Sunday, July 11, 2010

LeBron James, U-Haul rental rates, the Ocean Endeavor drilling rig, and Central Banks

Speaking of LeBron James moving from a state with a 7% state income tax (Ohio) to a state with a 0% state income tax (Florida) and apparently not even considering a state with a 12% income tax (New York).....

Mark Perry at the Carpe Diem economics blog has been looking at U-Haul rental rates between Ohio and Florida.  LeBron isn't the only one leaving the Buckeye state. 

One-way rental rates for a 26-foot U-Haul truck on August 4, 2010

Miami, FL to Cleveland, OH: $1,000
Cleveland, OH to Miami, FL: $1,457
Premium to leave Ohio: 45.7%

Orlando, FL to Cleveland, OH: $834
Cleveland, OH to Orlando, FL: $1,301
Premium to leave Ohio: 56%

Tampa, FL to Cleveland, OH: $917
Cleveland, OH to Tampa, FL: $,1379
Premium to leave Ohio: 50.4%

Assuming that one-way U-Haul rates are based on relative demand, there are lot more people and trucks leaving Ohio for Florida than vice-versa, resulting in large premiums to rent trucks going to Florida and large discounts for trucks going to Ohio.

Any idea why?  Here's something from an earlier post about Ohio:

While LeBron's departure got extraordinary media attention, it is hardly unique. In the early 1990s, Ohio was the home of 43 Fortune 500 companies. Twenty years later the number is 24. Census Bureau data show that from 2004-2008 Ohio saw a net outmigration of $6 billion of income and some 97,000 taxpayers. Even Ohio's famously liberal Senator, the late Howard Metzenbaum, moved to Florida late in his life to reduce his estate taxes.
Just for grins, here's the U-Haul relative demand between Detroit (relatively statist) and Dallas (relatively libertarian).

In related news, from The Houston Chronicle:

Diamond Offshore announced Friday that its Ocean Endeavor drilling rig will leave the Gulf of Mexico and move to Egyptian waters immediately — making it the first to abandon the United States in the wake of the BP oil spill and a ban on deep-water drilling....

Larry Dickerson, CEO of Houston-based Diamond, signaled that other of his company's rigs could be relocated, too.

"As a result of the uncertainties surrounding the offshore drilling moratorium, we are actively seeking international opportunities to keep our rigs fully employed," Dickerson said. "We greatly regret the loss of U.S. jobs that will result from this rig relocation."

It was unclear how many U.S. jobs could leave with the Ocean Endeavor, but typically more than 100 workers are on the rig at any given time, doing everything from drilling to cooking meals. Onshore, a network of businesses supplies the rigs with groceries, equipment, uniforms and drilling materials.

"It's not unusual for an energy service company to have 1,000 vendors that they buy from or purchase services from," noted Rep. Kevin Brady, R-The Woodlands. As a result, Brady said, the economic damage from the moratorium stretches far and wide.

And finally, from Fortune magazine:

A new report from Morgan Stanley analyst Emma Lawson confirms what many had suspected: the dollar is firmly on its way to losing its status as the reserve currency of the world.

We already knew that central banks have preferred gold to dollars, and that they're even selling their gold for cash; now, according to Lawson's data, it seems that those central banks prefer almost anything to dollars.

So what do LeBron James, the Ocean Endeavor drilling rig, and Central Banks have in common? 
They all respond to negative incentives.  All three of them are abandoning places and commodities run by crazy people. 
Just like you do, every time you get a chance. 


A fresh coat of Whitening to Newsalert for all the links. 

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