Index of Leading Economic Indicators up more than expected in April

By TALI ARBEL, AP Business Writer – May 21, 2009
NEW YORK – A private research's group forecast of economic activity rose more than expected in April, the first gain in seven months and fresh evidence that the recession could end later this year.
The Conference Board said Thursday its index of leading economic indicators, designed to forecast economic activity in the next three to six months, rose 1 percent last month. Economists surveyed by Thomson Reuters expected a 0.8 percent increase.
Conference Board economist Ken Goldstein said that means declines in activity could switch to growth in the overall economy in the second half of the year. The recession began in December 2007.
In April, the index posted its biggest gain since November 2005, said Ian Shepherdson, chief U.S. economist at High Frequency Economics. It is now even with its level from last November.
The index is derived from 10 components including stock prices, the money supply, jobless claims and new orders by manufacturers.
The Conference Board said strengths among the components exceeded weaknesses for the first time in more than a year. "This is more broad-based. It's not just the stock market rally," Goldstein said.
Seven indicators rose, including stock prices, as the Dow Jones industrials are up by about a third since March. Consumer expectations, the average work week, manufacturers' new orders for consumer goods and deliveries by vendors grew, while initial jobless claims dropped, also a positive.
However, some analysts expressed reservations about the strength of the gain.
"How strong the upturn will be is still in doubt, and it is possible that the improvement in (consumer) sentiment seen the last couple months, which has lifted the index of leading indicators, could stall out," Deutsche Bank chief U.S. economist Joseph LaVorgna wrote in a research note. He doesn't expect the economy to grow until early 2010.
Weekly claims for jobless aid had been dragging the index down. The U.S. unemployment rate stands at 8.9 percent and is expected to hit double digits later this year or in 2010.
The Labor Department on Thursday said new requests for jobless benefits fell to a seasonally adjusted 631,000, down from a revised figure of 643,000. Claims had reached a 14-week low of 605,000 earlier this month, which many economists thought heralded an easing in the wave of layoffs.
Earlier this week, computer giant Hewlett-Packard Co. said it would cut 6,400 jobs, or 2 percent of its work force, while credit-card issuer American Express Co. said it was slashing 4,000 jobs. Beleaguered auto makers General Motors Corp. and Chrysler LLC recently announced they will terminate their contracts with around 2,000 dealerships nationwide, which likely will result in shutdowns for many. The National Automobile Dealers Association, a trade group, said the auto makers' decisions could result in 100,000 job losses.
Meanwhile, the Conference Board said building permits, manufacturers' orders for capital goods and the real money supply weighed down the index last month.
The recession was precipitated by a crisis in housing, and while homebuilders' confidence has ticked higher, both building permits and housing construction fell to record low annual rates in April, the government said earlier this week.

Is Opposition to Gay Marriage an Economic Issue?

The chairman of the Republican National Committee, Michael Steele, recently provided an economic argument for the opposition to gay marriage:

"Republicans can reach a broader base by recasting gay marriage as an issue that could dent pocketbooks as small businesses spend more on health care and other benefits, GOP Chairman Michael Steele said Saturday.
Steele said that was just an example of how the party can retool its message to appeal to young voters and minorities without sacrificing core conservative principles. Steele said he used the argument weeks ago while chatting on a flight with a college student who described herself as fiscally conservative but socially liberal on issues like gay marriage.

`Now all of a sudden I've got someone who wasn't a spouse before, that I had no responsibility for, who is now getting claimed as a spouse that I now have financial responsibility for," Steele told Republicans at the state convention in traditionally conservative Georgia. "So how do I pay for that? Who pays for that? You just cost me money.´"

Regardless of one´s position in the gay marriage debate, is this the type of reasoning that should decide this issue? The same logic can be applied to the advocacy of almost any prejudice or bigotry. For example, does Michael Steele want to deny equal pay for women? Is the Republican Party opposed to paying women the same wages and salaries as men for doing the same job because it will be more costly to businesses? Would the GOP advocate a law that requires businesses to pay women less than men? It would save small businesses money, would it not?

Or how about other discriminations, such as on the basis of race or religion? Does the Republican Party advocate maintaining spousal benefits for white Protestants, but abolishing them for blacks, Hispanics, Asians, Catholics, Jews, and Muslims? Those actions would save small businesses money. Yet, that does not make it the right thing to do.

Or perhaps Michael Steele wants Republicans to advocate the general abolition of marriage. Not providing spousal benefits for anyone would reduce business expenses, right?

The Economic Origin of Celibacy

The May 5 publication of a photo of a Catholic priest frolicking on the beach with an attractive woman raised the issue of the origins of the rules that prohibit clergymen from engaging in sex. It is another example of how economic concerns influence religious doctrine, especially within the Roman Catholic Church. (See also "The Economic Origin of Eating Fish on Fridays.") One can argue the motive was purely theological - priests should devote themselves fully to God. The more practical reason was that supporting a family is a much larger financial commitment than providing for just the priest. And as M.J. Stephey points out in the May 25, 2009 issue of TIME magazine,

"celibacy meant no offspring vying to inherit church property."

Glenn Weisner published a more detained history of celibacy in the Roman Catholic Church. It begins:

"As it turns out, the wealth and power of Rome had more to do with the practice than spirituality. Clerics often married until the Middle Ages, until concern, mostly over the loss of Church lands to heirs of priests, led to the imposition of the celibacy rule."

The Future Church also published a brief history of celibacy in the church. It begins:

"First Century
Peter, the first pope, and the apostles that Jesus chose were, for the most part, married men."

Actor Gabriel Byrne (HBO´s In Treatment) mentions the celibacy issues in his April 30, 2009 interview with Terry Gross on NPR´s Fresh Air.

Update (May 28, 2009): Sex Scandal Miami Priest Quits Catholic Church:

A popular U.S. Roman Catholic priest photographed frolicking with a woman on a Florida beach announced on Thursday he had joined the Episcopal Church to pursue the priesthood in a faith that allows married clergy.

Markets are not Perfect!

As mentioned in an earlier post, markets are amazing. Yet, they are far from perfect. When markets are unregulated, they create many undesirable social outcomes, such as too much pollution, poverty, and market power, and too few public goods, such as national defense, police protection, education, and investment in technology. Evidence of this is the 1969 burning of the Cuyahoga River in Cleveland, Ohio, which prompted the adoption of significant pollution control laws in the United States, such as the Clean Air Act and Water Quality Improvement Act of 1970. Prior to this intervention in the marketplace, businesses dumped so much pollution into the environment that a river literally caught on fire. To highlight this event, the Great Lakes Brewing Company named a featured ale "Burning River."

Key to Happiness: Give Away Money

According to a 20 March 2008 article by Jeanna Bryner in Live Science:

"Those incoming federal tax-rebate checks could do more than boost the economy. They might also boost your mood, with one caveat: You must spend the cash on others, not yourself.

New research reveals that when individuals dole out money for gifts for friends or charitable donations, they get a boost in happiness while those who spend on themselves get no such cheery lift. ...

Despite the benefits of "prosocial spending" on others, participants spent more than 10 times as much on personal items as they did on charitable options. The researchers note personal purchases included paying bills.

Statistical analyses revealed personal spending had no link with a person's happiness, while spending on others and charity was significantly related to a boost in happiness.

`Regardless of how much income each person made," Dunn said, "those who spent money on others reported greater happiness, while those who spent more on themselves did not.´ ...

In another experiment, the researchers gave college students a $5 or $20 bill, asking them to spend the money by that evening. Half the participants were instructed to spend the money on themselves, and the remaining students to spend on others.

Participants who spent the windfall on others — which included toys for siblings and meals eaten with friends — reported feeling happier at the end of the day than those who spent the money on themselves.

If as little as $5 spent on others could produce a surge in happiness on a given day, why don't people make these changes? In another study of more than 100 college students, the researchers found that most thought personal spending would make them happier than prosocial spending.

"Often people, at some implicit level, have this idea that 'buying these things is going to make me happier,'" Ahuvia said. "It does make them momentarily happy," he added, but the warm feelings are short-lived.

AP Economic Stress Index

The Associated Press Economic Stress Index provides " monthly, multi-format updates on the economic stress of the United States down to the county level." The index uses three economic variables: the rates of unemployment, foreclosures and bankruptcy. The result is "a score on a scale of 0-100 that measures how the recession is affecting a county compared to all others." The index number increases as economic conditions worsen (and thus stress rises). Improving conditions lower the index.

Happiness Is ... Being Old, Male and Republican

Robert Roy Britt reports in a May 15, 2009 article for LiveScience:

"Americans grow happier as they age, surveys find. And a new Pew Research Center survey shows the tendency is holding up as the economy tanks.

Happiness is a complex thing. Past studies have found that happiness is partly inherited, that Republicans are happier than Democrats, and that old men tend to be happier than old women.

And even before the economy got nasty, seniors were found to be generally happier than Baby Boomers. Some of that owes to the American Dream being lived by past generations, while Boomers work two jobs and watch the dream whither.

In times like this, it's clear how age can have its advantages. While not all seniors are weathering the recession well, for many the impact is much less severe than it is for younger people.

Why? Many people 65 and older retired and downsized their lifestyles before the economy imploded, according to Pew analysts. Most aren't raising kids and many are not so worried about being laid off. Loss of income can be, of course, a source of stress and displeasure. (While money doesn't buy happiness, a study in February showed cash can help, especially when people use it to do stuff instead of buy things.)

If you're thinking that Republicans are happy just because they perhaps make more money, that does not seem to be the case. The study that found Republicans to be happier than Democrats also showed that it held true even after adjusting for income.

It's those age 50-64 who've "seen their nest eggs shrink the most and their anxieties about retirement swell the most," the Pew survey found. It also finds that younger adults (ages 18-49) "have taken the worst lumps in the job market but remain relatively upbeat about their financial future."

Not everyone in any category is blissful, of course. Other research has shown that happiness in old age depends largely on attitude factors such as optimism and coping strategies. Add financial planning to the list.

In the new Pew telephone survey, taken in March and April of 2,969 adults, here's how many respondents in each age group said they had cut back on spending in the past year:

18-49: 68 percent
50-64: 59 percent
65+: 36 percent.
And is the recession causing stress in your family?

18-49: 52 percent
50-64: 58 percent
65+: 38 percent.
Now for the good news: A study in January found that key groups of people in the United States have grown happier over the past few decades, while other have become less so. The result: Happiness inequality has decreased since the 1970s. Americans are becoming more similar to each other on the happiness scale."

Ridiculous Ideas That Made People Millions

This article was also available from Yahoo Finance. 

"Have you ever watched an infomercial or seen an item in a department store and thought "I could have thought of that!" Have you wished you had invested money early in a blockbuster invention? Learn the stories behind some (seemingly) ridiculous ideas that have made inventors and investors very wealthy, and find out what you, as a potential investor, should look for and consider before putting up capital for a potential funding opportunity." - Katie Adams, investopedia.com, retrieved May 16, 2009.

"The Koosh Ball

You've may have never heard of Scott Stillinger but somewhere in your home or office you probably have one of his inventions – the Koosh ball, which made millions of dollars. Stillinger came up with the idea for the Koosh ball when he tied rubber bands together to create a smaller, easier-to-catch ball for his young children in 1987. He founded OddzOn Products Inc. to distribute the small, simple toy, and within just 12 months it was flying off of store shelves as that year's hottest Christmas gift.

The company expanded, and in 1994 Stillinger sold OddzOn to toy manufacturer Russ Berrie and Company Inc., which in turn was bought by toy behemoth Hasbro (NYSE:HAS) in 1997 for more $100 million. And it all happened a mere 10 years after the first ball was created. (For more on mergers and acquisitions, read our tutorial:Mergers and Acquisitions.)

Santa Mail
Every year, millions of children around the globe pen letters to Santa and hope for a response. Byron Reese realized the potential in this market. In 2002, he launched "Santa Mail," a service that allows kids to send letters to the North Pole. Parents enclose a small fee of just $9.95, and little Johnny or Jane receives a personalized letter back from the "big man" himself. By 2009, Santa Mail had responded to nearly 300,000 children. At close to $10 a letter, well, you can do the math - needless to say, it was a little idea that has earned Reese a big return. (Get some tips on how to come up with your own winning business idea. See 10 Breakout Ideas For Small Businesses.)

Lucky Break Wishbones
Are you still a little bitter that, at last year's Thanksgiving dinner, you lost out to your cousin Ned in the annual fight over the lone turkey wishbone? Well, thanks to Ken Ahroni, those days are long over. In 1999, he had something of an epiphany at his family's Thanksgiving dinner table: a family with multiple people would like multiple wishbones. He shuttered his previous consulting business and launched Lucky Break Wishbone Corp. in 2004, in order to sell his one-of-a-kind breakable plastic wishbones. Within two years, the company was generating nearly $1 million in sales through distributors in more than 40 states nationwide. (For more on Thanksgiving expenses, read Keep Thanksgiving Costs From Taking A Fowl Turn.)

Antenna Balls
You've seen them; maybe you even sport one on your car. Those ubiquitous, yellow smiley-faced balls perched atop antennas in parking lots nationwide have made Jason Wall a very wealthy man. Inspired in 1997 by a commercial for the fast food chain Jack in the Box, Wall created some antenna ball designs and began selling them locally through auto stores in California in 1998. Within a year, he had earned more than $1.15 million in sales and quickly won major accounts to sell his product through national chains, including Wal-Mart (NYSE:WMT).In 2009, the multimillionaire is president and CEO of In-Concept Inc.

Investing in Far-Out Ideas and Inventions
If you can't come up with your own idea - or don't want to put in the time - you can always invest in another inventor's ingenuity. Inventions can come from anywhere and anyone - friends, family members or even coworkers. But before you start writing checks out to just anyone who promises they have "the next BIG idea," there are five key tips to consider:

1. Learn about the industry. If you don't personally know a potential investor in whom to invest, you can learn more about opportunities through industry trade magazines, like Investor's Digest or America's Inventor Magazine, or through organizations like the National Congress of Investor Organizations. (To learn more about specific industries check out our Industry Handbook.) 
   
   
2. Stick to your strengths. Investing in an invention is a risky proposition. That's why it's a good idea to stick to investigating investment opportunities in a field or concept with which you are somewhat familiar. For example, if you are a mother of young children, you will have a keener sense of the needs of children and parents than someone without children. Use your background, interests and experience to your advantage when evaluating investment opportunities.   
   
   
3. Find the right people to back. Sure, your uncle Frank may be utterly convinced that his remote-controlled backyard squirrel zapper is what every home needs, but that shouldn't be enough to get you to open your wallet. Instead, look for inventors who have demonstrated success - people who have multiple patents and success in selling their inventions, either directly to retailers or to larger companies. Successful inventors have the proven ability to secure patents and sell products. (For more on patents, seePatents Are Assets, So Learn How To Value Them.)
   
   
4. Get to know the market and the team. All successful investors research the product and company they're going to help fund first. Do some homework to get to know not only the inventor you are considering backing, but also the market potential for the product and its profitability and evaluate the team the inventor has assembled to bring the product to market. Ask key questions such as: 
   
         ·        What need does the invention satisfy?
         ·        Are there competitors?
         ·        Have similar types of inventions failed in the recent past?
         ·        What is the inventor's time line to get to market?
         ·        What is his or her business and marketing plan to not only sell products but realize a healthy profit margin?
         ·        Are there any other potential patents pending on a similar type of product?  
   
   It takes a team of skilled professionals with the right product working in the right market to make your investment realize its potential. 
   
   
5. Do your financial and legal due diligence. As with any investment, make sure that you know exactly what you're investing in up front. Does the person or organization seeking funding have a sound business plan? What is the current financial status and are there any other debt obligations to which you, as an investor, could be exposed? Are there any other funders, and if so, who are they? Ask for all financial records, business plans and projections; carefully review any documents you're asked to sign; seek professional legal and financial counsel, and be sure you understand any potential risk that you're incurring, including the risk of losing of your investment altogether. (For more information on doing research before investing, take a look at our article Due Diligence In 10 Easy Steps.)

The Bottom Line
Realistically, the odds are stacked against most investors looking to make their fortune by backing an inventor. The U.S. Patent Office notes that, "approximately 2% of patents earn significant dollars for their investors." Still, there are future Koosh balls and Lucky Break Wishbones to be made and profited from. Perhaps with some hard work and careful investing, you too could find a ridiculous idea that gets you laughing all the way to the bank. 

by Katie Adams, (Contact Author | Biography)

Katie Adams is a freelance commercial writer, marketing and public relations professional with 18 years experience. She has written extensively about financial issues and was previously Director of Regional Communications for Fannie Mae. Adams earned a B.A. from the College of William and Mary and lives with her family in Virginia Beach, Virginia. She is actively involved in international philanthropic work to improve orphan care and accelerate sustainable development in Central America. Visit her website atwww.katieadams.homestead.com."

Personal Investments: Profit from Market Fluctuations

"Look at market fluctuations as your friend rather than your enemy. Profit from folly rather than participate in it."

- Warren Buffett

Markets are Amazing!

Markets are amazing.  For example, no single individual knows everything necessary to make a pencil  Yet, markets create pencils.

Further elaboration of this argument can be found in Leonard E. Read´s essay, I, Pencil, on the web site for the Foundation for Economic Education.

Newt Gingrich does not believe Americans should sacrifice.

In a TIME magazine article on November 1, 2008, Newt Gingrich said:

"People don't elect presidents who tell them to sacrifice. They elect presidents who solve problems so they don't have to sacrifice."

This is further evidence that Baby-boomers are the most selfish generation in U.S. history.  Baby-boomers have been unwilling to pay for all of the government services they have used.  The public debt began to rise dramatically around 1980, when Baby-boomers began to play a significant role in running both the government and the private sector.  And the wars in Afghanistan and Iraq are the first time in American history when Americans have insisted on tax cuts in a time of war.  Many Americans seem unwilling to make sacrifices for any cause - not even for war or national defense.

Health Benefits of Red Wine

The publication of medical studies that suggest drinking red wine has health benefits caused an increase in the demand for red wine.  The quantity of red wine demanded increased at almost every possible price.  Graphically, this is illustrated by a shift of the demand curve for red wine to the right.  The effect of increased demand in the market for red wine was an increase in both the price of red wine and the quantity of red wine purchased and consumed.

Here is an overview of the medical studies that suggest there are health benefits to drinking red wine:

"It's thought that red wine, despite the alcohol content, also has helpful properties, like resveratrol and other polyphenols," says Barbara Shukitt-Hale, a research psychologist at the Jean Mayer USDA Human Nutrition Research Center on Aging at Tufts University in Boston.

Polyphenols are chemical compounds found in the skin of grapes and other plants. These compounds act as "antioxidants" -- the vitamins, minerals and enzymes in foods that protect the cells in your body from damage caused by the normal process of metabolism and ward off chronic disease. Resveratrol is a type of polyphenol found in red wine.

You could say that each serving that you have of a fruit or a vegetable — or perhaps a glass of wine — is beneficial, Shukitt-Hale reasons, as long as you don't forget that wine is alcohol, and you need to drink responsibly.

"You don't want to have seven glasses of red wine a day instead of seven servings of fruits and vegetables," she cautions.

One of most widely documented benefits of red wine is heart health. A pivotal study published several years ago in journal Nature found that red wine inhibited the synthesis of a protein called endothelin-1 that can lead to the development of atherosclerosis, a build-up of fatty material along the artery walls.

A November 2006 article in the academic journal Nature claims: 

Regular, moderate consumption of red wine is linked to a reduced risk of coronary heart disease and to lower overall mortality¹, but the relative contribution of wine's alcohol and polyphenol components to these effects is unclear². Here we identify procyanidins as the principal vasoactive polyphenols in red wine and show that they are present at higher concentrations in wines from areas of southwestern France and Sardinia, where traditional production methods ensure that these compounds are efficiently extracted during vinification. These regions also happen to be associated with increased longevity in the population.

...

Calif. County Prosecutions Halt May Spread

Tax cuts are very popular.  Yet, so are government services.  There seems to be a huge disconnect between many people´s desire for the benefits of government and their willingness to pay its costs.  The following story from National Public Radio (NPR) explains how budget cuts are forcing a county in California to stop prosecuting many crimes.  Citizens are outraged.  What will it take to increase the willingness of people to pay for the government services?  Will an increase in the crime rate do it?

All Things Considered, May 13, 2009 · The District Attorney of Contra Costa County, Calif., set off a uproar when he announced he will stop prosecuting misdemeanors and low-level felonies because of budget cuts in his office. Many say what's happening in Contra Costa County today will likely occur elsewhere in cash-strapped California as counties slash their budgets.

Retail sales drop unexpectedly in April, raising recovery doubts

Macroeconomic policy attempts to manage the economy by affecting overall spending on newly produced goods and services (which economists call "aggregate demand").  The largest component of aggregate demand (AD) is consumption (C).  Retail sales are the primary  component of consumer spending.  Thus a decline in retail sales indicates a decrease in aggregate demand.  The primary cause of recessions is insufficient overall spending.  Thus, the news that retail sales are declining indicates the recovery from the recession may not be imminent.

Bloomberg reports the same news:

May 13 (Bloomberg) -- Retail sales in the U.S. unexpectedly dropped in April for a second month, indicating that rising unemployment is prompting consumers to conserve cash.

The 0.4 percent decrease followed a revised 1.3 percent drop in March that was larger than previously estimated, the Commerce Department said today in Washington. Other reports showed companies continued to cut stockpiles as demand slowed, and climbing oil costs pushed up prices for imported goods.

Fewer jobs, falling home values and the biggest loss of household wealth on record may limit consumers’ ability to spend for years, analysts said. Stocks dropped for a third day as the reports indicated any recovery from the worst recession in at least half a century is likely to be subdued.

“It looks like consumers are losing momentum heading into the second quarter and that is a very worrisome development,” said Carl Riccadonna, an economist at Deutsche Bank Securities Inc. in New York. “They have very significant headwinds and number one among them is that the labor market is far from turning the corner.”

Is the Republican Party an Endangered Species?

In a May 7, 2009 TIME magazine article entitled "Republicans in Distress:  Is the Party Over?", Michael Grunwald claims:

"These days, Republicans have the desperate aura of an endangered species. They lost Congress, then the White House; more recently, they lost a slam-dunk House election in a conservative New York district, then Senator Arlen Specter. Polls suggest that only one-fourth of the electorate considers itself Republican, that independents are trending Democratic and that as few as five states have solid Republican pluralities. And the electorate is getting less white, less rural, less Christian — in short, less demographically Republican. GOP officials who completely controlled Washington three years ago are vowing to "regain our status as a national party" and creating woe-is-us groups to resuscitate their brand, while Democrats are publishing books like The Strange Death of Republican America and 40 More Years: How the Democrats Will Rule the Next Generation. John McCain's campaign manager recently described his party as basically extinct on the West Coast, nearly extinct in the Northeast and endangered in the Mountain West and Southwest.

So are the Republicans going extinct? And can the death march be stopped?"