Seeking Alpha

Leonid Kanopka's  Instablog

Leonid Kanopka
Send Message
.
  • Reaganomics - Just What The Doctor Ordered

    Keynesian vs. Supply-Side "Reaganomics;" do consumers create the demand or do the "suppliers" create the demand maybe this will help us decide which economic policy we should follow. Both have worked at one point, but which one will work when we need it most, NOW. Personally I believe the private sector creates demand causing consumers to spend more generating more growth, hence the "trickle-down" effect. For example, in an economy where no one wants to spend money and instead are paying down debt and saving, Apple sells more products than it can keep up with. Consumers did not create the need for an iPod or an iMac or even an iPad, but Apple did. Yes this is a very simple dissection and perhaps a naïve explanation, but let's face it this is pure fact. When gas prices began rising out exponentially consumers cut back on driving so what happened? Car companies saw the need for a change and then came the electric car. Car companies created an artificial demand. As long as innovation continues people will continue to buy, this is what made the United States the greatest country in the world, but will innovation continue?

    Ronald Reagan popularized the controversial idea that greater tax cuts for investors and entrepreneurs provide incentives to invest and produce economic benefits that trickle down into the overall economy. The single biggest distinction between Keynesian theory and supply-side economics is: Keynesian believes that consumers' demand for goods and services are key economic drivers, while a supply-sider believes that producers and their willingness to create goods and services set the pace of economic growth.

    Supply-side economics also suggested that some tax cuts actually raise federal revenues. For example, cutting the capital gains tax rate might induce an unlocking effect that would cause more gains to be realized, thus causing more taxes to be paid on such gains even at a lower rate. With threats today to raise taxes and more government spending than we can handle, is this really what our economy needs? Keynesian Economics worked wonders for the UK in the 1930s, but has not performed so well today. Government intervention has crippled free markets and sparked gloom over our economy that erases confidence. There has been an $800B stimulus package, then $420B, $780B, $830B, etc. The national debt has increased from $9 Trillion to over $15 Trillion since the start of the recession. That's an increase of about 67% in the debt, and there are still talks of more government spending. The dilemma with Keynesian's theory is: creating too much inflationary liquidity, or not sufficiently "greasing the wheels" of commerce with enough liquidity. Therefore, the Fed may inadvertently stifle growth by contributing to deflation (which is what looms over the horizon) and encouraging investors to horde dollars.

    It is so shocking to see how carefully woven and intertwined the economy really is. The collapse of the housing bubble brought down financial institutions, which caused wide-spread layoffs and panic, credit crunch and unemployment, etc. This is exactly the same way a recovery would work. Creating supply through marginal tax cuts would create artificial demand thus workforce would increase, more workforce equals more taxes paid, etc. Maybe I am missing something but how would raising taxes stimulate any kind of growth? Or adding to the debt, which has Americans shaking in fears of stagflation: happened to Japan and UK now is coming here. The U.S. lost their AAA credit rating in part to the growing debt. The higher the unemployment is the lower amount of taxes collected no matter how much you raise taxes (and take away incentives to earning more in the process).

    Let s talk facts:

    About 50% of people do not pay taxes.

    If we could reduce this number to 1990 levels of 20% through a flat tax or through increasing employment levels cutting unemployment to 4-5% there would be no reason for a stimulus (and unemployment benefits would obviously be cut in the process). Of course lowering unemployment it is easier said than done, but is nothing we have not done before. We are a country of innovation and growth. Maybe a little push towards supply side economics is just what the economy needs.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: economy
    Jan 26 12:51 PM | Link | Comment!
  • Warren Buffett's Top 5 Positions

    Warren Buffett is an American business magnate, investor, and philanthropist.  He is widely regarded as one of the most successful investors in the world and I feel mimicking his investments could have a higher rate of return than the market in the long run.  As of June 30, 2011, funds at Warren Buffett's Berkshire Hathaway were valued at $52.36 billion, and at the end of the quarter Berkshire had 27 total positions.  Below are a list of the top 5 holdings:

    Company

    Ticker

    Price

    % of Buffett's Portfolio

    The Coca-Cola Co

         KO

    $67.85

    25.70%

    Wells Fargo & Co

        WFC

    $26.67

    18.90%

    American Express Co

        AXP

    $46.10

    14.97%

    The Procter & Gambel Co

         PG

    $64.89

    9.32%

    Kraft Foods Inc

        KFT

    $35.23

    6.69%


    The Coca-Cola Co (KO) manufactures, distributes, and markets nonalcoholic beverages worldwide. It principally offers sparkling and still beverages.  The current price is $67.85 with a dividend yield of 2.8%, and makes up 25.7% of Buffett's portfolio.  Buffett holds 200 million shares and his position remains unchanged, which shows just how bullish he is with this company.

    Wells Fargo & Co (WFC) through its subsidiaries, provides retail, commercial, and corporate banking services primarily in the United States. The company operates in three segments: Community Banking; Wholesale Banking; and Wealth, Brokerage, and Retirement.  The current price is $26.67 with a dividend yield of 1.8%, and makes up 18.9% of Buffet's portfolio.  Buffett holds 352.33 million shares, and recently his position changed by +9.7 million shares, +2.8%.

    American Express Co (AXP) together with its subsidiaries, provides charge and credit payment card products, and travel-related services worldwide.  The current price is $46.1 with a dividend yield of 1.6%, and makes up 14.97% of Buffett's portfolio.  Buffett holds 151.61 million shares and his position remains unchanged.

    The Procter & Gambel Co (PG) provides consumer packaged goods in the United States and internationally.  The current price is $64.89 with a dividend yield of 3.2%, and makes up 9.32% of Buffett's portfolio.  Buffett currently holds 76.77 million shares and his position remains unchanged.

    Kraft Foods Inc (KFT) together with its subsidiaries, manufactures and markets packaged food products worldwide.  The current price is $32.23 with a dividend yield of 3.3%, and makes up 6.69% of Buffett's portfolio.  Buffett currently holds 99.47 million shares, and recently his position changed by -5.75 million shares, -5.5%.

    One thing in common with all these stocks that I like is they all pay dividends, overall these seem to be safe bets, after all they do make up most of Buffett's portfolio!



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Oct 17 9:32 AM | Link | Comment!
  • 3 5-Star Funds

    1.) Invesco Van Kampen Exchange Fund (MUTF:ACEHX) is currently at 425.3 with a gross expense ratio of 0.54%.  ACEHX is primarily invested in large cap domestic stocks.  This Fund is in the top 25%, with a Morningstar rating of 5 stars for 3yr and 5yr.  The 3yr risk rating is below average, but the return is high. 

     1Yr3Yr5Yr10YrSince Incep
    /Date
    ACEHX Invesco Van Kampen Exchange4.599.333.554.1010.77
    12/16/1976

    2.) American Century Equity Income Fund  (MUTF:AEURX) is currently at 6.70 with a gross expense ratio of 1.46%.  AEURX is mostly invested in domestic stocks, top 3 of its portfolio is Exxon Mobile Corp 4.21%, Bank of America Corp 3.95%, and Annaly Capital Mgmt Inc 3.19%.  The Fund has a Morningstar rating of 5 stars for 3yr, 5yr, and 10yr.  Its risk score is low, and above average returns.

    3.) First Eagle US Value Fund  (MUTF:FEVCX) is currently at 15.83 with a gross expense ratio of 1.99%.  The initial minimum is $2,500 or $1,000 for IRA.  The fund has a 5 star rating for 3yr, 5yr, and 10yr.  Its risk score is low, and above returns rates high.

     1Yr3Yr5Yr10Yr 
    FEVCX First Eagle US Value Fund  2.13.33.018.04 



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Oct 10 11:40 AM | Link | Comment!
Full index of posts »
Latest Followers

StockTalks

  • $BAC up after earning, see my article before earnings announcement: http://seekingalpha.com/a/6uzt
    Jan 19, 2012
  • $AEG up from $3.94 to to $4.9, $BAC up $GS, $C, etc
    Jan 19, 2012
  • my financial portfolio is out of control today, HUGE gains
    Jan 19, 2012
More »
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.