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  • The Problem With The U.S. Stock Market And The Economy [View article]
    I think deflation would result in a lot more people walking away from their debts. That's what people saddled with debts they can't pay do. Lenders would get stuck with collateral that's worth less or can't be sold, similar to what happened during the recent recession. Repo men would be the only job field experiencing growth.
    Apr 1 03:41 PM | 1 Like Like |Link to Comment
  • The Problem With The U.S. Stock Market And The Economy [View article]
    I'll go along with your "freeloaders" argument as long as we're clear about who the freeloaders are. Corporate welfare is five times what's paid to the individuals you stereotype as pot-smoking hippies (most of whom, in reality, are either disabled people, or are abused or abandoned single mothers in need of public aid because the jerks who fathered their children are shirking their legal and moral duty to financially support their children).*

    George W. Bush filled his cabinet with CEOs who had run companies that lived on federal largesse; they were experts at shoveling government dole into their companies' coffers, and none of them had experience in running a company that made it in free markets. So, voting for Republicans instead of Democrats doesn't solve the freeloading problem.

    * (Full disclosure: I spent part of my working career as an attorney for a state child support enforcement agency, so I've had lots of experience with deadbeat parents.)
    Apr 1 03:33 PM | 1 Like Like |Link to Comment
  • Gannett: Compelling Risk Reward Due To Overblown Regulatory Risk [View article]
    I've noticed broadcast shares were faltering this year, and wondered why; this article offers an explanation. But is it just FCC initiatives, or are other factors in play?

    I own two and follow three stocks in this space: Gannett, Meredith, and Journal Communications. All three are combo print/broadcast media companies.

    A couple of recent developments should give shareholders of media companies some cheer: Wealthy individuals like Buffett and Bezos are acquiring newspapers, so they must see some investment potential there; and hiring of journalists is picking up, especially in digital media.

    The need and demand for news reporting never went away; what was broken was the newspaper industry's revenue model as online companies siphoned away ad revenues. Print newspapers have slimmed down considerably, shedding newsroom jobs and reducing pages, as readership shifted to online news sources and blogs.

    But people are still hungry for news, and the need for a healthy journalism profession is as vital as ever. What has changed is someone needs to figure out new ways of paying for gathering and delivering journalistic content, and this is a somewhat unresolved question for investors, media bosses, and their employees although the industry seems to be groping toward a solution.
    Apr 1 02:49 PM | 1 Like Like |Link to Comment
  • The Problem With The U.S. Stock Market And The Economy [View article]
    "Average middle class U.S. consumers are avoiding new debt and paying down (or defaulting on) old debt."

    Charles, I think you're misinformed. Data and analyses I've seen on Seeking Alpha (from multiple authors) and in other sources indicate that most of the debt reduction since the financial crisis has been due to foreclosures, bankruptcies, and other involuntary writeoffs; and, contrary to paying off debt, consumers are borrowing when they can, although several factors (unemployment, tighter lending standards, poor credit) now constrain consumer borrowing.

    "Corporations hold record amounts of cash on their balance sheets."

    Agree. At the same time, they're borrowing cheap money to fund stock buybacks and dividends; and margin debt is at record levels because investors are borrowing to buy stocks.

    "Both are sending the loud and clear message that debt is too high, and should be reduced. In short, it's a 'problem'."


    "So, how is accelerating the rate of increase in debt (i.e.; stimulus) on the backs of the American middle class a SOLUTION to this problem of too much debt?"

    I think we need to clarify terms here. Monetary stimulus (the Fed) and fiscal stimulus (Congress) are two different things. Keynesian school economists argue we've had too much monetary stimulus and not enough fiscal stimulus. Bernanke, as I recall, warned that the Fed couldn't do Congress' job. Political conservatives seem to think any fiscal stimulus is too much, and they're apparently not fond of monetary stimulus, either. I would agree that Greenspan is one of the villains in this saga whose easy-money policies contributed to the housing bubble. I would also agree that Bernanke's QE and ZIRP policies have contributed to the current misuse of debt. I don't agree, though, that there is a deliberate policy either at the Fed or in Congress to increase debt to enable government to grow larger. When you talk about the "political limits of taxation," you're discussing a moving target, because current taxation certainly is not high by historical comparisons. In fact, federal revenues as a percentage of GDP have fallen to post-World War 2 lows, and tax cuts are more responsible than spending increases for the exploding federal debt. Americans have a something-for-nothing mentality, and they wanted low taxes without giving up any of the government spending they were used to. The difference has been funded with debt.

    There are genuine and legitimate issues about changes in American culture that have led to declining morality, increased corruption, fewer people taking personal responsibility, more self-indulgence, and so on. Vietnam deeply corroded public confidence in government, and the Nixon scandals undermined confidence in our national leadership. Pressures on the middle class have increased, without concomitant rewards, and the frustration level among ordinary Americans is very high. They have been repeatedly disappointed by the leadership of our country, from both parties, and there's now a widespread feeling among the general public that America is being run for the benefit of a few at the expense of the rest of us. They don't see a solution or a way out; the political and financial systems appear to them to be rigged and unchangeable.

    In this environment, the risk of people falling for demagogues and charlatans is high. What we need is honest and competent pragmatists; what we must avoid is following ideologues who promise that bumper-sticker slogans can solve our problems.
    Mar 31 04:09 PM | 2 Likes Like |Link to Comment
  • The Problem With The U.S. Stock Market And The Economy [View article]
    "So far, the govt policies have all been to add to the existing tax burden."

    I'm sorry, but that's just not true. Corporations and their lobbyists have bought the politicians, and they get to dictate government policies in exchange for the billions they contribute to political campaigns. They've never been less taxed than they are right now; the corporate share of federal tax revenues is at its lowest percentage level since World War 2, and some major corporations pay no federal corporate income taxes at all. What policies to foster business growth are you talking about? If you want business to prosper, first you need prosperous consumers. What fosters business growth is good jobs paying good wages. CEOs seem to have forgotten that.
    Mar 30 04:47 PM | 4 Likes Like |Link to Comment
  • The Problem With The U.S. Stock Market And The Economy [View article]
    "exponentially rising Federal spending"

    With all due respect, Charles, you appear to be mistaken about the basic facts of the matter. Federal spending has been flat in absolute dollars, and falling as a percentage of GDP, since the onset of the financial crisis.

    Deficits typically increase during a recession because of lower tax receipts and temporary spending increases for things like unemployment benefits, food stamps, and financial aid to struggling state and local governments. Tax cuts intended to stimulate the economy also contribute to higher deficits. These recession-induced deficit increases are always temporary, because recessions are temporary.

    "Basic logic and economic history show that the private economy uses resources more efficiently than government, yet you argue for more inefficiency by increasing the size of the public sector."

    What economic history actually shows is that countless private companies have been badly managed and gone bankrupt. There is no evidence that private sector managers are gifted with superior intelligence or management skills that ensure a private organization will always outperform a government organization, given the same task. Privatizing government services, for example, seldom produces savings for taxpayers. The belief system that asserts government is wasteful and inefficient is a political theology, not an empirical fact. It also overlooks the fact that profit is not the purpose or goal of government. We give government tasks that are inherently unprofitable -- police and fire protection, flood insurance, poor relief, etc. There is no more wasteful or inefficient use of economic resources than fighting wars. It is governments, not businesses, that are out there looking for that missing airliner and footing the bills for the search.

    If you are arguing for a policy of government austerity, and it's not clear to me that you are, we've seen how that worked in this recession when applied to the economies of Europe -- it didn't. It didn't work in Hoover's time, either. History offers us no empirical basis for believing that slashing government spending during a recession is sound policy and makes things better. That, too, is an ideology divorced from reality.

    As a retiree on a fixed income, and with no debts, I would theoretically benefit from falling prices. Supposedly my purchasing power would increase. But let's consider what deflation would do in the larger economy. Those who owe debts (the poor and middle class) would become poorer and those who own those debts (the rich) would become richer. Debts would become harder to repay, so the economy's debt problems would become worse. Consumer spending would be further impaired, not improved. It's unlikely wage earners would benefit from deflation because wages would fall in tandem with prices; businesses couldn't reduce prices without also reducing wages. Housing prices, which are closely tied to incomes, would also fall and you'd have a new cycle of homes going underwater, triggering another round of defaulted mortgages and abandoned houses. The Fed rightly regards deflation as a threat, not a benefit, to the economy.

    In short, you haven't convinced me that your policy ideas are the right ones for our economic problems.
    Mar 30 04:20 PM | 9 Likes Like |Link to Comment
  • Tapping Into Home Equity To Buy Stocks Is A Very Risky Proposition [View article]
    Houses are for living in, stocks are for making money. Never shall the twain meet. I own my home free and clear, and a stock portfolio worth more than the home. I more income than I need and no debts. No reason for me to gamble. I may not be maximizing my returns on my capital, but having no financial stress in my life is worth something.
    Mar 27 04:07 AM | 1 Like Like |Link to Comment
  • How Much Does Coca-Cola's Compensation Dilute Shareholders? [View article]
    As individual investors, we can't fire directors or managements, we can only fire the stock (by selling it), which is what you should do if you're dissatisfied with how a company is run and/or the returns you're getting. With KO going nowhere, and fully valued at a P/E of 20, the 3.2% yield is all we get, and we're paying these guys billions for that? They're not worth it. Count me among those who are tired of paying big bucks to non-performing managers. I'll give them another year to put money in my pocket. If they don't, my capital has better things to do.
    Mar 26 05:15 PM | 2 Likes Like |Link to Comment
  • Would Keynes Have Called This A 'Liquidity Trap'? [View article]
    I'm under the impression the principal reason people aren't buying new cars is because they're earning less or don't have jobs. As for buying new machine tools or opening new stores, people don't do that unless they have customers, and people who are earning less or don't have jobs don't make good customers. The guy with a job who spends his earnings is the dog that wags the tail. No dog, no wagging tail.
    Mar 25 02:01 AM | 1 Like Like |Link to Comment
  • Economic Consequences Of Income Inequality [View article]
    Well done, author.
    Mar 25 01:55 AM | Likes Like |Link to Comment
  • No IMF, Market Income Is Not 'Captured', It's Earned [View article]
    What do vulture capitalists, equity strippers, and high-frequency traders produce?
    Mar 19 02:29 AM | 1 Like Like |Link to Comment
  • Income Inequality And Financial Instability [View article]
    And for those at the top, even easier to sit at home and collect stock dividends. The owners of capital don't have to work or produce anything. It is wage earners who "bother working."
    Mar 11 03:25 AM | Likes Like |Link to Comment
  • 2 High-Yield Plays That Are Breaking Out [View article]
    Riding a 50cc motorbike paid for my senior year of college, after I got out of the hospital and found a good personal injury lawyer.
    Mar 8 08:23 PM | 4 Likes Like |Link to Comment
  • 6 Dividend Stocks That Belong To Your Ideal Portfolio For The Next 5 Years [View article]
    Leading up to Macondo, BP was an accident waiting to happen. The company had a dubious history of accidents, due to a corporate culture that only paid lip service to safety. That changed with a new CEO and a cultural shift after the Gulf spill. The business changed, too, as a result of selling off assets to pay spill-related costs. BP's future is divorced from its past to a greater degree than most companies. The challenge for investors is to figure out what that future will be, without having past performance to guide them in the usual sense.
    Mar 6 01:08 PM | Likes Like |Link to Comment
  • 6 Dividend Stocks That Belong To Your Ideal Portfolio For The Next 5 Years [View article]
    BP has different management now. You can't judge the company by its past. However, in investing, you always have to look past raw numbers at the company itself. BP is a speculative play because the extent of its legal liabilities for the Gulf disaster are still in litigation and unknown.
    Mar 5 09:35 PM | Likes Like |Link to Comment