Safety in the S&P 500

by Nick Rodriguez on March 31st, 2012 at 11:50 pm
Posted In: Finance

Since 1957, the lowest annual average growth rate (AAGR) over any 20 year period is 2.2%.  The lowest average annual growth rate over any 30 year period was between 1959 and 1989, growing at 5.7% annually.  The chart below shows the daily closing levels of the index.  The brackets to the left call out the lowest 20 and 30 year AAGRs over this time period. 
 
Over the first forty years of the chart growth was lower but more consistent.  Despite the volatility over the past 20 years growth was significantly higher even at the troughs.  While short term investing may pose risk, the S&P 500 has shown to be a reliable long term investment option.  Investors that kept their positions for at least 20 years and pulled out at pit of the most recent recession still saw an annual return of 4.4%.

                                                                                                                        
Source: Federal Reserve Bank of St. Louis

Can Less Working Lead to Lower Unemployment in 2012?

by Nick Rodriguez on February 15th, 2012 at 12:39 am
Posted In: Unemployment

The US unemployment rate dropped from 10% to 8.3% between October 2009 and January 2012 (latest BLS estimate).  Due to the slow economic recovery, some are concerned that the decrease in unemployment is due to people leaving the workforce rather than people finding jobs. 

BLS only calculates those who are searching for a job but cannot find one as unemployed, people no longer searching for a job are not part of the workforce and not considered unemployed.  Hence, the unemployment rate can be reduced without the addition of any jobs.

 The figure below shows the entire labor force (olive green) at a fairly constant level, between 153 and less than 155 million.  The employment level (gold) begins to fall sharply in 2009 until it reaches the trough in the fourth quarter of 2009.  For the past two years the level has been rising and most recently at an increasing rate.

National Budget by Presidential Term

by Nick Rodriguez on January 30th, 2012 at 10:02 pm
Posted In: Public Finance

Much like personal finances the United States finances are composed of income and expenditures.  The chart below summarizes these components of the Federal budget on an average annual basis by presidential term in dollars adjusted for inflation.  For example, on average during President Carter’s four year tenure the US government earned $1.1 trillion (olive green bar), spent $1.2 trillion (gold bar), and the cumulative debt averaged approximately $2.1 trillion.

  • President Regan: National Debt grew approximately 200% over these 8 years, higher than the other two with eight year terms.  However, the overall debt grew $1 trillion less than Bush Jr.’s tenure.
  •  President Clinton: Income exceeded spending for three consecutive years.  Income to the Federal Government grew most during this term.  President Bush Jr.’s first year in office was the only other president of the five to have a surplus in the fiscal year.
  • President Obama: Observed largest year-to-year decrease in expenditures of the six.  Regan, Clinton, and Bush Jr. also had expenditures decrease in one year, at significantly lower levels.

 

“The New NFL”: A look at Passing Trends of the 21st Century

by Ahmad Sarsour on January 23rd, 2012 at 8:15 pm
Posted In: Sports

The 2011 NFL season was unprecedented in terms of passing proficiency.  Three quarterbacks threw for over 5,000 yards.  A quarterback throwing more than 5,000 yards in a single season has happened twice before in the history of the NFL. 
 
The top 10 NFL passers in the 2011 season averaged 4,644 yards, 769 yards more than their 2000 season predecessors.  Those same 2011 passers attempted on average 35 more passes than their 2000 counterparts. In contrast, the top 10 rushers averaged 175 less yards and 45 less attempts in 2011 than their 2000 season predecessors. 
 
While the twelve years worth of data is not linear it is worth noting that several major rule changes/enforcements took place in the 2000s. 

  • 2004: NFL instructed officials to strictly enforce illegal contact, pass interference, and defensive holding.
  • 2006: NFL prohibited defense of players from hitting passers in the knee or below.
  • 2010: NFL expands definition of a ‘defenseless receiver’. 
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How Much “Cleaner” is Natural Gas?

by Nick Rodriguez on January 17th, 2012 at 12:48 am
Posted In: Energy

Nearly half of the electricity generated in the US comes from coal resources and nearly a quarter from natural gas resources.  It is commonly known that coal is the “dirtier” of the two fuels, producing larger amounts of CO2 and other greenhouse gases.  However, how much cleaner is natural gas in the electricity sector?  The Energy Information Administration forecasts in 2012, coal will make up over 80% of the CO2 emissions in the electricity sector, while natural gas will contribute less than 20%.  If coal generation were to be replaced by gas, CO2 emissions in the US electricity sector would be reduced by more than half.

 

Source: EIA, Annual Energy Outlook 2011

Obstacles in Natural Gas

Aside from the expense of building a new gas fleet to replace old coal plants, the other economic obstacle preventing this conversion is the variability in price of natural gas.  The US is an exporter of both gas and coal, however the gas price has been significantly more volatile while coal prices have remained low.

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