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Mark's Market Blog

2-20-09: Bears awaken, life expectency

By Mark Lawrence

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This week the S&P lost 7.5% as the markets slid downwards every single day this week, roughly matching to previous market bottom on November 20th 2008. There were serious questions about our banking industry, which continues to be under capitalized. There is also widespread concern that this recession is going to be deeper and longer than any other in the last 50 years. Of course people who read this blog learned of this likelihood back in early January. Wall Street employees aren't having any fun this year, and the outlook for the rest of the year for them is grim.

Money invested 10 years ago in stocks have lost 50% over the period from Feb. 17, 1999 to Feb. 17, 2009, matching the worst ten years of the Great Depression. Even Warren Buffet's company, Berkshire-Hathaway, is down 50%, the stock selling at a bargain basement price of $77,000 per share. Treasury Sec. Geithner has recently asked Congress for another $2T for Tarp, and Obama is talking about a $75B plan to keep homeowners in their houses. Obama felt it necessary on Friday to announce that he had no plans to nationalize our banking system. One is reminded of President Johnson's famous quote, "Of course it's not true! But let's make the b*****d deny it!"


S&P 500 index from Nov 21 2008 to Feb 20 2009

Obama is, in my opinion, showing his lack of experience in high political office by giving far too many interviews. If he keeps on with these twice-weekly flights to give speeches and daily sound bites, he's going to find all too soon we're all bored with him. Apparently Obama really likes riding in Air Force One, but I think he would be better served to just take off and circle for a few hours a couple times a week.

Greenspan, widely considered substantially to blame for the housing price bubble, gave a talk this week where he said, "We need not rush to reform. Private markets are imposing far greater restraint at the moment than would any of the current sets of new regulatory proposals." This is referring to the current effective market demand that banks raise their reserves from 10% of loans to 15%. Answering a question on whether he would have done anything differently to try and prevent the housing bubble, Greenspan said, "I think it would be desirable to find a way to suppress asset bubbles. But I am skeptical that it can be done."

GM and Chrysler submitted their required plans for reorganization to the White House on Tuesday. Chrysler is not projecting a substantial upturn in auto sales until 2012, they're planning on living in the current sales environment for three more years. GM on Friday gave up on getting loans from the Swedish government and put Saab into bankruptcy. Saab was selling about 23,000 cars per year. By comparison, Toyota sold 436,000 Camrys last year. GM is playing hardball with Sweden to get the attention of Germany. GM has asked Germany for loans to support Opal, which makes 1,500,000 cars in Germany each year. GM needs a deal with their bond holders to satisfy Obama, who requires the bond holders to trade their GM bonds in for new bonds worth about 15 cents on the dollar, plus another 15 cents worth of stock. The bondholders are playing chicken with GM, with the result that GM stock is again under $2.

I briefly became interested this week in life expectancy. There are a couple popular ways to describe life expectancy - one of these is life expectancy at birth, shown at the right. The curves are rising from 1970 to 2004, showing that in spite of McDonald's we're actually getting better at being healthy.A white female child born in 2004 is expected, on average, to live to be about 81. Women outlive men by a sizable margin, due, according to Alan King (highly recommended), to the fact that women don't have to be married to women. Interestingly, black women and white men have nearly identical life expectancies; perhaps they should marry.

The other popular way to describe life expectancy is to show how many years you have left at a given age. This is a higher number than life expectancy at birth - someone who has made it to 50 years old has already survived childhood illnesses, teenage car driving, and the violence experienced by many Americans in their 20s. In the table below, look down the first column to your approximate age, then across to find the expected number of years you have left. If you're 53 and a white male, you look across the 50 and 55 rows. On the age 50 row you expect to live to be 50+29.1 = 79; on the 55 row you expect to live to be 55+24.9 = 80. You expect to live about 27 more years. A black female of the same age expects to live to be 50+30.1 = 80 or 55 + 26 = 81, about 28 more years. Of course if you smoke or used to mine coal or asbestos you have to presume that these numbers are a bit optimistic. If your parents lived to be 106, then likely you'll beat these estimates. The unexpected winner is the 100 year old black female, who proves incredibly resistant to sudden death. Although whites outlive blacks by sizable margins, once the blacks get to age 80 they start outliving the whites.

Expectation of life by age, race, and sex: United States, 2004
 All racesWhiteBlack
AgeTotalMaleFemaleTotal MaleFemale TotalMaleFemale
0 77.875.280.4 78.375.780.8 73.169.576.3
5 73.570.876.0 73.871.376.3 69.265.772.4
10 68.565.971.0 68.966.371.3 64.360.867.5
15 63.661.066.1 63.961.466.4 59.455.962.5
20 58.856.261.2 59.156.661.5 54.651.257.7
25 54.051.656.3 54.452.056.6 50.046.752.8
30 49.346.951.5 49.647.351.8 45.442.348.1
35 44.542.246.6 44.842.646.9 40.837.843.4
40 39.937.641.9 40.137.942.1 36.333.438.8
45 35.333.137.2 35.533.437.4 31.929.134.3
50 30.928.832.7 31.129.132.9 27.825.130.1
55 26.624.728.3 26.724.928.4 24.021.526.0
60 22.520.824.0 22.620.924.1 20.418.222.2
65 18.717.120.0 18.717.220.0 17.115.218.6
70 15.113.716.2 15.113.716.2 14.112.415.3
75 11.910.712.8 11.910.712.8 11.49.9 12.2
80 9.1 8.2 9.8 9.1 8.1 9.7 9.1 8.0 9.6
85 6.8 6.1 7.2 6.7 6.0 7.1 7.1 6.3 7.5
90 5.0 4.4 5.2 4.9 4.3 5.1 5.5 4.9 5.7
95 3.6 3.2 3.7 3.5 3.1 3.6 4.2 3.8 4.3
100 2.6 2.3 2.6 2.5 2.2 2.5 3.2 2.9 3.2

From CDC data

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