09.29.09
How the U.S. government spends your money
Billions of tax dollars are going for a US-Mexico border fence, but is it doing any good? Well, if you read the Christian Science Monitor article by Daniel Wood you’ll have more questions than answers.
In 2006 DHS awarded a “virtual fence” contract to Boeing for a stretch of the border in Arizona as part of President Bush’s “Secure Border Initiative.” The budget grew to nearly $1 billion just two years later. So far, no virtual fence; just a very real budget. DHS recently decided to extend its contract with Boeing for another year.
Several sites now report that the Government Accountability Office (GAO) recently predicted that $6.5 billion will be needed to maintain the rest of the actual, though still incomplete, multi-billion dollar non-virtual fence over the next 20 years, addding:
“So far, it has been breached 3,363 times, requiring $1,300 for the average repair.”
Just so you don’t have to reach for your calculator, the math works out like this:
3,363 breaches x $1300 = $ 4,371,9000
But the kicker is there’s no way to prove if it’s actually making any real difference – well, beyond fattening the wallets of the folks awarded the contracts and costing tax-payers money, of course. So, we’ve spent about $2.5 billion so far on construction, we’re seeing several new breaches each day (on average), and CSM interviewed one woman, Dawn Garner, who says that 40 illegal immigrants a day cross her small ranch.
Sound bad? Don’t answer yet.
Ronald Reagan famously urged Gorbachev to tear down the Berlin Wall. There was a lesson there we’ve somehow forgotten about what the effects and effectiveness of walls really are.
Yasha Levine, writing at The Exiled, reports he’s interviewed a Border Patrol agent who asserts that it’s not just breaches – in some cases ramps are deployed on both sides and smuggler’s caravans drive right over! Levine has more bad news:
There is one thing we can be sure of:
the massive steel pylons have been a boon for Mexican scrap metal entrepreneurs, who are able to supplement their incomes by dragging off whole sections of the fence right under the nose of our beefed up Border Patrol.
And those we capture trying to make the crossing? We spend a bit of money to detain them, a bit to process them, a bit to send them back home again, and – you guessed it – start the cycle over. Because if there’s one other thing we can be sure of:
No matter which country they’re a citizen of, the folks who prefer the USA to Mexico aren’t likely to change their minds.
But DHS, born under former GOP President George Bush, sees no reason to change course, or deny money to Boeing or the other contractors. They’ve got a mandate for, “more effective use of personnel and technology” and “physical infrastructure enhancements to 
prevent unlawful border entry,” and so spend they will. But are we stopping the drugs and other smuggling? Honestly, nobody knows.
It’s past time to think about our priorities, particularly our spending/funding priorities and the role of the federal government. It grew larger than ever over the early part of the 21st Century, but failed to address the needs of our nation.
Instead politicians awarded lucrative contracts as political favors. It’s no wonder the trust for Congress has plummeted – the scrutiny has them scurrying for cover, and some of them are talking out of both sides of their mouths.
09.23.09
Sep 2009 ERRI reflects late summer softness on Wall Street
Despite significant improvement in the number of job losers 
in August, traditional end of summer sell-offs on Wall Street sent the Economic Recovery Reality Index (ERRI) itself 1.62 points lower, giving back some of the August gain to a modest 3.13 points over July 2009, to 14.41 for September, 2009. In August, the number of unemployed persons increased by 466,000 to 14.9 million, bumping the unemployment rate by three tenths of a percent – essentially unchanged among the major demographic divisions examined by the U.S. Bureau of Labor Statistics, and few experts doubt an overall rate increase to 10% as hiring necessarily lags other economic indicators; both construction and manufacturing employment continue downward trends, though overall manufacturers are so light-staffed that any order can stimulate hiring decisions.
Despite the slight correction as summer wound down, investors seem optimistic and stock markets continue to reflect increasing willingness to move capital back into equities over the past quarter. The ERRI is based in part on a weighted, hypothetical mid-cap oriented index fund (see below) which lost nearly 5% of its August value with uneven movement across the sectors and industries being tracked, weighing the ERRI down. Solar technology and consumer goods reflected weak sentiment, with renewed confidence in finance and non-solar energy.
Average weekly earnings continued modest improvement after a dip in the early part of the summer. The increase in the number of “discouraged” workers is still slowing, while the number of “involuntary part-time” workers crept up slightly. (Discouraged workers are those not currently looking for work because they doubt jobs are available for them.) The bright spot in the figures may be Health Care, where employment continued to make gains – up another 28,000 jobs (roughly the same number of jobs shed in the financial sector) after an increase of 20,000 in July.
U.S. government unemployment figures are estimates based on a monthly survey of households. All persons who are without jobs and are actively seeking and available to work are counted among the unemployed, including those on temporary layoff are included (even if they do not actively seek alternative work.)
Note: The particular selections comprising the security/equity component of the ERRI (data below) were selected to track various sectors, not out-perform the broader U.S. equity markets. These are not investment recommendations, and should not be construed as such. The ERRI fund is an entirely hypothetical construct, and while the author and/or persons connected to the research and/or this website may at times hold positions in these securities, particularly via any one of a number of mutual funds, no representation is made as to the suitability of any given equity, sector, on investment strategy for the reader.
Further, while the hypothetical index fund component shows apparent growth of 17% when calculated simply against an initial cost-basis of $10,000 (the September valuation was $11,697.72) it should be noted that the weighting of various sectors and components means the effective impact is approximately tantamount to only a 7.5% increase. The ERRI fund calculation represents only investor sentiment to the extent stock market behaviors reflect this mostly professional group; domestic (and global) economic recovery depend heavily on wages and employment, as well as difficult-to-quantify public sentiment.
Data on the equities is presented “as though” an investment had been made in an “index fund” for the ease of comparison and understanding, but no such fund exists nor did any investment take place. Equity investments are volatile, particularly when not carefully diversified and monitored. The third column in the table below represents the percentage change in the individual equity prices as of the close of the NYSE on 4 September 2009 versus the previous month.
| symbol | 4 Sep 09 close |
% +/- |
index value |
Sector | Industry |
| EMN | $ 50.26 |
-4.68 |
1,357.02 |
Basic Materials | Chem. (Plastic & Rubber) |
| HON | $ 37.15 |
+2.12 | 594.40 | Capital Goods | Aerospace & Defense |
| CAT | $ 46.11 |
-3.50 | 691.65 | Capital Goods | Constr. & Agric Machinery |
| FDML | $ 11.46 |
-23.50 | 1,180.38 | Consumer Cyclical | Auto & Truck Parts |
| HQS | $ 8.40 |
-7.59 | 999.60 | NonCyclic Consumer | Fish / Livestock |
| BBEP | $ 9.94 | +13.86 | 675.92 | Energy | Oil & Gas (Integrated) |
| PZE | $ 6.74 |
-3.99 | 559.42 | Energy | Oil & Gas (Integrated) |
| AIB | $ 6.91 | +17.52 | 497.52 | Financial | Money Center Banking |
| CMA | $ 25.42 | -7.93 | 381.30 | Financial | Regional Bank |
| FITB | $ 10.52 | +8.34 | 494.44 | Financial | Regional Bank |
| CCI | $ 27.83 | -1.00 | 556.60 | Services | Communications Srvcs |
| JWN | $ 29.23 | -3.53 | 701.52 | Services | Retail (Apparel) |
| FSLR | $121.47 | -17.07 | 850.29 | Solar Technology | Semiconductors |
| RIMM | $ 77.50 | +0.53 | 542.50 | Technology | Comm. Equipment |
| PLXS | $ 25.25 | -5.00 | 580.75 | Technology | Electronic Instr & Controls |
| POM | $ 14.17 | +1.87 | 1,034.41 | Utilities | Electric |
Disclaimer: Readers are advised that the ideas, materials, and opinions contained herein should be used solely for informational purposes. The author does not purport to tell or suggest investment securities that should be bought or sold. Investors should always conduct their own research and due diligence and obtain professional advice before making any investment decision. Neither the author nor realitytax shall be liable for any loss or damage caused by a reader’s reliance on information obtained in any posts, newsletters, special reports, email correspondence, or comments on the web site. The author is not a registered investment advisor or broker/dealer. The information contained herein does not constitute a representation by the publisher or a solicitation for the purchase (or sale) of securities. Opinions and analyses are based on sources believed to be reliable and are written in good faith, but no representation or warranty is made as to their accuracy or completeness, and we are not liable for errors or omissions. All such information should be independently verified with the companies mentioned. The author(s) receives no compensation of any kind from any companies that may be mentioned on this web site. Any opinions expressed are subject to change without notice. Owners, employees and writers may hold positions in the securities that are discussed; the intent is neither to suggest investment choices/strategies nor to influence market conditions, but rather to divulge methodology for inclusion of equities and sectors in the Economic Recovery Reality Index [ERRI]
Digg the ERRI report.
09.15.09
Misinformation 101: Spin Influences Debates
Polling can reliably reveal whatever the person who constructs/conducts the poll was investigating – if we’re given the raw data and a good description of the sampling procedure. But in practice, the data is usually glossed over in favor of a sound-bite summary tending to support the interests of the person and/or network doing the reporting on it, and the description of the sample is only included by the most rigorous of editors.
Without knowing how the sample of people was selected (and randomized) you simply can’t know anything more than what’s reported about a poll.
You can’t know, for instance, if its findings are useful in any logical sense, because you don’t know who the sample represents.
It’s all in the design
I can ask 13, 17, or 21 people a question, and come back with convincing-looking numbers that don’t look “too round.” But if I select who most of those people are it will darn sure tell you what I want you to think I learned.
An example of shaping a poll
Imagine I go to a GOP Town Hall meeting, and survey 15 people wearing shirts or carrying signs that say either “Nobama,” or, “Joe Wilson was right!” I’ll ask them one simple question:
Are you a) “for” Obama’s government takeover of our health care system that he’s pushing through the congress under the name of “reform” or b) “against reform” that will make changes that undermine the free market system that has given us the best health care in the world and cost the tax payers even more money?
OK, I’ve plausibly got 15 “b) against reform” responses now in my hypothetical example. I’ll ask 6 additional people, more or less randomly selected, that same question. Let’s say for the sake of argument that most of them magically favor reform (not a given the way the question’s phrased, is it?) But for the example say I got 4 out of 6 favorable replies.
Now I’ll summarize the poll for you based on that (fake) survey:
“In a [hypothetical] survey conducted Wednesday, only 19% of those responding favor the proposed reforms to health care, while nearly 81% said they were ‘against change.’ That’s more than 4 out of 5 in our survey who are hoping their representatives in Congress will stop the President’s take-over of business.”
If you believe what anybody in the media tells you without understanding both the sample and the data, all you know is what the reporter’s boss wants you to believe. If you choose to believe on that basis – which you just might if it agrees with your political leanings – rather than examining the poll itself, then you’re gullible indeed. The good news is: the politicians on your side and the ratings-hungry networks (who are on the side of earning a living from ad revenues) both love you. They’ll go out of their way to validate your “wisdom and insight” into the issue.
If the poll isn’t conducted on a random sample, but merely open to those who respond…? Well, my friends, that will tell you a bit about the people who responded, of course, but one must be wary of extrapolating to draw any useful conclusions about a larger population. We call it spin. But knowing that they’re gaming us doesn’t stop the echoes.
Media complicity
In fact, it won’t surprise me to find this utterly fake survey example quoted elsewhere within days, if not hours. Can’t you see it, at DIGG maybe, or on another blog, or even on Fox? Something like:
A post on Wednesday at a liberal-leaning blog about politics and economics described a survey which concluded that, quote, “only 19% of those responding favor the proposed reforms to health care, while nearly 81% said they were ‘against change.’” In other words, that’s more than 4 out of 5 who want their representatives in Congress to stop the President’s assault on insurance providers and let capitalism work.
There you go: lifted out of context, but the quote is nearly character-for-character what I reported in the fake “summary” above. Now we’re set up for the media echoes to persist even though the numbers are clearly unreal. Now they’re not reporting on the survey, they’re reporting on the reporting, which is just an irresponsible excuse to keep repeating the misleading numbers. Next thing you know, nobody knows how many people were at that rally on the mall in DC, but everybody believes the numbers support their hopes.
Misinformation distorts any debate. I could easily have made the example go the opposite way, of course, but I don’t want somebody to echo a story that falsely represents support for reform. In fact, some well-constructed surveys do reveal that over 90% favor “at least some reform.” But then, who wouldn’t favor “at least some” unless they were making money from the insurance industry? It’s like asking who wants lower taxes without considering how you’d pay for those government services you realize you benefit from.
Are you leading an “unexamined” life?
You know that commercial media outlets rely on advertising revenues. So, do you follow the money? Better still, my favorite (somewhat cynical) question: Why do you trust who you always have to report on things you care about? And yet, those are the sources most people trust to describe the town hall “meetings” as well as the “expert” arguments for and against reforming the health care insurance system.
