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Latest | Highest ratedThinking the Unthinkable: Can Sovereign Nations Default? [View article]
The collapse of the whole notion of responsibility, whether at the country level, corporate level, or individual level is the reason for the impending reduction in living standards for the "advanced" Western economies. Regrettably, it has become so routine and socially acceptable to abbrogate our obligations at all levels, expecting others to bail us out.
If and when we all return to the basic principles of responsible conduct, respecting our obligations, contracts or treaties, then we have a chance to remain "advanced economies".
Bright Days for Bernanke, Bulls and Breadwinners [View article]
4 Good Value Stocks Nearing Buy Territority [View article]
XOM pays low dividends to shareholders, and plow cash into stock buy-backs instead. The buy-backs give a paltry return to shareholders, and a super-sized return (100's of millions) to the value of their executives' stock options. Questionnable corporate governance, treating owners (aka shareholders) as second class citizens, and executives as royalty.
Zale Corp's Management: Paid for Failure [View article]
The fact that many listed companies are run for the benefit of their executives and their cronies on the board, not the benefit if their shareholders, is one more reason to apply an additional discount when evaluating the intrinsic value of a stock.
Yet another symptom of the damage artificially-low interest rates have done to the economy: People are forced to invest their savings and pensions in worthless stocks and ponzi schemes because the return they would otherwise recieve is zero or negative.
Lack of Cash Could Threaten the Equity Rally [View article]
Chasing any asset, regardless of its price, just to avoid owning low-yielding cash is not a profitable strategy.
John Hussman: Reported Earnings vs. 'Owner Earnings' [View article]
Too many "one-time" charges and expenses, failure to deduct costs of options as compensation, and the inherent opacity of accounting, all help to "dress up" reported earnings. That's why I've always assigned greater value to dividends because they are tangible proof of value delivered to shareholders (aka owners), whereas "earnings" are fudgy.
Why I'm Negative on Equities Despite Good Earnings Season [View article]
In the US, the govt has basically taken over the housing and financial sectors, and may yet take over the health care sector. It has also largely taken over the domestic automotive sector. If these were truly socialist takeovers, they would be bad enough, but in reality, these takeover are much worse than purely socialist as the losses, costs, and subsidies are being socialised, whilst the profits, lavish pay, and bonuses, remain privatised; especially for finance. This makes these quasi-socialised sectors far more costly than they would have been, had they been truly nationalised. To subsidise them, govt needs to egregiously tax the dwindling number of truly productive members of the economy, in addition to monetise debt, create inflation, and fleece savers.
In the long-term, the risk of misguided policy that decimates productivity and prudence, to subsidise bloated, inefficient and unproductive sectors is the greatest negative of all.
The Precarious State of Our Union [View article]
Recovery, Crisis in Confidence and Curing Too Much Debt with More Debt [View article]
The world needs a relatively stable currency. Since WW2, and until the Greenspan era, the US has provided it in the form of a semi-stable USD. However, since the Greenspan bubble era, the US has abdicated its role as a provider of a stable global currency, preferring short-term fun over long-term stability; and the Euro grew to fill that void. Now the Euro is in jeopardy because of the irresponsible behavior of the government of one of its junior members. If the Euro follows the path of the USD, the world will have to resort to commodities as the new currency, and hyperinflation will engulf the global economy.
Why Does It Feel like 1987 for the Markets? [View article]
While a few stocks in game-changing technological areas can be good investments even if they don't pay a dividend, there are many other worthless stocks riding on their coattails, paying no dividend and going nowhere.
Valuations for stocks that pay zero or paltry dividends, and which lack prospects for compensatory growth, have been divorced from fundamentals for two decades. Uncertainty now reigns because the majority of equities fall into this category. Once markets return to levels conforming with basic and clear valuation based on dividends, they will be stable but boring. Until then ponzi fantasies, wherein investment is premised on a greater fool rewarding each lesser fool, will guarantee continuing instability.
Removing Oligarchs from Per-Capita GDP Statistics [View article]
Removing Oligarchs from Per-Capita GDP Statistics [View article]
We include government spending in GDP, but government does not "produce", and only redistributes, taking from some and giving to others, so about 20% of our "production" is actually redistribution.
Financial services now account for 7.5% of US GDP. What have they recently "produced"? If you wish to count borrowing money created by the fed from thin air @0.15%, then lending it to the treasury @4% as a "productive activity", then GDP is indeed growing.
To calculate real GDP "production", I would propose to exclude all redistributive and parasitic activities. This would show true production of useful value, such as food, energy, manufacture, medical services, entertainment services, etc. Excluding the parasitics, I doubt that you would see much in the way of GDP growth in recent years.
It's the Business Climate, Stupid [View article]
Mark Thoma wonders whether Bernanke will get the message with 30 votes against - not that close, but still the most nays since Volcker's 16 thumbs-down in 1983. Megan McArdle: Whew; who'd be confirmable if not Ben? Rolfe Winkler notes the seven senators who likely wanted a campaign point: voting aye on cloture, but then switching to nay on the all-but-certain confirmation vote. [View news story]
Servicing Mortgages (Part 1): Underwater Homeowners, Banks and Social Trust [View article]
However, the social, economic, and political implications of the government bailing out those who have chosen to live lavishly, at the expense of those who have chosen to live prudently, remain to be explored. Many will argue that the government should bail out "the little people" just as it has bailed out "the fat cat banksters" at the expense of the taxpayers. After all, the latter are rejoicing with record bonuses ($150 bn) at public expense, as a reward for creating a mess, whilst the overstressed mortgagees struggle to make ends meet. This argument has merit, arising from the moral hazard already entrenched in the bailout nation paradigm that we have been suckered into. Once on a slippery slope, it becomes harder to climb back to the high moral ground.