This is the first in what I'm planning will be a series of posts discussing the contribution that the energy price spike of 2008 made to our present economic difficulties. In this first installment, I revisit a very interesting research paper on the response of consumer spending to energy price increases written by Lutz Kilian (Professor of Economics at the University of Michigan), and Paul Edelstein (Senior Economist for Decision Economics). I first brought this paper to the attention of Econbrowser readers in the spring of 2007. I thought now would be a good time to take a look at how well the equations in Edelstein and Kilian's paper can describe what we saw happen in the later part of 2007 and first half of 2008.

Edelstein and Kilian summarized the historical correlations between energy prices and economic activity in terms of

...

Jeff is traveling, so we are republishing his recent interview from the Kirk Report, one of our featured sources.  The Kirk Report is an excellent investor resource, with many specific stock ideas for members.  Charles Kirk also reads very widely and provides regular links to articles we might otherwise have missed.  He came up with some excellent questions for the interview, getting Jeff to discuss many topics he has not covered on "A Dash." Here is the Kirk Report interview: It is with great pleasure to have Jeff Miller, from A Dash Of Insight, to participate in this month's Q&A. Many of you know Jeff because I've linked to many (if not the vast majority) of his blog posts. In this Q&A we'll cover a variety of topics ...

A fair bit of deliberation has taken place on this site regarding stock market valuations, and specifically what is in store for the “E” component of PE multiples. In order to cast light on this matter and to incorporate insightful research into the valuation debate, I have obtained republishing permission to share with readers a study just published by John Hussmann*, president of Hussman Investment Trust. His report follows below.

With the S&P 500 down nearly 40% from last year’s highs, and now trading modestly above 10 times last year’s peak earnings level, I continue to view stocks as somewhat undervalued, in that long-term investors can expect the S&P

...

Since December 1998, EV Rentals Cars (EVTP.OB) has continued to expand to meet the growing green trend. EV Rental is the only rental company in the United States that offers a fleet containing only environmentally-friendly hybrid-electric vehicles. Currently, the company has rental facilities at 8 major airports including San Francisco, Los Angeles, San Diego, Phoenix, and Las Vegas. The company is on a mission to provide the most advanced green vehicles to the public and to raise the public’s awareness of the benefits of driving clean-fuel cars to increase the demand for these environmentally-conscious vehicles. EV Rental is led by an experienced team of professionals who are conscientiously growing the company and its fleet.

The idea to create EV Rental hit Jeffrey Pink in 1997 when he saw an aerial view of Los Angeles. The founder of the company saw the condition of the

...

In the currency market, the dollar was sharply higher against the euro. Late Friday, the euro was trading at $1.2751 vs. $1.2932 on Thursday.

“Flows and technical factors are driving” the dollar, wrote currency strategists at Brown Brothers Harriman. “Demand for the dollar has been much stronger in Asia and Europe than in the U.S. in recent sessions. That may reflect the fact that fewer U.S. investment funds hedge equities than do Asian and European funds.”

And, as the stock market closes its worst month since October of 1987, many are still taking refuge in the buck.

The day’s numbers were grim, beginning with the Commerce Department reporting the biggest drop in consumer spending in four years. Spending fell 0.3% in September after being flat since June. Year over year, spending was down 0.4%, the first such decline since the recession of 1991.

In addition, the University of Michigan/Reuters consumer sentiment index

...

In the currency market, the dollar moved slightly higher against the euro. Late Friday, the euro was trading at $1.3408 vs. $1.3463 on Thursday. The buck held up despite a second straight day of dismal data.

The University of Michigan/Reuters index reported that U.S. consumer sentiment took a huge nosedive in October. The index fell to 57.5, compared with a reading of 70.3 in late September. That constituted a record single-month drop, and was more than twice as nasty as economists’ projections for an October result of 64.5.

“Clearly, this is the response to the market chaos, and it does not look good,” wrote Ian Shepherdson, of High Frequency Economics adding that it’s unlikely consumer confidence will reach levels consistent with rising spending until next year.

In addition, the Commerce Department reported that construction of new homes sagged to the second-lowest level in 50 years last month. Housing starts fell 6.3% in September

...

Updates on some of the series we regularly follow, and they’re not good.

On Thursday the Federal Reserve Board announced that its index of industrial production fell by 2.8% in the month of September (yes, as in 33.6% at an annual rate). That’s the biggest monthly decline in the index since January 1975. To put it in perspective, UCLA Professor Ed Leamer suggested last August that a 6-month decline of more than 3% should be characterized as a recession. That had been the

one holdout among Leamer’s four indicators in suggesting that the economic situation was still not so bad. But according to Leamer’s criterion, the September drop in industrial production almost counts as a recession all by itself.

100 times the 6-month change in natural log of index of industrial production,
from FRED, with NBER recessions as shaded regions …

Early August marked the first anniversary of the credit crunch. The infant that arrived unheralded and unwelcome on the doorstep of the financial world is now, believe it or not, just over one year old. While we all hoped that its unhappy life would be a short one, it now seems as though this unwanted foundling is going to be with us for a while yet. And, by all accounts, it is going to cause us a lot more sleepless nights before it goes away.

If the credit crunch were a storm we might now be in its eye – that expanse of uneasy calm in the storm’s centre, which whispers to the unwary that the worst is behind them. No chance, I’m afraid, if we listen to the utterances of

...

IsraelNewsletter.com had the chance to sit down with an amazing, young pair of college students who are leading an innovative initiative that will give college students hands-on exposure to the Israeli economy by learning and by doing.  The TAMID Israel Investment Group at the University of Michigan is just the tip of the iceberg for this pair.

**************************************************************

Tell Us A Bit About TAMID Israel Investment Group.

Eitan Ingall, President: This whole idea started because Sasha Gribov and I are both the Presidents of Pro-Israel groups on campus at University of Michigan. Sasha is head of the Hillel group, American Movement for Israel and I am currently heading up a pro Israel political advocacy group called the Israel Initiative for Dialogue Education and Advocacy. We have both noticed a serious void in hasbara (Israel advocacy) on our campus in that there is a serious lack of sustained and substantive

...