Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktVital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1423.2 | 3.0 | 0.21% |
| Eurostoxx Index | 2615.1 | 19.1 | 0.73% |
| Oil (WTI) | 85.78 | 0.2 | 0.26% |
| LIBOR | 0.31 | -0.001 | -0.32% |
| US Dollar Index (DXY) | 80.09 | -0.236 | -0.29% |
| 10 Year Govt Bond Yield | 1.65% | 0.03% | |
| RPX Composite Real Estate Index | 190.8 | 0.3 |
Markets are higher this morning on optimism for a deal on the fiscal cliff and a better-than-expected report on German investor confidence. The US government exited its AIG position. UBS will begin charging clients for deposits in swiss francs. Bonds and MBS are down.
The NFIB Small Business Survey fell off a cliff in November to 87.5. The survey blames the election, not Sandy. If people though uncertainty over the election was the cause of the nascent slowdown, this survey shows that it wasn’t. Of course there is a correlation and causation effect happening here: Does uncertainty cause a lousy economy, or does a lousy economy increase the risk that politicians will do something stupid?
Chart: NFIB Small Business Optimism:
Part of the reason for falling optimism is falling profits. One claim constantly thrown out is “Profits are at record levels, why aren’t people hiring?” Maybe it is because they are not, at least not in the small business arena. This is even more profound when you consider that taxes are going up. Small business should be pushing as many expenses as possible to next year in order to minimize their 2013 tax bite, which means that profits should be increasing now as their expenses are deferred. Which means that underlying business profitability may in fact be lower.
Chart: NFIB Small Business Earnings:
Note that Bill Dunkelberg is a free-market sort of guy, so the language of his survey will reflect his political leanings. That said, the numbers are what the numbers are.
Ezra Klein of WaPo sums up where things really stand in the fiscal cliff negotiations. The White House needs (a) an increase in tax rates for the rich, (b) a long-term solution to the debt ceiling, and (c) an extension of unemployment insurance. Republicans need something on the entitlement front – either an increase in the medicare eligibility age or a change in inflation calculations for Social Security.
The change in inflation calculation involves a going to a “chained CPI.” One of the historical criticisms of the Consumer Price Index is that it fails to take into account the substitution effect, which means that as relative prices increase, consumers substitute cheaper goods for higher priced goods. In other words, if the price of beef rises, consumers substitute chicken for beef. Since the CPI is based on a static basket of goods, it fails to take into account the fact that the basket of goods changes as relative prices change, which means that it overstates inflation. The chained CPI is an attempt to correct for this.
Today begins the two-day meeting of the FOMC. The Street is expecting that the Fed will announce an open-ended Treasury Purchase program, which could push its balance sheet to almost $4 trillion. The estimate is that the latest round of QE will add $500B in Treasuries to $620B in mortgage backed securities. It will be interesting to see if the Fed notes its frustration that consumer borrowing rates are not falling in lockstep with mortgage backed securities. It would be even more interesting if there was some acknowledgement of G-fee increases, which explain the reason why.
Filed under: Morning Report |
All Things in Moderation 
I can honestly say that I lobbied for chained CPI before it was popular. Wrote both my senators and two congresspersons. Told them I was drawing SS, but not using chained CPI was simply an artifice we could not afford, b/c only chained CPI took into account the substitution effect. Used cell phones as my example. Yay, me.
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I still find it interesting that the government gets to calculate the rate at which its liabilities increase. The government would never allow that sort of conflict of interest in the private sector.
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OK, I’m not getting the UBS thing.
Investors are searching for currencies that are more stable than the euro because of uncertainty about Greece. They deposit in Swiss francs because they think the franc is more stable, but the decreases its value relative to the euro. Now the banks don’t want to lose money, so they are charging for holding francs (or kroner)?
Why wouldn’t you just move your money out of Switzerland and invest in some other currency (dollars?)?
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Forgot to post the link for the HSBC and Standard Chartered settlement.
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Mike, it reflects the fact that interest rates are negative in Swiss francs. The 2Y, 3Y, and 4Y govvies are all negative as are overnight to 5 month interbank rates. In other words, the Swiss 2-year bond is trading t 104.419. You will get a 2% coupon payment per year and par at maturity. So you are paying 104.419 to get (2 + 2+ 100 = 104) over two years.
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Ah, thanks Brent. That’s a key piece of information that I was missing.
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““You’re not going to refuse your paycheck because the taxes are higher,” said Roberton Williams, senior fellow at the nonpartisan Tax Policy Institute. “The people that can make adjustments, who can change the way their world works, are the wealthy.”
This is front a front page Post article on how “the wealthy” are structuring their assets to avoid higher taxes.
And it’s complete BS that people won’t forgo a paycheck. If we have another child, it makes zero financial sense for remain a two income household and double out daycare bill to about $40,000 a year.
We’d be working about 120 man hours a week to pay taxes and daycare at the point. one of us absolutely would quit. Most people might not have that option, but those in the cross-hairs of these higher tax rates do.
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The idea that as marginal tax rates increase, people substitute leisure for work is well-established in economics. It explains why Europeans take home less pay, but get six weeks of vacation. Vacation is untaxed, so employers substitute vacation for compensation.
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New old topic: corruption.
http://www.statesman.com/news/business/travis-da-investigating-cancer-fighting-agency/nTSZG/
The Texas cancer fighting agency has a $2B kitty and has spent $700M in the last five years. Only NIH is a bigger funder of cancer research.
We have suspected that some of the money that did not go to M.D. Anderson or to TX A&M has been used as a Goodhair crony fund.
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For a bit of levity, here’s The Onion take on the fiscal cliff. My personal favorites include their proposals to eliminate all damns and to raise taxes on single mothers to encourage them to work harder.
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From Ash’s link:
“STEP ONE: Eliminate school breakfast and lunch programs, Medicaid, the Consumer Product Safety Commission, the Environmental Protection Agency, Medicare, PBS, New Mexico, elk, the Coast Guard, and all dams.”
I don’t have anything against elk.
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An elk here, a Coast Guard there; before you know it it adds up to real money.
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well, could just charge a user fee for the elk.
“Chuck E. Cheese could run the parks. Everything operated by tokens. Drop in a token, go on the swing set. Drop in another token, take a walk. Drop in a token, look at a duck.” — Ron Swanson
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From Mark’s link:
“The Travis County investigation is the second announced Tuesday. Texas Attorney General Greg Abbott, who serves as an ex-officio member on the agency’s board, also is investigating.”
Can’t wait to see the results of Abbott’s investigation of himself.
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I’m also soliciting recommendations for a good digital SLR camera. Mrs. Ashot keeps dropping hints. I’m trying to spend less than $1,000 so right now I’m leaning towards the Cannon EOS T3i, what additional lenses should I get? Thanks for any recommendations.
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Eliminate New Mexico? I’d better stock up on Hatch chiles then …
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ashot:
I’ve been happy with my Canon EOS dSLR. How avid a photographer is Mrs. Ashot? I’d probably pick up the 75-300 mm lens in addition to the 18-55 mm that comes with the camera. You should get the polarizing and UV filters too, but those are cheap. Maybe a monopod or tripod as well.
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Ash — I bought a used Nikon D70 on ebay with the kit lenses. it was half (or better) of what I would have paid for a new one. It’s an entry level, but a great way to learn. I took a few classes with it, and once I outgrow it, I’ll sell it on ebay and use to proceeds to upgrade. i’d probably recommend something with a better lcd display and an easier menu navigation.
I’m a big fan of fixed-focal length lenses. it forces you to move, rather than relying on the zoom. and that helps facilitate creativity. the trick is to get off auto as soon as you’re comfortable playing with the aperture and thinking about the depth of field of your shot.
see http://www.kenrockwell.com/nikon/dslr.htm for loads of details.
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Thanks for the recommendations. Mrs. Ashot is not an avid photographer, but the point and shoot cameras just don’t work for taking pictures of a infant/toddler. I think she and I would both take more pictures if we had a better camera. Her birthday is in a few months so I get her some lessons for that. From what I have heard, lessons are necessary to fully utilize all an SLR can offer.
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same reason we got an SLR — that, and I felt really limited on a trip to SE Asia with out point in shoot. you can go crazy with the gear. invest in classes first.
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I like the zoom lens, but I use my camera for outdoor shots while hiking/backpacking. I used to carry a point-and-shoot because it is easier to access as you’re hiking, but the improvement in picture quality with the dSLR is just about worth the added weight and inconvenience.
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“The idea that as marginal tax rates increase, people substitute leisure for work is well-established in economics. It explains why Europeans take home less pay, but get six weeks of vacation. Vacation is untaxed, so employers substitute vacation for compensation.”
Good argument for higher taxes.
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