Let's eavesdrop on Q (the anxious investor) and A (the conventionally-wise advisor) as they discuss what's eating at Q...
Q: The market just had its worst quarter since the 1st quarter of 2009...
A: That's what they tell me...
Q: Should I get out of stocks?
A: Is it time to spend the money?
Q: Well no, I just don't want to lose any more...
A: Have you lost any lately?
Q: Well duh, it was the worst quarter in 3 years!
A: Yes, I know that... But how did you lose money?
Q: What are you talking about? I lost money because you have 60% of my portfolio in stocks...
A: Yes, I know that, but I don't see how you lost any money...
Q: Have you looked at my account lately?
A: Of course...
Q: You haven't noticed how much it's down?
A: Oh I get it - you think you lost money because your account value's down...
Q: You think I didn't?
A: Well, the way you look at it, you did.
Friday, September 30, 2011
What's Eating Q?
Let's eavesdrop on Q (the anxious investor) and A (the conventionally-wise advisor) as they discuss what's eating at Q...
Q: The market just had its worst quarter since the 1st quarter of 2009...
A: That's what they tell me...
Q: Should I get out of stocks?
A: Is it time to spend the money?
Q: Well no, I just don't want to lose any more...
A: Have you lost any lately?
Q: Well duh, it was the worst quarter in 3 years!
A: Yes, I know that... But how did you lose money?
Q: What are you talking about? I lost money because you have 60% of my portfolio in stocks...
A: Yes, I know that, but I don't see how you lost any money...
Q: Have you looked at my account lately?
A: Of course...
Q: You haven't noticed how much it's down?
A: Oh I get it - you think you lost money because your account value's down...
Q: You think I didn't?
A: Well, the way you look at it, you did. The way I look at it you still have all the shares of funds, etc. you had at the beginning of the quarter - in fact, you have more in the funds where you reinvested the dividends... If you haven't sold, in my view, you haven't lost...
Q: Alright I get that, but as far as I'm concerned I'm worth less money than I was 3 months ago... And I know you're going to say; only if I sell... But I do remember you sold some after our last review meeting... I don't recall why, but I wish you had sold more...
A: The reason we sold was because the market had done well and your allocation to stocks was up to 70%... We sold back to your 60% target... Which leads me to today's recommendation... Because stocks are down, your current exposure is 54%... We need to buy you back to 60%...
Q: But stocks are getting creamed. Shouldn't we wait and buy when things get better...
A: Notice how you said "when things get better", as opposed to "if things get better"...
Q: Well yeah, I know things will get better, eventually. But I see no reason for optimism at the moment...
A: Let me ask you a question; when do you think stocks are at their cheapest, when things look bright or when they look bleak?
Q: Hmm... Hadn't thought of it that way.. You're saying when things look bad, stocks are cheap - because everyone's selling... I guess that makes sense...
A: Man you catch on quick!
Q: So you think it's a good time to buy?
A: I think it's time to rebalance your portfolio...
Q: But you obviously think stocks are cheap...
A: I know they're cheap - compared to where they were at our last review meeting... Whether they'll get cheaper going forward is anybody's guess...
Q: So what if they get cheaper...
A: We'll buy more, back to your target, at our next review...
Q: And if they're up, we'll sell?
A: Yep, just like last time...
Q: I understand, I just hate seeing the declines on my statement...
A: Try to think of it in the context of our next review meeting... When you rebalance in a down market, you're exploiting an opportunity... That's smart investing... In essence; a decline in the value on your statement is nothing more than a signal that you'll be buying sometime soon... We want to be buying, not selling, in down markets...
Q: So down markets are good?
A: You betcha they are...
Q: The market just had its worst quarter since the 1st quarter of 2009...
A: That's what they tell me...
Q: Should I get out of stocks?
A: Is it time to spend the money?
Q: Well no, I just don't want to lose any more...
A: Have you lost any lately?
Q: Well duh, it was the worst quarter in 3 years!
A: Yes, I know that... But how did you lose money?
Q: What are you talking about? I lost money because you have 60% of my portfolio in stocks...
A: Yes, I know that, but I don't see how you lost any money...
Q: Have you looked at my account lately?
A: Of course...
Q: You haven't noticed how much it's down?
A: Oh I get it - you think you lost money because your account value's down...
Q: You think I didn't?
A: Well, the way you look at it, you did. The way I look at it you still have all the shares of funds, etc. you had at the beginning of the quarter - in fact, you have more in the funds where you reinvested the dividends... If you haven't sold, in my view, you haven't lost...
Q: Alright I get that, but as far as I'm concerned I'm worth less money than I was 3 months ago... And I know you're going to say; only if I sell... But I do remember you sold some after our last review meeting... I don't recall why, but I wish you had sold more...
A: The reason we sold was because the market had done well and your allocation to stocks was up to 70%... We sold back to your 60% target... Which leads me to today's recommendation... Because stocks are down, your current exposure is 54%... We need to buy you back to 60%...
Q: But stocks are getting creamed. Shouldn't we wait and buy when things get better...
A: Notice how you said "when things get better", as opposed to "if things get better"...
Q: Well yeah, I know things will get better, eventually. But I see no reason for optimism at the moment...
A: Let me ask you a question; when do you think stocks are at their cheapest, when things look bright or when they look bleak?
Q: Hmm... Hadn't thought of it that way.. You're saying when things look bad, stocks are cheap - because everyone's selling... I guess that makes sense...
A: Man you catch on quick!
Q: So you think it's a good time to buy?
A: I think it's time to rebalance your portfolio...
Q: But you obviously think stocks are cheap...
A: I know they're cheap - compared to where they were at our last review meeting... Whether they'll get cheaper going forward is anybody's guess...
Q: So what if they get cheaper...
A: We'll buy more, back to your target, at our next review...
Q: And if they're up, we'll sell?
A: Yep, just like last time...
Q: I understand, I just hate seeing the declines on my statement...
A: Try to think of it in the context of our next review meeting... When you rebalance in a down market, you're exploiting an opportunity... That's smart investing... In essence; a decline in the value on your statement is nothing more than a signal that you'll be buying sometime soon... We want to be buying, not selling, in down markets...
Q: So down markets are good?
A: You betcha they are...
Thursday, September 29, 2011
Stability Shmability -or- The Ultimate Catch 22
"Helicopter Ben" (Bernanke), made so much sense in [some of] yesterday's speech (AP report below) that I must, in all sincerity, pay him due tribute herein... However, all due tributing aside, my interjections (parenthesized/italicized) point out the paradox that infects Washington ideology and is the essence of our problems - we simply can't have free markets and a controlled economy at the same time...
Or you might say our policymakers find themselves in the ultimate Catch 22 (a logical paradox arising from a situation in which an individual needs something that can only be acquired by not being in that very situation; therefore, the acquisition of this thing becomes logically impossible. Catch-22s are often spoken with regard to rules, regulations, procedures, or situations in which one has knowledge of being or becoming a victim but has no control over it occurring...)
AP
Or you might say our policymakers find themselves in the ultimate Catch 22 (a logical paradox arising from a situation in which an individual needs something that can only be acquired by not being in that very situation; therefore, the acquisition of this thing becomes logically impossible. Catch-22s are often spoken with regard to rules, regulations, procedures, or situations in which one has knowledge of being or becoming a victim but has no control over it occurring...)
AP
Wednesday, September 28, 2011
As I Recall
Market maven Meredith Whitney uncannily predicted Citigroup's woes and became an instant Wall Street celeb... Reminds me when, back in the day, Elaine Garzarelli foretold of a market collapse close enough to Black Monday (Oct 1987) to garner oracle status - inspiring, as I recall, tens of thousands to subscribe to her newsletter...
Sometime last year, as I recall, Ms. Whitney released a bold, analytical and armageddonish expos
Sometime last year, as I recall, Ms. Whitney released a bold, analytical and armageddonish expos
Monday, September 26, 2011
Sunday, September 25, 2011
When Nobody Wants It
Last week one of our clients said she became especially nervous after reading an article in the local paper... Dang! I hate reading the local paper! I only get Sunday's because a nice door-to-door peddler caught me at a weak moment... So when I heard the thump this morning, alas, I figured I'd forego the recycle bin and see what's what...
"Gold still looks appealing when you look at its run since October 2007, when the stock market was at its peak. An ounce of gold sold for about $740." So says the author of Going for Gold in today's business section...
That statement epitomizes the average investor mindset... Which is; whatever's happening now will go on forever... It's like looking at the NASDAQ in 1999 and saying "at 5,000, it looks appealing when you look at its run since the late '80s"... It's like looking at a $600,000 house in 2006 and saying "it looks appealing when you look at real estate's run over the past 10 years"...
So when gold was at $300 and the house at $200,000, what was the thought then? Certainly not "appealing when you look at its run"...
The optimal entry point, for any commodity, is never when everybody's after it - it's (counterintuitively for the "average" investor) always when nobody wants it...
"Gold still looks appealing when you look at its run since October 2007, when the stock market was at its peak. An ounce of gold sold for about $740." So says the author of Going for Gold in today's business section...
That statement epitomizes the average investor mindset... Which is; whatever's happening now will go on forever... It's like looking at the NASDAQ in 1999 and saying "at 5,000, it looks appealing when you look at its run since the late '80s"... It's like looking at a $600,000 house in 2006 and saying "it looks appealing when you look at real estate's run over the past 10 years"...
So when gold was at $300 and the house at $200,000, what was the thought then? Certainly not "appealing when you look at its run"...
The optimal entry point, for any commodity, is never when everybody's after it - it's (counterintuitively for the "average" investor) always when nobody wants it...
Saturday, September 24, 2011
Clients' Concerns
Here are five questions/statements I've fielded over the past few weeks, followed by my responses... See if you relate...
1. Can you tell me anything positive?
1. Can you tell me anything positive?
Clients' Concerns
Here are five questions/statements I've fielded over the past few weeks, followed by my responses... See if you relate...
1. Can you tell me anything positive?
2. Can you give us hope that things are coming back?
3. It'll take a long time to make back the losses of the last few months.
4. If things get much worse, shouldn't we move to cash and wait till things look better, then get back in?
5. This is a great opportunity, what should we buy?
1. Can you tell me anything positive?
Response: In terms of stocks, bear markets tend to bottom amidst extreme fear. That's when share prices have been beaten down to extreme levels, cash is at extreme highs, and interest rates are at extreme lows... The things buyers dream of... (stocks can certainly stay cheap for awhile however)...
2. Can you give us hope that things are coming back?
Response: Throughout the ages "things" have always come back. And while political headwinds are stronger than I've ever seen them, I believe markets will nonetheless (ultimately) prevail... There remains a world of opportunity out there... particularly in emerging markets where you have the demographics and the desperate desire for better lives... Read Wildly Optimistic... and It's Not All About the U.S. Economy...
3. It'll take a long time to make back the losses of the last few months.
Response: That may be, however, even after the recent sell off, stocks are up roughly 70% off the March '09 bottom... That's a big move over a short period... And while I can't guarantee anything related to market timing, I can guarantee that if you sell (haven't lost until then by the way), it will take a very long time to make it back...
4. If things get much worse, shouldn't we move to cash and wait till things look better, then get back in?
Response: You haven't been listening/reading, have you? If you move to cash, you want things to get way worse (way cheaper), then you get back in...
5. This is a great opportunity, what should we buy?
Response: Nothing if you're at your target to equities... If you happen to be underweight however, you rebalance or add more, but you stay diversified... Our typical portfolio today is (roughly) 25-35% staples, 65-75% (strategically) everything else... I especially like technology (long-term), financials look interesting here as well (they're getting creamed), but, again, I wouldn't overweight any one sector...
1. Can you tell me anything positive?
2. Can you give us hope that things are coming back?
3. It'll take a long time to make back the losses of the last few months.
4. If things get much worse, shouldn't we move to cash and wait till things look better, then get back in?
5. This is a great opportunity, what should we buy?
1. Can you tell me anything positive?
Response: In terms of stocks, bear markets tend to bottom amidst extreme fear. That's when share prices have been beaten down to extreme levels, cash is at extreme highs, and interest rates are at extreme lows... The things buyers dream of... (stocks can certainly stay cheap for awhile however)...
2. Can you give us hope that things are coming back?
Response: Throughout the ages "things" have always come back. And while political headwinds are stronger than I've ever seen them, I believe markets will nonetheless (ultimately) prevail... There remains a world of opportunity out there... particularly in emerging markets where you have the demographics and the desperate desire for better lives... Read Wildly Optimistic... and It's Not All About the U.S. Economy...
3. It'll take a long time to make back the losses of the last few months.
Response: That may be, however, even after the recent sell off, stocks are up roughly 70% off the March '09 bottom... That's a big move over a short period... And while I can't guarantee anything related to market timing, I can guarantee that if you sell (haven't lost until then by the way), it will take a very long time to make it back...
4. If things get much worse, shouldn't we move to cash and wait till things look better, then get back in?
Response: You haven't been listening/reading, have you? If you move to cash, you want things to get way worse (way cheaper), then you get back in...
5. This is a great opportunity, what should we buy?
Response: Nothing if you're at your target to equities... If you happen to be underweight however, you rebalance or add more, but you stay diversified... Our typical portfolio today is (roughly) 25-35% staples, 65-75% (strategically) everything else... I especially like technology (long-term), financials look interesting here as well (they're getting creamed), but, again, I wouldn't overweight any one sector...
Freshman Economics Part II
Had another one of those teenager carpooling moments yesterday... Not only do my son's buddies now hop in expecting an econ lesson, they're beginning to come with their own topics... Yesterday Robbie starts with "what's going on with the market?" After my pithy response (I find kids get almost any concept as long as I throw in a few "dudes", "those dudes" and make references to their weekly allowance) he asks if I heard about some conference in Washington where the government paid $16 each for the muffins and $6 for every cup of coffee...
I said "here's the problem Robbie, there are four ways you spend money", my boy Ryan chimes in here and says "Dad Dad, let me say the last one" (I guess he's heard this a time or two)...
"#1 You spend your own money on yourself: You'll be careful how much you spend and you'll make sure you get your money's worth...
#2 You spend your own money on someone else: You'll be careful how much you spend but you won't be quite so concerned with quality...
#3 You spend someone else's money on yourself: You won't be as careful how much you spend, but you'll make sure you get their money's worth..."
Ryan says:
"#4 is when you spend someone else's money on someone else: You spend all you want and you don't care what you get..."
I close: "That, Robbie, is how they end up spending $16 for a muffin." (although this one might be a #3, depending on who ordered the muffins)...
That, ladies and gentlemen, is how we end up $16 trillion in debt...
note; credit for "the four ways we spend money" goes to the late Milton Friedman...
I said "here's the problem Robbie, there are four ways you spend money", my boy Ryan chimes in here and says "Dad Dad, let me say the last one" (I guess he's heard this a time or two)...
"#1 You spend your own money on yourself: You'll be careful how much you spend and you'll make sure you get your money's worth...
#2 You spend your own money on someone else: You'll be careful how much you spend but you won't be quite so concerned with quality...
#3 You spend someone else's money on yourself: You won't be as careful how much you spend, but you'll make sure you get their money's worth..."
Ryan says:
"#4 is when you spend someone else's money on someone else: You spend all you want and you don't care what you get..."
I close: "That, Robbie, is how they end up spending $16 for a muffin." (although this one might be a #3, depending on who ordered the muffins)...
That, ladies and gentlemen, is how we end up $16 trillion in debt...
note; credit for "the four ways we spend money" goes to the late Milton Friedman...
Friday, September 23, 2011
What About You and Me?
I'll bet you thought that China just willy-nilly prints yuan to keep its value down so as to export more to us than we do to them... Because that's what the democrat politician, the republican politician, the union leader, the talk show host, the journalist, and the wannabe billionaire/politician has been feeding you... It's provocative - and the media loves provocation...
I have much to say on the whole currency-manipulation topic, and will in future posts, but for today's discussion let's say it's true... Let's say China, through whatever means, makes their stuff cheap so you and me will buy it... That's terrible!! How dare they make stuff inexpensive for you and me!! How dare they increase our discretionary income that way!! That's not fair!! That gives you and me the incentive to buy stuff from them as opposed to the same stuff from U.S. manufacturers!! And that leaves you and me with leftover money to invest for our future, or our next vacation, or our next cup of Starbucks U.S. Coffee, or that Briggs and Stratton U.S. Lawnmower we've been eyeballing over at Home U.S. Depot... Those Bastards!!!!
Get ready folks, the politicians, bipartisanly, are gearing up to make international trade a focal point between now and next November...
I have much to say on the whole currency-manipulation topic, and will in future posts, but for today's discussion let's say it's true... Let's say China, through whatever means, makes their stuff cheap so you and me will buy it... That's terrible!! How dare they make stuff inexpensive for you and me!! How dare they increase our discretionary income that way!! That's not fair!! That gives you and me the incentive to buy stuff from them as opposed to the same stuff from U.S. manufacturers!! And that leaves you and me with leftover money to invest for our future, or our next vacation, or our next cup of Starbucks U.S. Coffee, or that Briggs and Stratton U.S. Lawnmower we've been eyeballing over at Home U.S. Depot... Those Bastards!!!!
Get ready folks, the politicians, bipartisanly, are gearing up to make international trade a focal point between now and next November...
Thursday, September 22, 2011
Wednesday, September 21, 2011
Tuesday, September 20, 2011
Monday, September 19, 2011
Vicious Cycle
You've all heard the stories about people on welfare or unemployment applying for jobs they have absolutely no chance of getting, just to keep their benefits coming...
How about politicians proposing plans/bills, knowing they have literally zero chance of passing, just to keep their constituents and contributors thinking they're on their side? I.e., just to keep their benefits coming...
We've all seen it, time and again - most recently the President's proposed tax increase on the wealthy. But make no mistake, both sides do it egregiously. All the while blowing taxpayer money (and confidence) and inciting warfare from across the aisle and across the classes... It's a vicious cycle of vendettas and victimization...
How about politicians proposing plans/bills, knowing they have literally zero chance of passing, just to keep their constituents and contributors thinking they're on their side? I.e., just to keep their benefits coming...
We've all seen it, time and again - most recently the President's proposed tax increase on the wealthy. But make no mistake, both sides do it egregiously. All the while blowing taxpayer money (and confidence) and inciting warfare from across the aisle and across the classes... It's a vicious cycle of vendettas and victimization...
Markets Figure Things Out
In his weekly podcast Econtalk, Russ Roberts talks with fellow George Mason professor Garrett Jones about the people who were hired with money from the 2009 stimulus package... Jones, when discussing Keynesian policy, explains how government, during recessions, will put some unemployed folks back to work paving roads, building bridges, etc... Essentially making good use of available labor, while markets figure things out (or words to that effect)... Suggesting that the creation of infrastructure jobs is simply something that happens in the meantime, neither helping nor hurting measurably, while market forces (not, as Keynesian's would suggest, government spending) bring the economy back to life...
I can (in theory) live with that... I.e., rather than just throwing unemployment benefits at all these folks, finding something useful for them to do until the economy cycles back around...
So what's the problem this time around? Why is the economy, when there's sooooo much liquidity in the system, when interest rates are sooooo low, not budging? It's disgustingly, outrageously, and stupefyingly simple... This time around, rather than staying out of the way and allowing the recession's aftershocks to settle, rather than allowing consumers to regain their emotional footing, government has heaped upon their employers (present and would-be) countless pages of new regulations and the threat of higher taxes...
Stay tuned.......
I can (in theory) live with that... I.e., rather than just throwing unemployment benefits at all these folks, finding something useful for them to do until the economy cycles back around...
So what's the problem this time around? Why is the economy, when there's sooooo much liquidity in the system, when interest rates are sooooo low, not budging? It's disgustingly, outrageously, and stupefyingly simple... This time around, rather than staying out of the way and allowing the recession's aftershocks to settle, rather than allowing consumers to regain their emotional footing, government has heaped upon their employers (present and would-be) countless pages of new regulations and the threat of higher taxes...
Stay tuned.......
Interview With a Millionaire (and Milton Friedman)
The problem with the proposed "Buffet Tax" is that it does little more than fan the flames for class warmongers. Without knowing all the details, I can tell you, with confidence, that the "Buffet Tax" would amount to nothing more than an increase in the tax on investment success. I.e., an increase in the capital gains tax rate, although it'll come disguised as an alternative minimum tax.
The following is a hypothetical Q&A with a "Fat Cat". Understand, as Milton Friedman pointed out (see video), that a tax on business is a tax on people...
Interview With a Millionaire (M)
Q: You understand that, should the President's proposal pass, making over $1 million per year will subject you to the "Buffet Tax"? Plus he's proposing a tax increase on those earning over $200k/year. So you could be looking at substantially higher taxes in the years ahead...
M: Yes, that's what I understand...
Q: How do you feel about that?
M: I think it's very unfortunate...
Q: So it's unfortunate that you'll have to scale your lifestyle back a bit?
M: Honestly, that's no big deal. My family and I will still enjoy our homes and vacations. But to the extent that we do cut back others will be hurt.
Q: What do you mean?
M: We'll have to wait and see, but if we decide to lay off some of our housekeeping staff and/or vacation less, that hits everyday people who rely on our spending. Which of course could add to the unemployment and welfare rolls...
Q: Come on! You've got millions in the bank! You're not going to have to cut back a thing...
M: Well you know, I didn't end up with millions in the bank by spending irresponsibly. Make no mistake, I will cut back. But let's, for conversation sake, say you're right. Were I not to cut back, I'd either have to pull from my "millions in the bank", or add less, to pay the higher tax. You do know what banks do, don't you? You know that banks lend that money out in the form of home mortgages, loans to small businesses, etc., right? You understand that less capital in the bank means less economic activity, right?
And we haven't even touched on my businesses. While it's too soon to tell whether I'll lay anyone off, make no mistake, to the extent that my tax burden increases, the lesser the prospects for raises, benefits packages and additional hiring going forward...
Q: So you would have other people suffer so you can continue to live the high life?
M: I'd like you to take a look at the benefits packages enjoyed by the politicians who are pushing at my lifestyle. Just take a look. And then ask yourself, what are they ultimately contributing to the economy, to jobs growth, to bettering the life of the average American? Then take another look at me—look at the people I employ, both in my homes and in my businesses. Look at the people I support as I lavish the world's luxuries onto myself and my family...
But let's say, for conversation sake, I do decide to cut my lifestyle and not my number of employees. Will you help me decide whom to hit first? Should it be the individuals and businesses who rely on my capital in the bank to expand? The busboys, etc. at the restaurants we frequent? The maids and other essential employees at the hotels/ski resorts, etc. where we vacation? The cotton farmers, pickers, etc. and the hundreds, if not thousands, of individuals it takes to bring all those clothes we buy to market? I could go on all day...
So where do we start?
Q: Silence....
Here's Milton Friedman on the subject:
http://youtu.be/YmqoCHR14n8
The following is a hypothetical Q&A with a "Fat Cat". Understand, as Milton Friedman pointed out (see video), that a tax on business is a tax on people...
Interview With a Millionaire (M)
Q: You understand that, should the President's proposal pass, making over $1 million per year will subject you to the "Buffet Tax"? Plus he's proposing a tax increase on those earning over $200k/year. So you could be looking at substantially higher taxes in the years ahead...
M: Yes, that's what I understand...
Q: How do you feel about that?
M: I think it's very unfortunate...
Q: So it's unfortunate that you'll have to scale your lifestyle back a bit?
M: Honestly, that's no big deal. My family and I will still enjoy our homes and vacations. But to the extent that we do cut back others will be hurt.
Q: What do you mean?
M: We'll have to wait and see, but if we decide to lay off some of our housekeeping staff and/or vacation less, that hits everyday people who rely on our spending. Which of course could add to the unemployment and welfare rolls...
Q: Come on! You've got millions in the bank! You're not going to have to cut back a thing...
M: Well you know, I didn't end up with millions in the bank by spending irresponsibly. Make no mistake, I will cut back. But let's, for conversation sake, say you're right. Were I not to cut back, I'd either have to pull from my "millions in the bank", or add less, to pay the higher tax. You do know what banks do, don't you? You know that banks lend that money out in the form of home mortgages, loans to small businesses, etc., right? You understand that less capital in the bank means less economic activity, right?
And we haven't even touched on my businesses. While it's too soon to tell whether I'll lay anyone off, make no mistake, to the extent that my tax burden increases, the lesser the prospects for raises, benefits packages and additional hiring going forward...
Q: So you would have other people suffer so you can continue to live the high life?
M: I'd like you to take a look at the benefits packages enjoyed by the politicians who are pushing at my lifestyle. Just take a look. And then ask yourself, what are they ultimately contributing to the economy, to jobs growth, to bettering the life of the average American? Then take another look at me—look at the people I employ, both in my homes and in my businesses. Look at the people I support as I lavish the world's luxuries onto myself and my family...
But let's say, for conversation sake, I do decide to cut my lifestyle and not my number of employees. Will you help me decide whom to hit first? Should it be the individuals and businesses who rely on my capital in the bank to expand? The busboys, etc. at the restaurants we frequent? The maids and other essential employees at the hotels/ski resorts, etc. where we vacation? The cotton farmers, pickers, etc. and the hundreds, if not thousands, of individuals it takes to bring all those clothes we buy to market? I could go on all day...
So where do we start?
Q: Silence....
Here's Milton Friedman on the subject:
http://youtu.be/YmqoCHR14n8
Friday, September 16, 2011
Follow Up to Never Shoot Your Customer
I've received a couple emails with comments re; Trump... One says he's an idiot, the other calls him a smart businessman...
I won't label him (not today anyway), but he might re-think his position with regard to trade:
"I don't need to do business with somebody who's going to take $300 billion out of our pockets..." Mr. Trump, referring to China, on CNBC this morning...
Now think about it; if Chinese manufacturers hadn't taken that $300 billion out of our pockets, how much do you reckon we'd have paid for all that stuff? I'd say a trillion, easy... So, Mr. Trump doesn't need to do business with somebody who's going to leave $700 billion in our pockets? I wonder how sparse (and short) Trump Tower would be had he honored that pledge a few years ago...
I won't label him (not today anyway), but he might re-think his position with regard to trade:
"I don't need to do business with somebody who's going to take $300 billion out of our pockets..." Mr. Trump, referring to China, on CNBC this morning...
Now think about it; if Chinese manufacturers hadn't taken that $300 billion out of our pockets, how much do you reckon we'd have paid for all that stuff? I'd say a trillion, easy... So, Mr. Trump doesn't need to do business with somebody who's going to leave $700 billion in our pockets? I wonder how sparse (and short) Trump Tower would be had he honored that pledge a few years ago...
Thursday, September 15, 2011
Never Shoot Your Customer
"I don't need to do business with somebody who's going to take $300 billion out of our pockets..." "They talk about China, the rip off from China and what they're doing to this country. A lot of what I've been saying for the last three or four years." "If we ever stop doing business with China, China would go into an immediate depression the likes of which the world has never seen." "They're smarter than us." Donald Trump, on CNBC this morning...
Hmm? On one hand; China is, in essence, killing us... On the other; if they succeed, they'll crash, "the likes of which the world has never seen." And "they're smarter than us." Wow! What does that say about US?
By the way, guess which Auto manufacturer dominates the Chinese market; GM...
The Donald also threw up "we're losing our jobs, we're losing our manufacturing, if we haven't already lost it." Au Contraire Monsieur Trump, as I mentioned the other day, we're presently producing real stuff at an all-time record pace...
Hmm? On one hand; China is, in essence, killing us... On the other; if they succeed, they'll crash, "the likes of which the world has never seen." And "they're smarter than us." Wow! What does that say about US?
By the way, guess which Auto manufacturer dominates the Chinese market; GM...
The Donald also threw up "we're losing our jobs, we're losing our manufacturing, if we haven't already lost it." Au Contraire Monsieur Trump, as I mentioned the other day, we're presently producing real stuff at an all-time record pace...
Wednesday, September 14, 2011
Fat Cat Capital
Moody's Analytics Chief Economist, and former J. McCain advisor, Mark Zandi predicts the President's ($440 billion) Jobs Bill, if passed, would produce 1.9 million jobs, add 2% to GDP and reduce the unemployment rate by 1%... Hmm? 1.9 million - now that's precise!
I suspect Mr. Zandi, having achieved political-advisor status, is a bright fella - I'll therefore assume he's accounted for some number of job losses, or perhaps jobs not created, on behalf of the $467 billion (Jobs Plan payback) of proposed tax increases on $200k+ earners (we'll call them Fat Cats) over the next ten years... That would be folks the Fat Cats let go, and/or won't hire, or folks the suppliers of certain goods/services to the Fat Cats let go, and/or won't hire, or folks the borrowers of capital from the Fat Cats' banks will let go and/or won't hire (and on down the line) - as a result of extracting a $half trillion of Fat Cat Capital...
So will the Plan, for example, create 4.1 million jobs and the tax increase cost 2.2 million? Hmm? I'd love to see the breakdown... Golly, to be that precise, he must have it broken down by industry as well... Pray they're not all infrastructure jobs! Someday the roads will be paved, then what?
"Oh no!" you say... "The workers will spend the money and create jobs"... "Well then" I say... "What happens when the roads are paved and the paychecks stop"... "Can't go there" you say... "By then the economy will be off and running and the workers will find new jobs"... "Hmm?" I say...
So then, we tax the Fat Cats (their employees and/or would-be employees, their vendors, their vendors employeees and/or would-be employees, their banks' borrowers, their banks' borrowers employees and/or would-be employees, and so on)...We take that money and pay the construction workers, then tax it again... They go spend it back into the hands of the 200k+ers, then we tax it again... Hmm?
In other words; government takes capital out of the economy, keeps a chunk, what's left goes back into the economy to do what it otherwise would have (would have, that is, at the evermore effecient direction of the private sector)... And that's going to stimulate growth? "Hmm?" I say...
Well shoot then, if that's gunna work, why the heck are we going so small? Let's do a $880 billion Jobs Plan, take $934 billion of Fat Cat Capital and create 4 (oops, I mean 3.8) million jobs, a 4.0% GDP increase and cut unemployment by 2%? Or better yet, lets go $1.32 trillion, take $1.40 trillion from the Fat Cats and create 5.7 million jobs, a 6% GDP increase and cut unemployment by 3%? Or better yet, let's do $++++++++++++++++++++...
Read the following quote and PLEASE allow Mr. Friedman to disabuse you of a most pernicious myth:
I suspect Mr. Zandi, having achieved political-advisor status, is a bright fella - I'll therefore assume he's accounted for some number of job losses, or perhaps jobs not created, on behalf of the $467 billion (Jobs Plan payback) of proposed tax increases on $200k+ earners (we'll call them Fat Cats) over the next ten years... That would be folks the Fat Cats let go, and/or won't hire, or folks the suppliers of certain goods/services to the Fat Cats let go, and/or won't hire, or folks the borrowers of capital from the Fat Cats' banks will let go and/or won't hire (and on down the line) - as a result of extracting a $half trillion of Fat Cat Capital...
So will the Plan, for example, create 4.1 million jobs and the tax increase cost 2.2 million? Hmm? I'd love to see the breakdown... Golly, to be that precise, he must have it broken down by industry as well... Pray they're not all infrastructure jobs! Someday the roads will be paved, then what?
"Oh no!" you say... "The workers will spend the money and create jobs"... "Well then" I say... "What happens when the roads are paved and the paychecks stop"... "Can't go there" you say... "By then the economy will be off and running and the workers will find new jobs"... "Hmm?" I say...
So then, we tax the Fat Cats (their employees and/or would-be employees, their vendors, their vendors employeees and/or would-be employees, their banks' borrowers, their banks' borrowers employees and/or would-be employees, and so on)...We take that money and pay the construction workers, then tax it again... They go spend it back into the hands of the 200k+ers, then we tax it again... Hmm?
In other words; government takes capital out of the economy, keeps a chunk, what's left goes back into the economy to do what it otherwise would have (would have, that is, at the evermore effecient direction of the private sector)... And that's going to stimulate growth? "Hmm?" I say...
Well shoot then, if that's gunna work, why the heck are we going so small? Let's do a $880 billion Jobs Plan, take $934 billion of Fat Cat Capital and create 4 (oops, I mean 3.8) million jobs, a 4.0% GDP increase and cut unemployment by 2%? Or better yet, lets go $1.32 trillion, take $1.40 trillion from the Fat Cats and create 5.7 million jobs, a 6% GDP increase and cut unemployment by 3%? Or better yet, let's do $++++++++++++++++++++...
Read the following quote and PLEASE allow Mr. Friedman to disabuse you of a most pernicious myth:
Tuesday, September 13, 2011
The Curse of the Individual Investor
Yesterday a top technical analyst with B of A Merrill Lynch predicted a 20% S&P 500 decline in the coming weeks/months. Also yesterday, B of A Merrill Lynch's U.S. Equity Specialist raised his S&P 500 12 month target to 1450 - that's a 24% increase from here... This morning B of A ML's Senior Global Equity Analyst explained that their technical analyst is expressing a very short-term view of the market, but as a committee they agree that stocks will be higher 12 months out...
Here's the thing folks, Merrill Lynch, with all its impressively-credentialed analysts, is making an academic guess... My observation (after 27 years of observing) is that none of them (ML, etc.) are any good at prognosticating... I do however make note of their logic... The 12 month 1450 target is based on valuations... Meaning when you consider the price of an average share of stock compared to the company's earnings (now and projected), you get a valuation lower than we've seen since the early 80s... And make no mistake, opportunities like this only present themselves in the midst of horrendously bad news... That's how it works... Stocks are the one thing nobody wants when they're on sale...
As an advisor I'm ultimately concerned with my clients' perspective... There are those who decry their August account statement, thinking "stocks-will-take-forever-to-come-back", who have completely lost sight of the market's (the Dow) move from March of '09 (up 90+% at the 12,700 peak) in a mere two years... Then there are those who are raiding their junk drawers to scrape up whatever cash they can to buy more... Five years out, who do you think has it right?
My concern is with both extremes... Those with the this'll-never-get-better attitude suffer the curse of the typical investor - the follow-the-crowd mentality which virtually assures a buying high and selling low result... Those with the this-is-the-opportunity-of-a-lifetime mentality risk allocating more of their portfolio to stocks than their time horizon warrants...
Of course a big part of my job is to help my clients buy the right sectors, etc., but most importantly I effort to keep them from making portfolio killing mistakes...
Read the following hundred-year-old quote from Charles Merrill (speaking of Merrill Lynch)... With great eloquence he described why individuals, left to their own devices, tend to fare poorly in the market:
Excerpt from my upcoming book:
The curse of the individual investor is his propensity for whatever
Monday, September 12, 2011
Sunday, September 11, 2011
Is Our Decline in Manufacturing Such a Bad Thing?
"Positive non-interventionism involves taking the view that it is normally futile and damaging to the growth rate of an economy, particularly an open economy, for the Government to attempt to plan the allocation of resources available to the private sector and to frustrate the operation of market forces" Sir Philip Haddon-Cave, Hong Kong's Finance Minister 1971-1981...
Manufacturing's contribution to U.S. GDP amounted to 11.7% in 2010... Back in the 50s, manufacturing accounted for 28% of national income... So clearly, the notion that we've exported away 60% of our capacity to produce tangible items is indisputable, right? Of course that's what certain special interest groups (labor unions) would have us believe...
Reality however, is something altogether different... In fact we're producing more autos, plastic and steel products, electronics, etc., in U.S. factories than we ever have, by a bunch - almost $2 trillion (that's more than our total GDP in the 50s) worth in 2010... It's just that the service sector has grown faster over the past 60 years...
So is our decline in manufacturing as a % of GDP a bad thing? Depends on whom you ask... Unions and politicians (right and left merge on this one) say yes... I say no, with a huge exclamation point! In fact I'll add "misrepresenting manufacturing data"to my list of red flags (read We Need to Educate our Policymakers)...
Protectionists have a field day with this one... They site the dwindling manufacturing-as-a-%-of-GDP along with the so called trade deficit (read On Balance) as reasons to reign in foreign investment by U.S. companies, and tariff steel, rubber and any other item they might dangle in front of politicians looking to keep their seats...
I'm convinced that if we could only regain our position on the Economic Freedom Index (we've gone from 3rd to 9th and our score continues to drop. See Index Rankings) we would achieve all the (jobs, inflation and GDP) goals our central planners claim they can bring us...
The only nations currently enjoying what we're after - low unemployment, low inflation and high GDP growth - are the ones that sit atop the Index...
Here's how #1, Hong Kong (a country that, over the past 30 years, has seen manufacturing decline to a mere 7.4% of GDP) does it:
*The Hong Kong Government has traditionally played a mostly passive role in the economy, with little by way of industrial policy and almost no import or export controls. Market forces and the private sector were allowed to determine practical development. Under the official policy of "positive non-interventionism", Hong Kong is often cited as an example of laissez-faire capitalism.
*Hong Kong, one of the world
Manufacturing's contribution to U.S. GDP amounted to 11.7% in 2010... Back in the 50s, manufacturing accounted for 28% of national income... So clearly, the notion that we've exported away 60% of our capacity to produce tangible items is indisputable, right? Of course that's what certain special interest groups (labor unions) would have us believe...
Reality however, is something altogether different... In fact we're producing more autos, plastic and steel products, electronics, etc., in U.S. factories than we ever have, by a bunch - almost $2 trillion (that's more than our total GDP in the 50s) worth in 2010... It's just that the service sector has grown faster over the past 60 years...
So is our decline in manufacturing as a % of GDP a bad thing? Depends on whom you ask... Unions and politicians (right and left merge on this one) say yes... I say no, with a huge exclamation point! In fact I'll add "misrepresenting manufacturing data"to my list of red flags (read We Need to Educate our Policymakers)...
Protectionists have a field day with this one... They site the dwindling manufacturing-as-a-%-of-GDP along with the so called trade deficit (read On Balance) as reasons to reign in foreign investment by U.S. companies, and tariff steel, rubber and any other item they might dangle in front of politicians looking to keep their seats...
I'm convinced that if we could only regain our position on the Economic Freedom Index (we've gone from 3rd to 9th and our score continues to drop. See Index Rankings) we would achieve all the (jobs, inflation and GDP) goals our central planners claim they can bring us...
The only nations currently enjoying what we're after - low unemployment, low inflation and high GDP growth - are the ones that sit atop the Index...
Here's how #1, Hong Kong (a country that, over the past 30 years, has seen manufacturing decline to a mere 7.4% of GDP) does it:
*The Hong Kong Government has traditionally played a mostly passive role in the economy, with little by way of industrial policy and almost no import or export controls. Market forces and the private sector were allowed to determine practical development. Under the official policy of "positive non-interventionism", Hong Kong is often cited as an example of laissez-faire capitalism.
*Hong Kong, one of the world
Saturday, September 10, 2011
Freshman Economics
It's the day after the President's jobs speech and I'm picking up my 9th grader and his buddy from school... I say to them, "dudes, I have a question for you; let's say you own one of the top two restaurants in town, and are in need of a cook... Three people apply:
There's John; he's one of the area's best chefs and currently works for the other one of the top two...
Then there's Jane; who recently lost her first chef's job due to her employer going out of business... Their food was, uh, well, they're out of business...
And lastly there's Jim; who just got laid off at another local restaurant... They say he's a pretty good chef, but, well, he got laid off...
So whom do you hire?"
They, without hesitation and in unison reply, "John"...
I say "good answer. But what if I told you that Jane's been unemployed for 7 months, and Jim's a veteran... Which, in either case, would win you a very nice, one-time, several thousand dollar tax break?
Now whom do you hire?"
They, with a half-second hesitation and in unison reply, "John"... (not at all concerned with the amount of the tax credit)...
I say "why?"... The hitch-hiker answers, "if your food's the best, your customers will keep coming back. You'll make a lot more money that way."
I then ask, "so what if you didn't need a new cook, but the government was going to give you a big chunk of money for hiring one anyway (if he/she's a vet or been unemployed for 6+ months), would you?"
They, (still not concerned with how much) without hesitation and in unison reply, "NO"... (a smirky teenager that's-a-stupid-question kind of "no")... Asking why would have been an intellectual insult and inspired more smirkiness, so I didn't...
So how is it that a couple high school freshmen have a better business sense than the authors of The President's jobs bill? You think maybe it's because they lack political instinct?
There's John; he's one of the area's best chefs and currently works for the other one of the top two...
Then there's Jane; who recently lost her first chef's job due to her employer going out of business... Their food was, uh, well, they're out of business...
And lastly there's Jim; who just got laid off at another local restaurant... They say he's a pretty good chef, but, well, he got laid off...
So whom do you hire?"
They, without hesitation and in unison reply, "John"...
I say "good answer. But what if I told you that Jane's been unemployed for 7 months, and Jim's a veteran... Which, in either case, would win you a very nice, one-time, several thousand dollar tax break?
Now whom do you hire?"
They, with a half-second hesitation and in unison reply, "John"... (not at all concerned with the amount of the tax credit)...
I say "why?"... The hitch-hiker answers, "if your food's the best, your customers will keep coming back. You'll make a lot more money that way."
I then ask, "so what if you didn't need a new cook, but the government was going to give you a big chunk of money for hiring one anyway (if he/she's a vet or been unemployed for 6+ months), would you?"
They, (still not concerned with how much) without hesitation and in unison reply, "NO"... (a smirky teenager that's-a-stupid-question kind of "no")... Asking why would have been an intellectual insult and inspired more smirkiness, so I didn't...
So how is it that a couple high school freshmen have a better business sense than the authors of The President's jobs bill? You think maybe it's because they lack political instinct?
Friday, September 9, 2011
Thursday, September 8, 2011
A Leashed System
Is it just me, or does the politician's (Perry, Romney, etc.) claim "I've created X many jobs during my term", sound strange to you as well? Now if we're talking government jobs, that's one thing (one thing any self-promoting politician would never confess to), but they lay that claim to whatever growth their state has seen in private sector employment...
So when XYZ, Inc. invests in a new production facility because its gizmo revolutionizes the gizmotech space and it anticipates massive global sales growth, and therefore employs a hundred folk, its state's governor takes the credit...
Last night President Obama, referring to job creation, admonished Congress with "we have to fulfill our responsibility"... Implying that it's government's responsibility to create jobs... If he (they) truly believes this, we're in deeper dogma doodoo than we think... For the consequence of such delusion would be evermore government spending, targeted as it may be, which means evermore capital-extraction from the private sector...
Which means less capital in the hands of entrepreneurs competing globally to produce better gizmos, better medicines, better cars, better planes, better cell phones, better energy sources, the next world-changing technology and, lo and behold, better jobs...
As Milton Friedman said;
"The record of history is absolutely crystal clear; there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system."
Sadly, at present, the government has (ever-so-tightly) leashed the system... Hence the slow economy...
So when XYZ, Inc. invests in a new production facility because its gizmo revolutionizes the gizmotech space and it anticipates massive global sales growth, and therefore employs a hundred folk, its state's governor takes the credit...
Last night President Obama, referring to job creation, admonished Congress with "we have to fulfill our responsibility"... Implying that it's government's responsibility to create jobs... If he (they) truly believes this, we're in deeper dogma doodoo than we think... For the consequence of such delusion would be evermore government spending, targeted as it may be, which means evermore capital-extraction from the private sector...
Which means less capital in the hands of entrepreneurs competing globally to produce better gizmos, better medicines, better cars, better planes, better cell phones, better energy sources, the next world-changing technology and, lo and behold, better jobs...
As Milton Friedman said;
"The record of history is absolutely crystal clear; there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system."
Sadly, at present, the government has (ever-so-tightly) leashed the system... Hence the slow economy...
On Balance
Bad news folks; our overall trade deficit came in lower than anticipated in August. The good news however is, when we single out China, the trade gap continues to widen. Meaning we are still buying substantially more manufactured stuff from Chinese companies than Chinese citizens are buying from American companies.
Confused? For starters, there is no "trade deficit". The term itself is oxymoronic. How can you have "trade" and "deficit" at the same time? To trade is to accept one thing for another. No one, least of all a Chinese capitalist, would willingly trade an item for something of lesser value.
So then, a Chinese manufacturer is desperate to trade ceramic cups for little green pieces of paper. See the mismatch? They had to buy the materials, man the assembly lines, do the packaging, pay the freight, etc., while all we had to do was print a few notes. Are we getting a phenomenal deal or what?
Then, to top it off, to the extent that China isn't using all those dollars to buy toothpicks from Indonesia, because a company in Indonesia wants those dollars to buy software from Microsoft (okay, I guess we do have to make some stuff), we enjoy a huge Capital Account Surplus. Which accounts for the dollars the Chinese opportunist spends here on financial services, real estate, business acquisitions, t-bills, etc. You see, on balance, things are balanced.
So when White House hopefuls cry foul and accuse China of devaluing their currency (how dare they make the dollar stronger and things cheaper for you and me), while we print like mad, understand he's either not as well-informed as he would profess, or finds political expediency in the rhetoric and hopes you and me are none the wiser.
Ultimately, we don't need policymakers to be more pro-business---we have cronyism aplenty already---pro-freedom, on the other hand, is an across-the-board win!! Read again Doing Freedom...
Confused? For starters, there is no "trade deficit". The term itself is oxymoronic. How can you have "trade" and "deficit" at the same time? To trade is to accept one thing for another. No one, least of all a Chinese capitalist, would willingly trade an item for something of lesser value.
So then, a Chinese manufacturer is desperate to trade ceramic cups for little green pieces of paper. See the mismatch? They had to buy the materials, man the assembly lines, do the packaging, pay the freight, etc., while all we had to do was print a few notes. Are we getting a phenomenal deal or what?
Then, to top it off, to the extent that China isn't using all those dollars to buy toothpicks from Indonesia, because a company in Indonesia wants those dollars to buy software from Microsoft (okay, I guess we do have to make some stuff), we enjoy a huge Capital Account Surplus. Which accounts for the dollars the Chinese opportunist spends here on financial services, real estate, business acquisitions, t-bills, etc. You see, on balance, things are balanced.
So when White House hopefuls cry foul and accuse China of devaluing their currency (how dare they make the dollar stronger and things cheaper for you and me), while we print like mad, understand he's either not as well-informed as he would profess, or finds political expediency in the rhetoric and hopes you and me are none the wiser.
Ultimately, we don't need policymakers to be more pro-business---we have cronyism aplenty already---pro-freedom, on the other hand, is an across-the-board win!! Read again Doing Freedom...
Wednesday, September 7, 2011
Utterly Mind Boggling
If you thought the lack of loan activity was more about bank stinginess as opposed to lack of demand (I've argued the latter of late), you ain't seen nothin yet...
The Federal Housing Finance Authority (FHFA), Fannie Mae's and Freddie Mac's overseer, is suing 17 major banks for damages involving $200 billion in mortgage backed securities purchased by the aforementioned Govt Sponsored Enterprises...
This is utterly mind boggling, in that the Fed, in an effort to inspire lending, has bloated its balance sheet (liquifying banks) and promised zero short-rates as far as the eye can see (not to mention, on the fiscal side, TARP)... In that $multi-billion settlements involving so-called robo-signing are about to hit the banks' balance sheets... In that the onerous Dodd-Frank Bill substantially increases their compliance burdens... And, in that you'd think Fannie and Freddie, being mortgage securitizers themselves, might be held to task for their failings of risk analysis... Again - Mind Boggling!!
If you've doubted to any degree the notion that government is our economy's biggest single problem, now you know better!!
That said, given all the headwinds facing the banks, given that analysts tell us the market won't come back without financials leading the way, and given that a weak economy come election time will kill the incumbents, I suspect political advisers will be pushing their masters to push the FHFA to push for settlement asap...
If this was in anyway politically inspired (I honestly don't know that the FHFA didn't act independent of The Whitehouse), I'm afraid it was a monster of a miscalculation...
The Federal Housing Finance Authority (FHFA), Fannie Mae's and Freddie Mac's overseer, is suing 17 major banks for damages involving $200 billion in mortgage backed securities purchased by the aforementioned Govt Sponsored Enterprises...
This is utterly mind boggling, in that the Fed, in an effort to inspire lending, has bloated its balance sheet (liquifying banks) and promised zero short-rates as far as the eye can see (not to mention, on the fiscal side, TARP)... In that $multi-billion settlements involving so-called robo-signing are about to hit the banks' balance sheets... In that the onerous Dodd-Frank Bill substantially increases their compliance burdens... And, in that you'd think Fannie and Freddie, being mortgage securitizers themselves, might be held to task for their failings of risk analysis... Again - Mind Boggling!!
If you've doubted to any degree the notion that government is our economy's biggest single problem, now you know better!!
That said, given all the headwinds facing the banks, given that analysts tell us the market won't come back without financials leading the way, and given that a weak economy come election time will kill the incumbents, I suspect political advisers will be pushing their masters to push the FHFA to push for settlement asap...
If this was in anyway politically inspired (I honestly don't know that the FHFA didn't act independent of The Whitehouse), I'm afraid it was a monster of a miscalculation...
Tuesday, September 6, 2011
The 9.1
This Thursday President Obama will address the nation and tell of how the government will tackle our whopping 9.1% unemployment rate… From what I gather, there may be yet another plan to extend benefits in the works…
Rudimentary economic theory teaches that you get what you pay for… In essence, if you pay for unemployment, you get unemployment… Not to suggest that we shouldn’t assist our fellow citizens in need, but I can’t help but wonder (per my observation below) if too large a percentage of recipients aren’t abusing the system.
The problem being, as Milton Friedman pointed out;
“When you spend someone else’s money on someone else (which would be every government program) you have no incentive to economize and no incentive for quality…”
The 9.1
I personally know of exactly 5 individuals who have received unemployment benefits over the past year. Here are their true stories:
1. A woman who’s now permanently housewifing, who refers to her unemployment checks as her Macy’s money…
2. The Giant’s fan my son met at the gym who says “at 2,500/month it’s not worth going back to work.” He brags of watching his premium MLB channels all day long.
3. A young man I play basketball with who works 9 months for the state and takes 3 months unemployment benefit every single year, and “absolutely loves it”…
4. A guy who claims he could get a job in a heartbeat, who, when he worked, outspokenly resented those who exploited the system, yet now confesses to be loving life as one of the 9.1, with no intent whatsoever to get a job till his benefits expire (if ever)…
5. A gentleman who accepted benefits just long enough to get his real estate license, who now works full time…
So then, empirical evidence (my study) suggests 80% of the 9.1 are abusing the system… And that unemployment benefits clearly inspire unemployment…
I suspect (hope) this isn't the norm, that surely the majority are using their unemployment benefit to tide them over as they diligently look for work, or, like #5, learn a new trade… I just can’t prove it…
Rudimentary economic theory teaches that you get what you pay for… In essence, if you pay for unemployment, you get unemployment… Not to suggest that we shouldn’t assist our fellow citizens in need, but I can’t help but wonder (per my observation below) if too large a percentage of recipients aren’t abusing the system.
The problem being, as Milton Friedman pointed out;
“When you spend someone else’s money on someone else (which would be every government program) you have no incentive to economize and no incentive for quality…”
The 9.1
I personally know of exactly 5 individuals who have received unemployment benefits over the past year. Here are their true stories:
1. A woman who’s now permanently housewifing, who refers to her unemployment checks as her Macy’s money…
2. The Giant’s fan my son met at the gym who says “at 2,500/month it’s not worth going back to work.” He brags of watching his premium MLB channels all day long.
3. A young man I play basketball with who works 9 months for the state and takes 3 months unemployment benefit every single year, and “absolutely loves it”…
4. A guy who claims he could get a job in a heartbeat, who, when he worked, outspokenly resented those who exploited the system, yet now confesses to be loving life as one of the 9.1, with no intent whatsoever to get a job till his benefits expire (if ever)…
5. A gentleman who accepted benefits just long enough to get his real estate license, who now works full time…
So then, empirical evidence (my study) suggests 80% of the 9.1 are abusing the system… And that unemployment benefits clearly inspire unemployment…
I suspect (hope) this isn't the norm, that surely the majority are using their unemployment benefit to tide them over as they diligently look for work, or, like #5, learn a new trade… I just can’t prove it…
Saturday, September 3, 2011
Too Much Faith in America
In November 2008 the American people handed Barak Obama, and his party, the most golden of opportunities
Friday, September 2, 2011
Thursday, September 1, 2011
Not Because It's September
Yesterday evening I listened to one of Wall Street's finest proclaim that he was recommending a move to the sidelines until well into October - for no other reason than September being historically the worst month for stocks.
Not Because It's September
Yesterday evening I listened to one of Wall Street's finest proclaim that he was recommending a move to the sidelines until well into October - for no other reason than September being historically the worst month for stocks. This brought to mind a coupleshould-we-sell-everything-now-and-get-back-in-in-October calls I received last year.
Again, the guru offered nothing, in fact expressed his cluelessness, with regard to the cause of this September phenomenon...So in essence, while the "experts" tend to be so quick to join the it's-different-this-time chorus when things go south, they'll resort to it's-the-same-this-time to justify a market call... Huh...
By the way, August 2010, using the Dow, delivered a whopping 4.49% hit to the market...Ironically August 2011, dealt a virtually matching 4.36% blow... September 2010 saw a sharp 7.72% rebound (the "experts" were stunned)...
I predict September 2011 will indeed see the market rebound, decline further or stay roughly where it is right now... And you can quote me on that...
Again, the guru offered nothing, in fact expressed his cluelessness, with regard to the cause of this September phenomenon...So in essence, while the "experts" tend to be so quick to join the it's-different-this-time chorus when things go south, they'll resort to it's-the-same-this-time to justify a market call... Huh...
By the way, August 2010, using the Dow, delivered a whopping 4.49% hit to the market...Ironically August 2011, dealt a virtually matching 4.36% blow... September 2010 saw a sharp 7.72% rebound (the "experts" were stunned)...
I predict September 2011 will indeed see the market rebound, decline further or stay roughly where it is right now... And you can quote me on that...
Subscribe to:
Posts (Atom)