Brent Nyitray
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Let the mutherfuker burn!
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Kevin S. Willis
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Bits & Pieces (TGIF & Halloween Is Near)
Posted on October 28, 2011 by Kevin S. Willis
The Addam’s Family Credo. Those just aren’t pretty words.
Christina Ricci supplies a classic film moment as Wednesday Addam’s, also from Addam’s Family Values.
I just recently heard a reference to Fried Green Tomatoes as “that movie that came out in 1991”. Finding that unbelievable, I checked, and indeed that is when it came out. What’s wrong with time? Why does it keep moving forward? And so fast? Anyway, the inimmitable Jessica Tandy starred in Fried Green Tomatoes, and was also in The Birds. Boo!
Scary Halloween (in 3 days), everyone!
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Visually Focusing on the Job of the "Select Committee"
Posted on October 28, 2011 by markinaustin
I think it is important to have these graphics in mind when we talk about seizing the initiative on budget. I believe the various commissions that made recommendations had these graphics in mind. I believe BHO had these in mind when he made the decision to go after health care costs. I believe that as long as hospital ERs must take anyone Medicaid will be the single biggest red ink pool in our economy. I believe that SS OA&S can be self sustaining with modest tweaking, but Medicare is a different story [and why I so opposed single payer]. I believe that we can manage the budget in the long run if we can deal with med costs. I believe that even if we deal with med costs we must increase revenue. I think the method for increasing revenue is to go to consumption, VAT, and transaction taxes as a replacement for income and estate taxes while retaining excise and “sin” taxes, and tariffs where appropriate. Again, a very small [less than one half of one per cent] transaction tax on every transaction raises huge amounts of money because there are so many transactions, and so much more transactional volume than net income volume. One side effect of the transaction tax is that it would kill day trading, and that would not break my heart, either.
The commissions, and the Select Committee, did/do not have the luxury of immediately moving to consumption and transaction taxation, so in their reality, individual and corporate preferences/loopholes must be closed and nothing less than return to Clinton rates on everyone will make a dent. And they must find as much to cut as they can, but my optimism is exceeded by my dubiety in that respect. They seem to have about $200B/yr in cuts in mind, both Ds and Rs, so that is about it. I hasten to add that personal deductions [tax expenditures, or preferences, or loopholes] do leave @ $1 trillion/yr. in the pockets of homeowners and donors. We will not get rid of the entire mortgage deduction and the charitable deduction this month, either, and I do not know that we should.
And as to health care, I would not propose to let the needy who cannot pay the bill go without care, either. So I see the problem and don’t think I can solve it under present constraints, including ones I impose on myself.
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Morning Report
Posted on October 28, 2011 by Brent Nyitray
Vital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1275.5 | -7.1 | -0.55% |
| Eurostoxx Index | 2462.2 | -14.720 | -0.59% |
| Oil (WTI) | 93 | -0.960 | -1.02% |
| US Dollar Index (DXY) | 75.083 | 0.052 | 0.07% |
| 10 Year Govt Bond Yield | 2.34% | -0.05% |
Markets are giving back a little after yesterday’s furious rally. By all accounts, this euro deal does not solve the problem, it just is a downpayment. Sovereign credit default swap levels declined yesterday, but not dramatically. EURIBOR / OIS (an esoteric calculation that measures fear in the banking system) did not tighten yesterday as one would expect. That is a caution flag.
Volatility is a characteristic of bear markets, which is why trading them is so hard. Yesterday’s rally certainly had the feeling of bears throwing in the towel, and maybe some of it was end of the month window dressing. I am still of the view that we are in a secular bear market in equities that started in 2000 and probably has a few years left to run. That said, earnings have been increasing as the equity markets have marked time, and the dividend yield on the S&P 500 is nearly that of the 10-year bond. Yet people continue to sit in the 10-year. Ben Bernake must be tearing his hair out.
In economic data this morning, personal incomes were up .1% in September, while the employment cost index was up .3% for 3Q. Spending was up .6% in Sep while inflation remains subdued. The WSJ has an article this morning discussing the dynamic between incomes and the employment cost index. Wages aren’t rising, but employees are getting more expensive. It has all sorts of effects not only on employment and productivity levels, but also income inequality.
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Bits & Pieces (Thursday Night Lorax)
Posted on October 27, 2011 by Kevin S. Willis
This is no time for play, there is no time for fun, this is no time for games, there’s work to be done!
So, all you get tonight is the trailer for the new movie version of The Lorax.
Seems like a more light-hearted, less apocalyptic Lorax.
With a lot more background on The Onceler. Might be pretty good.
Laterz!
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Bits & Pieces (Wednesday Night Cyberspace Edition)
Posted on October 26, 2011 by Kevin S. Willis
What was I doing at this very moment 26 years ago? This:
It’s amazing I found this interesting enough to do for hours and hours at a time. But I did, smoking my Max Menthol cigarettes, dialing up the local BBS with my acoustic modem, drinking my Diet Pepsi. Sigh. Those were the days.
So, you may be asking yourself. Did Kevin compose an entire album of music dedicated to playing Downland on a TRS-80 Color Computer in 1985? Why, yes I did. Today’s soundtrack I would have wanted to jam to while playing Downland back in the day? Noodles.
This resembles a lot of my daydreaming back in 1985. And possibly yesterday.
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Morning Report
Posted on October 26, 2011 by Brent Nyitray
Vital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1226.5 | 1.9 | 0.16% |
| Eurostoxx Index | 2361.9 | 17.890 | 0.76% |
| Oil (WTI) | 91.94 | -1.230 | -1.32% |
| US Dollar Index (DXY) | 76.223 | 0.017 | 0.02% |
| 10 Year Govt Bond Yield | 2.15% | 0.04% |
Markets are selling off on reports talks are deadlocked in Europe over the haircuts bondholders will have to take. Stocks initially rose on reports that Germany’s lower house approved plans to boost the European bailout fund.
In earnings, Amazon reported disappointing results and is down roughly 10%. Also reporting today: Ford, Nabors, Exelon, Hess, Wellpoint, FMC, Boeing, Sprint, Corning. We are in the heart of earnings season. So far, on average, corporate profits are holding up and CEOs are in general constructive on the near future.
In economic data, durable goods orders were better than expected, with a 1.7% increase ex transportation. New Home Sales came in at 313k, a slight bump from August’s reading of 296k, but still in depressed territory.
Chart: New Home Sales:
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COUNTERINTUITIVE (for me)
Posted on October 26, 2011 by markinaustin
I have strongly believed, without more evidence than what I see in my life as a lawyer representing small businesses, and the generally repeated “accepted knowledge” that small biz, and especially NEW biz, are the engines of growth. I was thus struck dumb, deaf, and blind by the following article, which may be behind the NYT paywall for you.
It is deceptively titled, in that we know that consumer spending is the biggest component of the GDP. What struck me is the assertion that private investment is not historically necessary for growth; that growth is a function of gummint spending and consumer debt. Which of his assertions are based on misstatements of fact? Which are correlated to facts that are irrelevant to his conclusions? Or is this the new wisdom? I have provided emphasis to the central factual allegations.
It’s Consumer Spending, Stupid
By JAMES LIVINGSTON
AS an economic historian who has been studying American capitalism for 35 years, I’m going to let you in on the best-kept secret of the last century: private investment — that is, using business profits to increase productivity and output — doesn’t actually drive economic growth. Consumer debt and government spending do. Private investment isn’t even necessary to promote growth.
This is, to put it mildly, a controversial claim. Economists will tell you that private business investment causes growth because it pays for the new plant or equipment that creates jobs, improves labor productivity and increases workers’ incomes. As a result, you’ll hear politicians insisting that more incentives for private investors — lower taxes on corporate profits — will lead to faster and better-balanced growth.
The general public seems to agree. According to a New York Times/CBS News poll in May, a majority of Americans believe that increased corporate taxes “would discourage American companies from creating jobs.”
But history shows that this is wrong.
Between 1900 and 2000, real gross domestic product per capita (the output of goods and services per person) grew more than 600 percent. Meanwhile, net business investment declined 70 percent as a share of G.D.P. What’s more, in 1900 almost all investment came from the private sector — from companies, not from government — whereas in 2000, most investment was either from government spending (out of tax revenues) or “residential investment,” which means consumer spending on housing, rather than business expenditure on plants, equipment and labor.
In other words, over the course of the last century, net business investment atrophied while G.D.P. per capita increased spectacularly. And the source of that growth? Increased consumer spending, coupled with and amplified by government outlays.
The architects of the Reagan revolution tried to reverse these trends as a cure for the stagflation of the 1970s, but couldn’t. In fact, private or business investment kept declining in the ’80s and after. Peter G. Peterson, a former commerce secretary, complained that real growth after 1982 — after President Ronald Reagan cut corporate tax rates — coincided with “by far the weakest net investment effort in our postwar history.”
President George W. Bush’s tax cuts had similar effects between 2001 and 2007: real growth in the absence of new investment. According to the Organization for Economic Cooperation and Development, retained corporate earnings that remain uninvested are now close to 8 percent of G.D.P., a staggering sum in view of the unemployment crisis we face.
So corporate profits do not drive economic growth — they’re just restless sums of surplus capital, ready to flood speculative markets at home and abroad. In the 1920s, they inflated the stock market bubble, and then caused the Great Crash. Since the Reagan revolution, these superfluous profits have fed corporate mergers and takeovers, driven the dot-com craze, financed the “shadow banking” system of hedge funds and securitized investment vehicles, fueled monetary meltdowns in every hemisphere and inflated the housing bubble.
Why, then, do so many Americans support cutting taxes on corporate profits while insisting that thrift is the cure for what ails the rest of us, as individuals and a nation? Why have the 99 percent looked to the 1 percent for leadership when it comes to our economic future?
A big part of the problem is that we doubt the moral worth of consumer culture. Like the abstemious ant who scolds the feckless grasshopper as winter approaches, we think that saving is the right thing to do. Even as we shop with abandon, we feel that if only we could contain our unruly desires, we’d be committing ourselves to a better future. But we’re wrong.
Consumer spending is not only the key to economic recovery in the short term; it’s also necessary for balanced growth in the long term. If our goal is to repair our damaged economy, we should bank on consumer culture — and that entails a redistribution of income away from profits toward wages, enabled by tax policy and enforced by government spending. (The increased trade deficit that might result should not deter us, since a large portion of manufactured imports come from American-owned multinational corporations that operate overseas.)
We don’t need the traders and the C.E.O.’s and the analysts — the 1 percent — to collect and manage our savings. Instead, we consumers need to save less and spend more in the name of a better future. We don’t need to silence the ant, but we’d better start listening to the grasshopper.
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Bits & Pieces (Tuesday Night Open Mic)
Posted on October 25, 2011 by Kevin S. Willis
Why you never see the black & white Flinstones episodes in the synidcation packages:
Speakin’ of how they used to smoke it up back in the day, here’s Desi Arnaz on I’ve Got a Cigarette–I mean, I’ve got a Secret.
Winston was obviously the brand of choice back in the day.
Not much has changed. Only now, it’s vajayjays.
Any one who listens to No Agenda knows it’s Big Pharma and various feminine hygiene products forcing all the big networks to shoehorn the word “vagina” into episode after episode of “comedy” programming. And if you’ve watched many sitcoms in the new season, it’s as good an explanation as any. Because I’ve heard the word in every sitcom I’ve watched, at least once, this season, and in every case the joke falls flat. It’s all about the Monistat.
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Comparing this bubble to the Great Depression
Posted on October 25, 2011 by Brent Nyitray
The last real estate bubble couldn’t have been bigger than the Great Depression, could it?
Actually, it was – about twice the size
The following chart compares an index of real estate prices for the 10 years leading up to the peak and then the behavior 5 years after. The Great Depression bubble ran from 1915 – 1925. The US bubble ran from 1995 – 2006.
For those wondering, the Great Depression bear market bottomed out 3 years later down 21% from the end of this chart.
Food for thought…..
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