We were scolded this pm by the nursery crowd for not highlighting today’s signing by BO of a bill providing small business tax breaks, something to crow about apparently. Well, we know facts can be very pesky critters, so let’s take a look at this little dandy.
The bill contains $12 bln of tax cuts for little guys, such as a 100% exclusion of cap gains income for certain small start ups, expensing for certain capital expenditures, and new deductions for start-up expenses. Whoa now!
One little problem. Only a fraction of businesses will be eligible, and the write-offs last for only one, maybe two years. What is that Obama?
As the WSJ asks, while in fact granting the WH is correct that a cap gains tax cut will help small businesses raise capital, is “why raise that tax rate to 20% from 15%on Jan/1 for everyone else?” And as these folks illustrate, “This bill isn’t even a net business tax cut, because the temporary small business cuts are offset by permanent corporate tax increases. Obama is promising $12 bln of cuts with his left hand while proposing to collect about $300 bln in tax increases from this bill, and others, with his right.”
Gosh, guess that’s why we didn’t highlight this deal.
Robert Craven
Thursday, September 16, 2010
Monday, September 6, 2010
Things Economic and the Masses
Obama continues to self-immolate. In Milwaukee today he 1) blamed the economic mess on Republicans and 2) pimped another spending program. The first year he could get by with this nonsense. No longer. The masses, bored to tears by things economic in days past, have caught on.
CBS reported this weekend that Democrats are distancing themselves from BO. “Not only are they running away from...Obama, they’re running away from being Democrats in some cases,” reports Nancy Cordes, Congressional correspondent. Well ya. Most of these Democrats are not handicapped as is Obama. They listen.
We all know a cure for the economy - cut taxes, then stand back. Kennedy and Reagan proved that works.
Trouble is, most elected officials haven’t learned to sit on their hands; the left doesn’t even try. Now that radicals are at the helm, the US electorate has had enough. Simple.
While BO was busy force-feeding a phony health solution down our throats, bribing opposition along the way and aiding the enemy in Afg by promising a withdrawal date (to gain health heist votes), the masses saw the economy go nowhere.
Now, it is true that the average voter didn’t know up front that gov’t stimulus doesn’t work, that it can’t work (unless you’re a union bloke). Most have jobs; few have time for scholarship. We knew, but then they don’t all read our blog. Now they know.
But BO doesn’t know they know. His background is incestuous, a closed system of a few self-appointed elites living an abstract, shouting out, holding hands together in the dark.
That’s unhealthy behavior.
Robert Craven
CBS reported this weekend that Democrats are distancing themselves from BO. “Not only are they running away from...Obama, they’re running away from being Democrats in some cases,” reports Nancy Cordes, Congressional correspondent. Well ya. Most of these Democrats are not handicapped as is Obama. They listen.
We all know a cure for the economy - cut taxes, then stand back. Kennedy and Reagan proved that works.
Trouble is, most elected officials haven’t learned to sit on their hands; the left doesn’t even try. Now that radicals are at the helm, the US electorate has had enough. Simple.
While BO was busy force-feeding a phony health solution down our throats, bribing opposition along the way and aiding the enemy in Afg by promising a withdrawal date (to gain health heist votes), the masses saw the economy go nowhere.
Now, it is true that the average voter didn’t know up front that gov’t stimulus doesn’t work, that it can’t work (unless you’re a union bloke). Most have jobs; few have time for scholarship. We knew, but then they don’t all read our blog. Now they know.
But BO doesn’t know they know. His background is incestuous, a closed system of a few self-appointed elites living an abstract, shouting out, holding hands together in the dark.
That’s unhealthy behavior.
Robert Craven
Sunday, September 5, 2010
Caught Flat Footed
In our sketch of Aug/22 we noted that the Fed has done about all it can. On reflection, that statement is perhaps not accurate; we were a tad hasty; we should have known better given our background. Let’s take a look. (No yawning now. Stick with us.)
Alan Blinder, once vice chair of the Fed and now a Princeton prof said that, “The heavy artillery has already been fired.” We have a letter from Alan dated Jan/96 thanking us for supporting his in-house battle with Greenspan. That was a pleasure. Still, dear Alan represents a certain class of economist - lefties. It so happens that the chorus that the Fed is finished is from this school, which represents perhaps 70% of major names in the trade. We joined them Aug/22. That was a mistake. (Not thinking, watching videos of our granddaughter.)
Blinder, Roubini, Krugman and others may not be completely neutral in their prediction of Fed impotence. All are supporters of Keynesian witchcraft. All now go by the prescription that the ball is in the fiscal court. Most of us know that means more debt and a crushing burden for our kids.
In fact, as a few tethered thinkers have disclosed, “The Fed has an arsenal of neutron bombs if it wants to use them...,” according to Ambrose Evans-Pritchard in today’s Telegraph. He lectures the rest of us to, “Get a grip, the lot of you. While there is no easy way out for the US after stealing so much prosperity from the future through debt, there is no excuse for this dead-end defeatism. Clearly, the ‘canonical New Keynesian' model that holds such sway on America's elites is intellectually exhausted.” Hah! Refreshing stuff from this Brit.
And of course he is right. In grad school, we all had to memorize the so-called aggregates, the expanding components of money supply. M1 is the core; M2, M3 include a broader scope. No need on this occasion to delve into particulars. In the article we hear from Tim Congdon, from International Monetary Research that, “Bernanke continues to babble on about futile credit easing: neither he nor his staff seems to appreciate the difference between purchases of assets from non-banks and from banks.” Congdon knows that nowadays banks sit on the money and that others use it, or might.
This means huge bond purchases by the Fed but outside of the banking system; it means buying from pension funds, public bodies, insurers, etc. This is the broader M3; these folks might actually spend it. (Where does the Fed get the $? Out of thin air naturally, but we won’t worry about that right now.)
So for all you readers out there who have been distraught, fretting that the Fed’s desultory firing of popguns is all that's left, take heart. We know this topic eclipses all others at dinner time. We know you ponder the aggregates endlessly. Don’t worry. There's a few "neutron bombs" left.
Robert Craven
Alan Blinder, once vice chair of the Fed and now a Princeton prof said that, “The heavy artillery has already been fired.” We have a letter from Alan dated Jan/96 thanking us for supporting his in-house battle with Greenspan. That was a pleasure. Still, dear Alan represents a certain class of economist - lefties. It so happens that the chorus that the Fed is finished is from this school, which represents perhaps 70% of major names in the trade. We joined them Aug/22. That was a mistake. (Not thinking, watching videos of our granddaughter.)
Blinder, Roubini, Krugman and others may not be completely neutral in their prediction of Fed impotence. All are supporters of Keynesian witchcraft. All now go by the prescription that the ball is in the fiscal court. Most of us know that means more debt and a crushing burden for our kids.
In fact, as a few tethered thinkers have disclosed, “The Fed has an arsenal of neutron bombs if it wants to use them...,” according to Ambrose Evans-Pritchard in today’s Telegraph. He lectures the rest of us to, “Get a grip, the lot of you. While there is no easy way out for the US after stealing so much prosperity from the future through debt, there is no excuse for this dead-end defeatism. Clearly, the ‘canonical New Keynesian' model that holds such sway on America's elites is intellectually exhausted.” Hah! Refreshing stuff from this Brit.
And of course he is right. In grad school, we all had to memorize the so-called aggregates, the expanding components of money supply. M1 is the core; M2, M3 include a broader scope. No need on this occasion to delve into particulars. In the article we hear from Tim Congdon, from International Monetary Research that, “Bernanke continues to babble on about futile credit easing: neither he nor his staff seems to appreciate the difference between purchases of assets from non-banks and from banks.” Congdon knows that nowadays banks sit on the money and that others use it, or might.
This means huge bond purchases by the Fed but outside of the banking system; it means buying from pension funds, public bodies, insurers, etc. This is the broader M3; these folks might actually spend it. (Where does the Fed get the $? Out of thin air naturally, but we won’t worry about that right now.)
So for all you readers out there who have been distraught, fretting that the Fed’s desultory firing of popguns is all that's left, take heart. We know this topic eclipses all others at dinner time. We know you ponder the aggregates endlessly. Don’t worry. There's a few "neutron bombs" left.
Robert Craven
Friday, September 3, 2010
Today's Aug Payroll Release
Unemployment rose to 9.6%, as expected. What happened is that there was a larger increase in the labor force (+550M) than in so-called household employment (+290M), resulting in an increase in unemployment (+260M). That’s how it works.
The headline result, overall jobs declined 54M, not quite as bad as expected. The private sector job gain, at +67M was a tad better than expected.
Why did overall jobs fall? Due to another huge decline in temp census workers and another drop in state and local gov’t employment.
In conclusion, the economy is generating a modest number of private sector jobs, firing on 5 of 8 cylinders. Only BO’s policies stand in the way of a full blown recovery.
Miscl: The workweek and total hours worked were unchanged as expected. Hourly earnings at +0.3% were better than expected. We don’t know if this indicates future trend or not. Probably not.
Robert Craven
The headline result, overall jobs declined 54M, not quite as bad as expected. The private sector job gain, at +67M was a tad better than expected.
Why did overall jobs fall? Due to another huge decline in temp census workers and another drop in state and local gov’t employment.
In conclusion, the economy is generating a modest number of private sector jobs, firing on 5 of 8 cylinders. Only BO’s policies stand in the way of a full blown recovery.
Miscl: The workweek and total hours worked were unchanged as expected. Hourly earnings at +0.3% were better than expected. We don’t know if this indicates future trend or not. Probably not.
Robert Craven
Wednesday, September 1, 2010
Learning Experience?
We have the key employment report on Friday, this for the month of August. The near term value of every 401K or small business hangs in the balance. We better take a look at this thing.
Formally known as the Non-Farm Payroll report, the BLS gives us a monthly read for payroll in all categories except farm, domestic help, general gov’t employees and some non-profit employees. Why BLS types are afraid of cows or maids, we’re without a clue.
Past years, the market-moving potential of this release was huge. We know. We used to trade each release. With the general dampening of bond-price change, past decade, interest rates are not so vulnerable. Stock prices have replaced bond prices in that regard.
First, the likely result. Let’s take a layman’s look at the components: 1) Overall Payroll is expected to have dropped by 100M, due primarily to census bureau layoffs. Private sector employment is expected to have increased by some 40M. 2) The Average Workweek and Total Hours Worked are expected to be unchanged. 3) Unemployment is expected to hit 9.6%. 4) Hourly Earnings rose a tad, maybe 0.1%.
That’s the guts of the thing. Anything a lot worse and your 401K will tank. Any discretionary spending that might have been coming your way will vanish.
Now let’s think with our pocketbooks. We know that employers are scared to death of Obama. We know this because they’ve told us so. Witness Paul Otelinni, head of Intel, two weeks ago at the Technology Policy Institute’s Aspen Forum. From the IBD, “The Intel chief was harsh on the massive spending by the White House and Congress — and on the failure to extend the Bush tax cuts, the takeover of the health care industry, and the threat of new taxes on businesses to remove carbon from the atmosphere. ‘I think this group does not understand what it takes to create jobs,’ he said. ‘And I think they're flummoxed by their experiment in Keynesian economics not working.’”
OK, that is established, and, it is key to the prolonged slowdown.
And so this reading carries double the horsepower. Not only is it a reading on an economy in isolation, but a reading of an economy, for the first time in our lifetime, hanging on the whim of hamstrung employers (who by the way are cash rich).
So here is what you do, all our lefty-small-business-owner pals out there. If this release blows through estimates to the upside, you can celebrate. Buy a new Volvo or tie-dyed shirt. It means more discretionary spending in the future; folks will buy your flowers and spend for new breasts once again. If the release is below or at expectations, then be prepared to vote Republican in November. You don’t have to tell a soul, not even your spouse. But if you care about the bottom line, it’s a good move.
Face it lefties. You screwed up big time. Before you were insulated - ok for everyone else but you. It felt good to talk up the typical abstract notions. Now the hens have come home to roost because for the first time in recent memory, you guys actually gained traction by the way of BO.
How’s it feel now, making the personal sacrifice?
Try making it a learning experience while you’re at it.
Robert Craven
Formally known as the Non-Farm Payroll report, the BLS gives us a monthly read for payroll in all categories except farm, domestic help, general gov’t employees and some non-profit employees. Why BLS types are afraid of cows or maids, we’re without a clue.
Past years, the market-moving potential of this release was huge. We know. We used to trade each release. With the general dampening of bond-price change, past decade, interest rates are not so vulnerable. Stock prices have replaced bond prices in that regard.
First, the likely result. Let’s take a layman’s look at the components: 1) Overall Payroll is expected to have dropped by 100M, due primarily to census bureau layoffs. Private sector employment is expected to have increased by some 40M. 2) The Average Workweek and Total Hours Worked are expected to be unchanged. 3) Unemployment is expected to hit 9.6%. 4) Hourly Earnings rose a tad, maybe 0.1%.
That’s the guts of the thing. Anything a lot worse and your 401K will tank. Any discretionary spending that might have been coming your way will vanish.
Now let’s think with our pocketbooks. We know that employers are scared to death of Obama. We know this because they’ve told us so. Witness Paul Otelinni, head of Intel, two weeks ago at the Technology Policy Institute’s Aspen Forum. From the IBD, “The Intel chief was harsh on the massive spending by the White House and Congress — and on the failure to extend the Bush tax cuts, the takeover of the health care industry, and the threat of new taxes on businesses to remove carbon from the atmosphere. ‘I think this group does not understand what it takes to create jobs,’ he said. ‘And I think they're flummoxed by their experiment in Keynesian economics not working.’”
OK, that is established, and, it is key to the prolonged slowdown.
And so this reading carries double the horsepower. Not only is it a reading on an economy in isolation, but a reading of an economy, for the first time in our lifetime, hanging on the whim of hamstrung employers (who by the way are cash rich).
So here is what you do, all our lefty-small-business-owner pals out there. If this release blows through estimates to the upside, you can celebrate. Buy a new Volvo or tie-dyed shirt. It means more discretionary spending in the future; folks will buy your flowers and spend for new breasts once again. If the release is below or at expectations, then be prepared to vote Republican in November. You don’t have to tell a soul, not even your spouse. But if you care about the bottom line, it’s a good move.
Face it lefties. You screwed up big time. Before you were insulated - ok for everyone else but you. It felt good to talk up the typical abstract notions. Now the hens have come home to roost because for the first time in recent memory, you guys actually gained traction by the way of BO.
How’s it feel now, making the personal sacrifice?
Try making it a learning experience while you’re at it.
Robert Craven
Tuesday, August 31, 2010
The Noise Industry
We looked at the media a little bit this pm. My goodness! Noise is everywhere. Folks are desperate to be heard; they clamor endlessly for spots on TV (we were one of these, once upon a time). The competition in the noise industry is intense, both for an appearance, and in debate. It’s big business. But it’s not necessarily information.
Excess is also the norm with the written word. There are too many words, too many stories, too many diatribes that aren’t worth a trip to the outhouse. We are suffering from a sever case of inflation in word usage, verbiage re-defined.
All of this particularly irritates when applied to economics. You think these witch doctors, prognosticating on the stock mkt and the economy have any idea about what they’re talking about? As the chief economist of Northern Trust (and a friend) once told us, “We’re just entertainers.” Think these guys provide insight? You come home, have a Jack, let some barker tell you what happened and why today, and then you sleep better. That’s it. They know it. That’s where the $ comes from. Ask them, as you would a plumber for example, for their track record and there is only silence.
Humility is key in trying to close the economic pattern ahead. Most of us have our hot moments. Key is to recognize the not-so-hot, that is, our limitations. We all have the power of insight. That is what this blog is about. We don’t need authority figures, economists (who continue to earn salaries given a track record south of 50%), or anyone else. All we need is judgement, common sense.
Our last sketch presents in distilled form just what is needed to fire this economy. Let’s leave it at that for the moment. The rest is noise.
Robert Craven
Excess is also the norm with the written word. There are too many words, too many stories, too many diatribes that aren’t worth a trip to the outhouse. We are suffering from a sever case of inflation in word usage, verbiage re-defined.
All of this particularly irritates when applied to economics. You think these witch doctors, prognosticating on the stock mkt and the economy have any idea about what they’re talking about? As the chief economist of Northern Trust (and a friend) once told us, “We’re just entertainers.” Think these guys provide insight? You come home, have a Jack, let some barker tell you what happened and why today, and then you sleep better. That’s it. They know it. That’s where the $ comes from. Ask them, as you would a plumber for example, for their track record and there is only silence.
Humility is key in trying to close the economic pattern ahead. Most of us have our hot moments. Key is to recognize the not-so-hot, that is, our limitations. We all have the power of insight. That is what this blog is about. We don’t need authority figures, economists (who continue to earn salaries given a track record south of 50%), or anyone else. All we need is judgement, common sense.
Our last sketch presents in distilled form just what is needed to fire this economy. Let’s leave it at that for the moment. The rest is noise.
Robert Craven
Sunday, August 22, 2010
US Economy Ahead
In financial markets the business of the future is to be dangerous. Most of us have found that out the hard way, past quarters. Those whose income is dependent on discretionary spending - landscapers, plastic surgeons, restauranteurs, vacation-home realtors for example have especially taken it on the chin as the US economy remains in creep mode following the shock of Q4 ‘08.
Most have some idea of how we got here but little idea of how or when we’ll get out. Neither current economic numbers nor surveys of consumer or business attitudes are reassuring.
Few can insure against wild card events; surely there are more on the way but most of us can at least obtain some kind of tether, a modest leg up in anticipating economic reality ahead. That is the purpose of this sketch and those to follow.
Understanding near-term Fed policy is generally key to correctly anticipating growth. Not this time. The Fed has done about all it can. Liquidity is ample; corporations are cash rich. Instead, it is business attitude that needs to change. If we can anticipate that change we can to a large extent anticipate our own financial situations.
Problem #1) Employment is on hold. Large employers are afraid of the threat of well-advertised new burdens planned for them by the administration, all detailed in past blogs. Small businesses are afraid of the threatened tax hike - the Obama-Pelosi-Reid plan which will raise taxes on those making over $200M. As most small businesses are S-corps (tax pass through to the individual) these potential job creators have no reason for optimism. (Nor are investors encouraged as additional hikes on capital gains and dividends are planned by this trio.)
Problem #2) Washington’s spending spree. First the “stimulus” bill. As we predicted last year, gov’t spending did not create jobs on net. It is merely smoke. Next, the health heist and the financial regulation bill. Folks know enough now to reject the health bill; nobody knows what’s for certain in Dodd’s bill (one scary provision gives federal agencies powers to dictate pay at financial firms).
Not only are private-sector employers worried about new burdens, they are worried about anemic growth in general, looming deficits and tax hikes never ending. In the larger sense, private enterprise does no relish a future for the US as a social democracy, in the fashion of an economically stagnant Europe. Yet the perception by private enterprise is that this is where Obama and extremists in control of both houses, are taking us.
So understanding Fed policy ahead won’t help but understanding political reality ahead sure will. We’ve all got to become political strategists.
No one any longer argues that this administration and those in control of Congress are job killers. Thus, the greater the odds that Republicans take over the House and win enough Senate seats in November to ensure the ability to block legislation and block tax hikes, the more likely free enterprise will take heart and the engine will fire.
James Shirk of the Heritage Foundation summarizes for us: “Congress must recognize that a strong recovery and new hiring depends on the confidence businesses have in the future. Uncertainty is a fact of life for all businesses, but when Washington adds materially to that uncertainty, businesses invest less and hire less. The most powerful, no-cost strategy Congress can adopt is to stop threatening those in a position to hire—no more taxes, no cap-and-trade legislation, no government takeover of private health care, and no massive increase in the public debt.”
Robert Craven
Most have some idea of how we got here but little idea of how or when we’ll get out. Neither current economic numbers nor surveys of consumer or business attitudes are reassuring.
Few can insure against wild card events; surely there are more on the way but most of us can at least obtain some kind of tether, a modest leg up in anticipating economic reality ahead. That is the purpose of this sketch and those to follow.
Understanding near-term Fed policy is generally key to correctly anticipating growth. Not this time. The Fed has done about all it can. Liquidity is ample; corporations are cash rich. Instead, it is business attitude that needs to change. If we can anticipate that change we can to a large extent anticipate our own financial situations.
Problem #1) Employment is on hold. Large employers are afraid of the threat of well-advertised new burdens planned for them by the administration, all detailed in past blogs. Small businesses are afraid of the threatened tax hike - the Obama-Pelosi-Reid plan which will raise taxes on those making over $200M. As most small businesses are S-corps (tax pass through to the individual) these potential job creators have no reason for optimism. (Nor are investors encouraged as additional hikes on capital gains and dividends are planned by this trio.)
Problem #2) Washington’s spending spree. First the “stimulus” bill. As we predicted last year, gov’t spending did not create jobs on net. It is merely smoke. Next, the health heist and the financial regulation bill. Folks know enough now to reject the health bill; nobody knows what’s for certain in Dodd’s bill (one scary provision gives federal agencies powers to dictate pay at financial firms).
Not only are private-sector employers worried about new burdens, they are worried about anemic growth in general, looming deficits and tax hikes never ending. In the larger sense, private enterprise does no relish a future for the US as a social democracy, in the fashion of an economically stagnant Europe. Yet the perception by private enterprise is that this is where Obama and extremists in control of both houses, are taking us.
So understanding Fed policy ahead won’t help but understanding political reality ahead sure will. We’ve all got to become political strategists.
No one any longer argues that this administration and those in control of Congress are job killers. Thus, the greater the odds that Republicans take over the House and win enough Senate seats in November to ensure the ability to block legislation and block tax hikes, the more likely free enterprise will take heart and the engine will fire.
James Shirk of the Heritage Foundation summarizes for us: “Congress must recognize that a strong recovery and new hiring depends on the confidence businesses have in the future. Uncertainty is a fact of life for all businesses, but when Washington adds materially to that uncertainty, businesses invest less and hire less. The most powerful, no-cost strategy Congress can adopt is to stop threatening those in a position to hire—no more taxes, no cap-and-trade legislation, no government takeover of private health care, and no massive increase in the public debt.”
Robert Craven
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