Archives for December 2012
Over the Threshold
The Fed held its last meeting of the year yesterday and announced two important changes in policy. First, as was widely expected the FOMC decided to transition Operation Twist—the bank’s maturity extension program—into QE4. So now instead of printing $40 billion per month to buy mortgage backed securities and selling $45 billion in short-term Treasuries to buy long-term treasuries the Fed will just print $85 billion per month and buy $45 billion worth of treasuries and $40 billion worth of mortgage backed securities. What is the point? The Wall Street Journal editorial page had the same … [Read more...]
Election Results Hammer Small Business Optimism
The last survey of small business optimism, released just days after the presidential election didn’t really give business owners much time to comprehend what the outcome meant for them. Tuesday’s survey showed that small business owners, a month after, were fully factoring in another four years of the Obama administration. … [Read more...]
A Landfill Investment
Today, insurance companies are trying to buy their way out of promises on variable annuities. The guarantees have become too costly. Variable annuities with guaranteed lifetime income were aggressively marketed by insurers for years. A lot of salesmen became millionaires on the fees they collected, and insurers were able to mint their own money. In many cases, the fees exceeded 3.5% of assets per year, and most had surrender fees for early withdrawal, which could lop off 7% of your assets on the way out the door. But now insurers are offering to buy back these variable annuities with … [Read more...]
The Startling Story of American Labor
Every month for the last few years Americans—especially politicians—have been keeping a close eye on the employment report to see how many jobs were created, and what the unemployment rate would be each month. Once the report is released, it’s off to the races, politicking and nitpicking the headline numbers to throw mud at any opponent. But the most startling trend emerging is revealed deeper in the report. … [Read more...]
Fiscal Cliff Fix: Americans Still in La-la land on Fiscal Crisis
In the video below, CNBC’s Steve Leisman explains the results of a recent CNBC survey on the fiscal cliff. The survey indicates that Americans are still living in la-la land when it comes to the nation’s fiscal crisis. To solve the fiscal crisis, a wide majority of Americans favor raising taxes on the “rich”, which shouldn’t come as a surprise. If Americans know that somebody has to get punched in the gut, most will say better him than me. Of course even if we do raise taxes on the “rich” it will only reduce the deficit by about $100 billion. That isn’t going to make much of a dent in our $1 … [Read more...]
How to Increase Shareholder Return Today
The Wall Street Journal ran an article yesterday titled Top U.S. Firms Are Cash-Rich Abroad, Cash-Poor at Home. The piece pointed out that American companies are holding record amounts of cash, but much of it is overseas. By example, “Emerson Electric Co. has $2 billion of cash in the bank. But this year it had to borrow money in the U.S. to help buy back shares, distribute dividends and even pay its taxes.” Why does Emerson Electric hold $2 billion in cash overseas and borrow money to fund dividends in the U.S.? Sounds like an awful waste of time and effort that could be better spent … [Read more...]
Home for the Holidays
The Federal Reserve seems to feel inflation is under control. But those of us living in the real world know it’s far from under control. Have you tried buying an airline ticket lately? Even the airlines that are “bankrupt” or close to it are charging a fortune. Enjoying the holidays together isn’t cheap, especially if you like to eat. If you like being comfortable inside your home as opposed to shivering uncontrollably or sweating profusely, then you know utility costs aren’t getting cheaper either. Consider how much you’ve spent in the past 10 years alone, never mind your lifetime. The … [Read more...]
Your Ever Shrinking Income
On Friday the BEA released the October numbers for American’s income growth. After adjusting for inflation, Americans chalked up their fourth month in a row of diminishing incomes. That is the most consecutive negative months since 2009. Real incomes fell by 0.06% in the month. The effect of the income drop acts like a $369 tax on the median wage earning American by the end of the year. Americans are being pressed between a vice, with a weak dollar policy promoting Federal Reserve on one side, and a fiscal policy on the other side that is stifling economic growth with uncertainty and … [Read more...]