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Joseph Stuber

 
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  • The Fallacy Of Central Bank Stimulus [View article]
    Kevin

    I never miss your articles and am always entertained, if not enlightened. "Counterfactual speculation" - I love that and intend to use it frequently from now on although counterfactual wasn't in my online dictionary. I added it though.

    And this one:

    "What the EU needs most of all is a much weaker euro - like about 25% lower for a start - and it won't get it without undergoing collapse first. Think about it. You're betting that someone else will buy your tulip."

    I read all your articles but only comment on the really good ones and this one is a really good one.

    JS
    Sep 5 05:21 PM | Likes Like |Link to Comment
  • How Can This Market Capitalization Be Justified? [View article]
    Anthony

    Great analysis and great advice. My compliments.

    JS
    Jul 31 10:26 AM | 1 Like Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    T Rail

    I think the point I am trying to make is getting lost in the stereotypes. I am not advocating raising taxes on the rich so the government can have more money to spend. To the contrary, I am advocating raising taxes on the rich as a means if incentivizing them to spend it to avoid giving it to the government in the form of taxes. And that doesn't mean CAPEX spending. That is what China did and look what that got them - ghost cities.

    Got to pay the profits through to those who will spend them. Individual companies won't do that on their own. It has to be by government mandate and tax policy seems to be at least one tool that would accomplish that.

    Frustrates me that readers are missing the message. It is not to the long term advantage of capitalists to destroy those who feed them and that is what we are seeing today. We've simply got to create an equitable balance between the capitalists and those who work for them or Marx will end up being correct.

    JS
    Jul 29 06:21 PM | Likes Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    Paul

    You do see the distinction between buying "stuff" that increases demand and investing in a company that does virtually nothing to increase demand for "stuff" don't you? When the money is used to buy goods and services we are driving demand which means more jobs and more more money to buy more "stuff" - a virtuous circle of growth and prosperity.

    When we see more and more of our money supply flowing into stocks we see stock price inflation and when that inflated stock price is unsupported by demand for what the company sells you end up with a bubble.

    JS
    Jul 27 10:21 AM | 1 Like Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    NJ

    I've been asked that by more than a few people. The truth is I haven't had a lot to say that I haven't already said. I worked for about two weeks on this piece as I felt it was worth publishing. It seemed particularly important in light of the negative GDP print in the 1st quarter.

    JS
    Jul 27 08:23 AM | 1 Like Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    newbeach

    I do agree that comments should stay focused on the subject of the article and not used as a forum for readers to express their own - often ill informed and narrowly focused - views of what is right and wrong with the world.

    A lot of readers do like to write their own mini essays on unrelated subjects in the comments section of articles.

    JS
    Jul 27 08:15 AM | 1 Like Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    Cash

    I agree with the idea that $100,000, $200,000, or $500,000 income levels should not be taxed excessively. Those income levels are still in the realm where a high percentage of the income will be spent.

    My issue is with those individuals and corporations who receive so much money that they simply can't spend a significant percentage of it driving GDP growth.

    The objective is not to fill the coffers of the Treasury - it is to keep as much of the money we create churning in the economy and driving GDP growth. When the money flowing to the upper end income earners can't be spent in significant proportion on goods and services it is invested in risk assets instead. That takes that money out of circulation in the economy and puts it to work pushing risk assets higher. That is what we saw with MBS's when housing starts began to fall. The new debt being created did nothing to drive GDP or jobs, it just pushed housing prices higher as it churned around in the real estate market with more and more money chasing the same number of houses.

    JS
    Jul 27 08:11 AM | 2 Likes Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    MI

    Krugman is right on one thing - if we don't keep up the fiscal stimulus at ever increasing levels we will see GDP go negative. The problem is the idea that fiscal stimulus is needed at ever increasing rates to keep us out of a recession and it is not a sustainable policy. As deficit spending is now slowing so is GDP.

    Take a close look at the nominal GDP chart:

    http://bit.ly/1nvce0C

    Going back over 35 years, the only time we've seen nominal GDP actually fall is during the Great Recession (4 quarters) and the 1st quarter of 2014.

    Krugman doesn't really make predictions so much as advocate policy. That is the reason I asked the question.

    JS
    Jul 27 07:56 AM | Likes Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    Cash

    The tax holiday is nonsense. Read the link below to an article - Offshore Corporate Profits - The Only Thing Trapped is Tax Revenue:

    http://bit.ly/1nv9yA5

    Here is one excerpt:

    "There is no trillion-dollar pot of gold at the end of the offshore profits rainbow. There is no free stimulus to be had by “bringing the money home”—the money is already here. Corporations are already depositing these funds in American banks, investing them in American bonds and equities, and leveraging them for domestic activities and payments to shareholders. What corporations are not doing is paying taxes on these profits. That is the problem that policymakers should focus on."

    Here is another excerpt:

    "Proponents sold the tax giveaway as a means to increase employment and investment in the U.S. economy, but economic researchers have found that the holiday had no effect on employment or investment. In the end, corporations that repatriated profits just used that money for dividends and other payouts to investors. This is not surprising given that, as explained above, repatriation of profits that are offshore for tax purposes should not be expected to spur economic growth."

    The fact is that corporations won't do anything to add employees or invest in ways that ramp up production levels until the demand is their to support it. It is a really ridiculous "cart before the horse" argument that is utter nonsense.


    JS
    Jul 27 07:36 AM | Likes Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    Paul

    Stuber does not call the value of Zuckerberg's stock money. Dammit I hate when someone who decides to attack a thesis elects to misstate the thesis or infer things not said. Where exactly do I suggest that Zuckerberg's stock is money?

    What I said is that if Zuckerberg earned 2% on his net worth he would make roughly $600 million in income. Whether he does make that or not I don't know but it serves to make a point. And the point is he isn't likely to spend much of that money buying goods and services.

    The thesis presented here is when the income disparity becomes so extreme that those in the upper brackets simply use it to buy risk assets instead of goods and services we are in trouble. There is no other viable explanation that I can think of for why M2 velocity is so low. As I noted above, if we were at the same levels on M2 velocity today that we were prior to the recession we would see GDP at about $5 trillion more than it is now. How many many more jobs would we see if that were the case? A rough guess would be 30 to 40 million more based on $17 trillion in GDP supporting roughly 140 million jobs.

    It is indeed frustrating to me that you can't see that. Do you have an explanation other than the one I offered for why M2 velocity is in the tank or why 6 or 7 trillion dollars in new money created since the recession hasn't had a greater impact on GDP growth or job creation? I have an answer and presented it in this article. I will wait for yours if different than mine.


    JS
    Jul 27 12:28 AM | 2 Likes Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    MI

    What Krugman predictions are you talking about that you say are spot on?

    JS
    Jul 27 12:04 AM | 1 Like Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    Red

    "The money that goes into MMFs does not just lie there. As I stated, it is used to buy short-term paper. That short-term paper is issued by businesses to satisfy their working capital needs or by the government. So, the money does get spent by the government, business, or either’s employees if it is used to help meet payroll, It can then cycle around and go back into an MMF and again be used to buy more short-term paper. Rinse and repeat."

    Today that money supports the shadow system at various levels. It doesn't go significantly into commercial paper as in the past. It goes to fund the various stages of the credit transformation process that takes high risk junk debt and converts it into liquid assets. It then provides the short term financing for various versions of the carry trade in these assets as well as stocks.

    Big corporations are awash in cash and those that desire more find it in the shadow system as well. What makes these low grade investments work is short term funding and derivatives. Investors can engage in leveraged carry trades and buy puts through the derivative market that protect against downside risk - a least that is what they hope they are doing. We know that didn't work to well the last time they blew a bubble as those writing the puts weren't able to pay-off when called to do so - think AIG.

    The world has changed and not for the better.

    JS
    Jul 26 11:52 PM | 1 Like Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    David

    I so hate it when readers extract one or two comments, take it out of context, and then label me a certain way or extrapolate a few words into something that goes well beyond my thesis.

    Some choose to take note of my comments on the Marx conflict and extend that to mean that I am a socialist/communist. Others take my position on capitalistic efficiency to skew things to their advantage and assume I am a democrat, a liberal, and a socialist.

    I am not those things. I am just a passionate researcher who is more than willing to look at the evidence, define the problem, and offer solutions.

    And the problem today is that too much of the money supply that exists is held by those who have no way to spend it. If they don't spend it to buy goods then we don't need to produce goods at the same rate. if we drop goods production then we lay off workers who then have no money to buy goods. It ends up getting worse and worse over time to the point where the whole system collapses on itself - a point we are very close to right now.

    You can cling to whatever belief you choose - Keynesian, Austrian, Classical, Marx, supply side, market based - whatever. There are elements in each school of thinking that are useful but none that is all encompassing. If unions were so strong that their collective bargaining power was enough that corporations couldn't make a profit then that side of the equation would be out of control and we would need to move the needle back the other way.

    And I would advocate for that if that was the case. Today that is not the case and so we need to move the needle the other way. Tax policy is just one way to do so and doesn't constitute the whole of my solution to the problem. Aggressive enforcement of anti-trust laws would be another area that would produce good results.


    JS
    Jul 26 09:03 PM | 11 Likes Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    Alpha

    You mean Austrian school thinking on "malinvestment" resulting from low interest rates as one example. I think I did hit on that pretty thoroughly. Sorry I didn't assign credit.

    Consider that the article is rather long. I had to decide what not to elaborate on.

    JS
    Jul 26 08:12 AM | Likes Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    You just did remind them and thanks.
    Jul 25 04:39 PM | 1 Like Like |Link to Comment
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