The French Connection

By | 2014-09-09T16:47:42+00:00 February 29th, 2012|Global Market Update|

Tax analysts may get a chance to test out their latest theories. In a recent paper Christina and David Romer studied the effect of changes in tax rates on reported taxable income. They did this on taxpayers in the top 20th of the income distribution—the top .5%--studying the 20 years between 1919 and 1939. This period is interesting because top rates changed a lot. To no one’s surprise they found that as taxes go up, reported income goes down. Higher taxes discourage work. But [...]

(Un)Seasonal Greetings

By | 2014-09-09T16:46:15+00:00 February 28th, 2012|Global Market Update|

It looks like the gloom-crew just might score a couple for their team. For the past five months economic data have been stronger than expected. At the end of September it was widely assumed that the US economy was rolling over, that we were headed towards another recession, and that stocks were headed into another bear market. But it turned out to be a bear trap. The economy didn’t roll over, and for the past five months almost all the economic data have surprised [...]

Durable Goodness

By | 2017-07-17T12:34:57+00:00 February 27th, 2012|News|

Today’s durable goods number was lousy,  but here’s the overall chart:Total durable goods orders remain in an uptrend. Let’s keep an eye on this one, though. We’re 40% above the trough of March of ’09, and the uptrend from before was broken in May of ’08. Then it fell off the cliff.

The State of States

By | 2014-09-12T10:32:30+00:00 February 26th, 2012|Global Market Update|

A year ago there was a general consensus that the states were in trouble. Many felt that a stagnant US economy would lead to declining revenues and budget turmoil. States then would have to curtail support payments to municipalities, cutting them adrift to fend on their own. A waterfall effect would ensue, leading to hundreds of defaults. A year later that prediction doesn’t look very accurate. Across the country state revenues have been trending up. With employment improving across the country, tax receipts are [...]

Return of the King

By | 2014-09-09T16:45:29+00:00 February 24th, 2012|Global Market Update|

Apple is discussing what to do with its cash. Over the past five years Apple has been a cash machine. Although five years ago their principal products didn’t exist, the iPhone and iPad are now so popular that they generate three quarters of the company’s revenue. And profitability has been eye-popping: 25% of every dollar the company generates in sales flows to the bottom line as earnings. As a result, they’ve built up a lot of cash—almost $100 billion. That means that $100 of [...]

What Do Investors Want?

By | 2014-09-09T16:44:02+00:00 February 23rd, 2012|Global Market Update|

Once upon a time, a college endowment was managed by a famous investor. The investor did well; sometimes very well. But a time came when that investor underperformed. He didn’t lose a lot of money, but he didn’t do as well as his peers. During the late ‘90s, while the world was going all techie, he was busily investing in infrastructure and finance. After a very bad year, they hired someone else. Eventually, his approach was vindicated. Tech stocks pulled back and value stocks [...]

Homing In

By | 2017-07-17T12:34:57+00:00 February 22nd, 2012|Economics, Global Market Update|

Is housing about to come out of its funk?The current economic downturn is unique. It was based on a boom and bust in housing, which is both a financial asset and a place to live. It’s the largest single purchase most people ever make, and it’s an essential consumer good. It also is a key component of the US financial system, so it’s no wonder that a housing bust caused a financial panic. […]

Too Much Information!

By | 2017-07-17T12:34:57+00:00 February 21st, 2012|Global Market Update|

Information comes at us from all sides, these days. We have smart phones, smart cars, a smart electric grid, and I can check the latest sports app to see my nephew’s downhill skiing results in real time. What do we do with all this data? The easy answer is to ignore it. Or at least to ignore the parts that we don’t like. If we don’t want live tweets of the air traffic of the coast of England, we don’t need to follow them. [...]

College Costs, Mortgages, and Student Debt

By | 2014-09-09T16:42:08+00:00 February 17th, 2012|Global Market Update|

The numbers say no. Our aggregate debt figures have come back some, but the overall debt burden is way down from its peak in 2007. And with lower interest rates, debt payments relative to income are reasonable. But the incidence of the debt is changing. Young adults are graduating with significant student loan burdens. This is happening because the price of a college degree continues to grow faster than inflation. Over the past 25 years aggregate prices have doubled, but tuition costs have gone [...]

The Downside of Liking

By | 2017-07-17T12:34:57+00:00 February 16th, 2012|Global Market Update|

An old poker-playing maxim goes something like this: in every game, there’s a patsy (that pays for the other players). If within five minutes you can’t tell who the patsy is, you’re the patsy. It’s like that with all kinds of different enterprises: if you don’t know what the business is selling, they’re probably selling you. With TV, radio, and newspapers we’ve known that all along. Ad revenues have a big part of their business strategy. That free newspaper that you pick up at [...]