs whose equipment is provided for free and whose monthly charge is lower than TiVo's. Here is another example of good enough is. Although TiVo is much more sophisticated, has many more recording options, allows downloads from Amazon Unbox, and has a much better user interface, the Cable Co's DVRs have won the field with their "good-enough" feature set and low cost.

TiVo has a 6.54% Market Share for DVRs, 1.7 million units out of a total of 26 million
Source: Magna Global/Interpublic Group

The Housing Story, cont.

Housing is still in a dismal state with mixed messages on where the market is heading, although I think most analysts are far too optimistic in their assessment. The S&P/Case-Shiller home price index hit record lows for June 2008, posting a record 15.4% decline in home prices over the second quarter of last year, worse than the 14.2% drop posted in the first quarter. (Composite-10) The monthly numbers issued showed home prices in 10 major metropolitan areas fell a record 17% in June from the prior year and 0.6% from May, according to the indexes. The month-to-month drop improved from 1% in May over April.

In 20 major metropolitan areas, home prices dropped a record 15.9% from a year earlier, and just 0.5% from the prior month. That’s better than the 0.9% drop recorded in May over April.

S&P/Case-Shiller Index for June 2008

20-City Index: -15.9%
N.Y. Metro: -7.3%
Las Vegas: -28.6%
Los Angeles: -25.3%
Miami: - 28.3%
Phoenix: -27.9%
Washington: -15.7%

S&P/Case-Shiller Composite-20 Trend Line
Source: S&P

The only good news here is that the declines are starting to moderate, as seen in the slope of the graphs for May and June 2008.

Adding to the dismal news the supply of pre-owned houses on the market now stands at an 11 month backlog, normally that number is 6 months.

Supply of Pre-Owned Homes on the Market Stands at 11 Months

Home prices in areas where prices had been pretty much stable, such as Bergen County, NJ, have started to crack with a drop in median home prices of 2.3 percent in the first half of 2008, compared to the first half of 2007. Additional trouble can be seen in the foreclosure rate with 2,800 North Jersey homes in some stage of foreclosure, about one in 135, compared with 1,000 homes, or one in 385, a year ago. Foreclosed homes add an additional drag to housing prices, as foreclosed homes usually sell at a steep discount to their market value when sold by banks.

Foreclosure Actions in North Jersey

Add to all this that roughly $1.9 trillion in available credit has dried up, largely due to bank losses in the home mortgage industry, then the housing industry is in for a continued rough ride. While some analysts forecast an upturn in 2009 or at the latest 2010, I don't see much good happening to housing until 2011 or perhaps even 2012. There is just still too much pain in the system that still needs to be worked out. And remember, when the Japanese mishandled their housing burst-bubble and banking crisis in the '90s by shoring up insolvent banks, their recession lasted ten years as a result.

Further adding to bank woes is the hundreds of billions of dollars of floating-rate notes the banks took out to finance their housing bubble lending binge. The crunch will begin next month when banks have to pay off $95 billion in floating rate loans that come due. J.P. Morgan Chase & Co. analyst Alex Roever estimates that financial institutions will have to pay off at least $787 billion in floating-rate notes and other medium-term obligations before the end of 2009, about 43% more than they had to redeem in the previous 16 months. The pain of the credit crunch will not end soon with for lenders or borrowers.

Banks will have to redeem $787 billion in floating rate notes over the next 16 months that were sold to finance their lending binge

A Numerical History of the War in Iraq

US troop fatalities in Iraq have fallen from a high of 130 per month at the beginning of 2007 to 25 per month in mid-2008. At the same time, Iraqi civilian fatalities have fallen from a high of 3,700 per month at the beginning of 2007 to 500 per month in mid-2008.

This is partly a result of the "surge" and pacification of hostile neighborhoods as well as the steep increase of fighting Iraqi troops from 100,00 in 2004 to almost 500,000 by mid-2008.

With the al-Maliki government now pushing for a fixed time table to withdraw American troops it seems that the war in Iraq is coming to a conclusion. It will be hard for the Democrats to make hay of a fait accomplis during the election season, leaving the economy, energy, health care and possibly Russia, depending on its actions in Georgia and environs, the big issues in the 2008 Presidential election.

Tuesday, August 26, 2008

Price of Nickel Down 30% January - August 2008

The price of nickel continues to fall, down 30% so far in 2008. Falling prices together with rising costs are making many nickel operations unprofitable. Russia's Industrial Metallurgical Holding has shut down 30% to 40% of its production capacity because falling nickel prices made its operations unprofitable.

Despite the lower prices, demand from the stainless-steel industry, the main consumer of the anticorrosive metal, hasn't picked up. Instead, buyers appear to be hoping for even lower prices.

Nickel producers are being squeezed by energy prices and the rising costs of sulfuric acid, a key component to extract nickel laterite ores. Sulfur prices have rocketed from an average of just more than $100 a ton last year to more than $800 a ton.

The Price of Nickel is Down 30% January - August 2008

Tuesday, August 19, 2008

The Inflation Story

The producer price index (PPI) is up 8.8% year over year, partly due to higher energy and higher commodity prices. But consumer prices are up only 4% on all items and 2.2%, excluding energy and food. This means that producers have been eating about 5% in gross margins to keep prices low. Discount retailers have been holding the line on prices as well, reluctant to give ground to any competitor. But if the PPI continues at this level or higher, eventually manufacturers and retailers will have to cave, accelerating the growth of inflation even more.

Producer Price Index is up 8.8% this year (8-19-08)

Core Inflation and Consumer Price Index through August 2008

At the same time, union membership has been falling steadily for the past two decades and outsourcing of white-collar information worker jobs gives workers less room to negotiate higher wages and salaries.

Partially offsetting the rise in prices, the dollar has been rising against foreign currencies, mostly due to their weakness, rather than the strength of the US economy. This makes imports cheaper and helps hold the line on inflation.

The Dollar Exchange Rate vs the Yen and Euro

All told, at the end of four years a 4% inflation rate, where the overall consumer price index is today, results in a $100,000 salary being worth only $80,000.

The Fed will have to turn its attention to this issue sooner rather than later if it wants to avoid a repeat of the stagflations of the late '70s and early '80s.

Wednesday, August 13, 2008

Online Ad Printing Shows High Recall Rates

New research by researcher Nidhi Mathur of HP's Bangalore, India, research lab shows that Web printed ads have very high unaided brand and content recall of 33% and 22% respectively. Of course, HP would like nothing better than to get Web surfers to print Internet ads since they make their money on printers and (mostly) ink. The research was done using Web travel sites where study participants were required to print out their itineraries, etc. Recall of ads accompanying the printouts was then tested.

Most marketers don't have the luxury of having content that requires printing or that users would even want to print. Maps are an exception to this, and marketers may want to keep this in mind when geo-content is relevant to material, or perhaps even create geo-content that can be used as a vehicle to include printed ads.

Another tactic is to use online coupons more, especially in our financially straightened times. Web coupon use has grown 83% in the past three years, and not only do coupons create buyers and good will, but together with printed ads can form a powerful vehicle for brand and message recall on the Web.

Unaided Recall of Printed Web Ads

Source: Nidhi Mathur, HP Labs, Bangalore, India
via NewScientist, July 19-25, 2008; P. 26

Monday, August 11, 2008

iPhone apps - 30 days after launch of the iPhone App Store

iPhone app trends:

When the iPhone App Store launched a month ago on July 11, 522 apps were available, 25% were free. On July 15, there were 791 apps available, 20% were free. As of August 11 Cnet, citing PinchMedia, claims that whatever the ratio of free to paid software on site, that the ratio of free to paid downloads was 10:1. The number of apps available at the site is now about 1500.

Source: Cnet

Learning from Nature: How Bacteria Become Resistant to Antibiotics

  1. The bacteria may acquire an enzyme that that can either act like a pair of scissors, cutting the antibiotic into an inactive form or modify the drug's chemical structure so that it is no longer effective.
  2. Pumps inside the antibiotic can spit out the drug once it penetrates the cell wall. This was discovered 30 years ago by Dr. Stuart Levy at Tufts University School of Medicine and greeted with profound skepticism at the time.
  3. The bacteria may mutate its inner contents so that the drug can no longer inactivate its target.
Source: Superbugs, by Jerome Groopman, The New Yorker, August 11 & 18, 2008

Sunday, August 10, 2008

Top 10 Most Powerful Brands - Millward Brown "brandz" Report

Millward Brown "brandz" Top 10 Most Powerful Brands - April 2008
Source: Millward Brown

Bullish on the US Dollar - Exchange Rate vs Euro, Yen, British Pound

The dollar enjoyed its best one day performance in six years (on August 8, 2008). Fears that Europe's economic woes are just beginning and that Japan may be entering another recession prompted some analysts to say, "The dollar bear market is over. A multiyear bull market for the dollar has just begun." - Marc Chandler, currency strategist at Brown Brothers Harriman, New York.

Since July 1, 2008, the dollar is up 3.5% against the pound, 3.6% against the yen, and 6.0% against the euro.

US Dollar to Euro Exchange Rate 2005 - 08/08/08Source:

U.S. Dollar to Yen Exchange Rate 2005 - 08/08/08

US Dollar to British Pound Exchange Rate 2005 - 08/08/08Source:

The Balance of Trade Between the U.S. and China

U.S. Balance of Trade with China 1997 - 2007

Source: U.S. Census Bureau

How Other Countries View China

Source: Pew Research Center polls of 4,257 adultsin the five countries conducted in March and April 2008 (International Views)

Friday, August 8, 2008

U.S. Retail E-Commerce Sales, 2007 - 2012

eMarketer estimates that U.S. retail e-commerce sales (excluding travel) will reach $146 billion in 2008, up 14.3% over 2007. But growth rates are declining as consumer spending woes mount over housing, credit and the "non-recession recession". eMarketer predicts that online sales will drop less than in-store sales since e-commerce consumers tend to be more affluent and may be shifting their purchasing online to save on gasoline costs.

Source: eMarketer

Internet Coupon Users

Scarborough Research reports that 11 percent of households currently obtain coupons via the Internet, an increase of 83% since 2005. The Sunday paper remains the number one place where consumers clip coupons.

Source: eMarketer

Wednesday, August 6, 2008

E-marketing Effectiveness Benchmarks for the Pharmaceutical Industry

ComScore has released its 2nd Annual e-Marketing Effectiveness Benchmarks for the Pharmaceutical Industry. The study was based on passive observation of ComScore's million person panel across 30 drug brands. Some very interesting metrics that have hitherto been unpublished or unavailable on the effect of e-marketing on script uplift and incremental next fill/adherence are revealed in the study.

According to the study, 90 million Americans visited health-related Web sites in March 2008. This is a 32 percent increase in two years, a rate of growth over 3x the general Internet growth rate of 10% over that same period of time.

U.S. Unique Visitors - Total Internet and Health-Related Sites

US Internet Users Who Have Searched Online for Medical Information
Source: eMarketer

Top 10 US Health and Medical Web Sites March 2008Source: eMarketer

The ComScore study measured incremental effect on aided and unaided awareness and brand favorability, looking at online banner ads, interactive rich-media ads, and visits to a branded web site or unbranded "" site. Perhaps not surprisingly, online advertising effectiveness increased with richer interactions, rising to its peak with visits to a Web site. Unaided awareness from visiting a Web site and brand favorability rose significantly to a high of 36% and 28% respectively with prospects, those not using the drug in the year prior to the study, and favorability rose 15.8% among patients.

Throughout the report no mention is made of abandonment rate's (visitors who leave a site after viewing just one page) effect on the results, although the study does discuss the importance of number of pages viewed in general. In any case, it is a truism for measuring Web site effectiveness (and is a standard measure used by all Web metrics programs) that increasing number of page views increases visitor engagement with a site and thereby also any of the benefits from that visit. The study also does not state whether length of time on site, another standard Web site effectiveness metric, showed any significant uplifts. Presumably not, or it would have been mentioned.

Things start to get very interesting in the next two charts where data is presented that could lead to some hard ROI calculations for pharmaceutical Web sites. These are the first published metrics of script uplift and incremental adherence/next fill from online advertising that I am aware of. Among new patients the study showed an almost 5% script uplift from prospects visiting the "" Web site and an almost 20% increase in adherence/next fill among patients visiting the Web site.

Again, the report does not discuss whether site abandonment was factored into its results, but one could always measure both single page visits and multipage visits to calculate an ROI range from conservative to optimistic. It is very difficult to know which visitors to a "" Web site are prospects and which patients, so while these metrics are an excellent start, they still fall short of a methodology to calculate a hard ROI for pharmaceutical Web sites. Presumably ComScore asked the members of its panel who participated in this study whether they were users of the drugs being studied to determine who was a prospect and who a patient. This is a luxury that is more difficult to realize in the wild, although incentives can obviously be provided to visitors to part with anonimized personal information. From this one could periodically calibrate the percentage of prospects to patients at a "" Web site and from this have the beginings of calculating a hard ROI based on increase sales of the drug.

It is interesting that online ads showed no effect on script uplift among prospects, but showed a 4% - 9.5% increase in next fill/adherence among patients. Perhaps this is like a mother's reminder to take your medicine: Ignored if one is not already doing so, but otherwise a word to the wise is sufficient. This also suggests a more targeted approach for these ads towards patients. (Something like - "Don't forget to take your medicine" -- Mom.)

For the first time ComScore was able to measure incremental conversion by referral source: Display media, search (both paid and algorithmic), and organic (or direct navigation). For prospects, conversion to a new sale showed an almost 12% increase over the control group with direct navigation to a "" site. This was 3x - 4x higher than the incremental conversion from search and display media. This is a very significant finding. I would have expected the large difference over display media but would have expected a much smaller difference with search, especially algorithmic search. This suggests that cross media campaigns, viral and word of mouth campaigns, and social networking-focused campaigns that build brand awareness and generate direct navigation to a site, rather than SEM or SEO, are the best way to create script uplift online.

Incremental adherence/next hill uplift for patients was virtually the same across all of the media types. Again, a word to the wise is sufficient no matter the source.

The study is available upon request from ComScore.

Tuesday, August 5, 2008

World Wide Reserves of Oil 2007

Source: Wikipedia

The Strategic Petroleum Reserve

The Strategic Petroleum Reserve is a U.S. Government complex of four sites with deep underground storage caverns created in salt domes along the Texas and Louisiana Gulf Coast that store emergency supplies of crude oil.

  • Current inventory: Click to open inventory update window
  • Highest inventory - On April 2, 2008, the SPR inventory exceeded 700 million barrels, the highest level ever previously held. The former record was reached in late August 2005, just days before Hurricane Katrina hit the Gulf Coast, causing the SPR to conduct emergency releases. Repayment of the Katrina loans and resumption of the RIK program (in 2007) has restored the inventory to its former level and beyond.
  • Current storage capacity - 727 million barrels
  • Current days of import protection in SPR - 58 days (Maximum days of import protection in SPR - 118 days in 1985)
  • International Energy Agency requirement - 90 days of import protection (both public and private stocks)
    (SPR and private company import protection - approximately 118 days)
  • Average price paid for oil in the Reserve - $28.42 per barrel

Drawdown Capability

  • Maximum drawdown capability - 4.4 million barrels per day
  • Time for oil to enter U.S. market - 13 days from Presidential decision
Strategic Petroleum Reserve Inventory August 2008

Iran has threatened to blockade the Straits Of Hormuz should its nuclear facilities be attacked. Should we look for a drawdown of reserves from the SPR in advance of an attack, since it takes 13 days to get reserves from the SPR to market, or would that send too loud a warning?

Due to security concerns, the exact location of the SPR storage sites has been removed from the DOE's web sites. However, this map remains:

Location of Strategic Petroleum Reserve Storage Sites

If you are any good at Google Maps you can likely spot the locations yourself. This is left as an exercise for the reader. Sometimes security is more about CYA than security.

More on politics and the Strategic Petroleum Reserve

Inflation and Consumer Spending - July 2008

Disposable personal income (income after taxes), change from previous year:
Down to 1.2% after being up to 6% two months ago on the strength of Federal stimulus checks.

Personal consumption expenditures, change from previous year:
Down to 1.2% from a high of 6% in 2006

Prices - All items: up 4%
Prices, excluding energy and food: up 2.2%

An inflation rate of 4% will reduce the buying power of $100,000 to $80,000 in just five years.

40% of all Seaborne-Traded Crude Oil Moves Through the Straits of Hormuz Daily

17 million barrels of oil move through the Straits of Hormuz daily, 40% of all seaborne-traded crude oil. (This is about 25% of the world's total crude supply.) Closure of the Straits, even for a short time, as threatened by Iran if its nuclear facilities are attacked, would raise the price of crude to $300 per barrel, according to George Friedman, founder of StratFor, the Austin Texas-based global intelligence company.

(Source: Barrons, August 4, 2008, "In Sight, an Amicable Endgame in Iran")

Bulgaria - GDP Growth and Contract Killings

Memorable lines from Casablanca:

[Annina is contemplating Renault's offer of exit visas for sex]
Rick: How long have you been married?

Annina: Eight weeks. We come from Bulgaria. Oh, things are very bad there, Monsieur. A devil has the people by the throat. So, Jan and I, we, we do not want our children to grow up in such a country.
Rick (wearily): So you decided to go to America...

Annina: Oh, monsieur, you are a man. If someone loved you very much, so that your happiness was the only thing that she wanted in the world, but she did a bad thing to make certain of it, could you forgive her?

Rick: Nobody ever loved me that much.

Annina: And he never knew, and the girl kept this bad thing locked in her heart? That would be all right, wouldn't it?

Rick: You want my advice?

Annina: Oh, yes, please.

Rick: Go back to Bulgaria.

Bulgaria is one of the European Union's newest and most troubled countries. While Bulgaria is the EU's poorest economy, GDP has been growing at at more than 6% since 2004. Nevertheless, the country is plagued by organized crime, corruption, drug trafficking, theft of economic assets, and an ineffectual judiciary. Opinions polls show that Bulgarians view the judiciary as the country's second most corrupt profession, after customs officials. Bulgaria's 7.7 million people face the EU's lowest wages, averaging around £150 a month. The country's per capita gross domestic product in 2005 was $3,328, compared with a European average of $29,207.

Source: IndexMundi

The country is struggling to cope with organized crime with a wave of unsolved contract killings and allegations of official collusion in mafia networks this year. There have been more than 150 contract killings since 1997 with not a single conviction, and according to the March report by the United Nations Office on Drugs and Crime, the majority of heroin on Europe's streets come via Bulgaria from Afghanistan.

Monday, August 4, 2008

U.S. Dollar, Euro and Yen Exchange Rate Trends

Since 2007, the U.S. dollar has fallen an average of 8% against the currencies of its major trading partners and the Euro and Yen have risen 12% and 10% respectively against the U.S. Dollar.

Suffering from a $1.9 Trillion Dollar Shortage in Credit

The Fed has cut its target interest rate 3.25 percent since last September, but interest rates remain stubbornly high. Rates on 30 year mortgages went for 6.6% last week, compared with 6.4% on the day the Fed started cutting rates. Corporate borrowing rates have risen to 6.1% from 5.9%. The Wall Street Journal quotes David Rosenberg, Merrill Lynch's bearish chief North American economist saying in a note to clients, "In over two decades of experience on the Street, let's just say I have never seen this condition before, and [Ben] Bernanke has only read about it."

Why this divergence? The biggest reason is the credit crunch. Says the WSJ:

Banks have lost roughly $480 billion in the past year, but have raised only about $345 billion in new capital, estimates James Bianco, president of Bianco Research. Assuming they weren't overcapitalized before, that leaves them about $135 billion undercapitalized.

With leverage, that capital translates into roughly $1.9 trillion in lending capacity now off the market, he estimates.

In short, Supply and Demand: an absence of $1.9 trillion in lending supply has driven up the price of borrowing, despite the federal funds rate.

U.S. Hispanic Advertising Spending by Media, 2007 (millions and % total)

TV dominates US Hispanic advertising spending. Advertisers spent $2.5 billion on TV ads targeting Hispanics last year, accounting for more than six out of 10 Hispanic ad dollars spent.

Source: eMarketer

Unique Visitors to Social Networking Sites and Ad Spend on Social Networking Sites

Ranking of Top Social Networking Sites by Unique Visitors

Source: Clickz

U.S. Online Social Networking Revenues 2006-2011

Worldwide Online Social Networking Spend 2006 - 2011

U.S. Teen Online Social Networking Users 2006 - 2011

U.S. Adult Online Social Network Users 2006 - 2011

Source: eMarketer