24/7/2013: CBRE Q2 2013 Irish Commercial Property Report

A very good quarterly report from CBRE on Irish Commercial Property markets in Q2 2013.

Some highlights:

In the above, I added the red line for referencing current yields to other urban locations across the EU. Pretty much suggests current valuations are in line with current macro fundamentals. Also, the chart above shows just how much more dramatic the swing has been from the cycle high to the cycle low in Dublin - wider than anywhere else.

Does this mean the market is now priced about right? Barring any dramatic improvement in the fortunes, I can't see much of an organic upside here. That said, external investment demand and longer-time investment horizons can (and probably will) push prices up. On the downside, there is the pressure of cost of long term funding news acquisitions.

On the shorter end, there are strong signs of market recovery. Per CBRE: "There was a significant improvement in transactional activity in the Irish investment market during the first half of 2013. In total, there were 34 investment transactions of more than €1 million in value completed in the six month period. In total, €603 million was invested in the first half of 2013, compared to a full year spend of €545 million in 35 transactions in the entire year last year."

More on the good news side: " Total returns in the Irish market in Q2 2013 increased by 2.3% while capital values were flat in the period according to the Investment Property Databank (IPD) Irish Index. Indeed, total returns in this index have been positive for seven consecutive quarters now." However, the chart shows continued negative capital returns:

The chart also shows that cumulated total returns over the positive 7 quarters are just about cover total losses cumulated from Q4 2009 -Q1 2010.

The headwinds remaining in the market, in my opinion are:

1. Risk to growth fundamentals in the economy: any further significant compression on current yields will have to be factoring stronger growth than recorded in 2010-2012,
2. Risk to the future long-term interest rates
3. Risk to supply/demand balance: current demand is driven largely by lack of other asset classes with comparable returns, plus surplus cash positions built up by some domestic investors. These are at risk of reversals on foreign demand side and exhaustion of domestic cash reserves. On supply side, there is a risk of NAMA eventually starting to dispose of domestic assets in earnest. 

For now, however, my feeling is that the yields are close to fundamentals-determined equilibrium.

24/7/2013: Q2 2013 CDS report: spotlight on Irish CDS performance

CMA published Q2 2013 report on CDS markets. Here's the top 30 table of riskiest sovereigns (ranked by probability of default over 5 years):

Note Ireland's significant improvement from Q1 2013, moving from 20th most risky (5 year CPD of 15.7% and mid-point CDS  at 188.64) to 27th most risky (5 year CPD down to 14.0% and CDS at 165.22).

23/7/2013: Irish Residential Property Prices: June 2013

Irish Residential Property Price Index (RPPI) is out today with latest figures for June 2013 offering a snapshot on H1 and Q2 activity in the sector, with some encouraging signs.

From the top line data: the overall property price index has managed to post the first annual increase in June since January 2008. However, overall trend in overall index remains flat, as established from Q2 2012.

• Year on year, RPPI was up 1.23% in June, having posted -1.07% growth in May 2013.
• 3mo cumulated change through June 2013 was at 2.34% and this contrasts +0.62% rise in 3 months through May 2013.
• 6mo cumulated change remains negative at -.03%, but much shallower than -1.97 6mo cumulated change through May 2013.
• M/m June rise of 1.23% was the largest m/m move up since September 2007.
• However, on 3mo MA basis, the index June reading was 65.0 - still below the levels recorded in February 2013.
• Relative to peak the index is down 49.73%, the best reading since December 2012. However, the RPPI is only 2.34% above the all-time low.

Top-line conclusion: RPPI is struggling to lift up above the flat trend despite the unprecedented level of prices collapse to-date.

Chart to illustrate the above trends:

Apartments drove the overall index up on a m/m basis and largely accounted for much of change y/y. The problem is that apartments index is based on thin data, so it is subject to much volatility.

• Houses RPPI was up 0.89% y/y in June, having posted a y.y contraction of -0.88% in May. M/m index rose 0.89%.
• 3mo cumulated increase in Houses RPPI was 2.10% in June against a rise of 0.9% in May.
• 6mo cumulated move in Houses RPPI remains negative at -0.73% - a moderation on -2.17% contraction in May.
• 3mo MA through June is 67.7, which is the best 3mo MA reading since February 2013 (67.93).
• Relative to peak, Houses RPPI is down 48.3% and current index reading is only 2.1% above the all-time low.
• Apartments RPPI reached 50.1 in June 2013, up 5.25% y/y and this contrast in the index being down 3.09% y/y in May 2013. M/m June move stood at +6.37%.
• 3mo cumulated change through June 2013 stood at +4.59% a strong reversal on -8.54% 3mo cumulated fall in May 2013.
• 6mo cumulated rise in June stood at 6.82% against 6mo cumulated rise of 3.06% in May 2013.
• Current reading of the index is 59.56% below the peak and is 9.53% ahead of the absolute low.
• However, Apartments RPPI STDEV during the crisis period has been at 23.5 against 20.3 for Houses Index. And STDEV for m/m changes was 2.36 for Apartments, against 0.84 for Houses.
• 3mo MA for Apartments index reached 48.53 in June 2013, which is above May 3mo MA, but below April.

Chart below illustrates Apartments and Houses indices trends:

Top line conclusions: Again, the flat trend remains for the houses index and there is a slight upward trend for the apartments. Both series are relatively anaemic, despite the positive moves. High volatility in Apartments index suggests that caution should be used in interpreting overall RPPI data short-term moves.

Dublin RPPI:

• Dublin RPPI rose 4.15% y/y in June 2013, having posted a rise of 1.37% y/y in May. June marks sixth consecutive month of increases in Dublin RPPI (y/y terms).
• 3mo cumulated change in June stood at 2.38% reversing the 3mo cumulated decline of -0.17% in May 2013.
• 6mo cumulated increase in June was 1.69%, reversing a -1.33% 6mo cumulated drop in may.
• Relative to peak, Dublin RPPI is now down 55.24% and relative to absolute low the index is up only 5.06%.
• 3mo MA at 59.43 in June 2013 is the best 3mo MA reading since January 2013.
• Against the peak, current reading brings us back to the levels last seen in December 2011-January 2012.

Chart to illustrate:

Top line conclusions:  Dublin RPPI is showing most significant and lasting gains of all sub-indices, backed also by medium-range volatility (STDEV for m/m changes is 1.38 for Dublin RPPI).

How significant was the skew in All Properties RPPI due to movements in Apartments? Very significant. 

• All RPPI was up 1.2% y/y in June 2013
• National Houses RPPI was up 0.9%
• National Apartments RPPI was up 5.3%
• Ex-Dublin, All RPPI was down -1.0%, Ex-Dublin Houses RPPI was down 0.9% (close to All RPPI ex-Dublin)
• Dublin All RPPI was up 4.2% with Dublin Houses RPPI up 3.6% and Dublin Apartments RPPI up 9.7%.

Hence, overall RPPI was strongly pushed up by Apartments and Apartments index was pushed up by Dublin Apartments.

23/7/2013: Ireland is not Greece... and never was...

Resting on one's laurels is a dodgy proposition. However, forgetting one's achievements is of an equally problematic virtue. To balance things up - a good reminder of Ireland's road travelled from the 1960s through 2008 and I have adjusted figures for Greece and Ireland for 2012 levels of GDP per capita based on IMF data.

Source: the original from World Bank, 2012.

Interesting bit - Ireland remains in the 'rich' club as a country that managed an elusive move from middle income economy in the 1960s to high income economy in 2000s and 2010s. Greece dropped out of the same group.

22/7/2013: That Growing Debt Pile...

In the week when Irish debt/GDP pushes above 125% that some of the luminary 'green jerseyists' said it will never do, let's say loudly to ourselves: "Ireland is not Greece..."

A gentle reminder to stay calm and not to worry, because, as we now know, debt does not matter at all... what matters is pants,.. bright pink pants...

Chart source: http://www.bis.org/publ/arpdf/ar2013e1.pdf

22/7/2013: G20 Spells Out a Squeeze on Tax Arbitrage

Last week we saw the conclusion of the G20 Finance Ministers and Central Bank Governors meeting in Moscow. The meeting covered, in part, financial regulation and international taxation issues, aimed at addressing, as the IMF put it, "international spillovers of national tax policies".

Here's what the basic set of the proposals discussed implies for Ireland - a country at the centre of these spillovers in the euro area and largest per-capita beneficiary of the international tax arbitrage after Luxembourg.

The OECD-prepared, G20 discussed 'Action Plan' on Base Erosion and Profit Shifting (BEPS) covers loads of technical ground. The main points of relevance to Ireland's real economy are:

1. Tax issues relating to the Digital Economy - including coverage of tax application to services, geographic distribution of tax revenues etc. In the nutshell, the G20 will aim to adapt international direct and indirect taxation rules to the digital economy, including attribution of profit 'together with the character and source of income'. In simple terms, aggressive tax base shifting from, say the UK-sold advertising revenues to, say Ireland-based pro forma sales centre. In other words, the rules will challenge the system on which much of the Ireland's comparative advantage in ICT and financial services currently rests. The threat is more genuine in my view in the case of ICT services than in the case of financial services.
2. Tighter controls over Controlled Foreign Company rules - a relatively minor issue from the point of view of Irish real economy, but having a potential to impose small adjustment on our official GDP.
3. Reduce artificial avoidance of tax application, presumably including by schemes such as Double Irish. This has potentially strong adverse impact on Irish economy.
4. Intangibles transfers within the company group are to be tightened, to reduce effectiveness of transfer pricing. Once again, this suggests pressures on IP tax arbitrage and licenses arbitrage - a core competitive point for Ireland.
5. The Plan also aims to (explicitly) develop rules to align profits with value creation. Bad news for major MNCs operations here.
6. Beefing up of data, tax and transfer pricing documentation, and reporting compliance in line with BEPS proposals - an additional significant cost for Irish companies and MNCs, although this is symmetric for all other jurisdictions, so not an issue from comparative advantage of Ireland point of view.

In effect, many proposals link directly into CCCTB structure (see my analysis of this in the G8 context here):

• Reporting on tax matters re-aligned to cover business activities and capital bases
• Focusing on documentation of the location where key business risks and business processes are located
• A country-specific breakdown of group profits and revenues
• Common anti-avoidance regime
• Services delivered on-line will migrate toward effective tax rates based on location of end-user of services
• As KPMG analysis statesd: "Change in effective rate of tax on group profits where change in transfer pricing basis for profit attribution alters the mix of profits attributable to group members". Or in other words: kiss goodbye the key pillar of tax arbitrage in Ireland via consolidation of the tax base.
• Tax base will migrate to the locations "of key functions and management and oversight of key risks"

So good luck eating that 'breakfast of champions' of the claims that the G20 proposals present no threat to Ireland's economic model. They might not spell a full-scale closure of the tax 'haven' we run, but they do present a significant costs and risks threat to our model, where it is reliant heavily on tax arbitrage. Not a catastrophe, but...

21/7/2013: WLASze Part 3: Weekend Links on Arts, Sciences and zero economics

The third part of my regular WLASze: Weekly Links on Arts, Sciences and zero economics...
Parts one and two are available here and here. Enjoy!


On science, first.

The EU calls for a radical action to cut carbon emissions on Mars… well not quite, but sometime ago, they could have with some justification, some 3.6 billion years ago: here. Alas, the Martians were not to be blamed, it appears, for that environmental disaster, as much of the CO2 concentration on the Red Planet is due to rapid and massive thinning of the atmosphere, as new data from NASA's Curiosity rover shows: here.


And on arts - more specifically, architecture.

Here's an excellent retrospective of new architectural practices from around the world by the Wallpaper: http://www.wallpaper.com/directory/architects/2013

Numbers 13-16 are a delightfully whimsical translation of a barn-set modernism.
Brilliant treatment of stairs in number 29

A physical proof that modernising garden gnomes is not an improvement on the hideous original at numbers 36-38. A great attempt at doing the obvious: merging outdoors with indoors and opening up to light and view at 92-95 and 106-109… and so on… drive through this deck!

And Metropolis mag has another, much more pret-a-porter stairway treatment - http://www.metropolismag.com/July-August-2013/Ready-to-Build/


My most favourite museum in the world, NYC's MOMA is having two exhibitions not to miss: the first one is the Rain Room installation: http://www.moma.org/visit/calendar/exhibitions/1380

and Le Corbusier: An Atlas of Modern Landscapes retrospective http://www.moma.org/visit/calendar/exhibitions/1321. The clinical painting devoid of dynamism (Le Corbusier was a lousy painter, as most architects are) contrasted by surgical ability to restructure space (Le Corbusier was a brilliant architect, intuitive and bold at the same time, dynamic and imposing, a fine balancing act of mass and space).

Both exhibitions are, ultimately, about forced interactions between external and internal , both are basically about pushing nature into our domain (yes, in that - reversed - order).


Moscow Biennale is coming up in the second half of September:
http://www.theartnewspaper.ru/posts/104/
Official site here: http://5th.moscowbiennale.ru/ru/ or in English: http://5th.moscowbiennale.ru/en/
You can see previous Moscow Biennale site here: http://4th.moscowbiennale.ru/ru/
Special Projects section is of interest while the rest of the site is still being assembled: http://5th.moscowbiennale.ru/en/program/special_projects.html


An interesting article on the issue of whether dinosaurs were cold- or warm-blooded suggesting that the latest evidence points to the latter possibility: link here.


Dinosaurs might have been warm blooded, but our news flow this week, concerning Detroit, was very much cold-blooded, with Detroit being in the news - for the wrong reasons, but possible for the right outcome as I argued here: http://trueeconomics.blogspot.ie/2013/07/1972013-detroit-officially-files-for.html. However, as they point out in Detroit's favourite graffiti message:

For all its multiple 'fails', there's always a reminder of the Detroit's good corners. DIA is one… a superb museum…
http://www.dia.org/object-info/1b623d3b-2a68-4c93-8fea-2073126e55e0.aspx?position=50
Kiki Smith, Lot's Wife, 1997
http://www.dia.org/object-info/df738a50-a117-494f-a6dd-3ceedfd6f442.aspx?position=55
Beverly Fishman, C.E.L. 1997 MediumCollage, resin, paint
http://www.dia.org/object-info/b421345c-1220-444c-827e-f5329e997fbd.aspx?position=91
Clyfford Still 1951. Oil on Canvas - my favourite of all DIA collection:

And, H/T to @FrankSunTimes we also have Detroit's music legacy: http://www.bbc.co.uk/news/entertainment-arts-23377160. MrsG has encyclopedic knowledge of this stuff...


Last point on the arts via ArsTechnica:
http://arstechnica.com/business/2013/07/algorithmically-generated-artworks-comprise-average-of-faces-from-movies/#image-3

I am not sure this qualifies as art, since the whole project is a simplified form of averaging based on dimensional measurements. There is a very clear separation between a mechanical averaging exercise and a perceptive interpretation of the average by an artist or a human observer.

To see this, look no further than the most famous 'averaging' attempt by an artist (actually two artists together - Vitaly Komar and Alex Melamid) here: http://awp.diaart.org/km/painting.html. Artists' official webpage is here: http://www.komarandmelamid.org/. The duo brilliantly took their Most Wanted and Least Wanted paintings series to music: http://www.wired.com/listening_post/2008/04/a-scientific-at/


And for another dose of smiles, recall Mr Grigory Yakovlevich Perelman (You say who? I say Poincare) who in 2006 was confirmed by the Science journal to have proved the famous Poincare Conjecture that eluded mathematicians from 1904… Mr Perelman has a beautiful mind. And as such, he is rather eccentric, earning him number 1 spot in Top 10 Odd News Stories of 2011: http://www.upi.com/News_Photos/Features/Top-10-Odd-News-Stories-of-2011/5963/ (H/T to @greentak for spotting the list). One obviously wonders what his Mom response was when he came back home with the news: "Ma, I told em to shove their 1 million dollars where the sun doesn't shine, cause I can control the universe, ya know!" Needless to say, Mr Perelman has not been seen in the news ever since… Note, the Dude also declined Fields Medal (2006) which is the equivalent of the Nobel Prize in mathematics.

So little does Mr Perelman engage with the media or the public, that his life is already attracting that voyeuristic attention which can only be attracted by the unattainable (oh, human nature) - there's a German book on his life out last month:  http://www.welt.de/geschichte/article117427879/Die-wahnhafte-Welt-des-russischen-Rechen-Genies.html.

Here are some good academic links on Perelman's proof of Poincare Conjecture: http://www.math.ucla.edu/~tao/285g.1.08s/ You can feel your brain twist reading this and after about an hour, you too can get to the point of controlling the universe... just don't tell your Ma, please... And should you be at risk of gaining such powers, a non-technical discussion: http://theconversation.com/millennium-prize-the-poincar-conjecture-4245.

Image from the Clay Institute and a write up: http://www.claymath.org/millennium/Poincare_Conjecture/


The end of WLASze for this week… 

20/7/2013: WLASze Part 2: Weekend Links on Arts, Sciences and zero economics

The second part of my regular WLASze (Weekly Links on Arts, Sciences and zero economics)... enjoy!

Part one is available here.



Let's start the second WLASze for the weekend we are in from science. The cognitive science to be more precise. Basically, in a summary, there's a myth that once we hit twenties, we are already matured, formed and, although conditions and our responses to them do change, we are basically 'emotional intelligence'-wise pre-determined. I am not so sure if my own recollection of my twenties supports this myth, but someone, somewhere, in large enough numbers believes it to be true. 

It turns out this is not the case (which makes me at my 45 at last being on the sane side of an argument about my own twenties). And here's an article arguing the point: "The brain is going through a second critical period of growth," she explained. "The brain doesn't finish developing until some time in your twentysomething years. Being more specific, the pre-frontal cortex doesn't reach maturation until some time in your twenties. This is the last part of the brain to have evolved; it's the last part of the brain to mature. For our purposes, what's important to know about the pre-frontal cortext is that this is the part of the brain that thinks about time, probability, and uncertainty."

Enough said. And a H/T @raluca3000 for digging the article up...

PS: I have no idea who the Girls are, but they look like something of a horror flick, where a bunch of giggly cheerleaders are about to be terrorised by a crazed alien that emerges from their mom's smile...


With alien worlds, then, here's a tale of a speedy demon: basically, someone digging through old data from that relic of the technology past that keeps on ticking - the Hubble Telescope - has spotted a little dot - a new Moon of Neptune. Quote d'resistance: “This is a moon that never sits still long enough to get its picture taken”. The thing flies around at a speed of ca 16,174 miles per hour. 

Staying with the theme of speed: ArsTechnica reports about the black hole that sucks gases at a speed of 10 million kmph or 6.21 million mph or 384 times faster than the Neptune's newest moon moves at. For those old enough to remember Ross Perot (no, not Hercule Poirot) can certainly see now where his famous reference about the 'giant sucking sound from the South' coined 21 years ago has some tangible traction... No, not in Texas, yet...

Shifting the gears from pure science (no, not Ross) to a grey area between science and arts: amasing visualisation of numbers properties: here is visualisation of π, φ and e: http://mkweb.bcgsc.ca/pi/art/

impressive visualisation h/t to Brian O' Hanlon and his comment to last week's WLASze. 

And while on the topic: progression and transition for the first 2,000 digits of e:

I have always argued that:

1. Mathematics is a part of Art,
2. Art is the most powerful tool of inquiry available to the (wo)mankind, and
3. Physical sciences (beyond theory) can only aspire to possess the power of Art

Need more evidence? The above was a trip from math to art. Now, from art to math by Roman Opalka:

Moving on from the methodologised (or theorised) madness of subtle beauty, but staying with the boundary between art and science theme, here's an interesting post on the evolution of typography and design in scientific publishing. Here's an oldest (albeit not the best designed) academic journal:

Although the French as usual claim the whole thing to be their own invention (they beat the Brits to it by 3 months) with this

Thankfully, we don't have to fight this one, though the French design definitely beats the UK dysfunctional plain-face approach to jumbling together a page of text made up of some 10 fonts and about as many font sizes... 

More on history, this time - a new discovery from the Mayan civilisation. The discovery relates the tales of political battles that raged in the Dark Period (dark because we know little about it, although the entire Mayan civilisation was not exactly 'light' when it came to ethics, but...). This dates back to AD 550-560s, as my reading of the article suggests and gives us the names of two kings we didn't know about... Meanwhile in Europe Justinian's boys smuggle contraband silkworms from Asia and Black Death is all the rage across the continent... Also, rather not very light-filled years...

Silkworm was smuggled from China back in AD 553. In return, we brought Chinese art back into the fold of 'thinking art' (away from pure propaganda utilitarianism) ca AD 1980s (yep, it took that long and even as late as 1989, the Chinese Communist Party was not too keen on modern art, especially when the bosses shut down the first modern art exhibition held in China in February 1989). But as with silkworm taking hold in Europe, it will take time for art to take hold in China, although the country art scene has been hugely dynamic and original. The reason for it is that we are now into the early stages of the second generation of Chinese (resident) artists that have any capacity to think beyond the constraints of the limited vocabulary and philosophy of Communist art (Socialist Realism). 

To see this, go no further than this example of a superb online flip book of contemporary Chinese artists in Paris: http://flipbook.kohn.fr/private-sale_chine-a-paris/ Much of this is 'soft' - excitingly interesting for its novelty and naivety factors, but conceptually and artistically boring. Take numbers 10 and 11 - iconoclasm does not work in Western art context. 

Not since we broke the taboos of strictly dogmatic interpretation of the subject of art as drivers of form - the school of thought that dominated pre-Rinascimento and then occasionally re-floated under various political regimes throughout the ages, including in the 1930s-40s in fascist states and subsequently in the Warsaw Pact (plus Yugoslavia and Albania). Stuff like the above is now mostly kitsch, unless it has a historical (as opposed to artistic) value. Don't tell the fans of late (post-abstract minimalist) works of Jeff Koons:

Efforts at abstract art as well as reinterpreted traditionalist expressions represented in the e-book on Chinese art in Paris remind me of the period in Russian art around 1988-1998 when Russian artists raced to catch up with the Western vocabulary, philosophy, composition and theory, and semiotics. This process in Russian art is now exhausted, largely, although the market for Russian art still shows strong interest in that expressionist nostalgia for preservation of any departure from the past norm, even if that departure relies on the very same norm for juxtaposition-defined raison d'etre.

The entire book left me in a strange state: I would not want to hold a single work in my collection, but I would not be averse to holding many works, were I to end up with them in my collection… Strange? Try not to think too hard… the e-book is lovely... just lovely... just...

Stay tuned for Part 3 of WLASze coming up later tonight.

19/7/2013: WLASze Part 1: Weekend Links on Arts, Sciences and zero economics

The first part of my regular WLASze (Weekly Links on Arts, Sciences and zero economics)... enjoy!

Before we begin, you can now follow my art wandering on-line here: http://theartstack.com/gurdgiev

And a nice pre-cursor to news yet to be released... something special is brewing for September 14th... news here, once public...

Now, on to WLASze:

Starting with some art. Altman Siegel Gallery showing Trevor Paglen photography. Here are select two images from the show and one image from archives:

A nearly abstract expressionist quality to this panoramic shot's composition:

Followed by 'spin'-styled composition:

And one of delightfully dark and dynamic, almost threatening with density and light:

The photograph's texture is so rich and viscous and the composition so stripped out of superfulous positioning drama to its raw natural subject that it reminds me of one of my old favourites: Emil Nolde. Especially his poignant late watercolours - artist's favourite medium in the 1940s after he was forbidden to paint by the Nazi regime in 1941 (though Nolde was a member of the Nazi party and yet was deemed to be unworthy of being called an artist. His work featured in the famous Entartete Kunst, 1937).

Meanwhile, in Orange County (yes, Detroit's bankruptcy spings to mind) we have an on-going California-Pacific Triennial, showing an excellent Araya Rasdjarmrearnsook Two Planets: Millet’s The Gleaners and the Thai Farmers, 2008

Some more of the Thai artist works: http://www.trfineart.com/exhibitions/28. Millet too dressed up his gleaners as if they were heading out to the church, just as Rasdjarmrearnsook’s Thai framers are dressed as if for posing...


Loving juxtapositions and ever slightly shifting toward science: "Ulric Collette is a French-Canadian photographer who does some quirky portrait work. In his photo series “Genetic Portraits” he photographs family members and then cuts them side by side to create one portrait." Genetic manipulation or photographic nature? Or vice versa? It's juxtaposition of age and genetics - one denotes distance, another proximity.


Proximity v distance juxtaposition leads to time v gravity juxtaposition and to Trinity College, Dublin where it took scientists 69 years to carry out one experiment - not to discover something new, but to illustrate a point: it takes a very long time for very viscous stuff to succumb to gravity...
http://www.scientificamerican.com/article.cfm?id=worlds-slowest-moving-drop-caught-on-camera-at-last Best quote: "it takes 7 to 13 years for a drop to form, but only a tenth of a second for it to fall". I dare not think what Sunday Indo might say about the use of taxpayers money for this stuff, but it made Scientific American and that is worth an Irish punt or two or few thousands... Oh, and in case you wonder - no, Physics gang did not invite celebrity economists to watch the historical moment...


Staying with juxtapositions for one more trip... WordlessTech has a photoshop fascination with merging 'two opposite place, New York and the Grand Canyon' that worries me for one reason: what is it in Grand Canyon's imagery that makes people constantly desiring to do aesthetic violence to it? http://wordlesstech.com/2013/07/18/merge-new-york-in-the-grand-canyon/ . I wrote about Grand Canyon as the focal or experiential point last week here. My plea is for people to stop attempting to fill Grand Canyon with 'stuff', bridge it with hotels and make it accessible to couch potatoes beyond the usual 'view from the top'. It is here to challenge, beat us into dreadful sweat and wear our legs out. It is not here to sip double-skinny-caramel-dill-latte while levitating in some fancy capsule over the abyss...


And onto science, simple: Classic dilemma for those in pursuit of public health and personal well-being: drink or dry… or trilemma for some cultures: drink till you drop, drink or dry… or 'To Drink or Not to Drink' problem.

Much of the research on life expectancy in relation to alcohol consumption shows an inverted U-shaped relationship: mortality is high for those who drink alot and... for those who do not drink. The question, that so far remained un-answered is: but why? What explains higher mortality for those who do not drink at all.

A recent paper (here is its 2012 version http://paa2012.princeton.edu/papers/122744) looked at a huge data set on drinkers and non-drinkers that covered their 'survivorship' data and also data about their social and physical health. The study divided nondrinkers into three major categories:

• "abstainers" - people who had 12 or less drinks in their lives; 
• "infrequent drinkers" - people who consumed less than 12 drinks a year; and 
• "former drinkers"

They then sub-divided Abstainers into sub-clusters.

• Abstainers with religious or moral motivations for not consuming alcohol, not drinking due to their sense of responsibility to their family had similar mortality risks to light drinkers.
• Abstainers who dislike the taste of alcohol and referenced this dislike as the main driver for not consuming alcohol had mortality risk 17% higher than light drinkers. 
• Infrequent drinkers overall exhibited a slightly higher mortality risk than light drinkers. 
• Former drinkers had the highest mortality risk of all nondrinkers. 
• Former drinkers with reasons for abstaining included being an alcoholic and problems with drinking had 38% higher mortality risk

So the dilemma/trilemma is sorted: enjoy your life, but don't abuse the enjoyment lest it becomes an addiction?


And while on drink subject, here is a more current data study on 'drink till you drop' cluster mortality outcomes: http://www.sciencedaily.com/releases/2013/07/130719085152.htm
Not a light-hearted piece of research, although I disagree with one of the scientists' policy prescriptions, but, hey that 'ze' in WLASze stands for 'zero economics', so no more on this...


Small Print Stuff: The above statements and research are not an endorsement of either consumption or non-consumption of anything, including alcohol. Please, exercise caution when operating heavy machinery while consuming vanilla ice cream. But seriously - do stay safe!

And stay tuned for Part 2 of WLASze coming up tomorrow.

19/7/2013: Global Asset Returns: 10-year Averages

A nice inforgaphic on 10-year average annual returns for a number of major asset classes from Pictet:

Details of calculations and strategy discussion - as usual, with Pictet's no-nonsense straight talking analysis - is here: http://perspectives.pictet.com/wp-content/uploads/2013/07/Pictet-Horizon-EN1.pdf

What can I say, I like these guys...

19/7/2013: Reuters TV on Irish Economy & Bankruptcy Tourism

Two recent Reuters TV programmes on

• Irish Bankruptcy Tourism http://www.reuters.com/video/2013/07/15/is-holiday-over-for-bankruptcy-tourists?videoId=244230864 and 
• Whether Ireland is on the Road to Recovery http://www.reuters.com/video/2013/07/12/is-ireland-really-on-road-to-recovery?videoId=244195065&videoChannel=5

Note: both programmes feature my contributions.

19/7/2013: Ireland: Six Points on Government Spending Stats for Q1 2013

Four key trends in Irish Government expenditure through Q1 2013:

Chart above shows three aspects of Irish Government spending:

1. Overall, expenditure continues to outstrip revenues, generating deficits well in excess of the target and accelerating in Q1 2013 once again, although part of this acceleration is seasonal and part is riven by the IBRC shut-down cost (see my earlier post on this: http://trueeconomics.blogspot.ie/2013/07/1872013-irelands-government-deficit.html)
2. Decline in Government spending since Q1 2009 has been much shallower, once we strip out banks measures than at the aggregate level. This highlights the nature of our fiscal statistics reporting, whereby there is not a single full database (by either the Department of Finance, or CSO) which actually provides clear accounting for ex-banks spending. Question is: why? The IMF this week praised Irish Government for delivering on fiscal transparency. Yet, the very same Government continues to cherry-pick data to show desired effects. 
3. Q1 2009-Q1 2013, overall reduction in gross public spending ex-banks, based on Q1 figures alone (so a caveat here) is closer to EUR470 million or 2.67%. Meanwhile, tax and social security contribution revenues are up EUR979 million or 9.2%. And this disregards the fact that much of the expenditure reductions came from higher charges on private users of public services, not an actual budget cut to budget-covered institutions.

Chart above shows breakdown of the expenditure for four main lines of spending:

1. Compensation of employees has declined 7.53% on Q1 2009 (saving EUR390 million). We were promised billions in savings here and we have attained… well sort of short of that. 
2. Use of goods and services (gross of taxes payable) declined 37.47% or EUR1.01 billion, with parts of these savings now arising due to timing issues. Bunching in spending on this line has increased from 2009 through 2012. Q1-Q2 quarter on quarter changes used to be negative (higher spending in Q1 than in Q2) in 2009 and 2010 and they are now positive for 2011 and 2012. Swing in the rate of change q/q between Q1-Q2 2009 and 2012 was from -13.2% to +10.4%. Which neatly summarises the austerity we've been living through: taxes massively up, capital spending massively down, current spending… err… 'don't ask-don't tell'

One of the worrying trends in the overall expenditure, however, is the interest on our debt. Chart above shows its evolution over time and a clear trend up and up even as taxes are continuing to rise. Now, I know it is trendy nowadays to say 'debt don't matter'… actually, when 20% of your tax revenue goes to pay interest on it… err… it sort of obviously does.