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5 Things To Ponder: Multifarious Cogitation

Tyler Durden's picture




 

Submitted by Lance Roberts of STA Wealth Management,

Most of my weekend reading lists are generally focused on a common theme, however, that will not be the case this time. There were just too many interesting readings to share with you and felt that I would be remiss not to bring your attention to them. Therefore, this weekend’s “Things To Ponder” is comprised of a variety of readings that cover a fairly broad spectrum from educational to informative and even a little bit sarcastic. I hope that you will enjoy them.


1) Stanley Fischer & Schrodinger’s Cat by Jeffrey Snider via Alhambra Partners

This past Monday, Stanley Fischer, the official who took over as Vice Chairman of the Federal Reserve in June, commented that the weak economic recovery might simply be continued fallout from the financial crisis and subsequent recession. However, “it is also possible that the underperformance reflects a more structural, longer-term shift in the global economy.”

Much ink was spilled in response to his comments, however, an interesting take came from Jeffrey Snider. To wit:

“That should be the one unambiguous observation for all of the monetary pieces of this grand experimentation; ‘despite historically low interest rates,' a qualifier that disqualifies monetary policy of having the effects it both intends and expects.  In his conclusions, despite all these allusions to unspecified problems and deficiencies, Fischer is both still somehow supportive of the idea QE was successful and more than sanguine about the further efficacy of related policy prescriptions, including the growing chorus turning fad of ‘macroprudential’ policies.

 

No theories were expended by Mr. Fischer as to what may actually be drastically altering the trajectory of investment in the US and globally, these unnamed ‘supply’ structures…The lack of actual speculation on this account is quite revealing, as it is in the course of observing it in context.”

 ABOOK-Aug-2014-Fischer-Buybacks

“Since the start of QE2 in 2010, the 500 companies of the S&P 500 have repurchased an astounding $1.5 trillion in stock (through only Q1), sending the index soaring while at the very same time confounding economists as to why the productive base in the US and globally may be so eroding.  That this has been done via cheap debt also indicts the monetarist impulse of ‘historically low interest rates’ as a means for economic growth that is efficient, and thus actually sustainable.”

READ ALSO: The Drag On Sustainable Economic Growth by Lance Roberts via Streettalklive

READ ALSO: Proof Of A Structural Change In The U.S. Workforce by Doug Short via Advisor Perspectives

2) Taxes Say It’s A Recovery, It’s Just Really Weak by Scott Grannis via Calafia Beach Pundit

“As a supply sider, I don't see the logic behind the theory that more government spending is stimulative and less is restrictive. How can taking money from those who are working and giving it to those who aren't create a bigger economic pie? It creates perverse incentives, for one thing. And it also channels the economy's scarce resources into the less-productive sectors of the economy. True economic growth only comes about when scarce resources are utilized in a more productive manner. I think the massive amounts of deficit-funded spending we've seen since 2008 are one of the main reasons the economy has been so weak. Bigger government is not better. With spending now having shrunk to historic norms relative to GDP, I'm tempted to say that growth has a chance of picking up."

Federal-Revenues-081414

“As the graph above shows, federal revenues have been rising for over 4½ years. Annual federal revenues are up by almost $1 trillion from their recession lows. They are up $365 billion from their pre-recession high, for a gain of 13.7%. Most of the gain has come from individual income taxes (including capital gains taxes) and payroll taxes. That is powerful testimony to the fact that the economy is generating more jobs, higher incomes, and higher profits. Corporate taxes probably would have contributed a lot more if our corporate profits tax weren't so high, since more and more companies appear to be avoiding the repatriation of their foreign profits. These days the government is earning 35% on lots of nothing, when instead it could be earning, say, 10-15% on $500 billion or more (of repatriated profits) per year if we had the wisdom to reduce our corporate tax rate.

It's the weakest recovery ever, but it is nevertheless a recovery. Taxes don't lie. And it could be a much stronger recovery if tax rates and transfer payments were reined in.”

READ ALSO: 5 Myths About Overseas Tax Advantages by Bill White via IBD

3) 4 Signs This Bull Market Is On Its Last Legs by Michael Sincere via Marketwatch

“All bull markets end eventually, either with a whimper or a bang, although no one can say when. The good news is that if you are observant, a number of clues announce the end is near.”

  • Rallies fizzle quickly
  • Market breaks key technical levels
  • Breadth indicators show major divergences
  • Sentiment indicators reflect complacency
  • What the bulls think

READ ALSO: What Market Correction, Was That It? by David Rosenberg via National Post

READ ALSO: Past Performance And Future Results by Market Anthropology

READ ALSO: The Guru Who Predicted The 2008 Crisis Is Back by Michael Schuman via Time

4) Everyone’s An Expert In A Bull Market by Cullen Roche via Pragmatic Capitalist

“One troubling trend I am seeing more and more in recent reporting is how many amateurs now appear to be financial ‘experts’. 

 

Of course, everyone’s a financial expert during a raging bull market and so the backlash against any ‘active’ portfolio manager or anyone who charges a fee for advice is growing louder and louder as retail investor confidence increases.

 

It seems that the bull market is going to some people’s heads.  I know, I know – the entire financial industry, MUST, just MUST be all evil.  We’re all just greedy self-interested thieves looking to separate mom and pop from their hard earned savings.  Well, it’s not true.”

READ ALSO: My Opinion, It May Be Wrong But It’s Not Evil by Robert Seawright via Above The Market

5) A Little Humor To Lighten The Load

30 Reasons NOT To Worry About A Stock Market Crash by Brett Arends via WSJ MarketWatch

“I have seen the error of my ways.

 

At long last, I understand. This stock market is a great investment. Stocks are just going to keep going up and up and up and up. Anyone who doesn’t buy now is a fool.

 

I have learned to love the bull market.

 

Why? Here’s why.”

An Honest Stock Market Update by Morgan Housel via Motley Fool

“Stocks gained momentum on Monday, with the Dow Jones Industrial Average closing up 48 points, reversing losses from last week's decline.

 

Experts hailed both moves as a "remarkable, textbook example of pure statistical chance," chalking up Monday's gains to a couple random marginal buyers being slightly more motivated than a few random marginal sellers.

 

A report from the Bureau of Labor Statistics showed the economy added 209,000 jobs last month. An economist from a right-leaning think tank called the report disappointing. Another at a left-leaning organization called it encouraging. Neither has a reputable track record. Both yelled.

 

Marc Faber appeared on TV predicting a 20% stock market crash within the next six months, repeating a call he has made bi-weekly since the Carter administration. Another pundit explained that his last failed prediction would have been right if only he hadn't been so wrong. Executives of financial TV networks met to discuss why ratings are at decade lows. “


 

 

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Fri, 08/15/2014 - 17:11 | 5099757 NOTaREALmerican
NOTaREALmerican's picture

Payrol tax up, yet the participation rate is down...

Perhaps we should have been obsessing about payroll tax increases all this time?

Fri, 08/15/2014 - 17:34 | 5099835 Otto Zitte
Otto Zitte's picture

Moar print! Moar tax! Moar immigration!

Moar print! Moar tax! Moar immigration!

C'mon, say it with me:

Moar print! Moar tax! Moar immigration!

Moar print! Moar tax! Moar immigration!

Fri, 08/15/2014 - 18:27 | 5100027 ebworthen
ebworthen's picture

You pay a 10% penalty plus 15% "income" taxes when you cash out 401K/IRA funds to survive.

Fri, 08/15/2014 - 17:19 | 5099782 Cognitive Dissonance
Cognitive Dissonance's picture

“Since the start of QE2 in 2010, the 500 companies of the S&P 500 have repurchased an astounding $1.5 trillion in stock (through only Q1), sending the index soaring while at the very same time confounding economists as to why the productive base in the US and globally may be so eroding."

Cheap money makes for cheap thrills. It has been one hell of a ride.

<The thing about roller coasters is you always end up at the same elevation you started out.>

Fri, 08/15/2014 - 17:36 | 5099838 Yen Cross
Yen Cross's picture

 He does present a compelling question though Cog... If Zero want's to repatriate offshore corporate earnings

 With record Q-2 tax revenue receipts, one does have to hypotheSIZE, the TRUE intentions of Valerie Jarrett.

 

Fri, 08/15/2014 - 17:34 | 5099834 joego1
joego1's picture

If history repeats itself it looks like those taxes will be headed down in the near future. I couldn't imagine that there was so much revenue to fleece from the tea party.

Fri, 08/15/2014 - 18:38 | 5100068 disabledvet
disabledvet's picture

Again...low interest rates are a sign of huge risk and imminent default...that's the only reason treasuries and bunds are soaring in value.  5 billion in debt for some company I've never heard of (NII) is getting ten cents on the dollar.  Stock down 90% to...ten cents I believe.

Not all skittles and unicorn farts out there.

Sat, 08/16/2014 - 01:01 | 5101185 nostromo17
nostromo17's picture

Soungs like a lotta bull to me. Predicting is predictably a waste of time. So many clairvoyants so little time.

Sat, 08/16/2014 - 14:53 | 5102678 AdvancingTime
AdvancingTime's picture

While we do our pondering it might be wise to give a little thought to sustainability in terms of planning our future in a way that we do not set ourselves up to crash and burn at some future date. Long-term planning has not been something politicians excel at or are even good at and business has become more concerned about the next earning report.

Our system is geared at getting politicians reelected and fulfilling the most pressing needs of today.  Things like profit, greed, and quenching our unrelinquishing desire for growth are placed in front of longer term issues and needs. Mapping out a logical and sustainable long-term plan requires delving into some rather hefty philosophical questions like what brings real happiness. More on this important topic in the article below.

http://brucewilds.blogspot.com/2014/04/planning-sustainable-future-for-m...

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