Recently I received a campaign flyer for an opponent of Stephanie Endres that was factually and blatantly untrue.
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Local Politics Can Bring Out the Worst
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World Economies: Stimulated Into Recession
Do you remember the science experiments you saw as a kid? There are two that come to mind. One is where the rats are stimulated via electrical impulses to do things? Another is where the frog is dead, but when electricity is used to stimulate the muscles, the leg moves?
That’s where I see us economically today.
Financial websites are awash in conversations this week about all the recessionary signals we are seeing. The Federal Reserve is meeting this week. Expect nothing of significance. From Zerohedge to the Wall Street Journal to David Stockman, Peter Schiff, and others, the headlines are ll the same
The Central Banks just do not get it.
There are many people who will also tell me that I just do not get it. But I think I do. And from local issues to international issues, there is a common thread that runs through them all.
Economic opportunities are drying up. Sales are declining. Profits are falling faster than than the leaves on the trees. Central banks around the planet are trying not to panic but they are ready to. They cannot get things moving forward whatsoever. Why is that?
If you step back for a moment, ask yourself what was the original point of all that the Central Banks hoped to accomplish with their policies?
Stimulate. They wanted to stimulate someone to do something today that they would not have had the money to do so until tomorrow.
QE programs have left the planet awash in money . Economies are receding anyway.
They wanted to generate demand. Who is “they”? It’s not just Central Banks. It’s the Federal Government. It’s State Government. It’s Local Government. How do they accomplish this stimulation? They are raining easy money anywhere and everywhere.
Stimulate Stimulate Stimulate
But it’s not that simple. They pulled demand from tomorrow into today. Then they pulled demand from next month into this month. And when that was exhausted, they pulled demand from next year into this year.
Everyone everywhere all stimulating and pulling future demand into today.
You get the picture.
And then BAM! We hit the wall when we got to the future where that demand was from, and there was no demand left. There is no future demand to pull into today.. A vacuum exists. A really big vacuum. And today that vacuum is like none we have ever seen.
That vacuum, which cannot be filled by magic, will have to be endured. Unfortunately, they do not believe this to be the case.
There are ways to lessen that vacuum, but that will not happen either.
Reduce and eliminate rules and regulations.
Cut business taxes dramatically.
The Powers that Be will never let that happen.
They continue attempting to stimulate and show us that things are great.
Yet the economic numbers(which clearly have an upward bias) paint a very different picture.
I have a unique spreadsheet that calculates a weighted per share performance from companies that are followed by Valueline.
While we still have 56% of the companies reporting higher profits than 1 year ago, overall for all the companies, profits are now down 2.31% for the most recent quarter. The same quarter last year was up 7.84%.
That’s a very large drop for an economy that is supposed to be gaining speed. No wonder the Federal Reserve is afraid to raise interest rates even 1/4 of a point.
And so we wait….
We Said This Day Would Come
Recently, I was at a restaurant and ordered a salad. Being Gluten-free, my options are generally limited. $10 for a salad I could make at home for $3 was ok. After all I was at the beach.
I asked to have some chicken added. Informed they cannot do chicken, but they could do shrimp.
“How many would you like?”, Alex asked.
I could smell the ocean from where I sat. “Six is good”, I replied.
A few minutes later, Alex came back to the table, and said “Just wanted to give you the heads up that the shrimp are $3.50…..each”.
How does one keep a straight face with that sort of news? Better yet, how does one not laugh hysterically?
How do I keep a straight face as my friends watch what I might say.
That’s the way I felt when I got home and opened my Blue Cross rate letter for 2016. They are careful not to place you current premium anywhere for the sake of comparison.
For the record, I have not made any progress towards my $5500 deductible for the current plan year-I have not been to the Doctor for any reasons.
That’s what makes it even more shocking. My premium has gone from $273.31 to $497.01.
Yes, you read that correctly.
81.84%
Here’s a calculator you can use as well. Depressing, isn’t it?
http://www.marshu.com/articles/calculate-percentage-increase-decrease-percent-calculator.php
Obamacare: The Gift that keeps on taking.
We said this day would come. We said rates would rise sharply. No one believed us.
And now here we are.
If you want to know what is killing this economy, look no further.
Blue Cross wants to collect nearly $2,111 from me for doing…..absolutely nothing.
Had Blue Cross been actually concerned about my health, they would have told me to sit down before opening that letter.
And if I were smart?
I’d still be at the beach. But I would get my own shrimp.
I am also changing to a Medical Cost Savings plan.
My monthly contributions will be LESS than the increase that BCBS is asking from me in 2016.
To be a bit more precise, it will be 40% less than what BCBS wants from me.
And my new deductible? $500.
With that kind of savings, I will be able to head to the beach sooner rather than later.
You should explore those sort of options as well.
After all, it is YOUR money.
Conflicts of Interest
As a Libertarian, I understand what it is like to be perceived as being against anything and everything. Those that try to characterize Libertarians in this manner often have a conflict of interest.
There are many conflicts of interest that we are surrounded with each and every day. The best way to address these issues is to be up front and acknowledge that “Yes, here is my conflict of interest, and this is how I will attempt to balance it with the issue”.
Instead, we see the denial of the conflict of interest through carefully worded statements. Statements that seem to give the sense that there is no conflict. But that does not eliminate the real conflict that exists. Continue reading
How The Federal Reserve’s Rate Policies Are Out Of Sync With Our Economic Reality
The Federal Reserve is the weakest of the links in the US economy. Their timing is poor. They operate under two mandates and one works in direct opposition of the other.
Maintaining a stable money supply is one objective. Full employment is another. However, the Fed has a goal of 2% inflation and not 0% inflation, which is not stable, but inflationary. Additionally the Fed includes data in calculations that are not inflation based on monetary policy, but rising and falling prices due to greater or lesser demand.
That leads us to their second objective: full employment. When we get towards full employment, wages should rise and businesses compete for labor. But as soon as this were to happen, the Fed will stomp on the brakes. Continue reading
Quantitative Easing and The Impact on Jobs: Disaster Looming Straight Ahead
If you have been following my work for some time, you know that I have expressed belief that there is a strong correlation between Corporate Profit Growth and job growth in the United States.
My research had shown that there was a very high correlation between those two numbers. The higher the profit growth year over year, then the higher the job growth 4-5 quarters later.
Have a look at the following data. We have higher job growth with profit at lower levels? What is wrong with this picture?
Profits Jobs
Sep-10 -29.11% 0.09%
Sep-11 32.94% 1.66%
Sep-12 6.55% 1.48%
Sep-13 11.77% 1.79%
Sep-14 1.10% 2.04%
Sep-15 1.89% 2.05%
Profit Growth % from previous year
Job Growth % 4 quarters ending date shown
At the time I discovered this relationship, the correlation was .91 or so. This would imply that 81% of job growth was related to profit growth. And as I have written and suggested to anyone that would listen, if you wanted more job growth, you enabled more profit growth in the business sector. Using the same time frames as before, I watched the correlation fall from .81 to .57, suggesting that only 32% of job growth was now due to profit growth. Disappointing to me to be sure, but it was still a positive correlation Continue reading
Coming Soon: DOW 14,000
Rand Paul’s Falling Behind-Is There Anything That Can Be Done?
Rand Paul faces a series of major decisions. He has lost the edge he came into office with. His positions are dulling as he listens to advisors that tell him he needs to be more inclusive. WRONG WRONG WRONG.
Paul needs to be so clear on his positions that anyone(and I mean anyone friend or foe) knows where he stands and what his reply would be.
Rand has made some critical mistakes along the way. But he is still young. Let’s see if he can learn from them and correct his course.
Here are three things I suggest he do immediately:
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1) Apologize for supporting McConnell
Let’s face it. This was a mistake. Rand showed us that his loyalties were to the party and a fellow Kentuckian, even if that Kentuckian was wrong for America. And since then we have paid a heavy price for this choice. Rand could have had another ally in the Senate had he not supported McConnell.
2) Take a hard line on the border and illegal immigrants. Libertarians support an open border ONLY if crossing it does not come with food stamps, welfare, housing and medicare. Crossing the border into the US should not mean you get all the perks of citizenship.
Donald Trump has shown clearly that this is the single biggest issue we all have at this moment. We have been told for decades that something would be done. It hasn’t. The needs of law-abiding citizens are secondary to the wants of illegal aliens. And we are being bullied from all directions that we must accept illegals. We do not. If your native country sucks, I am sorry. But it’s NOT my problem.
3) Start attacking the Fed. The Fed has painted themselves into a corner. We are screwed. If you cannot make the most of this opportunity, you never will.
We are on the cusp of a major economic event. The Fed is at the root of the problem. It’s going to be hard. But we must remove our economic outcome away from the idea that printing more money, and borrowing future demand to shore up businesses today is the answer. Our future is dismal if we do not act soon. It may very well be too late. But Paul can boost his standing by continuing to highlight the mistakes the Federal Reserve is making(and who is getting rich on their coattails).
Rand has decide where he stands if he wants us to stand with him. As of now, I think he is trying to play both sides. I am not sure where he stands.
That will be a fatal mistake to his campaign. There are 15 flavors of vanilla being offered by the Republican slate. And then there’s Trump. Rand needs to show what his true flavor is.
Paul has potential. He has shown courage. But he has faltered over the last twelve months. I suggest he pause and look around. Are those advising him of what he needs to do palying inside the box? Or are they thinking outside the box?
This game will be won outside the box. So why continue to play inside the box?
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Introducing the Fulton County Residential Authority( Or Why We Should Not have the Fulton County Development Authority)
I’d like to propose (for illustration only) a new agency for Fulton County. We will call it the Fulton County Residential Authority(FCRA). This authority will do for residents what the Fulton County Development Authority(FCDA) does for businesses.
Fulton County needs to attract some of the best and brightest residents out there who are looking for new homes. There are many attractive locations, and it would be in Fulton County’s own best interest to attract them here.
We can attract them by helping them get the financing they need for their homes. We will help them to float bonds for their residences, and offer tax incentives for those that are willing to purchase those bonds.
Current residents that are already in their homes?
We will offer you a hearty thank you. Thank you for not questioning our actions.[read more=”Read more” less=”Read less”]
Thank you for continuing to pay the full taxes on your property.
Thank you Thank you Thank you. (If you are one of our valued residents come in and chat-we may be able to work a favorable deal for you as well)
We will also offer through the FCRA property tax breaks for you that will lower your cost of residency during your first ten years. We will lower your property taxes by 50%, and then slowly increase your taxes over the years. And if needed to keep you happy, we will work with you to help lower those taxes in other ways as well. We are here for you.
Current residents that are already in their homes, and paying the full tax rates without any abatements-once again we offer you a hearty thank you!
Once a month, the FCRA will get together and look over the list of those who have applied for an inducement to have their residence within Fulton County. We will be evaluating you based on what you say will be the benefits of having you here.
Are you a high income earner and will be spending dollars? There’s a plus.
Going to be hiring a maid and lawn care and nannies? Babies on the way? Greater purchases of goods and job creation is always a plus.
Building a new home versus a resale? Even better. Raw materials purchased. Building permits and inspections. More jobs.
So we invite you to apply. Make your case. Help make Fulton County a better place for all. Your FCRA will make the right choices picking the right new residents for Fulton County.
For those current residents who will be living besides our beneficiaries of the FCRA, do not be concerned, upset, or feel cheated. These new residents will add value. They are bringing in new construction projects, jobs, and other intangibles.
We assure you this will not lead to overbuilding or speculation in our markets. Do not look at these new residents as getting a tax break at your expense. Look at it as incremental revenue that we will spend on behalf of everyone.
Let’s create the FCRA and do for residents what we are doing so well for our business community!
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Now that you have a sense of how the Fulton County Residential Authority might work, you can see why I would oppose the Fulton County Development Authority.
It picks winners actively and losers passively. Current businesses pay more taxes than those that make deals with the FCDA.
It encourages speculation and overbuilding.
My list is long as to why I think the FCDA is a bad idea. Despite the fact that “everyone has or wants a development authority”, it artificially stimulates demand for commercial space. It also comes with a price: Property Tax Abatements.
Treat everyone and every business equally. If the idea is accepted that lower taxes stimulate(as the FCDA can affirm by why it does what it does), then lower taxes across the board for EVERYONE.
Lower business taxes for everyone. It’s the only equitable way to do business.
If you create a business environment that benefits ALL participants then that is the single best thing you can do.
Do not penalize current businesses by giving newcomers better deals and tax breaks.
It’s just that simple.
If you create that sort of environment for your businesses, you will not have to “induce” them to be in your community. Instead, they will beat a path to your community, and everyone will benefit.
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Heading Closer and Closer to the Recessionary Wall
Much of the financial information we get on a daily basis tends to shape our perspectives of how the economy is doing. Unfortunately, much of that data tends to be a first pass WAG (wild-assed guess), which has often proven to be more wrong than right.
Take the the numbers for job creation, which are released monthly by the BLS, for example. They are definitely NOT rooted in reality. But what happens is when the revision for a month comes out, the attention is focused squarely on the new WAG for the most recent month.
Other economic numbers of varying degrees of significance experience similar releases, and are also, more or less WAGs.
I have, over the course of the last 10 years, been working on a different approach, although it lags the headline grabbing urgency of a July number for job creation, for instance. No, instead, my numbers crawl along slowly, three to four months behind. But they are clearly superior. I do not give you false hope with WAGS. I do not sound false alarms with WAGS. I also do not have to provide seasonal adjustments or other economic tricks. I have no reason to inject bias into the numbers. They are what they are.
While many economists also love to focus on top line growth, I have been dissuaded from putting too much importance on that line. Instead, it’s the bottom line growth that drives the US economy forward in the long term. This line is where the dollars come from for new expansion, new pay increases, new product development: the keys to real growth.
And unfortunately, the news I have to share is not positive.
Here is a chart depicting the rate of profit growth year over year for the last four quarters on a per share basis for 1625 companies I track. So, had you owned one share in each of these companies, one year ago and today, you would have seen your earnings grow by 5.27%, down from 8.40% a year ago, and 34.64% four years ago.[read more=”Read more” less=”Read less”]
One must keep in mind that Valueline drops companies that are heading in the wrong direction and add companies that are headed in the right direction. So this data tends to have a natural bias towards the better businesses overall.
What’s going to be the stimulus to returning businesses to higher profit growth?
I simply cannot come up with any ideas that might be able to do it. I can tell you what is working to drag profits even lower.
Higher interest rates.
Higher tax rates.
More regulations.
Increases in minimum wages in various locations.
Continued implementation of Obamacare.
So, we are at a junction where things need to get better but can’t. Where will that send us? What happens next?
Once the lack of growth in the chart above is acknowledged, the joy of owning stocks will become a fond memory. Those stellar returns since the last bottom will disappear faster than the vapor from that E-cig your kids are smoking.
This recession will be unlike the last one. The Federal Reserve cannot cut rates. Too many businesses have taken on too much debt to buy back shares at their peaks (they should have been selling shares at the peak). Companies used to be in the business of issuing shares to expand their businesses. Today? They borrow dollars to buyback shares to make their earnings per share look good.
Meanwhile the total profits of the Dow 30 will fall by 9% in 2015. But fear not. Their per share numbers look better than should.
States with the most issues financially have been able to mask the smell of their stinking liabilities so far. But that gig is nearly up. Puerto Rico is a hint of things to come. Chicago is not far behind.
I suggest you prepare for the downturn which is coming. Many of us were able to grin and bear the last downturn.
This one…well it’s gonna hurt.
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