Political Calculations
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December 13, 2017

How well are typical American households faring through the third quarter of 2017?

To answer that question, we're going to turn to a unique measure of the well-being of a nation's people called the national dividend. The national dividend is an alternative way to measure of the economic well being of a nation's people that is primarily based upon the value of the things that they choose to consume in their households, which makes it very different and by some accounts, a more effective measure than the more common measures that focus upon income or expenditures throughout the entire economy, like GDP, which have proven to not be well suited for the task of assessing the economic welfare of the people themselves.

To get around that problem, we've developed the national dividend concept that was originally conceived by Irving Fisher back in 1906, but which fell by the wayside in the years that followed because the government proved to not be capable of collecting the kind of consumption data needed to make it a reality for decades. And then, it wasn't until we got involved in 2015 that anybody thought to try it, where we've been able to make the national dividend measure of economic well-being into a reality.

With that introduction now out of the way, let's update the U.S.' national dividend through the end of September 2017 following our previous snapshot which was taken for data available through April 2017.

Monthly National Dividend, January 2000 through September 2017

We find that the third quarter of 2017 has seen some of the most robust increases in the national dividend in 2017, which itself has been an improvement over what happened to it in 2016, where the national dividend actually declined in the latter half of that year.


This is the first update that we've had since June 2017, which is a direct consequence of Sentier Research's termination of its monthly household income estimates data series after May 2017. We had suspended our presentation of our national dividend estimates until we developed a viable substitute for this original data source, which we've been test driving for this application behind the scenes.

What we've found so far is that our estimates for the national dividend are conservative in the period from 2015 onward, in that we believe that they are understating the amount of consumption by U.S. households, which we believe is a consequence of a change in methodology by the U.S. Census Bureau for how it collects the source data we use in our calculations. We do not as yet have enough data to establish the extent to which our estimates of national income may be understated, which we're continuing to collect and review behind the scenes. We do believe however that our measure is capturing the overall picture for the direction of the national dividend, which perhaps is a more useful indication of the relative well-being of typical American households that can be determined by this kind of analysis.

Previously on Political Calculations

The following posts will take you through our work in developing Irving Fisher's national dividend concept into an alternative method for assessing the relative economic well being of American households.


Chand, Smriti. National Income: Definition, Concepts and Methods of Measuring National Income. [Online Article]. Accessed 14 March 2015.

Kennedy, M. Maria John. Macroeconomic Theory. [Online Text]. 2011. Accessed 15 March 2015.

Political Calculations. Modeling U.S. Households Since 1900. 8 February 2013.

U.S. Bureau of Labor Statistics. Consumer Expenditure Survey. Total Average Annual Expenditures. 1984-2015. [Online Database]. Accessed 7 February 2017.

U.S. Bureau of Labor Statistics. Consumer Price Index - All Urban Consumers (CPI-U), All Items, All Cities, Non-Seasonally Adjusted. CPI Detailed Report Tables. Table 24. [Online Database]. Accessed 15 November 2017.

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December 12, 2017

Since the end of the first quarter of 2016, the S&P 500 has experienced a relatively stable period of order, where the variation of stock prices with respect to the mean trend curve established from the relationship between stock prices and their trailing year dividends per share has generally followed a standard normal distribution.

When we last reported on the status of the current period of order several months ago, the level of the S&P 500 had dropped to the point where stock prices were within one standard deviation of falling below a level that would indicate that the period of order was at very high risk of breaking down. Today, we can confirm that the S&P 500 has instead reverted back to the mean trend curve that defines its current period of order.

S&P 500 Index Value vs Trailing Year Dividends per Share, 30 September 2015 through 8 December 2017, with period of order since 31 March 2016

So in case you've ever wondered what "reverting to the mean" really means where stock prices are concerned, what has happened with the S&P 500 from 21 August 2017 to 8 December 2017 can be considered to be a textbook example of mean reversion.

And in case you're wondering what it means when stock prices move outside the outer limits described by this kind of analysis, where order really does break down (as opposed to simply being the result of statistical outliers in a continuing trend), the ultimate textbook example involves the ultimate sell signal.

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December 11, 2017

The S&P 500 behaved more as we expected that it would during the first full week of December 2017, with stock prices dipping as investors shifted their forward looking focus to 2018-Q1 in setting current day stock prices.

Alternative Futures - S&P 500 - 2017Q4 - Standard Model - Snapshot on 08 December 2017

But ended up on Friday, 8 December 2017 at a level that would at first appear to be more consistent with their being focused on 2018-Q2. The reason for that has a lot to do with the positive jobs report that came out on Friday, 8 December 2017, which had the official unemployment rate hold steady from the previous month at 4.1%, but which is down a half percent from November 2016. The report was stronger than expected, which appeared to clear the way for the Fed to not just announce that they will hike U.S. short term interest rates this Wednesday, 13 December 2017, but up to three more times in 2018.

The CME Group's FedWatch tool is reflecting that assessment, where after a 100% probability that the Fed will hike rates on this Wednesday (with a 90.2% chance they'll hike them to a target range of 1.25%-1.50%, and a 9.8% chance they'll hike them even higher to the 1.50%-1.75% range), the Fed Funds Rate futures suggest additional hikes in at least the first quarter of 2018 (2018-Q1) and again in the third quarter of 2018 (2018-Q3).

Probabilities for Target Federal Funds Rate at Selected Upcoming Fed Meeting Dates (CME FedWatch on 8 December 2017)
FOMC Meeting Date Current
100-125 bps 125-150 bps 150-175 bps 175-200 bps 200-225 bps 225-250 bps
13-Dec-2017 (2017-Q4) 0.0% 90.2% 9.8% 0.0% 0.0% 0.0%
12-Mar-2018 (2018-Q1) 0.0% 38.6% 54.8% 6.5% 0.1% 0.0%
13-Jun-2018 (2018-Q2) 0.0% 17.9% 44.7% 31.8% 5.3% 0.3%
26-Sep-2018 (2018-Q3) 0.0% 10.3% 32.8% 36.5% 16.9% 3.2%

Since no hike in the Federal Funds Rate would appear to be anticipated for 2018-Q2 at this time, investors have little reason to focus much of their forward-looking attention on this future quarter, which is why we think that they are now primarily focusing on 2018-Q1, where the level of the S&P 500 is still falling within the range that we would anticipate they would be in that situation.

In any case, this upcoming week will be a big one for markets as the Fed acts and also because we'll start getting our first look at what the future holds for dividends through the end of 2018. In the meantime, here are the market-moving headlines that caught our attention during Week 1 of December 2017.

Monday, 4 December 2017
Tuesday, 5 December 2017
Wednesday, 6 December 2017
Thursday, 7 December 2017
Friday, 8 December 2017

The invaluable Barry Ritholtz provides an overview of the positives and negatives for the U.S. economy and markets in the first full week of December 2017.

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December 8, 2017

Randall Munroe is the author of best-selling (and great gift idea) books like Thing Explainer: Complicated Stuff in Simple Words and our favorite, What If?: Serious Scientific Answers to Absurd Hypothetical Questions, who has just recently come up with a creative way to resolve the decades-old debate on which is the better temperature scale: Fahrenheit or Celsius. Munroe presented his solution at xkcd:

The symbol for degrees Felsius is an average of the Euro symbol (€) and the Greek lunate epsilon (ε).

Now, that's the kind of practical genius that we just cannot ignore, so to help facilitate the worldwide adoption of the new Felsius temperature scale, we've built the following tool to convert either degrees Fahrenheit or degrees Celsius into the new degrees Felsius. If you're accessing this article on a site that republishes our RSS news feed, please click here to access a working version of the tool on our site.

Temperature Data
Input Data Values
Temperature Units (Degrees ...)

Temperature Conversion Results
Calculated Results Values
The Temperature in Degrees Felsius

Take that, Lord Kelvin!

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December 7, 2017

The City of Philadelphia's tax collections from its controversial tax on sweetened beverages are continuing to fall well short of the levels that the city's politicians desired. For taxes assessed on sales from January 2017 through preliminary data for October 2017, total beverage tax collections in the city are running over 14% below the amount that city officials were counting upon to support their desired level of spending for a new "free" pre-K school programs, to cover a portion of the debt that the city will take on to make physical improvements to parks, libraries and recreation centers, and also to fund benefits for city employees.

Desired vs Actual Estimates of Philadelphia's Monthly Soda Tax Collections, January 2017 through October 2017)

In the chart above, we've projected the amount of tax collections that Philadelphia would need to collect in each month of the year to reach its annual target of $92.4 million if sales of the sweetened beverages distributed in the city followed the seasonal pattern for soft drink distribution in the United States, which we've shown in blue. Meanwhile, we've shown the actual tax collections that Philadelphia's revenue department has taken in from the tax assessed in the indicated months in red. As you can see, the city's actual sweetened beverage tax collections have continually fallen anywhere from 4% to 21% short of the monthly revenue targets needed to meet their annual revenue target.

The closest that Philadelphia has come to hitting its desired level of monthly revenue was for the soda taxes assessed in September 2017 and collected in October 2017, which at $7,567,159, nearly came within $348,000 of the amount that might reasonably have been expected for the month if the city's tax collections were coming in as city officials desired. Unfortunately, that month appears to be an anomaly, according to Philadelphia's Deputy Revenue Commissioner Marisa Waxman:

"This is a new tax with a lot of seasonality and patterns that we’re still learning, so we've never had collections in October before," she said. "There were some circumstances that contributed to this that we think might not repeat. There are other things in there that could repeat. We’ll just have to continue to monitor how this comes in month to month."

Waxman's comments can also be taken as a confirmation that Philadelphia's soda tax collections are not coming in anywhere near as reliably as city officials expected.

Overall, we also find that through October 2017, the total sales of beverages that are subjected to the Philadelphia Beverage Tax are collectively running about 37% below the levels that city officials indicated were occurring before the implementation of the tax.

Estimates of Quantity of Sweetened Beverages [Millions of Ounces] Subject to Philadelphia Soda Tax, January 2017 to October 2017

We should point out that these figures apply to the quantity of beverages that have been subjected to Philadelphia's soda tax, which is not the same as the quantity of beverages that Philadelphians are consuming, where many residents are purchasing drinks outside of the city's limits to avoid the tax, increasing their consumption of alcoholic beverages that are now closer in cost to the taxed soft drinks, or are creatively hacking their way around having to pay it while also getting their sugar fix.

Previously on Political Calculations

Presented in chronological order....

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