growser7

What Will Replace the Piggy Bank After the Stimulus Is Gone?

User 353732---perfectly said

Hunkering Down for a Big Correction

Jan Paul---bravo.

The True Cost of the Home Buyer Tax Credit

Smrt1. Your property taxes are new only to you; the previous owner of the house was paying them before you. There is no increase in the tax base. The house in fact cost the taxpayer $43,000.

Expanding Manufacturing Foreshadows Recession's End

Forgive me, but I don't understand why we should be anything other than skeptical if not downright afraid. We all have some understanding as to what caused the wheels to come off the cart--over expansion of the money supply, excess risk taking, over-leverage, etc etc. In light of that, why do we now think the cart is fixed? What is structurally different about our economy now vs 18 months ago?

Household debt levels and debt service payments remain horrible by any metric; commercial real estate is adding to banking stress; and who knows what kind of derivative mess could be lurking around the bend, esp if corporate defaults increase. I am sure other better-informed bloggers could add to the list.

This report is another green shoot, sure--but I think the risk of a killer frost remains pretty high.

Sobering Stat: ARMS Index Indicates Market Is at Peak, Not Bottom

Why do we always insist that the March lows priced in the utter collapse of the US economy? An SP 500 of 660 is perhaps fair valuation for an index with earnings of 50-60 facing the headwinds of a deleveraged economy with marginal growth ahead for the next 3-4 years (or longer).

What is not being priced in is the fact that inflation and Fed rates are as low as they can go. Unless we believe that these rates are the new order of the universe, they will go up, and pull equity valuations down.

U.S. National Debt: Deficit Hypocrisy

"And that’s why deficit spending by the federal government is probably here to stay for a long time. The government is only doing its part to help."

No....unsustainable systems tend to stop running. We already have two stacks under water and three propellers in the air.

Did Bernanke Save the World?

Brian McMorris and all who might agree that the world has been saved---this isn't over yet. At best, it is merely a postponement of a more harsh day of reckoning. Our dubious "salvation" has been accomplished only by the expansion of public debt, which will need to be dealt with, either by inflation or higher taxes. Right now that is a mere abstraction, but it will come to pass, and will bleed wealth, growth, and opportunity out of this land. There is no free lunch. We enjoyed the upswing of a massive sine wave, and we will inevitably face the down swing---postponement is not a resolution. But more to the point, the economic contraction isn't over. A 10-15 year credit bubble isn't going to resolve in 18 months. As a physician I would never say I saved anybody while I am sitll doing CPR.

I would also differ with your comment that people aren't really poorer. The unemployed and the marignally employed are getting twisted into the ground, and their ranks are growing. Give this another one to two years and we might all sadly see how poor our fellow citizens (and ourselves) have become.

--The ides of March have come.
--Aye, Caesar, but not gone.

Boomers in Trouble: The Unheralded Economic Mega-Trend, Part 2

This will sound like sacrilege, but if a generation is to be faulted, the blame needs to be laid at the feet of the "Greatest Generation". They are the ones who voted in the wealth-transferring legislation that will in the end choke us to death, and they have formed one of the most powerful lobbies (AARP) to squelch any reduction of senior entitlements---the "Third Rail." Current Soc Security and Medicare recepients are stabbing a fat hog, enjoying the best investment returns imaginable if their contributions are to be considered an investment. These progrmas are Ponzi schemes--and like all such affairs, it pays to get in early.

Boomers are dismissed as grasping and crass and venal. But it was their parents who sowed the seeds of destruction. I was playing T ball when the Great Society legislation was inacted, and was trying to get dates or was picking zits in the mirror when it was being liberalized again and again.

God has a dark sense of humor, laced with irony. The Boomers and their children are going to have to clean up after the Greatest Generation. Boomers aren't going to retire, many will live out their twilight years in poverty with the knowlege that their children will have it even worse.

I remember seeing a bumper sticker on an RV: "I am spending my children's inheritance." I didn't think it was funny then and I sure don't now. Moon Woong is right "Never loan your credit card to your parents."

Fool's Gold (Part 2)

Agree with Celcius and the others. Mr Stathis, your infatuation with yourself is breathtaking. You aren't some Old Testament prophet stumbling out of the desert with a vision---a lot of people have made the same predicitions you have. You bum Peter Schiff a lot as a shill. But you wrote a book too, right? You aren't planning to just give that away now are you?

As far as gold goes, most would agree that as a tradeable asset, at times it has performed relatively lousily and at times it has been great. But now... with the government struggling to reflate and "stimulate" the economy and at the same time embrace visions of a green utopia and expanded social programs, with deficits already hitting record levels even as a tsunami of unfunded liabilities is bearing down on us, with California being just a preview of coming attractions from the epic that Washington is preparing....this would be one of those times when gold will do very very well.

For my part, I respect the opinion of Felix Zulauf, and he makes a good argument for gold. With no ego involved.

Obama's Health Care Reform Inspires Little Confidence

There are some funny misconceptions about the life of a doctor. I have practiced internal medicine for 20 years. My two hours off for lunch are spent seeing patients in the hospital; my nights and weekends are spent doing paperwork (filling out Medicare forms justifying the use of Depends; those miserable forms form the Scooter Store; recertifying people for home oxygen, petitioning insurance companies to allow me to use certain medicines, or get a walker paid for, plus writing letters to patients, returning calls, etc etc). On average I spend about 20 hours a week doing this invisible stuff, and my workweek averages about 70 hours, 51 weeks a year. My call nights of course kick that up to maybe 90-100 hours, I don't know.

Meanwhile, my income (in nominal dollars) has risen a grand total of only 15% over the past decade. I make a decent wage, but at enormous personal cost, and I'm losing ground.

The fact is, primary care doctors, at least in my region of the US, lose money on Medcare and Medicaid patients. Simple irrefutable fact. So---we have to pass those costs on to the rest of you to stay upright. There are exceptions in specialty care---some quirks of the fee system allow for ridiculous charges e.g colonoscopy costing multiple thousands, but most primary care doctors feel embattled and many would quit if they could.

The fat cat doctor is largely a myth---at least in primary care. And herein lies the dilemma. It sounds fine, all of this talk of savings, but it has to be accompanied by reduced and more realistic expectations. I could see more people (with reduced unit costs per patient) if I didn'thave to fill out all of those @#$%% forms and push against various bureaucrats, and wargame my practice style to counter the malpractice attorneys who fish in these waters.

I have found that no one wants to do without---as long as someone else is paying for it. As the saying goes "Everyone wants to go to Heaven, but no one wants to die to get there". In this case, many/most people are more than happy to utilize the system e.g. have a brain MRI because they have had a headache (even when doctors try to dissuade them) but then act shocked when their premiums rise.

There needs to be less care, less doctors, greater acceptance of mortality and hardship. This isn't heartlessness---I love my practice and my patients. Compassion and understanding don't cost that much....but unfortuantely they don't generate clinic revenue, ROI, and don't pay for my nurse, typist, insurance compliance person, coding and billing specialist, quality compliance auditor, or my malpractice insurance. You get the picture.

--Written during a break in the action on call, 3 AM

Give Obama 40 More Years in Office!

Mr Armisted states that it took the US 50 years to wander into the woods and it may take 50 years to pull itself out. Well, we don't have 50 years. He seems to be overlooking the fact that all of this debt is interest bearing and a lot of it rolls over in the short term. Interest rates will rise as investors demand a risk premium to keep supporting the feckless US government. Interest service payments will rise dramatically at some point---and we will either default, inflate/monetize or institute draconian taxes to right the ship in the water. Meanwhile we will find that the "emerging economies" will have emerged and we will be a marginalized cautionary tale.

We can't afford too many "ifs" strung together to shape policy---we don't have the luxury of screwing this one up. America got away with a lot of stupidity for a long time, but the charts show that the day is past. As Einstein said: "There at two things that are infininte-the universe and stupidity. And I'm not so sure about the universe."

Obama built his campaign on hope. I think his economic plans rely on it far too much.

Medicare and Social Security - Means of Deficit Reduction

Cutting military spending as a means of saving the day overlooks the fact that defense funds are paid out as wages to military and non-military personnel and as purchase payments to defense contractors which employ thousands of workers (American workers no less). Millions of households depend on military spending/procurement.

I'm not saying that defense is necessarily the best use of federal dollars---but it is not like conceptwizard would suggest--cut defense and Shazzam! our economy moves to broad, sunlit uplands. It isn't like the government digs a big hole, takes all of the defense money and dumps it in and covers it back up.

Maybe a better way of looking at it is to accept that all government exenditure in a budget neutral environment is a drag on the economy (as opposed to leaving money in private hands). Which is the least efficient use---entitlement payments or defense? As a physician I can only point out that a huge percentage of healthcare money is spent on the last six months of life. Is that an appropriate use of dollars? Is it any less wasteful than payroll for a million servicemen? Likewise, is the maintenance of a large leisure class in the form of entitlement recipients a better use of money? Is there a compelling social contract there which preempts spending on defense (or infrastructure, the environment, education, etc)?

Will Natural Gas Be the Next to Rally?

US consumed 23 TCF of gas last year and imported 3.9 TCF--down from 4.6 TCF the year prior. The vast majority were pipeline imports from Canada. LNG amounted to only 0.35 TCF and is projected to increase to only 0.6-0.7 TCF in the next few years. Offsetting this is the declining production in Mexico and Canada (the latter due to lower wellhead prices causing reduced drilling)--so imports may stay flat despite increased LNG.

Regarding shale, the decline rate is steep--aggregate Barnett production is down 20% over the past 9 months, with a lot of the wells already past the steep one-year decline curve. Same holds true for other shale plays, but as they are younger than the Barnett they are falling faster. Barnett I believe is producing ? 8 BCF a day and falling. Marcellus is hampered by lack of infrastructure to boot.

Demand destruction is the issue here; natural gas price rebound is a gamble that our economy will gear back up with increased industrial gas consumption. Supply looks like it should be tight based on the above--but a lot of operators have shut in wells and have drilled and cased wells but haven't completed them. There is a lot of gas behind pipe (PDNP) waiting for some price recovery to be put on line. It will take a while for this overhang to be worked through without a significant turn around in our economy.

cbrev, the breakeven for some of the shale plays is higher than your numbers--on the order of $5-6/mcf depending on the play. Also, these are wellhead prices not Henry Hub. (Well head is discounted rel to H. Hub). It is hedging that is keeping the rigs in the field--and that will only last so long.

Employment Report Indigestion

Markos, to what degree could the government fudge the numbers? The birth-death adjustment comes to mind. How big of a factor is that? Also to what degree was the level of job loss offset by government hiring? The loss of private sector jobs is what we should be looking at as a barometer reading for the state of the economy. Thanks for any insight here.

Two Economic Theories You Shouldn't Listen To

Inflation is good for those underwater with their mortages, sure---and terrible for those who save. And, as wage growth won't match the inflation rate, it will put the squeeze on workers. Ultimately, there is no free lunch; the excess needs to be absorbed--after our big blow-out binge, there is going to be pain, The only question is how it is apportioned---to those who overconsumed or, by this slight-of-hand, to those who work and save.

If these schemes are acted upon, I fear the experts will prove to be like MIckey Mouse as the Sorcerer's Apprentice. They will put things in motion they can't control. A little inflation will turn into a lot of inflation.

College professors of course live off a system that is maintained by the indenturing of students (and their families) along with taxpayer money. Universtiy budgets are growing faster than GDP and the CPI, and can continue to do this through the exploitation of the hopes of middle class Americans for their children. Of course inflation is OK in their book---after all, they get to play by different sets of rules.