Tag Archives: economy

Current Events

Beware of Halloween Spooks

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Hello followers. I hope this missive finds you and yours in the best of health and staying safe. My bride and I returned from our getaway to St. Lucia very early this morning. Truly a relaxing place for the late twenty to late thirty crowd. For the early eighty crowd, not so relaxing; glad I purposely did not bring my Hearing Aids. Not quite my genre of music; in fact, it was unbearable. However, the place is so large and dissected in such a way we found a quiet pool away from all that. Anyway, we both had a great time, lots of fun in the sun.

I arrived home to find an excellent treatise by Greg on the current state of the economy in this once vibrant and glowing country of sane people. And as usual, I totally concur with all he states. It is coming folks. For those living off their 401K’s beware!! I and most who think like me have been selling for the past several weeks, and I shall continue during the ups and downs of Wall Street. I shall also do some selective buying, but inflationary companies, which are many, will not be on my sought-after lists.

The highlights in red within Greg’s treatise are mine.

October Instincts

By: G. Maresca

The Executive Director of JPMorgan Chase admitted that the stock market’s “biggest nightmare periods have tended to be October. You go back to obviously the crash in 1929, but the 1987 crash, and in 1989… was in October. You tend to have these October moments.”

Financially most are feeling pretty good as brokerage accounts never looked healthier and home prices are over-the-top. Over the past year, the S&P 500 has closed at new, all-time highs over 50 times and in so doing has created the illusion that the market only rises.

This results in taking more chances when investing.

The K-shaped economy and booming stock market underscore that Main Street and Wall Street are at a major disconnect. Many dismiss the growing rate of inflation, the unprecedented intervention by the Federal Reserve’s nonstop money-printing and increased debt believing that the dollar today is worth the same as it was last year.

It’s not.

The duality of low interest rates and those stimulus payouts have devalued the dollar. Thanks to inflation and time, savings in fixed investments like CDs, bank accounts and money markets lose purchasing power. With yields registering next to nothing, where are investors expected to put their money?

As a result, savers seek more risk in order to obtain better returns leading to a stock market that is cooking and overvalued. Increasing stock prices coupled with a mushrooming federal debt is a brick road paved over with inflation.  As the Fed continues easy-money policies, the market will continue higher as the infusion of cheap dollars rules the day.

Most bankers, brokers, and politicians understand that these bouts with inflation are what economists call: “The Money Illusion.” It is when one’s wealth is measured in how many dollars they possess, rather than its purchasing power.

Among investors, the Money Illusion breeds risk taking and heightened speculation. It’s like watching a skilled magician work his stagecraft. It looks and appears amazing and impossible, but it is not at all what it seems.

Low interest rates did, in fact, rescue the market. The Fed slashed short-term interest rates to near zero at the onset of the COVID-19 debacle and bought large purchases of Treasury and mortgage bonds making dollars discounted. In so doing, The Fed propped up not only the bond markets, but stocks, too.

Many are in denial about what is truly happening throughout our financial system. To paraphrase writer Upton Sinclair, it’s difficult to get someone to look when their getting paid depends on not looking.

Adding to the illusion is that 40% of all U.S. currency in circulation has been printed since March 2020. Few comprehend the effects of so many trillions in our financial system. The Case-Shiller Index which measures home prices has risen 18.6% for the year, up from a record 16.8% the month before. The index is the proverbial rat in the financial mine that brings with it a healthy dose of inflation.

Financial storm clouds are forming as the economy experiences labor shortages, supply chain disruptions, rising prices, and increasing inflation. With too many dollars chasing too few assets, the good times won’t last forever.

One out of every four companies are on life support because of low interest rates. With rates near zero, and with inflation rising, The Fed cannot afford to keep them low forever.

Bankruptcies are on the horizon.

The federal debt continues to grow as trillions crowd the government’s balance sheet with the debt literally growing by the second. Inflation does to a degree keep the debt somewhat manageable. However, as inflation rises, Social Security, and other assorted fixed incomes like pensions will see their buying power shrink even further.

Eventually, a significant tax increase will hit all Americans hard and below the belt – regardless of income.

Rising stock prices are great, but when easy money begins to create social, political, and economic turmoil, something is seriously amiss. A White House which believes that global warming, systemic racism and COVID are our greatest threats, does not possess the foresight and wisdom to comprehend what is economically occurring.

The laws of economics cannot be repealed, no matter what one’s wishful thinking may be.

As October looms, consider this a heads-up.

Postscript: Beware of the ghouls of October, they are coming, meanwhile many Americans keep chasing those soon to be negligent goods and, to paraphrase Mack the Knife , “Spending like a Sailor.”

Originally posted 2021-09-20 14:39:12.

Current Events

Immigration – AGAIN!

Oaky, here we go again with the immigration issue. What’s the issue? Well, to begin, we don’t have an immigration policy in this country. Oh, forgive me, yes we do have a system, but can anyone tell me exactly what that system is? I am sure we all know immigrants who applied through the “system”  and took them years to be vetted and eventually allowed to become an American citizen. 

But the “system” we have today is based solely on political leanings. Mexicans at our southern border will eventually become democrats,. Come on, you know it, everybody knows it, especially since the creatures in the swamp will kowtow to their every needs, provide them with all sorts of benefits paid for by you and me. So why would they not vote for those who accepted them? They surely would not vote for those of us who try our best to keep the interlopers out! Agreed?

Okay, so know what about Cuban immigrants. Which way would they lean? Ahh, now we see a different set of immigrants and a different “system.” So, does it not surprise anyone that the douchebag in charge, who by the way, happens to be a Cuban immigrant himself said they will not be allowed ashore in America. 

This whole immigration thing is laughable and very simple. If you lean left come on in, if you lean right. get the hell out of here.

About this thing called immigration

by bunkerville

US immigration is unnecessarily complex. It has evolved into a patently unfair system to everyone who enters the system honestly and with good intent — who seeks lawful admission.  It favors those who skip ahead of everyone else and go to the head of the line.  US officials created this problem; illegal invaders only take advantage of an opportunity handed to them by political leaders who are either nefarious in their intent or incompetent.  You know, people like Biden/Harris whom the American people overwhelmingly elected. If our immigration system is broken, then we broke it.

This must change.  No one has a right to come here, but if immigrants knock on our door, it must be in accordance with our laws and procedures.  Yes, we need a border wall, but we also need a commitment to our immigration system.  No one must come here by cutting in front of the line.  No one must come here who cannot contribute to the American economy, who will not embrace American values, and who will not assimilate American society.  No “child” must come here without their mother or father.

There is no question that the United States of America is the best place on the planet to live, but does that mean that everyone who lives in a nation less vibrant than our own has a case for political asylum?  If everyone who lives in a country ruled by petty dictators or religious despots has an asylum claim, then literally two-thirds of the world’s population will soon show up at our door.  There ARE limits, after all, to the number of immigrants our economy can support.  People who do not/will not speak our language, who are not educationally prepared for the challenges of our economy, and who know less about our values than they do about speaking in English simply do not have a realistic expectation of success.  Note: most Latin Americans are illiterate in their own language. At some point, we must acknowledge that there are (pragmatically) limited opportunities for goat-herders-turned taxi drivers in Newark.

Although with that said, from a historical point of view, the cultural differences between Spanish and Anglo immigrants could not be more unambiguous.  I can readily see why Democrats are anxious to accept tens of thousands of Latinos as potential citizens: they are far more inclined to do whatever the government tells them than people of British stock. It also occurs to me that for every individual who runs away from their own country, whatever those conditions are, there is one less person available to fight for meaningful change in the land of their birth and cultural heritage.

Secretary Mallorcus told us that Cubans must not be allowed to come to the United States.  Shouldn’t this standard apply to every immigrant who is trying to jump ahead in line or who files a frivolous petition for asylum?  Should we return all such people to their home country (or, as he suggested, a third country) until US officials process their claim in an orderly fashion?  Note: I’m not sure how French-speaking Haiti would be a good fit for immigrants from Guatemala, but that was his idea, not mine.  I suspect there are few Spanish-speaking countries in the Americas willing to accept Guatemala’s problems.  Nor should we.  What we observe unfolding along our southern borders is only a “humanitarian crisis” because we’ve made it into one.

Sending people back to their home country for processing reinforces the traditional process of putting the names of people hoping to immigrate to the US on a waiting list, which is the only way we have of properly vetting applicants for admission to the United States.  There is an exception to every rule, of course, but exception must not become the rule.  We must maintain an orderly process of immigration.

Notice that tens of thousands of people, having spent their entire lives living in a communist/socialist country, suddenly appear on our southern border demanding entry to a country in which half of the population can support a communist/socialist administration.  Is this not an example of politically compliant people trying to leap from a frying pan into a fire?  I find the whole situation very odd, and I wonder why we Americans think we need more communists in our country rather than fewer.

Mustang also blogs at Fix Bayonets and Thoughts From Afar

Originally posted 2021-07-16 11:48:32.

Current Events

Hidden in Plain Sight

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Well, it’s Saturday and we wonder what the scum swamp creatures are up to? There’s not telling, nothing surprises me any more. Just read where the VP is not very well liked throughout the nation among both parties. Well, that’s no surprise since she only got 3% of the votes in the Dem primary amongst all those other duds.  

Anyway, I digress and as you know I have chosen to not post any more about Joe and the “other” ones. 

Today’s post is another from my good friend and frequent contributor Greg. Thank you sir.

By: G. Maresca

Jimmy Carter is a retired peanut farmer and among historians is arguably one of the nation’s most maligned chief executives.  Current White House occupant Joe Biden has a trillion-plus-dollar “infrastructure bill” with only peanuts set aside for actual infrastructure that has the potential to change the relationship between government and the economy.

Democrats, beginning with FDR and the New Deal, refer to “infrastructure spending” as if it’s the magic elixir that will solve all of the nation’s fiscal and economic trials.

Back during the Carter years, we had gas lines, but they were not the result of a disabling cyberattack that occurred with the Colonial pipeline that was felt nearly instantaneously.  The circumstances may have been different, but the results were equally as devastating.

Owning a piece of the pipeline attack is the politically charged FBI and CIA and a socially woke corporate America that failed to secure and protect such sensitive infrastructure.

This latest manmade disaster only underscores how America’s enemies understand how vulnerable our infrastructure remains.  It is only a matter of time before another strike comes to fruition, but rather than shutting down a regional pipeline, how about hacking in and disabling the nation’s electric power grid?  Try going without electricity for a week and given the dated nature and vulnerability of our grid, the possibilities are not unthinkable.

One of the key ingredients why infrastructure gets neglected, or in many cases ignored, is that there remains little to no political pay-off to upgrading airports, repairing potholes or replacing bridges.  Juxtapose that to spending the same money building community centers, creating rails to trails and upgrading public swimming pools.  Such ribbon-cutting events provide politicians with plenty of favorable and free publicity. Nobody holds ribbon-cutting ceremonies for upgrading and securing computer software, milling roadways, and replacing sewer lines.

The threat of the power grid crashing like it did in Texas over the winter is quite real, but preventable.  Most, however, have no idea the severity of vulnerability under which we live.

The Task Force on National and Homeland Security is comprised of citizens, engineers, and field experts concerned about the vulnerability of our critical infrastructures.  It is an official Congressional Advisory Board that receives no federal funding and operates exclusively on donations. They have reported to Congress on several occasions that in the event of an Electro Magnetic Pulse attack, 70- 90% of Americans could be dead within a year.

And you thought COVID-19 was bad.

Minor negligence has a way of resulting in major consequences. As our country’s infrastructure continues to age — something America takes for granted — we will see more foundational systematic breakdowns.  Being attentive to our country’s infrastructure by advocating for its continued improvement is critical when it comes to working toward the common good and is everyone’s responsibility.

Why does it take several years to replace a bridge, when the Empire State Building was constructed in two years and during the Great Depression?  It is little wonder that Americans have lost faith in government institutions.

Government-funded projects often fail to live up to their lofty intent.  The problem is not that tax dollars are not being spent, but rather the money is being allocated and managed so poorly.  While it may sound costly, building resilient infrastructure will save plenty of money over the long term as it invests in the future.

Allow state and local governments to raise and spend money for their own projects making the case for what they really need, while freeing them from the tedious strings that always come attached to federal subsidies.

Infrastructure, like anything else in the physical world deteriorates and needs not only to be maintained, but at times, upgraded and improved.  It is important that elected officials understand public works are not just a short-term inducement or a vehicle for politically driven job creation.  The goal should be to create the best and broadest necessary infrastructure for the most responsible price.

Transforming and securing our national infrastructure is the best kind of financial stimulus since it supports all economic avenues.  There is no reason why we cannot build a better and smarter future for our children’s and grandchildren’s generation.

The nation’s subsistence depends on it.

Do some due diligence and you will be utterly shocked at how little money in that bill is actually going to fix our infrastructure. I did. WOW! How do you spell immigrants?

Originally posted 2021-05-22 12:54:31.

Recent Posts

Punishment

LOL, this is so funny. Some may have trouble understanding what Mr. Lindsey is saying in this article. Heck I had to read it again slowly to get the full drift. The bottom line is simple, raise the tax and get less revenue. LOL Makes sense to me, What an idiot this president is. That is unless he is doing it as Mr. Lindsey thinks, to punish the rich and the hell with revenue. OMG.

 

And if anyone is qualified to talk on this subject it is certainly Dr. Lawrence Lindsey, former Governor of the Federal Reserve System for six years.

The Biden administration last week proposed to increase the capital-gains tax rate—currently 20% for most assets held for at least a year—to 39.6% for people making more than $1 million. Since capital gains are also subject to the 3.8% Medicare tax, the new capital-gains rate would be 43.4%.

What makes this unusual is that 43.4% is well above the rate that would generate the most revenue for the government. Congress’s Joint Committee on Taxation, which does the official scoring and is no den of supply siders, puts the revenue-maximizing rate at 28%. My work several decades ago puts it about 10 points lower than that. That means President Biden is willing to accept lower revenue as the price of higher tax rates. The implications for his administration’s economic thinking are mind-boggling.

Even the revenue-maximizing rate is higher than would be optimal. As tax rates rise, the activity being taxed declines. The loss to the private side of society increases at a geometric rate (proportional to the square of the tax rate) as rates rise. The government collects more revenue, but its gains slow as the taxed activity declines. The revenue-maximizing rate is the point at which the government starts losing from higher taxes. Tax rates above the revenue-maximizing rate are punitive: The government is giving up revenue simply to punish the rich.

Punishing the rich is distinct from redistribution. Higher taxes on the rich to finance spending, or to transfer money to lower-income people, may be good for society’s welfare. Economists express this idea in a “social-welfare function,” which weights additional income received by different people, usually based on income. The same sum is considered less valuable if it goes to a high-income person than a lower-income one. The weights are subjective and different analysts will choose different weights.

Still, economists can agree that the ideal is to make someone better off without making someone else worse off. The simplest case is a voluntary exchange of goods for money, in which the buyer values the purchase at least as much as the price, while the seller values the money at least as much as the item being sold. Economists call such an exchange Pareto-optimal after Vilfredo Pareto, the Italian economist who formally framed the concept.

There is no choice in paying taxes, and usually the government is better off and the taxpayer is worse off. But above the revenue-maximizing rate, even the government is worse off. This is called Pareto-pessimal.

Generally, the government can raise tax rates and transfer the money to lower-income people, thereby improving social welfare. The government can do this even after incurring the economic burdens caused by higher rates and the costs of transferring money (known as the “leaky bucket”). The trade-off depends on how much tax rates distort the economy, how big the leaky-bucket effect is, and how one evaluates the difference in value of money going to people in different income groups.

As indicated by other proposals, the current administration rates money going to lower-income people extremely highly relative to higher-income people—higher than has traditionally been the case in U.S. economic policy. It also seems to put little weight on excess economic burdens and leaky-bucket costs. The wisdom of those choices will be tested at the ballot box.

But to an economist, a Pareto-pessimal choice is unwise by definition. There is no set of “weights” one can devise to justify this proposal, because there are no highly prized winners to offset the losses to the low-weighted losers.

The concept of social-welfare maximization has been a cornerstone of economic thinking across the political spectrum for the past century. It dates back at least to Adam Smith in the 18th century, and arguably to the 17th, when Jean-Baptiste Colbert, King Louis XIV’s finance minister, declared “the perfection of taxation consists in so plucking the goose as to procure the greatest amount of feathers with the least possible amount of squawking.”

That’s why it is shocking that this policy got past the economists in the administration, many of whom have had long and distinguished careers. The Biden administration is blowing up one of the key concepts that has united the economics profession: maximizing social welfare. It now believes in taxation purely as a form of punishment and is even willing to sacrifice revenue to carry it out.

Mr. Lindsey is president and CEO of the Lindsey Group. He served as a Federal Reserve governor (1991-97) and assistant to the president for economic policy (2001-02).

Originally posted 2021-04-26 15:14:18.

Current Events

All Dollars and Little Sense

3 Comments

Good day fellow patriots and conservatives. Haven’t posted in a few days as I have been overwhelmed with tales from the swamp creatures and their devious ways. The trial is over, and as we expected he was was found guilty, albeit with Joe and the b**ch from california ( I refuse to capitalize the name of that foreign land) spouting off at the mouth there is lots of ammo for an appeal. Let’s keep praying for it to happen..

And of course the House voted to make DC a state. Oh isn’t that great two more leftist senators and one congressman for the swamp. I don’t hold out much hope from the senate to strike it down; too many leftist republicans in there. So, how will we arrange the stars in the flag?  That will be fun to watch.

From my tone you may wonder what is going on. Well at my ripe age, I refuse to get excited about what happens. Oh, don’t get me wrong. When the war comes, I shall man the lines as I have done before, and if anyone offers me a billet such as a battalion commander, I shall rise to the occasion, as I am sure you will as well.

Had lunch today with two old fellow retired colonels with whom I have served several times, but not seen them in a while — I really don’t know why since we are all retired.  Joining us was another local retired colonel and a retired captain. Of course the items of discussion was a few war stories and lots about the swamp. It’s always a good time when Marine brothers can get together — I miss that.

Okay, what’s the post? Well , as many of you know, I am an Economist by education and full time hobby. I enjoy playing in the market. Today’s post came from my old friend and contributor , Eric Maresca. As a market player I found the article interesting and a dire warning to those who do as I do. Read and learn

By Eric Maresca

The stock market bull rally that got underway after a giant fall last February and ushered in the COVID era has been relentless. Who would believe record highs were even possible after such a swift drop during a pandemic, followed by political turmoil and civil chaos.

After the Federal Reserve cut interest rates again and went on a printing spree pumping trillions into the economy through three stimulus packages, the benchmark S&P 500 and the Dow Jones Industrial Average were catapulted to virgin territory. Likewise, we are in the midst of a cryptocurrency revolution where their hourly values run like an amusement park roller coaster.

With the M1 Money supply – the amount of liquidity available for spending – also at an all-time high at $18.4 trillion, the potential for one of the biggest economic booms in U.S. history is primed.

This optimism has predicted a strong 2021 second half.

The larger concern is 2022 and beyond.

Historically, long periods of low interest rates combined with a growing federal debt is no yellow brick road to Oz. You cannot ignore the laws of physics, gravity, or economics, as the government is spending itself into oblivion. From 2010 to 2019, the aggregate GDP growth was nearly the same Uncle Sam spent in COVID stimulus.

With so much stimulus finding their way to Wall Street, stock prices have been inflated. To underscore how pricey stocks are all you have to do is to juxtapose the price-to-earnings multiple at 31.5 and the price-to-sales at 2.9. At the peak of the dot-com bubble in March 2000, the price-to-earnings ratio was 29 and the price-to-sales ratio at 2.3. In addition, the stock market capitalization-to-GDP ratio that measures markets relative to the economy that peaked in 2000 at 140%, stands today at 190%.

Can you whisper bubble? Such a pop would result in a fiscal 9/11 and catch many nascent investors napping. Many were too young to recall the dot-com bubble burst over a generation ago and will pay dearly.

As the stock market rolls along, so does the national deficit. In fact, it seems to be about the only thing that is mushrooming faster. This should concern plenty, but along the D.C. Beltway such matters are dismissed.

 Stock trading has drawn plenty of new players armed with their “stimmy.” Rather, than paying bills, buying necessities, or paying down their debts, these emerging investors have turned day trading into gamification. With success they gain confidence and buy more shares, but the market’s present trajectory won’t last. When it drops many will see it as a fire-sale opportunity.

The stock app at center stage is aptly named Robinhood having taken its namesake from the English Democrat who robbed from the rich and redistributed their wealth. In this stimulus era of Robinhood fever and GameStop, why waste time researching good companies at reasonable prices, and then waiting years for returns to compound?

Apps like Robinhood, SoFi, Webull, and Public.com can be fun, but addictive, and a bookkeeping nightmare.

Such internet trading platforms make basic tax-abating strategies difficult to implement. Buying and selling stocks by the lot can lower your tax bill by choosing which shares to sell. However, selling specific lots are difficult or impossible to do online as sales are based on a first-in-first-out (FIFO) basis, where the oldest shares are sold first.

These time-honored tactics may be the least of their concerns when the market turns because it will. Once the public buys in, time is short and the potential for disaster gains momentum. When the melt down commences, nearly everyone will lose more on the way down than they made on the way up. Melt Downs do not end quickly, but over time. If the market is one thing – it is unforgiving.

Market peaks are clear in retrospection, but not in the moment, but the warning signs are there.

Do not confuse a bull market for brains.

As the timeworn adage rings: “Markets can remain irrational longer than you can remain solvent.” That applies for booms, too.

Mot people do not have an exit plan like trailing stops that protects your gains and prevents you from losing more money. A diversified portfolio and fixed selling points is always your friend.

In my ECON 101 class the professor told a story that I have found over the years to an absolute. “Put five Economists in a room and ask them a simple question and you will always get at least six answers.” I have been trimming my portfolios for the last two months. I have more cash than I have ever had, upwards of 30% cash, and I keep building it. I have good stocks e.g., DOW down over 300 points today and my portfolio was up 1.9%. But I keep taking some profits and paring down. I believe it is coming folks; somone has to pay the bills the swamp is piling up.  Greg is talking common sense.

Originally posted 2021-04-22 17:16:31.