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Stephen Aniston

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  • Supply-Side Versus Keynesian Economics [View article]
    So there is no balance sheet crisis today in 2013 and 2014. Stocks are at all time highs and so are bonds. Housing has recovered nicely as well. So the balance sheets are not in a crisis in 2013, why do we still pursue balance sheet fixes?

    I thought during a recovery, the goal of government is to run a surplus. Bill Clinton did it to no noticeable effect on the economy. I am not sure why we are talking ourselves into a dependency on government spending for growth? I agree roads can be fixed and all that stuff, but government spending will add 1% to annual GDP growth. How are going to get the other 1% to get to 3%?

    Are you saying that we need government contribution to GDP to be raised to 30%? Europe is 50%. Are you saying we need to get closer to the European model?
    Aug 20 11:52 AM | Likes Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    I am not sure why you say this crisis was so severe. The S&L crisis of the 80s took down more financial institutions than this one and affected 3% of GDP vs 1% of GDP in 2008. In addition the recession in 1980s was 16 months vs 18 months in 2008. The GDP effect of 2008 was 2% worse. The 2008 crisis is similar to 1980. I don't hear anybody say how bad 1980s crisis was. And it was bad, but the recovery was so strong people forgot about it. Why was the recovery strong? Because a different set of policy prescriptions was implemented.

    So public employment has fallen, while public expenditure is up. I think that has to do with paying ever increasing pensions to retired government workers. So tell me again, why do I have to keep paying increased public pension costs as a private sector worker or owner and I don't have a guaranteed pension myself? I am forced to be in 401k and exposed to the volatility of the market (it's not like the market hasn't gone down twice by 50% in the past 15 years) or getting paltry returns in bonds which trade at 30-year highs. Unfortunately, I wasn't old enough to start investing in the 70s or 80s or 90s to reap the benefits of the secular rise of stocks and bonds.

    So we have a situation where government as part of GDP is growing, yet we get less contribution to GDP from government spending. Where is the multiplier effect?
    Aug 20 10:08 AM | 1 Like Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    @coffee - you do realize that government spending as share of GDP has increased markedly in recent years. From 1990 to 2000, it decreased from 23% down to 19%. Since 2000 to 2007, it barely increased from 19% to 20%. From 2007 on, it increased from 20% to 25%.

    So over the past 6 years, we have had Keynesian stimulus on steriods. Over 25% incremental increase in government spending. 25%! On a national scale as large as the US, this is a huge stimulus. With a lot of it packed around 2010 and 2011. So it has been done. Where is the 3%+ annual growth? You can't tell me that a cold winter or the stagnant economy of Europe which has always been stagnant or the fall of one bank - Lehman - is the cause for 1% growth 6 years after that bank went into bankruptcy. GM went bankrupt too, but nobody is even mentioning that anymore it was so long ago. They cleared their slate, changed management and moved on. Why do we keep pointing a finger to events that happened 6 years ago. Banks now make more money than they ever did. So liquidity crisis we have no longer. Why don't we have 3% growth this year? If you are gonna blame the weather, prepare for another cold winter. I didn't know we depend on global warming for our economic growth.

    Keynesian stimulus has always been meant to be a temporary solution to temporary condition. Not a permanent solution to a temporary condition.

    Stimulis is an EMT shock to wake up a dying patient. If you continue to shock the now revived patient with EMT, all you get is dazed patient who can't recover his senses from the constant shocking. This is where we are now because we continue to treat the economy as if it is on the verge of collapse. The economy has up and down cycles, we can't treat every down cycle as if the world will end.
    Aug 20 09:48 AM | Likes Like |Link to Comment
  • The Curious Mathematics Of Moving Averages [View article]
    Well, the Italians never reset the lira so they can remind people of inflation. Not that it ever changed anybody's mind though :)
    Aug 20 09:10 AM | Likes Like |Link to Comment
  • The Curious Mathematics Of Moving Averages [View article]
    So if the price is as so: 1 2 2 2 2 2 2 2 2 1, then moving average is 1? Somehow I don't think so. I think it is 1.8. The specific example you picked made it look like you can do just a division by 2. If only stock prices would go up $1 a day to infinity :)
    Aug 19 03:19 PM | 6 Likes Like |Link to Comment
  • Geopolitical Risks And Now The 'Presidential Cycle Curse' - Will They Lead To More Short Term Market Weakness ? [View article]
    Well, this year it will coincide with the end of QE infinity. Completely unrelated, of course. But then again, isn't it odd that QE infinity will end precisely one month ahead of a mid-term election? It's almost as if they planned it.. LOL
    Aug 19 02:20 PM | Likes Like |Link to Comment
  • Don't Buy This Dip: The Fed Is Not Your Friend [View article]
    Feel free to misinterpret me as you wish Macro.
    Aug 19 02:10 PM | Likes Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    Profits are at record because they are not taxed. Most multinationals have 80-90% of their profits stashed abroad. Actually, the profits are somewhere offshore but ultimately they are in treasury accounts. This explains why treasury yields are record lows as well and can't take off. Demand from the foreign subsidiaries of SP500 corporations is a net demand that didn't exist prior to 2009 when the profit-offshoring trend began.

    The US in 1980s was not an emerging economy with poor infrastructure, yet there was no secular stagnation. The economy in the 80s and 90s needed people with new, not commonly found, skills as well. Yet, employees without skills were hired and trained. When I left college, I didn't have any skills but a series of companies hired me and trained me. Now, those same companies probably would not hire me because I don't have the skills. Why hiring happened in the 90s but not now is the real question that needs to be answered. Why were companies hiring workers down on the productivity scale and not now? Why were companies hiring in the 90s with a lot less cash on hand than now?

    I agree with Kudlow that "secular stagnation" is an excuse for failed policies.
    Aug 19 10:44 AM | 3 Likes Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    Yep, people in the past couldn't even imagine the state of affairs today. Keynes was a heretic for suggesting that government has a role in smoothing the business cycle. And now of course, we now want to obliterate the business cycle which takes us straight into arms of the centrally-planned economy concept.
    Aug 19 09:27 AM | 4 Likes Like |Link to Comment
  • Is The U.S. Stock Market Overvalued? [View article]
    LOL.. It's awesome when people compare the current market to 1929 and call valuations still "reasonable". You know, 1929 is how things should be. The party should never end....
    Aug 19 07:52 AM | 1 Like Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    One of the problems with this article is dynamic vs static analysis. Your analysis seems to be primarily static - that there is fixed demand and that government can help up the demand in a crisis. While that is true, the government can only provide TEMPORARY lift in the economy with various subsidy programs and stimulus packages. 5 years after the recession, people are still calling for a stimulus package? Really?

    Kudlow and company point to very significant issue that leads to tight demand - the US is not the preferred place to do business. While in the past, a company that made cars made all the components of the cars and the cars themselves in the United States, that is no longer the case. A big part of the production happens abroad and only the sale happens in the United States. Of course, this is possible because the US has the lowest credit standards in the entire world - you should go to the UK and try to get a house loan. And the UK is the best of the rest. If you can make the US the preferred place to do business, full-time jobs will be added to the economy leading to an expansion in aggregate demand.

    The issue is full-time job employment growth. The monthly statistics mask a huge problem - full-time jobs are being replaced with part-time jobs. We are still 4 million full-time jobs less since the 2007 peak. The average wage of a new job is $45K vs $65K. There is no aggregate pickup in demand because new employees contribute less to aggregate demand.

    The solution to the demand problem is making employers locate their business in the US and create full-time jobs here. Kudlow and company are right that the US employers are on strike against this administration and it's policies. The US is no longer the only country to do business in unlike the 60s,70s and 80s. Nobody would put a plant in China in the 70s, but they would now. And China has a lower tax rate than the US. Communist China and liberal France have both lower corporate tax rates than the US. Lowering the corporate tax rate will help the US economy as will a normalization of interest rate policy.

    It really is as simple as that. Remember the Gordian knot. One day it will be tried and it will work and the detractors will point to all kinds of other issues that helped. It worked in the 80s, but it also worked in the 60s when the interest rates weren't 20%.
    Aug 19 05:49 AM | 4 Likes Like |Link to Comment
  • Don't Buy This Dip: The Fed Is Not Your Friend [View article]
    The Fed Model never officially endorsed by the Fed... LOL

    According to that model, P/E has to be near 50 for stocks and bonds to be fairly valued?

    At least I gave you a link to a FED site.

    In any case, that "FED model" doesn't take into account:
    1. Volatility of stocks vs volatility of bonds (risk premium)
    2. Earnings yield is not dividend yield which is what investor's actually get paid.
    3. The bond side of the corporate capital structure apparently doesn't exist.
    Aug 18 03:41 PM | Likes Like |Link to Comment
  • Don't Buy This Dip: The Fed Is Not Your Friend [View article]
    LOL Apparently Bill Clinton and Obama never were presidents. Why didn't they reverse Reagan?
    Aug 18 03:33 PM | Likes Like |Link to Comment
  • Don't Buy This Dip: The Fed Is Not Your Friend [View article]
    See this:
    Aug 18 03:19 PM | Likes Like |Link to Comment
  • A Teflon S&P 500 [View article]
    He also lives on an island off the coast of Connecticut. His professor's salary sure isn't enough for that.

    Interesting article on Mr. Shiller by the New York Times from 2005:

    Some quotes:
    "In speeches, in television and radio interviews and in a second edition of his prophetic 2000 book, "Irrational Exuberance," he is arguing that the housing craze is another bubble destined to end badly, just as every other real-estate boom on record has.

    These, in short, are his second 15 minutes of gloom. He predicts that prices could fall 40 percent in inflation-adjusted terms over the next generation and that the end of the bubble will probably cause a recession at some point."

    "Shiller is predicting the mountain goes into the sea," Robert I. Toll, the chief executive of Toll Brothers, a home builder, said in a recent interview, without having been asked about the economist. "He's selling himself."

    "Even so, Mr. Shiller has little company for his radical notion that house prices could fall by 40 percent. Many economists say that interest rates are low enough and demand for housing in big urban areas is high enough to keep from prices from falling very far. "

    "If he is right, the Herengracht also looks due for one of its occasional corrections. Prices there have doubled, even accounting for inflation, over the last decade or so. It almost seems like they might never fall again."

    Well, what can I say...
    Aug 18 03:16 PM | Likes Like |Link to Comment