Well shoot! I got up this morning early, intending to dive into a new book, when I made the fatal error of looking at my emails and clicking a link to an article titled Is The Debt Issue Phony?
I thought I'd share with you the knee-jerk, hopefully coherent (I really want to get to that book), reaction I couldn't help but type into the article's comment section
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Wow! Where to begin...
Coke, really? Coke posted $10 billion in net income last year. How did Uncle Sam do? Oh, that's right, we're not supposed to make those kinds of comparisons. Not, that is, unless---in some dimension---it supports our story.
And you somehow know that we're poised for years of economic growth, and then you get real and say we have no clue how the future will unfold.
And, I didn't know this, but we can grow assets at will. Wow!! We develop a "real debt crisis", and, as you say, the answer is simple, "grow assets". Sure, just like all those other countries throughout history have done. You know---the ones who have borrowed themselves into real crises---how they've just turned the switch, and voilà!, grown assets. As opposed to inflating their currency, decimating their economies and outright defaulting on their debt. Never mind the fact that growing government debt is synonymous with growing government, and growing government is synonymous with a slowing private sector, and how history utterly demolishes your theory.
And I'll stop here (I could go on all day) with saying thank you for putting us all at ease with your assets to government debt analysis. We can sleep easy knowing that when we get into a real debt crisis, all we have to do is nationalize 20% (at this point) of net household assets and we're in good shape.
Dang it! One more: You're kidding us on your interest on the debt analysis, right? I mean, you make the statement that we'll never pay off the debt, which means we'll be refinancing it into eternity. Now, if we're, at this juncture, so utterly sanguine about Uncle Sam's ability to borrow harmlessly into the future, do you think just maybe we could (just maybe) one day find ourselves in a "real debt crisis"? I mean, what happens if the rest of the world, our creditors, don't agree that a country can simply operate on a credit line for eternity. And, you know, some of them don't. And if they, therefore--somewhere along the way--decide to do more transacting in other currencies, and less lending to Uncle Sam, you think maybe we run into a bit of trouble, maybe interest rates rise, maybe a lot? And if interest rates rise, maybe alot, well, I guess rising interest rates on God knows how many trillions in debt---rolling over in perpetuity---is what you might call a debt crisis.
Saturday, October 5, 2013
Friday, October 4, 2013
Never a dull moment...
"After Congress failed to reach an agreement on a new spending bill, the federal government officially shut down. So roads won't get fixed, public employees won't be able to help you, and getting a federal loan for a house will be very difficult — but there will also be a lot of differences." Jimmy Fallon
It's day 4 and we're still here. Still no deal, but Boehner says there'll be no default. He's clearly attempting to create a little space between himself and his colleagues who are beholden to the Tea Party. And, from what I can tell, he's receiving some pats on the back as a result. Nobody wants to bear the blame for a government default (not even, I suspect, the Tea Party). At this juncture, those who've been assigned the task of killing the Affordable Care Act, knowing it ain't happening, are praying that appearing to try really hard will keep their supporters engaged.
As for the market, while the down days were down more than the up days were up this week, nothing resembling panic has yet hit the trading floor. Going into the weekend with green arrows tells us that traders---for the moment anyway---believe the political risk will ultimately take care of the market risk.
Rest assured---potential fireworks notwithstanding---this will soon blow over and it'll be smooth sailing from then on. I mean, from then until the market begins thinking about the QE taper, 3rd quarter earnings, the Middle East, interest rates rising, revenue growth, Euro Zone debt, Italian politics, consumer sentiment, industrial production, capacity utilization, the unemployment rate, durable goods orders, 52 week moving averages, China GDP, and roughly a zillion other things. Never a dull moment...
It's day 4 and we're still here. Still no deal, but Boehner says there'll be no default. He's clearly attempting to create a little space between himself and his colleagues who are beholden to the Tea Party. And, from what I can tell, he's receiving some pats on the back as a result. Nobody wants to bear the blame for a government default (not even, I suspect, the Tea Party). At this juncture, those who've been assigned the task of killing the Affordable Care Act, knowing it ain't happening, are praying that appearing to try really hard will keep their supporters engaged.
As for the market, while the down days were down more than the up days were up this week, nothing resembling panic has yet hit the trading floor. Going into the weekend with green arrows tells us that traders---for the moment anyway---believe the political risk will ultimately take care of the market risk.
Rest assured---potential fireworks notwithstanding---this will soon blow over and it'll be smooth sailing from then on. I mean, from then until the market begins thinking about the QE taper, 3rd quarter earnings, the Middle East, interest rates rising, revenue growth, Euro Zone debt, Italian politics, consumer sentiment, industrial production, capacity utilization, the unemployment rate, durable goods orders, 52 week moving averages, China GDP, and roughly a zillion other things. Never a dull moment...
Thursday, October 3, 2013
Hooked on subsidies...
CNBC's Alison Linn, in her article, You think the Obamacare fight is ugly?, highlights the vicious political battles that were fought over the enactments of Social Security and Medicare:
Ronald Reagan warned that Medicare would be followed by:
I say Reagan, in that statement, had it right. Indeed, our personal freedoms have been, and continue to be, invaded. But the thing is, while the number of laws regulating our individual actions has grown exponentially over the past 30 years, I don't believe that your average citizen would necessarily agree that we're substantially less free. In terms of social security and medicare, when (today) nearly 8% of an individual's income is taken over his working lifetime---in return for the promise of subsidized* healthcare and income throughout his retirement---he, being that that's all he's ever known (and having no choice in the matter anyway) is likely okay with that. Never minding what he might have done with all that hard-earned money were he FREE to allocate it as he saw fit. Never minding that an equal sum was confiscated from his employer for his "benefit" over all those years. Never minding---in fact, utterly oblivious to---the wages and benefits he, therefore, never realized due to that cost to his employer. Never minding that these programs, in present form, have literally zero chance of surviving our changing demography.
*Yes, subsidized. Workers pay social security and medicare "taxes" that essentially transfer to older-aged recipients. Workers become recipients by statute, which can be changed, as opposed to by an insurance contract in which benefits cannot be unilaterally altered or terminated (except for nonpayment of premiums).
Linn quotes Jonathan Oberlander, a professor of health policy and management at the University of North Carolina:
Huh? "Turned out OK"? I'll state it again, these programs have LITERALLY ZERO chance of surviving our changing demography. So no! We can take no comfort in the prognosis for Medicare and Social Security.
As for our immediate mess: A minority of House Republicans' dance steps are, allegedly, being choreographed by the Tea Party. Now, assuming that's the case, we must ask, why is the Tea Party going after a law---as ill-conceived as it may be---that has already been passed, and upheld by the Supreme Court? They have to know that there'll be no defunding of the Affordable Care Act. I mean why blow a perfectly good budget battle on an objective they have zero chance of achieving, when they can push hard for a little reforming of two programs that are scheduled to explode in our faces in the not too distant future? You think maybe the Tea Partiers are just people, like the rest of us, who pursue their own separate interests? You think maybe, as Linn wrote:
I'm not aware of the Tea Party's demography (although I'm guessing they're a mature bunch), and I'm just not inspired to Google it at the moment, but I suspect they're not pushing for Social Security and Medicare reform because---personal freedom aside---they're either already hooked on their "benefits", or they're not the least bit interested in hurting their prospects for receiving "benefits" in the future.
Robert Samuelson thinks it's a matter of pragmatism:
I say, alas, deficit spending is a terrible thing, that is until some of it lands on your doorstep.
The Social Security Act, which in 1935 introduced old-age insurance, unemployment insurance and other social welfare programs, faced critics who worried it would threaten democracy itself.
Isn't this socialism?" one senator, Thomas Pryor Gore, a Democrat from Oklahoma, asked at one point.
Ronald Reagan warned that Medicare would be followed by:
other federal programs that will invade every area of freedom as we have known it in this country.
I say Reagan, in that statement, had it right. Indeed, our personal freedoms have been, and continue to be, invaded. But the thing is, while the number of laws regulating our individual actions has grown exponentially over the past 30 years, I don't believe that your average citizen would necessarily agree that we're substantially less free. In terms of social security and medicare, when (today) nearly 8% of an individual's income is taken over his working lifetime---in return for the promise of subsidized* healthcare and income throughout his retirement---he, being that that's all he's ever known (and having no choice in the matter anyway) is likely okay with that. Never minding what he might have done with all that hard-earned money were he FREE to allocate it as he saw fit. Never minding that an equal sum was confiscated from his employer for his "benefit" over all those years. Never minding---in fact, utterly oblivious to---the wages and benefits he, therefore, never realized due to that cost to his employer. Never minding that these programs, in present form, have literally zero chance of surviving our changing demography.
*Yes, subsidized. Workers pay social security and medicare "taxes" that essentially transfer to older-aged recipients. Workers become recipients by statute, which can be changed, as opposed to by an insurance contract in which benefits cannot be unilaterally altered or terminated (except for nonpayment of premiums).
Linn quotes Jonathan Oberlander, a professor of health policy and management at the University of North Carolina:
"We've been through this before, and in some ways that's comforting because Medicare and Social Security turned out OK.
Huh? "Turned out OK"? I'll state it again, these programs have LITERALLY ZERO chance of surviving our changing demography. So no! We can take no comfort in the prognosis for Medicare and Social Security.
As for our immediate mess: A minority of House Republicans' dance steps are, allegedly, being choreographed by the Tea Party. Now, assuming that's the case, we must ask, why is the Tea Party going after a law---as ill-conceived as it may be---that has already been passed, and upheld by the Supreme Court? They have to know that there'll be no defunding of the Affordable Care Act. I mean why blow a perfectly good budget battle on an objective they have zero chance of achieving, when they can push hard for a little reforming of two programs that are scheduled to explode in our faces in the not too distant future? You think maybe the Tea Partiers are just people, like the rest of us, who pursue their own separate interests? You think maybe, as Linn wrote:
one reason both Medicare and Social Security endured is that people quickly started getting benefits, and enjoyed them. Even Ted Cruz, the Texas senator who is among Obamacare's fiercest opponents, told Fox News one worry is that people will become "hooked" on Obama's health-care plan and not want to repeal it.
I'm not aware of the Tea Party's demography (although I'm guessing they're a mature bunch), and I'm just not inspired to Google it at the moment, but I suspect they're not pushing for Social Security and Medicare reform because---personal freedom aside---they're either already hooked on their "benefits", or they're not the least bit interested in hurting their prospects for receiving "benefits" in the future.
Robert Samuelson thinks it's a matter of pragmatism:
You can ascribe the mismatch between tea party rhetoric and the budgetary realities to pragmatism. Even tea party groups know that Social Security and Medicare are wildly popular. To attack them head on would be a political death wish.
I say, alas, deficit spending is a terrible thing, that is until some of it lands on your doorstep.
Wednesday, October 2, 2013
Today's TV Segment (video)
This morning Zara and I discussed all the goings on in Washington and how the market seems to be discounting it. Click here to view...
Tuesday, October 1, 2013
Do my eyes deceive me? - And - "The Law"
Do my eyes deceive me? As I type (embarrassingly early on Tuesday October 1, 2013), day one of the 2013 U.S. Government shutdown, Dow futures are pointing to a 34 point gain at the opening. At one point last night, as I reported, Dow futures were off over 100 points (that's not that much, by the way). You gotta love it, at least in concept. I've been preaching for the better part of 30 years that market-timing is the most foolish of games, and moments like this serve to, further yet, seal that conviction. Who, other than perhaps a rabid free-market fanatic, like yours truly, would expect a, albeit small (and likely brief), rally during the initial stage of a government shutdown---although, truthfully, I didn't.
So what gives? Why would buyers venture anywhere near the market at a time like this? I mean, even if the government reopens all those departments tomorrow, we still have the debt ceiling standoff coming in 16 days. Perhaps, as I suggested the other day, the market indeed finds present policymakers an unthreatening lot. Okay, but I absolutely expected the market to give them a real drubbing---should a shutdown occur---and, in very short order, force their hand. If, therefore, you happen to be hoping for a quick resolution, green arrows for stocks is not what you're after. Although I'll be very surprised if, barring that quick resolution, and/or a surprise deal on the debt ceiling, those green arrows don't soon turn red, and on their heads. Which, again, is the sort of thing that would get you what you're hoping for.
What am I hoping for? Oh, you shouldn't have asked, but since you did: As an advisor to long-term investors, I'm not the least bit rattled by today's goings on; the government will reopen and, alas, borrow to its heart's content---Tea Party pressure notwithstanding---before you know it (uh, maybe I should be rattled). My hope (pardon my digression) is that one day Frederic Bastiat's 1850 Essay, The Law, will be required reading in every school in the nation. I know, alas, it'll never happen.
Here's a snippet:
So what gives? Why would buyers venture anywhere near the market at a time like this? I mean, even if the government reopens all those departments tomorrow, we still have the debt ceiling standoff coming in 16 days. Perhaps, as I suggested the other day, the market indeed finds present policymakers an unthreatening lot. Okay, but I absolutely expected the market to give them a real drubbing---should a shutdown occur---and, in very short order, force their hand. If, therefore, you happen to be hoping for a quick resolution, green arrows for stocks is not what you're after. Although I'll be very surprised if, barring that quick resolution, and/or a surprise deal on the debt ceiling, those green arrows don't soon turn red, and on their heads. Which, again, is the sort of thing that would get you what you're hoping for.
What am I hoping for? Oh, you shouldn't have asked, but since you did: As an advisor to long-term investors, I'm not the least bit rattled by today's goings on; the government will reopen and, alas, borrow to its heart's content---Tea Party pressure notwithstanding---before you know it (uh, maybe I should be rattled). My hope (pardon my digression) is that one day Frederic Bastiat's 1850 Essay, The Law, will be required reading in every school in the nation. I know, alas, it'll never happen.
Here's a snippet:
See whether the law takes from some persons that which belongs to them, to give to others what does not belong to them. See whether the law performs, for the profit of one citizen, and, to the injury of others, an act that this citizen cannot perform without committing a crime. Abolish this law without delay; it is not merely an iniquity---it is a fertile source of iniquities, for it invites reprisals; and if you do not take care, the exceptional case will extend, multiply, and become systematic. No doubt the party benefited will exclaim loudly; he will assert his acquired rights. He will say that the State is bound to protect and encourage his industry; he will plead that it is a good thing that the State to be enriched, that it may spend the more, and thus shower down salaries upon the poor workmen. Take care not to listen to this sophistry, for it is just by the systematizing of these arguments that legal plunder becomes systematized.
And this is what has taken place. The delusion of the day is to enrich all classes at the expense of each other; it is to generalize plunder under pretense of organizing it. Now, legal plunder may be exercised in a multitude of ways. Hence come an infinite multitude of plans for organization; tariffs, protection, perquisites, gratuities, encouragements, progressive taxation, free public education, right to work, right to profit, right to wages, right to assistance, right to instruments of labor, gratuity of credit, etc., etc. And it is all these plans, taken as a whole, with what they have in common, legal plunder, that takes the name of socialism.
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