Ah, April 15th! I want you to consider that the date means absolutely nothing to 47% of US households as they will pay zero in federal income tax. Yes, state, property and sin taxes still get them, but we are seeing a disturbing trend towards a tipping point where fewer than half of us pay any sort of income tax. Five years ago it was 40% who paid no income tax. By 2012 this could be the first election in which the majority of voters will be able to vote themselves more government largess paid for by a minority of taxpayers. We may soon have to re-jigger the American Revolution’s familiar rallying cry into: “Representation Without Taxation!”
Statistics vary slightly but it can be argued that the top five percent of US households pay 60% of federal income tax. Ten percent account for over 75%. Another two-fifths make up the rest. And half are exempt. And yet…twenty percent of US households get 75% of their income from the federal government. Another one-fifth receives 40% of their financial support from Uncle Sam. Think about what this means in terms of fiscal responsibility down the road. How receptive to cutting taxes which they do not pay, or cutting government spending, from which they benefit, is a majority voting block going to be in the future? Indeed, what does this say about our prospects for economic growth or curbing the size and scope of an ever growing government colossus in the face of a crushing $20 trillion deficit looming on the horizon?
Very soon we may not be merely de-incentivizing economic activity but actively waging war on it.....
Obamacare is but the most recent and fiscally insane manifestation of this myopia that now holds sway in the capitol and white
house—and has for over a decade regardless of the party in power (in case one thinks this overtly partisan). I am coming to fear that this administration is not about mere “spreading the wealth” as 2008 candidate Obama let slip in a revealing off-teleprompter moment. Rather its aim is to increase dependency upon the state based upon an illogical faith in the judgment of detached federal bureaucrats over the parochial citizenry. It is also about cynically creating a permanent voting block addicted to government hand-outs which will in turn reward politicians with life-time tenure so long as they keep the gravy train of our confiscated wealth flowing. Democracy’s most insidious enemy is the gradual devolution into the tyranny of the majority where 51% of the populace can vote again and again to empty the pockets of the other 49%. Not only is this dynamic morally wrong, this is the death knell for a free and vibrant republic as wealth will inevitably flee to safer havens (or to the black market) taking future prosperity and stability with it. How many of us ever got a job from a poor man?
A lot of harm in the world has been done by intellectuals who started off with noble intentions but little understanding of how the real world operates. Consider the on-going Eurozone’s massive bail-outs of financially distressed states like Greece because, at the risk of oversimplifying, the ballooning costs of its overly-generous state entitlement apparatus eventually overwhelmed its tax base—25% of which has been driven underground. It should be a stark lesson in the mathematical limits of trying to financially engineer social justice…one Washington should watch very closely. Unless, of course, the aim is just the accumulation of raw power through expanding government and manifesting life-time tenures in Congress by robbing productive Peters to pay suckling Pauls in exchange for votes. Then the lessons screaming at us from across the pond are irrelevant. In the meantime, Happy Tax Day! I’m sure our money is being well spent.
Monday, April 18, 2011
Sunday, April 17, 2011
Epc Leadership Failure: Obama Threatens Global Recession If Debt Ceiling Is Not Raised.....
And people made fun of Hank Paulson for threatening with eternal damnation if congress didn't stamp his multi-trillion blank check to bail out his former co-workers from Goldman. In a step that makes the Kashkari-Paulson threat seem like amateur hour, the teleprompter just received its latest high frequency directive from the Wall Street superiors, promptly delivering the latest MAD message to what continues to be perceived as an idiot audience: "Failure by Congress to raise the U.S. debt limit "could plunge the world economy back into recession," President Barack Obama declared Friday, and he acknowledged that he must compromise on spending with Republicans who control the House to avoid such a crisis. Obama urged swift action, saying he doesn't want the United States to get close to a deadline that would destabilize financial markets. He said he was confident Congress ultimately would raise the limit. "We always have. We will do it again," said Obama, who voted against raising the debt limit as a freshman senator from Illinois.
For those keeping score of the President's numerous accolades, this merely underscores that the president is now in contention for the Nobel Prize in hypocrisy: after all compare this statement to Obama's now supremely ironic remark from March 20, 2006: "The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better." They sure do. And in order to replace the current failed leadership, they will gladly start with a new president.
From AP:
"I'm the person who is best prepared for us to finish the job so that we're on track to succeed in the 21st century," Obama said. That's the heart of his argument for voters to give him a second term over more than a half dozen Republicans seeking the White House.
As the 2012 campaign gets under way, it's being shaped by a deep disagreement over federal spending in Washington between Republicans who control the House and Democrats in power in the Senate and White House. Obama and Republicans compromised a week ago on a spending bill to avert a government shutdown, a preview of the debate that's certain to dominate the coming months on deficits and the ceiling on money the nation can borrow.
The president said that he doesn't expect either side to get everything it wants in negotiations and that he's pushing for "a smart compromise that's serious."
He warned of dire consequences if the debt ceiling is not raised before it hits its limit of $14.3 trillion; the administration says the latest Congress could possibly act is by early July. But Obama said some longer-term questions about where the government trims its operations will have to be left until after the 2012 presidential election.
"I'm confident that the withdrawal will be significant," he said. "People will say this is a real process of transition, this is not just a token gesture."
For those keeping score of the President's numerous accolades, this merely underscores that the president is now in contention for the Nobel Prize in hypocrisy: after all compare this statement to Obama's now supremely ironic remark from March 20, 2006: "The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better." They sure do. And in order to replace the current failed leadership, they will gladly start with a new president.
From AP:
"I'm the person who is best prepared for us to finish the job so that we're on track to succeed in the 21st century," Obama said. That's the heart of his argument for voters to give him a second term over more than a half dozen Republicans seeking the White House.
As the 2012 campaign gets under way, it's being shaped by a deep disagreement over federal spending in Washington between Republicans who control the House and Democrats in power in the Senate and White House. Obama and Republicans compromised a week ago on a spending bill to avert a government shutdown, a preview of the debate that's certain to dominate the coming months on deficits and the ceiling on money the nation can borrow.
The president said that he doesn't expect either side to get everything it wants in negotiations and that he's pushing for "a smart compromise that's serious."
He warned of dire consequences if the debt ceiling is not raised before it hits its limit of $14.3 trillion; the administration says the latest Congress could possibly act is by early July. But Obama said some longer-term questions about where the government trims its operations will have to be left until after the 2012 presidential election.
"I'm confident that the withdrawal will be significant," he said. "People will say this is a real process of transition, this is not just a token gesture."
Friday, April 15, 2011
Thoughts
Many economists/strategists who have waxed enthusiastically about forward growth rates have explained that the housing market is now such a low percentage of GDP that it will no longer be an economic drag in 2011-12.
That said, I see plenty of drag, as yesterday BAC announced that is laying off 1,500 underwriters and loan processors in its mortgage business.
And it's happening at other mortgage and lending bank departments around the country, as the housing market's outlook has not improved.
This softness will serve as another headwind to the more optimistic jobs growth expectations from the bullish cabal, and it seems to me to be something of a statement regarding the future outlook for housing markets as well.
Despite all the hubbub surrounding the municipal bond market several months ago after Meredith Whitney's 60 Minutes appearance, muni prices have behaved well.
Cleveland Fed Sees More Inflation
The Federal Reserve Bank of Cleveland's Median Consumer Price Index signals increasing inflation.
Some conspicuous insider selling in Google should give dip-buyers some pause.
Before one buys the Google weakness, I would suggest looking at the company's insider sales recently.
Even though this is likely 10b5-1 selling, it is, well, conspicuous and should give dip-buyers some pause.
Value Traps
BAC is to the banking sector as CSCO is to the technology sector. They may be poor investments over the balance of 2011 with lingering fundamental legacy headwinds. As such, they both may be value traps.
"When the facts change, I change my mind. What do you do, sir?"
-- John Maynard Keynes
Worries:
* March ISM manufacturing showed notable declines in the growth rates for orders, exports and order backlogs. And core capital goods orders were surprisingly weak in both January and February.
* The trade deficit unexpectedly expanded and will be a drag on first-quarter 2011 growth.
* First-quarter IDC personal computer sales were disappointing.
* Consumer confidence continues to be weak.
* Housing remains in the crapper.
* Jobless claims have deteriorated.
* Cost pressures abound (especially of an energy kind).
* Sovereign debt pressures in the eurozone are intensifying.
That said, I see plenty of drag, as yesterday BAC announced that is laying off 1,500 underwriters and loan processors in its mortgage business.
And it's happening at other mortgage and lending bank departments around the country, as the housing market's outlook has not improved.
This softness will serve as another headwind to the more optimistic jobs growth expectations from the bullish cabal, and it seems to me to be something of a statement regarding the future outlook for housing markets as well.
Despite all the hubbub surrounding the municipal bond market several months ago after Meredith Whitney's 60 Minutes appearance, muni prices have behaved well.
Cleveland Fed Sees More Inflation
The Federal Reserve Bank of Cleveland's Median Consumer Price Index signals increasing inflation.
Some conspicuous insider selling in Google should give dip-buyers some pause.
Before one buys the Google weakness, I would suggest looking at the company's insider sales recently.
Even though this is likely 10b5-1 selling, it is, well, conspicuous and should give dip-buyers some pause.
Value Traps
BAC is to the banking sector as CSCO is to the technology sector. They may be poor investments over the balance of 2011 with lingering fundamental legacy headwinds. As such, they both may be value traps.
"When the facts change, I change my mind. What do you do, sir?"
-- John Maynard Keynes
Worries:
* March ISM manufacturing showed notable declines in the growth rates for orders, exports and order backlogs. And core capital goods orders were surprisingly weak in both January and February.
* The trade deficit unexpectedly expanded and will be a drag on first-quarter 2011 growth.
* First-quarter IDC personal computer sales were disappointing.
* Consumer confidence continues to be weak.
* Housing remains in the crapper.
* Jobless claims have deteriorated.
* Cost pressures abound (especially of an energy kind).
* Sovereign debt pressures in the eurozone are intensifying.
Shoulda Rolled Over, But Didn't
A ramp in crude oil and poor reactions to earnings from GOOG and BAC gave the market a good excuse to sell off, but buyers were unperturbed. Positive breadth was 2-to1 and most every major sector except banks were in the green.
Even after an intraday reversal on Thursday, we were still technically oversold today. That and option expirations were probably sufficient reasons for the market to hold up the way it did, despite the negative news flow. Watch out for early next week though; April can get rough after tax day - April 18th this year.
If we take a step back and look at the bigger picture, there is good reason to remain cautious, especially since the early responses to earnings reports have been so poor. We have a classic oversold bounce occurring and it is going to take some pretty good earnings news to turn it into another V-shaped bounce.
Next week brings hundreds of earnings reports, but probably the most important will be IBM, INTC and AAPL. IBM's report has often been a turning point in the market, and in view of the struggles of the semiconductor sector lately, it is hard to be overly optimistic.
Apple has been acting quite poorly for a while now but still isn't finding any major buying support. There are worries that its supply chain has issues due to Japan disruptions, but at some point the bottom-fishers are going to be looking for entries. I suspect a lot of buyers would like to jump in if the stock gaps down on its earnings report. I'd love to buy it in the 290s.....
Even after an intraday reversal on Thursday, we were still technically oversold today. That and option expirations were probably sufficient reasons for the market to hold up the way it did, despite the negative news flow. Watch out for early next week though; April can get rough after tax day - April 18th this year.
If we take a step back and look at the bigger picture, there is good reason to remain cautious, especially since the early responses to earnings reports have been so poor. We have a classic oversold bounce occurring and it is going to take some pretty good earnings news to turn it into another V-shaped bounce.
Next week brings hundreds of earnings reports, but probably the most important will be IBM, INTC and AAPL. IBM's report has often been a turning point in the market, and in view of the struggles of the semiconductor sector lately, it is hard to be overly optimistic.
Apple has been acting quite poorly for a while now but still isn't finding any major buying support. There are worries that its supply chain has issues due to Japan disruptions, but at some point the bottom-fishers are going to be looking for entries. I suspect a lot of buyers would like to jump in if the stock gaps down on its earnings report. I'd love to buy it in the 290s.....
Thursday, April 14, 2011
Thoughts
The bad feature in the GOOG report was the eleveated operating expenses.
Run, don't walk, to read Goldman Sach's Dave Kostin's "Portfolio Strategy Research" comprehensive report this morning.
In terms of sectors, Dave would be long cyclicals, short defensives and companies that have large sales exposure into BRICs.
The greatest risks to economic growth and to his market projections are interest rates and the cause, duration and macroeconmic backdrop of a potential oil price shock.
Things to worry about:
1. higher oil and input prices;
2. a debased U.S. currency, lingering budget concerns and political partisanship, which could jeopardize a budgetary compromise (and resolution);
3. screwflation of the middle class and its inevitable impact on economic growth and corporate profits;
4. the specter of structural unemployment;
5. the absence of a recovery in home prices;
6. the fiscal and monetary "stabilizers" are soon to be taken off;
7. vulnerability to consensus 2011 growth projections, corporate margins and profitability;
8. the euro sovereign debt crisis, thought to be contained, has continued to spread;
9. a relatively anemic recovery exposes the economic cycle to the vulnerability of more black swans (and tail risk), which are occurring with greater regularity; and
10. investor sentiment has moved to a lopsidedly bullish extreme.
Run, don't walk, to read Goldman Sach's Dave Kostin's "Portfolio Strategy Research" comprehensive report this morning.
In terms of sectors, Dave would be long cyclicals, short defensives and companies that have large sales exposure into BRICs.
The greatest risks to economic growth and to his market projections are interest rates and the cause, duration and macroeconmic backdrop of a potential oil price shock.
Things to worry about:
1. higher oil and input prices;
2. a debased U.S. currency, lingering budget concerns and political partisanship, which could jeopardize a budgetary compromise (and resolution);
3. screwflation of the middle class and its inevitable impact on economic growth and corporate profits;
4. the specter of structural unemployment;
5. the absence of a recovery in home prices;
6. the fiscal and monetary "stabilizers" are soon to be taken off;
7. vulnerability to consensus 2011 growth projections, corporate margins and profitability;
8. the euro sovereign debt crisis, thought to be contained, has continued to spread;
9. a relatively anemic recovery exposes the economic cycle to the vulnerability of more black swans (and tail risk), which are occurring with greater regularity; and
10. investor sentiment has moved to a lopsidedly bullish extreme.
Initially At Least, A Negative Reaction To GOOG
For the first time in about two weeks, we managed to close near the highs of the day. Of course, we were oversold and due for some sort of bounce, but at least it was a decent effort for a change. Volume was light and breadth wasn't great, but it was positive. The issue now is whether the bulls can keep on pushing a little longer, or will they quickly run into resistance.
Unfortunately, GOOG isn't helping. The Internet giant missed earnings estimates by a couple of cents, but that was enough to send the shares down $20 or so. That puts the stock below its 200-day simple moving average for the first time since last September. Of course, the fanboys on CNBC loved the report, but it doesn't look overwhelmingly healthy to me at the moment.
My big concern is that we have a negative theme developing so far this earnings season. This is the third major report to receive a negative reaction, and that is going to cause folks to look harder for exits as other reports roll out.
The bounce we had today was an improvement over some of the recent action, but it was neither very big nor very vigorous. Could be just an oversold bounce.
Unfortunately, GOOG isn't helping. The Internet giant missed earnings estimates by a couple of cents, but that was enough to send the shares down $20 or so. That puts the stock below its 200-day simple moving average for the first time since last September. Of course, the fanboys on CNBC loved the report, but it doesn't look overwhelmingly healthy to me at the moment.
My big concern is that we have a negative theme developing so far this earnings season. This is the third major report to receive a negative reaction, and that is going to cause folks to look harder for exits as other reports roll out.
The bounce we had today was an improvement over some of the recent action, but it was neither very big nor very vigorous. Could be just an oversold bounce.
Wednesday, April 13, 2011
Thoughts
The Federal Reserve has launched enforcement actions against Lender Processing Services relating to its foreclosure services.
This should be viewed as a positive for ASPS.
Mortgage Malaise
More weak mortgage data this morning.
Both new mortgage and refinancing applications dropped again -- 5% and 8%, respectively.
The bulls continue to argue that a supposedly improving jobs market, a decade high in affordability, favorable case for ownership vs. renting, relatively low mortgage rates and low levels of new home construction all augur for a gradual improvement in the residential real estate markets.
Given the immense phantom inventory of unsold homes and other factors, I am less optimistic.
From my perch, housing will scrape along the bottom for the next couple of years.
Donald Trump will announce that he has no intention to run for president.
Why?
As with Howard Stern in years past, he (Trump) is unwilling to disclose his personal finances.
This should be viewed as a positive for ASPS.
Mortgage Malaise
More weak mortgage data this morning.
Both new mortgage and refinancing applications dropped again -- 5% and 8%, respectively.
The bulls continue to argue that a supposedly improving jobs market, a decade high in affordability, favorable case for ownership vs. renting, relatively low mortgage rates and low levels of new home construction all augur for a gradual improvement in the residential real estate markets.
Given the immense phantom inventory of unsold homes and other factors, I am less optimistic.
From my perch, housing will scrape along the bottom for the next couple of years.
Donald Trump will announce that he has no intention to run for president.
Why?
As with Howard Stern in years past, he (Trump) is unwilling to disclose his personal finances.
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