Lok Sang Ho

Nearly 4 out of 10 Americans Pay No Income Tax

I suspect this reflects more an increasingly skewed income distribution than a pro-poor tax cut policy. More low income people who should not pay the income tax because of their low ability to pay. In HK the percentage of nonpayers are even much higher.

Obama's Fiscal Stimulus Has Saved Jobs

I agree 100% to what Frankel wrote here, and am amazed how some commentators continue to ignore the many signs of improvement that have occurred. With further improvement in industrial production and exports, employment growth should come back in a matter of months.

U.S. Housing Market Has Likely Bottomed

Reservation demand refers to owners not willing to part with their homes unless the price is at their expected levels. If they regain confidence, then they may not be willing to sell their homes at the going price, and they are prepared to hold on to them. Some of the commentators refer to banks keeping their foreclosed homes from the market. That indeed is reservation demand, to the extent that they are optimistic about the housing market and do not want to sell at the going prices.

Manufacturing, Exported Goods Sharply Up: So What's the Problem?

Actually, global manufacturing jobs have been declining secularly for a long time. It is already amazing that US had managed to keep so many manufacturing jobs. HK had almost 1 million manufacturing workers in mid 1980s, but has kept less than 1/10 of that number by now. Even in mainland China, reputed to be the factory of the world, manufacturing jobs had peaked and appear to be on a downward trend. Thanks to increasing productivity, manufactured goods are costing a tiny fraction of their previous prices.

7 Economic Fallacies

By excess I was only referring to bringing about excessive demand. I have always argued that excessive government spending has to be judged by considering the marginal benefit of that spending versus its cost. To the extent that the economy is very much underemployed, the real cost of government spending may be relatively small(cost in terms of alternative goods and services forgone). More government spending to replenish worn-out highways and bridges and other infrastructure to me makes sense.


On Jul 16 09:26 PM mlonz wrote:

> You said, "government spending on goods and services is not really
> excessive."
>
> Going to have to call you on that one.

7 Economic Fallacies

1979 was the date of the second major oil crisis. At the time, US GDP was even more dependent on oil than today because today we have almost 90% in services. The supply shock caused inflation was wrongly dealt with by Paul Volcker using a severe monetary policy(20% plus interest rates) that plunged the American economy into the deepest recession since WWII.


On Jul 16 10:51 AM Brandon211 wrote:

> My favorite is, "So there will not be much inflation in the foreseeable
> future because there will not be excessive spending." From 1979 -
> 1981 the U.S. saw inflation rates of 11%, 14%, and 10% per annum.
> This was in the midst of a major recession, when spending by businesses
> and consumers was actually DECREASING. The problem is that the author
> seems to think that spending actual paper currency is the only thing
> that leads to inflation, while the truth is, the easy availability
> of CREDIT is a much more important part of the equation.We don't
> produce assets in this country, we monetize assets. The government
> doesn't live within its means, it monetizes a massive debt. No, you
> cannot spend a treasury note, so does that mean it will never contribute
> to inflation?? Look, inflation isn't just a danger, it's the only
> possible outcome of this mess, whether or not we have "excessive
> spending" now or not.

7 Economic Fallacies

You do not disagree with me. I cited these as fallacies and therefore they are not true, even though I keep reading people making the points.


On Jul 16 05:59 AM Ryu Mei Co wrote:

> I agreed with some of your points, but others I disagreed.
>
> For instance, "4. Increase in the savings rate means no recovery"
> is not entirely true. The market will adapt to a change in consumer
> spending behavior and thus may eventually lead to a market recovery
> no matter how long it takes.
>
> Another one "5. A weakened US dollar is bad for America." is also
> not true. You said, "A weaker dollar will help American exports and
> create jobs for Americans, though Americans need to pay more for
> the goods they import. Americans need to work harder for less (consumption)",
> In this case Americans need to work hard and consume less import
> goods to reduce debts! Ironically this mean more Protectionism. Anybody
> noticing Toyota falling to 3rd place in auto sales. Americans will
> be buying more Ford and GM cars in the future, I bet my life on it.
> LOL......

U.S. Economy Mending Faster than Expected

Case Shiller is based on repeated sales. This means there is no bias due to more expensive homes being traded.


On Jul 06 05:12 AM Steven Hansen wrote:

> very few think the economy will keep sinking forever, and most like
> myself see a true bottom before the end of the year. the exact timing
> is getting harder to estimate because the economy has been weakened
> considerably. upward pressure is weak even though our decline was
> rapid (we normally have strong drivers for rebound in this event).
>
>
> you cannot claim the housing market is coming back quicker than expected
> based on case-shiller when the volumes are so low. there is no indication
> yet that housing volumes are rising. also, the mix of home sales
> has changed enough that higher value homes were selling in higher
> proportion.
>
> i wish you would hyperlink where you take your data from as may 2009
> usa industrial production is down 1% according to the chicago fed.
> i suspect you are using the change in some survey's values.

Most Likely Scenario Is Still Recovery

My forecast for the US economy is not "rosy": I see recovery soon but not strong recovery; I also see unemployment possibly peaking around 10%; I see more need for assistance to the states; I see piles of debt as you do. However, I see a weak dollar and a higher US savings rate to be part of the solution. Americans need to tighten their belts and pay for their overspending in the past. Americans need to work harder for LESS(less consumption). More Americans have to work. But we have seen higher debt to GDP ratios before. When the economy recovers, the debt to GDP ratio will fall, and the current debt levels does not spell the end of the world.


On Jul 09 10:51 AM Larry House wrote:

> Why does someone who sees problems in the economy have to be a pessimist?
> I am an optimistic person, but when I see what I think are problems,
> they don't just go away because I am an optimistic person. I hope
> you are right in your rosy outlook. I don't short stocks; I don;t
> buy distressed debt; I want things to pick up. I have four grandkids
> that I hope live better than I do. However, I guess there had to
> be a "however," I see a consumer on his heals who is spending less
> and saving more; I see credit hard to get; I see 10% unemployment;
> I see massive government debt; I see a weakening dollar, and I think
> those things will prevent a robust economic rebound for many months
> to come. So that affects my investing outlook. I am underweight
> stocks (right now) and overweight bonds. I am not sitting in all
> cash or hiding in a cave or only investing in gold. I don't think
> my view makes me a pessimist, but I don't think things are just fine
> or as good as your cherry picking data would suggest. Can't we all
> just get along!!

U.S. Economy Mending Faster than Expected

I am talking about factory orders, not industrial production.


On Jul 06 05:12 AM Steven Hansen wrote:

> very few think the economy will keep sinking forever, and most like
> myself see a true bottom before the end of the year. the exact timing
> is getting harder to estimate because the economy has been weakened
> considerably. upward pressure is weak even though our decline was
> rapid (we normally have strong drivers for rebound in this event).
>
>
> you cannot claim the housing market is coming back quicker than expected
> based on case-shiller when the volumes are so low. there is no indication
> yet that housing volumes are rising. also, the mix of home sales
> has changed enough that higher value homes were selling in higher
> proportion.
>
> i wish you would hyperlink where you take your data from as may 2009
> usa industrial production is down 1% according to the chicago fed.
> i suspect you are using the change in some survey's values.

Fear vs. Cheer in the Markets

You need to understand the dynamics of social psychology to know what drives markets during times of irrational exuberance or irrational fear.




On Jun 09 12:05 PM Larry House wrote:

> It is NOT "cheer vs. fear." There is truth underlying the opinions.
> Someone is going to be right, and someone is going to be wrong. Opinions
> do not change fundamentals. We are in crazy period where data can
> support a hopeful view and a less hopeful view. It is a disservice
> to pit view against view in this mess. Opinions are not the problem.
> "Fear-mongers"--what a terrible label for anyone one who dares talk
> about some of the dangers that we face.

PPIP Must Be Part of the Recovery Plan

It is important to realize that we were very close to the point that would trigger a depression similar to that in the 1930s. You may not like it, but to the extent that the global economy has been saved from a repeat of the Great Depression means that many taxpayers actually end up better off than otherwise.

My point is that without a circuit breaker, the interest rate resets for Atl-A and Option ARM could trigger a second serious tsunami that could swallow many more industries and jobs, and the recovery could take much longer after all the damage is done.

Is a Manufacturing Rebound in the Works?

My judgement: in the absence of unforeseen blunders from the government or natural disaster of sorts, better than 50% chance for a Q to Q GDP rebound in the third quarter; better than 90% chance for a Q to Q GDP rebound in the last quarter.

A 'Cheer-Cheer Spiral' Appears to Be Taking Hold

A reply to basehits. Wbat you mentioned are longer term problems that need to be dealt with over the longer term. What I am addressing is short term. Many of the longer term problems were there 10 years ago, like dependence on foreign oil. But actually some recent trends, particularly the narrowing current account deficit, are encouraging and begin to address the global imbalance problem. Regarding employment, it is typical that workers are laid off before a full recovery and labor productivity is known to be cyclical. There is no mystery in there being excess capacity in most factories even though orders are picking up from their very low levels.

A 'Cheer-Cheer Spiral' Appears to Be Taking Hold

I did not mention rising factory orders and declining current account deficits. These are positive signs and the decline in GDP in Q2 is probably much less than most people expect.