DougM

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86 Comments

    • Mon Sep 8th 11:03 AM | Rating: 0 0
      Commented on:
      Frannie CDS Triggered
      I've been trying to figure out what the problem is here for sellers of protection, since the bonds are now backed by the US Gov. Let me make a stab at it: they're now going to have to pony up cash and go long the bonds at whatever the nominal interest rate is. If you're a hedge fund that used a leverage position to sell "insurance" on these bonds, you're probably not looking forward to raising enough cash to pay off your counterparty and then ending up long these bonds at today's historically low interest rates. Just a guess.
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    • Wed Sep 3rd 14:27 PM | Rating: 0 0
      Commented on:
      The Nuttiness of This Market
      More and more of the market is likely being treated like a gambling casino by hedge funds. Eventually their well-heeled investors will wise up to the fact that the only ones really making money are the managers, who have every incentive to take big gambles to juice the returns, and no skin in the game if the bets go wrong. The fact that they can do all this and still pay the "long term capital gains" tax rate is an outrage.
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    • Wed Sep 3rd 10:03 AM | Rating: 0 0
      Commented on:
      Three Reasons Solar Sell-off May Be in Early Innings
      I don't think a McCain presidency means we won't do as much solar. Fact is the industry's running flat-out, and that's likely to continue no matter who wins. As a fan of the drill-drill-drill idea, what I would say about my side of that issue is that we need to be realistic about how long it will take before we have enough solar capacity (and electric cars) to make a dent in our oil demand, so we need more production to get us through the next 10-20 years. That is in line with what both McCain and Palin are saying. Meantime, the real competition for solar isn't oil, it's nat gas. Power companies unable to use the cheapest source (coal) have been turning to gas in droves over the past 10 years. Nat gas is cheap and getting cheaper. All that said, valuations in the solar sector are stratospheric.
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    • Sun Aug 31st 20:43 PM | Rating: 0 0
      Commented on:
      Obama's Green Promise
      You propose an import tax on oil to make it more attractive for companies to produce more oil at home. News flash: it's *already* plenty attractive for them. They go literally to the ends of the earth to find oil and yet still can't replace their reserves. They're being tossed out of the most promising areas abroad by the likes of Chavez and Putin. What's stopping them here then? Obama, Pelosi, and Reid have slammed the door in their faces on our most promising resources. An import tax may or may not be a good idea, but by itself it won't be enough to raise production at home. The most likely effect is that it will raise prices on consumers (good, because it will get them out of wasteful SUVs) and create a profit windfall for the companies as their remaining domestic reserves rise in value to the new market price inside the country.
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    • Sun Aug 31st 20:09 PM | Rating: 0 0
      Commented on:
      The Election's Impact on the Market
      Oops, forgot something. Re. Alienation's comment, I'm not sure which labour laws aren't being enforced. Illegal immigration? Both parties are failing us badly there - the Dems by creating "sanctuary cities", the GOP by paying lip service to enforcement while turning a blind eye to what's really going on. Don't hold your breath for a return to the good ol' days of the 50s and 60s, when unskilled labour could command a good wage in the US. That was a unique situation resulting from the fact that the US was the only major manufacturing power left standing after WW2. The world's changed, and we can't go back to those days. Even Obama's top economist recognises this - his proposed solution is to raise the number of native-born Americans that graduate from college, though the article I read (in Technology Review) didn't say how that was to be accomplished.
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    • Sun Aug 31st 20:02 PM | Rating: 0 0
      Commented on:
      The Election's Impact on the Market
      Roger, you're one of the best writers on this site. Thanks for this article. Realist has already said everything I was going to, so I'll just ditto his or her remarks.
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    • Sun Aug 31st 17:45 PM | Rating: 0 0
      Commented on:
      Questioning Obamanomics
      Many businesses and unions are already paying hefty sums to provide health benefits, money that mostly buys health care, but in part pays insurance companies. There's some money to be wrung from the existing system there with a national health insurance plan.

      You don't mention that Mr. Obama also wants to roll individual tax rates back to Clinton-era levels, which is tolerable and would provide funds for many of his proposals. It would come at the expense of what you'd call "residential"... savings, a troubling result given our already-low national savings rate. Whether this is a net economic win depends on the extent to which the money flows into "investment" versus yet more "consumption"... - if the money goes back out in the form of stimulus checks and transfer programs, it will ultimately reduce savings and boost consumption - we might as well just send the money directly to the Chinese and OPEC countries. If, on the other hand, it goes into beefing up our aging infrastructure, it could be a net positive. Given the line about a big pay raise for teachers, I'm not optimistic - we're already spending double per child of most other industrial nations, and getting a poorer result, from the existing public education monopoly.

      The proposal that really scares me is the proposed enormous increase in social security taxes, a payroll tax that will fall not on billionaires like Buffett, nor on Hollywood stars, but on the so-called "working rich", e.g. educated professionals like doctors, small business owners, etc. The tax is punitive enough that many will decide simply not to work once they've reached the government-defined maximum allowable salary. The effect of that can't be good, and I'm hoping that if Obama is the next president, he backs off this idea, or that his majority in the senate is not sufficient to stop a filibuster. A more reasonable measure might be to bump the medicare tax by half a percent. Everyone already pays that one anyway, and a glance at the unfunded future liabilities shows clearly that medicare, not social security, is the biggest looming budget problem.
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    • Thu Aug 28th 16:52 PM | Rating: 0 0
      Commented on:
      4 Money Problems That Obama Can't Fix
      Good article. Add a 5th problem that the next president can't solve: the falling value of unskilled labor in a globally competitive marketplace.
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    • Tue Aug 26th 17:22 PM | Rating: 0 0
      Commented on:
      Looming Financial Catastrophe: A Real Inconvenient Truth
      Great article.

      The chart projects that due to entitlement spending and increasing interest on the national debt, government spending reaches 60% of GDP. State government's another 10%, so that's 70% of GDP. It should be clear from those numbers that we can't tax our way out of the problem - future generations aren't going to work for nothing. Even in socialist Sweden, the government's only 50% of GDP.

      Re. the energy crisis, I see nothing but stalemate created in large measure by powerful environmental lobbies who, apparently lacking any real engineering education, have ruled out everything but conservation and renewables. Yet conservation won't take us to zero consumption, and renewables have a huge unsolved problem - intermittency. We slammed the door on nuclear power and put the most promising domestic oil resources off-limits. The result is that decades later we're still using coal for 50% of our power, and in future years we seem bent on using more and more natural gas for our power (the only non-renewable source that can get past the environmentalists) until it, too, goes into inevitable decline. Meanwhile we get a piddling amount of power from renewables other than hydro. Germany's well down the road to a conservation-and-renew... future, and are finally starting to recognize that it still leaves a large energy deficit. In order to keep their own anti-nuclear greens happy, they're now considering - wait for it - building more coal plants.

      Re. the education crisis, I can only point to public employee unions that steadfastly oppose any change other than more money for the system. As you've pointed out, we're already outspending other countries by a wide margin, and with poorer results. Yet taxpayers are asked to come up with more and more money to pour into the system.

      GW Bush certainly has done nothing to help the situation, and has arguably made things worse with a costly war and yet another budget-busting entitlement. But let's face it, the Democrats have had a big hand in creating our present situation, and the policies proposed by that party's leaders are straight from the decades-old playbook: higher taxes to keep the spending machine going a little longer, continuation of the public monopoly on education, and an energy policy crafted by the Sierra Club, Greenpeace, and the NRDC that will continue down the road of energy starvation and trade deficits with energy exporters. Can't say I'm looking forward to it.
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    • Mon Aug 25th 18:50 PM | Rating: 0 0
      Commented on:
      Obama Is Bad for the Economy - Barron's
      Robert F. here are a few charts that might show some light on the economic miracle of the 1990s:

      Crude oil prices showing the effect of the glut, followed in this century by the current supply/demand imbalances helped in no small measure by putting domestic resources off-limits and not doing squat about the boom in gas-guzzlers:

      tinyurl.com/5d97eu

      The false prosperity of the stock-market boom as P/Es went stratrospheric (and I'm being kind by showing the S&P and not the Nasdaq):

      tinyurl.com/5qg2fe

      The "peace dividend" that followed our winning the cold war, another benefit Clinton got from prior administrations going back to Truman, and one that literally went "bang" in 2001:

      tinyurl.com/6qdvoa
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    • Mon Aug 25th 17:52 PM | Rating: 0 0
      Commented on:
      Obama Is Bad for the Economy - Barron's
      Where are yours, Robert F? Can you show how the tax increases led directly to the performance metrics you cite?
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    • Mon Aug 25th 12:49 PM | Rating: 0 0
      Commented on:
      The Obama Plan: We Can't Entitle Our Way Out of Paying Taxes
      My current state (California) isn't spending anything on waging war, and yet we can't balance our budget despite an income tax rate (9.3% for most folks, 10% at the top end) that's double what my home state (Virgina) takes in. Runaway spending on bloated bureaucracy and redistributionist policies are at the root of the budget problems at the local level, and, if you look out more than a few years, at the federal level as well.

      Tim Miles, I apparently don't make enough to take advantage of all those tax shelters you think high earners are getting. I think that's my point. Those of us that worked hard in school, got good jobs, saved our money, and pay our taxes, are the ones who'll get screwed by the tax hikes, especially Mr. Obama's proposed popping of the social security tax limit. In contrast, Hollywood stars and ballplayers earning millions each year will get their income structured so that it doesn't flow to them as "wages" and won't pay those confiscatory taxes. You haven't answered my basic issue, which is that even at current tax rates those of us with money to save have a negative incentive to do so. Limits on IRA contributions exclude all but a paltry amount of money from being saved tax-deferred each year - the rest of any savings we might have are taxed at rates that guarantee that we'll have less purchasing power in later years. How is that fair? How is that wise economic policy? Those tax rates incent people to spend everything now (e.g. the McMansions you deride) before their hard-earned savings are stolen by the inflation tax. This drives all sorts of economic malinvestment. Want another whopper? The Democrats proposal to punish oil companies with an extra tax, and distribute the money to consumers so they can presumably spend it buying gas. Net effect: take money away from savers (who own those oil companies in their 401ks) and give it to people to send to OPEC countries to buy expensive oil. Another way to punish those of us who are trying to live within our means and didn't buy a 10mpg vehicle when it was fashionable, and reward those who foolishly did so.
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    • Sun Aug 24th 16:00 PM | Rating: 0 0
      Commented on:
      Obama Is Bad for the Economy - Barron's
      LOL - Clinton's tax increase produced the longest sustained expansion in US history? Gimmee a break. That expansion occurred in spite of his tax increases. Lessee, as I recall, Soviet Union in collapse, oil prices falling due to a glut, and an unsustainable bubble in tech stocks that popped right before he left office. There's the real source of that expansion, not the higher taxes. How many of those tailwinds do you think we'll be able to resurrect by raising taxes this time?
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    • Sun Aug 24th 15:26 PM | Rating: 0 0
      Commented on:
      The Obama Plan: We Can't Entitle Our Way Out of Paying Taxes
      I don't know about you, but the current combination of low interest rates, high inflation, and a marginal tax rate of 45% (including my state's income tax), I have a pretty strong disincentive to save - every dollar of consumption that I defer today buys me less consumption a year from now, after taxes have eaten up most of my meager interest income. The fact that I'm well-off doesn't change the math - the fact is, it's people like me who have the money to save, not those living paycheck to paycheck, or blowing their disposable income on big SUVs and TVs. At least spare those of us paying all the bills a break and stop insulting us by saying we're not paying our "fair share".
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    • Sun Aug 24th 15:18 PM | Rating: 0 0
      Commented on:
      Obama Is Bad for the Economy - Barron's
      I think the Democrats had a big hand (in decades past) in creating the entitlement programs that are now the biggest ticking bombs in the budget - recent deficits pale in comparision to what's coming.

      Re. taxes, on the whole they have the effect of punishing the successful, the productive, and the savers, and rewarding everyone else - this is a road to increasing prosperity? Of course, those on the left always hold up some group that they think doesn't deserve what they're earning - is that what we've come to as a country, using the tax system to vent our envy? If we're going to start voting to take money from people because they don't deserve it, please tell me where I can vote to reduce the incomes of ballplayers, Hollywood stars, and trial lawyers, all big constituencies of the Democrats.
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