Really? Keynes Was Right?

Nobel Prize Laureate and NY Times OP-Ed Columnist Paul Krugman in his last Thursday's piece Keynes Was Right wrote;

"In declaring Keynesian economics vindicated I am, of course, at odds with conventional wisdom. In Washington, in particular, the failure of the Obama stimulus package to produce an employment boom is generally seen as having proved that government spending can't create jobs. But those of us who did the math realized, right from the beginning, that the Recovery and Reinvestment Act of 2009 (more than a third of which, by the way, took the relatively ineffective form of tax cuts) was much too small given the depth of the slump. And we also predicted the resulting political backlash.

So the real test of Keynesian economics hasn't come from the half-hearted efforts of the U.S. federal government to boost the economy, which were largely offset by cuts at the state and local levels. It has, instead, come from European nations like Greece and Ireland that had to impose savage fiscal austerity as a condition for receiving emergency loans - and have suffered Depression-level economic slumps, with real G.D.P in both countries down by double digits."

He essentially makes the (intuitively plausible)case that spending cuts during a downturn can only exacerbate a nation's woes... And cites Greece and Ireland as proof...

Now, in my simplistic view of the world, I struggle with Mr. Krugman's assertions... For one, Greece and Ireland need "emergency loans". Greece and Ireland apparently subscribed fully to the Keynesian notion that when a government borrows from its own people and/or others, the deployment of the borrowed capital will provide offsetting stimulus and the wherewithal to later pay back the debt with interest... But, again, Greece and Ireland need "emergency loans"... And what's this about "savage fiscal austerity"? Yes, those who would offer aid to Greece demand that they show real fiscal restraint going forward (how dare they), that if they continue in their profligate ways, bailed-out they ain't... But "savage" is an awfully strong word, and wasn't Greece's austerity budget just passed the other day? Has there indeed been ample time for this "savagery" to cause a "Depression-level economic slump"? Or could it be that Greece is what becomes of a country when [virtually] its entire economy is at the mercy of bureaucrats spending other people's money on other people?

Our Brief New Year Message

Our 2012 objective, as a firm, remains to help our clients keep their heads about them... To maintain proper allocations, consistent with each individual/family's unique circumstances, time horizon and temperament - and to rebalance as needed... To encourage them, as always, to keep the blinders (to short-term volatility) on and maintain their long-term focus... To remind them that the equity portion of their portfolios' advances tend to (historically speaking) come in spurts (of varying lengths), and those who attempt to time the market's ups and downs risk missing the advances, as well as the buying of declines (through rebalancing), and thus risk blowing permanent holes in their long-term results...

As a commentator, my aim is to aggressively promote commonsense reasoning in a world dominated by media hyperbole and political confusion... To illustrate the unseen costs of every proposition - to, in essence, promote the free-market ideology... To take notice of the opportunities that lie ahead and, in the process, help our clients understand the logic behind our specific investment recommendations...

All of us here at PWA are sincerely grateful for the opportunity to work with a most wonderful group of clients... Please never hesitate to call on us at any time during the year (i.e., no need to wait for your semi-annual review date) when we can be of any service, in any manner, whatsoever!!

Wishing you and yours a healthy, happy, and enlightening New Year!!!!

Lessons from 2011 & Cause for Optimism

*If you're prone to earthquakes, never stick a nuclear plant on the beach...

*If you're a ruthless dictator, keep the peasants off the internet...

*Socialism is fiscally unsustainable... As Margaret Thatcher stated in February 1976, "Socialist governments traditionally do make a financial mess. They [socialists] always run out of other people's money. It's quite a characteristic of them." And in the words of Thomas Sowell; "Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it."

*We (President Obama) justify intervention (Libya) by "a moral imperative to prevent the massacre of citizens." Yet, when the same occurs elsewhere, our actions [in Libya] were inspired by a "unique set of circumstances"...

*Not smart to even suggest trying 9/11 terrorists in civilian courts in, of all places, New York City...

*Never mess with Navy Seals...

*Harold Camping doesn't know, after all, when the world's going to end...

*There's no buying an NBA title...

*The Amazon's current can wash away any Border (as in Amazon.com and Borders bookstores)...

*The banks of the Mississippi contain mother nature about as well as debt ceilings in Washington contain political ambition...

*Standard and Poor's couldn't foretell the disasters of Lehman and AIG, but they'll downgrade a country that prints its own money...

*Gold is no safe haven...

*By and large, pundits, politicians and the populace don't seem to understand that when you buy something, regardless of where it's made, with a U.S. dollar, you're supporting the U.S... Go find a Euro and try to spend it at Starbucks...

*Protesting cronyism is a worthy pursuit... That is until the politics are exposed... The "Occupiers" will never make a serious play at their own party...

*Those who would protest capitalism haven't the slightest clue what they're protesting...

*The last resort for failed socialist states is to privatize state-owned enterprises... Shoulda tried that first...

*Welfare states eventually become states on welfare...

*You can run [for President], but you cannot hide [your past]...

*Anyone who's aware of child abuse and doesn't do everything humanly possible to prevent its reoccurrence deserves prosecution (and should do time!!)...

*Payroll tax "holidays" cannot, by definition, produce long-term [positive] economic results... You have to come home [to reality] when your holiday's over, right?

*$trillions, stubbornly stuck, oncorporate cash and in bank excess reserves tell the 2011 story; uncertainty-induced inertia....

*Stocks can stay cheap for extended periods...

*Government intervention into the economy presents headwinds of its own, in that it generally comes laced with stifling new regulations... The current annual cost of regulatory compliance sucks $1.7 trillion annually from businesses... That would be roughly 40 million new jobs... Watch this 2 minute video...

*And lastly, in the words of Yogi Berra; "a nickel ain't worth a dime anymore"...

All that said, bumpy ride notwithstanding, there's cause for optimism going forward... As;

*Emerging nations, with their favorable demographics, have huge infrastructure needs, substantial growth prospects within, and welcome foreign investors...

*Better than 50% of the earnings of the companies comprising the S&P 500 come from abroad (emerging nations in particular)...

*Companies, by and large, are in good fiscal shape...

*Liquidity, interest rates and equity valuations line up nicely going forward...

*Pent-up demand will drive U.S. consumer purchases of autos and homes (ultimately).

*Pent-up demand will drive business investment (including acquisitions)... I.e., all that cash is burning a hole in balance sheets...

*Common-business-sense will [ultimately] outlast common-political-nonsense...

Who pays for the payroll tax holiday?

Market Commentary (audio)

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EU Crisis Update 12/23/11 (video)

The Monthly Statement Part 1

Correction: At the very end I said "added a hundred thousand dollars", meant to say "added a hundred dollars a month"...

A Sure-Fire Strategy (for suckers)

Heard a commercial for Updownstocks.com on the way in this morning... Subscribe to their service and they promise a 90% success rate... Amazing! So I'm thinking I should buy in and follow their strategy on behalf of our clients' portfolios... I mean they wouldn't pay for the radio ads and charge for their service if they weren't 100% confident they'll be right 90% of the time... Right?

Well umm, wait a minute... Why would they pay for the ads and sell their strategy if they were indeed certain it'll work going forward? I mean wouldn't they just make zillions for themselves using their own strategy? Or are they already filthy rich and care deeply for the suffering 99%? But if that were the case, wouldn't they just give it away?

And if everyone bought in, who'd sit on the other side of the trade? I mean if it's time to buy Company A, and everyone knew it, who'd we buy it from? Obviously no Company A shareholders would sell when 90%-right-updownstocks.com says buy... Right?

The moral of today's message; you can't time the market... And even if you could, you'd take your strategy to your grave... And if you buy the sure-fire strategy, you're a sucker...

I.e., remember, every transaction requires two individuals possessing opposing opinions...

Lost in the Woods (2011)

Using the see-the-forest metaphor, we'll first acknowledge that, for virtually all of 2011, we've been mired deeply within the trees; debt ceilings, budget deficits, sovereign debt, payroll tax holidays, Japan tsunami, Middle Eastern/North African uprisings, regulatory expansion, market volatility, commodities inflation, etc...

It's all too easy to get lost in the woods, to lose perspective and self-fulfill some pundit's prophecy for our portfolios... I.e., to panic and sell in the midst of a market decline... To, sometime later, wake up to the painful fact that the devastation we feared, was simply, once again, the market doing its business...

Yes, governments can start fires, but whether the trees ultimately burn is determined entirely by natural forces... Nature will inevitably burn the dry, decaying foliage... If man steps in with a scientifically concocted fertilizer, nature may allow some immediate stimulation, but, where necessary, it will nonetheless cull the forest...

When nations lever themselves up, and promise more than they can deliver, the market (nature), through higher borrowing costs, brings them down... Man may intervene, but ultimately, the market determines the outcome...

Stay Tuned...

December 21, 2011 Market/Economic Report (video)

Dear Mr. Chambers,

Republican presidential hopeful Rick Santorum proposes zero tax on all repatriated corporate cash, as long as it's put into plants and equipment... Nevada Democrat Shelley Berkley proposes a reduced repatriation tax if companies promise to increase U.S. payrolls... Good old NY Democrat Chuck Schumer, along with Andy Stern (former union president), proposes using a low 5% repatriation tax to fund an infrastructure bank...

While all other developed nations allow their corporations to bring home foreign-earned(and taxed) profits, either tax-free or at 2%, without condition, the U.S. policymaker would reduce Washington's cut in exchange for control over how a company would deploy that cash - or - as an opportunity (for he/his union pals) to grow the size of our ever-growing government... In thinking he can coerce job growth, and, most importantly, his own political success, the politician would have you and me believe that government, with its $1.6 trillion budget deficit and its $15 trillion debt would best direct private sector profits... Operative words being "his own political success"...

Here's a pretend letter from congresswoman Aty Pical (she would be your 'atypical' politician) to Cisco Systems CEO John Chambers with a message that would bring foreign-held capital back to the U.S. and [potentially] do wonders for our economy:

Dear Mr. Chambers,

Congratulations on your success abroad. We are proud that you, the CEO of a United States corporation, had the foresight [and freedom] to develop profitable ventures worldwide. Should you see opportunity in the U.S. market going forward, we encourage you to invest, free of repatriation tax, those earnings herein, however you see fit. And we promise to stay out of your way in the process. For all evidence strongly suggests that you are substantially more adept at allocating capital than we here in Washington...

We wish you continued success in the years ahead...

Sincerely,
Rep. Aty Pical

This Week's Quotes

"Keynes himself was famously obsessed with affecting government policy. So he focused his brilliant intellect on the short-run rather than on the long-run; on the seen rather than on the unseen; on the superficial rather than on the foundational; on what is politically expedient today rather than on what is economically sound tomorrow." Don Boudreaux on John Maynard Keynes (the architect of today's public economic policy)...

"The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups." Henry Hazlitt (author of Economics in One Lesson) on how good economists view their craft...

"If there is a shutdown, 800,000 nonessential federal employees will be suspended. You know, maybe that's our budget problem right there. We have 800,000 nonessential federal employees." Jay Leno on the real problem!!

Market Commentary (audio)

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The Washington Flu

Two years ago last August the shingles did a number on my eighth nerve (runs between my brain and my left ear)... Unfortunately (it would seem), a quarter-decade has passed and that nerve just ain't healing - the ear rings constantly...

But, like I said, this would only seem unfortunate... As it turns out, my hellacious bout with the shingles has left me with a barometer; when I get 8 hours sleep, the ringing 'virtually' goes away... When I get 4, my left ear rings like a grammar school fire alarm (imagine the annoyance)... And I suspect it was my formerly-typical 3-4 hours sleep that laid open my immune system to begin with... So what do I do? I (more often) sleep like a normal person... And, from what I've been told, healthy sleep habits lead to greater longevity... So maybe I live longer having suffered the 2009 shingles...

The CEO who suffered the 2008 recession hears a ringing every time a politician proposes tighter regs or higher taxes... He therefore sleeps under a pristine balance sheet laced with enough cash that, were he inspired to put it to work, would surely push GDP, as well as the market, to substantially higher digits... He's simply not willing to venture beyond his safety net while fearing he could catch the Washington flu at any moment...

Bottom line; whether we're talking cash on corporate balance sheets or excess reserves in the banking system, today's money is smart money... It will ultimately be put to work, I assure you, but only when it makes good sense... And I wouldn't have it any other way...

Mike Kelly doing his job (must see video)

Democrat, Republican or Independent, you cannot in good conscience deny that this man makes perfect sense... If he legislates true to his words, Mike Kelly (from a fiscal policy standpoint) exemplifies the policymaker our country so desperately needs... Anyone who would reject the truth in his assumptions is either entirely partisan or intuitively challenged... This gentleman, if he's for real, would get my vote regardless of party affiliation... Pass it on!

http://youtu.be/CEArFmRDtrw

This Week's Quotes

From Joseph Schumpeter (2/8/1883

Light Volume...

The headline reads: "Market down three straight days on light volume." Now you know what “market down” means, but do you know what “light volume” means? In case you don’t, it goes like this: volume = number of shares changing hands. Therefore “light volume” means there’s fewer number of shares changing hands than normal.

Here's a simple example of how volume impacts volatility: Let’s say we get bad news out of Europe, or the U.S., or China, or Capitol Hill, or wherever, and you say “enough’s enough.” You’ve ridden that one share of Apple from $40 to $400, you checked Yahoofinance.com and see it priced at $385 – you’re ready to bail.

So you call me and you say “sell my Apple, I’m goin shoppin.” And I say, “at the market?” And you say “at the market, or wherever I feel like shoppin.” I chuckle and say “I mean do you want me to sell your Apple at the market?” You say “you mean you can’t sell it from your office?” I chuckle and say “I mean are you willing to take whatever you can get for it, or do you insist on a price?”. You say “I want $385”. I say “great.” You say “can you direct deposit?” I say “sure.” You say “when?” I say “when it sells.” You say “huh?” I say “somebody has to be willing to pay $385.” You say “Oh (long pause), okay. But what if nobody’ll pay $385?” I say “then it won’t sell.” You say “get what you can for it.” I say “great.”

So I put in a sell order, at the market, and it fills (sells) at $350. I call you and say “it sold at $350.” You say “geeze! Is that all?” I say “yep. Europe, etc., has buyers skittish at the moment.” You say “hmm, I guess that makes sense.”

Now let’s say you and the sucker (or genius), willing to pay $350, were the only two market participants today. Even though only a single share traded hands (very light volume), the headline reads “Apple plunges 9.1% on European debt fears.” Feels like all hell’s breaking loose, but in reality, there’s no panic – it’s just that, for today, nobody’s in the mood to buy.

Really quick, let’s turn it around. You just figured out your new iPad 2 (you’re a new man/woman), and you want to own the wonderful company that created the instrument of your new passion. So you call me and say “I want to buy a share of Apple.” I say “great. At the market?”. -(let’s skip the “huhs”, etc.)- You, seeing it on Yahoofinance.com at $385, say “sure.” I call you back a bit later and say “you got it for $420.” -(let’s skip all the dialogue)- Why so high? Because the news out of Europe was good, and the sucker (or genius) who owned that share of Apple wasn’t willing to let it go for anything less than $420… Even if you and the seller were the only two in the market, the headline would read “Apple skyrockets 9.1% on European optimism.”

As for this week; the Dow’s off a few hundred points on “light volume”. I.e., no big downside conviction (a few sellers), just nobody feeling like buying (at yesterday’s prices)– I suspect because of news out of Europe.

December 14, 2011 Market/Economic Commentary (video)

Market Commentary (audio)

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Nomomoneyprinting...

The Dow was up triple-digits Tuesday until the news that Germany's Angela Merkel rejected increasing the Eurozone bailout fund... In a blink the market was trading at zilch on the morning...

Then back up a hundred it went because somebody was thinking Bernanke would utter "QE3" in his post-meeting commentary...But nope, he actually said the labor market is showing improvement (oh dear) and made no utterance of a near-term dollar-weakening strategy...

Dang! Germany's screwing everything up because it's demanding fiscal responsibility from its over-bloated, spend/borrow-happy subordinates, and, the Fed's not helping when it doesn't promise momoney...

So what do you get? For the moment you get less government spending, less money printing, cheaper gas and cheaper stocks... All good things if you can think beyond the next five minutes...

Letter to the Editor

A poignant message from Phil:

Hi Marty. Well here goes.......

1. I believe in the free market system.
2. I believe that government has far exceeded its role; must be reduced in size immediately. It will be unfortunate that many people loose their jobs due to it's reduction, but things MUST change. (Both parties)
3. I believe that protectionism via tariffs will ultimately severely damage our fragile economy.
4. It is true that history repeats itself; however sometimes those of us that rationalize the events of the moment, do so without recognizing the eventual impact of our actions. Please understand, I'm as guilty as the next guy, but what is clear to me and as you have stated many times; we're spending more than we're bringing in. It must stop.
5. I do believe that the US economy can live with a deficit, and prosper. However, not to the levels that we have currently permitted.

All that said, we have a broken governmental system (bloated and unable to perform properly) If it were 100 years ago, what would we as citizens do? Well, for one; we didn't consider Welfare as a legitimate occupation and means for earning a living. Secondly; the taxes that the "Citizens" of the United States paid actually were used somewhat wisely. Today there are too many watchdogs. If you're a criminal; go to jail and work your time. If the crime is serious enough, the cost of a bullet is only about .75 cents. If you're a citizen; pay your taxes, if you're not a citizen; get out of Dodge. We give too much aid to other countries (never repaid), should concentrate on our own "Legal Citizens", creating jobs.

If US industry can't find a way to build a widget more efficiently, then build something else. We are our own worst enemies; technology developed in the US, in one form or another, has found its way to work against us. It's logical that if you build a better mouse trap and give the technology to another country, they will improve upon it. Live with it...... we have great minds... build something else.

The math is, indeed, the math...

Econ Prof Don Boudreaux, blogging at Cafehayek.com, sheds commonsense onto this entirely fallacious statement made by the President to Steve Kroft on Sunday's 60 Minutes;

"Steve, the math is the math. You can

Market Commentary (audio)

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Another great month for trade!!

Great news folks... International trade numbers are in, and the U.S. successfully imported $40+ billion more in goods and services than it exported last month... I.e:

*The free-to-do-business-anywhere U.S. consumer (and institutions) continues to find bargains worldwide... Which leaves her with more in her pocket with which to save, invest in her kids' education, spend at local businesses, etc...

*Foreign producers have 40 billion more U.S. dollars with which to invest in U.S. stocks, bonds, real estate, job-creating enterprises, etc...

*U.S. businesses, employing huge numbers of U.S. citizens, continue to profit from the bargains they offer U.S. consumers through their foreign supply chains...

*The U.S. dollar is still a valuable commodity... I.e., foreign producers are so eager to accumulate them that they produce [11.5% of] the goods we need at the lowest possible prices...

Like I keep saying;

Protectionism is a most exploited, pernicious and, sadly, pervasive economic fallacy

The Cost of Coercion

Machinist workers in Seattle cheering after their contract with Boeing was ratified. The current accord expires in nine months. By BLOOMBERG NEWS Published: December 8, 2011

Unions are the backbone of our economy, of our Nation's middle class, right? I mean they protect the common man against fat cat corporations, right?

Let's check it out:

Four union walkouts at Boeing over the past 22 years (that's gotta be almost every new employment contract) have, according to Bloomberg, delayed literally hundreds of deliveries... Of course, as the union is fully aware, Boeing can ill afford another strike at this time...

Boeing therefore signed a four-year contract that will increase production in Seattle (will build a 737 there), guarantee 2% annual pay raises to members, provide a new performance-based incentive program, pay a $5,000 "ratification" bonus this month and avert a strike...

The machinists' union agreed to then drop its complaint with the National Labor Relations Board over a new 787 non-union plant in South Carolina, and its members will pay more for medical benefits...

So Boeing, hamstrung by the union, agrees to build a new jet under sub-financially optimal conditions (would've been cost-effective in South Carolina)... And you say; "who cares if Boeing is forced to put out more when it benefits hard-working Americans?"

Now you gotta ask yourself; who ultimately pays the price? "Boeing" you say... I say "nay"... well, maybe not entirely nay... I guess Boeing could go the way of the auto maker... But it's like anything else, you up the cost of a business's doing business and the cost gets passed onto customers, shareholders and, sadly, in Boeing's case, all those folks in South Carolina (assuming that's where they'd have gone had they their druthers) - the would've-been Boeing employees, the contractors and all the ancillary workers who would've built the new plant, and all the South Carolina businesses/consumers who would've benefited from all that efficiently-produced economic activity....

When the politician and the columnist/nobel-laureate-economist champion union's as the backbone of the American economy, as institutions to be coddled and protected, they never seem to consider the unseen side-effects of coercion... I wonder why?

Fairness or Freedom??

It's been my intent from day one to offer commentary herein that transcends political boundaries... To offer my perspective on markets, economies, investment theory and politics in as objective a manner as my free-market instincts allow... Therefore I risk finding myself at odds with some readers when I suggest that unilateral free trade is in our best interest, when I imply that too large a number of the unemployed are abusing the system, when I criticize a conservative politician, a liberal politician, an "occupier" or, as I have repeatedly of late, find fault in the ideology of a number of Republican candidates... Thus far I've had unsubscribers from both the left and right... Each subtly, or not, accusing me of unfairly promoting their opposition's platform... I suppose if I'm ticking off both sides of the aisle, I'm achieving my objective...

If today's message is the proverbial straw for you, I completely understand. Just shoot me the email and I'll quietly concede your subscription...

"This is a make-or-break moment for the middle class and all those who are fighting to get into the middle class," Says President Obama in Tuesday'sOsawatomie, Kansas speech. "At stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home and secure their retirement."

What the &!#% is he talking about???? I'm sorry if you're a sympathizer... But let's entertain just a little intellectual honesty here... Yes, I understand, the President and his advisors have determined that rich-bashing plays well with the populace, nevertheless, as an American, I am offended!

We damn well do live in a country where working people can do the above? Fact is, the only countries in history where "working" people had not these opportunities have been those ruled by heavy-handed dictators. As for centrally-planned economies, you may think they offer such opportunity, but of course (being the intellectually honest bloke you are) you'll look across the pond and see the ultimate effect of politicians promising the populace that which their budgets can't sustain...

"In the end," the President said, "rebuilding this economy based on fair play, a fair shot and a fair share will require all of us to see the stake we have in each other's success."

Here's how it works folks: You, acting in your best interest, produce a good or service that others benefit from and sell it at a price that makes you a profit... If others can't afford it, you'll have to find a cheaper method of production or profitably produce something else. Your product could very well be your talents offered to your employer... If your talents justify a wage, determined by the payer (your boss), that affords you a home and a retirement account, you're in luck. If not, you'll never starve in America. But if you want that home and pension bad enough - it's not to be handed to you, it's not to be taken from someone else (not in America) - you'll work harder and/or you'll develop better talents... Government intruding on this process can only corrupt it...

"Fairness = A (the politician) deciding what's right for B and C, and taking something for himself along the way"... Milton Friedman

"The society that puts equality before freedom will end up with neither. The society that puts freedom before equality will end up with a great measure of both"... Milton Friedman

This year's federal budget tops $3.8 trillion... Our projected revenue is $2.2 trillion - leaving us in the red by a record $1.6 trillion... Unfathomable!! So how do we fix that? Simple; we have three options: One; cut the budget to match revenue... Two; raise tax rates, halt all new spending initiatives and pray the economy doesn't contract under the weight of higher taxes... Three; leave tax rates as is, or reduce them (per JFK), get out of the way (no new regs) and allow the economy to expand...

Fed Chair Ben Bernanke, on the urgency of addressing budget challenges, stated in January 2007: "The longer we wait, the more severe, the more draconian, the more difficult (think Europe) the objectives are going to be. I think the right time to start was about 10 years ago."

Here's our budget, year-by-year, since 2007...

2007 United States federal budget - $2.8 trillion (submitted 2006 by President Bush)
2008 United States federal budget - $2.9 trillion (submitted 2007 by President Bush)
2009 United States federal budget - $3.1 trillion (submitted 2008 by President Bush)
2010 United States federal budget - $3.6 trillion (submitted 2009 by President Obama)
2011 United States federal budget - $3.8 trillion (submitted 2010 by President Obama)

Apparently Washington wasn't listening...

Market Commentary (audio)

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December 7, 2011 Market/Economic Report (video)

"Still a man hears what he wants to hear and disregards the rest, hmhmhmhmhmhmhmmmmm hmhmhmhmmmm"

Mark Zandi, Moody's Chief Economist, says that extending the payroll tax cut will add .5% to next year's GDP, and extending Unemployment Insurance benefits will add .4%... I.e., almost one full percent of economic growth next year hinges on extending short-term programs... Somehow he knows these things...

So here's how it goes: If the extensions are granted, and we grow by 3% next year, 1/3rd of that growth (and oodles of new jobs) will be the direct result of the wisdom of those who pushed through the extensions...

If, on the other hand, the extensions are not granted, and we grow by 3% next year, our economy will have been held back 1/3rd (and thousands will be left jobless) as a direct result of the actions of those who blocked the extensions...

Your bias will determine whether or not you buy it...

"Still a man hears what he wants to hear and disregards the rest, hmhmhmhmhmhmhm hmhmhmhm" Simon and Garfunkel

Market Commentary (audio)

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Kennedy got it right...

Warren Buffet's gripe goes like this: If a rich guy makes say $2 million (net) this year, of which ordinary income (wages, interest, etc.) amounts to $500k, and the remaining $1.5 million results from sale of stocks, real estate, etc., his effective Federal tax rate would be a mere 19%, as follows:

Capital Gains Tax (15%): $225,000
Ordinary Income Tax (35% top marginal): $146,574

Total Tax: $371,574 (19% effective tax rate)

No one would dispute the fact that Mr. Buffet has been a blessing to the business of America... He has employed capital to the betterment of himself and his fellow man... And being the generous soul he be, he would like to see the tax code changed so that those who have achieved great success (notice I don't characterize them as "fortunate") pay a larger percentage of their income in taxes... He would get his wish if the government would simply end the tax break for capital gains...

Here's how allowing the capital gains tax break to expire (set to on 12/31/2012), assuming no new legislation keeping it [at all] below ordinary income rates, would look for our $2 million earner:

Capital Gains Tax (35%): $525,000
Ordinary Income Tax (35% top marginal): $146,574

Total Tax: $671,574 (34% effective rate)

Or, what if we, as some suggest, compromise and go back to the heydays of President Clinton? Many pundits are quick to remind how well the economy did during the '90s, while tax rates were considerably higher... Here's how the $2 million would've been taxed at the end of Clinton's reign (he did lower the cap gains tax from 28 to 20% by the way):

Capital Gains Tax (20%): $300,000
Ordinary Income Tax (39.6% top marginal): $171,349

Total Tax: $471,349 (24% effective rate)

The question is, was it the booming private sector or income tax rates (higher on all income levels by the way) that created the '90s economy? Dumb question, I know...

There's no debating that we had a great economy in the '90s... Revenue poured in as productivity gains (all the new technology) made companies famously profitable... Tech sector spending/investment (not public sector spending) of course led the way to a balanced budget...

So the question for today is; would we be wise to raise taxes (on any level of income) at this juncture? I.e., would we be better served by supporting the public sector or the private sector?

Here's how John F. Kennedy handled things back when he presided over an economy struggling its way out of recession. His plan, enacted the year he died (1963), preceded "a boom that lasted through the 1960s and into the 1970s"... We don't need leaders committed to bringing both sides together, we simply need leaders committed to commonsense... Were today's left to follow Kennedy's lead, today's right would have no choice but to follow as well...

Highlights of his remarks to the Economic Club of New York on Dec. 15, 1962... (excerpted from an abridged version of his speech featured in November 25th's Investors Business Daily)... I highly recommend you read the full text:

"the most direct and significant kind of federal action aiding economic growth is to make possible an increase in private consumption and investment demand - to cut the fetters holding back private spending.

In the past, this could be done in part by the increased use of credit and monetary tools, but our balance of payments situation today places limits on our use of those tools for expansion.

It could also be done by increasing federal expenditures more rapidly than necessary, but such a course would soon demoralize both the government and our economy... If government is to retain the confidence of the people, it must not spend more than can be justified on grounds of national need or spent with maximum efficiency.

The final and best means of strengthening demand among consumers and business is to reduce the burden on private income and the deterrents to private initiative which are imposed by our present tax system - and this administration pledged itself last summer to an across-the-board, top-to-bottom cut in personal and corporate income taxes to be enacted and become effective in 1963...

In short, to increase demand and lift the economy, the federal government's most useful role is not to rush into a program of excessive increases in public expenditures, but to expand the incentives and opportunities for private expenditures...

I am confident that the enactment of the right bill next year will in due course increase our gross national product by several times the amount of taxes actually cut. Profit margins will be improved, and both the incentive to invest and the supply of internal funds for investment will be increased. There will be new interest in taking risks, in increasing productivity, in creating new jobs and new products for long-term economic growth.

It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the rates now... The experience of European countries and Japan has borne this out. This country's own experience with tax reduction in 1954 has borne this out. The reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy that can bring a budget surplus.

Our practical choice is not between a tax-cut deficit and a budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy, or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues and achieve, I believe - and I believe this can be done now - a budget surplus. The first type of deficit is a sign of waste and weakness; the second reflects an investment in the future..."

If you can get it for the same, buy American (video)

I am a passionate proponent of foreign trade... Notice I didn't say "free trade"... Free trade implies two or more countries trading freely with one another... Quite frankly, I'm not concerned when a foreign country tariffs a U.S. product, but it troubles me to no end when we tariff a foreign product; when our policymakers favor a select industry over the U.S. consumer... Not to mention the fact, as I've illustrated here ad nauseum, that tariffs can exact real harm upon their host economy...

That said, I would never discount any American's desire to buy American... It's a personal call... And, per the video below, there are indeed instances where one might even buy USA in large scale without severely hitting one's bottom line...

The cost of constructing the featured home in Diane Sawyer's report, using only U.S. made materials, was a mere 1% more than it would have been using the standard array of foreign made materials... Now of course, in most cases, 1% on the cost of a home is at least a couple grand (that someone will eat), but nonetheless, to many that would be a price worth paying to support American industry... And I totally sympathize....

The one caveat that I don't believe I've ever seen addressed in expos

Good Grief! Where Are All The Jobs? (originally posted Oct 2009)

It

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November 30, 2011 Market/Economic Report (video)

Temporary measures beget temporary (election aiding) results...

The great political debate of late is over whether or not to extend the current payroll tax cut that cuts into the social security trust fund... The proponents cite Barclays Bank Economists who say if it's allowed to expire we're looking at a 1+% hit to next year's GDP... The opponents say it hasn't produced squat thus far and blows another $300 billion hole in the budget - and that the proposed offsetting permanent tax-hike on high-earners will result in a net long-term hit to the economy...

Milton Friedman's Permanent Income Hypothesis suggests that the opponents would have it right.... Its central idea being that people base consumption on what they consider their "normal" income. I.e., they maintain a fairly constant standard of living even when their incomes vary from month to month or from year to year. Therefore temporary increases in income would have minimal effect on their spending...

While I'm a huge fan and ardent student of the late Mr. Friedman, his hypothesis is, to me, unconvincing... My experience (with clients) has been that long-term allocations of income (mortgages, retirement savings, etc.) tend to be based on "normal" income... And that consumption spending (other than on essentials, i.e., discretionary) is based on discretionary income... Therefore, when an individual realizes a temporary increase above "normal" income, he/she is every bit as (if not more) likely to spend it as he/she is to save it...

Now, to the payroll-tax-cut-opponent's point; I entirely agree that, at this juncture, it hasn't worked... But I wonder if that hasn't been simply the result of fear (inspiring people to save the extra, or pay down debt). And that, in a period of greater consumer confidence (that survey having improved of late), the consumer wouldn't indeed spend every dime (record-setting Black Friday) of that temporary pick up in income...

I'm afraid the opponents, this time around, may be barking up the wrong tree... Simply stating that it hasn't worked thus far, and therefore won't this time, is very likely to bite their credibility come this time next year...

They would be wiser to focus on the strikingly obvious problem with "temporary" tax cuts - the fact that they're temporary... Think about it; how can we expect anything but temporary (election-aiding) results from a temporary tax cut? And how can we expect anything but a weaker economy and larger deficits (more gov't spending) from a permanent tax increase on any consumer/producer, regardless of his/her level of income?

And I don't care what side of the aisle you lean to; if you don't work for the government (politicians [especially] included), if you're not on [or do not enjoy being on] welfare or unemployment, or if you believe that giving a man the opportunity to fish is better than giving him a fish, you cannot, with a straight face, argue that capital is better allocated by bureaucrats than it is the private sector...

As for the pending vote; look for the Republican Congress, those supposed fiscal champions, knowing it's a fundamentally bad idea for the country, to go right along with the payroll tax cut extension anyway... I'm guessing it would be too politically risky for the dubbed "Party of No" to do the right thing... In the end, they're all just a bunch of politicians...

My Kind of Insanity!

Let's pretend it's early 2009 and you happen to be your typical modern-day politician... And let's say you inherit an economic nightmare: A mammoth 44% of revenue deficit, a sick economy, and a looming credit rating downgrade threat from Moody's... Now, being typical, if you happen to run a nation, you'd attempt to print your way out of trouble; bailouts, stimulus programs, quantitative easing... If you run a state, you'd grab all the stimulus money you can and transfer most of it straight through to your myriad entitlement programs...

Now let's pretend you're different, let's pretend your name is Luis Fortu

Idealistic, I know...

“As we go into an election year, I think really fixing problems gets politically harder,” said Nicholas Johnson, who tracks the conditions of states as vice president for state fiscal policy at the liberal-leaning Center on Budget and Policy Priorities. From Some States Are Facing Revenue Shortfall—Again… Published: Wednesday, 23 Nov 2011 by Reuters:

Alas, Mr. Johnson I’m afraid has it right…

The latest example of going-into-an-election-year politicking would be The Super Committee failure—efforts stemming from nothing more than a weighing of political risks. Ironically, a no win proposition for the party that was virtually powerless the first two years of the present administration. The Democrats facing recession-induced disaster, come November 2012, are masterfully exploiting the Republican’s Achilles heel; a slash spending/no new taxes, written-in-blood Bush(1)-style pledge.

“The “Party of No” wants to cut your social security, medicare, medicaid, food stamps, etc., all the while refusing to ask the fat cats to pay their fair share.”  That’s the left’s battle cry. They’re thinking the populace will buy in and give them yet another round of change-making. We’ll see. It’s a long road to November.

I’m thinking the Republicans have a legitimate riposte. And, ironically, their best political maneuver would be in the best interest of the country. They must join with the ranks (not that they’ll be widely accepted mind you)—the occupiers, the victims, the “99%” – and move to end crony capitalism once and for all (realistically; once and for awhile). No more loopholes, no more subsidies or deductions for government-friendly (to the right or left) enterprises, and no more bailouts. They need to call it like it is. Admit that government screwed up the day it flinched first and performed its first bailout of a supposedly systemically important enterprise. Roll back all new regs imposed on the bailees, etc., over the past three years. That’s right, let them do business within the framework of pre-2008 regs. Knowing there’ll be no backstop, and no incentive to grease the politician, will inspire prudence and due diligence, I guarantee it. Then lower the corporate tax rate to 25% (even lower would be better). I don’t know whether that (no loopholes w/lower rates) will initially result in more or less taxes due, but I assure you, longer-term, the confidence that stems from tax and regulatory certainty will unleash capital in a huge way, create jobs and ultimately increase government revenue.

Idealistic, I know…

Shoulda experimented with low income driving first...

So the fella whose mismanaged his affairs, and consequently sports a 600 credit score, can finance a brand new car - but only at an interest rate of 12%... The problem is, he may not be able to afford it? While the guy whose managed his affairs well, and consequently sports an 800 score, can finance the same car at an easily affordable 2%...

More evidence that our system tilts in favor of the fortunate... The 800 scorer makes out, the 600er gets screwed... It's as if those who go to school, work hard, pay off their student loans, and save for their futures should be rewarded with opportunities not available to those who choose otherwise... Blatantly unfair!!

The problem folks isn't government, it's the free market... In the case of lending, banks are free to charge rates commensurate with risk... Lending to someone with a history of not honoring his commitments is risky business and therefore the banks require a higher return on investment... The government needs to put a stop to this prejudice and force lenders to treat everyone equally...

One solution would be to require banks to pool the risk: Instead of charging one customer 12% and the other 2%, split the difference and charge them both 7%... The banks still make out fine... In fact, there'd be a dramatic pick up in pickup sales and, consequently, loans... A greater number of subprime borrowers could get into cars they couldn't previously afford, and the greater demand would force prices and production higher. Everyone would be driving brand new cars and the economy would be booming!!

Hmm?? Sound at all familiar? Think subprime mortgages... Think real estate bubble... Think Barney Frank 2003:

A bit of tough love...

There's this growing frustration with Germany for not stepping up and fixing the Euro problem... 'The one country that's gained big time from the Euro experiment shouldn't be so reluctant to step in and help its prodigal brethren', many think... But unlike the Good Book's Prodigal Son, the Euro's wayward children don't get an open-arms pass for all their wandering and squandering... However I do sense there's still a little something pulling at Germany's heartstrings...

Chancellor Merkel indeed maintains her adamant stance that there'll be no Euro bond and no ECB rescue of sovereign debt, per CNBC.com this morning: Hopes for a swift resolution have been dampened after yet another inconclusive summit on Thursday. German Chancellor Angela Merkel, French President Nicolas Sarkozy and Italian Prime Minister Mario Monti's meeting did not result in any new initiatives, with Merkel reiterating her opposition to issuing joint euro bonds and allowing the ECB to print money.

However, she has offered up hints of late that maybe, just maybe, there is a scenario where Germany can step up without herself losing face... Here's more from this morning's article: Besides the German obsession with central bank independence and fear of hyperinflation, the core of the German opposition is "all about conditionality," Carsten Brzeski, an analyst with ING, said.

"The German government does not believe in a quick fix of the crisis, only in structural changes," Brzeski said.

"In fact, chancellor Merkel has recently made several pleas for more political integration in the euro zone. However, it is obvious that the German government first wants to see more political integration before it would give structural access to German money. This explains the German emphasis on Treaty changes," he added.

And seriously, can you blame her? Instead of just throwing money at the problem willy nilly, Germany's saying "hey, if you want our help, show us you can handle it, responsibly"... A bit of tough love you might say....

Something to Celebrate

With a hint of concern, perhaps disappointment even, the cable network staff economist reports that government spending has declined four straight quarters... He laments;

"now four straight quarters of decline in government spending in the GDP accounts, that hasn't happened since the wind down of government spending in the wake of the Vietnam War in 1971. So it's been a long time since government has been this sort of a drag on the economy."

"It's been a long time since (a decline in) government (spending) has been this sort of a drag on the economy" - let that sink in... As if government spending, as if $15 trillion in national debt, as if a $1.5 trillion budget deficit and its attendant uncertainty hasn't indeed been THE drag on the economy these days...

Notwithstanding the impact to GDP, I'm thinking four quarters of decline in gov't spending is something to celebrate...

Never [ever!] forget, the government doesn't have its own money... It has tax revenue that it extracts from the private sector... Every dollar the government doesn't spend is ultimately one the private sector allocates... You think maybe that dollar has a way better chance of growing (jobs, etc.) in the private sector than it would in the clutches of the politician?

How Bonds Work - and the European Debt Crisis (video)

Big time sacrifice this ain't...

So what do you think about this pending "mammoth" sacrifice (the so-called Super Committee's charge of $1.2 trillion in spending cuts over the next decade)? Listening to the spenders, you'd think we're facing 10 years of gut-wrenching austerity...But they're only talking $1.2 trillion out of a budget estimated to increase our debt by $10.2 trillion...

So while they'd have us believe the deadlock is over how to manage less spending, what they're killing (let's pray) their careers over is how to stem the projected spending/debt increase by a paltry 10%...

It's like the spendthrift consumersaying, "instead of running up my credit cards by another $50,000, I'm going to sacrifice big time and only spend $45,000 I don't have..."

Sacrifice sharing

"Shared sacrifice", "fair share"; the mantras of those who'd raise taxes to cure our present ills... I'm sorry, but this has gone way beyond any semblance of commonsense... The Administrations and Congresses of the past decade+, consisting of both Republicans and Democrats, have furthered their respective agendas with no regard for anything other than what a fiat currency has to offer, i.e., unfettered printing...

Let's rewind all the way back to the ancient times of 2007... In 2007 our budget was $2.7 trillion, against revenue of $2.5 trillion (sadly The Bush Administration was bragging about the mere $200 billion deficit)... Today our budget is $3.7 trillion, against revenue of $2.2 trillion... I.e., over the course of the past 4 years we've ramped up annual spending by $1 trillion while tax revenue has declined (due to recession, not tax cuts, mind you) by only $0.3 trillion... I.e., politicians have been fully engaged in sacrifice sharing... I.e., while you've been sacrificing your time and resources (working your rear off, raising your kids, paying your bills, your taxes, saving for retirement, etc.), our policymakers have been sharing (and leveraging) your tax dollars with whoever bests their odds of keeping their jobs...

Now I'm not entirely suggesting that raising taxes should be entirely out of the question... I've stated here before that if a corporate tax code overhaul, consisting of closing loopholes and lowering rates, results in a net increase in revenue, so be it... It's the right thing to do, and I suspect that the certainty of a simpler tax code alone might inspire companies to begin deploying some of that $trillion+ resting on their balance sheets...

But let's not pretend we're in this fix as a result of heightened inequality...
It's like 4 years ago you were making X, paying taxes, etc... Today (if you're lucky) you're still making X, paying taxes, etc... While 4 years ago the government was spending X... Today it's spending Y (X+$1 trillion)... And they'd have you believe that the gap between government spending X and government spending Y is the result of you (or someone) not paying your (their) fair share... Ask yourself, is the problem taxes or spending? Now be honest...

Now read Dude, we need to put you on a diet...

Doodoo's doing them in...

If you're an "Occupy Wall Street" sympathizer, aren't you just a little embarrassed? Forget for a moment that their message is harder to make out than Alcatraz on a foggy morning (that in and of itself ought to discourage your allegiance), but when the Mayor of San Francisco, the "liberal" capitol of America, wants to kick your can down the road, your cause is in deep doodoo my friend...

And speaking of doodoo, your heroes are on the outs due to unsanitary acts too grotesque to mention on this family channel...

But you know, as nauseating as the whole thing's been, I'm thinking the efforts of these vulgar vagabonds haven't been entirely in vain... As misplaced (should've been placed in DC) as this movement's (not to mention bowel movements) been, if it has in any way shined more light on crony capitalism (gov't picking its winners) it wasn't all for naught...

Should we default to commonsense?

Granted, I'm a bit strange, but I enjoy studying economics... And as much as you'd suspect I'd go searching for only that evidence which supports my free market biases, that's not entirely the case... I do in fact subject my nervous system to even the most Keynesian of Keynesians, the likes of Nobel Laureate Paul Krugman and others... I suspect therefore that someday in the not too distant future some caring soul might suggest a little Botox to undo the crevices etched between my eyebrows...

It is indeed troubling:
In this morning's NY Times Mr. Krugman emphatically states the opposite of the logic I was reared on... He implies that the path to our nation's prosperity involves tax and spending hikes (reading Krugman does more to add character to my brow line than just about anything I can imagine)... What probably frustrates me the most is his penchant for blurting, with no links to studies that might support his position...

When you have a little time, if you're a bit strange, read Krugman's article, and this one [I just quickly Googled] that leans more toward my bias...

In the end, shouldn't we simply default to commonsense? I mean shouldn't we apply to government spending the same logic we apply to our personal spending?

I know people, personally and professionally, who operate their finances much like our government (present and immediate past administrations in particular), and I know people who pay off their credit cards every month, save for their vacations and store nuts for the winter... I find the latter (save for the obsessive/compulsive) to be, virtually without exception, happier and healthier than the former...

Unscientific as that (comparing gov't money management to personal, and comparing personal happiness among spenders and savers) is, I think ultimately that's how we should consider how we allow our government to operate going forward... Doesn't Europe clearly make the case?

Dude, we need to put you on a diet!!

So the nurse invites you back, asks you to slip off your 4-inch heel boots, you step on the scale, she rests the sliding bar on 261 pounds, you cheat a tiptoe to 59 inches...

Ninety minutes later (you're starving) the doc says "Dude (young/hip doc) we need to put you on a diet!" You say "how about diet pills?" Doc says "no, I don't like the side effects, and your heart's not sounding so good. Let's see how you do with just cutting calories for awhile." You say "no way Doc! That's not fair! If you don't give me the pills I'm not cutting back what I eat!!" "What'r you nuts?" cries Doc, "whether or not you get the pills, assuming you wanna live, you still gotta go on a diet!!"

So our nation's frame currently supports $2.2 trillion per year... We step on the scale and we're at $3.7... One side says "Dudes we have to cut spending!" The other says "how about we raise taxes?" The one side says "let's see how we do with just spending cuts first (being that the economy's been so erratic)." The other says "that's not fair! If you don't give us tax increases, we're not cutting a dime!!" You know the rest...

Our "leaders" in action...

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November 16, 2011 Market/Economic Report (video)

Can't we even get a drop in the bucket??

You and I were told that there'd be this bipartisan "super committee" that would, by November 23rd, agree on some $1.5 trillion in spending cuts over the next ten years (a drop in the bucket btw) or, automatic spending cuts ($1.2 trillion worth) would be forced upon the nation's budget... That, they (Congress and the President) made it seem, was carved in stone...

As it stands, we're seven days from the deadline, lightyears from an agreement, and lo and behold, they who made the rules are reportedly scrambling to change them... I.e., they don't like the automatic cuts, so they're (reportedly) looking to proverbially kick the can down the road...

Should they fail however to scrap the prescribed consequence for failure (i.e., if Congress doesn't do away with the automatic cuts), the President suggests he may veto them anyway... Which is interesting in that, as I understand it, no cuts whatsoever would force another debt ceiling battle some two months before next year's election... Hmm?

Stay tuned...

In Your Face

I find it utterly fascinating how politicians forever get away with professing allegiance to the consumer at large while doing everything within their might to promote select producers and consumers (operative word; "select")- right in the face of the consumer at large...

A case in point would be The President's comments following last weekend's Asia-Pacific Economic Cooperation summit... According to yesterday's Reuter's article titled Obama to China; Behave like 'Grown Up' Economy the president minced no words in shaming China for not "playing by the rules"... "We don't want them taking advantage of the United States" he told reporters... He demanded that China stop "gaming" the international system and create a level playing field for U.S. and other foreign businesses.

For starters (I can't resist); Obama, presiding over $15 trillion in debt, 1/3rd of which was borrowed in the past 3 years alone, telling Jintao to grow up is like the guy who mortgaged his house six times in 2006 (you know, the guy who had the boat, the his and her jet skis, the Escalade and the Harley) telling Ben Stein how to manage his money...

But of course that's not what the President's carping about... His gripe is the same poll-inspired gripe of virtually every politician from Dennis Kucinich to Michelle Bachman... Operative words; "poll-inspired"...

The strange irony is that without our so-called trade deficit (a myth by the way), Obama would be presiding over an even bigger economic mess here at home... You see one of the many items China is spending all those U.S. dollars on is U.S. Treasury bonds... Now ask yourself, if goods from China suddenly became expensive and you therefore kept all of your purchases domestic, do you suppose the U.S. producer would be apt to use his profits to buy 10 year treasury notes at 1.9%, like China's doing? And if you're right and they wouldn't (you said "no", right?), then I assure you the interest rate on all that U.S. debt the government needs to fund that $trillion.5 budget deficit would be substantially higher - thus exacerbating the problem - big time!!

And besides, if China is indeed guilty of purposely cheapening the Yuan, it is, in no uncertain terms, to our (consumers at large) net benefit... Read On Balance...

If I just woke from a coma

If I were to awaken today from a five year coma, being the chap I be, I'd first ask about my family, then the market, then the economy...

Here's how the market/economy Q and A (an analyst) would go:

Q: What's the S&P's current multiple? (the aggregate price/earnings ratio for the companies making up the S&P 500)...
A: Somewhere between 12 and 14, based on estimates... Probably will come in around 13...

Q: That's pretty cheap... How's the earnings outlook?
A: Two-thirds of companies have been meeting or beating expectations... Forward guidance has been decent, depending on the industry... Next year's multiple looks to be around 13 as well...

Q: That's great! What about profit margins?
A: Higher than they've been since the '50's...

Q: That's incredible!What about balance sheets?
A: Huge cash positions, and any debt is at extremely low interest rates...

Q: Unbelievable!! What about overall interest rates and money supply?
A: Interest rates are at all-time lows and money supply is off the charts...

Q: Wow!The market looks better than I've ever seen it!

Q: Now tell me about the economy...
A: Well.... we just went through the worst recession since the Great Depression - and we're just limping along at this point... Unemployment remains at 9%... The Administration passed a trillion dollar stimulus package that went largely to the states, which they used largely to fund their transfer payments (welfare, etc.)... We now have a national healthcare plan that has done nothing thus far but mired the industry in uncertainty... The Fed has embarked on a QE bonanza like you wouldn't believe... Its balance sheet is bulging with $2.8 trillion in treasuries and mortgage backed paper... Our nation's budget for 2011 is something like $3.7 trillion and our revenue is $2.2... The debt ceiling was recently raised to accommodate the borrowing for another year or so... The Administration has been on a class warfare campaign as ridiculous as any we've ever seen... The financial industry has been saddled with some 400 new regs... Small banks are struggling mightily to keep up... I could go on and on but suffice it to say that all this explains why companies are hanging onto all that cash... Oh and don't even ask me about Europe...

Q: Oh my God! That's sickening!
A: Yep...

Q: That explains why stocks aren't going through the roof...
A: Yep...

Q: I imagine corporate earnings are coming largely from the business they're doing in emerging markets, which I suspect are doing much better than us...
A: Yep...

Q: Hmm... Sounds like corporate America has its act together... Guess I'll be owning stocks... And without all this crap going on, I wouldn't be getting in this cheap... I like it!
A: I agree... But you should expect a great deal of volatility going forward...

Q: I know, but I love that... When I rebalance twice a year, I'll be selling when the market's rising and buying when it's falling...
A: Yep...

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Setting Up Big Business

Our individual advisory clients pay us a fee, a percentage of the value of their portfolio, directly from their accounts on a quarterly basis... We like this because it's entirely transparent, they know what they pay us... No mystery...

Having been in the investment business for 27 years, I'm sure I've seen it all... And I suspect (I know in fact) there's still the "advisor" out there who, using fee-bundling vehicles, such as traditional annuity contracts, load funds, etc., would have his client believe he gets paid by his company, or the fund/annuity, as opposed to by his client... Nothing, as you might imagine, is further from the truth...

As I suggested in The Market at Work, the big banks backing off the monthly debit card fee was no victory for the consumer - I wondered if the $5 wasn't ultimately a bargain... The title of this morning's NY Times article Banks Quietly Ramping Up Costs to Consumers says it all... And for this my friends you can thank the Durbin Amendment; an eleventh-hour add-on to the Dodd Frank Financial Reform Bill - you know that wonderful new, two-thousand+ page slate of regs forged (they say) on behalf of the little guy...

You see it's all too often, if not always, the little guy (often himself lobbying for tighter regs) who takes it in the chin with tighter regs... The politician sets up big business (big retailers in Durbin's case) to benefit, then sets up big business (big banks in Durbin's case) to take the blame...

Forever mired in the us-vs-them debate

I find it fascinating how empirical evidence proves that vast mobility exists between levels of prosperity... One might think therefore, given the evidence, that we wouldn't be forever mired in this us-vs-them debate...

Clearly the "us" and the "them" are composed of ever-changing individual combatants... I.e., some of the "us" inevitably become the "them" and vice versa... The question is, in terms of upward mobility, who wants to work for it and who wants government to give it to them?

With respect to poverty, is government the answer, or in fact the problem to begin with?

Here's Milton Friedman on the topic (this is what you call confirmation bias):

http://www.youtube.com/watch?v=fKc6esIi0_U&feature=youtube_gdata_player

Open Wide(r)

"Government is that fiction whereby everybody believes that he can live at the expense of everybody else." Frederic Bastiat, 19th Century French Economist...


Here are the highlights from Ohio Congressman Dennis Kucinich's rant on Friday evening's edition of CNBC's Kudlow and Company (Keynesianism at its finest)... And my translations:

DK: "We've got to do something about our trade deficit... We're talking about $550 billion a year; those are jobs out of our country... We've got to start bringing work back into this country"...

Translation: We've got to do something about our consumers exploiting the opportunity to save money through international trade... They should pay up for U.S.-made goods... I don't give a rip about the U.S. businesses where they spend that surplus... And forget about those U.S. companies (and the jobs they create) that redeem those U.S. dollars our foreign trading partners are so eager to get their hands on... It's all bad for our unions!

DK: "And we've got to prime the pump of our economy"...

Translation:And we've got to borrow, tax and spend more money to keep government growing and our unions going...

DK: "If the Fed can create money out of nothing, with its Quantitative Easing and give it to the banks, or give it to the banks in Europe, why can't our government claim our constitutional authority to be able to create millions of jobs rebuilding America's infrastructure... We should be expanding our economy, we should be creating wealth, we should be creating jobs"...

Translation: If the Fed can print money and give it to the banks, why can't we, through tax-hikes, higher interest rates and inflation, suck even more capital out of the private sector to pay for yet another monster spending bill... We need to open wide(r) the flood gates! I have supporters to support damn it!

DK: "We need to change our thinking about America and create wealth again and get the government involved in it and stimulating the private sector in a way that everybody wins... This whole approach we're taking right now is a losing approach."

Translation: We need to change our thinking about America and destroy wealth by getting the government involved and stimulate my supporters in a way that only they win... This whole approach we're taking isn't enough... We need bigger government!

Once again:
"Government is that fiction whereby everybody believes that he can live at the expense of everybody else."

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Can't you come up with a better question?

"Under a Republican governor, the state of California hired a company in China to build major portions of the new San Francisco Oakland Bay Bridge. Created thousands of jobs in China, and California did that because it was cheaper. Is that smart purchasing by government in a global economy or is there something wrong with that?" CNBC's John Harwood asked the Republican candidates during last night's debate...

Can't you come up with a better question?

"Under a Republican governor, the state of California hired a company in China to build major portions of the new San Francisco Oakland Bay Bridge. Created thousands of jobs in China, and California did that because it was cheaper. Is that smart purchasing by government in a global economy or is there something wrong with that?" CNBC's John Harwood asked the Republican candidates during last night's debate...

Directed first at Herman Cain, who of course responded with how the panacea 999 Plan cures all ills... Then to Mitt Romney who, after railing at China's stealing of our intellectual property (I sympathize) and promising to label it a currency manipulator (I don't sympathize), threw up the T word... Gingrich intelligently yielded to Huntsman, the one candidate with real world [direct] experience with China (Newt did touch briefly on cracking down on intellectual property theft and the fact that our burdensome regs hinder our global competitiveness)... Huntsman (re; tariffs) was right on the money; "you start a trade war if you start slapping tariffs randomly on Chinese products based upon currency manipulation, that's not a good idea". Oh andMichelle Bachman chimed in with more on counterfeiting (again, I sympathize) and a chilling, spy-novelish account of the digging of thousands of miles of nuclear-weapon-housing underground tunnels in China - that we're paying for... Implying that China is readying itself to become the next North Korea and essentially destroy all the economic gains its realized over the past thirty years...

Now what would you think of a candidate who would offer the following?

"John, you said "because it was cheaper", well of course that's "smart purchasing by government" - global economy or not... In fact I would hope that every taxpaying Californian would insist that his/her state get the quality it requires at the cheapest possible price from wherever on the planet it can find it... Don't we compromise job creation in the industries we compete well in (tech for just one example) when we operate inefficiently; essentially requiring more (higher taxes) from the private sector?

Now let's look at this in the context of a truly foreign concept to the state of California; a budget... Let's assume that California allocated only so many dollars toward the project... And that U.S. labor costs simply didn't allow for its completion within the budget's limits... Then what? Should they have recalculated what was needed, perhaps in terms of quality? Should they have used cheaper materials? Maybe skimped on the number of support beams?

And when you say "jobs in China", are you not implying that we're sending our taxpayer money overseas, as opposed to keeping it here at home? Now tell me John, in what currency did California pay this Chinese contractor? That's right, U.S. Dollars... Or let's say, they were paid with little green claims on U.S. goods and services... You see John, U.S. dollars never ultimately leave home; they're only good for U.S. stuff. I.e., U.S. dollars spent on non-U.S. labor, goods and services can be every bit as stimulating to the economy as when they're spent on domestic goods and services... Particularly when, as a result, we have leftover capital to invest elsewhere...

Now John, you're not suggesting that, for political favor, California's Governor should've jeopardized the quality of the bridge, are you? Or in any way minimized the gains to the U.S. producers of the goods and services aimed at capturing those dollars we paid the Chinese contractor? Or denied the beneficiaries of the investments we'd have made with the money we saved by hiring the Chinese contractor? Or denied the Californian the future prosperity that comes from living in a state that is finally doing the right thing with his/her taxpayer money?

John, can't you come up with a better question?"

Now I'd call that candidate a true blue American patriot!

If you struggle with this, here's Part 1 of my 3 part video series on International Trade...

We Always Seem to Muddle Through

As I put together my second collection of past essays, I'm constantly reminded of how short-term our memories can be... I'm amazed at how many crises have befallen the world in the mere twenty-seven years I've been in the investment business... I came across a column I wrote back in 2008 that chronicled the panics I

November 9, 2011 Market/Economic Commentary (video)

They'll Need New Sneakers

Let's face it folks, you and I suffer from extreme naivet

Market Commentary (audio)

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Liberalizing Ain't Easy

Simon Galina is feeling nervous these days... He has five years left to pay back the money he borrowed (originally $185k) to buy his taxi license... That's right $185,000... That's what it took to start his company in Rome ten years ago...

Liberalizing Ain't Easy

Simon Galina is feeling nervous these days... He has five years left to pay back the money he borrowed (originally $185k) to buy his taxi license... That's right $185,000... That's what it took to start his company in Rome ten years ago...Insane, I know, but perhaps that gives you a little more insight into why Europe is what it is...

Isn't it interesting how the fix, for the Eurozone debt crisis, involves "liberalizing" their economies? That's "liberalize"; as in "favorable to or in accord with concepts of maximum individual freedom" (dictionary.com)... In Italy it means no more government control over the number of taxis (and other industries)... And of course that's why Mr. Galina's losing sleep...

Please tell me you're getting the message... The U.S. has been slipping when it comes to economic freedom... And that my friends is entirely the problem...

Please watch this video again and send this post to everyone you know...

Thanks!!

http://www.youtube.com/watch?v=v1U1Jzdghjk&feature=results_video&playnext=1&list=PL07079E222C41F872

Credit Default Swaps and the European Debt Crisis (video)

http://youtu.be/yINes7dfqCg

Market Commentary (audio)

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Haven't we done enough??

"We simply haven't done enough." says Nancy Pelosi, Jared Bernstein, Mark Zandi, etc. I.e., the stimulus was too small, we need another round and this time we need to go huge!

Now let's see, in the past three years we've grown the national debt by $5.5 trillion and the Fed's ballooned its balance sheet to $2.8 trillion. So I'm guessing we should blow past the [next] debt ceiling by say another $6 trillion and maybe the Fed should buy up another few trillion worth of bonds/mortgages?? Hmm...

George Mason University Professor Don Boudreaux, blogging at cafehayek.com, puts it this way;

“It’s as if a person who is bleeding to death because of a gunshot wound in his stomach is brought to a physician.  The physician correctly realizes that the patient is losing massive amounts of blood and, also, correctly understands that such blood loss is dangerous to the patient’s health.

So the physician prescribes massive infusions of blood, period.  If the patient doesn’t recover, the physician orders that the volume of blood-infusions be increased.  If the patient dies, the physician will forever blame himself for not increasing the volume of blood-infusions even further.

If the patient does recover, the blood-infusions will be praised for saving the patient.”

Scary!

Wow! I gotta tell ya, it is a little scary out there. I just read a NY Times article by Nobel Laureate Paul Krugman that had some 400+ comments attached... Mr. Krugman, a devout Keynesian, dismisses the arguments folks like me have presented in the presently-heated class war debate... While we've offered up empirical evidence that things aren't necessarily as they seem, Krugman simply dismisses them as "not so"... I guess all this chap needs to do is say "not so", perhaps reference a study or two (with no link) and we're to accept it - with no evidence attached... Hmm...

The scary part is the comments... I just skimmed through them and found but one dissenter (there's surely more)... Clearly folks buy the whole "we gotta redistribute" malarky... Krugman talks about "total income" as if our income somehow belongs to the nation... That one gets me; per this excerpt from my column The Pie:

Folks, don

On Fairness

Some two-thirds of people surveyed would like to see a more even (more "fair")distribution of the "nation's wealth" (if you don't see the misnomer in that sentence read Whose Wealth?)... The implication being that government should step in, through taxation and redistribution, and even the field...

The problem with fairness, as I forever preach, is that someone else must choose on behalf of someone else... The following excerpt from F.A. Hayek's 1944 classic The Road to Serfdom (a must read) succinctly describes the problem...

Where the precise effect of government policy on particular people are known, where the government aims directly at such particular effects, it cannot help knowing these effects and therefore it cannot be impartial. It must, of necessity, take sides, impose its valuations upon people, and instead of assisting them in the advancement of their own ends, choose the ends for them... As soon as the particular effects are foreseen at the time a law is made, it ceases to be a mere instrument to be used by the people and becomes instead an instrument used by the lawgiver upon the people and for his ends.

Market Commentary (audio)

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Illusive Labyrinth of Loopholes

Dueling congressmen faced off last evening (on CNBC) over corporate tax reform... The Democrat suggested we need to scrap the loopholes but to expect push-back from companies that presently exploit the system... His opponent agreed that "loopholes that don't make sense" can go, but at the end of the day, we can't have what results in an increase in corporate taxes...I sensed, in the conservative, a hint of hesitation with the "loopholes that don't make sense" comment...

Now loopholes, by definition, are a means of escape or evasion... And I, for one, would be all for legislation that stamps out all means of escape or evasion... Liberals lobby for what they call tax-fairness... Conservatives for (what I'd call) tax-friendliness. I say we vote for neither... The notion of "tax-fairness" is utter nonsense, for it requires A (being politicians) to determine what's fair for B (being you) and C (being me)... And as for friendliness, speaking for myself, a small business owner, I desire no chumminess whatsoever from politicians... What I want is freedom!!

The fundamental problem is two-fold... One; we have the second highest corporate tax rate on the planet (Japan says it's ultimately going to bring its down). And Two; the code is an incredibly illusive labyrinth of loopholes... Close the loopholes, lower the rates, and what do you get? Certainty... Certainty for CEOs as to what the future holds tax-wise... And certainty (in today's world) would clearly trump a potential increase in taxation when it comes to putting that $trillion+ in corporate cash to work...

November 2, 2011 Market/Economic Report (video)

Market Commentary (audio)

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Let's Think a Little Deeper

So you pay $70 for a pair of sneakers that sport a label under the tongue reading "made in China"... You think "well there's another $70 heading China's way"... You start checking the bottoms of every item you see and you think "Sheese! Pat Buchanan's got it right, we're selling our souls to the Chinese!"...

Let's Think a Little Deeper

So you pay $70 for a pair of sneakers that sport a label under the tongue reading “made in China”. You think “well there’s another seventy bucks heading China’s way”.You start checking the bottoms of every item you see and you think “Sheese! Pat Buchanan’s got it right, we’re selling our souls to the Chinese!”

Now let’s think a little deeper for a minute: You bought said sneakers from an English-speaking, home-grown lad who goes by the name of John. John works for U.S. retailer Sports Authority, which has to rent the building (from a U.S. landlord), transport and market the item, pay its employees, etc.. The fact of the matter is that the bulk of that $70 stays right here at home. I.e., you bought a Chinese-made sneaker but you supported the U.S. economy—big time!

I bet you didn't know that according to the Census Bureau 2011 U.S. International Trade Data; the Bureau of Labor Statistics 2010 input-output matrix; and personal consumption expenditures (PCE) by category from the U.S. national accounts of the Commerce Department’s Bureau of Economic Analysis, a mere 11.5% of U.S. consumer spending goes for imported goods and services—i.e., 88.5% stays home. And that Chinese goods account for only 2.7%—of which, 55% goes for services (as in above example) provided right here in the U.S.. Which means, the politician and the protectionist pundit are getting you all worked up over 1.2% [of your expenditures] going to China…

 

 

The Market at Work

According to this morning's Wall Street Journal, B of A will announce today that it'll drop its plan to charge some customers $5 a month for debit card purchases... This follows similar moves by the competition...

No legislation, no new reg, just the market at work... Customers spoke with their feet, Credit Unions grabbed some new business and the big banks decided that hitting their customers in this fashion wasn't in their best interests after all...

Now before you get too excited, understand that legislation did indeed intrude on the marketplace with the Durbin Amendment - which effectively cut (by 50%) the per swipe fee charged to merchants... Costing, they say, the likes of B of A's shareholders, employees and customers some $2 billion a year... Notice I said "shareholders, employees and customers" - that's who pays corporate expenses... Corporations themselves are inanimate objects...

The question now is, how will shareholders, employees and customers share the pain inflicted by the Durbin Amendment? Lower deposit rates, higher loan fees, maybe? I wonder if it (The Durbin Amendment [I stress]) won't ultimately cost the customer more than $5 a month... Hmm...

Market Commentary (audio)

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Weekly Message (audio)

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A Mockery of the "Barriers"

Let's debunk this income inequality garbage once and for all... Ask yourself, when you see/hear the stats suggesting that the top 20% of Americans are gaining, at the expense of everybody else, are you thinking that the top quintile, or 1% for that matter, is some elite fraternity that allows only a privileged few to join - that essentially sports the same members today as it did thirty years ago?

A Mockery of the "Barriers"

Let's debunk this income inequality garbage once and for all. Ask yourself, when you see/hear the stats suggesting that the top 20% of Americans are gaining, at the expense of everybody else, are you thinking that the top quintile, or 1% for that matter, is some elite fraternity that allows only a privileged few to join - that essentially sports the same members today as it did thirty years ago?

If you're thinking yes (in fact, if you're at all upset about the CBO's findings, you are indeed thinking yes), you couldn't be more wrong.

So let's disabuse you of that faulty notion. And I promise to move the content of this blog on to bigger and better things (maybe) going forward.

The fact of the matter is, in this great country, a great number of people move up and down the income ladder over time; per the following summarized results of a study (which covers only 7 years) from The Federal Reserve Bank of Minneapolis:

*Of the households occupying the bottom 20% in 2001, 44% broke into the higher ranks by 2007.

*61% of the 2nd quintile moved either above or below.

*58% of the 3rd quintile moved either above or below.

*55% of the 4th quintile moved either above or below.

*34% of the highest 20% moved into a lower quintile.

And take note, there's no blaming/crediting the "great recession", since the data was compiled pre-2008.

Nobody says it better than Thomas Sowell:

Only by focusing on the income brackets, instead of the actual people moving between those brackets, have the intelligentsia been able to verbally create a “problem” for which a “solution” is necessary. They have created a powerful vision of “classes” with “disparities” and “inequities” in income, caused by “barriers” created by “society.” But the routine rise of millions of people out of the lowest quintile over time makes a mockery of the “barriers” assumed by many, if not most, of the intelligentsia.

Whose Wealth??

Sixty-six percent of participants in a New York Times/CBS News Poll say the country's wealth should be more evenly divided...

I assume the question read something like;

"Do you believe the country's wealth should be more evenly divided? Yes or No"

I doubt it read;

"Do you believe another citizen's wealth should be coercively reduced and divided amongst those who didn't produce it? Yes or No"

Do you think of your home, your bank account, your investments as the "country's wealth" or your own?

This is America, right?

Honestly, I am anything but a conspiracy theorist, but clearly there's a class war effort afoot the likes of which we haven't seen in a very long time (if ever)... What troubles me is I'm hearing it from folks I would have never dreamed would buy this garbage...

Inequality? Well Duh!

Man I'd love to have Michael Jordan's jump shot, Bill Gates' or Steve Jobs' brains, Jay Leno's wit or Muhamad Ali's left hook... Oh well, I suppose all men just aren't equally endowed... But boy am I thankful my country's system rewards individuals for their unequaled talents...

Please take a listen to NYU Law Professor Richard Epstein...

Market Comments

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The Voter's Ire

An excerpt from an email I received re; The Pie;

"I feel a connection to the 1%, and it has nothing to do with wealth.

The Voter's Ire

An excerpt from an email I received re; The Pie;

"I feel a connection to the 1%, and it has nothing to do with wealth. As someone who deals with regulation/government on a daily basis, it is the ultimate frustration to do an excellent job at managing your business (within the rules) and at the end of the day be criticized, condemned, or at least not appreciated, for what has been accomplished for the good of the consumer and the economy."

This gentleman epitomizes the American employer...

Your Congressman, President, Candidate and Film Maker are drawing the voter's ire onto the many by pointing to the exceptions... Key incentive being votes...

The Pie

"The top 1% has doubled its share of national income." So says (citing a Congressional Budget Office report) California congressman Brad Sherman. Our President, in virtually every speech, disses the "wealthy" (or, let's say, disses our system that he claims favors the "wealthy"). Even Presidential hopeful Mitt Romney finds political expediency, albeit treads lightly, in discounting the "wealthy" while promising a better world for the "middle class".

You'd think, per the rhetoric, that "national income" is some number that exists in and of itself. As if it's some already-baked pie to be sliced up and divvied amongst the masses.

Folks, don't let this malarky infect your thinking. There is no "national income", our nation doesn't produce income, we do. This notion that the upper 1% have somehow sliced a bigger space into the pie pan is utterly ludicrous. If indeed the CBO report is accurate (the vantage point, angle if you will, is critical [which we'll explore in a future post]); that, as a percentage of total income produced by the total population, the 1% own a greater percentage than in years past, it simply means that the 1% profitably produced more of whatever they produce at a price the world was willing to pay.

I.e., it simply means that the 1% made the pie larger. Go hard after the 1% and I assure you, we'll be eating less pie in the future.

International Trade (Part 3) - The Effects of Tariffs

Protectionism is where politicians find bipartisan opportunity to exploit consumer thinking... The ideology, its been my experience, is rampant among conumers... This is where many of our clients (even some who'd profess a free-market bent) are at odds with my thinking... I hope our series on trade inspires a reassessment on their part...

Protectionism, as history has vividly shown, can be economically disastrous...

Here's Part 3 (taking you back to Econ 101)...

http://www.youtube.com/watch?v=kra5njer6qw&feature=youtube_gdata_player

The Land of the Free to Work Your Ass Off!

The somewhat-articulate ball-capped "Wall Street Occupier" bemoaned being banned from the stock exchange... Flanked by a group of 99%ers, he chastises CNBC's correspondent for the network not inviting him into the studio (dress code), then offers up "the movement"'s message...

I bullet-point:

Bold means I absolutely sympathize, not bold means I don't... my retorts parenthesized.....

But first, allow me to interject: Generally I wouldn't give the likes of Michael Moore my (and now your) attention... However, the Wall Street Occupiers' message, bolstered by yesterday's CBO (Congressional Budget Office) report suggesting that the top 1% more than doubled their share of the national income over the last thirty years (I'll have plenty to say on this shortly), is just too aggravating (for me, for the most part) to ignore...

"
*We have an unjust and unfair economic system that benefits the wealthiest few at the expense of the many... (the wealthiest employ the many)

*Not a single arrest here, on this street, with these banks... (there was one taken away today)

*Where's the special prosecutor?(waste of time/taxpayer $)


*Don't the American people deserve some answers and some justice?

*Where did their money go? (check their credit card statements)

*Who stole this money? (how much did they save while working)

*Who misappropriated or played with it awrong?

*They (the Occupiers) want the wealthy to be taxed more... (and then what? redistribute?)

*They want Glass Steagle reinstated... (no more regs, please!)

*They want to get money out of politics...

*What bankers do good is buy politicians...

*The reason why this protest isn't centered in Washington is because those are just the employees of this street... (nonono... you'd have better luck going after the politicians for accepting the payoffs)

*This is the center, this is the core of the problem... (nonono... it's D.C.)

*They (politicians) don't listen to the people, they only listen to who's lining their pockets and those people happen to be right down this street... (they listen to the polls too)

*These are people who have a story to tell and I'm just one of those people... (you're a fat cat multi-millionaire)

*We need to build a much better country, a much more equitable and fair country... (nonono... we need a free country... fairness = someone else deciding what's fair for someone else)

*That's not an economy that's run by the people... (thank God it's not run by the occupiers)

*I do not own a single share of stock and I have never owned a single share of stock. (the Dow was at 2,169 the beginning of the year you made your first movie - that's an 8.04% annual rate of return - with several bear markets along the way... what a dumbasscus)

*I don't support this, this is a rigged casino, I don't know why anyone would put in their hard-earned money, especially after what happened in this last decade. (ditto last comment)...

*These guys on this street played with people's future, played with people's pensions.

*These derivatives and credit default swaps, no regulation from DC, and it's still going on... (CDSs are legitimate hedging vehicles.... just need to stop bailing out the abusers)

*Who's making this money? Who's divvying this pie up so that the 1% get the majority of it? (that's just an ignorant statement)...

*They want to know where their jobs went, they want to know where their future's going to be... (how did they become such victims... did it have anything to do with personal choice?)
"

Summary:

Michael Moore made his first movie, Roger and Me, in 1989...

He mentioned (referring to the occupiers) something about them "all having iPhones"...

Where would we be, as a country, if the 1% hadn't created their businesses and all those jobs in the process?

What country does enjoy income equality anyway? Go find one then tell me if you'd like to live there... And if you would, what are you waiting for?

Are we not each, as individuals, built uniquely... Would you personally be pulled higher or lower if by some magic we were all blessed with equal talents and motivation? Would the consumer be more or less motivated in such a world? Would Steve Jobs, Bill Gates, yourself, have achieved all they/you had in such a world? Is it even true that"we have an unjust and unfair economic system that benefits the wealthiest few at the expense of the many..."??

Hmm.... Today = iPhones/Androids (etc), 6th graders with laptops, flat screen TVs (with 99 thousand channels that I betchya 99% of the 99% own), affordable air travel - you can imagine all the other stuff I could add when comparing to 1989...

Yes I know; 9% unemployment, record foreclosures, etc... And yes I feel for those folks... My only hope is that they remember where they live; the land of the free to work your ass off... Picketing Wall Street ain't going to land them a job or start them a business...

Moore rails against what he doesn't understand... How could any American in his right mind protest capitalism? Capitalism is synonymous with capital, growth, opportunity, entrepreneurship, freedom, hard work, ingenuity, invention, prosperity, productivity...

Notice the areas I bolded above, there he's talking cronyism - and I couldn't agree more... Moore might actually inspire the hearts of true capitalists if he understood his own undertaking, if he chose his words more carefully... But, that said, he has made $millions, he has definitely capitalized on America (big time!)...

This nation was built by people exploiting capitalism... Tour Ellis Island when you have a chance... Unrelenting individuals, heroes, risked life and limb to come to the country where they'd be granted the opportunity, the freedom, to work their asses off - and keep the fruits of their labor!!!!