Category Archives: News

Nate’s Numbers Hub January 2017

Markets

$2,269 = S&P 500 close 10 Jan 2017 (Yahoo Finance)

28.09 = S&P 500 P/E Ratio on 10 Jan 2017 based on previous 10 years of earnings, AKA “Shiller Ratio,” “CAPE Ratio,” or “PE 10.” (www.multpl.com)

$29.8 trillion = total US market capitalization = $20.2 trillion NYSE + $9.6 trillion NASDAQ

$18.9 trillion = US annual GNP estimate (www.BEA.gov, GDP and the National Income and Product Account (NIPA) Historical Tables, Table 1.7.5)

131.2% = “Buffett Indicator” current as of 10 Jan 2017. This number is a variation* on [Total Market Capitalization] / GNP**.

(The calculation is explained here. Numerator obtained from Federal Reserve Bank of St. Louis, current value obtained by extrapolating with the Wilshire 5000 Index. The denominator is obtained from the BEA’s GNP from above. Calculations and chart in this Excel spreadsheet).

*Instead of using actual market cap value, I used “Nonfinancial corporate business; corporate equities; liability, Level” from the Federal Reserve Bank of St. Louis because the data is available since 1945. That number is only reported quarterly, so the Wilshire 5000 index is used to extrapolate to find the current value.

**The GDP is used by some reports instead of GNP, but Buffett uses the GNP. GDP and GNP are very similar, within about 1% of each other, and don’t fluctuate like total market cap does.

I have to pick an economist. My pick is John P. Hussman. He posts straightforward charts showing strong correlation between current indicators and future results. He uses the S&P 500 to measure performance and he has consistently posted weekly since 2003. All of his posts are available for quick reference: Hussman Funds Weekly Market Comment.

241 = current Consumer Price Index. This number is adjusted so that it averages 100 from 1982-1984. For the first year this number was calculated, 1913, the value was 9.9 (BLS)

1/2-3/4 = target range for the federal funds rate. (www.federalreserve.gov, 14 Dec 2016 FOMC Statement, and bankrate.com)

“Yield Curve” at stockcharts.com

6.93 = Chinese Yuan Renminbi for 1 US dollar (x-rates.com)

My Market Tools, Long-Term to Specific

  1. Buffett Indicator from above
  2. My economist pick: John P. Hussman, referenced above.
  3. Investor’s Business Daily Big Picture
  4. CANSLIM checklist for picking individual stocks

Energy

All energy data here is in petajoules = 1 quadrillion joules = “1-with-fifteen-zeros” joules, which can quickly be converted to other units of energy for comparison:

1 petajoule =

  • 163,456 barrels of oil, energy from (BOE)
  • 277.8 gigawatt-hours = 277,800,000 kilowatt-hours
  • 0.02388 million tonnes of oil equivalents (MTOE)
  • 0.0009478 quadrillion British Thermal Units (BTU)
  • 0.0009202 trillion cubic feet of natural gas, energy from (based on 1,030 BTU / cubic foot, IEA website)

395,000 petajoules = 2014 global energy consumption estimate (International Energy Agency, Key World Statistics 2016)

102,704 petajoules = 2015 US energy consumption estimate, 26.0% of global total (US Energy Information Administration Annual Energy Review, Table 1.1)

See also the US energy flow graph, Section 1.0, for a visualization of energy use.

9,911,000 petajoules = energy contained in the 1,620 billion barrels of proved world petroleum reserves (US Energy Information Administration), using the above conversion as an estimate of the energy equivalent.

7,153,000 petajoules = energy contained in the 6,582 trillion cubic feet of proved world natural gas reserves (US Energy Information Administration). This is probably a very rough estimate because of variance in the energy contained in different natural gas.

$50.82 / barrel = current price of WTI crude oil (US EIA) = $8,307,000 / petajoule of energy

$3.41 / million BTU = Henry Hub spot price of energy from natural gas (US EIA) = $3,232,000 / petajoule from natural gas

8.307 / 3.232 = 2.6: oil energy currently costs 3.4 times as much as natural gas energy.

Commodities

$1,188 = price of one ounce of gold (goldprice.org)

$16.74 = price of one ounce of silver (goldprice.org)

1,188 / 16.74 = 71, current gold-silver ratio, historical range of 14 – 100 since 1975 (goldprice.org charts)

Jobs

324 million = total US population (US Census Bureau Population Clock)

251 million = US civilian noninstitutional population

59.0% = employment-population ratio, which is the percentage of civilian noninstitutional population who are employed. Total employed is 148 million people. This is 45.7% of the total population.

5.3% = “unemployment rate” the most-often-reported percentage that does not include people who are not seeking employment, whether receiving unemployment benefits, welfare, or otherwise.

Click here for historical employment numbers. For more detail in easy-to-read charts, see “Charting the Labor Market.” The data is also broken down regionally and by state.

(US Department of Labor, Bureau of Labor Statistics Current Population Survey, November 2015)

Breaking News! Barrier to Information Dissemination Drops to Zero

Why am I writing this? More importantly, why are you reading? More importantly, how is it that I can publish something that the entire world can read instantly and for free? This is possible because the internet went public 25 years ago on 6 August 1991. Yes, 25 years ago, but it is still a huge deal–huge–and it may be just now ramping up. Is it breaking news? Yes! Every day of our lives.

I took European history as an AP class in high school, and I could hardly have found it more boring. I specifically remember being taught what a huge deal the “Gutenberg Press” was. I happened to believe that the Gutenberg Press was the single most boring invention or event I’d ever heard of. No longer! By a combination of The Great Courses lectures and learning my own family history, I am a history convert and an enthusiastic believer that the Gutenberg Press matters to us! By “us,” I mean everybody alive today.

History can put the times in which we live in perspective. It may not reveal the future, but it can help us understand the present. History repeats itself, but you have to know which history to look at. The Gutenberg Press is the most pertinent historical event to us today because the internet went public 25 years ago, and the internet is the modern-day acceleration of what the Gutenberg Press started 550 years before it.

Every source of history that I’ve read calls the moveable type printing press, or “Gutenberg Press,” the most important invention of the 2nd millennium. That may not mean unanimous agreement by historians, but it was a big deal. It was a big deal because it enabled the rapid dissemination of information. It greatly lowered the barrier to producing copies of ideas. Instead of requiring a team of monks to copy books by hand one word at a time, you could stamp out pages by the hundreds. Before the press, copying was extremely slow, after the press, several orders of magnitude faster, but you still needed a printing press and employees, or later an antenna and a license to broadcast by radio or television, or a copy machine and some kind of network to disseminate the paper. From the press and employees to an antenna and broadcast license, these were all things that only organizations and businesses had, so there was still a barrier. However, beginning in August of 1991, that requirement dropped to zero. Literally anybody with internet access–free at your public library–can publish an idea and give instant access to most of the world within seconds and at a ridiculously low cost of less than $70 per year for a website. Twitter, Facebook, and all social media that matters is free. TV networks actually report what social media says, not the other way around.

What does it mean? It means that both the printing press and the internet are a big deal, and a big deal for the same reason. Therefore, some of their effects on society will be analogous. If you want to read history that is pertinent to today, a good target year is somewhere between 1440 and 1648–plus or minus of course.

The internet went public 25 years ago, and 1465 was 25 years after the printing press was invented, so you might say 1465 is the best year to look at, but things happen faster today. I would argue that we’re past 1465. Did the average peasant even know about the press in 1465? Probably not. Maybe they had seen a printed Bible at church by that time or heard some rumors. By contrast, an estimated 40% of the world’s population is already using the internet.

1648 was 208 years after the invention of the press, and by that time, the protestant movement was established, and The Thirty Years’ War had concluded, the largest conflict that can be directly connected to the invention of the printing press. The Thirty Years’ War involved all the major European powers, resulted in the fracture of the Catholic Church, established an entire new category of religion, and an estimated 8 million people died.

Back to what made this interesting to me in the very first place. Let’s have a quick conversation with my great x 9 grandfather, Michael Rouffin, in Bexbach, Germany in 1655 when he was 20 years old (in German of course, and I made some of this up).

“So Nine-Great Grandpa, that’s a nice wooden-covered Bible you have displayed on the table there.”

“Yes. I’m the first in my family to own one. It was given to me by the church as a gift when I came here to Bexbach.”

“Why did you move to Bexbach? Was there a problem in Rouffin where you’re from?”

“No. The problem was here in Bexbach. Most of the men in this town were killed in the war. Bexbach and the surrounding towns were decimated. I was summoned here by the landlord to replace them and farm the land and repopulate the town.”

“What do you think of the war and these new religions that have established themselves?”

“I don’t know. It sure is a crazy world these days though.”

Boy, was he right! Sound familiar? It was a time of extreme knowledge increase, and extreme upheaval.

That’s all I have. I have to read more history…

President Trump’s First 100 Days

Donald Trump is (or will be on 20 January) the most powerful man on the planet. He released two pages outlining what actions he is going to take in his first 100 days in office, his 100-Day Action Plan to Make America Great Again on his website in late October. Let’s see how he does.

Here is a link to the pdf that I downloaded around the time of the election.

Here is a link to where you can download it directly from his site. (same document, different place)

8 November 2016: Trump elected.

15 Nov 2016: President-elect Trump announces presidential inaugural committee leadership. Unrelated to the plan, just preparing for the inauguration.

21 Nov 2016: President-elect Trump releases video message. The video is just over 2 minutes. He reiterates items directly from the plan.

18 Jan 2017: two days before the inauguration, Trump does an interview with Fox News. Most of the talk was about the inauguration. From the election through today, there were 3 main focuses in the media and from Trump:

  1. Trump selecting cabinet members
  2. The media trying to make stories out of very little actually happening
  3. Trump tweeting and responding to the media on Twitter.

23 Jan 2017: Sean Spicer’s first White House press briefing, work day one.

  • Trump has already withdrawn from the Trans-Pacific Partnership.
  • He has revived two proposed oil pipelines, the Keystone and Dakota. (I don’t personally support this, but he signed something that allowed them to go forward).
  • He reiterated his intention to withdraw from NAFTA, but that there is a procedure that has to be followed in accordance with the deal.
  • He reiterated his intent to repeal the Affordable Care Act.
  • There were no specifics yet, but he reiterated his intent to make deals that allow businesses to create jobs.
  • He still intends to build a wall on the Mexican border. Sean Spicer continued the focus on illegal immigrants who have committed crimes per the 100-day plan.

Many of the questions at the briefing sound stupid. Initially, I hesitated to make that judgement because the reporters must be well-vetted to even be in the room. Then one of the reporters (named “Shane,” no further ID stated) referred to the “First Day Action Plan,” and asked why Trump didn’t address everything on the plan on the first day. That subject I am familiar with and I am 100% sure it’s an incredibly stupid question. It’s a 100-day plan, not a 1-day plan. I’m really surprised they don’t suspend reporters’ privilege of being in that room sometimes and replace them with competent people.

Trump still believes there were millions of illegal voters in the election.

28 Jan 2017: I am not going to continue to follow this contract. It just takes too much time. In attempting to follow, I have heard various reporters say that it is difficult and it is their full-time job. I will return to the subject on 30 Apr to check the results.

In searching for the truth on this subject, the best source I found was to search “Sean Spicer” on YouTube. A good portion of what the media talks about comes from the White House spokesman. I am certainly not suggesting agree with everything that he says, but if you get the information second-hand it is often not even recognizable from what Sean Spicer actually said.

Another source, and I know this hurts, is to follow Trump on Twitter. Like it or not, fact: the president of the United States tweets daily. The media talks about it. If you’re going to hear them talk about it, you should know what they’re talking about.

That is obviously only one side. For dissenting opinions, I look for Trump’s own people because they don’t have ulterior motives to dissent. Secretary of Defense General Mad Dog Mattis’ dissenting opinion on the use of torture is a good example so far.

Two other sources from the past that appear genuine are his former employees Louise Sunshine and Hayley Strozier. They tell unflattering stories that appear to be true while they don’t appear to be gaining personally from it.

What I believe are unifying truths in this situation are that we don’t have a unifying purpose. Had Obama succeeded at his agenda, half the country didn’t want it. He talked smoothly of unification and “crossing the aisle,” but to me and many people, he was divisive in his own way. Trump is openly hostile, and I thought that, counter-intuitively, maybe this approach would have the opposite effect by making it a badge of honor to get along with the big bad Trump. That is a stretch I know! So far, that does not appear to be the result.

What are we doing? What is success?

So we lack a unifying purpose at the national level: we need to invest personally in our local communities! People are already doing this. You probably already are. Turn off the TV, and feel good about it! Embrace your sense of purpose!

30 April 2017: His first 100 days are complete.

Global Warming: Some Numbers, and My Opinion

Below are some numbers to put our effect as humans in perspective. I have heard both sides of this polarizing issue for a long time, and have been meaning to put some numbers to my own intuition. I chose numbers that can be intuitively understood and, though they are estimates, can be measured fairly directly. As far as I know, the following is not seriously in dispute.

5.15 x 1018 Kg = total mass of the atmosphere.

3.0 x 1015 Kg = total mass of CO2 in the atmosphere.

0.0582% = CO2 in the atmosphere by weight.

https://micpohling.wordpress.com/2007/03/30/math-how-much-co2-by-weight-in-the-atmosphere/

35.9 x 1012 Kg = annual CO2 released by human activity, 2014.

Annual CO2 released by humans as a fraction of total = [35.9 x 1012 Kg] / [3.0 x 1015 Kg] = 1.2% of the total CO2 in the atmosphere.

2.0 x 1015 Kg of CO2 = total CO2 released from 1870-2014.

[2.0 x 1015 Kg] / [3.0 x 1015 Kg] = CO2 released from 1870-2014 equals 67% of total CO2 in the atmosphere.

https://www.co2.earth/global-co2-emissions

The amount of CO2 released by humans can be measured fairly accurately. Annually, it equals ~1.2% of the total weight of CO2 in the atmosphere*.

*This is not to be confused with a ratio comparing to the amount released naturally annually. We are one source of many in an equilibrium. The amount released and consumed naturally cannot be measured as directly.

The amount released by humans since the beginning of the industrial revolution can also be estimated. This equals ~67% of the total CO2 in the atmosphere. However, the total we have poured in over that amount of time is like measuring the amount of water you put into a bucket with a big leak. How much is still in the bucket? It depends on the leak!
My conclusion: the amount that humans release is not massively alarming in proportion. However, it certainly cannot  be dismissed as irrelevant.

The Volcano Effect

~200 x 109 Kg = mass of CO2 that volcanoes release annually on average. This number is widely disputed, and is known to be not well measured.

http://hvo.wr.usgs.gov/volcanowatch/archive/2007/07_02_15.html

[200 x 109 Kg] / [35.9 x 1012 Kg of CO2] = .56%,

The CO2 released by volcanoes continuously is less than 1% of the amount released by humans continuously, based on this estimate. How much does a big eruption produce? …

The Tambora Eruption of 1815

Regardless of what you believe, you have to read about this! The magnitude is unbelievable. Fun to read about.

https://www.wired.com/2015/04/tambora-1815-just-big-eruption/

The Tambora eruption was possibly the largest in the last 10,000 years: https://en.wikipedia.org/wiki/1815_eruption_of_Mount_Tambora

Tambora released up to 120 x 109 Kg of SO2 and likely caused the “Year Without a Summer” of 1816: https://en.wikipedia.org/wiki/Year_Without_a_Summer

What is the long-term effect of one huge volcano? How does that compare to our human effect? I do not know.

My Opinion

I personally believe that yes, the earth is warming because we continuously release significant amounts of CO2 into the atmosphere. It makes common sense. Almost everything we do releases CO2. More CO2 changes the reflective properties of the atmosphere. The greenhouse effect as a concept is a proven fact. If it is possible to change the temperature by adding CO2, we are doing everything we can to make it happen.

What do I think we should do? What do I think government policy should be? Regardless of climate change, I believe that reducing dependency on carbon-based fuels is a worthy challenge. Regardless of climate change! Even though I believe global warming is happening, I can’t prove it. Nobody can. Even if it can be proven, can we stop it or reverse it? Well, who cares? Alternatives are cleaner, more renewable, and we could use a good challenge anyway! I think the government should set policy–yes including raising taxes on carbon-based fuels–such that the price is at a level where people have to make significant life choices to economize, but can still live comfortably. For example, car pooling and public transportation are a lot more attractive at $5 / gallon than at $2 / gallon. This simultaneously buys time to find alternate solutions, spurs market ingenuity, provides a meaningful challenge that encourages people to work together, and even supports national security by reducing dependency.

Nate’s Numbers Hub December 2015

Markets

$2,091 = S&P 500 close 4 Dec 2015 (Yahoo Finance)

26.09 = S&P 500 P/E Ratio on 7 Dec 2015 based on previous 10 years of earnings, AKA “Shiller Ratio,” “CAPE Ratio,” or “PE 10.” (www.multpl.com)

$26.1 trillion = total US market capitalization = $18.7 trillion NYSE + $7.4 trillion NASDAQ

$18.3 trillion = annual US GNP estimate (www.BEA.gov, GDP and the National Income and Product Account (NIPA) Historical Tables, Table 1.7.5)

121.5% = “Buffett Indicator” current as of 7 December 2015. This number is a variation* on [Total Market Capitalization] / GNP**.

(The calculation is explained here. Numerator obtained from Federal Reserve Bank of St. Louis, current value obtained by extrapolating with the Wilshire 5000 Index. The denominator is obtained from the BEA’s GNP from above. Calculations and chart in this Excel spreadsheet).

*Instead of using actual market cap value, I used “Nonfinancial corporate business; corporate equities; liability, Level” from the Federal Reserve Bank of St. Louis because the data is available since 1945. That number is only reported quarterly, so the Wilshire 5000 index is used to extrapolate to find the current value.

**The GDP is used by some reports instead of GNP, but Buffett uses the GNP. GDP and GNP are very similar, within about 1% of each other, and don’t fluctuate like total market cap does.

Buffett Indicator chart with various standard deviation lines based only on past data.
Buffett Indicator chart with various standard deviation lines based only on past data.

I have to pick an economist. My pick is John P. Hussman. He posts straightforward charts showing strong correlation between current indicators and future results. He uses the S&P 500 to measure performance and he has consistently posted weekly since 2003. All of his posts are available for quick reference: Hussman Funds Weekly Market Comment.

236 = current Consumer Price Index. This number is adjusted so that it averages 100 from 1982-1984. For the first year this number was calculated, 1913, the value was 9.9 (BLS)

0-1/4 = target range for the federal funds rate. (www.federalreserve.gov, 28 Oct 2015 FOMC Statement, and bankrate.com)

“Yield Curve” at stockcharts.com

6.42 = Chinese Yuan Renminbi for 1 US dollar (x-rates.com)

My Market Tools, Long-Term to Specific

  1. Buffett Indicator from above
  2. My economist pick: John P. Hussman, referenced above.
  3. Investor’s Business Daily Big Picture
  4. CANSLIM checklist for picking individual stocks

Energy

All energy data here is in petajoules = 1 quadrillion joules = “1-with-fifteen-zeros” joules, which can quickly be converted to other units of energy for comparison:

1 petajoule =

  • 163,456 barrels of oil, energy from (BOE)
  • 277.8 gigawatt-hours = 277,800,000 kilowatt-hours
  • 0.02388 million tonnes of oil equivalents (MTOE)
  • 0.0009478 quadrillion British Thermal Units (BTU)
  • 0.0009202 trillion cubic feet of natural gas, energy from (based on 1,030 BTU / cubic foot, IEA website)

389,000 petajoules = 2013 global energy consumption estimate (International Energy Agency, Key World Statistics 2015)

103,000 petajoules = 2013 US energy consumption estimate, 26.5% of global total (US Energy Information Administration Annual Energy Review, Table 1.1)

See also the US energy flow graph, Section 1.0, for a visualization of energy use.

10,100,000 petajoules = energy contained in the 1,656 billion barrels of proved world petroleum reserves (US Energy Information Administration), using the above conversion as an estimate of the energy equivalent.

7,578,000 petajoules = energy contained in the 6,973 trillion cubic feet of proved world natural gas reserves (US Energy Information Administration). This is probably a very rough estimate because of variance in the energy contained in different natural gas.

$39.93 / barrel = current price of WTI crude oil (US EIA) = $6,527,000 / petajoule of energy

$2.11 / million BTU = Henry Hub spot price of energy from natural gas (US EIA) = $1,942,000 / petajoule from natural gas

6.527 / 1.942 = 3.4: oil energy currently costs 3.4 times as much as natural gas energy.

Commodities

$1,086 = price of one ounce of gold (goldprice.org)

$14.54 = price of one ounce of silver (goldprice.org)

1,086 / 14.54 = 75, current gold-silver ratio, historical range of 14 – 100 since 1975 (goldprice.org charts)

Jobs

322 million = total US population (US Census Bureau Population Clock)

252 million = US civilian noninstitutional population

59.3% = employment-population ratio, which is the percentage of civilian noninstitutional population who are employed. Total employed is 149 million people. This is 46.2% of the total population.

5.0% = “unemployment rate” the most-often-reported percentage that does not include people who are not seeking employment, whether receiving unemployment benefits, welfare, or otherwise.

Click here for historical employment numbers. For more detail in easy-to-read charts, see “Charting the Labor Market.” The data is also broken down regionally and by state.

(US Department of Labor, Bureau of Labor Statistics Current Population Survey, November 2015)

Big Money 2

I wrote a post called Big Money almost 2 years ago in January 2014. This is a follow-up to that post to update the numbers.

$18.1 trillion = annual US gross domestic product estimate (www.BEA.gov)

$3.2 trillion = US government tax revenue, fiscal year 2015 estimated (http://www.gpo.gov, Fiscal Year 2016, Historical Tables, Table 2.1)

$18.7 trillion = US government national debt as of today (www.treasurydirect.gov)

$0.40 trillion = interest expense on US government outstanding debt, fiscal year 2015 (www.treasurydirect.gov)

0.40 / 18.7 = 2.1% average annual interest rate on the national debt

0.40 / 3.2 = 12%, interest expense as a percentage of tax revenue

$3.53 trillion = currency exchange reserves held by the Chinese government as of Oct 2015 (www.tradingeconomics.com) This has been steadily decreasing since it peaked at $3.99 trillion in mid-2014.

$4.25 trillion = money supply inflation as of Nov 2015 by the practice of quantitative easing (www.federalreserve.gov with data interpretation help by Wikipedia) This amount has been relatively steady since Oct 2014.

All of the US government numbers come directly from balance sheets available on .gov sites. It was calming to find the numbers I’ve heard about in the news on a regular old balance sheet. I don’t think I will rush to cash in my savings bond.