Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

Copyright Notice

Everything that appears on this blog is the copyrighted property of somebody. Often, but not always, that somebody is me. For things that are not mine, I either have obtained permission, or claim fair use. Feel free to quote me, but attribute, please. My photos and poetry are dear to my heart, and may not be used without permission. Ditto, my other intellectual property, such as charts and graphs. I'm probably willing to share. Let's talk. Violators will be damned for all eternity to the circle of hell populated by Rosanne Barr, Mrs Miller [look her up], and trombonists who are unable play in tune. You cannot possibly imagine the agony. If you have a question, email me: jazzbumpa@gmail.com. I'll answer when I feel like it. Cheers!

Tuesday, October 29, 2013

Debt Service Ratio

Via CR we find the Fed report on household debt Service ratio, just out today.

The household debt service ratio (DSR) is an estimate of the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt.
The household debt service ratio (DSR) is an estimate of the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt.
Read more at http://www.calculatedriskblog.com/#BHACpsgJPrkXpjCY.99
The household debt service ratio (DSR) is an estimate of the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt.
Read more at http://www.calculatedriskblog.com/#BHACpsgJPrkXpjCY.99
The household debt service ratio (DSR) is an estimate of the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt.
Read more at http://www.calculatedriskblog.com/#BHACpsgJPrkXpjCY.99

This is based on estimates, so it's less exact than we would like, but as a time series ought to be illustrative.

This is just what I've been looking for, since I think of the debt burden in terms of ability to pay, and that is determined by the percentage of disposable income required for debt servicing.

CR shows a graph of DSR aggregated over homeowner and renters (red line) and mortgage and consumer obligations for homeowners only, reproduced below.  The red line is mislabeled on the CR graph as DSR for homeowners only.  It is corrected in the accompanying text, though.

Graph 1 from CR, Note misidentified Red Line

I took closer look at the red line, and added trend channels.  This is displayed in Graph 2.

Graph 2 - Household debt service payments as a percentage of disposable personal income; seasonally adjusted

I like to find a narrative that makes sense of the curve.  Since data before 1980 isn't included, we don't have earlier values.  But there is an immediate, though small drop, due to deleveraging during the early 80's double dip recession.  There is a sizable increase from '84 to '87, perhaps due to changing regulations and loosening lender requirements.  I  don't know what to make of the slight decline for the rest of the decade.  The next big deleveraging occurs starting in Q2 '91, after the '90-'91 recession had officially ended, and the bottom extends into 1994.  After that, it's good times and irrational exuberance, with only a slight down tic at the next recession, lasting from late '01 through mid '04, then up again to the ultimate top at the end of '07.  Then came the crash and a huge delveraging that might now start to level off at a new low around 9.8 to 9.9%.  The previous low of 10.43% is indicated by the purple horizontal line.

That's my attempt to understand the data.  What are your thoughts?

Wednesday, October 23, 2013

Political Incorrectness

These days there is some well-deserved critical attention being paid to the name of the Washington D.C. professional football team.   The name has been around since 1933 when George Preston Marshall, one of the original owners of the at-that-time 1-year-old Boston Braves, changed the team name to the current racial epithet.  In 1937 he moved the team to D.C.

Marshall was by all accounts a virulent racist who deliberately chose a  team name that would be overtly offensive.  Make no mistake, this was done knowingly and willfully.  1933 was not some innocent, halcyon time.  Racism in those days was more explicit, vicious and violent than anyone born in the civil rights era would be able to imagine. 

Marshall also refused to let African-American players participate on his team, until finally relenting in 1962, 13 years after the rest of the league began drafting black players.  Even then, he relented only under a direct threat of having his stadium lease revoked.  It's no coincidence that for most of Marshall's tenure, the Washington team was the southernmost in the NFL.

You can have whatever opinion you like on this matter.  But the fact remains that the team name is a racial epithet, offensive per se, and specifically selected to be so.  In my opinion, every bit of that is inexcusable. 

A couple of weeks ago I heard a radio host rant about this topic, going on to likewise condemn the names of the Florida Seminoles, Illinois U. Illini, Cleveland Indians, etc.etc.  Also included in this rant was criticism of the Altlanta Braves.  There is considerable validity to this point of view, but it's possible to take it too far.

The radio host went on to say that there are no mascots that are caricatures of white people.  But, without too much dedicated thinking, I came up with the Minnesota Vikings, Notre Dame Fighting Irish, Michigan State Spartans, and Southern Cal Trojans.  That pretty much deflates the argument.  Also, the Oklahoma Sooners and Nebraska Corn Huskers, though not ethnic groups, specifically refer to the white settlers in these areas.

The other part of it is that team names, or mascots if you prefer to think of them that way, have as eponyms entities known for courage, valor, tenacity and fighting spirit.  Consider those chosen from the animal kingdom:  Lions and Tiger and Bears, oh my, Eagles, Falcons, Hawks, Sharks, Wolverines, Badgers, 'Gators; on and on it goes.  No sheep, lemmings, flamingos or squirrels, though the Cardinals and Ducks might make you stop and go, "hmmmmm."

So I think harping about the Braves is protesting too much.  In between, there is a broad, gray area.  The Cleveland Indians Chief Wahoo is certainly pushing it.  But is that really any more out of line than the pugnacious leprechaun representing the Fighting Irish, the horn-helmeted Viking, or Herbie Husker?

As I said before, you can have any opinion you like.  Mine is that the Washington D.C. professional football team should either change their name to something non-offensive [or at least LESS offensive] or adopt a new logo.

Thursday, October 17, 2013

Rethugs Against Government

Via Ed Schultz on FB, a list of the 18 Senators who voted against reopening the government.

Coburn, Tom - (R – OK)
Cornyn, John - (R – TX)
Crapo, Mike - (R – ID)
Cruz, Ted - (R – TX)
Enzi, Michael B. - (R – WY)
Grassley, Chuck - (R – IA)
Heller, Dean - (R – NV)
Johnson, Ron - (R – WI)
Lee, Mike - (R – UT)
Paul, Rand - (R – KY)
Risch, James E. - (R – ID)
Roberts, Pat - (R – KS)
Rubio, Marco - (R – FL)
Scott, Tim - (R – SC)
Sessions, Jeff - (R – AL)
Shelby, Richard C. - (R – AL)
Toomey, Patrick J. - (R – PA)
Vitter, David - (R – LA)

 A rougue's gallery of fools, tools, thieves, thugs, and idiots.

Tuesday, October 15, 2013

A Tale of Two Sluggers

I took a look at life time stats for David "Big Papi" Ortiz of the Red Sox and Miguel "Miggy" Cabrera of the Tigers.

Ortiz is older and has been around longer.  In the following graph, I eliminated his first three years when he had limited plate appearances.  For both hitters, I've looked at home runs and doubles.  The idea is that for sluggers like these guys, a double is a hit that didn't quite have enough oomph to make it out of the park.  [I've omitted triples, because these are big, slow guys who never get more than a couple per year.]

What I'm probing here is the possibility of drug induced enhanced performance, looking for a trade off between doubles and home runs.

Here are Miggy's stats for at-bats, HRs and doubles.

Here is a graph of HR's and 2Bs per at-bat; HRs in blue, 2Bs in pink, average of the two in yellow.

Doubles vary a lot from year to year, but exhibit no discernible trend.  HRs clearly go up over time, as he approaches his prime and his slugging improved.  The average of HRs and 2Bs also increases, laregely due to the HR increase.  Doubles are way off this year, since lower body injuries have made it mpossible for him to run at times.  HR production in September was close to non-existent, so he really was on fire the rest of the year.

Here are similar stats for Big Papi


Note the huge shift from HRs to 2Bs from 2006 to 2007, the year MLB got serious about PEDs.

Here is the graph, same color coding.

Two striking things about this graph are different from Cabrera's.  First, the big drop off in HR's in 2007, and second the HR-2B trade-off indicated by the contrary motion from 2002-2007.

Note that the average of HRs and 2Bs remains fairly constant.

This is strongly suggestive that, despite his denials, Big Papi was using PEDs.

And Miggy was not.

Friday, October 4, 2013

Friday Night Music - Glow

Not sure what's up with the wreckage, the floating, nor the hospital gown.  But this is pretty mellow for Kaki King, Just right for a Friday night.

Tux, in the comment, offers some insight that is to good to moulder there.  So I bought it up to moulder here, instead.

What happened was that she created a rock band for her previous album (Junior), and found out that touring with a rock band is a lot more expensive than touring with just herself and her guitar. So the new album (Glow) was written for just herself and her guitar to tour, though the album itself has other instrumentation on it. And most of the songs on the new albums are instrumentals like back when she was starting out because she can't do fancy guitar picking and sing at the same time, it just gets to be too much. So that's the story on why the album has so much acoustic instrumental guitar work on it. As for the video itself, beats me :).

Thursday, October 3, 2013

A New Look at Real GDP - Part 2

Part 1 took a hard look at GDP growth after 1955.  Part 2 will take a hard look at Volatility.  The usual measure of volatility is the Standard Deviation.  Graph 1 is a scatter plot of Standard Deviation [St Dev] vs RGDP growth over an 8 year period.  The X-axis value is the average RGDP over the previous 8 years [32 quarters] while the Y-axis value is the standard deviation of RGDP growth over the identical period.  There's nothing magical about using an 8 year period, you get a similar picture using a 15 year period.

Graph 1 - RGDP Growth and Volatility

When I looked at the 15 year graph I noticed something that made me want to use an 8 year period, and that is the data trend over presidential terms.  The last data point in the term represents the performance of a given 8-year administration, and the trend over the term can offer contrast to other administrations.

Since the major trend over time has been decreases in both RGDP and St Dev, the data set starts at the upper right, and moves generally down and to the left over time.  The blue points at the start of the data set represent the Kennedy-Johnson administration from 1963 on.   JFK inherited high volatility from Ike, and during the Democratic term, RGDP growth increased while volatility decreased from 2.95 to 2.09.  During Nixon-Ford [purple], volatility jumped back up to the 2.5 range while average RGDP growth plummeted from 4.8 to 2.7%.  During the Carter administration [light blue], RGDP growth increased to 3.6%, then fell again, while volatility remained fairly constant in the 2.5 to 2.7 range.  Interestingly, the moribund Carter administration at it's best gave us average RGDP growth equal to Reagan's, at it's best, with much lower volatility.

During Reagan's term [red], RGDP growth fell, then rose. Both RGDP growth and volatility reached their maxima in Q4, '84 at 3.5% and 3.06, respectively.   During George H. W. Bush's term [yellow], average RGDP and St Dev didn't change much, despite the sharp RGDP drop in 1991.  By Q2, '95, RGDP growth stabilized, and grew slowly from there for the rest of Clinton's term [blue] while volatility dropped dramatically from 2.5 at the begiining of the term to 1.3 at the end.  During the George W. Bush term, volatility remained low while average GDP growth took a nose dive from 3.8 to 2.3%.

Then the Great Recession happened, and during Obama's term we've seen RGDP growth and volatility both stabilize.   While the Std Dev has settled in at an intermediate level, average RGDP growth has never been lower during the period under study.

This demonstrates what I've believed for a long time:  the Great Moderation is a myth.  The only meaningful declines in St Dev took place during the Kennedy-Johnson and Clinton administrations - what I call the two little moderations.  You can attribute this to good policy or good luck.  But the Great Stagnation is real.  Only during the Kennedy-Johnson and Clinton administrations did we experience increasing GDP growth along with falling volatility.

Now, I'm gong to introduce the concept of Relative Standard Deviation [RSD] this is simply the standard deviation divided by the average of the data set on which it is based.  You might think this is a novel concept, but analytical chemists and quality engineers use it all the time.  Think about it this way.  If the St Dev is two and the data is clustered around 10 that's one thing, but if its clustered around 2, that's something quite different.  The denominator provides context for the numerator.

Graph 2 shows the RSD of RGDP growth, again based on a moving 8 year kernel.

Graph 2 - Relative St Dev of RGDP Growth

I've included the grand average [0.735] in yellow and some trend lines. At the beginning of the series, RSD falls sharply to a low of 0.418 in Q4, '69.  From there it's a bumpy rise to the top at 1.35 in Q4, '82.  But the value remains below the average for 9 years from Q4 '65 to Q4, '74.  Following the peak, there is no meaningful breach of the average again until Q1, '97.   In other words, after the peak, volatility remained high for 7 years, and at or above average for 15.  From 1990 through '96, the values cluster close to the average line.  After that, values stay below average until Q4, '98, 12 years later.  What we have are two roughly symmetrical, approximately decade long periods of low volatility - the little moderations - surrounding two above average decades that include two volatility bumps and one brief excursion into ultra-high high volatility in 1982-3.  The low volatility of the little moderations results from avoiding recessions - periods when volatility goes up while GDP growth declines.  The 1982 peak is an artifact of the double dip recessions of  '80 and '82. The whole key to having low volatility has been, up until recently, to avoid recessions.

As I said, I think the Great Moderation is a myth.  It's entire existence is predicated on 2 things: 1) a brief ultra-high volatility blip due to a double dip recession; and 2) completely ignoring the existence of the first little moderation. 

But what's happened since is truly remarkable.  We now have what some people consider to be [and applaud as] remarkably stable GDP growth.  But what we actually have is the lowest non-recessionary GDP growth ever recorded, coupled with historically high RSD.  This is a truly ugly economic environment.  Anyone graduating now is the unluckiest of all.

Wednesday, October 2, 2013

A New Look at Real GDP

At Art's Place, Marcus Nunes presents his argument that 1982, despite being the all time high in unemployment, was a great time to enter the work force, "just as the Volcker adjustment took effect, ‘eradicating’ inflation from the system and stabilizing the economy, paving the way to the Great Moderation."  He presents some charts with trend lines that I think are conceptually incorrect.  Putting a single straight trend line through a data set that clearly has an inflection point near 1982 obliterates the change resulting from that inflection.  The right method, in my opinion, is to connect peak to peak and trough to trough, as I did here in My Graph 1.1, for a more extreme example.

But for this post, I want to focus on RGDP, the basis for part of Marcus' Argument.  His claim is that, taking 1982 as an inflection point, volatility was high in the early period and low in the later period, while both periods exhibit the same mean.  There is certainly a volatility difference, with standard deviations of 2.789 and 2.000 for the early and late periods, respectively.

But, the mean is only the same [3.42 vs 3.39] if you truncate the late period at the end of 2007, and eliminate the Great Recession.  One could argue for this, I suppose, if there is an assumption that the Great Recession were an aberration and not the end game of the Great Stagnation.  But I don't believe that is true.  In fact, RGDP growth was already faltering by Q2 of 2004, and had dipped to 1.4% by the beginning of 2007.  Plus, this all follows a rather anemic recovery from the 2001 recession.

Graph 1 shows YoY RGDP growth from 1955 thought Q2 of 2013.  The grand average of 3.37, is shown in pink.  The '55 to '82 average of 3.42 is in yellow, the late period average of 2.94 is shown in bright blue.

Graph 1 - RGDP - YoY % Change

Aside from the post recession spike of 8.6% in Q1, '84, and the bump from Q4, '95 through Q2, '01, the entire post-82  period up until the Great Recession looks rather bland. 

One way to tame jumpy data is to take a moving average.  Graph 2 zeros in on 13 [purple] and 21 year [blue] moving averages from 1967 on.

 Graph 2 - RGDP - YoY % Change with Avgs

The averages reach their all time highs in Q2, '74 and Q1, '79, respectively.  I've placed a trend channel in brown around around the 13 yr average line.  The orange mid-channel line turns out to be the lower boundary for the 21 year average line.  There's basically sideways motion from the late 80's through the early naughts in both lines, then drop-offs starting in 2003 for the 21 yr averages and 2007 for the 13 yr average.  These declines begin before the onset of the Great Recession.

There's always more than one way to look at data. Two years ago, I charted the the YoY % change in the 5 year average of quarterly RGDP data.  That is shown in graph 3.

 Graph 3 - YoY % Change in % Yr Avg of RGDP Growth

The line is color coded by presidential administration.  Make of that what you will.  I didn't put a trend channel on this graph, but you can eye-ball one easily enough, with a clearly downward slope.  Also included in yellow is a 13 year average of the red-blue line.  Clearly, there are two regimes, with an inflection near 81-82, and lower growth after.

The point of all this is to demonstrate that there is more of a difference between the pre- and post 1982 periods than simply a volatility reduction.  There is also a decline in RGDP growth, if you dig into the numbers to find it.  The Great Moderation really was the Great Stagnation.  And it culminated in the Great Recession.

Tuesday, October 1, 2013

Tigers and the Slough of Despond

Looking forward to the playoffs with fear and trepidation, I'm also trying to get over the mental and emotional breakdown I suffered due to the Tigers season ending sweep by - not of - the 100 loss Miami Marlins.  Even worse, they scored only 3 runs in that 3 game series.  Even worser, they got no-hit on the last game of the season.  Adding to the worsitude, their 4th game from the end of the season was a 1-0 shut out of the Twins.  The Tigers scored a grand total of exactly 4 runs in their last 4 games of the season.

In the first game of the Marlins series it was pretty clear Leyland didn't care about the W-L result.   In fact, he sort-of went with the program I outlined here, using lots of pitchers and platooning the non-starters.  It's not at all clear that he wasn't trying to win the last two games - though he didn't put everything on the line to do so.  As a result, they wound up only one game in front of the red hot 2nd place Indians, who ended their season running away from the 3rd place Royals with 10 straight wins.

I ended my August wrap-up saying, "Scoring is down a bit, and that might be a concern going forward."  Really, I had no idea.  Graph 1 shows how scoring has declined over the season.  The purple line is season average to date.  The yellow line is the average of the last 34 games.

Graph 1 - Season Scoring

From game 34 through game 62, the 34 game average stayed in the relatively narrow range of 5.26 to 5.68 runs per game [RPG].  Then, through game 80, there was a steep decline to 4.24 RPG.  After that came a climb to a double peak culminating in the season high of 5.74 RPG at game 115.  Since then, the bumpy slide into the slough of despond, and the season ending 4.35 RPG.

Season average to date [purple line] is a lot less volatile, but shows a similar pattern.  After a double bottom at 4.93 RPG at games 71 and 81, the high for the 2nd half of the season came at 5.18 RPG in game 106.  But from there was a slide to end the season at 4.91 RPG, the lowest reading since May 1st.

Despite having a stretch where they won 11 of 15 games, September was a very poor month for the Tigers, ending with a 13-13 record.  Three of those 13 wins came against the Royals, and 1 against the Red Sox.  The rest were against the hapless White Sox, Twins and Mariners.

Two defects have characterized the Tigers play for most of the season: ineffective relief pitching, and an inability to score runs late in games - and, as it turns out, late in the season, too.  Those problems were mitigated in August, but came home again in September.  In August, the Tigers outscored the opposition by 150 to 113.  In September, with 4 fewer games, it was 97 to 94.  Four fewer games, 57 fewer runs.  RPG for the month took a nose dive from 5.0 to 3.73.  Opponents RPG only slipped slightly from 3.77 to 3.62.  The Tigers got 31% of their September runs after inning 6, which is not awful, but down from August's 35%.  They gave up 41.5% of their runs after inning 6, which is awful, and up from August's excellent 26.5%.  From the 6th inning on, the Tigers have been outscored 53 to 34 in September.  Clearly, starting pitching is not the problem.

Seven of their 13 September losses were by 1 run.  In those 7 games, the opponents averaged 2.4 RPG.  Anemic late scoring and inept relief pitching are death in close games.  In their 13 September wins, the Tigers averaged 5.9 runs; in the loses, 1.54.  They were shut out an astounding 4 times in September, and 12 for the season.  The 2012 Tigers were shut out twice.  This year's Tigers scored 796 runs, second only to Boston's 853.  I just discovered that the Tigers 3-0 win over the Red Sox on labor day was the 11th time the Sox were shut out this year.  There is no way to make sense of this.

Graph 2 shows runs scored per inning in September.  I've used a 30 run vertical axis all season, since the Tigers have topped 25 for a given inning a few times, starting with 28 in inning 4 in April.

Graph 2 - September Runs per Inning

 Graph 3 shows runs allowed in September.

Graph 3 - Runs Allowed in September

Graph 4 shows Tigers runs per game in September.

Graph 4 - September Runs per Game

The blue line is runs for the game, yellow line is 5 game average, green line is season average to date

Last year, after the 4 day lay off before the world series, the Tigers came out flat and got swept away by the Giants.  Historically, these lay-offs have not been kind to the resting team, while their opponents keep fighting it out.  This year, the Tigers ended the season on such a low note that a lay-off can't possibly do any harm.

The A's strategy in the playoffs should be to run up the pitch count for Tiger's starters and dig into the bull pen as quickly as possible.  That ought to get them a ticket to the next round.

The first 150 games

August Wrap up

July Wrap up [includes links to June, May, and April]