The Nasdaq halted trading today and was down for a couple of hours. Listening to the financial media (CNBC, Larry Kudlow, etc.), you would have thought a great crime had occurred. 99 percent of the investing public had no idea and could care less, me included.
What serious investor could possibly be harmed by a two hour shutdown of the Nasdaq? Are these pundits serious? If there was ever an 'inside baseball' issue, this is it. Only manic traders and hedge funds could possibly care one way or another about the Nasdaq shutdown.
No portfolio of any serious investor could possibly be damaged by a temporary shutdown of a stock exchange. This is a ridiculous tempest in a teapot.
Thursday, 22 August 2013
Obama and Higher Education
Just what we need, the Obama tenacles reaching into higher education. In typical style, Obama points to a problem -- the high cost of higher education -- and proposes a solution that has nothing to do with the problem and actually will likely make the problem far, far worse than it is now. This has been the pattern with the economic rescue plan, with the 'affordable' health care act, with wind and solar initiatives, and on and on. Every problem that Obama has inherited has become a much bigger problem under his leadership.
What is wrong with higher education? Mainly the government, as in most other things. Federal funding for research grants and student loans has made higher ed less interested in scholarly pursuits and more interested in the pursuit of federal largesse. Students are borrowing huge amounts of money to maintain a college lifestyle that for prior generations was simply unavailable. Who could spend that kind of money on beer and fitness centers in the good old days?
Education itself doesn't cost much to provide; less today than a generation ago thanks to the advent of the digital age. But 'higher education' is no longer in reach for middle income Americans unless they are willing to bankrupt themselves and their children to enrich university bureacrats and aging academics (and they are aging thanks to tenure). There is a growing gap between 'education' and 'higher education.' More and more these two concepts are separate and distinct -- perhaps, incompatible.
Obama is going to measure the inputs to higher education to figure out what the outputs are -- a completely absurd approach to measuring the effectiveness of an education program. Why not measure the difference between a student's life chances when entering the institution with the life chances when leaving the institution. The 'elite' colleges would not fair very well using a measure like that. But, if only inputs are measured -- the Obama plan -- then the elite colleges will do very well indeed (that's why they are called 'elite'), but the community colleges, who fare much better using my measure will not do well under the Obama plan.
Once more, under Obama, the rich get richer and the poor and middle class will be left holding the bag.
What is wrong with higher education? Mainly the government, as in most other things. Federal funding for research grants and student loans has made higher ed less interested in scholarly pursuits and more interested in the pursuit of federal largesse. Students are borrowing huge amounts of money to maintain a college lifestyle that for prior generations was simply unavailable. Who could spend that kind of money on beer and fitness centers in the good old days?
Education itself doesn't cost much to provide; less today than a generation ago thanks to the advent of the digital age. But 'higher education' is no longer in reach for middle income Americans unless they are willing to bankrupt themselves and their children to enrich university bureacrats and aging academics (and they are aging thanks to tenure). There is a growing gap between 'education' and 'higher education.' More and more these two concepts are separate and distinct -- perhaps, incompatible.
Obama is going to measure the inputs to higher education to figure out what the outputs are -- a completely absurd approach to measuring the effectiveness of an education program. Why not measure the difference between a student's life chances when entering the institution with the life chances when leaving the institution. The 'elite' colleges would not fair very well using a measure like that. But, if only inputs are measured -- the Obama plan -- then the elite colleges will do very well indeed (that's why they are called 'elite'), but the community colleges, who fare much better using my measure will not do well under the Obama plan.
Once more, under Obama, the rich get richer and the poor and middle class will be left holding the bag.
Media Misleads Once Again
Reuters has a story today about the jobless claims number that is completely absurd. According to Reuters, "...then new claims... rose...but...gave a positive signal for hiring during the month." This conclusion is based upon absolutely nothing.
What the data, in fact, shows is that jobless claims rose last week and rose more than the market expected -- not good news at all. Worse, the numbers are barely (five percent on average) lower than the numbers in the early part of the year. Given that revisions are typically well above five percent, a drop of five percent is statistically irrelevant.
The real truth is that the economy is not producing enough jobs and the few that are produced are mostly part-time, low wage jobs. Not surprising, given the Obama economic program, which guarantees economic stagnation as far as the eye can see.
The media has made a habit of consistently distorting the truth about the American economy in their cheerleading effort to defend failed policy.
What the data, in fact, shows is that jobless claims rose last week and rose more than the market expected -- not good news at all. Worse, the numbers are barely (five percent on average) lower than the numbers in the early part of the year. Given that revisions are typically well above five percent, a drop of five percent is statistically irrelevant.
The real truth is that the economy is not producing enough jobs and the few that are produced are mostly part-time, low wage jobs. Not surprising, given the Obama economic program, which guarantees economic stagnation as far as the eye can see.
The media has made a habit of consistently distorting the truth about the American economy in their cheerleading effort to defend failed policy.
Read David Stockman
A new book by David Stockman, "The Great Deformation," challenges the current orthodoxy of financial market regulation.
This book is a great read. Don't expect a calm and collected analysis. This book is definitely not calm and collected. Stockman takes on all comers and his style is blatantly polemical. He aims his brickbats at the right and the left as he excoriates the rise of indebtedness, public and private, since the 1960s.
Don't think conservatives get a free ride in this book. They don't. Ronald Reagan and Milton Friedman are targets of Stockman. Indeed, Stockman sees Reagan and Friedman as major culprits in the incredible growth of America's financial liabilities. Some of this is, no doubt, sour grapes for his well-publicized split with the Reagan Administration in the 1980s when Stockman was Director of the Bureau of the Budget. He resigned that post in a feud with the Reagan folks over their unwillingness to support spending reductions to accompany the famous Reagan tax cuts.
But, the heart and soul of Stockman's book is his interpretation of the 2008 financial crisis. Here, Stockman makes a real contribution to what has been an embarassingly simple-minded consensus view of government policy. Stockman argues that the federal government, including the Fed, should not have intervened to save AIG, Morgan Stanley and Goldman Sachs. According to Stockman, saving these firms was the main purpose of the hastily-assembled $ 780 billion bailout backage, known as TARP.
Stockman argues that the financial system and the American economy was not threatened by the collapse of AIG, MS, and GS, as was argued at the time. He shows, by analyzing the balance sheets of these firms, that the American economy could have easily survived the collapse of these firms. Few, today, agree with that, but Stockman makes his case convincingly.
In essence, Stockman is challenging the "too big to fail" crowd that dominates government policy today and that dominated government policy in the Bush Administration in 2008. By challenging a hackneyed consensus devoid of analytical underpinning, Stockman has done a great service, writing this book. He's right. Read his book.
This book is a great read. Don't expect a calm and collected analysis. This book is definitely not calm and collected. Stockman takes on all comers and his style is blatantly polemical. He aims his brickbats at the right and the left as he excoriates the rise of indebtedness, public and private, since the 1960s.
Don't think conservatives get a free ride in this book. They don't. Ronald Reagan and Milton Friedman are targets of Stockman. Indeed, Stockman sees Reagan and Friedman as major culprits in the incredible growth of America's financial liabilities. Some of this is, no doubt, sour grapes for his well-publicized split with the Reagan Administration in the 1980s when Stockman was Director of the Bureau of the Budget. He resigned that post in a feud with the Reagan folks over their unwillingness to support spending reductions to accompany the famous Reagan tax cuts.
But, the heart and soul of Stockman's book is his interpretation of the 2008 financial crisis. Here, Stockman makes a real contribution to what has been an embarassingly simple-minded consensus view of government policy. Stockman argues that the federal government, including the Fed, should not have intervened to save AIG, Morgan Stanley and Goldman Sachs. According to Stockman, saving these firms was the main purpose of the hastily-assembled $ 780 billion bailout backage, known as TARP.
Stockman argues that the financial system and the American economy was not threatened by the collapse of AIG, MS, and GS, as was argued at the time. He shows, by analyzing the balance sheets of these firms, that the American economy could have easily survived the collapse of these firms. Few, today, agree with that, but Stockman makes his case convincingly.
In essence, Stockman is challenging the "too big to fail" crowd that dominates government policy today and that dominated government policy in the Bush Administration in 2008. By challenging a hackneyed consensus devoid of analytical underpinning, Stockman has done a great service, writing this book. He's right. Read his book.
Monday, 19 August 2013
Time to Buy Emerging Markets?
Emerging market stocks have been hammered this year as the US and Europe have enjoyed one of the best stock markets in history. Why? What happened to the argument that slow (GDP) growth in the developed world and much higher (GDP) growth in the emerging economies argued in favor of a heavy commitment of investment funds to emerging market?
As it turns out, emerging market economic growth has, indeed, been much, much higher than economic growth in the Western nations. So, why did their stock markets put in such a pitiful performance thus far this year? A similar pattern occurred in US history when foreign investors, mostly British and Russian investors, lost bucketloads of money betting on growth in the US economy in the 19th century. This is not the first time that dramatic GDP growth failed to help investors in public stocks.
Many of the most vibrant companies in the countries that fall into the 'emerging market' category are not public companies. They are privately owned companies that aren't included in any of the emerging market portfolios that you and I can own. Instead, roughly 40 percent of the capitalization of 'emerging market' ETFs are typically government-owned or heavily regulated companies, such as the local telephone company or local utility company. Are these good investment bets in a third world political environment?
If emerging markets boom, you are much more likely to make money owning Coca Cola stock than the stock in the local telephone company in Egypt or Venezuela. The inherent logic behind huge investments in emerging markets never made any sense in the first place.
That said, it may now be time to buy the emerging markets, since everyone seems to be abandoning them in a rush. India's stock market lost four percent of its value in a single day at the end of last week.
It may be time to take another look at emerging markets, now that their staunchest supporters seem to be running for the exits. But, one should be cautious. Emerging markets involve stocks that have fundamentally different characteristics and corporate governance rules than Western investors may be accustomed to.
As it turns out, emerging market economic growth has, indeed, been much, much higher than economic growth in the Western nations. So, why did their stock markets put in such a pitiful performance thus far this year? A similar pattern occurred in US history when foreign investors, mostly British and Russian investors, lost bucketloads of money betting on growth in the US economy in the 19th century. This is not the first time that dramatic GDP growth failed to help investors in public stocks.
Many of the most vibrant companies in the countries that fall into the 'emerging market' category are not public companies. They are privately owned companies that aren't included in any of the emerging market portfolios that you and I can own. Instead, roughly 40 percent of the capitalization of 'emerging market' ETFs are typically government-owned or heavily regulated companies, such as the local telephone company or local utility company. Are these good investment bets in a third world political environment?
If emerging markets boom, you are much more likely to make money owning Coca Cola stock than the stock in the local telephone company in Egypt or Venezuela. The inherent logic behind huge investments in emerging markets never made any sense in the first place.
That said, it may now be time to buy the emerging markets, since everyone seems to be abandoning them in a rush. India's stock market lost four percent of its value in a single day at the end of last week.
It may be time to take another look at emerging markets, now that their staunchest supporters seem to be running for the exits. But, one should be cautious. Emerging markets involve stocks that have fundamentally different characteristics and corporate governance rules than Western investors may be accustomed to.
Wednesday, 14 August 2013
European Recovery -- Seriously?
The news services are abuzz this morning with the "news" that Europe has finally turned the corner with an economic rebound in the 2nd quarter of this year. Underneath the headline is the dismal number of an annualized 0.3 percent estimated growth rate for the 2nd quarter. Whoop-to-doo! This is a recovery. This number is not significantly different from a negative number, given the pattern of revisions. Meanwhile, unemployment in Europe remains above 12 percent and sovereign debt is soaring on to new highs.
There are further stories that Greece is on the road to recovery. What are their current statistics? GDP only dropped an annualized four percent in the first half of this year. Wow! That's really something to write home about. Combined with almost 28 percent unemployment overall and nearly 70 percent unemployment among youth, it sure sounds like Greece is just humming along.
Wonder what the statistics would show if Europe was doing poorly?
There are further stories that Greece is on the road to recovery. What are their current statistics? GDP only dropped an annualized four percent in the first half of this year. Wow! That's really something to write home about. Combined with almost 28 percent unemployment overall and nearly 70 percent unemployment among youth, it sure sounds like Greece is just humming along.
Wonder what the statistics would show if Europe was doing poorly?
Monday, 12 August 2013
Some Good News for the US
Steve Moore's column today in the Wall Street Journal is worth a read. The sequester, according to Moore, has worked. Total federal spending has been slowed, even reversed, in the past two years, according to Moore. This is, indeed, good news. Let's hope it continues.
Moore notes that all it takes to continue to hold federal spending in line is to not undo the budget deal that led to the sequester in the first place. It will be interesting to see if politicians can stick with the plan by doing nothing.
Moore notes that all it takes to continue to hold federal spending in line is to not undo the budget deal that led to the sequester in the first place. It will be interesting to see if politicians can stick with the plan by doing nothing.
Update on Greece
Now, after five years of European Union policies, how do things look in Greece. The headline today on Yahoo looks encouraging: "Greece Beats January-July Budget Target." In fact, Greece did not do any such thing. More bailout funds from the EU, though, made it look that way.
Here is what the EU has done for Greece: GDP today is 20 percent lower than it was in 2008, when the EU bailouts began. Unemployment is at a record pace, pushing toward 30 percent. These numbers are not very different from where the US was in 1933 at the lowest point of the Great Depression.
Meanwhile, civil order is breaking down in Greece. Crime is rife and the only things growing are the nation's indebtedness and the black market. Political discourse is moving to the extremes as the center breaks down.
Finally the debt to GDP ratio is rapidly climbing to 200 percent. The EU has made a small problem into a large problem and has obligated the entire European continent to back a bailout that has absolutely no hope of success. Politicians hard at work again!
Here is what the EU has done for Greece: GDP today is 20 percent lower than it was in 2008, when the EU bailouts began. Unemployment is at a record pace, pushing toward 30 percent. These numbers are not very different from where the US was in 1933 at the lowest point of the Great Depression.
Meanwhile, civil order is breaking down in Greece. Crime is rife and the only things growing are the nation's indebtedness and the black market. Political discourse is moving to the extremes as the center breaks down.
Finally the debt to GDP ratio is rapidly climbing to 200 percent. The EU has made a small problem into a large problem and has obligated the entire European continent to back a bailout that has absolutely no hope of success. Politicians hard at work again!
Sunday, 11 August 2013
The Changing Face of the American Workplace
The US economy was once the envy of the world. From 1865 to 1965, the US economy grew faster than any large economy in the world. The great American middle class came into prominence during this period and American income and wealth had no rivals anywhere in the world. For most of these years, there was no Federal Reserve or central bank in the United States, though central banks had a long history in every other large country in the world. For most of these years, there was little business regulation and no income tax. The Federal Reserve and the Federal income tax came into existence in 1913, coming on the heels of the best 60 years of economic growth in the history of the US.
Not that everything was rosy. Financial panics and the great depression occurred during this 100 year span. Unemployment rose and fell. Markets rose and fell. The dynamics of American growth were chaotic, though powerful. But, with all of the chaos and panic, the American pie grew at an unprecedented rate, matched, in world history, only by modern China. The standard of living of the average American grew at the fastest pace ever. Unemployment levels above 6 percent were considered a sign of a 'recession.' The current 7.6 percent unemployment rate would have been seen as an extreme economic slowdown (not an economic recovery).
Since 1965, the American economy has grown at a dramatically slower pace. The American middle class has consistently struggled, except for the 20 year period that followed the inauguration of Ronald Reagan. The financial position of the average American is today untenable, if proper account is taken of the federal, state and local government debt. America is headed for financial disaster and the American middle class is sitting in the passenger seat.
In the driver's seat is the new political class. The fastest growing demographic in America is the American government or quasi-government employee. On the defensive is the American private economy. Besieged by so much regulation that most companies are not even aware of most of the regulatory burden that they face, small business is no longer the engine of American economic progress -- government is where the real growth is taking place. Government employment has been the largest source of employment growth in the US economy since 1965.
Unfortunately, government doesn't produce anything but problems for the private sector. Most government employees (including public school teachers, university professors, and bureaucrats of all stripes) view the private sector with suspicion. They see private businesses as quasi-criminal enterprises bent on polluting the environment and exploiting their employees. This culture dominates the media characterizations, not only in the daily news, but in television series and movies.
So what does all of this mean for the workplace in modern America? Private businesses realize that they are the target of the political classes and they make adjustments. They know that if they hire full time employees, their regulatory burden goes up. They know if they hire 50 employees or more, they fall into certain categories that must face significantly higher costs of complying with the modern legal environment that has been imposed upon them.
So, what happens? Small business reacts by hiring as few full time employees as possible. Part time workers are easier to fire and are not subject to Obamacare and other regulatory burdens. Many companies keep their companies deliberately smaller to avoid certain employment trigger levels that put companies under a much more severe regulatory regime. Employees that are 'protected' under current laws -- minorities, women, persons over the age of 55 -- involve far greater expense to a private business than other employees. So, fewer of them are hired. Protecting an employee with legislation simply means making that employee more expensive to the employer. Employers aren't stupid (a common assumption of the political class that supports these 'protections).'
So, today, the workplace is a very rigid bureaucratic environment. The blizzard of paperwork that employees face is nothing compared to the blizzard of paperwork that companies face. There is more concern with what might be said at the water cooler than what the work output might be. Private email communications are now perused for politically incorrect comments. Free speech doesn't apply to the workplace. In financial service companies, mistakes or errors are seen as criminal (the 'whale' episode at JP Morgan is a modern instance). Gone are the old processes of free people making free decisions in free markets. Now you have to worry about whether Barney Frank or Elizabeth Warren is looking over your shoulder.
All of this means that America is in a period of relative economic decline. The middle class will remain an endangered species as the political class bent on the destruction of the middle class continues to claim that all they care about is the middle class. Gradually, less and less of America is based upon free market economics and more and more is driven by un-elected elites, who have spent most of their lives either in politics or academia. The workplace is now a bureaucratic environment with rigid rules and little or no room for initiative and energy. The dull and the routine is more and more a description of the modern American workplace.
The workplace is also becoming more and more a land of part-timers. Businesses in America, like their European counterparts, are increasingly reluctant to hire people that, by law, they cannot fire. Workers now have protections and guarantees that mean, even if workers received no wages at all, they are still very, very costly to business. Increasingly, wages are a smaller and smaller fraction of the costs to an employer of hiring an employee. The result is a much reduced take home pay and more and more of worker income is siphoned off to worthy causes, favored by elite bureacrats in the Elizabeth Warren mold -- bureacrats with virtually no life experiences similar to that of ordinary American workers.
A hundred years ago, a young employee could take a job at a reduced wage or no wage at all as a way of entering the work force and learning a trade. Minimum wage laws, promoted by big unions, are designed to block such work force entrants and preserve a monopoly for existing workers. These laws are effective and help destroy a large part of the Horatio Alger culture that once was. The elite that make these rules don't face such problems since they, by and large, go to elite colleges and universities and find that entry into the work force doesn't involve wage and salaries anywhere near the minimum wage.
It is no accident that college students are in the forefront of the call for a "living wage." A living wage virtually guarantees that the college students will not face future competition from folks whose start in life is not as pampered as their own. The poor simply can't get through the front door, since their skill set rarely justifies a "living wage." Meanwhile, those who support the "living wage' think of themselves as bastions of morality, while crushing the hopes of folks who would simply like to have an opportunity to move up in the world through their own work efforts.
Great wealth creates idle time for the wealthy. It is no accident that the wealthiest US politicians are also those who most vociferously support the agenda of ever bigger government. Why not? It will never effect them. As fewer and fewer Americans derive their living from the free market, the free market has fewer and fewer defenders. The wealthy and the new bureacrats are the power brokers in modern America. Their contempt for the American middle class and for free enterprise is on display every day in our media and in their political program. It has changed the face of America and the American workplace. Meanwhile, folks like Obama ponder why part-time workers are replacing full time workers in America. He blames that on greedy businesses. But, the reality is that Obama policies are one of the key reasons that full time workers are becoming an endangered species.
Not that everything was rosy. Financial panics and the great depression occurred during this 100 year span. Unemployment rose and fell. Markets rose and fell. The dynamics of American growth were chaotic, though powerful. But, with all of the chaos and panic, the American pie grew at an unprecedented rate, matched, in world history, only by modern China. The standard of living of the average American grew at the fastest pace ever. Unemployment levels above 6 percent were considered a sign of a 'recession.' The current 7.6 percent unemployment rate would have been seen as an extreme economic slowdown (not an economic recovery).
Since 1965, the American economy has grown at a dramatically slower pace. The American middle class has consistently struggled, except for the 20 year period that followed the inauguration of Ronald Reagan. The financial position of the average American is today untenable, if proper account is taken of the federal, state and local government debt. America is headed for financial disaster and the American middle class is sitting in the passenger seat.
In the driver's seat is the new political class. The fastest growing demographic in America is the American government or quasi-government employee. On the defensive is the American private economy. Besieged by so much regulation that most companies are not even aware of most of the regulatory burden that they face, small business is no longer the engine of American economic progress -- government is where the real growth is taking place. Government employment has been the largest source of employment growth in the US economy since 1965.
Unfortunately, government doesn't produce anything but problems for the private sector. Most government employees (including public school teachers, university professors, and bureaucrats of all stripes) view the private sector with suspicion. They see private businesses as quasi-criminal enterprises bent on polluting the environment and exploiting their employees. This culture dominates the media characterizations, not only in the daily news, but in television series and movies.
So what does all of this mean for the workplace in modern America? Private businesses realize that they are the target of the political classes and they make adjustments. They know that if they hire full time employees, their regulatory burden goes up. They know if they hire 50 employees or more, they fall into certain categories that must face significantly higher costs of complying with the modern legal environment that has been imposed upon them.
So, what happens? Small business reacts by hiring as few full time employees as possible. Part time workers are easier to fire and are not subject to Obamacare and other regulatory burdens. Many companies keep their companies deliberately smaller to avoid certain employment trigger levels that put companies under a much more severe regulatory regime. Employees that are 'protected' under current laws -- minorities, women, persons over the age of 55 -- involve far greater expense to a private business than other employees. So, fewer of them are hired. Protecting an employee with legislation simply means making that employee more expensive to the employer. Employers aren't stupid (a common assumption of the political class that supports these 'protections).'
So, today, the workplace is a very rigid bureaucratic environment. The blizzard of paperwork that employees face is nothing compared to the blizzard of paperwork that companies face. There is more concern with what might be said at the water cooler than what the work output might be. Private email communications are now perused for politically incorrect comments. Free speech doesn't apply to the workplace. In financial service companies, mistakes or errors are seen as criminal (the 'whale' episode at JP Morgan is a modern instance). Gone are the old processes of free people making free decisions in free markets. Now you have to worry about whether Barney Frank or Elizabeth Warren is looking over your shoulder.
All of this means that America is in a period of relative economic decline. The middle class will remain an endangered species as the political class bent on the destruction of the middle class continues to claim that all they care about is the middle class. Gradually, less and less of America is based upon free market economics and more and more is driven by un-elected elites, who have spent most of their lives either in politics or academia. The workplace is now a bureaucratic environment with rigid rules and little or no room for initiative and energy. The dull and the routine is more and more a description of the modern American workplace.
The workplace is also becoming more and more a land of part-timers. Businesses in America, like their European counterparts, are increasingly reluctant to hire people that, by law, they cannot fire. Workers now have protections and guarantees that mean, even if workers received no wages at all, they are still very, very costly to business. Increasingly, wages are a smaller and smaller fraction of the costs to an employer of hiring an employee. The result is a much reduced take home pay and more and more of worker income is siphoned off to worthy causes, favored by elite bureacrats in the Elizabeth Warren mold -- bureacrats with virtually no life experiences similar to that of ordinary American workers.
A hundred years ago, a young employee could take a job at a reduced wage or no wage at all as a way of entering the work force and learning a trade. Minimum wage laws, promoted by big unions, are designed to block such work force entrants and preserve a monopoly for existing workers. These laws are effective and help destroy a large part of the Horatio Alger culture that once was. The elite that make these rules don't face such problems since they, by and large, go to elite colleges and universities and find that entry into the work force doesn't involve wage and salaries anywhere near the minimum wage.
It is no accident that college students are in the forefront of the call for a "living wage." A living wage virtually guarantees that the college students will not face future competition from folks whose start in life is not as pampered as their own. The poor simply can't get through the front door, since their skill set rarely justifies a "living wage." Meanwhile, those who support the "living wage' think of themselves as bastions of morality, while crushing the hopes of folks who would simply like to have an opportunity to move up in the world through their own work efforts.
Great wealth creates idle time for the wealthy. It is no accident that the wealthiest US politicians are also those who most vociferously support the agenda of ever bigger government. Why not? It will never effect them. As fewer and fewer Americans derive their living from the free market, the free market has fewer and fewer defenders. The wealthy and the new bureacrats are the power brokers in modern America. Their contempt for the American middle class and for free enterprise is on display every day in our media and in their political program. It has changed the face of America and the American workplace. Meanwhile, folks like Obama ponder why part-time workers are replacing full time workers in America. He blames that on greedy businesses. But, the reality is that Obama policies are one of the key reasons that full time workers are becoming an endangered species.
Friday, 2 August 2013
Another "European" Jobs Number
162,000 new jobs in July. Not only is that an absurdly low number for an economy as large as the US, the job numbers for both May and June were revised downward as well. No one is much interested in hiring anyone. That's the main message of this report.
A subtext is reflected in the unemployment rate, which fell to 7.4 %. How, if a pitifully low number of jobs are created each month, is the unemployment rate falling? When people give up looking, they aren't counted anymore and more than 6 million have given up looking. Unemployment could get down to 1 percent if almost everyone just gave up and went on public assistance. Is this the Obama plan?
The White House is succeeding in getting the economy that they have wanted -- the European economy -- no growth, no opportunity for the young and ever rising debt levels that have no conceivable way of being repaid. This is the liberal dream.
A subtext is reflected in the unemployment rate, which fell to 7.4 %. How, if a pitifully low number of jobs are created each month, is the unemployment rate falling? When people give up looking, they aren't counted anymore and more than 6 million have given up looking. Unemployment could get down to 1 percent if almost everyone just gave up and went on public assistance. Is this the Obama plan?
The White House is succeeding in getting the economy that they have wanted -- the European economy -- no growth, no opportunity for the young and ever rising debt levels that have no conceivable way of being repaid. This is the liberal dream.
Thursday, 1 August 2013
Big Companies More Valuable Than Small Companies
So what explains the surging stock market, when the fundaments of the economy remain weak? Again, micro-factors favor large companies with access to government. This is true for banks as well as for non-financials. Smaller companies are getting hammered by higher tax rates, more mandates, and looming ObamaCare. Large businesses, with some exceptions like coal, can deal with all the bureaucratic regulatory stuff because they have so much scale. Not true for smaller businesses.
So what you're seeing is a change in the playing field. The big guys are doing relatively well and small business is in the doldrums. That is keeping with the Obama playbook of the grand corporate-government teamwork. Obama can relate to big giant companies, because they are so much like the government and, in some ways, indistinguishable. But small business is an annoyance in the Obama scheme.
The problem is: small business produces the new jobs for the economy; big business is a stagnant employer in the aggregate. So folks looking for a job are out of luck. The Obama economy is great if you're big and rich, but not so great if you're an out of work American or a small business enterprise.
So what you're seeing is a change in the playing field. The big guys are doing relatively well and small business is in the doldrums. That is keeping with the Obama playbook of the grand corporate-government teamwork. Obama can relate to big giant companies, because they are so much like the government and, in some ways, indistinguishable. But small business is an annoyance in the Obama scheme.
The problem is: small business produces the new jobs for the economy; big business is a stagnant employer in the aggregate. So folks looking for a job are out of luck. The Obama economy is great if you're big and rich, but not so great if you're an out of work American or a small business enterprise.
Wednesday, 31 July 2013
Urban Renewal -- The Big Government Way
Having spent the past four days wandering the neighborhoods of Washington DC, it is clear that this city is a prosperous, booming area. Wonder what business enterprises are sparking this growth? Big government.
Years ago, when I was a newbie intern for the US Treasury, walking a couple of blocks from One Washington Circle (where I lived back when it was an apartment complex) was a dangerous undertaking. No More. For miles around, there are now leafy suburbs with casually dressed joggers and dog walkers. The homes are well maintained and coiffed and the comfortable residents seems at ease with their plush surroundings.
Who lives here? The new "protected" class.
These are the people that work for the federal government or the numerous so-called private businesses that devote their endeavors to providing services to government or lobbying to gain a share of government largesse. These are the folks that view people outside the beltway as moronic environment-destroyers and homophobes. They are comfortable in the knowledge that they are doing God's work, protecting the environment and defending the minorities and the poor from the caprices of the evil private sector. These are the regulators, the tax collectors and the righteous -- living high on the taxpayer.
Out in the hinterland, struggling Americans are laboring with massive unemployment and stagnant economies and providing the tax revenues to support this ruling class that lives in modern luxury in much of Washington DC. No real products are produced here. Indeed, the primary function for most of these Washington upper income folks is to find ways to restrict the private sector and to increase the flow of resources into their own pockets. This is the new "European prosperity" for the ruling classes.
You wonder how much longer this can continue. A dwindling private sector carries this elite group on its backs. Meanwhile the poor in DC are shunted off into ghettoes with some of the worst public schools in America. But, those folks are out of the view of this elite. This elite lives in safe neighborhoods with protected jobs. Even folks who take the fifth amendment before Congress, when they are asked about what they are doing, continue to prosper at full pay with zero work responsibilities. This is the liberal dream, right here in Washington DC.
Years ago, when I was a newbie intern for the US Treasury, walking a couple of blocks from One Washington Circle (where I lived back when it was an apartment complex) was a dangerous undertaking. No More. For miles around, there are now leafy suburbs with casually dressed joggers and dog walkers. The homes are well maintained and coiffed and the comfortable residents seems at ease with their plush surroundings.
Who lives here? The new "protected" class.
These are the people that work for the federal government or the numerous so-called private businesses that devote their endeavors to providing services to government or lobbying to gain a share of government largesse. These are the folks that view people outside the beltway as moronic environment-destroyers and homophobes. They are comfortable in the knowledge that they are doing God's work, protecting the environment and defending the minorities and the poor from the caprices of the evil private sector. These are the regulators, the tax collectors and the righteous -- living high on the taxpayer.
Out in the hinterland, struggling Americans are laboring with massive unemployment and stagnant economies and providing the tax revenues to support this ruling class that lives in modern luxury in much of Washington DC. No real products are produced here. Indeed, the primary function for most of these Washington upper income folks is to find ways to restrict the private sector and to increase the flow of resources into their own pockets. This is the new "European prosperity" for the ruling classes.
You wonder how much longer this can continue. A dwindling private sector carries this elite group on its backs. Meanwhile the poor in DC are shunted off into ghettoes with some of the worst public schools in America. But, those folks are out of the view of this elite. This elite lives in safe neighborhoods with protected jobs. Even folks who take the fifth amendment before Congress, when they are asked about what they are doing, continue to prosper at full pay with zero work responsibilities. This is the liberal dream, right here in Washington DC.
Friday, 26 July 2013
Guilty Until Proven Innocent
I carry no brief for people that break laws, but, in the securities industry, indictments destroy businesses and innocent shareholders are usually left picking up the tab. That was the result when Drexel Burnham was indicted in 1988. Many of Drexel employees who trudged silently in the back office found their retirement hopes and dreams destroyed when Rudolph Guliani's over-zealous indictment caused Drexel to go bankrupt overnight -- long before anyone produced any evidence to a judge or jury to peruse. Most of the folks who lost their life savings by the indictment of Drexel were innocent and had no knowledge of any wrongdoing. That's what happens when you indict corporations, as opposed to individuals.
This same theme plays out in the litigation and settlement arena. Pension funds who trumpet their lawsuits against corporations are really only suing themselves and enriching the legal profession. The wrongdoers go unscathed, while innocent shareholders get hammered. This is what happened in the tobacco settlements, in the BP settlement, and on and on. Shareholders, who often have no idea that they are really shareholders, find their own retirement hopes and dreams crushed by breast-beating righteous souls who run these pension funds involved in all of this litigation. The lawyers love this as they salt away fortunes. It's simply a transfer from working class people to wealthy lawyers, while pension executives proclaim that they are fulfilling their fiduciary duty.
In the SAC case, why doesn't the government indict individuals? How can a corporation get inside information without an individual being involved? Could it be, they can't prove their case. By simply indicting SAC, they destroy the business and, presumably, a lot of Stevie Cohen's net worth. But, what if Cohen is innocent (and I am not saying that he is). We may never know. What we do know is that SAC is done for, whether innocent or guilty. The indictment will destroy SAC's future and much of Stevie Cohen's net worth, regardless of guilt or innocence.. At least in this case there are no public shareholders being looted -- just Mr. Cohen as far as I can tell. But, still.
What happened to the rule of law?
This same theme plays out in the litigation and settlement arena. Pension funds who trumpet their lawsuits against corporations are really only suing themselves and enriching the legal profession. The wrongdoers go unscathed, while innocent shareholders get hammered. This is what happened in the tobacco settlements, in the BP settlement, and on and on. Shareholders, who often have no idea that they are really shareholders, find their own retirement hopes and dreams crushed by breast-beating righteous souls who run these pension funds involved in all of this litigation. The lawyers love this as they salt away fortunes. It's simply a transfer from working class people to wealthy lawyers, while pension executives proclaim that they are fulfilling their fiduciary duty.
In the SAC case, why doesn't the government indict individuals? How can a corporation get inside information without an individual being involved? Could it be, they can't prove their case. By simply indicting SAC, they destroy the business and, presumably, a lot of Stevie Cohen's net worth. But, what if Cohen is innocent (and I am not saying that he is). We may never know. What we do know is that SAC is done for, whether innocent or guilty. The indictment will destroy SAC's future and much of Stevie Cohen's net worth, regardless of guilt or innocence.. At least in this case there are no public shareholders being looted -- just Mr. Cohen as far as I can tell. But, still.
What happened to the rule of law?
Monday, 22 July 2013
Same Ole; Same Ole
So what is the New York Times offering up this morning.
First, European sovereign debt continues to skyrocket to new levels -- both in absolute terms and as a percentage of GDP. Guess the bailout is working, if more debt is the goal. Meanwhile the long running recession in the Eurozone continues unabated with no end in sight.
What about the US? Economists are now busily reloading their economic forecasts, according to the NY Times this morning, to accommodate much slower economic growth in the US than they anticipated previously. The latest consensus forecast -- 1.5 percent. That's barely a pulse.
Meanwhile the same article puzzles over why this is such a jobless recovery. They should be reading my blog.
Here's what they are missing: employers do the hiring. The Times (and the Obama Administration) don't seem to get that. Along with their main cheerleader, Paul Krugman, the Times believes that government borrowing and spending is all it takes to convince someone to hire employees. After five years of this, you would think they would see the folly of their ways.
The coup de grace this morning is, of course, the NY Times' coverage of Detroit. Think of Detroit as a snapshot of the American future -- promises abandoned, hopes crushed, politicians running for cover, unions screaming for justice, and no money left in the till. NY Times can't seem to figure out how Detroit came about (especially while the auto industry's profits are soaring).
Same ole NY Times.
First, European sovereign debt continues to skyrocket to new levels -- both in absolute terms and as a percentage of GDP. Guess the bailout is working, if more debt is the goal. Meanwhile the long running recession in the Eurozone continues unabated with no end in sight.
What about the US? Economists are now busily reloading their economic forecasts, according to the NY Times this morning, to accommodate much slower economic growth in the US than they anticipated previously. The latest consensus forecast -- 1.5 percent. That's barely a pulse.
Meanwhile the same article puzzles over why this is such a jobless recovery. They should be reading my blog.
Here's what they are missing: employers do the hiring. The Times (and the Obama Administration) don't seem to get that. Along with their main cheerleader, Paul Krugman, the Times believes that government borrowing and spending is all it takes to convince someone to hire employees. After five years of this, you would think they would see the folly of their ways.
The coup de grace this morning is, of course, the NY Times' coverage of Detroit. Think of Detroit as a snapshot of the American future -- promises abandoned, hopes crushed, politicians running for cover, unions screaming for justice, and no money left in the till. NY Times can't seem to figure out how Detroit came about (especially while the auto industry's profits are soaring).
Same ole NY Times.
Saturday, 20 July 2013
Denial in Detroit
Detroit's problems are not the fault of the decline of the auto industry -- an industry that is, in fact, on a bit of a roll these days. Detroit's problems are the same problems that plague Illinois, California and the US Treasury -- promises paid for with ever increasing levels of promises and debts.
Detroit's problems were compounded by corrupt and incompetent politicians, which are a staple of modern big city government in the US. Citizens vote for these folks, so there is some justice in the fact that these cities are all collapsing fiscally. The absurd notion that taxing a few rich people can solve a city's problems simply matches a similar absurd notion at the national level. (Taxing a few rich people is mainly a way of having rich people move to friendlier places).
No defined benefit pension plan is ever going to survive. Social security is a defined benefit system . It won't survive either. Any system that makes future promises without any means of payment is not going to make it. Detroit is just the beginning; Chicago can't be far behind. And yes, Virginia, you will have your day in the bankruptcy court as well.
All of those defenders of defined benefit systems forgot to ask what happens when there is no money to pay the benefits. Is the great advantage of a professional investment process worth much when the system can't pay the benefits? Even bad investments by individuals in defined contributions systems would have been way better for Detroit pensioners than the outcome that is headed their way.
By the way, it is worth noting that it is not possible to be on a financial loss if you own a typical index fund. Not possible. How's that? Well, as of Thursday's close, the stock market has never been higher.
For all of the villification of Wall Street by the Obama Administration and the media, it turns out that a simple buy-and-hold strategy by ordinary investors is a ticket to wealth that has been and is available to everyone. I bet a lot of Detroiters now wish they had had the opportunity to opt out of the defined benefit system and invest their own money, their own way.
Not to mention that if you have a defined contribution plan and you die, your children can inherit the assets, something that cannot happen with defined benefit and and its twin -- social security.
Just like ObamaCare, promises are made that politicians have no intention of keeping. But, the media pretends that these promises are true. Detroit shows us the reality.
Detroit's problems were compounded by corrupt and incompetent politicians, which are a staple of modern big city government in the US. Citizens vote for these folks, so there is some justice in the fact that these cities are all collapsing fiscally. The absurd notion that taxing a few rich people can solve a city's problems simply matches a similar absurd notion at the national level. (Taxing a few rich people is mainly a way of having rich people move to friendlier places).
No defined benefit pension plan is ever going to survive. Social security is a defined benefit system . It won't survive either. Any system that makes future promises without any means of payment is not going to make it. Detroit is just the beginning; Chicago can't be far behind. And yes, Virginia, you will have your day in the bankruptcy court as well.
All of those defenders of defined benefit systems forgot to ask what happens when there is no money to pay the benefits. Is the great advantage of a professional investment process worth much when the system can't pay the benefits? Even bad investments by individuals in defined contributions systems would have been way better for Detroit pensioners than the outcome that is headed their way.
By the way, it is worth noting that it is not possible to be on a financial loss if you own a typical index fund. Not possible. How's that? Well, as of Thursday's close, the stock market has never been higher.
For all of the villification of Wall Street by the Obama Administration and the media, it turns out that a simple buy-and-hold strategy by ordinary investors is a ticket to wealth that has been and is available to everyone. I bet a lot of Detroiters now wish they had had the opportunity to opt out of the defined benefit system and invest their own money, their own way.
Not to mention that if you have a defined contribution plan and you die, your children can inherit the assets, something that cannot happen with defined benefit and and its twin -- social security.
Just like ObamaCare, promises are made that politicians have no intention of keeping. But, the media pretends that these promises are true. Detroit shows us the reality.
Thursday, 18 July 2013
ARTHNEETI JUNE 2013 ISSUE
Gold in India has a special place apart from just an instrument of investment. Indians have a sentimental connection with gold. This is the reason that the gold imports of India show no signs of reduction in spite of all the measures like increase in the import duty. This is worsening the situation of Current Account Deficit (CAD) for the country. CAD is one of the major problems that India is facing today and hence not able to achieve the growth as expected. The depreciating rupee is worsening the situation further. So gold imports are now becoming a problem for the country though they are adding to the assets of the citizens of India. Wednesday, 17 July 2013
The 1970s Without the Inflation
We are now entering a long term period of economic stagnation that is reminiscent of the 1970s. The only real difference is that inflation is subdued today. The term "stagflation" came to prominence as a description of the 70s economy, as inflation soared toward the end of the the 1970s. Ronald Reagan rescued us from all of that after his election in 1980. How soon we forget.
Inflation, of course, is only temporarily subdued. The only way to retire our absurd debt levels is to inflate our way out of them. That's coming.
For now, we live in world of never-ending promises of things that cannot possibly come to pass -- medicare, social security, ObamaCare, state and local pension funds. All of these things will run out of funding within the lifetime of those now reaching adulthood. As politicians dream of even more things to promise the citizenry, the funding for the existing promises is rapidly drying up.
Meanwhile, a dwindling percentage of Americans are actually working these days. While records are being set every day in the percentage of Americans on welfare, on food stamps, on disability, the percentage of the economy devoted to the free market is shrinking.
The culture is following suit. Think of the last time that you watched a television show where the bad guy wasn't a businessman or woman -- polluting the environment, stealing from unwitting investors, or fleecing someone in a novel way. Who are the media heroes? -- the government or the non-profit world (or media).
Making a profit is viewed with suspicion in our modern American culture. Unfortunately, that means creating wealth and hiring folks is tainted with the same brush. There is a certain consistency here, since working for a living is losing its hold on the American lifestyle.
Inflation, of course, is only temporarily subdued. The only way to retire our absurd debt levels is to inflate our way out of them. That's coming.
For now, we live in world of never-ending promises of things that cannot possibly come to pass -- medicare, social security, ObamaCare, state and local pension funds. All of these things will run out of funding within the lifetime of those now reaching adulthood. As politicians dream of even more things to promise the citizenry, the funding for the existing promises is rapidly drying up.
Meanwhile, a dwindling percentage of Americans are actually working these days. While records are being set every day in the percentage of Americans on welfare, on food stamps, on disability, the percentage of the economy devoted to the free market is shrinking.
The culture is following suit. Think of the last time that you watched a television show where the bad guy wasn't a businessman or woman -- polluting the environment, stealing from unwitting investors, or fleecing someone in a novel way. Who are the media heroes? -- the government or the non-profit world (or media).
Making a profit is viewed with suspicion in our modern American culture. Unfortunately, that means creating wealth and hiring folks is tainted with the same brush. There is a certain consistency here, since working for a living is losing its hold on the American lifestyle.
Tuesday, 16 July 2013
"We're Recovering"
It is now mid-July of 2013, more than 4 1/2 years since the financial collapse and still we hear the phrase: "we're recovering." How long are we going to hear that?
Below 2 percent economic growth and almost 8 percent unemployment means that the US economy is paralyzed. The Obama Administration seems to have thrown in the towel on the subject of growing the economy. Right they should! The Administration policies, piled on top of the policy history of the past fifty years, virtually guarantee that the vibrant economy of the Old USA is not in our future.
There are bright spots -- autos, housing, energy -- but there are always bright spots. What is missing is small business vitality. That's gone and not coming back until folks figure out how to get around the mass of regulations and taxes that bedevil the American economy. Other than outsourcing, it is not clear how to avoid the strangling effect of American regulatory policy. As for employment, hiring anyone seems downright irrational, given current tax and regulatory policies.
The Obama Administration has reduced the expectations of most Americans to the kind of future that Europeans now have -- stagnation, limited opportunity for the young, guarantees for the oldest demographic that are coming apart at the seams, and debts that no one has any intention of honoring.
So the phrase "we're recovering" is getting tiresome. We're not recovering, we're changing. The quasi-socialism that has supplanted free enterprise is preventing a serious recovery like the one we had in the 1980s. The "bad old days" were actually "good old days" as Americans are learning to their dismay.
Below 2 percent economic growth and almost 8 percent unemployment means that the US economy is paralyzed. The Obama Administration seems to have thrown in the towel on the subject of growing the economy. Right they should! The Administration policies, piled on top of the policy history of the past fifty years, virtually guarantee that the vibrant economy of the Old USA is not in our future.
There are bright spots -- autos, housing, energy -- but there are always bright spots. What is missing is small business vitality. That's gone and not coming back until folks figure out how to get around the mass of regulations and taxes that bedevil the American economy. Other than outsourcing, it is not clear how to avoid the strangling effect of American regulatory policy. As for employment, hiring anyone seems downright irrational, given current tax and regulatory policies.
The Obama Administration has reduced the expectations of most Americans to the kind of future that Europeans now have -- stagnation, limited opportunity for the young, guarantees for the oldest demographic that are coming apart at the seams, and debts that no one has any intention of honoring.
So the phrase "we're recovering" is getting tiresome. We're not recovering, we're changing. The quasi-socialism that has supplanted free enterprise is preventing a serious recovery like the one we had in the 1980s. The "bad old days" were actually "good old days" as Americans are learning to their dismay.
Friday, 5 July 2013
The Real Message in Egypt
The Egyptian economy has collapsed. This was a process that began with the 'Arab Spring' and accelerated with the election of Morsi, deposed over the weekend by the Egyptian military.
What this shows is that the average Egyptian, Islamist or not, prefers to have food, shelter and safety to political ideology. Democracy doesn't mean much of anything if there are no free institutions.
The US foreign policy is not helpful here, because the US government is busily dismantling free institutions as a cornerstone of its own domestic policy. The US can hardly be expected to promote free institutions -- a free press, for example -- if it doesn't believe in free institutions on its own home turf.
A rule of law would be helpful as well, but current American domestic policy -- witness, the recent suspension of the employer mandate in the Affordable Care Act until elections are safely over -- is mainly a retreat from the rule of law. Actions speak louder than words and the world is plugged in these days.
The right to start a business and provide for your family is all that the average Egyptian wants and the demonstrations that crushed the political power of Morsi were a testament to that desire. Perhaps the Obama Administration should take notes.
What this shows is that the average Egyptian, Islamist or not, prefers to have food, shelter and safety to political ideology. Democracy doesn't mean much of anything if there are no free institutions.
The US foreign policy is not helpful here, because the US government is busily dismantling free institutions as a cornerstone of its own domestic policy. The US can hardly be expected to promote free institutions -- a free press, for example -- if it doesn't believe in free institutions on its own home turf.
A rule of law would be helpful as well, but current American domestic policy -- witness, the recent suspension of the employer mandate in the Affordable Care Act until elections are safely over -- is mainly a retreat from the rule of law. Actions speak louder than words and the world is plugged in these days.
The right to start a business and provide for your family is all that the average Egyptian wants and the demonstrations that crushed the political power of Morsi were a testament to that desire. Perhaps the Obama Administration should take notes.
The Next New Thing
Are you ready for this? How about "unlimited vacations for all." Paid for, of course.
Check out the NY Times editorial page today. These folks have launched their latest job-killing, economy-crushing plan -- unlimited paid vacations.
That should really entice employers to increase their work force. The new idea from the left is to have employees on the payroll who, in reality, are always on vacation.
Check out today's NYTimes editorial page if you think this is a mirage.
Check out the NY Times editorial page today. These folks have launched their latest job-killing, economy-crushing plan -- unlimited paid vacations.
That should really entice employers to increase their work force. The new idea from the left is to have employees on the payroll who, in reality, are always on vacation.
Check out today's NYTimes editorial page if you think this is a mirage.
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