Corporate Spending May Be The Key For The Next Big Stock Market Rally [View article]
Eliminate corporate income taxes, and we'll see a lot of that money repatriate. If the rich pay higher taxes, OH NO, that virtuous consumer engine stops driving 70% of the economy. But in this dud of an economy where GOD FORBID you ever let creative destruction knock 0.1% off GDP in the name of higher productivity and a better life next year ... well, it's time to give CORPORATIONS the power to PUT THEIR MONEY TO WORK.
Tax the rich, end corporate taxation, end tax breaks and loopholes ... give corporations more money to spend and incentive to keep their cash in the US, and we'll see what happens to the unemployment rate.
JPM's Proposed Physical Copper ETF Runs Into Opposition [View article]
Ignorant question here - where would all that storage be for the "physical copper"? Would storage lead to ... (1) absurd cost, availability and practicality issues? (2) monthly contract delivery day wild price swings as seen in the 1-3% range on the oil market?
If this fund led to copper appreciation, though, what a great incentive for Congress to end the penny and melt down all the pre-1982 cents wasting all that vault space.
BP, Exxon Mobil (XOM) and ConocoPhillips (COP) are discussing a $40B project to export natural gas from Alaska to Asia, sources tell the FT. However, the companies first need to reach an agreement with Alaska's government regarding a North Slope oil and gas field; the government claims oil giants have been too slow to develop the field, and has sought to revoke their lease. [View news story]
Wow. Some thoughts:
(1) The reason the oil companies have been slow to drill for natural gas is because the deal Sarah Palin's government signed with Big Oil was too heavily taxed. Big Oil is waiting for a more favorable Republican government there. (Somebody find that old Harper's or Atlantic article on Palin ...)
(2) What good is it to export to Russia? They only want to control supply and corner their own markets, even if it means killing the poor in Poland.
(3) Global warming - storms and sea ice should be more intense in coming years/decades around the former land bridge (presumably where the pipeline would cross??). Maybe the hope is that with the melting of the polar ice cap, sea ice would not be as thick, and the risk of ice scouring the ocean floor and rupturing a pipeline would be diminished??
(4) Instead of fracking the crap out of the environment and exporting to Russia, wouldn't it make more sense to somehow capture the vanishing natural gas from the melting permafrost? There are thousands of lakes where you could literally burn off your eyebrows if you lit a match while boating ... Do we have this technology now??
Oil Prices Already Causing Recession In Energy Portions Of The Economy [View article]
Innocent question - what am I missing here? How can you have an "energy recession" combined with GDP growth outstripping productivity growth? For the equation
PRODUCTIVITY = (LABOR + RESOURCES + ENERGY)/TIME
if energy use decreases YoY while productivity rises slightly and GDP rises faster, can that be explained by stagnant wages combined with inflation? by workers putting in more hours?
Someone give me some hard numbers here that add up, not just "productivity down slightly" and "job growth continuing" headlines.
Capital intensity will be critical once a true recovery gets in the works.
We all know the profit growth of the past year results mostly from cost-cutting and accounting gimmickry. There is huge pent-up demand for inventory repletion and capital investment, as the ISM news on back orders reveal.
So after the cost-cutting, which companies can afford to grow, and which ones dissolve into their own mirages?
One could agree with the author but still say that bailouts are better than bankruptcies for huge banks. Creditors eventually would be repaid in a bankruptcy, but what the bailouts are addressing is the velocity of money.
When a large customer at a small business takes an extra 30 days to pay a bill, that business may need to delay other payments or seek other credit.
When a large bank suddenly doesn't have the cash to fund its liabilities right away, the velocity of money can slow throughout the entire economy. Voila - less credit to small businesses, lower money supply, eventual deflation, sudden rise in unemployment.
The banks would survive a bankruptcy OK ... eventually ... but the rest of us would be living in a box under a bridge. Bailouts keep the money moving without interruption.
Is Buffett Backing Away from Stocks? [View article]
My recollection of the GS bailout was that the US government had to artificially give itself a worse deal in order to reinstill investor confidence in GS and the entire banking sector. After all, it wouldn't be a "bailout" if the taxpayers got a sweetened deal.
Investor reaction, at the time, was backwards. Buffett's deal, which diluted shareholder value, was cheered. The government bailout, which should have put a floor under the share price, caused investors to rethink GS's solvency.
So, the next big drop in home prices depends on the coming wave of forclosures hitting the market. The government is already subsidizing low-end home sales via the first-time buyer tax credit ending in December. I think it's safe to assume some kind of preemptive government response.
The question is, what? The government is already using AIG to shelter toxic mortgage-backed securities. What government-majority-owned bank might ultimately own half the housing inventory? Will price controls be imposed? and homes failing to sell get bought by this stooge bank? Will the tax credit simply be renewed for another year, at $16k instead of $8k?
I suppose if the growth of federal housing stimulus does not exceed the inverse decline of the dollar, then call the housing solution simple quantitative easing.
But I fear that the coming bailout of commercial real estate will limit government's tools without totally trashing the dollar.
The whole industrialized world is gaming just how fast they devalue their currencies - to maximize stimulus but to minimize inflation (especially in commodities). Meanwhile, China and perhaps India hold all the cards. The US can beat the EU and Japan at this game of poker. But ultimately, China wins this hand. Is there an advantage to holding our cards and staying in the game?
Design A Country Rescue Package Here (Comment Competition) [View article]
The California problem is a real *national* problem. You cannot allow a government that large to default without some impact on its currency. Unfortunately for the rest of us, we share their currency but not their debt.
An amendment to the U.S. Constitution might help solve the issue. When a state defaults on a loan payment, the U.S. Treasury steps in to assume the obligation. In turn, the Treasury assesses a special tax on every citizen of that state proportionally according to recent tax returns.
How Congress Can Solve the Recession, Outsourcing and Social Security [View article]
Thanks for the comments - I wish to clarify a few of my points, just in case anyone reacted with their knees and not their heads ...
Abolishing Social Security can be done by *phasing out* benefits. Any FICA taxes you've paid through 2009 can be given back as benefits as though no law changes ever occurred. The real crunch to the system will occur in 2017 (or earlier) when outlays exceed receipts ... so if we change the law before then, presumably the trust fund can still fund benefits the way they were intended.
I would propose that the scope of taxes on capital gains and dividends remain unchanged ... only change the percentages. So some pensions and retirement plans might be affected when funds are withdrawn. But really - we should all have Roth IRA's so that these questions are irrelevant.
Requiring all employers to supply a 401(k) plan is meant to replace the mandatory aspect of Social Security. The cost should be either neutral or positive for employers, depending on the match percentage and on participation levels. To put it bluntly: conservatives believe that most people are smart and can take care of themselves, and liberals believe that enough people are stupid that we need government programs to protect ourselves from the damage stupid people can cause. Eliminating Social Security without another safety net puts a lot of manics and spendthrifts out on the streets.
I agree with the user "Socialism cannot compete!", that focusing on pollutants other than carbon makes more sense in the near-term. Just one example of how EPA could monitor: It would be pretty simple to tally at a coal energy station the amount of coal going in, and the amount of mercury trapped before going out the smokestacks. Have a formula for how much mercury would be expected to be used, and tax the difference. ... My proposal is meant as a way to continue taxing corporations, not for their positive impacts (making money), but for the negative (pollution). Cap-and-trade is better than what we have now, but it's subject to market distortions - just look at how Russia makes out under Kyoto protocol, thanks to their 1990's recession.
Why a Psychological Bottom Will Lag Any Real Recovery [View article]
I was glad to see PrudentMan steer the conversation to Social Security. For the bottom 2/3 of American wage earners, Social Security is their last defense against eating ramen and working at Wal-Mart past age 80. If IRA's and 401(k)'s are truly underwater for folks 20 years or less away from retirement, the system will change. Sure, the money will run out. But politically, until we start electing congressmen willing to lose elections in order to help the country, benefits will not go away.
Nevertheless, this credit crisis is making it easier for folks to consider change. I'm working on another article on tax code changes, and Social Security is Ground Zero for a needed change.
For those responding to my personal basket of oil and gold double long ETFs: I can't imagine holding a commodity other than gold more than a month in this market. It's too volatile. I'm in oil while expecting shorts to cover and supply cuts to finally register with folks. (People discounting peak oil theory reminds me of people discounting global warming.) And yes, gold is a commodity, and I've certainly been burned by the overall monetary deflation. But the short interest is immense, individual demand will be strong for years, and at some level it will function as a currency vis a vis exchange rates.
It's hard to say that gold supply will decrease (due to increased sovereign reserves and greater individual holdings), monetary supply will increase, but gold prices won't rise. In the event of deflation, all of this central bank monopoly money has to go somewhere. In the event of inflation, gold should rise as a traditional hedge against it.
Statistics will be almost meaningless in 2009. The year should be an *inflection point* between hyper-deflation and hyper-inflation. If commodities bounce back to 2005-2006 levels by next December, but groceries are 15% cheaper and electronics 30% cheaper, how do you measure GDP?
Major currencies will continue to swing 10-50% in a few months' time. How does that throw import/export data for a loop?
I'd look at statistics more meaningful to Joe Q. Public. By December 2009: - Unemployment will be between 11-15%; - Depending on when and which commodities are included, deflation will exceed 5%; - Those with jobs will enjoy their growth in purchasing power.
But as global trade dries up (tight credit, wild currency swings, sovereign defaults), any rise in consumption by the top 50% of Americans will kick-start hyperinflation. Global markets are too tight, all the players are placing their bets in the same directions.
Shortages and low prices at times will coincide. Volatility in 2009 will be studied in ECON 101 for centuries to come.
The Economic Meltdown: Dismantling, Yes; Doom, No [View article]
RCA had a nice reply to the original article. I think the author's point, though, is not that Fred Wilson's changes will come only to American companies, but that international companies are better equipped to survive such universal changes.
Consider- the USD will weaken v. other currencies. While US companies like KO with established overseas markets should do ok, other US companies needing to pay for overseas supply chains in USD will suffer.
Consider- the P/E of Vanguard Total Stock Market Index (VTSMX) is 15.46. The P/E of Vanguard Total International Index (VGTSX) is 11.97. In the private sector, there is more capital and less debt outside US borders. (Markets are just starting to price this!)
Consider- the US has the largest energy import/export deficit in the world (almost 700m tons oil equivalent in 2004, source: The Economist).
Consider- the US ranks 15th worldwide in broadband speed, access and price (source: ITIF).
Corporate Spending May Be The Key For The Next Big Stock Market Rally [View article]
Tax the rich, end corporate taxation, end tax breaks and loopholes ... give corporations more money to spend and incentive to keep their cash in the US, and we'll see what happens to the unemployment rate.
JPM's Proposed Physical Copper ETF Runs Into Opposition [View article]
If this fund led to copper appreciation, though, what a great incentive for Congress to end the penny and melt down all the pre-1982 cents wasting all that vault space.
BP, Exxon Mobil (XOM) and ConocoPhillips (COP) are discussing a $40B project to export natural gas from Alaska to Asia, sources tell the FT. However, the companies first need to reach an agreement with Alaska's government regarding a North Slope oil and gas field; the government claims oil giants have been too slow to develop the field, and has sought to revoke their lease. [View news story]
(1) The reason the oil companies have been slow to drill for natural gas is because the deal Sarah Palin's government signed with Big Oil was too heavily taxed. Big Oil is waiting for a more favorable Republican government there. (Somebody find that old Harper's or Atlantic article on Palin ...)
(2) What good is it to export to Russia? They only want to control supply and corner their own markets, even if it means killing the poor in Poland.
(3) Global warming - storms and sea ice should be more intense in coming years/decades around the former land bridge (presumably where the pipeline would cross??). Maybe the hope is that with the melting of the polar ice cap, sea ice would not be as thick, and the risk of ice scouring the ocean floor and rupturing a pipeline would be diminished??
(4) Instead of fracking the crap out of the environment and exporting to Russia, wouldn't it make more sense to somehow capture the vanishing natural gas from the melting permafrost? There are thousands of lakes where you could literally burn off your eyebrows if you lit a match while boating ... Do we have this technology now??
Oil Prices Already Causing Recession In Energy Portions Of The Economy [View article]
PRODUCTIVITY = (LABOR + RESOURCES + ENERGY)/TIME
if energy use decreases YoY while productivity rises slightly and GDP rises faster, can that be explained by stagnant wages combined with inflation? by workers putting in more hours?
Someone give me some hard numbers here that add up, not just "productivity down slightly" and "job growth continuing" headlines.
Could Stocks Be Overvalued? [View article]
We all know the profit growth of the past year results mostly from cost-cutting and accounting gimmickry. There is huge pent-up demand for inventory repletion and capital investment, as the ISM news on back orders reveal.
So after the cost-cutting, which companies can afford to grow, and which ones dissolve into their own mirages?
Thanks to the author for the fresh viewpoint.
A fascinating article by AEI's Peter J. Wallison challenges the very concept of systemic risk - the narrative around which U.S. and global regulatory reform is taking shape, but which "has no basis in fact." [View news story]
When a large customer at a small business takes an extra 30 days to pay a bill, that business may need to delay other payments or seek other credit.
When a large bank suddenly doesn't have the cash to fund its liabilities right away, the velocity of money can slow throughout the entire economy. Voila - less credit to small businesses, lower money supply, eventual deflation, sudden rise in unemployment.
The banks would survive a bankruptcy OK ... eventually ... but the rest of us would be living in a box under a bridge. Bailouts keep the money moving without interruption.
Is Buffett Backing Away from Stocks? [View article]
Investor reaction, at the time, was backwards. Buffett's deal, which diluted shareholder value, was cheered. The government bailout, which should have put a floor under the share price, caused investors to rethink GS's solvency.
'Mr. Mortgage' on how to identify false bottoms in real estate. [View news story]
So, the next big drop in home prices depends on the coming wave of forclosures hitting the market. The government is already subsidizing low-end home sales via the first-time buyer tax credit ending in December. I think it's safe to assume some kind of preemptive government response.
The question is, what? The government is already using AIG to shelter toxic mortgage-backed securities. What government-majority-owned bank might ultimately own half the housing inventory? Will price controls be imposed? and homes failing to sell get bought by this stooge bank? Will the tax credit simply be renewed for another year, at $16k instead of $8k?
I suppose if the growth of federal housing stimulus does not exceed the inverse decline of the dollar, then call the housing solution simple quantitative easing.
But I fear that the coming bailout of commercial real estate will limit government's tools without totally trashing the dollar.
The whole industrialized world is gaming just how fast they devalue their currencies - to maximize stimulus but to minimize inflation (especially in commodities). Meanwhile, China and perhaps India hold all the cards. The US can beat the EU and Japan at this game of poker. But ultimately, China wins this hand. Is there an advantage to holding our cards and staying in the game?
Design A Country Rescue Package Here (Comment Competition) [View article]
An amendment to the U.S. Constitution might help solve the issue. When a state defaults on a loan payment, the U.S. Treasury steps in to assume the obligation. In turn, the Treasury assesses a special tax on every citizen of that state proportionally according to recent tax returns.
How Congress Can Solve the Recession, Outsourcing and Social Security [View article]
Abolishing Social Security can be done by *phasing out* benefits. Any FICA taxes you've paid through 2009 can be given back as benefits as though no law changes ever occurred. The real crunch to the system will occur in 2017 (or earlier) when outlays exceed receipts ... so if we change the law before then, presumably the trust fund can still fund benefits the way they were intended.
I would propose that the scope of taxes on capital gains and dividends remain unchanged ... only change the percentages. So some pensions and retirement plans might be affected when funds are withdrawn. But really - we should all have Roth IRA's so that these questions are irrelevant.
Requiring all employers to supply a 401(k) plan is meant to replace the mandatory aspect of Social Security. The cost should be either neutral or positive for employers, depending on the match percentage and on participation levels. To put it bluntly: conservatives believe that most people are smart and can take care of themselves, and liberals believe that enough people are stupid that we need government programs to protect ourselves from the damage stupid people can cause. Eliminating Social Security without another safety net puts a lot of manics and spendthrifts out on the streets.
I agree with the user "Socialism cannot compete!", that focusing on pollutants other than carbon makes more sense in the near-term. Just one example of how EPA could monitor: It would be pretty simple to tally at a coal energy station the amount of coal going in, and the amount of mercury trapped before going out the smokestacks. Have a formula for how much mercury would be expected to be used, and tax the difference. ... My proposal is meant as a way to continue taxing corporations, not for their positive impacts (making money), but for the negative (pollution). Cap-and-trade is better than what we have now, but it's subject to market distortions - just look at how Russia makes out under Kyoto protocol, thanks to their 1990's recession.
Why a Psychological Bottom Will Lag Any Real Recovery [View article]
Nevertheless, this credit crisis is making it easier for folks to consider change. I'm working on another article on tax code changes, and Social Security is Ground Zero for a needed change.
For those responding to my personal basket of oil and gold double long ETFs: I can't imagine holding a commodity other than gold more than a month in this market. It's too volatile. I'm in oil while expecting shorts to cover and supply cuts to finally register with folks. (People discounting peak oil theory reminds me of people discounting global warming.) And yes, gold is a commodity, and I've certainly been burned by the overall monetary deflation. But the short interest is immense, individual demand will be strong for years, and at some level it will function as a currency vis a vis exchange rates.
It's hard to say that gold supply will decrease (due to increased sovereign reserves and greater individual holdings), monetary supply will increase, but gold prices won't rise. In the event of deflation, all of this central bank monopoly money has to go somewhere. In the event of inflation, gold should rise as a traditional hedge against it.
2009 Economic Forecasts Ignore Demographic Shift [View article]
Major currencies will continue to swing 10-50% in a few months' time. How does that throw import/export data for a loop?
I'd look at statistics more meaningful to Joe Q. Public. By December 2009:
- Unemployment will be between 11-15%;
- Depending on when and which commodities are included, deflation will exceed 5%;
- Those with jobs will enjoy their growth in purchasing power.
But as global trade dries up (tight credit, wild currency swings, sovereign defaults), any rise in consumption by the top 50% of Americans will kick-start hyperinflation. Global markets are too tight, all the players are placing their bets in the same directions.
Shortages and low prices at times will coincide. Volatility in 2009 will be studied in ECON 101 for centuries to come.
AIG Now Fed's Vehicle for Buying Toxic Assets [View article]
The lawsuit is on the docket as 08-CV-9595 in the Southern District of New York circuit.
On Dec 27 03:56 PM countrybanker wrote:
> Great article. Whats status of Bloomberg lawsuit?
The Economic Meltdown: Dismantling, Yes; Doom, No [View article]
Consider- the USD will weaken v. other currencies. While US companies like KO with established overseas markets should do ok, other US companies needing to pay for overseas supply chains in USD will suffer.
Consider- the P/E of Vanguard Total Stock Market Index (VTSMX) is 15.46. The P/E of Vanguard Total International Index (VGTSX) is 11.97. In the private sector, there is more capital and less debt outside US borders. (Markets are just starting to price this!)
Consider- the US has the largest energy import/export deficit in the world (almost 700m tons oil equivalent in 2004, source: The Economist).
Consider- the US ranks 15th worldwide in broadband speed, access and price (source: ITIF).
AIG Now Fed's Vehicle for Buying Toxic Assets [View article]