DougM

'December Effect' Bodes Well for Hedge Funds, Equities

Taxes are scheduled to go back up in 2011. So, no worried until this time next year. Near the end of 2010 people will be looking at 5%+ increase in marginal tax rates and a jump from 15% to 25% in the LT cap gains rates - significant incentives to cash in before the calendar rolls.

Social Security: Bankrupt System Will Impact Markets Sooner than Expected

Jason, you are starting to get the picture, whereas Sether is clueless. Once taxes get too high, younger workers will stop paying one way or another, unless (Sether) your plan is to reintroduce slavery.

Those with portable skills and the will to do so will move out of the country. Others such as professional people will work fewer hours, perhaps working only 6 months of the year or less, rather than work an additional 12 months for minimal net take-home pay. Those with the means to do so and of the right age will retire early, lowering their income (and not producing anything anymore) and consuming their savings while benefiting from programs like free healthcare. Small businesses will be hurt the worst, they'll presumably have to pass on the costs in higher prices for goods and services, or by paying lower wages to fewer workers, or both. Those willing to risk punishment may begin to form an underground economy. Finally and worst of all, future generations will see that there is little to be gained economically by (say) spending years in school training to be a physician, versus taking their high-school education and going immediately into a government job such as firefighting where the pay's almost as good and much of the compensation flows in the form of generous early-retirement benefits.

Obama Wants a 'Better Plan'? Here's One: Bite the Bullet

So, I don't live in a McMansion and drive a fancy car purchased on credit, and have tried to save money for my old age so I won't be dependent on the government, and I've "stolen" my savings from my neighors who've leveraged themselves to the hilt to live a lifestyle their economic productivity simply can't support, ever? What's the country come to?

The Shedlock-Schiff Affair: A Chronicle

The fact is, Shedlock is one of the few who not only correctly called the implosion, but called for a deflationary implosion. Shedlock stuck to his guns even when everyone was wringing their hands a year ago about hyperinflation. The fact that a lot of perma-bears also called the implosion isn't very helpful since, like stopped clocks, they were bound to be right (about the direction of the market) eventually. Schiff's inflationary scenario may ultimately be proved right, but the time frame matters, and the fact is, he's been wrong about inflation and wrong about decoupling. If and when inflation becomes a credible threat, Shedlock may call that turn too, and the information would be of much greater value to his readers than a call that goes horribly wrong for years before eventually coming true.

Let's Just Say It: Print More Money

Dirk, on the other side of those loans are millions of savers who did not recklessly overleverage themselves. Your plan to wipe away the debts of the imprudent through inflation will come at their expense. What's your plan then, take them all on as wards of the state, printing yet more money for that? And what do you think will happen in the long run if you prop up the over-consumers at the expense of the savers? Google Warren Buffett's 2003 article in Fortune where he talks about Squanderville and Thriftville.

First Call of a Double-Dip Recession: Setting Up a Market Bottom?

Fitz919, as another poster has indicated, I believe you're referring to the Credit Suisse ARM reset chart, circa early 2007. A tidal wave of toxic "pick-a-payment" option-ARMs and "liar's loan" Alt-A loans are due to reset in 2009 and 2010. That housing bubble is a gift that just keeps on giving.

That said, the chart was prepared almost 2 years ago. We don't know how many of those mortgages have been refied or have already defaulted. We also don't know (but can suspect) that the government's efforts to push fixed mortgage rates to artificially low levels will be successful in the short term and that many of these loans will somehow be rolled (despite negative equity) into fixed rate loans before the lid pops off the inflationary bubble the government's creating.

Does Buffett Still Stand by His 1999 Sun Valley Prediction?

There's nothing contradictory here. In past secular bears (1930s, 1970s) they lasted about 17 years with a lot of zigs and zags in between, but in the end with no returns for someone who bought in at the beginning. However, the time to buy wasn't right at the end of the bear, but somewhere in the middle during one of the big legs down. You didn't have to get the best downdraft to do well, you just had to get a good enough drop. Or better yet, stagger your buys across them to hedge your bets.

Where Will Baby Boomers' Savings Go?

Stephen: I'm a boomer at the tail end of the curve. What you say is true, but guess what, it's been true for us too! We've been paying the max into the SS system at the highest rates for the past 20 years, and continue to do so. This has funded a much higher level of benefits for the prior generation vis-a-vis their relatively lower contributes in the 40s, 50s, and 60s. Somehow we were supposed to do this and save for our own retirements. There's nothing new here, the system was and is flawed.

Jackoo: you are exactly right, the tax system treats the phantom income from inflation as if it's regular income and takes so much of the return that you end up with less purchasing power later on. Saving money means deferring $1 of consumption today for less than $1 of consumption later. The only exception is the existence of tax-deferred savings vehicles like IRAs.

Justice: I think you're too quick to write off real estate as a vehicle for investment. Not homes per se, but other forms of income property may begin to look as good as or better than equities. Income property has similar characteristics to a TIPS bond but with the benefit that the inflation component can be tax-deferred (as a cap gain).

Uncle Ben Signals the End Game

Rather than buy treasuries, we should be unloading as many longer maturities as possible at current interest rates. In this case, sell (treasuries to paniced investors) when there is blood in the streets...

Letting the Reinflation Genie Out of the Bottle

55065, here is why inflation is bad. It devalues the savings of people while also devaluing debt. So it discourages savings and encourages debt. We already have too little savings and too much debt. Who will keep lending us the money? If the dollar goes into free fall, trading partners that sell stuff we need to import will demand to be paid in something other than dollars - gold, trade goods, or ownership of our land, buildings, and other assets. That won't end well. Another problem is, it screws anyone on a fixed income or with fixed savings to retire on. What's supposed to happen to all those people? Another problem is, once expectations get built in that inflation is high, people will start demanding very high interest rates to loan money, even to the US government. That also won't end well for a government that has massive borrowing needs in the future.

The Shallowest Generation

JGQ, get a clue. Like fun the SS system could be changed by Congress - it was a self-perpetuating monster and it still is. The WW2 generation paid relatively low tax rates into the system for decades, then raised the benefits tremendously during the 60s and 70s. The net result is that they are getting back far more from the system than they could have earned had the money they contributed been put into treasuries over the relevant period. The boomers, in contrast, will be lucky to get an effective yield equal to treasuries, and most of us (the ones paying the max into the system) will be earning a yield lower than that (a negative yield in real dollars). Boomers may indeed get every penny they put into the system, but those pennies won't be worth as much. Do some research next time before you spout off - this was studied in detail as long as 10 years ago, and nothing's changed.

Give me a break. Social Security was put into place in the 1930's. It could have been changed at any time by Congress. Stop whining. Bush signed the Medicare Part D bill a few years ago. This program will cost more than Social Security. The Baby Boomers will get every dime plus that they put into SS. My grandchildren will have the 70% taxes. Every dime spent in deficit is a tax on future generations.

The Shallowest Generation

Kelly Bkk you are kinda right, the WW2 generation benefitted greatly and disproportionately from the social security and medicare systems, funded by the boomers who are also expected to somehow fund themselves as well. WW2 gen spent many decades paying much lower tax rates into those systems, and they are receiving benefits that produce an effective yield much better than had their actual contributions been put in treasuries over the same time period. In contrast, boomers will be lucky to break even on that, and those at the higher end of the income spectrum will lose. The boomers simply have the misfortune to be retiring at the same time as the ponzi scheme is finally imploding - they can't be blamed for having run up "unfunded mandates" sloughed off on "future generations" - they *were* the future generation onto which the burden was dumped.

The Shallowest Generation

For everyone pining for the good ol' days of high wage manufacturing in the US, what's your proposed solution to bring those days back?

The US was able to sustain high wages in the 40s, 50s, and 60s, because we were the last developed country left standing after WW2. Those days are gone for good. Now we live in a globalized world for better or worse, and the value of unskilled labor is low.

So what do you propose, trade protectionism and tariffs?

The Shallowest Generation

I have to agree with Spanish Moss. I'm in the tail end of the boomer group, and I've been conservative, saved my money, and lived within my means. I had nothing to do with voting in all those unfunded liabilities, most of which were set up to benefit the WW2 generation. Indeed, my generation has spent its peak earning years paying the max into those systems, and will get little back from them in the end. I fail to see how raising taxes on people like me to pay for these excesses is either fair or wise. I find that the current levels of taxation punish me for saving my money, because I cannot earn enough interest (after taxes are taken out) to stay even with inflation. I'm sure I'm not the only person to observe this. A dollar saved today is less than a dollar of consumption later. Is it any wonder that the savings rate has gone into the tank?

Time Not for a Bailout, But for Nationalization

WaMu probably wasn't a swaps player. I think they're deathly afraid of either a swaps player going down, or a firm that's the subject of a lot of swaps going down, because any such event threatens to trigger the swaps bomb.