The Supreme Court's surprise decision last week was viewed by ACA opponents as an utter travesty of justice. Of course for ACA proponents - those well-intentioned folk who are comfortable with the notion that government is the place to solve a most distressing problem that, in my opinion, ranks somewhere third-on in terms of what troubles me about America today - last Thursday will go down as one of the greatest days in our young nation's history.
So what would be my top two concerns?
1. The current unbridled pace of growth of government, and consequent shrinking of the private sector (and private sector liberties).
2. The current unbridled pace of growth of government debt.
(3-on would be issues such as spiraling healthcare costs, and others that you might simply add to number one. I.e., entitlements (including corporate welfare) in general, crony trade restrictions, monetary policy, too big to fail, etc.)
Its opponents argue that ACA only serves to exacerbate one and two, but since I've seen estimates suggesting both sides of two (some say ACA will grow the deficit, some say it'll shrink it), I can commit (for now) to only that it exacerbates number one. Now for all you ends-justify-the-meansers out there, make no mistake, number one is a huge deal. I've always said that if Keynesians got it right, that if government spending (government growing) is the path to prosperity, I'll take less prosperity in exchange for greater freedom any day of my life.
Please read Kevin Vallier's article The Obamacare Ruling
Saturday, June 30, 2012
Friday, June 29, 2012
Thursday, June 28, 2012
The bigger issue?
Chief Justice Roberts swung the vote in favor of the Affordable Care Act's personal mandate on the basis of its constitutionality as a tax, as opposed to a penalty. The fascinating thing is, it was never sold as a tax, in fact it was aggressively sold as not a tax.
So what is it, a tax or a penalty? And what should we be concerned with? Speaking for myself, I'm not nearly as concerned with the potential economic impact of ACA's mandate (I've covered that ad nauseam)as I am with the precedent: The allowing of legislation to directly influence our behavior (our freedom if you will) by simply labeling as a tax that which in all practicality is a penalty on personal decisions. You therefore have to wonder what new "taxes" we'll be facing in the years to come...
My friends who support ACA tell me not to sweat it. That the mandate is a must, and that it will not spark what I suggest above. I sincerely hope they're right!
So what is it, a tax or a penalty? And what should we be concerned with? Speaking for myself, I'm not nearly as concerned with the potential economic impact of ACA's mandate (I've covered that ad nauseam)as I am with the precedent: The allowing of legislation to directly influence our behavior (our freedom if you will) by simply labeling as a tax that which in all practicality is a penalty on personal decisions. You therefore have to wonder what new "taxes" we'll be facing in the years to come...
My friends who support ACA tell me not to sweat it. That the mandate is a must, and that it will not spark what I suggest above. I sincerely hope they're right!
The investor stomach...
Stock index futures, alas, are pointing to a less than savory open on Wall Street. Now I must confess, I generally feel better (in a knee-jerk sort of way) when the arrows are green. I feel better because my clients feel better. You see I am an investment consultant. And I therefore deal with futures on an everyday basis. People futures that is.
I do not subscribe, as do many in my vocation, to the notion that I'm in the "expectation management" business, that's too condescending for my taste. I'm not here to "manage" my clients' thoughts, I'm here to help them manage their portfolios in a manner that melds with who they are - with how they think (although I will effort to educate along the way). And that's an entirely different proposition altogether.
Now I can preach and cite history till I'm blue that an "investor" is not a trader, that investors always want to own viable businesses when traders and panickers are selling them (btw, panic comes wrapped in the bursting of tech bubbles, real estate bubbles, government bubbles, etc.). And when times are good, my clients, on that topic, are one big consensus of nodding heads. However, it's when times are "bad" (I use quotes because, to a volatility-tolerant investor, "bad" times are good [cheap] times) that we separate the nodders from the shakers. And of course there's no right or wrong, there's only personalities.
Investment mistakes - that is, mistakes measurably impacting long-term results - are forever emotionally based. That would be greed (think dotcoms in the late '90's and real estate in the mid '00s), and fear (think selling stocks in early '09 and buying bonds in early '12). If I've done my job well - if our clients' portfolios are allocated in a manner consistent with who they are - our clients are not making these mistakes.
So the challenge - yours and, if you're our client, ours - is to understand what makes you tick, and what keeps you up at night. That is, to what extent you can stomach the prudent investment process (owning equities in a globally diversified fashion, then rebalancing against the herd twice a year). Or, in other words, to what extent you can resist making emotion-driven decisions. I.e., it's your stomach I'm ultimately concerned with...
On this subject, here's a letter I wrote to clients back on July 6th, 2009. The Dow closed that day at 8,325...
Just the other day I noticed, in a shady corner of the backyard, there appeared to be just one tall pine tree, where there was originally two. Ten years ago I planted identical twins. One facing the open yard, the other in the corner, guarded by the fence and neighbors
I do not subscribe, as do many in my vocation, to the notion that I'm in the "expectation management" business, that's too condescending for my taste. I'm not here to "manage" my clients' thoughts, I'm here to help them manage their portfolios in a manner that melds with who they are - with how they think (although I will effort to educate along the way). And that's an entirely different proposition altogether.
Now I can preach and cite history till I'm blue that an "investor" is not a trader, that investors always want to own viable businesses when traders and panickers are selling them (btw, panic comes wrapped in the bursting of tech bubbles, real estate bubbles, government bubbles, etc.). And when times are good, my clients, on that topic, are one big consensus of nodding heads. However, it's when times are "bad" (I use quotes because, to a volatility-tolerant investor, "bad" times are good [cheap] times) that we separate the nodders from the shakers. And of course there's no right or wrong, there's only personalities.
Investment mistakes - that is, mistakes measurably impacting long-term results - are forever emotionally based. That would be greed (think dotcoms in the late '90's and real estate in the mid '00s), and fear (think selling stocks in early '09 and buying bonds in early '12). If I've done my job well - if our clients' portfolios are allocated in a manner consistent with who they are - our clients are not making these mistakes.
So the challenge - yours and, if you're our client, ours - is to understand what makes you tick, and what keeps you up at night. That is, to what extent you can stomach the prudent investment process (owning equities in a globally diversified fashion, then rebalancing against the herd twice a year). Or, in other words, to what extent you can resist making emotion-driven decisions. I.e., it's your stomach I'm ultimately concerned with...
On this subject, here's a letter I wrote to clients back on July 6th, 2009. The Dow closed that day at 8,325...
Just the other day I noticed, in a shady corner of the backyard, there appeared to be just one tall pine tree, where there was originally two. Ten years ago I planted identical twins. One facing the open yard, the other in the corner, guarded by the fence and neighbors
Wednesday, June 27, 2012
Only in government...
Congressman Ed Markey and Senator Ron Wyden called for a timeout on natural gas exports in the June 20 edition of USA Today...
Their case; the U.S. citizen benefits mightily, when compared to our trading partners, from our monster nat gas supply and production capacity. And if the Department of Energy were to grant the approval of 15 pending export licenses, our prices are going up.
Their proposition turns out to be yet another expos
Their case; the U.S. citizen benefits mightily, when compared to our trading partners, from our monster nat gas supply and production capacity. And if the Department of Energy were to grant the approval of 15 pending export licenses, our prices are going up.
Their proposition turns out to be yet another expos
Merkel's Got it Right - Or - Rip Off the Band-Aid!
The NY Times June 19th editorial titled The Trouble With Ms. Merkel read: "As recession and banking crises have enveloped Greece, Ireland, Portugal, Spain and Italy, the crisis response, led by Germany, has been dominated by a relentless insistence on self-defeating austerity and piecemeal rescue plans."
Hmm... I think I'd characterize Europe's mess a little differently. I'd say something like:
As the inevitable economic downturn came (the economy is forever cyclical), countries whose fiscal customs literally define the word profligacy found themselves where any spendthrift, entitlement-minded entity of any sort - be it a country, a company, a family or an individual - would in the midst of recession; Dead broke! And Germany's message (go figure) to their dead-broke fellow euro-members has been, "don't even think we're going to chip in unless you markedly change your ways!"
So what's a profligate nation to do? Now there's a tough question (NOT!). Frankly; sell state assets like they're going out of style (which they are, as long as they're state-owned). Cut public salaries (starting at the top), benefits and unnecessary payrolls like there's no tomorrow (there is no tomorrow for yesterday's Greece). Default on the debt (like they have numerous times throughout history); investors were stupid to lend there to begin with. End all subsidies, and enforce the tax code. And expect financing to be very hard to come by until they can prove they've changed their ways. I.e., it's going to be one painful experience.
(AND MAKE NO MISTAKE, THE U.S. HAS GOT TO GET ITS ACT TOGETHER SOONER THAN LATER!!)
Please pardon my frankness - please pardon the fact that the only good solution is to rip off the band-aid - but, as history has shown, per the following excerpts (I did the bolding) from an essay by Global Financial Data (GFD), the premier provider of historical financial data - "ripping off the band-aid" (NOW!) needs to become Europe's (and our) new motto. And the sooner the better.
FromPaying off government debt,Two Centuries of Global Experience
Dr. Bryan Taylor, Chief Economist, Global Financial Data
"The final source of government deficits is the attempt to increase government benefits and entitlements faster than people are willing to pay for them. These deficits are secular in nature and generally require a restructuring of government expenditures and obligations to stop the accumulation of debt."
"Because of the politics involved in making these structural adjustments, reversing structural deficits is the most difficult of all."
"Unfortunately, history shows that governments have to be forced into a crisis to solve these problems, rather than addressing them before the crisis occurs."
And finally, alas:
"The burden of government debt is born by government employees, taxpayers and bondholders. Above all, politics determines who bears the costs. With low interest rates or economic growth, politicians can continue to run deficits. Above all, politics determines who bears the costs of the government
Tuesday, June 26, 2012
Stumbling onto chestnuts
The weather report two weeks ago last Friday said the high for a week ago last Wednesday would be 102 degrees. By the time a week ago last Wednesday rolled around, the atmosphere delivered a cool 97. The forecast high for a week ago last Friday was originally 103, however as the cooling trend hit, the experts promptly lowered their expectations to a range of 95 to 98. However by the time Friday arrived, dang that global warming, we were back above the century mark. Last Wednesday's high was originally expected to come in around 96, however the previous Friday's heat wave caused the experts to abruptly alter their forecast to 104.
Oh how great life would be if only the Fed (revisions, revisions, revisions), your typical economist (predicted 10 of the last 3 recessions) and your most adept stock market forecaster (LOL) were nearly as accurate as your everyday weatherperson - I kid you not.
Now one might say, with regard particularly to the Fed and the economist, it's their lack of real-world experience (now that I just said that, I think I recall saying that myself), but the truth of the matter is; experiencing the real world will never make one an accurate forecaster. But if one pays very close attention, and remains detached, one becomes enlightened to something infinitely more important. That there is no 'art of forecasting'. That an educated lucky guess is every bit as much a random occurrence as a blind squirrel stumbling onto a chestnut.
My point; don't dare succumb to a forecast, rosy or gloomy. Nobody knows, particularly in the short-run, where the market's headed. Seriously; Dow down 130 yesterday, up 11 this morning. Why? Where's the logic? Don't even attempt to answer. That is, unless your answer is; because yesterday's buyers were only willing to come in 130 points below Friday's close. And this morning's sellers were only willing to sell 11 points above yesterday's close.
Oh how great life would be if only the Fed (revisions, revisions, revisions), your typical economist (predicted 10 of the last 3 recessions) and your most adept stock market forecaster (LOL) were nearly as accurate as your everyday weatherperson - I kid you not.
Now one might say, with regard particularly to the Fed and the economist, it's their lack of real-world experience (now that I just said that, I think I recall saying that myself), but the truth of the matter is; experiencing the real world will never make one an accurate forecaster. But if one pays very close attention, and remains detached, one becomes enlightened to something infinitely more important. That there is no 'art of forecasting'. That an educated lucky guess is every bit as much a random occurrence as a blind squirrel stumbling onto a chestnut.
My point; don't dare succumb to a forecast, rosy or gloomy. Nobody knows, particularly in the short-run, where the market's headed. Seriously; Dow down 130 yesterday, up 11 this morning. Why? Where's the logic? Don't even attempt to answer. That is, unless your answer is; because yesterday's buyers were only willing to come in 130 points below Friday's close. And this morning's sellers were only willing to sell 11 points above yesterday's close.
Monday, June 25, 2012
Fishing With Minnows
I happen to be one of those very fortunate souls who, out of sheer zest for life, seldom gets enough sleep. When I was a kid I loved to fish (still do). In fact I was utterly obsessed. I lived inside a parallel Outdoor Life and Field & Stream universe. I ate, drank and slept all things trout. Although slept doesn't much describe my nights before fishing trips. Put me on a stream, any stream, anytime of day and I will catch fish. No kidding. I know what trout do, where they hide, what they eat and how they think. My buddies and I used to have our own little fishing derbies, and, I swear, I don't recall ever losing. Oh the fish stories I could tell. Enough with the bragging (but it is true :))...
Now you'd think a soon to be quinquagenarian would be way beyond that childish event-eve insomnia. But no, it's far worse than ever. These days it's virtually a nightly affliction. It's not that I'm going fishing everyday mind you, that would be impractical (splendid, but impractical), it's my unbridled passion for all things economic. And these days, my goodness, there's, well, let's just say 'my goodness!'
I rise long before the sun, grab my cell, go to my inbox, check the daily message from the New York Times, click the link and begin reading. The article I choose will be the one, based on its title, I expect will jolt me like a double cappuccino never could. I read, I see the glaring contradiction, I spring from bed, I grab my iPad and I lose myself for the next hour or three before the market opens. I feel I must expose my readers to the between the lines reality of the oft-politicized topic du jour.
Today's jump starter was titled Prisons, Privatization and Patronage, by my very favorite antagonist Dr. Paul Krugman. I of course have a different take on the Professor's case against privatization. That is, he exposes the corruption inherent in government, and yet implies that the transparency of cronyism in an entirely government-run system justifies entirely government-run systems. I agree that the system he describes is anything but free market, but what he unwittingly endorses (in my biased view) is the inherent "magical" beauty of free markets. As he states:
"But ifyou think about it even for a minute, you realize that the one thing the companies that make up the prison-industrial complex
Now you'd think a soon to be quinquagenarian would be way beyond that childish event-eve insomnia. But no, it's far worse than ever. These days it's virtually a nightly affliction. It's not that I'm going fishing everyday mind you, that would be impractical (splendid, but impractical), it's my unbridled passion for all things economic. And these days, my goodness, there's, well, let's just say 'my goodness!'
I rise long before the sun, grab my cell, go to my inbox, check the daily message from the New York Times, click the link and begin reading. The article I choose will be the one, based on its title, I expect will jolt me like a double cappuccino never could. I read, I see the glaring contradiction, I spring from bed, I grab my iPad and I lose myself for the next hour or three before the market opens. I feel I must expose my readers to the between the lines reality of the oft-politicized topic du jour.
Today's jump starter was titled Prisons, Privatization and Patronage, by my very favorite antagonist Dr. Paul Krugman. I of course have a different take on the Professor's case against privatization. That is, he exposes the corruption inherent in government, and yet implies that the transparency of cronyism in an entirely government-run system justifies entirely government-run systems. I agree that the system he describes is anything but free market, but what he unwittingly endorses (in my biased view) is the inherent "magical" beauty of free markets. As he states:
"But ifyou think about it even for a minute, you realize that the one thing the companies that make up the prison-industrial complex
Thursday, June 21, 2012
Maybe Singapore?
I get a phone call Wednesday from a long-time client (and good friend)requesting that I attend a meeting with him and his CPA sometime nextweek. My client is 40 years old, and for the past several years hasbecome more involved in the family business (I consult the parents aswell). A business that, until recently, seemed certain to exist wellinto his seniorhood. Having been involved with the family and thecompany for years, I've had the pleasure of watching my friendgrow into the business and - he's very talented and forward looking -grow it to a place I suspect it would not have reached wereit not for his insight and ingenuity.
So I'm thinking, "alright, he wants to get a jump on next year's tax planning. But wait, we don't know what next year's tax rates are going to look like. And he wouldn't need me for that meeting anyway." As it turns out (I wish it were just taxes), he's got bigger fish to fry. You seehis is a heavily regulatedindustry, and, at present pace, 'heavily' may be an understatement in terms of what he sees coming down the pike. He thereforewants to share his concerns and have us explore whether he should spend the remainder of his working years navigatingendless red tape while trying to make a living, or close up shop (they employ several people btw) and seek his fortune elsewhere. Maybe Singapore?
And make no mistake, this guy is as American, and honest, and hardworking as they come. But being an American, particularly an American entrepreneur, means you require economic freedom (within reasonable regulatory boundaries).
Seriously folks, if you don't think the present (and we're not justtalking the past three years) pace of government growth isn't a major impedimentto the economy, you've got another think coming!
So I'm thinking, "alright, he wants to get a jump on next year's tax planning. But wait, we don't know what next year's tax rates are going to look like. And he wouldn't need me for that meeting anyway." As it turns out (I wish it were just taxes), he's got bigger fish to fry. You seehis is a heavily regulatedindustry, and, at present pace, 'heavily' may be an understatement in terms of what he sees coming down the pike. He thereforewants to share his concerns and have us explore whether he should spend the remainder of his working years navigatingendless red tape while trying to make a living, or close up shop (they employ several people btw) and seek his fortune elsewhere. Maybe Singapore?
And make no mistake, this guy is as American, and honest, and hardworking as they come. But being an American, particularly an American entrepreneur, means you require economic freedom (within reasonable regulatory boundaries).
Seriously folks, if you don't think the present (and we're not justtalking the past three years) pace of government growth isn't a major impedimentto the economy, you've got another think coming!
Is the Affordable Care Act Unconstitutional?
I know a number of you do not subscribe to much, if any, of what I've penned here on the Affordable Care Act. I do understand your position and, like me, I know you have the best of intentions. But there is the Constitution, and, as you know, it indeed restricts the powers of government.
For only the next four minutes, please try to suspend your bias and listen to Professor Foley make a case. My chief concern, as you've read, has to do with personal liberty. Oh and by the way, this would be my stance regardless of who might champion the mandate effort (it hasn't always been an entirely leftist cause)...
http://youtu.be/2-WISvX-SKI
For only the next four minutes, please try to suspend your bias and listen to Professor Foley make a case. My chief concern, as you've read, has to do with personal liberty. Oh and by the way, this would be my stance regardless of who might champion the mandate effort (it hasn't always been an entirely leftist cause)...
http://youtu.be/2-WISvX-SKI
Never time the market
Here's one of the many (many) reasons you (and Goldman Sachs) should never try to time the stock market:
March 21, 2012 Goldman Sachs Market Call to Clients (Dow at 13,125):
Goldman Sachs, in a sweeping report to clients Wednesday, said it is a once-in-a-lifetime opportunity to buy stocks, which the firm said are undervalued after 20 years of relative underperformance against bonds.
March 21, 2012 Goldman Sachs Market Call to Clients (Dow at 13,125):
Goldman Sachs, in a sweeping report to clients Wednesday, said it is a once-in-a-lifetime opportunity to buy stocks, which the firm said are undervalued after 20 years of relative underperformance against bonds.
Tuesday, June 19, 2012
Libertarian Lala Land (Q and A)
Had a spare half hour at the end of the day and made the mistake of drinking a cup of regular. So read at your own risk (although I think the point I make at the end is one worth considering).
This would be Q (your consumer/investor who suffers from multiple personality disorder) and A (your ever-consistent advisor). In case you haven't figured it out, A would be my pseudonym.
Q: I've been reading your stuff lately, and you're really starting to tick me off! You've been living in some Libertarian Lala Land and you're egregiously misleading your readers!
A: Libertarian Lala Land (lol), really? How's that?
Q: Really! Allow me to list 3 things:
1. You've criticized the health care mandate. While the fact of the matter is we'll never get anywhere unless everyone contributes. And I don't think it's fair that the rest of us pick up the tab for people who choose not to insure themselves.
2. You're suggesting we shouldn't tax the rich to help balance the budget. The fact is we need to raise revenue and they can afford it. And you suggesting they'll cut jobs is nothing more than rhetorical talking-point hogwash! Raising their taxes will not reduce demand for the stuff they sell. They'll therefore have to keep their people working to meet that demand. They'll cut back on their personal spending long before they cut workers.
3. You keep saying countries should act like companies and households. Cutting spending when times are tough. While that may make sense for a business or a family, you cut government spending during a downturn and you kill the economy. Just ask Paul Krugman.
A: Okay, I understand your arguments. Let's do this one at a time. 1: Regarding the mandate: We'll simply have to agree to disagree with regard to the freedom argument. That is my belief that, in America, one should have the freedom to not act in his own best interest, as long as he isn't directly harming others. And I know you'll say that he is harming others because others will pay for his irresponsibility. But, for one, the extent to which a given individual's healthcare needs will cost others in the future is entirely unquantifiable. And two, he is not forcing anyone to pick up his tab, government is. And when government (the taxpayer) helps out, those who otherwise would, won't.
As for the presumed savings to others by forcing his compliance; have you ever considered the guaranteed hit to the economy by forcing all the uninsureds to become insured? I mean what about the losses taken by all the places they used to spend that money?
Q: Yes, we will disagree on your freedom argument. As for the hit to the economy, you're kidding, right? You totally ignore the much larger hit to the economy when the others pick up his potentially huge future hospital bills. You didn't consider that, now did you?
A: Well, I did, but I didn't want to insult your intelligence by stating the obvious. But since you don't see the obvious, I guess I'll go ahead: You see the concept of insurance is to collect premiums from a large group of individuals, which will be used to pay the medical expenses for the ones who incur them. Some will incur a whole lot less than the total of their premiums, some a whole lot more. Insurance companies price their policies so as to insure (bigtime) that they'll net a profit when it's all said and done. Meaning it's a virtual guarantee that the current hit to the economy coming from all that capital diverted to premiums will be greater than the hit when the medical bills come due.
Q: Alright, I'll give you that one. I guess I didn't think that far into it.
A: You're still not thinking that far into it. There's even a rebuttal to what I just offered. You could have said that while the newly insured will have spent less in other places, the insurance companies will be in receipt of those monies. And therefore the insurance company employees, execs and shareholders will reallocate it back into the economy. To which I would have said: yes, but that's yet another example of government (in this case indirectly) taking from the (broader) private sector and redistributing where it sees fit. A provenly inefficient method of allocating resources.
Q: Like I said, I didn't think that far into it.
A: Very true. Now let's talk about #2, taxing the rich. For one, you could tax the rich at 100% and not nearly take care of our country's problems. And I could argue that raising taxes at this point will not raise revenue, but, in that the operative word on that topic would be 'argue', I'll leave that one for another day. As for directly costing jobs: guesswhat? I agree. Being an employer myself, there's no question I'd take the hit before I'd ever compromise the quality we deliver our customers. Besides, I have great staff and I would go to great lengths to keep from losing them (I'd need them when business picks back up, and they've been great to me). But we have to ask, what would an employer cutting his personal expenses look like? A cancelled vacation or two perhaps? Giving up the housekeeper? Mothballing the private jet? Freezing the country club membership? (in case you're wondering, I have no jet (I fly coach), and I don't play enough golf to justify a cc membership)
And should we feel sorry for the over-fed felines who, through higher taxes, will share our sacrifice by giving up a few luxuries? I certainly won't. But I do have a soft spot for the maid at the vacation resort, the personal housekeeper, the pilot and the caddy, who will all lose their jobs while fat cat cuts back. So I guess we are talking about job losses, now aren't we?
Q: Not sure I completely buy that. But I don't have a comeback at the moment.
A: No problem. But be sure to come back when you have that comeback. As for #3: countries cutting spending during a downturn: I'm very aware of Mr. Krugman's, whose NY Times column is titled The Conscience of a Liberal (not the most objective bloke I might add), thoughts on the subject. But here's one thing (oh there's much more I could offer on #3)you continue to miss. The money the government spends comes from tax revenue. To ramp up spending means to, now or later (or both), ramp up tax rates. And ramping up tax rates means taking from the economy in areas where free people spend their money and injecting it where government sees fit. Which gets us back to the inefficient allocation of resources conversation.
Q: But what about the Fed? It doesn't tax, it prints. Monetary stimulus programs (quantitative easing and the like) don't require any increase in taxes.
A: So you're suggesting that the private sector doesn't ultimately pay for the Fed's money printing? You need to get familiar with the concept of devaluation. That's what happens to the value of a currency when its supply grows faster than the supply of goods and services produced within the economy. Prices will ultimately expand to absorb the excess liquidity. The other term for that is inflation. Which means your dollars will buy less stuff. No different than having fewer dollars due to a tax increase. The worst case scenario is where you have taxes and inflation rising at the very same time.
Q: Okay. I can't argue any of your points at this point. But just because I don't have an argument doesn't mean you're right. A lot of people disagree with everything you just said.
A: I know. And just for the record there are very few (especially here) original ideas. I mean this isn't anything I've dreamed up on my own. In fact, I do check myself all the time. I'm even a regular reader of your Mr. Krugman and many of the other very intelligent folks who could no doubt debate me under the table when it comes to the economics of my positions. But there is one area where I believe I would win every single time, regardless of the credentials of my opponent - that is in exposing the sacrifice of personal freedoms inherent in the policies promoted by every economist, pundit and politician who advocates for growing the size of government.
Q: I may have to give you that one.
A: You don't have to give me anything. That is not until the government forces you to.
This would be Q (your consumer/investor who suffers from multiple personality disorder) and A (your ever-consistent advisor). In case you haven't figured it out, A would be my pseudonym.
Q: I've been reading your stuff lately, and you're really starting to tick me off! You've been living in some Libertarian Lala Land and you're egregiously misleading your readers!
A: Libertarian Lala Land (lol), really? How's that?
Q: Really! Allow me to list 3 things:
1. You've criticized the health care mandate. While the fact of the matter is we'll never get anywhere unless everyone contributes. And I don't think it's fair that the rest of us pick up the tab for people who choose not to insure themselves.
2. You're suggesting we shouldn't tax the rich to help balance the budget. The fact is we need to raise revenue and they can afford it. And you suggesting they'll cut jobs is nothing more than rhetorical talking-point hogwash! Raising their taxes will not reduce demand for the stuff they sell. They'll therefore have to keep their people working to meet that demand. They'll cut back on their personal spending long before they cut workers.
3. You keep saying countries should act like companies and households. Cutting spending when times are tough. While that may make sense for a business or a family, you cut government spending during a downturn and you kill the economy. Just ask Paul Krugman.
A: Okay, I understand your arguments. Let's do this one at a time. 1: Regarding the mandate: We'll simply have to agree to disagree with regard to the freedom argument. That is my belief that, in America, one should have the freedom to not act in his own best interest, as long as he isn't directly harming others. And I know you'll say that he is harming others because others will pay for his irresponsibility. But, for one, the extent to which a given individual's healthcare needs will cost others in the future is entirely unquantifiable. And two, he is not forcing anyone to pick up his tab, government is. And when government (the taxpayer) helps out, those who otherwise would, won't.
As for the presumed savings to others by forcing his compliance; have you ever considered the guaranteed hit to the economy by forcing all the uninsureds to become insured? I mean what about the losses taken by all the places they used to spend that money?
Q: Yes, we will disagree on your freedom argument. As for the hit to the economy, you're kidding, right? You totally ignore the much larger hit to the economy when the others pick up his potentially huge future hospital bills. You didn't consider that, now did you?
A: Well, I did, but I didn't want to insult your intelligence by stating the obvious. But since you don't see the obvious, I guess I'll go ahead: You see the concept of insurance is to collect premiums from a large group of individuals, which will be used to pay the medical expenses for the ones who incur them. Some will incur a whole lot less than the total of their premiums, some a whole lot more. Insurance companies price their policies so as to insure (bigtime) that they'll net a profit when it's all said and done. Meaning it's a virtual guarantee that the current hit to the economy coming from all that capital diverted to premiums will be greater than the hit when the medical bills come due.
Q: Alright, I'll give you that one. I guess I didn't think that far into it.
A: You're still not thinking that far into it. There's even a rebuttal to what I just offered. You could have said that while the newly insured will have spent less in other places, the insurance companies will be in receipt of those monies. And therefore the insurance company employees, execs and shareholders will reallocate it back into the economy. To which I would have said: yes, but that's yet another example of government (in this case indirectly) taking from the (broader) private sector and redistributing where it sees fit. A provenly inefficient method of allocating resources.
Q: Like I said, I didn't think that far into it.
A: Very true. Now let's talk about #2, taxing the rich. For one, you could tax the rich at 100% and not nearly take care of our country's problems. And I could argue that raising taxes at this point will not raise revenue, but, in that the operative word on that topic would be 'argue', I'll leave that one for another day. As for directly costing jobs: guesswhat? I agree. Being an employer myself, there's no question I'd take the hit before I'd ever compromise the quality we deliver our customers. Besides, I have great staff and I would go to great lengths to keep from losing them (I'd need them when business picks back up, and they've been great to me). But we have to ask, what would an employer cutting his personal expenses look like? A cancelled vacation or two perhaps? Giving up the housekeeper? Mothballing the private jet? Freezing the country club membership? (in case you're wondering, I have no jet (I fly coach), and I don't play enough golf to justify a cc membership)
And should we feel sorry for the over-fed felines who, through higher taxes, will share our sacrifice by giving up a few luxuries? I certainly won't. But I do have a soft spot for the maid at the vacation resort, the personal housekeeper, the pilot and the caddy, who will all lose their jobs while fat cat cuts back. So I guess we are talking about job losses, now aren't we?
Q: Not sure I completely buy that. But I don't have a comeback at the moment.
A: No problem. But be sure to come back when you have that comeback. As for #3: countries cutting spending during a downturn: I'm very aware of Mr. Krugman's, whose NY Times column is titled The Conscience of a Liberal (not the most objective bloke I might add), thoughts on the subject. But here's one thing (oh there's much more I could offer on #3)you continue to miss. The money the government spends comes from tax revenue. To ramp up spending means to, now or later (or both), ramp up tax rates. And ramping up tax rates means taking from the economy in areas where free people spend their money and injecting it where government sees fit. Which gets us back to the inefficient allocation of resources conversation.
Q: But what about the Fed? It doesn't tax, it prints. Monetary stimulus programs (quantitative easing and the like) don't require any increase in taxes.
A: So you're suggesting that the private sector doesn't ultimately pay for the Fed's money printing? You need to get familiar with the concept of devaluation. That's what happens to the value of a currency when its supply grows faster than the supply of goods and services produced within the economy. Prices will ultimately expand to absorb the excess liquidity. The other term for that is inflation. Which means your dollars will buy less stuff. No different than having fewer dollars due to a tax increase. The worst case scenario is where you have taxes and inflation rising at the very same time.
Q: Okay. I can't argue any of your points at this point. But just because I don't have an argument doesn't mean you're right. A lot of people disagree with everything you just said.
A: I know. And just for the record there are very few (especially here) original ideas. I mean this isn't anything I've dreamed up on my own. In fact, I do check myself all the time. I'm even a regular reader of your Mr. Krugman and many of the other very intelligent folks who could no doubt debate me under the table when it comes to the economics of my positions. But there is one area where I believe I would win every single time, regardless of the credentials of my opponent - that is in exposing the sacrifice of personal freedoms inherent in the policies promoted by every economist, pundit and politician who advocates for growing the size of government.
Q: I may have to give you that one.
A: You don't have to give me anything. That is not until the government forces you to.
Monday, June 18, 2012
The Can Got Nudged
When the news hit yesterday that Syriza would not lead a new Greek coalition government, Asian stocks and US index futures rallied. But, as I type, the Dow's in the red. Go figure?
So how is it that last week, when Syriza looked to be a serious threat, stocks rallied? If you followed the news releases you knew it was all about central banks readying themselves to churn out little portraits of dead politicians by the crateful. Now that the fear has abated, the printing presses are back on standby.
As for Greece; 'a mess' doesn't nearly describe their system, their economy or their attitude. The can just got kicked, or let's say nudged. For I don't suspect that there's yet another opportunity to bridge the chasm they're seeing in the not too distant distance.
So how is it that last week, when Syriza looked to be a serious threat, stocks rallied? If you followed the news releases you knew it was all about central banks readying themselves to churn out little portraits of dead politicians by the crateful. Now that the fear has abated, the printing presses are back on standby.
As for Greece; 'a mess' doesn't nearly describe their system, their economy or their attitude. The can just got kicked, or let's say nudged. For I don't suspect that there's yet another opportunity to bridge the chasm they're seeing in the not too distant distance.
Sunday, June 17, 2012
Breakfast with Dad - Or - You might be shanking your seven iron come next weekend
Having breakfast with Dad at Country Waffles.My wife shows me the news flash text fromCNBC.com:the exit polls in Greece show Syriza and The New Democracy parties are in a dead heat.
Ie., no matter what happens next week, we'll all be doing our things: we'll eat (that's why you own the fund that owns Kraft, Kellogg, General Mills, etc.), we'll work, we'll recreate, and the market will deliver the occasional buying opportunity. Although if Syriza wins, you might be shanking your seven iron come next weekend.
Me: If Syriza can gain a majority, the Dow could easily take a 600 point hitMonday morning. Except for the fact that central banks stand ready to print like mad: they're desperate to hold this thing together. So who knows? Maybe the market will rally either way.
Dad: Listening to you, I think I'll put all my money in money market.
Me: Not me, I'll be buying like mad. My challenge will be keeping my clients off the edge.
Dad: I played a little better golf last Friday.
Me: Cool, what'd ya score?
Ie., no matter what happens next week, we'll all be doing our things: we'll eat (that's why you own the fund that owns Kraft, Kellogg, General Mills, etc.), we'll work, we'll recreate, and the market will deliver the occasional buying opportunity. Although if Syriza wins, you might be shanking your seven iron come next weekend.
Saturday, June 16, 2012
The Impracticality of Freedom
This excerpt fromRobert Nozick's 1974 critically acclaimed philosophical masterpiece Anarchy, State and Utopia inspired today's column.
The Impracticality of Freedom
So the man who chooses not to purchase medical insurance exacts a cost upon the others who will pay the (they presume) inevitable hospital bill. The others must therefore mandate that he will take from his own resources to buy insurance. That is, others will require a sacrifice from him that he would not require of himself.Of course this makes sense, for again, others would bear the cost of his lack of coverage. It's only fair. Or is it?
Allow me to rephrase: Others exact a cost onto the man whose (they presume) eventual ill-health would be, were he allowed to go uninsured, the source of their future burden. How then, in the interest of fairness, will the others compensate the man for his very real current sacrifice? After all, there's no guarantee that his demise won't come in the form of a quiet, yet massive, instantly fatal heart attack. In which case he had sacrificed the enjoyment of his own resources (his cost of insurance), while the others he was forced to protect sacrificed nothing. What's fair about that? More importantly, what's free about that?
Remember Q from past conversations with A? He's not buying this one.
Does someone violate another's rights by performing an action without sufficient means or liability insurance to cover its risks? May he be forbidden to do this or punished for doing it? Since an enormous number of actions do increase risk to others, a society which prohibited such uncovered actions would ill fit a picture of a free society as one embodying a presumption in favor of liberty, under which people permissibly could perform actions so long as they didn't harm others in specific ways. Yet how can people be allowed to impose risks on others to whom they are not in a position to compensate should the need arise? Why should some have to bear the costs of others' freedom? Yet to prohibit risky acts (because they are financially uncovered or because they are too risky) limits individuals' freedom to act, even though the actions actually might involve no cost at all to anyone else.
The Impracticality of Freedom
So the man who chooses not to purchase medical insurance exacts a cost upon the others who will pay the (they presume) inevitable hospital bill. The others must therefore mandate that he will take from his own resources to buy insurance. That is, others will require a sacrifice from him that he would not require of himself.Of course this makes sense, for again, others would bear the cost of his lack of coverage. It's only fair. Or is it?
Allow me to rephrase: Others exact a cost onto the man whose (they presume) eventual ill-health would be, were he allowed to go uninsured, the source of their future burden. How then, in the interest of fairness, will the others compensate the man for his very real current sacrifice? After all, there's no guarantee that his demise won't come in the form of a quiet, yet massive, instantly fatal heart attack. In which case he had sacrificed the enjoyment of his own resources (his cost of insurance), while the others he was forced to protect sacrificed nothing. What's fair about that? More importantly, what's free about that?
Remember Q from past conversations with A? He's not buying this one.
Q: I understand your point, but you're way off base. You're being entirely impractical.
A: Why?
Q: Because the odds are great that he'll one-day need medical attention and it would be irresponsible of him to go uncovered, thereby forcing others to pay his bills. That's blatantly unfair.
A: So, per your definition of fairness, people should not be free to be irresponsible?
Q: Not when others have to pay for their irresponsibility.
A: So what if he were to simply say "don't take care of me, don't pay my bills"? Thereby forcing a burden upon no one. That'd be fair, right?
Q: But that's not how our system works. He'd know somebody's going to care for him when he's sick, even when he can't pay the bill.
A: True. And I think you're onto something. I think our system's the problem.
Q: Say what?
A: What if government didn't take care of people who chose not to take care of themselves? I wonder if knowing there's no reward for irresponsibility (that no one would pay his bills), if he wouldn't go ahead and buy the health insurance.
Q: So you're saying we should let people get sick and die?
A: I'm saying it's not government's responsibility to take from responsible taxpayers to pay the bills of irresponsible taxtakers.
Q: If government doesn't take care of these people who will?
A: For one, if government never did, I'm convinced there'd be vastly fewer irresponsible people. And those left would find aid by the grace of caring human beings of means. And by the way, in a world of smaller government, the private sector would have substantially more means with which to care for the [substantially fewer] people in need...
Q: You're dreaming!
A: I know...
Friday, June 15, 2012
Grains of Salt
While listening to the Bloomberg Radio app this morning at the gym it occurred to me that were I not the obsessor of all things market and economic and were I listening in for the very first time - I'd be catching the commentary of the great commodity bull Jimmy Rogers. And I'd likely be cutting my workout short, calling my advisor, or logging onto my Etrade account, and selling all my stocks and throwing everything into my commodities fund.
But if, were I that first-timer, I tuned in 10 minutes later and missed Mr. Rogers, I would have caught the commentary of famed money manager Michael Holland. And I'd likely be cutting my workout short, calling my advisor, or logging onto my Etrade account, and selling everything not stocks (say my cash, bonds and commodities) and throwing it all into my stock funds.
And what if, were I that first-timer, I stayed tuned to both? Utter confusion.
Two famous, and (I assume) successful, money managers, minutes apart at opposite extremes.
So who's right? Who's wrong? The answers: both and both. Over the course of the next few minutes, hours, days, weeks, months, years and decades, there will be periods when commodities rally, when commodities tank, when stocks rally, and when stocks tank. One thing you can be sure of, owning stuff (stocks, commodities, real estate) other people ultimately want, long-term, is the way you stay ahead of inflation.
So what's an investor, who knows how to apply grains of salt, to do? It's very simple: diversify, be patient, and rebalance twice a year...
But if, were I that first-timer, I tuned in 10 minutes later and missed Mr. Rogers, I would have caught the commentary of famed money manager Michael Holland. And I'd likely be cutting my workout short, calling my advisor, or logging onto my Etrade account, and selling everything not stocks (say my cash, bonds and commodities) and throwing it all into my stock funds.
And what if, were I that first-timer, I stayed tuned to both? Utter confusion.
Two famous, and (I assume) successful, money managers, minutes apart at opposite extremes.
So who's right? Who's wrong? The answers: both and both. Over the course of the next few minutes, hours, days, weeks, months, years and decades, there will be periods when commodities rally, when commodities tank, when stocks rally, and when stocks tank. One thing you can be sure of, owning stuff (stocks, commodities, real estate) other people ultimately want, long-term, is the way you stay ahead of inflation.
So what's an investor, who knows how to apply grains of salt, to do? It's very simple: diversify, be patient, and rebalance twice a year...
Thursday, June 14, 2012
What We Do Know - Or - Never Confuse Volatility With Loss
We can speculate, but you and I simply do not know how Europe will play out...
We can speculate, but you and I simply do not know how close the US will come to the "fiscal cliff"...
We can speculate, but you and I simply do not know whether the Fed will announce QE3, or the like, in the weeks to come...
We can speculate, but you and I simply do not know to what extent all the recent money printing will equate to future inflation...
We can speculate, but you and I simply do not know whether we're on the verge of the next great recession or a bull market for the ages...
We can speculate till the cows come home, but there's simply too many moving parts for you and I (or anyone else) to ever know precisely what's to come. Anyone who would suggest otherwise is fooling themselves - and trying to fool you...
But here's one thing we do know:
Historically speaking, the times to buy (and therefore hold) stocks are the times of great uncertainty. The times when they're cheap. The times, in essence, when no one else wants them.
TODAY'S MESSAGE: NEVER CONFUSE VOLATILITY WITH LOSS!
Here's my down and dirty scribble on that topic:
We can speculate, but you and I simply do not know how close the US will come to the "fiscal cliff"...
We can speculate, but you and I simply do not know whether the Fed will announce QE3, or the like, in the weeks to come...
We can speculate, but you and I simply do not know to what extent all the recent money printing will equate to future inflation...
We can speculate, but you and I simply do not know whether we're on the verge of the next great recession or a bull market for the ages...
We can speculate till the cows come home, but there's simply too many moving parts for you and I (or anyone else) to ever know precisely what's to come. Anyone who would suggest otherwise is fooling themselves - and trying to fool you...
But here's one thing we do know:
Historically speaking, the times to buy (and therefore hold) stocks are the times of great uncertainty. The times when they're cheap. The times, in essence, when no one else wants them.
TODAY'S MESSAGE: NEVER CONFUSE VOLATILITY WITH LOSS!
Here's my down and dirty scribble on that topic:
Wednesday, June 13, 2012
Tuesday, June 12, 2012
The Euro Solution: Taxpayer-funded Vacations
Famed NYU Econ Professor Nouriel Roubini told a German newspaper yesterday that Europe needs to "stop the savings madness." He said that Germany should give its citizens a 1,000 Euro voucher to be used only for vacationing in ailing Southern Europe. He also said that struggling European governments should be lowering taxes and increasing salaries to boost growth rather than insisting on austerity and increased savings. And that anyone who buys a vacation home in a Southern European country should get a tax bonus.
So let me get this straight:
1. Germany should take some of its taxpayers' money and give it back to its taxpayers, but only if they promise to spend it in say Greece. And that'll "boost growth" in Greece??
So what happens when the holiday's over?
2. Struggling countries should be lowering taxes and increasing salaries to boost growth. But in Greece, for example, few pay their taxes already and 2/3rds of its people work for the government - and get full pension at [something like] age 50.
And how's that model been working so far? And how does all this get funded? by Germans taking a holiday in Athens? Really?
3. So if you buy a vacation home in say Greece. You get a tax bonus. I thought anybody moving to Greece has been getting a tax bonus already: since Greece hasn't been collecting its taxes.
And how's this going to get Europe out of this mess?
So let's say Europe heeds the Great Roubini's message. Although he didn't say it, but surely he's camping with Stiglitz and Krugman and would suggest that the time for spending cuts is after all this throwing money at problems results in lasting economic growth, right? But you've seen what happens (Athens literally on fire) when governments try to take back what governments hand out.
Do you think these genius economists would ever prescribe responsibility? Is it human nature to cut back when times are good?
So let me get this straight:
1. Germany should take some of its taxpayers' money and give it back to its taxpayers, but only if they promise to spend it in say Greece. And that'll "boost growth" in Greece??
So what happens when the holiday's over?
2. Struggling countries should be lowering taxes and increasing salaries to boost growth. But in Greece, for example, few pay their taxes already and 2/3rds of its people work for the government - and get full pension at [something like] age 50.
And how's that model been working so far? And how does all this get funded? by Germans taking a holiday in Athens? Really?
3. So if you buy a vacation home in say Greece. You get a tax bonus. I thought anybody moving to Greece has been getting a tax bonus already: since Greece hasn't been collecting its taxes.
And how's this going to get Europe out of this mess?
So let's say Europe heeds the Great Roubini's message. Although he didn't say it, but surely he's camping with Stiglitz and Krugman and would suggest that the time for spending cuts is after all this throwing money at problems results in lasting economic growth, right? But you've seen what happens (Athens literally on fire) when governments try to take back what governments hand out.
Do you think these genius economists would ever prescribe responsibility? Is it human nature to cut back when times are good?
Monday, June 11, 2012
This Ain't Rocket Science
Joseph StiglitzandPaul Krugman, both having been honored with the prize named for Alfred Nobel, would be your economic rocket scientists. And of course they're infinitely smarter than you and me. From their perches atop academia's elite they scowl at any world leader who would dare hesitate to throw $trillions (yes trillions, before they're through) at countries like, for example, Greece: Greece; who recently tried to collect property taxes by adding them to utility bills: Whose people thus sued, and whose courts (I'm guessing academically accomplished judges) ruled in the peoples favor: So now the power companies can't turn off the lights when a customer doesn't pay his bill. So guess what, the Greeks stopped paying their gas and electric bills (that'll teach them. Who do they think they are trying to trick people into paying their property taxes). Greece; whose constitution says that once you get a job with the government, you're guaranteed a job for life. No kidding!
And Stiglitz and Krugman would have us believe that anyone with the wherewithal (Merkel, the IMF, the EU, the ECB, the Fed) to inject billions upon billions into Greece; who would even suggest that such aid must be met with substantial reform (austerity) is a blundering idiot. Growth at any cost would be their mantra. You don't reform during the worst recession since the Great Depression, you reform after you borrow and spend your way back to prosperity.
Seriously: These geniuses would have us believe that if "we" bailout say Greece (and all the others) and promote economic growth in the process, we can revisit reform once the economy recovers. No kidding; that's what these good professors profess: That the likes of Greece; who, upon acceptance into the Euro, not only didn't take the opportunity to change their profligate ways, stepped it up big time, will take its medicine once it's back on its feet. Now if that's notnaivet
And Stiglitz and Krugman would have us believe that anyone with the wherewithal (Merkel, the IMF, the EU, the ECB, the Fed) to inject billions upon billions into Greece; who would even suggest that such aid must be met with substantial reform (austerity) is a blundering idiot. Growth at any cost would be their mantra. You don't reform during the worst recession since the Great Depression, you reform after you borrow and spend your way back to prosperity.
Seriously: These geniuses would have us believe that if "we" bailout say Greece (and all the others) and promote economic growth in the process, we can revisit reform once the economy recovers. No kidding; that's what these good professors profess: That the likes of Greece; who, upon acceptance into the Euro, not only didn't take the opportunity to change their profligate ways, stepped it up big time, will take its medicine once it's back on its feet. Now if that's not
Saturday, June 9, 2012
The Modus Operandi - Or - 5,000 Calorie Austerity
Let me tell you how this round of this circus plays out. Bernanke (US Fed) and Draghi (ECB), both MIT grads, are seeing eye to eye these days. And let's make Merkel (Germany) the third leg of the stool. These are the players (Bernanke and Draghi) who can send your portfolio right back to that comfortable March 31 value with the push of a button (money's created electronically these days). And don't sweat it, that is the plan. However they don't have to, and prefer not to, just yet. They're sending a very direct message, albeit soft, to the politicians: Do some structural reform, make some commitments, do a little housecleaning - and then we'll talk about QE3, another LTRO, pool some debt, create an FDIC-type program for European bank deposits, and maybe even do the Eurobond (Merkel).
I expect all that (promises of reform and pushing of buttons) to play out. And while the skeptics are out in force suggesting that we're not going to get much bang for all those electronic bucks, when it comes to the stock market, recent price action says otherwise. Stocks are clearly signaling a strong desire for yet more monetary accommodation. When it comes to the global economy, long-term, however, I concur.
The other day I wrote a column titled Throwing Money at Problems Caused by Throwing Money at Problems: that's clearly the modus operandi. But there's this view among some that capitalism's the culprit. That we're throwing money at problems caused by unfettered markets. That we're where we are because of too much private sector freedom, now exacerbated by not enough government spending.
One problem (there's plenty more) with the too-much-freedom argument is that, when it came to large financial institutions, it was precisely the opposite - they lacked the freedom to lose (thanks to government bailouts). As for the claims of high profile economist Robert Reich (and others)- that we're smarting due to a decline in government spending - let's just say he's blatantly misleading his readers. To in any way stress that we're suffering due to (or even experiencing) a decline in federal spending, conveniently (and grossly) ignores the spending explosion in 2009. That's like saying in the beginning of 2009 you went from consuming 3,000 calories a day to gorging yourself on 6,000, but now you're starving your body with a 5,000 calorie diet. Oh and make no mistake, as Reich points out, out of control government spending is not merely a phenomenon of the past three years...
As for Europe; anyone who would have us believe that capitalism has somehow put them in this fine mess, is insulting our intelligence in the worst way...
Thankfully, the U.S. economy remains diverse, deep, and in the end resilient. Keynesians, those who believe governments should deficit spend during recessions, will claim victory when the economy finally begins gaining traction. When in reality this mess (the depth of the recent recession and the slow crawl since) was created by decades of governments throwing money at problems caused by governments throwing money at problems.
Stay tuned...
PS: I can't stop there without addressing Reich's article. I totally agree with his message that rampant cronyism exists on the right side of the aisle. The problem is that this unrepentant partisan continually, and egregiously, manipulates and misrepresents data in his articles and videos (sponsored by Moveon.org: a billionaire-funded entity that spent millions trying to unseat GWB). To put himself out there as some righteous whistleblower, without the slightest mention of the $hundreds of millions labor unions are fixing to spend to defend their man (who, in the auto-bailout,twisted the lawsof this country) - entirely demolishes his credibility.
I expect all that (promises of reform and pushing of buttons) to play out. And while the skeptics are out in force suggesting that we're not going to get much bang for all those electronic bucks, when it comes to the stock market, recent price action says otherwise. Stocks are clearly signaling a strong desire for yet more monetary accommodation. When it comes to the global economy, long-term, however, I concur.
The other day I wrote a column titled Throwing Money at Problems Caused by Throwing Money at Problems: that's clearly the modus operandi. But there's this view among some that capitalism's the culprit. That we're throwing money at problems caused by unfettered markets. That we're where we are because of too much private sector freedom, now exacerbated by not enough government spending.
One problem (there's plenty more) with the too-much-freedom argument is that, when it came to large financial institutions, it was precisely the opposite - they lacked the freedom to lose (thanks to government bailouts). As for the claims of high profile economist Robert Reich (and others)- that we're smarting due to a decline in government spending - let's just say he's blatantly misleading his readers. To in any way stress that we're suffering due to (or even experiencing) a decline in federal spending, conveniently (and grossly) ignores the spending explosion in 2009. That's like saying in the beginning of 2009 you went from consuming 3,000 calories a day to gorging yourself on 6,000, but now you're starving your body with a 5,000 calorie diet. Oh and make no mistake, as Reich points out, out of control government spending is not merely a phenomenon of the past three years...
As for Europe; anyone who would have us believe that capitalism has somehow put them in this fine mess, is insulting our intelligence in the worst way...
Thankfully, the U.S. economy remains diverse, deep, and in the end resilient. Keynesians, those who believe governments should deficit spend during recessions, will claim victory when the economy finally begins gaining traction. When in reality this mess (the depth of the recent recession and the slow crawl since) was created by decades of governments throwing money at problems caused by governments throwing money at problems.
Stay tuned...
PS: I can't stop there without addressing Reich's article. I totally agree with his message that rampant cronyism exists on the right side of the aisle. The problem is that this unrepentant partisan continually, and egregiously, manipulates and misrepresents data in his articles and videos (sponsored by Moveon.org: a billionaire-funded entity that spent millions trying to unseat GWB). To put himself out there as some righteous whistleblower, without the slightest mention of the $hundreds of millions labor unions are fixing to spend to defend their man (who, in the auto-bailout,twisted the lawsof this country) - entirely demolishes his credibility.
Friday, June 8, 2012
Where No Bond Has Gone Before
CNBC reported this evening that the biggest buyer of bonds during the first quarter was the "mom-and-pop investor". The author views this as cause for calm when it comes to concerns over a potential spike in interest rates. As if individual investors will act rationally when a little certainty surfaces and the smart money starts looking elsewhere. As if the individuals who bought sub 2%, 10 year paper in larger quantities than foreigners and the Fed combined in Q1 are the least bit rational.
There's an old adage on Wall Street that says (something like) the time to get out of stocks is when grandma finally gets in. In other words, when that last reluctant retail investor finally capitulates and follows the rest of the herd, the ballgame's over: All the buyers are in and the next meaningful move can only be to sell. The same logic would surely apply to fixed income securities as well.
I see buying bonds (prices decline when interest rates rise) today as being akin to buying tech stocks in '99 and real estate in '06. That is, they're trading today where no bond has gone before. Be careful...
There's an old adage on Wall Street that says (something like) the time to get out of stocks is when grandma finally gets in. In other words, when that last reluctant retail investor finally capitulates and follows the rest of the herd, the ballgame's over: All the buyers are in and the next meaningful move can only be to sell. The same logic would surely apply to fixed income securities as well.
I see buying bonds (prices decline when interest rates rise) today as being akin to buying tech stocks in '99 and real estate in '06. That is, they're trading today where no bond has gone before. Be careful...
Wednesday, June 6, 2012
A Game of Virtual Reality - Or - Moral Hazard is THE Risk
The G7's stepping up, the ECB will (ultimately) fire up the presses, the IMF stands ready to backstop ailing Europeans, China just cut interest rates this morning, and there's this overwhelming sense that the Fed is poised to weigh in big time with more (of the same) quantitative easing, operation twist or whatever "it" takes: That's why the Dow's up 400 points since yesterday's open, right? Wrong! Stocks are up because they're a bargain. Because share prices are depressed while companies are executing like never before.
Or let's say; stocks aren't up because of the decisions of global policymakers, they're down because of the decisions of global policymakers.
Here's the thing: when the ECB, the IMF, the Germans, the Chinese, the Americans, etc., pony up a few trillion collectively, the market rallies on the notion that the doctors, with their PhD's, their lack of real world experience, and their unrelenting desire to keep their jobs, will keep the patient alive.
But hey, who's to argue with a 3.5% two-day rally? Not me. Like I keep saying, stocks (historically speaking) are so compelling right here. The grander question is: will profligate policymakers (the reason stocks are cheap), while their bills are being paid for them, enact any structural reforms whatsoever? Or are the money-printers acting too soon? Were the spendthrifts on the precipice, were they staring into the abyss, or was this just a game of virtual reality? I suspect the latter :(. Moral hazard is, without question, THE long-term risk.
But, like I keep saying, the patient has one strong immune system (entrepreneurial spirit), it's just a little over-anesthetized at the moment...
Stay tuned...
Or let's say; stocks aren't up because of the decisions of global policymakers, they're down because of the decisions of global policymakers.
Here's the thing: when the ECB, the IMF, the Germans, the Chinese, the Americans, etc., pony up a few trillion collectively, the market rallies on the notion that the doctors, with their PhD's, their lack of real world experience, and their unrelenting desire to keep their jobs, will keep the patient alive.
But hey, who's to argue with a 3.5% two-day rally? Not me. Like I keep saying, stocks (historically speaking) are so compelling right here. The grander question is: will profligate policymakers (the reason stocks are cheap), while their bills are being paid for them, enact any structural reforms whatsoever? Or are the money-printers acting too soon? Were the spendthrifts on the precipice, were they staring into the abyss, or was this just a game of virtual reality? I suspect the latter :(. Moral hazard is, without question, THE long-term risk.
But, like I keep saying, the patient has one strong immune system (entrepreneurial spirit), it's just a little over-anesthetized at the moment...
Stay tuned...
TV Segment, June 6, 2012
This morning Zara and I talked about the general state of the economy (I used Don Boudreaux
Tuesday, June 5, 2012
Throwing money at problems caused by throwing money at problems...
Ask yourself, who would sign on to run a company where he'd have to answer to a board made up of ardent supporters on one side of the table and individuals committed to making certain he does not receive a second employment contract on the other?
And let's say that said company is an utter fiscal disaster and that, given the makeup of the board, there's virtually no chance of him measurably turning things around during the course of his first employment contract. And that the pay for running this bloody behemoth doesn't come near what he earns currently.
In summary, this new job would subject he and his family to unrelenting, and vicious, attacks, an utterly palpable sense of futility, a virtual no-win scenario and a huge cut in pay.
So who would want to be elected or reelected President? A politician is a special kind of person. Egomania is THE requisite, along with a strong will to succeed to two full terms. Which leads to an extreme aversion to short-term pain and therefore policy decisions aimed at placating the populace with short-term remedies to long-term problems. I.e., throwing money at problems that were caused by throwing money at problems.
That my friends is the fundamental "problem" in the world today. But, alas, that's the nature of politics, and life—people pursue their own objectives. We simply have to train our officials better. We have to teach them that it's in their best interest to make better policy decisions.
Is that a pipe dream? Of course it is! We don't like pain anymore than politicians do.
So here's how this plays out: The patient (the economy) ultimately heals itself—by the grace of its immune system (the entrepreneurial spirit)—and grows us out of this predicament, albeit much slower than it would have without all the meds*. And the politician takes the credit.
*Read Haven't We Done Enough?
And let's say that said company is an utter fiscal disaster and that, given the makeup of the board, there's virtually no chance of him measurably turning things around during the course of his first employment contract. And that the pay for running this bloody behemoth doesn't come near what he earns currently.
In summary, this new job would subject he and his family to unrelenting, and vicious, attacks, an utterly palpable sense of futility, a virtual no-win scenario and a huge cut in pay.
So who would want to be elected or reelected President? A politician is a special kind of person. Egomania is THE requisite, along with a strong will to succeed to two full terms. Which leads to an extreme aversion to short-term pain and therefore policy decisions aimed at placating the populace with short-term remedies to long-term problems. I.e., throwing money at problems that were caused by throwing money at problems.
That my friends is the fundamental "problem" in the world today. But, alas, that's the nature of politics, and life—people pursue their own objectives. We simply have to train our officials better. We have to teach them that it's in their best interest to make better policy decisions.
Is that a pipe dream? Of course it is! We don't like pain anymore than politicians do.
So here's how this plays out: The patient (the economy) ultimately heals itself—by the grace of its immune system (the entrepreneurial spirit)—and grows us out of this predicament, albeit much slower than it would have without all the meds*. And the politician takes the credit.
*Read Haven't We Done Enough?
Sunday, June 3, 2012
So What's It All About?
Suffice it say that in January 2001 the world looked quite bright to many. An epic bull market had made your everyday day-trader a self-proclaimed genius stock-picker. The individual investor learned how truly easy it was to make money in the market: Simply buy the latest dotcom and jackpot!, you're rich... As you know, things didn't turn out so good, not so good at all...
Suffice it say that in May 2012 the world looks quite dim to many. The market just made a sucker out of the retail investor sporting too-many shares of thatonline place where he chats with the cousin who warned him not to put all his eggs in one basket. The cousin who lost his life's savings day-trading dotcoms back in the day. The individual investor learned, alas, that making money in stocks is not all about buying the hot new issue...
So then, if it's not all about buying hot stocks, what is it all about? Well my friend, it's all about asset allocation, temperament and time horizon... And I guess, in terms of timing, which I suspect you're concerned with, it's also about the fundamentals. And here's how they (courtesy of Davis Funds Spring 2012 Review) stack up today versus 2001:
S&P 500 Index
1/1/2001: 1,469
4/1/2012: 1,408
(A lost decade plus 2 years? Yeah, but if you count dividends and if you did a little rebalancing.......)
S&P 500 Index Earnings Per Share
1/1/2001: $48
4/1/2012: $99 (est)
(I.e., for the S&P today to match its 2001 price to earning's ratio, it would have to be pushing 3,000 as we speak)
S&P 500 Earnings Yield
1/1/2001: 3%
4/1/2012: 7%
(Considered one of the best measures of value when compared to the 10yr treasury. With a 1.45% 10yr treasury, stocks, by this metric, are historically very cheap)
S&P 500 Dividends
1/1/2001: $17/share
4/1/2012: $30/share
(Dividends are up 76%. This speaks to a substantially healthier corporate America. And that's a 50% higher yield than the current 10yr treasury offers)
S&P 500 Debt to Equity Ratio
1/1/2001: 4x
4/1/2012: 2.5x
(Companies currently carry substantially less debt at substantially lower interest rates than they did in 2001. Does wonders for profit margins)
Bottom line: Stocks, historically speaking, are a bargain. That doesn't mean however that they can't remain (or become more of) a bargain (for the time being) in this world of uncertainty. But then again, stocks are a bargain thanks to this world of uncertainty. I.e., the best time to own stocks is when nobody else wants them. But you gotta have a stomach that can stand the volatility...
Suffice it say that in May 2012 the world looks quite dim to many. The market just made a sucker out of the retail investor sporting too-many shares of thatonline place where he chats with the cousin who warned him not to put all his eggs in one basket. The cousin who lost his life's savings day-trading dotcoms back in the day. The individual investor learned, alas, that making money in stocks is not all about buying the hot new issue...
So then, if it's not all about buying hot stocks, what is it all about? Well my friend, it's all about asset allocation, temperament and time horizon... And I guess, in terms of timing, which I suspect you're concerned with, it's also about the fundamentals. And here's how they (courtesy of Davis Funds Spring 2012 Review) stack up today versus 2001:
S&P 500 Index
1/1/2001: 1,469
4/1/2012: 1,408
(A lost decade plus 2 years? Yeah, but if you count dividends and if you did a little rebalancing.......)
S&P 500 Index Earnings Per Share
1/1/2001: $48
4/1/2012: $99 (est)
(I.e., for the S&P today to match its 2001 price to earning's ratio, it would have to be pushing 3,000 as we speak)
S&P 500 Earnings Yield
1/1/2001: 3%
4/1/2012: 7%
(Considered one of the best measures of value when compared to the 10yr treasury. With a 1.45% 10yr treasury, stocks, by this metric, are historically very cheap)
S&P 500 Dividends
1/1/2001: $17/share
4/1/2012: $30/share
(Dividends are up 76%. This speaks to a substantially healthier corporate America. And that's a 50% higher yield than the current 10yr treasury offers)
S&P 500 Debt to Equity Ratio
1/1/2001: 4x
4/1/2012: 2.5x
(Companies currently carry substantially less debt at substantially lower interest rates than they did in 2001. Does wonders for profit margins)
Bottom line: Stocks, historically speaking, are a bargain. That doesn't mean however that they can't remain (or become more of) a bargain (for the time being) in this world of uncertainty. But then again, stocks are a bargain thanks to this world of uncertainty. I.e., the best time to own stocks is when nobody else wants them. But you gotta have a stomach that can stand the volatility...
I Yam What I Yam - Or - The Cement of Ideology - Or (most of all) - Thank You Dorothea!
I just finished reading a few entries in this morning's New York Times online. You might think it odd that I read the Times virtually every day and visit the Wall Street Journal only on occasion. The thing is, the former inspires my creative juices like no other publication I've ever read. My only worry is that sooner or later I may have to consider a shot of Botox betwixt my eyebrows. I fear that one-day my forehead muscles will seize up, leaving that incredulous, scowling, frustrated look permanently etched into my face... I fear I'll scare away my grandchildren.
This morning, however, I find myself strangely at peace (perhaps it's the early sun peeking through the kitchen window). After reading good old Paul Krugman explain, once again, that debt doesn't matter if we owe it to each other - and that countries cutting back when they can't make their debt payments is utterly ludicrous and smacks of some conspiracy to destroy the poor - it occurred to me that there's just no changing a mind steeped in ideology.
They (folks like Krugman, those who comment below his articles, and even you perhaps) is what they is, and, in the words of Popeye the Sailor, "I yam what I yam" - and there's no changing them, or me. So why strain my face with such contortions (I'll look like Brutus if this keeps up)? Better to resign to the reality that many well-meaning folks will never come to understand that what I have to say is always 100% factually correct, and that my (unoriginal) ideology is what's absolutely best for this country. It's a crying shame that not everybody can be as flexible and open-minded as me.
So then, while I can punch gaping holes (seriously) in Krugman's assertions, and no doubt will when next in the mood, I don't know that it'd do anything more than confirm a bias for some of my readers, and incite severe face-contorting in others. I do believe however that there is the person out there who hasn't yet allowed the cement of ideology to encase the right hemisphere of his brain. A person who frankly doesn't give a rip, who believes that to get all worked up over stuff that is completely out of his control is tantamount to lunacy - a completely sane person that is. He's, I suppose, the person I'm after.
But you know, it's funny, I honestly don't want that swing-voter to soak his free-thinking brain in merely the stuff that I churn out. I want him reading the Krugman's of the world, I want him asking himself questions (Does it make sense that borrowing doesn't matter if you borrow from your next-door-neighbor or your brother-in-law? Does it make sense that the larger the government, the more the lobbying/corruption?), I want him coming to his own conclusions. And I want a government's policies to reflect the fiscal values of the majority of its citizens, even when I'm in the minority. Obama is president because he was elected, by the people, to that post; like it or not, that's how it works in a free country. If his policies have turned out to be anathema to the fiscal values of [the majority of] Americans, he won't win a second-term. If his policies are favorable to the American-at-large, or if the jury's still out, we'll likely have four more years to see if our thinking is indeed healthy, or to come to a different way of thinking.
In the end, whether President Obama's political career has more to run, or we turn the helm over to the gentleman from the other side of the ideological tracks, you and I will do just fine. You see the office of the president, while important, is not what ultimately turns this great big tiny world of ours (okay, maybe it tilts it a little).
Last Thursday my wife and I attended the funeral of a long-time client and friend*. While reminiscing on the times I visited Dorothea's husband Harry at his office back in the mid-80s, it occurred to me just how much has happened since those early days of my career; those days when I'd travel to Timbuktu (well, let's say Taft) just to sit with a prospective client. And how the crash of October '87, along with all the sovereign currency crises, all the bear markets and all the natural, and unnatural, disasters seemed so dire as they occurred - yet they remain, save for the most recent recession, but faint recollections. And make no mistake, we will one-day look back on the crises du jour, and say "hey, you remember when?"
*Honoring the life of a friend puts this world in perspective like nothing else can: Thank you Dorothea for the life you lived. For the memories your family shared at your celebration. You have truly inspired others to live lives of integrity, hard work, commitment and, above all, love. You did your job exceedingly well my dear!! You are the morning sun shining through the kitchen window.
I'll close here with day one of my soon to be published 31-day daily devotional on free-market thinking... If you're of my, or an earlier generation, you'll surely relate...
DAY 1: The Good Old Days
This morning, however, I find myself strangely at peace (perhaps it's the early sun peeking through the kitchen window). After reading good old Paul Krugman explain, once again, that debt doesn't matter if we owe it to each other - and that countries cutting back when they can't make their debt payments is utterly ludicrous and smacks of some conspiracy to destroy the poor - it occurred to me that there's just no changing a mind steeped in ideology.
They (folks like Krugman, those who comment below his articles, and even you perhaps) is what they is, and, in the words of Popeye the Sailor, "I yam what I yam" - and there's no changing them, or me. So why strain my face with such contortions (I'll look like Brutus if this keeps up)? Better to resign to the reality that many well-meaning folks will never come to understand that what I have to say is always 100% factually correct, and that my (unoriginal) ideology is what's absolutely best for this country. It's a crying shame that not everybody can be as flexible and open-minded as me.
So then, while I can punch gaping holes (seriously) in Krugman's assertions, and no doubt will when next in the mood, I don't know that it'd do anything more than confirm a bias for some of my readers, and incite severe face-contorting in others. I do believe however that there is the person out there who hasn't yet allowed the cement of ideology to encase the right hemisphere of his brain. A person who frankly doesn't give a rip, who believes that to get all worked up over stuff that is completely out of his control is tantamount to lunacy - a completely sane person that is. He's, I suppose, the person I'm after.
But you know, it's funny, I honestly don't want that swing-voter to soak his free-thinking brain in merely the stuff that I churn out. I want him reading the Krugman's of the world, I want him asking himself questions (Does it make sense that borrowing doesn't matter if you borrow from your next-door-neighbor or your brother-in-law? Does it make sense that the larger the government, the more the lobbying/corruption?), I want him coming to his own conclusions. And I want a government's policies to reflect the fiscal values of the majority of its citizens, even when I'm in the minority. Obama is president because he was elected, by the people, to that post; like it or not, that's how it works in a free country. If his policies have turned out to be anathema to the fiscal values of [the majority of] Americans, he won't win a second-term. If his policies are favorable to the American-at-large, or if the jury's still out, we'll likely have four more years to see if our thinking is indeed healthy, or to come to a different way of thinking.
In the end, whether President Obama's political career has more to run, or we turn the helm over to the gentleman from the other side of the ideological tracks, you and I will do just fine. You see the office of the president, while important, is not what ultimately turns this great big tiny world of ours (okay, maybe it tilts it a little).
Last Thursday my wife and I attended the funeral of a long-time client and friend*. While reminiscing on the times I visited Dorothea's husband Harry at his office back in the mid-80s, it occurred to me just how much has happened since those early days of my career; those days when I'd travel to Timbuktu (well, let's say Taft) just to sit with a prospective client. And how the crash of October '87, along with all the sovereign currency crises, all the bear markets and all the natural, and unnatural, disasters seemed so dire as they occurred - yet they remain, save for the most recent recession, but faint recollections. And make no mistake, we will one-day look back on the crises du jour, and say "hey, you remember when?"
*Honoring the life of a friend puts this world in perspective like nothing else can: Thank you Dorothea for the life you lived. For the memories your family shared at your celebration. You have truly inspired others to live lives of integrity, hard work, commitment and, above all, love. You did your job exceedingly well my dear!! You are the morning sun shining through the kitchen window.
I'll close here with day one of my soon to be published 31-day daily devotional on free-market thinking... If you're of my, or an earlier generation, you'll surely relate...
DAY 1: The Good Old Days
When I look to the future I get very nervous, but when I look to the past I feel pretty good.
Friday, June 1, 2012
That Lusty Month of May
May was a great month, honestly!
Yes, the market had a miserable (from a price-action standpoint) May, and it's taking yet another hit today, biggest since April... Yes, the May Jobs # stunk... Yes, Europe's a mess... Yes, the dollar's rallying... Yes, Oil's "tanking", etc., etc...
Here's a different (legitimate) angle on these events:
1. Stocks remain compelling from all angles but one... That is they're cheap (historically speaking) relative to earnings... Companies are cash rich... Profit margins are wonderful... Money is cheaper than ever... The bond market has nothing to offer... 180+ of the S&P 500 companies have increased dividends this year... And, per the great John Templeton "bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria" - suffice it to say euphoric we ain't... So what's the "but one"? Policy, of course...
2. Stinker of a jobs #... Believe me, you'd rather see companies playing it ultra-safe and hiring only when they're confident that they can sustain new employment long-term... It's way too soon to throw caution to the wind... Policymakers have got to wake up and create certainty by getting (frankly) the hell out of the way...
3. Europe is coming to a head sooner than expected... Coming to a head means they're either going to have to put their debt situation in a cast (as opposed to a band aid) or, let the chips fall where they may... Expect the cast, and therefore expect that we'll be wrestling with Europe further down the road - when the cast comes off...
4. The dollar's rallying! That deserves an explanation point, two even!! "They" say consumer spending is 2/3rds of the economy... When the dollar's up, the consumer has greater purchasing power... You'd think that'd be a good thing... However, traders don't give a rip about anything beyond today... To them it means U.S. goods are more expensive to foreign customers (i.e., bad for exporters) and deflation (possibly)...
5. Oil prices dropping like a rock! Wonderful!! Seriously - that's how it's supposed to work... Economic growth slows, anticipated demand wanes, prices decline, consumer has extra dough to spend (better to save) elsewhere... Elsewhere improves, economy improves, voila!!
I wrote the following back in October 2009... It so applies to what we're experiencing today... In fact it so applies to myriad periods I've experienced during my 28 year career (BTW on October 6, 2009, the Dow was 2,400+ points below this morning's level)...
The October 6th (2009) issue of Business Week featured the following two headlines; The Market Will Keep Going Up, the storm has passed, and the old rules of risk and reward are back, and
Yes, the market had a miserable (from a price-action standpoint) May, and it's taking yet another hit today, biggest since April... Yes, the May Jobs # stunk... Yes, Europe's a mess... Yes, the dollar's rallying... Yes, Oil's "tanking", etc., etc...
Here's a different (legitimate) angle on these events:
1. Stocks remain compelling from all angles but one... That is they're cheap (historically speaking) relative to earnings... Companies are cash rich... Profit margins are wonderful... Money is cheaper than ever... The bond market has nothing to offer... 180+ of the S&P 500 companies have increased dividends this year... And, per the great John Templeton "bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria" - suffice it to say euphoric we ain't... So what's the "but one"? Policy, of course...
2. Stinker of a jobs #... Believe me, you'd rather see companies playing it ultra-safe and hiring only when they're confident that they can sustain new employment long-term... It's way too soon to throw caution to the wind... Policymakers have got to wake up and create certainty by getting (frankly) the hell out of the way...
3. Europe is coming to a head sooner than expected... Coming to a head means they're either going to have to put their debt situation in a cast (as opposed to a band aid) or, let the chips fall where they may... Expect the cast, and therefore expect that we'll be wrestling with Europe further down the road - when the cast comes off...
4. The dollar's rallying! That deserves an explanation point, two even!! "They" say consumer spending is 2/3rds of the economy... When the dollar's up, the consumer has greater purchasing power... You'd think that'd be a good thing... However, traders don't give a rip about anything beyond today... To them it means U.S. goods are more expensive to foreign customers (i.e., bad for exporters) and deflation (possibly)...
5. Oil prices dropping like a rock! Wonderful!! Seriously - that's how it's supposed to work... Economic growth slows, anticipated demand wanes, prices decline, consumer has extra dough to spend (better to save) elsewhere... Elsewhere improves, economy improves, voila!!
I wrote the following back in October 2009... It so applies to what we're experiencing today... In fact it so applies to myriad periods I've experienced during my 28 year career (BTW on October 6, 2009, the Dow was 2,400+ points below this morning's level)...
The October 6th (2009) issue of Business Week featured the following two headlines; The Market Will Keep Going Up, the storm has passed, and the old rules of risk and reward are back, and
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