Monday, May 27, 2013

How one accident equals $2.2 trillion

I somehow became the target of a twitter rant from a well respected analyst/hedge fund mgr over the weekend when I dared to question the stories that seemed to flow to quickly following the failure of the I-5 bridge in Washington.  This guy is one of my favorites so it was a really weird exchange.

Yes, this was a scary accident and it would have been terrifying to have been on that span when it down.  However, it was essentially a 2 car accident.  Yet somehow every major network led with it as their top story for the next two nights.  They all had infrastructure experts lined up for miles to comment on how terrible US infrastructure is and how we need to institute a national spending spree of about $2.2 trillion to fix this problem.

However, after a couple of days the facts started to interfere with this story.  It appears that a truck carrying drilling equipment travelling at highway speed struck the bridge and took out several key supports leading to its collapse.  A leading transportation inspector said something to the effect of "well, if this truck had hit a new bridge at that speed, the result would have been the same."  Again, this doesn't fit with the "spend, baby, spend" mantra so we have to ignore the facts.

Look, I'm not opposed to upgrading our infrastructure when the payback is real and the budgets are clear.  The two things we can't do well as a nation is see our toes or build large projects.  In NYC we've finally capped the new WTC 12 yrs after 9/11 (and we're still 2-3 yrs from being finished).  In the interim China has built 10-15 CITIES.  As far as budgeting, note that Boston's Big Dig was estimated to cost $2.6 billion but when the final tab arrived it was almost $15 billion.  Locally, consider the $106 million investment in a new Ft. Drum connector route covering 8.4 miles (is it paved in gold?).

Is it embarrassing to fly back into JFK from just about any major airport in the world?  Sure.  Would I like Rt 95 through Connecticut to be more like a highway and less like a minefield?  Sure.  I just want to have an honest conversation about our infrastructure not a panic induced spending spree.

1) Our bridges aren't falling apart.  Many of them are hit (like the I-5 bridge) every day and the vast majority do not collapse.  In the UK it is estimated that 7 bridges are struck every day.  In a country, the size of the US I'd expect that we have 5-10 times that number every day.  Rarely do people end up in the drink.

2) A $ spent here does not return the same amount as a $ spent in India or China because our costs are so much higher and the incremental change isn't as great.  If you add 1,000 miles of 6 lane highway in India you are replacing 1 pothole filled road where the average speed was 20 mph.   If you add 1,000 miles of 6 lane highway in the US you are probably just replacing a 4 lane highway where the average speed was 68mph.

3) Let's invest with an eye to 2100 - Fiber, wireless, etc.  Roads, bridges, rail?  Nice but it feels a bit like building the Rideau Canal when the railroads were coming.

So, I took it on the chin this weekend from an angry hedge fund manager(who is probably long Caterpillar) with 40,000 twitter followers because I dared to question the "America is falling apart:" theme.  Point taken - next time I'll ask about your positions first :)

Tuesday, May 14, 2013

This is big news

Anyone that has followed higher education in the US knows that change in this industry typically occurs at a glacial pace.  However, I've been enthusiastically following the way companies like Udacity, Udemy, Coursera and edX.  I've said for some time that I think within 5 years we could see our first major universities offering fully online, accredited degrees for a fraction of the cost of the online experience.

Udacity took a baby step in that direction a couple of months ago with their announced partnership with San Jose State to offer accredited courses this summer for $150/course.

However, today Udacity moved a couple of light years forward in the evolution of online higher education. 

"The Georgia Institute of Technology College of Computing (Georgia Tech) announced today that it will offer the first professional Online Master of Science degree in computer science (OMS CS) that can be earned completely through the “massive online” format. The degree will be provided in collaboration with online education leader Udacity Inc. and AT&T.
All OMS CS course content will be delivered via the massive open online course (MOOC) format, with enhanced support services for students enrolled in the degree program. Those students also will pay a fraction of the cost of traditional on-campus master’s programs; total tuition for the program is initially expected to be below $7,000. A pilot program, partly supported by a generous gift from AT&T, will begin in the next academic year. Initial enrollment will be limited to a few hundred students recruited from AT&T and Georgia Tech corporate affiliates."
This hits on 3 major trends I see coming to higher education:
1) Online, accredited classes
2) Drastically lower costs
3) Partnering with corporations to deliver talented individuals with real skills.
The rate of change in this industry is really shocking to me.  I think it's possible that by 2020, a significant portion of our students could be taking online accredited courses from real universities.
There will be some bumps along the way, but this is very good news for the US.

Monday, May 06, 2013

Jobs and Dow 15,000!

Okay, so the market didn't hold the 15,000 level on Friday but the S&P blew through 1600 and the NASDAQ is also hitting post-bubble highs.

The catalyst on Friday was the better than expected news on the jobs front (I'll get to that in a minute) which was news itself because for much of the past two weeks bad news meant more Fed intervention which meant higher stock prices.  Suddenly on Friday good news was actually good news again :)

At this point everyone has beaten the headline to death so let's talk about what the numbers mean.

The 165k addition of jobs was slightly better than expectations but still relatively weak for this point in the recovery.  However, the upward revisions to March and February somewhat offset this concern. The trend lines have all sharply reversed (long-term unemployed, population ratio and to a lesser extent part-time) but remain at elevated levels.

My bigger problem with the euphoria over the jobs report is the breakdown of the jobs.  I've made this argument since 2001 to no avail as my argument falls on deaf ears.  We shouldn't be measuring jobs because a Walmart cashier does not generate the same level of economic activity as a software salesman.  However, in the eyes of the jobs report all jobs are equal.  Thus, when it is reported that 165k jobs were created no one cares that 103k of those jobs were in Retail, Temporary Help and Hospitality/Leisure (historically very low paying jobs).  This has been an ongoing trend for a decade and I'd love to see us include an equalizer (take a job created x its average hourly rate x its average workweek) to see if we are gaining strength as an economy.  To that end some have pointed out that despite the added jobs last month the reduction of the avg work week offset any gains in employees.  Ultimately, I'd say we have to deal with the jobs report because the computers love the headline game (note how the market opened straight up and then flatlined the rest of the day), but it is relatively meaningless in the big picture.

Side note if you're bored, watch this 5 minute video which turns 1/2 second of trading in Johnson & Johnson into a video game. Watch the barrage of quotes coming from all angles from the High Frequency Traders and then tell me if you think you stand a chance ---- remember this is all occurring one half second in the market.

Stats of the day:
Over 50% of Las Vegas new and resale home sales in March were to absentee buyers.
Las Vegas has roughly 10% vacancy rate but there was a 50% uptick in construction permits

Finally, thanks for still checking in here at the blog.  I'm going to cover a wider range of topics in the coming months as the first year of NNY Math winds down.  I'll be offering Summer Science Camps in the mall so if you know someone that might be interested drop me a note to brian at nnymath dotcom.