Good morning

The headlines:

1. The US Presidential Election is tomorrow.

   Link: and the job numbers are in.

   The US Presidential election is almost up, and it seems that the candidates are neck-and-neck. Which must say something about Obama, because Mitt has had that “47%” comment about freeloaders splashed around like the nude pictures of Prince Harry in Vegas. (For a fuller analysis of this slim edge, this article covers the Bloomberg points).

   But ahead of this game, the US employment numbers have been announced – and they highlight a statistical awkwardness. Because according to the numbers, 171,000 new jobs were added to the US economy in October. But, um, unemployment rose to 7.9% (from 7.8%). So either the US population suddenly exploded, or we should all be treating the unemployment numbers with more caution.

   And it’s the second one. Because “unemployment” is a definition that excludes people who could work, but are not looking for work, and haven’t been looking for some time. Which makes sense – how can you count someone as “unemployed” if they were never seeking gainful employment in the first place? But the trouble is that the way it’s presented, once could just assume that the ranks of the unemployed include all those people on welfare benefits. And in a welfare state, I think that figure is important. After all – surely part of the economic growth problem is the productive sectors of the population that are choosing to just live off the State?

   I did some statistical searching on Google. According to the US Department of Health and Human Services, 4.1% of the US population is on Welfare. And in 40 of the 50 states, Welfare pays more than an $8 per hour job (see here). That’s a salary of $1,400 per month… And in 9 states, Welfare pays more than the salary of the average US teacher.

   Does that not tell you something about the incentive not to work in a welfare state? And why the US is in educational crisis?

2. The upcoming Greek vote.

   Link: this week in game-changing decisions.

   The new austerity package vote is expected to come through this week. Antonis Somaras is pledging that this will be the last one. At the same time, he reminded everyone that a departure from the Eurozone could lead to “an 80% drop in living standards from 2009 levels”.

   Of course – there are lots of economists out there arguing that austerity is not effective and is clearly failing. My observation: it’s worked in many countries. Estonia. Latvia. Lithuania. Here’s an article that discusses it. The key issue seems to be structural reform – which the Greeks keep discussing but not imposing.

   Structural reform. Everyone agrees that it’s needed – but each special interest group has a special reason as to why it should apply to everyone else but not to them. The Greek politicians need to step up and cut it out.

3. The Zimbabwean Reserve Bank sells securities.

   Link: prepares to double-down.

   The Reserve Bank of Zimbabwe (RBZ) completed the sale of its first treasury bills last week since hyperinflation ended (more specifically, since 2008). It was for $15 million of 91-day treasure bills, on which it received $9.9 million in bids at an average yield of 8.51%.

   When you compare it to the billions and trillions of the developed economies – it seems almost… I want to use the word… “cute”.

   But what the world could learn from this situation is a story of resilience. Because Zimbabwe has been cut-off from external credit markets, internal credit markets, and since dollarisation in 2009, the ability to print its own money (the primary cause of the problem).

   The government has basically been operating on a cash budget of tax revenues in and public sector salaries out. It’s been a great inhibitor of economic growth – and yet, I would say, not nearly as inhibitive as the sheer instability of hyperinflation. And let me tell you: the Zimbabwean tax collection process has achieved draconian levels of efficiency.

   Greece?

4. Alcatel-Lucent sells assets.

   Link: Alcatel is still around?!

   Alcatel-Lucent, the french mobile producer, is trading at a 23 year low. And now they’re talking about selling assets off to finance debt.

   According to Markit, Alcatel is France’s “most-shorted stock”. Which is not really the record you’d like to have… (for a summary of short-selling, I wrote about it here).

   Frankly, I didn’t even realise that Alcatel was still around. It’s like the mobile version of hotmail – everyone’s reaction is “…[blank]…”

5. 72% increase in profit.

   Link: it could only be Berkshire.

   Net income rose to $2,373 per share from last year’s $1,380 per share – on better returns from its derivative book and earnings from a railroad company.

   We should all be in awe. Berkshire’s shares are trading at $130,555 per share. And given that book value of the shares is $111,718 – it sounds like the shares might even be cheap!!

That’s all for now.

Have a good day.