It is customary these days to ignore what should be done in favour of what pleases us.
Plautus
Chart of the Day
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| Via the Independent Institute |
Some Economic Speculations
I am not an investment guru; in fact, I would have done a lot better if I had simply put much of my retirement resources in a simple S&P 500 ETF over the past year. I did largely avoid the energy industry sell-off, but among my mistakes were a failure to anticipate the stronger dollar, some international diversification that didn't play out, and I made a timing mistake during the October sell-off; I did see a gain year-over-year but probably 4% down from my August peak. I have been very nervous about the bond market because like the real estate market of the 2000's, it seems, short of a deflationary spiral, to be a market looking for a correction if we have any regression to the mean interest rate over past decades. True, we've seen stock markets at higher multiples and we might expect American securities to attract attention in a sluggish global economy and uncertainties. Third years of Presidential terms are often positive for investments, but I'm even more cautious heading into the new year and others agree.
First, will the Fed finally raise rates, like they broadly hinted over the last year or two? I don't think so, although I think the reason of the dollar hitting an 11-year high in international exchange has a lot to do with this implicit defense of the dollar. But (keep in mind I oppose the Fed's ZIRP policy), I am doubtful that the Fed will actually deliver on that; why? A strong dollar translates to weaker import prices, which could add to deflationary pressures. Me, I'm okay with deflation (e.g., America had strong economic growth during the Gilded Age, which had a deflationary trend), but many conventional economists view it with alarm. In fact, the Fed has tried to aim for a 2% inflation rate; now, granted energy and food deflation don't factor in the typical COLA indices, but they were having trouble hitting their inflation targets before the recent surge in the dollar.
There are other things, including a currency war by Japan and Europe which can ill-afford a counterattack by the US. As Lacy Hunt points out (above link):
US growth is outpacing that of Europe and Japan primarily because those economies carry much higher debt-to-GDP ratios. Based on the latest available data, aggregate debt in the US stands at 334%, compared with 460% in the 17 economies in the euro-currency zone, and 655% in Japan. Economic research has suggested that the more advanced the debt level, the worse the economic performance, and this theory is in fact validated by real-world data [not to mention recent experience].Let's us also point out a lot of emerging market debt has an interest rate offset, meaning a US rate increase could throw developing markets into a recession. Collapsing oil prices is resulting into severe budget crises across OPEC, including socialist Venezuela looking for a Chinese bailout. Even worse news for OPEC: the Obama Administration has quietly lifted crude oil export restrictions (as this blog has long called for), which means domestic producers can arbitrage from depressed US pricing to world pricing. (The only question is whether the market has priced in American supplies in the global market, but it could help mitigate some of the damage to US shale producers by the oil market correction.)
Another point: nearly half the revenues of S&P 500 companies come from overseas operations. Stronger dollars mean weaker overseas earnings (now, of course, it's possible that the corporations could be hedging against currency fluctuations). But can these businesses sustain earnings growths propping up stock prices? And it does seem the Fed is particularly anxious to accommodate a robust stock market; let's also point out that Fed interest rate increases should also affect corporate rates upward, which adversely affects company profitability, shoring up share prices.
Not to mention that we could have a renewed crisis in the EU with a possible Greek election favoring leftists, which want Greek debt given a haircut, anathema to German bankers. And I'm concerned by how well banks have hedged loans to suffering shale producers; I do expect some consolidations and/or bankruptcies.
And, of course, if and when the Fed raises rates, it will likely significantly increase the costs of servicing the national debt.
Could Wary be correct, e.g., are we overthinking things, not unlike Hurricane Lili in 2002 which had all the earmarks of being a super-hurricane, but when it reached shore had diminished to a diminished Category 1? Possibly. Who knows? Maybe a 40% decrease in imported energy costs will jumpstart developing country economies and stabilize oil prices.
But Drudge is hinting that Obama is planning to come out swinging for expanded government spending noting recently revised GDP numbers showing strong economic growth in the second and third quarters and official unemployment near a decades-long trend line. No one can argue with the fact that one of the sharpest declines in oil prices in history has added to discretionary spending which can bolster other parts of the economy and/or reduced key costs in the transportation and chemical industries. But I would argue if there ever was a time to cut social spending, it is while we are in a growth phase of the economy.
What does that mean for my own retirement savings? I think that the easy money has been made, we may be lucky just to maintain 3% growth through the end of the Obama Presidency, and we are likely to see profits decelerating and market gains harder to come by; I may be lucky just to tread water over the year to come. I have been much better at closing positions that just weren't working.
Facebook Corner
(Ron Paul). Ten New Year’s Resolutions for Congress' - Read my recommendations to the new Congress in my Weekly Column. What would you add to the list? http://tinyurl.com/oou6s7f
Very good list. Some missing items:
1. Devolve or privatize social spending, tighten eligibility criteria to the states in accordance with the principle of Subsidiarity.
2. Audit the Pentagon.
3. Give Obama fast-track authority on TPP and TTIP.
4. Reform the FDA to limit consideration of drug approvals to safety vs. effectiveness.
5. Reform the Fed to eliminate the full employment mandate.
6. Corporate tax reform; elimination of taxes on savings and investment.
7. Zero-based regulatory reform; require economic impact cost-benefit threshold for any new regulations.
8. Liberalize immigration policy.
9. Hands off the Internet.
10. Reform financial accounting to recognize funding gaps for unfunded liabilities; balanced budget amendment.
(Stossel). ICYMI: This mom says we should give every kid in Little League a trophy, and claims that what critics call “wussification” is actually a "spiritual awakening”. Really? The right way to help our kids grow up tonight at 10pm ET on Fox News
Let's face it: baseball is a group sport. In last year's World Series Madison Bumgarner didn't win the Series just by himself. But his individual performances were off the chart. He nailed down the final game save in relief, on a short break since his last start; he wanted the ball with the Series on the line. Michael Jordan and others exhibited similar stuff; Michael Jordan nailed down the last-minute come-from-behind bucket in game 6 of the NBA championship against Utah--when everyone watching the game knew who was getting the ball.
Competition often brings out the best of us. One example from personal experience was in sixth grade; of course, I had been evaluated all through school, but what sparked me was finding myself on the top 10 list in homeroom. I immediately set a goal of achieving the top spot by the end of the school year and even told the incumbent #1 student that I was gunning for his spot. And I reached my goal. It had nothing to do with wishing ill of my competitor; in fact, I wanted to beat him doing his best. What I recall was his excuses, instead of his congratulations. And whereas academic excellence was important through college and 4 degrees, I usually had higher expectations of my performance than my professors did; I'll never forget fellow students who warned me not to take this female philosophy professor because she never gave A's--so of course I had to take her class. On the other hand, my best friend at UT-Austin, a pre-med major, studied grade distributions for each professor before registering for a course.
I think we need to knock off the anti-competitive, self-esteem crap, which I find patronizing and offensive. (I remember once doing a computer-based training when I found effusive praise for literally doing nothing more than changing a screen page--I actually was concerned I had missed some exercise or quiz, so I did the unit over.) I think coaches need to reinforce civility and sportsmanship vs. sore winner/loser attitudes. I remember trying out for my eighth grade basketball team. I made it all the way to the final cut. I was one of the better shooters on the team, and I hit a jumper cutting across the key when coach whistled an end to the last scrimmage, put his arm around me and told me I didn't make it. Of course, I was disappointed, and it was clear that the players who made the squad were several inches taller (you can't coach height). But it was the coach's decision, and the fact is I had survived earlier cuts; I had made a worthy best attempt.
Michael Jordan would not be who he is without the team. We are not talking about high school collegiate participation trophies. We are talking about kids up to 9 years old. There is a way to give accolades without patronizing kids. Everyone on this thread is mostly just falling into the trap that was laid by social media pros: my comments were dumbed down to illicit the lowest, most knee jerk reactions...
False. It's true that Michael Jordan couldn't win a championship by himself, but you are in a state of denial about his unique talent. We had a real-life test--the Bulls went nowhere during his mid-90s hiatus, while they had championship runs before and after his hiatus.
And I disagree with the point about younger kids. I had mediocre elementary school teachers who bored me; one of the stories of my sixth-grade turnaround was an English teacher who challenged me with material above grade level. We now have public school mediocrity that waters down educational standards. It reminds me of my high school biology teacher; he pulled me aside after class one day and told me I didn't have to attend class anymore, because he knew I wasn't being challenged and he would lose most of the class teaching to my level.
Jenn-Anne Gledhill No. I am not in denial about Michael Jordan's talent. But if his team wasn't unified, he wouldn't have been able to shine like he did. i advocated that life deals in disappointment without the help of little league. I suggested that we might use that time to teach something besides winning and losing, since A) kids already know when they suck, and B) winning really isn't everything. You sound like a smart person. Please don't get sucked into the social media machine that was designed to provoke these narrow discussions. Remember it's TV. the answers aren't so dumbed down and black and white. Be the one intelligent person around here who might thick beyond the knee jerk reaction that seems just too easy, right? http://www.chicagonow.com/.../things-i-wish-hadnt-been.../
First of all, I'm a former college professor, and I've had more than enough experience with ill-prepared, rude, overrated kids with false expectations and poor work habits. And I don't appreciate condescending crap from some patronizing windbag.
I stand by what I've written about Michael Jordan; you are in a state of denial. He was more than a player; he was a leader on the floor; the team was built around his talent. He was what is generally termed a franchise player.
How anyone could read what I wrote as simply about winning and losing is intellectually dishonest. I specifically addressed internalized goal-setting, teaching civility and sportsmanship, etc. I'll give one signature moment from my last year of teaching as on a temp appointment at Illinois State. I had my own style of evaluating student projects; I never simply issued a letter grade and scrawled some perfunctory "good job!"; I usually had a list of things I liked about a project and recommendations for improvements. Most students never paid attention to my feedback, but I remember this one male student came back to me and said "You yourself graded this, not a student." He then went on to say how much work he had put into his project, that my critique was spot on, and he felt vindicated by the careful consideration I had given to his work effort.
I had to leave academics in the middle of a recession and a tight job market in my discipline, but I had set out to improve on the efforts of all my predecessors, whom I generally respected. Colleges often evaluate professors with poorly designed scales that are easily manipulated by students with petty grievances; I had a mix of ratings--I did better with graduate students. One example from my UWM period: "I learned more under Dr. Guillemette than all my other professors. But he deserves none of the credit, because I did it all by myself." Imagine that: a student capable of working on his own without a Big Nanny professor! That's what employers in my discipline are looking for--somehow I got him to learn, but I had nothing to do with it! But I knew I was a great professor, and he unintentionally validated that.
(National Review). Bob Corker is reasserting a role for Congress in the nation’s foreign policy.
What we need is authentic conservative leadership in the Senate like the late Robert Taft. Both branches--the Congress and the Executive Branch--need to stop meddling in international disputes that are none of our business and funded on the backs of our grandchildren.
(IPI). Interested in buying a car today? Not so fast.
Buying a car on a Sunday is just another thing you cannot do in Chicago
Oh
please give me a break-- even people in Auto sales deserve a Sunday
off... Considering the majority of the individuals in the Car business
work close to 12 hours a day... So a mandatory day off is in ORDER.Oh please give me a break--do you think the military during wartime follows banker hours? Heaven help you if you should have a medical emergency on a Sunday.
NO, we don't need some fascists imposing their personal preferences. You don't want to shop or work on Sundays? Fine. Just don't impose your unreasonable rules on other people.
(National Review). For feminists and gun-grabbers, an infantile rallying cry
We need the political equivalent of the physician dictum, "Primum non nocere." Let us not forget one of The (Incompetent) One's favorite trite phrases, "We can't afford to do nothing." Just as acting on an unchecked assumption can be fatal to a surgeon's patient, fear-mongering on public policy is like putting government failure on steroids; there are opportunity costs, unintended consequences to interventionist policy, domestic or foreign, and acting impulsively typically doesn't solve the original problem, it merely exacerbates things..
Political Cartoon
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| Courtesy of Jerry Holbert via Townhall |
Glen Campbell, "Country Boy"
