Michael Gracie

I bagged going fishing this morning, and decided to upgrade this blog to Wordpress 2.6 instead. The long delay (over a year) in upgrading was due to the fact the new Wordpress had built-in tag functionality, and I wasn’t sure how things would go with Simple Tagging already in place. I had some database issues that needed attention too, but fishing/fun has taken precedence up until now. In other words, I was lazy - but finally the blog crashed - I couldn’t save anything, so it was as good a time as any.

The upgrade from 2.1 went pretty smoothly. The Simple Tagging import function took two runs to get everything in the right place, and I had to do some manually editing to the database to account for the use of both categories and tags (and had to delete a few tags too, since the slug field was indexed unique). The style sheet needed only minor changes - the call to tags (it’s now the_tags()), and a plug-in which I did some modifications on had to be removed.

The plug-ins (yes, there are some plug-ins here) got upgrades, with few exceptions. My tweaks to Sphere placement went off just fine, but the ShareThis plug-in was another issue. The plug-in is now run as a service - unfortunately I don’t do widgets and the last upgrade to the “classic” version wasn’t doing the trick. I wish Alex and Company much success, but for these web pages it’s now gone. The Flickr plug-in from Joe Tan is much improved, and the remaining utilities are business as usual.

And…I like the new interface!

UPDATE: Almost forgot…there was one permanent issue with tags. Simple Tagging joined words with underscores (_), while the Wordpress taxonomy uses dashes (-). So if you linked to say “../tag/fly_fishing/” you may want to try changing it to “../tag/fly-fishing/”.

UPDATE 2: I’ve also installed Google Gears support for Wordpress, when using Firefox. And while I’ve noticed that Safari 3+ doesn’t crap-out entries like it did before the upgrade, I’ll probably be using Firefox for accessing the system anyway. With Google Gears running (done by clicking the “Turbo” link in the top right-hand corner of the interface) the Wordpress 2.6 interface runs significantly faster than it did beforehand.

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I’ve seen this question pop up a number of times, and in each case different numbers are floated as the answer. So why not throw out another?

According to the Federal Reserve the aggregate market value of all the residential real estate in the US, as of Q1 - 2008, was (a) $19.718 trillion. In addition, there was (b) $10.601 trillion in mortgages against that real estate. Chart of growth below (click for larger view):

The estimate replacement cost of residential real estate structures at Q1-2008 was (c) $14.283 trillion. And here is a graph of the change in replacement cost of those residential structures over the period - this should provide some idea of the amount of value injected into the economy as a result of residential real estate construction (inflation notwithstanding):

Note: There are probably a few apples versus orange discrepancies as it relates to values, mortgages, and replacement costs on farm households, mobile homes, and second homes, as well as second liens taken out against properties. Also, multi-family residences were excluded where possible, as I could not ascertain what might be purely rental property.

Source: The Federal Reserve Flow of Funds Statements
(a) B.100 Balance Sheet of Households and Nonprofit Organizations - line 4
(b) L.100 Households and Nonprofit Organizations - line 25
(c) B.100 Balance Sheet of Households and Nonprofit Organizations - line 42

Homeownership rates jumped in 1995, and didn’t look back for a decade. According to Case-Shiller data points for its 10-City Composite, it took prices several more years to realize what was going on (click for larger view):

I looked at the 10-City because it had the most consistent data for all years, but I believe similar price action would, with few exceptions, be similar to most places in the US.

I tried it a few times, and found we burned an inordinate amount of gas in relation to the number of marlin we ran into. Nonetheless, it was the craze (and as good an excuse as any to buy 12wt rods and reels capable of holding 500 yards of backing).

Now, you need a helicopter to fish for marlin.

Motivated by the clampdown on short selling of financial stocks, the Wall Street Journal says…

That is one takeaway from Washington’s recent response to market turmoil. By singling out “speculators” who want to push bank stocks down and oil prices up, lawmakers and policy makers reinforce a message that the free market is a wonderful thing as long as it isn’t going against you.

From the list, you could also surmise the SEC is trying to keep last year’s stock bonuses above water, for its buddies of course .

UPDATE: Yet the WSJ contradicts itself a little while later, lobbying for return of the uptick rule. The argument cries out “Save my retirement account from those evil short-sellers.”

Nobody was whining when the financials were reporting billions upon billions in fresh new earnings during the mortgage boom. Now that those financials are writing off the same billions and their stocks are reflecting that fact, deflecting blame is the obvious reaction.

In the midst of oil-mania, Southwest significantly hedged their fuel consumption. Delta and American did not.

Guess who’s winning?

This is a management problem. Hedging is NOT speculation - you shouldn’t “lose” because you hedge, as the cost of fuel should wind up fixed if the hedge is managed appropriately. You determine your need for fuel, and figure out how that flows through to ticket price. Then you purchase forward contracts for that fuel and fix your ticket price appropriately. If fuel prices go up you take your gains on the contracts, which in turn offset your rising costs at consumption time. If fuel prices go down, you lose on the contracts but your fuel price has fallen as you’re buying it. Margin on your service stays the same, as you set your prices in advance.

Not hedging your fuel costs in this environment is the real speculation. And I’ll add that those who do cover their butts have the addition perk of being able to raise their ticket prices (even if slightly) on the back’s of their competitors’ misfortune without significantly effecting volume.

UPDATE: Forbes says: “The sky may not be falling for airlines just yet, but darker clouds could be just around the corner.”

Agreed (particularly if they don’t update their financial management tools to at least late 20th century levels).

UPDATE 2: Southwest turns its 69th consecutive profitable quarter.

This question posted on LinkedIn was too good to pass up:

Does anyone else think Fanny May and Freddie Mac sound more like cartoon characters than finance companies?

I’m thinking Wile E. Coyote and Homer Simpson, only not quite as funny.

Your thoughts?

Inflation is a nasty bug:

To reiterate, the last time Producer prices were this high, the Fed had rates up in the double digits — not at 2%…

Here’s a chart of the prime lending rate (as published by the WSJ) during “modern economic times” (each color change represents a rate change - click for larger view)…

I’ll bet few running around today remember how ugly things were in the midsts of that mountain-in-the-middle. But Paul Volcker was scrambling (and let’s note that he has been more vocal as of late too).

Producer prices have been rising for a while, but they held off passing on costs to consumers. That game is over. So, the highly leveraged are getting killed by plummeting home prices and the savers are getting killed by just about everything else.

And you can thank your Federal Reserve for that.