May 6, 2018....Bob Brinker was live on Moneytalk today.....(comments welcome)
STOCKS....(The S&P 500 ended this first week of May with a small 0.24% loss - down 1.2% YTD and 7.3% below its record close.)
Today, Brinker repeated his current stock allocation advice for retirees - maintain a balanced approach of about 50% stocks and 50% fixed income. Otherwise, Marketimer advice is 100% all in, with dollar-cost-averaging new money on "weakness."
Honey EC: Brinker is still looking for an S&P 500 level that he considers "attractive for purchase" so that he can issue a "special bulletin buy-signal." Theoretically, since Brinker has his followers fully invested AND dollar-cost-averaging, a buy-signal would only apply to those that suddenly come into a pile new money.
BONDS....(The U.S. Treasury closing yield on 10-year notes at 2.95%.) There were no calls today about bond funds and BB did not repeat his advice to keep duration very low, but he has made no changes in Marketimer.
GOLD....Vince in Delaware asked about buying gold. Brinker did his usual disclaimer about not recommending gold because it is "speculative." He does not recommend buying numismatic coins or bullion. But if you do decide to buy gold, he recommends the Exchange Traded Fund GLD. (BB said that Bitcoin is also speculative.)
Honey EC: Brinker actually had a recommendation for gold (GLD) in Marketimer's off-the-books list of "individual issues" for several years. However, he never gave any reason why, how much to buy or what price range to buy it. Then all of a sudden one month, with no comment whatsoever, GLD disappeared.
INFLATION....2.4% year-over-year
JOBS REPORT.... Brinker gave his usual long-winded report about the latest job report and unemployment numbers, along with the educational and racial demographics. (BB did not say this, but: Black and Hispanic unemployment rates have hit record lows.) BB has concerns about a tightening labor market. Not only is unemployment lower than it has been since the turn of the century (3.9%), but even the other numbers are way down too. The current U6 unemployment rate as of April 2018 is 7.80.
BB EXPLAINS OPTIONS MARKET: COVERED CALLS AND PUTS..... Brinker's reply to caller David from Virginia Beach: "This is a reasonably sophisticated operation. The vast majority of investors do not get into the options market.....What you are doing with writing covered calls is basically you are trading off the potential for upside in the stock, and in return you are getting current income. The current income you are getting is the premium that you receive on the calls that you sell on the stock that you own.
Keep it simple. Let's say that you own 100 shares of a stock that is trading at $50. And let's say that you are a long-term owner of the stock - that you really don't have any plans to sell the stock......but you are willing to sell the stock if it is called away from you, so you write a covered call. So you sell to somebody else for a price, the right to buy your stock at what's called the strike price for a limited period of time.....Let's say a three-month call-option.
So you own the stock at $50, somebody is willing to buy it from you at $55 and they will pay you cash money to buy it from you at $55 over a three-month time frame. So if the stock goes up beyond the cost, they are going buy it from you and you are out at $55, plus you get to keep the call-option money that you made when you sold the call. So you return is, you get the gain to $55 from $50.......and you keep the premium that was paid to you for that option.
On the other side, the buyer gets to buy the stock at $55 and anything above $55, minus the cost of the call option. That is the trade off that you make. Yes, you get cash income for selling that option but at the same time, you only have upside up to the strike price. After the strike price is realized, they are going to call the stock away from you and it will be out of your portfolio. And it may be that you are going to have to pay capital gain on the stock if you had one.....
So it's really a trade off. Do you want the gain potential or would you rather have the current income. Now if you get lucky and the stock stays at $50 or anything below the $55 strike price, you get to keep all the cash income that you make....That is the ideal outcome when you get to keep the call premium that you sold. That's the ideal outcome."
FRANKJ'S MONEYTALK GUEST-AUTHOR SUMMARY
Well, I got my wish: a break from the Conga line of
futurists. And what a break! Bob’s third hour guest on May 6, 2018 was
venture capitalist Bruce Cannon Gibney, author of the 2015 book, “A Generation of Sociopaths, How the Baby
Boomers Betrayed America.”
Editorial comments in italics, as usual.
That book title is designed to attract attention,
for sure. What is a sociopath? There are definitions all over the web, here
is one of the milder ones: “a person
with a personality disorder manifesting itself in extreme antisocial attitudes
and behavior and a lack of conscience.”
I’m a boomer but I’m not a sociopath.
I don’t know any sociopaths either.
With regard to the national
debt and fiscal irresponsibility on the part of Congress, Bob and the guest
could be joined at the hip, with the guest being the more strident of the
two. The guest said that fiscal
responsibility (in DC) “died in the 80’s.”
(He was born in 1976 he said).
The Republican party was known for its fiscal conservatism but no
longer. Bob chimed in that he has seen
no fiscal responsibility from either party.
The entitlement regime
(Social Security and Medicare in this context) is not sustainable. He mentioned later in the interview that
Social Security cannot continue past 2030 with some major changes. Bob asked why hasn’t there been more
pushback in Congress against these out of control programs?
Bob knows quite well and so do regular listeners –
he was lobbing a softball for the guest to knock out of the park.
He said 1) boomers want to
spend more; 2) this portion of the
electorate (boomers) have high voting rates; 3) politicians are focused on
maintaining entitlements. Bob added
that fooling around with either one is “the third rail of politics.”
If you are a newcomer to this country, and
unfamiliar with that term it refers to the rail in a subway system that carries
the electrical current. Touch it and you
die. Propose cutbacks to entitlement
programs and you will lose your next election.
The guest said he favors a
progressive federal tax system like we have.
The result though is a relatively few people end up paying the bulk of
taxes. He pointed out that despite
various tax reform measures over the years, the “percentage take” in taxes has
remained “shockingly constant.” My guess
is, he meant taxes as a percent of GDP.
In the same breath he said boomers benefitted from the 2008
bailout. I would have liked for him to elaborate on this point. Maybe Bob would have too, but he held the
reins loose for most of the interview.
After the break Bob asked
about state, county and city funded public pensions – will they be paid? The guest gave a long answer which included
the fact that California has the highest state tax rate on high earners, (him)
equaling 13.3 percent. Public pension
plans verge on fraud. Assuming a 7.5
percent return on assets as plans have done throughout this extended period of
low interest rates is an example of the type of fraud he meant. The long term returns are not that high and
the result is “wild underfunding.” The
Netherlands is doing things right, requiring that pension funds be funded at a
105 percent level. The Dutch have always been good with money, even Tulipmania worked out
well for some.
He bashed Illinois (which deserves to be bashed) but
didn’t mention California’s public pension system that I heard.
He mentioned wealthy people, like himself, who
get in on the ground floor of a tech company (in his case, PayPal) then make a
pile when it goes public, get rich and move (out of California presumably).
Callers did not get much useful information because there were no pat answers to their questions.
Callers did not get much useful information because there were no pat answers to their questions.
Joe, listening on WLS in
Chicago wanted to know how to protect assets when the national debt becomes a
problem in 8 to 10 years. The guest
rambled all over the place – I don’t think he was really prepared to answer such
a question. He said there is no easy
place to hide and cash is the “least pleasant” place to be.
Caller James said he took
his pension as soon as he could and when he discusses fiscal issues with
friends they don’t seem interested.
There is no great place to earn a good return. The guest advised investments in tech –
something that is truly growing. He
mentioned Google, Apple (“a utility company”), Facebook. He said you want to invest at a reasonable
price in a growing company.
Well, duh!
Keep a large stockpile of
cash so that when there is an opportunity “to buy America on sale,” you’ll have
the dough. Wait, he just told Joe that cash was … never mind.
Jerry from Green Bay, WI
took exception to the guest’s description of Social Security and Medicare as
entitlement programs. To him, they are
his pension and it is no different than a government entity paying out a pension
to retired public employees. Gibney rattled off a bunch of statistics from
a government website that he encouraged Jerry to visit. This site reported that people pulled out
$1.53 in benefits for every $1 they paid into Social Security and
Medicare. Does this include the employer’s portion? Inquiring minds want to know.
The take away? Vote out the politicians who made this
happen. Bob wrapped up a little early
at 3:50.
Do you
agree with me that the subtitle is just a way to attract attention? Would you be interested in the book if the
subtitle was: How CONGRESS Betrayed America. No, that would be a big Ho Hum to most
people. The blame doesn’t rest with the
Jims, Joes or Jerrys who called the program today. If anyone should be blamed it is Congress who
set up Social Security and Medicare on AUTO PILOT. Congress does not vote on appropriating the
money for these programs. How
convenient for them! So I’m clear, if
anyone cares, both parties are to blame.
Honey here: My apologies to FrankJ and to readers. I failed to add the last page of Frankj's summary last night - some of the best parts. It is now complete! Very sorry! 
75 comments:
Great. I am anxious to hear Brinker's abundant wisdom on the latest
employment numbers and current economic environment.
Honey: I await your next post. ;)
frankj: Milk trivia . . . I remember the milkman coming to our house when I was a kid; we had an insulated box by the back door. FWIW, our milk was homogenized. Various friends of my parents had the box built right into the wall, accessible from inside or outside by two doors.
My aunt and uncle, who lived in the Pa. boonies, also had deliveries from a local farm. They had Guernsey cows which produce very rich milk (5% butterfat) and it was not homogenized so they always had that beautiful cream on the top. The milk was delicious.
Eh, memories.
How on Earth did that first call get past the screener? What was he calling from, a siren-testing facility? And it just went on and on and on... bad radio!
One call, then to news at the bottom of the hour... let's get those bills paid, too!
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Anonymous...I published your comments so that I can remind readers to type their name in the link that is provided - otherwise, the chance of getting published are extremely small.
Bob who in my opinion is generally careful with his wording was kinda shooting from the hip with his opening comments about Hawaii. He described the situation as 'amazing' and 'incredible' . These days those 2 words , though incorrectly, are almost always used as descriptors with positive connotation The more egregious infraction was when he was trying to muster some semblance of sympathy, he spoke about (paraphrasing here) the current conditions and the 'problems that FLOW from them' . Kinda like extending sympathy to someone by saying 'Sorry for the death of your spouse who died in the flood, and the problems that FLOWED from it. You can't make this stuff up.
Too bad BB didn't listen to Eric from AZ. Eric contributes to his 401K at 15pct I believe I heard. Bob did not ask how much Eric had in that acct towards the 800K he needs to draw 4pct from. Maybe I am mistaken as I have been inhaling bbq smoke all day as I am cooking Boston Butts.
I remember when BB used to laugh at callers, I'll call them old timers, who were concerned about the national debt. He would scoff saying there is nothing wrong with sovereign debt. Now a few years later it's a concern to BB, a big one. What changed? What made BB see the headlight of the on coming train in the tunnel?
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Diogene505....I remember the same thing. The debt doubled during Bush and again under Obama.
Now like the FOMC raising interest rates 8 times over the past 1 1/2 years, things have all changed with Brinker.
Diogene505 you can answer this yourself... just address the questions of
1) running a trillion dollar deficit when the economy is not in recession - is this good or bad or even rationale and what problems are logical outcomes of this policy?
2) when rates normalize at what point does interest on the debt become a problem as far as servicing that debt?
The above concerns are legit.
If you recall the GOP voted to cut taxes (corporate rate slashed significantly) in the hopes that GDP growth well into the 3 and 4% range would ensue and we would have more revenue as a result of tax cuts and deficits would not sky rocket. That was the bet. BTW this has never worked out... when you cut revenue and increase spending and hope for the GDP rescue the math always gets you not in a good way.
We can't keep on making these same stupid policy mistakes and excusing those in power for voting for this stupidity.
Brinker in my listening history has always been against an overly growing national debt in times where the economy is doing well. He has made that point repeatedly . Also when the economy has been doing well he has been against tax cuts which only act to make the debt worse and aren't really necessary or wise.
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Smile...I will say the same thing to you as I did about Brinker: Where were you during the 8 years that the national debt doubled under Obama, and at the same time the welfare, food stamps and SSI (disability) numbers went up exponentially - as he piled in hundreds of thousands across our southern border - most all of them to immediately begin receiving hundreds of $billion of tax money to feed, house, clothe and healthcare.
You cavalierly pronounce things and claim they "never" work. HOGWASH.
Now you, old friend, have had your political rant for this week. And so have I....
As someone in Gen X who has contributed the max to Social Security for over 20 years and will never see a nickel form our bankrupt trainwreck of a country, I think characterizing the Boomer generation the way Bruce Gibney does is accurate.
Was listening with one ear while trimming the hedges on the 1/10th acre humble homestead, circa 1992 NorCal single-family housing development.
Only thing cooler is that new KFC ad with the ever over-tanned George Hamilton masquerading as The Colonel.
The radio show sounded like a Critical Mass class reunion with BB as guest speaker. Can't wait to digest the details later from the On Demand download.
Once again I heard Da Brink give his usual reflexive poor advice to a caller that amounted to roll your 401K plan over into a self-directed IRA. This is usually very poor advice unless you ask specific questions about hte plan in hand.
In almost every state (if not all) you get superior creditor protection from inside your 401K plan.
The plans I have examined had access to very, very low fee annuity options for retirement and based on the pressure from regulators, if a plan does not, it is likely to in the future.
In addition most plans are adding features such as robo advisory services, assessments, financial health checks that you have to pay for or have substantial assets to get and often free sessions with a financial planner. Moreover, wit the coming labor shortage, theses plans are likely to start competing even more and adding more features, points that will be moot if you roll out of the plan.
In addition many plans have access to very low cost index funds. My Son's plan has a small array of funds such as Total Stock Market at .02% ER.
Lastly many 401K plans have stable value funds in them, something you cannot find outside a 401K plan. I know over the past few years while Bob was hopping all over the place trying to lower duration and taking credit risk I sat in a stable value fund at rough 2.5% interest. The reason he had to do all that moving is because of the choices available outside a 401K plan.
I simply think it is irresponsible to reflexively keep telling callers that you should roll your4 01K plan in a self directed IRA.
tfb
As I recall back in 2004-2005, Da brink was dead set against George Bush's social security reform plan.
Here is one of the quotes from Bush, on what he was proposing:
“As we fix Social Security, we also have the responsibility to make the system a better deal for younger workers. And the best way to reach that goal is through voluntary personal retirement accounts.” This approach, the President argued, would offer younger workers a “better deal”: The rate of return would be higher than in the traditional system; the accumulation could be passed on to children and grandchildren; and “best of all, the money in this account is yours, and the government can never take it away.”
tfb
I’d add that if you retire between the age of 55-59 1/2, you can access the 401k from the company you are retiring from, penalty free. If you roll that 401k to an IRA, penalty free access before 59 1/2 becomes complicated. I never hear this point made by any of the talking heads I listen too...
BillCPA39
What is the comment Brinker frequently makes, "You don't want to be the wealthiest guy in the cemetary", or something like that. Good words of wisdom.
Bill
After having listened to yesterday’s guest author and his book on sociopaths, I’m going to extrapolate here and predict BB’s next guest author will be Dr. Doomngloom. His latest book will be something like: The Plundering of the Commons: K Street, Congress, the Politically Connected and the Entitled Tax-Exempt Class. While listening to the broadcast, we all could munch on some Soylent Green. In the background, coming from the guest authors phone line, you could just make out the lyrics of Sympathy for the Devil
Please allow me to introduce myself
I'm a man of wealth and taste
I've been around for a long, long year
Stole many a man's soul and fate
I was 'round when J..... C.....
Had his moments of doubt and pain
Made d.... sure that Pilate
Washed his hands and sealed his fate
Pleased to meet you
Hope you guess my name, oh yeah
But what's puzzling you
Is the nature of my game
The Rolling Stones
-Mick Jagger
-Keith Richards
"BB EXPLAINS OPTIONS MARKET: COVERED CALLS AND PUTS....."
The vast majority of Bob's callers are quite unsophisticated in basic investing whether it be stocks, bonds, money funds or even savings deposits.
He does a grave disservice to his listeners to take this call, let alone trying to explain options etc. within a time frame of a few minutes.
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Hi Danger....I see your point. I took some time to consider whether or not to cover the call and Brinker's long response.
My dictating machine (audio to written words) no longer works. It was an expensive gift to help me with the blog, and it was wonderful. However, I do not want to invest in a new one, so that means that I have to transcribe Brinker dialogue the hard way.
My decision was to go ahead with it because I do not recall Brinker ever making a detailed explanation about a very confusing subject like "options" in the past.
There are some very sophisticated investors who read the blog, so hopefully, they will benefit.
I wish caller Jerry from Wisconsin had stayed on a bit longer. He could have asked (as FrankJ points out) about the employer contributions, and how they have accelerated lately.
Then, possibly, they could have glanced at the elephant in the room who is under the age of 30, has never paid into the fund, yet draws $700 per month (or more) out of it.
Then just maybe the audience could have a clearer view of the $1.53 to 1.00 headline.
But, stating this fact is the "third rail" for talk show hosts.
B.S title and info from Gibney. Baby boomers fought and died in Vietnam, betrayals and blacklists from 50's -70's politicians. "National debt" is still extra zeros in the computers and will stay that way in the defense, security, petro, big banks complex
Irwin: As soon as I heard what the guest was about I shut Blinker off.
I've seen this subject more than once in recent years online: young people blaming Baby Boomers because their life is screwed up. It really angers me.
I'm pushing 68, have been doing the same thing for 50 years and still going full-time, never made a lot of money, but reached the proverbial "Critical Mass" several years ago -- mostly by minding my own business, living frugally, and spending less than I earned.
How did I screw America up for the younger generations?
Hi all. I just finished watching the Warren Buffett special on CNBC. It got me thinking. Of course, there are always share-holders attending the annual BH conference, but there are many more who attend thinking that Buffett is going to bestow upon them the secret of financial success. Yes, Warren is a great motivational speaker and his success is no secret with his ability to analyze the worth of companies. Little do these people know though that if they want to end up in the Land Of Critical Mass, all they have to do is watch the seminars and read the books of Bogle, Charley Ellis, and Burton Malkiel. Better yet, they can listen to Moneytalk and read this buzz. Even Warren Buffett supports this agenda. I guess most people can't be enlightened. I feel lucky to be among you. Maybe "lucky" is the wrong word. As BB said on the show of 12/27/2017, 11pm, "I deserve to be in the Land Of Critical Mass!"
Hi Honeybee... I enjoy your blog.
Recently your response to Danger on options: "whether or not to cover the call"
LOL
Theres some really good posters on this blog.
Awesome summary from Mr. Frankj once again. Very compelling commentary as well. As Jerry Reed might lament, "Keep the hammer down, boy, and never mind them brakes"
Hi again. Correction! On my previous comment, I meant BB's show on 12/27/2015, not 2017, about 10 minutes into the 3rd. hour where BB gives a wonderful 10 minute talk on "Critical Mass". Outstanding!
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April Best Month in History for U.S. According to CBO Figures
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More from the link I posted above:
The federal government took in a record tax haul in April en route to its biggest-ever monthly budget surplus, the Congressional Budget Office said, as a surging economy left Americans with more money in their paychecks — and this more to pay to Uncle Sam.
All told the government collected $515 billion and spent $297 billion, for a total monthly surplus of $218 billion. That swamped the previous monthly record of $190 billion, set in 2001.
Seems like the big money players on Wall st are waiting for something. Got it parked in neutral.
So far so good the debt under Trump has only gone up a little over a trillion over the last year or so (1.28 year).
1,090,658,354,109.90 added to the debt thru 5/4/18.
https://www.treasurydirect.gov/NP/debt/current
http://www.usdebtclock.org/#
To Bluse,......... similar story with my work career.......find a way, focus, save as much possible and "Critical Mass" is achievable...LIFE IS GOOD
I've come to the conclusion the US federal debt means diddly squat. Apparently spending yourself as a country to prosperity is a real strategy. Can something go wrong? Doesn't seem like it.
58 million SPY shares traded resulting in not even a penny change. Thats just amazing to me.
Deficits don’t matter as long as the debt service is less than 2.5% of GDP.
Irwin: Assuming you are a Baby Boomer, do you get offended when you hear a millennial trash us for "screwing the country up" for them?
J Wales, Gird your loins. As interest rates normalize on the long end via QT the average cost or interest on the debt begins to rise.
When this occurs the interest on the debt begins to crowd out other budgetary spending items some of which is mandatory which in turn increases deficit spending and therefore debt and the process begins to feed on itself.
At the current level of debt the following is an example as average treasury yields rise:
average
interest
.. rate .. annual interest expense
2%___ 420,759,258,186
3%___ 631,138,887,280
4%___ 841,518,516,373
5%___ 1,051,898,145,466
6%___ 1,262,277,774,559
Of course before we get to a trillion in interest at the 5% average interest rate level on the debt the Federal Reserve in charge of price stability will tighten the fed funds rate to the point of causing a recession (they will have no choice due to inflationary spiral prevention).
At some point, even at lower rates, debt servicing begins to overwhelm no matter what we do - it may be double where we are or it could be at 30 Trillion in debt (only 9 trillion away) which starts the perpetual point of no return decline.
Common sense tells us that too much debt is not good. The Fed can print money (QE) but again at some point we reach a point of financial collapse via controlling an inflationary spiral from which we will not recover as the Fed prints more and more dollars.
That is my view but who knows, except that we all really do.
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I'm sorry but when I get comments with no name typed in (see the name link below posting window), they go into the trash - 9 out 10 times.
Kilgore Trout:
EXCUSE ME? You are on the wrong blog for your political bull-crap.
Maybe you would be happier somewhere else.
Honeybee,
Just as a suggestion and possible time-saver + grief-preventer:
I wonder if more new people would follow your posting requirements if they stood out a bit more. Maybe revise it into a few bullet points, some bold typeface, etc.?
Just a thought.
I hate to see you spend so much time on something that is very straightforward if the rules are read and followed.
http://www.joshuanhook.com/wp-content/uploads/2017/05/I-will-follow-the-rules.png
During the amazing radio show, early in the first hour, RJB said that the unemployment rate fell right through the Fed's definition of full employment "like a hot knife through butter".
Not to quibble, but I thought the classic phrase was "a knife through hot butter" but maybe I'm wrong.
If you think about, a knife through hot butter is guaranteed to slice even with a dull edge, but conversely, a hot knife hitting frozen butter (to explore the limits of the equation, like in calculus) might encounter some resistance.
As a scientist, I really dig the awesomeness of absolutes. On the other hand, my statistical math friends completely enjoy the range of possible outcomes, even to the extent of laying awake at night dreaming of the data plots that reside under the outermost, microscopic regions of the bell curve. Then they text me about it, which annoys my spouse.
@ Honeybee's Helper: So are you officially a "worker bee"? Or a drone?
Nosy people want to know!
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Dear Honeys Helper....I gave it a shot. Let's see if it helps.
Thanks for the help. :)
Elwood: I believe the old expression is " . . . a hot knife through butter." As for the science of it all, not sure, but doesn't "hot butter" turn into a liquid?
Some of Bob's other favorite quips: "The chances of that are somewhere between slim and none. And I saw Slim headin' outta town at high noon."
Or " . . . taken out back to the woodshed."
Outside of the world of the hard sciences and more towards the human condition, I like this quote about absolutes, although I don't remember where it came from: "There are no absolutes except for the statement, 'there are no absolutes'."
Assuming you are a Baby Boomer, do you get offended when you hear a millennial trash us for "screwing the country up" for them?
As long as millennial females maintain a GILF fixation and invite me to come over for a rainbow party I am good. :)
But then I am a rabbit and it is springtime...
All of the postings on national debt worry? What matters is debt as a percentage of GNP. If your wealthy, servicing a $500k debt is fine. If your poor a disaster.
I was perusing a historical debt vs GNP, my thinking/observations:
1. High military or war spending goes directly to national debt. We have to get a handle on defense spending and make intelligent decisions of efficient use of money.
Also, in general all government spending goes directly to subvert the efficient private sector solutions. Solutions that earn the country tax revenue. Government actions should be directed to maximise private sector solutions that will result in increase in freedom and quality of life of its' citizens.
2. Inflation doesn't appear to be much of a factor as I once thought.
3. Reagan inherited a bad economy and chart went up at 45 degrees and 30% increase. Obama the same type inheritance. The chart within Obama and last bit of GW spending increased 39% at 70 degree clip. WWII spending up 70% at 85 degree clip.
5. It looks like the foundational juice to lower the national debt to GNP ratio is to first have a booming economy. This is absolutely required as step one.
6. Were told government spending will decrease the death spiral of recession. Problem is the debt will have to be serviced in future years. This "fee" will dampen future ability to obtain national wealth. National wealth does include private sector debt, as well. I fear utilizing this tool is bad economics, since increasing government spending is so crude and inefficient. Also, it will addict to many to easy wealth lifestyle of DC swamp operations.
6. So, does offering cheap money per the usual practice of Federal reserve entice more debt. Absolutely. The higher debt load will decrease economic vitality per cost to service this higher debt. Also, this will go to increase fear and motivate consumers of new and higher debt load to maximise savings (decrease spending).
This cheap money also works to inflate equity prices. Home prices and stocks soar. Good for future wealth accumulation, but little stimulus for immediate economic needs of a recession. The value mostly goes to already wealthy. However, refinancing old debt has the opposite effect.
7. What should government actions be to stimulate economy? Immediate even if temporary decrease in tax load especially pay checks. Citizen spending is extremely efficient. Spending efficiency in descending order; state, federal, military, and federal give away programs such as social services. Social service programs run by federal government cost taxpayers more to operate, often times, than what benefactors receive in value. How much does the ADA reg cost taxpayers and private sector for the true value?
Decrease government interference of economic activity such as onerous regulation. Maybe have free zone of regulation, taxes, and liability for startups such as experimental.
8. What should government actions be to stem inflation. Mess with money supply and cost of money? No. Instead raise the tax load, but do so only within inflation time periods.
Hi Smile. Maybe AI robotics & other new inventions will create an ultra productive economy. I bought a new microwave oven yesterday. Its 2.2 cu ft 1250 watt Panasonic made in China. My Kenmore also made in China became a fire hazard. Paid $180 for the new one. Paid close to $400 for the old one 14 years ago.
All of the postings on national debt worry? What matters is debt as a percentage of GNP
You statements may be accurate if all you concern is in regard to servicing the debt. But there is another concern, one not only of philosophy and morality, but one that gets to the very essence of the foundling of this nation: self determination.
What the national debt amounts to is the current generation forging a chain of bondage on the just earnings and thus a portion of the lifespan of a generation yet born. Every dollar piled on to that debt is a dollar that you indenture your children and your chlordane's children to pay. To me it is unconscionable. you children are already born into economic slavery to pay off the pension obligations fro services that were delivered before they were born. The national debt is annotate such burden where we spend on what pleases us now and pass the bill to a generations yet born. It is sick.
tfb well stated.
The question then becomes how do we get our moral compass back as a nation and do the right thing regarding debt and living within budgets which includes electing the correct legislature and top leader that shares this value.
It is about spending within means and not about spending and then hoping to get enough growth to offset the profligate spending. Simple math says we have a spending problem.
We have to do better for the kids who come behind us.
Didnt Shakespear in Hamlet remark that human nature has a canker? Something rotten about our nature that we cannot overcome. Saying no to spending money we don't have seems impossible to stop.
J Wales said...
Didnt Shakespear in Hamlet remark that human nature has a canker? Something rotten about our nature that we cannot overcome. Saying no to spending money we don't have seems impossible to stop.
The essence of personal integrity and morality isn't about the ultimate utility of your effort but rather the amount of impetus you extend no matter how futile the disposition.
This philosophical moment brought to you by fluffy, the rabbit who cares.
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You may have to read this twice to fully grasp the importance of it:
Federal Government Ends April With Biggest Budget Surplus in History
By Petr Svab
May 8, 2018 4:26 pm Last Updated: May 8, 2018 9:55 pm
The federal government cashed in big in April, climbing highest ever into the black.
The treasury received $515 billion and spent $297 billion, making for a record surplus of $218 billion, according to a Congressional Budget Office (CBO) estimate.
April is traditionally the best month for the federal budget—that’s when the government collects the bulk of tax payments for the previous year.
The previous record surplus of some $190 billion from April 2001 would be higher if adjusted for inflation.
Still, this April’s results are $30 billion to $40 billion higher than the CBO expected in its forecast less than a month ago.
CBO estimates can be off by a few billion. The Treasury is scheduled to release the official numbers on Thursday, May 10.
The record surplus materialized despite an 8 percent spending hike, compared to last April. The government spent $6 billion more to cover interest payments on its debt (up 21 percent April-to-April), while military spending rose by $4 billion (11 percent), Social Security benefits by $4 billion (5 percent), and Medicaid benefits by $3 billion (10 percent).
“Those payments were mostly related to economic activity in 2017 and may reflect stronger-than-expected income growth in that year,” CBO stated. “Part of the strength in receipts also may reflect larger-than-anticipated payments for economic activity in 2018.”
In short, people may have worked more, are getting paid more for the same amount of work, or both, resulting in more taxes.
Individual income and payroll taxes rose by $73 billion—20 percent—April-to-April.
In addition, withheld individual income tax and withheld payroll taxes rose by $7 billion (or 4 percent), despite people already paying less due to President Donald Trump’s historic tax cut bill. On the other hand, April had one more business day this year than the last, which also pushed the withheld tax a bit higher.
The economy has been on a streak of exceeding expectations thanks partly to the “Trump effect”—a boost to confidence in the economy linked to Trump’s cuts to regulations, taxes, and planned investment in infrastructure.
The unemployment rate fell to 3.9 percent in April. The only time it has ever dropped so low since 1969 was in April 2000, according to the Bureau of Labor Statistics.
Also, private sector wages and salaries grew in the first quarter at the fastest pace since 2007. Claims of unemployment benefits fell to the lowest level since 1969 in the week ending April 21.
Household disposable income increased at a rate of 3.4 percent in the first quarter, accelerating from the previous quarter’s 1.1 percent pace. Households also boosted savings.
The government, however, hasn’t been so comfortable. Tax cuts combined with increased spending made for an extra poor February and March, both with deficits over $200 billion. Aside from ever-increasing Medicare, Medicaid, and Social Security bills, the higher inflation has pushed up interest payments on government debt. Trump’s boost to the military budget and a hike in disaster relief spending added to it too.
Reuters contributed to this story.
Honeybee said...
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You may have to read this twice to fully grasp the importance of it:
Federal Government Ends April With Biggest Budget Surplus in History
I remember well back when Bush 44 had a budget surplus, Greenspan and O'Neil (to my mind the greatest Treasury Secretary in my lifetime)wanted to use the surplus to shore up Social Security and Bush opted for tax cuts(which may have been the right move given the subsequent 9/11 and the hit the economy took).
Cut to today, this is the strongest economy, in terms of pent up entrepreneurial start-ups I have ever witnessed; I credit Trump with it through his elimination of so many anti-business regulations. Franchising is thriving again thanks to Trump, an area that was decimated under Obama.
January 2016, $100 billion held in ultra short bond mutual funds and ETFs. April 2018, $174 million. Money pouring in. Source, Asjylyn Loder's and Daniel Kruger's article in Wall Street Journal.
VUSFX, Vanguard's Ultra Short bond fund, Admiral shares. exp. ratio 0.12% Yield, last 30 days, 2.23% Duration 0.93, Ave. maturity 1 year, average credit rating, BBB.
A one year CD can be purchased yielding 2.15%. No expense ratio. No concern about the net asset value decreasing as the Fed increases interest rates.
tfb said... this is the strongest economy, in terms of pent up entrepreneurial start-ups I have ever witnessed; I credit Trump with it through his elimination of so many anti-business regulations. Franchising is thriving again thanks to Trump, an area that was decimated under Obama.
If the above was true it would show up in GDP which is still stuck in the low to mid 2's growth rate.
Good day in the market hopefully I will soon break the high point back in January for my portfolio.
f the above was true it would show up in GDP which is still stuck in the low to mid 2's growth rate.
Good day in the market hopefully I will soon break the high point back in January for my portfolio.
It is true. And the two do not have to follow. As of last Saturday I cleared out all my inventory of heavy machines, restaurant equipment, and office equipment that I stockpiled from auction at liquidation sales under the great Obama depression.
My clients are humming, instead of retiring in March as I planned I decided to continue my small business consultancy practice and this will be a banner year.
If the gutless republicans would drive a stake through Obamacare you would see a tidal wave of hiring on the low end, likely not good for the overall market. And the reason I mention that, is what is good for main street is often not popular with Wall Street. My community, like many, has a huge off the books economy that is hard to measure unless you know how to capture its pulse.
tfb said...
"It is true. And the two do not have to follow."
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smile said...
Wrong. GDP measures the total value of all final goods and services produced.
If everyone was humming like your anecdotal example it would be captured by the GDP numbers.
Obviously everyone is not humming like your anecdote or else GDP would be above 3.5% annual YOY and it is not.
The mandate was expunged starting 2019 so no more excuses.
Smile, your ignorance is only exceeded by your uncalled for arrogance. Only the individual mandate was repealed, employers with 50 or more employees are still subject to the anti-employment provisions of Obamacare.
And once again GDP does not not capture the underground(off the books) economy which is what I referenced. Why do you always speak of things you know nothing of you partisan hack? What is amazing is the way you parade your ignorance like a pot-bellied middle aged man wearing a Speedo at the beach.
Be gone cretin I have little time for your fonts of ignorance.
tfb,
The premise of your argument is that you have this magical underground economy which is not captured by government entities or stats.
Well if that is truly the case why do you need to comply with any laws w2 reporting, medical provisions of Obama Care etc. BTW the only people using Obama Care are those where the employer is not providing medical or those who have lost insurance coverage.
Your entire premise makes no sense.
Besides if you spend a dime on anything that is captured in GDP regardless of whether you are on the cash system under the table etc. unless for some reason now that you ostensibly are doing better you are not spending any more than when you were so hampered by Obama LOL or no additional interest or capital gains to report to the IRS, or no RMDs. Most including myself doubled or tripled wealth under Obama. That is a fact. I deal in facts not fiction.
Seems the only cretin is the one calling names who can't backup the BS that you are peddling.
Gee smile, you post two things, one about Obamacare - proven false, then you make an idiotic pronouncement about GDP that is also false. What is clear as you do not know what you are talking about. You may be an intellectual giant among retards, but that is about it.
You are simply a drolling troll and an ignorant one at that. Why the HottieBee hosts your fonts of ignorance is beyond me.
Rant away troll, I shall ignore you henceforth like the prattling child you are.
Anyone think we will start a recession this year or next year? The microwave oven I bought on Monday for $180 was on clearance at another store for $100. So I returned the other one. Doesn't seem like there's cause to keep raising rates.
The attached link is to a Schwab article on Social Security when to take it.
I just scanned it briefly but it may offer insight.
I did a similar breakeven analysis using xcel about 10 or so years ago. I probably need to dust that off and take another look as I am about 3 yrs away from full benefits.
J Wales, I think as long as Powell doesn't over tighten on the fed funds we will be fine the wild card is the QT on auto pilot.
I'm counting on earnings and buy backs to push us forward and higher, and the Fed to not make any boneheaded errors to invert the yield curve.
tfb, you prove my points with every utterance. Thanks for the lightweight workout.
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Good news popping out all over the U.S. and the world. From Fox Business:
The Dow and S&P 500 moved higher as investors reacted to mild inflation data, which has eased concerns that the Federal Reserve might accelerate interest rate hikes.
Honeybee,
That revision to the instructions for the comment section looks great. Would I be correct in thinking that it solved the problem? I hope so!
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Dear Helper....I could tell you but I don't want to jinx it.
At least when I coldly delete comments from anonymous, I don't feel bad thinking it might be some nice person who doesn't know the rules.
The rules are almost unavoidable now - and if Google would offer more perks (like graphics), I'd make them even more unavoidable.
It is more important to spend retirement money up front and delay SS. Know that annuities are attractive, because they have more or less guaranteed life time benefits. Benefits that one can count on. So, SS is an annuity and top tier most attractive and available. Also, for old age security, nothing better than to maximise this annuity. It's better to have more security in late stage retirement. Better to count on SS than stock market earnings within this stage of life. As well, SS will offset the long term care costs and do so for an unlimited time frame.
The financial environment is very good. Stats imply that during this time period a extremely low chance of recession. It looks to be higher earnings of business and extremely low unemployment. What could be better? Not a good time to be in cash or precious metals. Nonetheless, it may be good to pull some out of FANGS and go for large cap value if in retirement. U.S. is the epicenter of honest reporting of finance, business, and political corruption. I know this isn't a high bar, but it does indicate how much these forces can corrupt.
I think it was smile that posted some "facts", but has a lonesome knowledge of business of economics. Stats are not the end all of truth. Meaning one has to think through the stats. Obama inherited an aggressive fed reserve that pushed stock wealth. Their may be more truth within the unemployment stats. My guess, high unemployment and economic stagnation are powerful indicators of a failed presidency.
It's obvious Smiles comments are slanted to the political left. The stock market soared in 2009 and beyond because of Federal reserve policy (infusion of capital and low interest pplicy) along with some fiscal government spending. Obama was just along for the ride. If anything his policy and regulations impeded economic growth as may have been his intention to weaken the USA. Fortunately his brutal and inept 8 year reign, remember he was a brilliant community organizer though,couldn't stop the power after the Fed policy
It's obvious Smiles comments are slanted to the political left. The stock market soared in 2009 and beyond because of Federal reserve policy (infusion of capital and low interest rates) along with some stimulus from fiscal government spending. Obama was just along for the ride. If anything, his policy and regulations impeded economic growth as it may have been his intention to weaken the USA. Fortunately his brutal and inept 8 year reign, remember he was a brilliant community organizer though, were not enough to stop the power of a loose Federal reserve policy in bringing us out of recession and into a new bull market
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Note to Smile:
I have read your extreme-liberal political diatribes for years - long before this blog. I know that you try to keep it down to a dull roar here, but it has become more than I want to be bothered with on what is clearly stated a Brinker blog.
I don't want to waste my time trying to reason with you or go through the long-winded stuff you write, and when others call you out on it, it turns into a peeing match.
So if you want to talk politics in my presence. I have a pro-Donald Trump message board at Silicon Investor. I won't ban you there as long as you stick to PROVABLE facts.
So long story short: I'm not publishing the comments you sent this morning.
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Note to Smile: I am not interested in your arguments. You, like all left-leaners think you are the only ones with all the answers.
IMO, you and you ilk are the main reasons this country was headed down the Venezuela-Socialism pit of hell. Maybe the voters will remember that when they go to the polls.
Now please take it somewhere else!
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