The Conference Board released the latest Consumer Confidence numbers this morning. The Consumer Confidence Index tumbled to 65.1 in December compared to a downwardly revised 71.5 last month. Consumers are apparently alarmed with the incompetence of their elected officials in Washington. Four days until year-end and the fiscal cliff is still not solved. Higher income earners who are going to take the brunt of the pain from the fiscal cliff reported the biggest drop in confidence. These are the same consumers who account for well over half of all discretionary spending and who own the … [Read more...]
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...]
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...]
It’s the Spending Stupid!
As congressional leaders and the White House begin to negotiate on the fiscal cliff we are hearing a lot about raising taxes on the “rich.” The debate has morphed from whether or not to tax the rich to how to tax the rich. Apparently, a majority of Americans bought into the President’s dubious campaign pitch about taxing millionaires and billionaires to solve the budget crisis. And based on the media’s coverage of the fiscal cliff—they did too. That’s a shame, because America doesn’t have a revenue problem. It has a spending problem. You don’t have to be a budget wonk to recognize that it … [Read more...]
The Illegitimate Tax Mandate
Following last week’s election, the President and his allies in congress are claiming the outcome of the election (and exit polls) indicates a mandate to raise taxes on the “rich.” Why? Because the President campaigned on a higher tax message. Actually, he campaigned on raising taxes on millionaires and billionaires, not the “thousand-iares” that will see a higher tax bill if he gets his way. But the more dominant message during President Obama’s campaign was not one of higher taxes, but that he isn’t Mitt Romney. If there is any clear mandate from this election, it is not to be Mitt Romney. … [Read more...]
Fairy Tales in the Fantasyland of Washington D.C.
Chuck Schumer, the liberal democratic senator from New York is out with some post-election blather on the fiscal cliff. Schumer and his liberal allies have yet to figure out that higher tax rates don’t generate more revenue. Here is what he said during an address at the Christian Science Monitor Breakfast yesterday. From the Daily Caller: “It’s a lovely thing but it’s a fairy tale…it is the Rumpelstiltskin tax fairy tale that if you cut taxes you increase revenues.” Mr. Schumer’s beliefs are grounded in a fantasy land where higher rates don’t encourage tax avoidance. But the truth is, … [Read more...]
RIP Economic Freedom
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years.” ― Alexis de Tocqueville In a nutshell, the above quote from Tocqueville explains the outcome of yesterday’s election. … [Read more...]
Housing Recovery: Your Best Investment Today or Already Overplayed?
Yesterday the Census Bureau released the September report on the number of Housing Starts and Building Permits. Both increased much more than expected—permits surged by 11.6%, and starts were up by 15%. After trudging along a Derpressionary bottom for more than three years, it is now safe to say that housing activity is finally picking up (prices may be a different story). But don’t get too excited. Despite the most accommodative monetary policy in the history of the republic, the 15% surge in starts only moves us from Depressionary levels to recessionary levels. Housing will of course … [Read more...]
The Burger Flipper Recovery Continues
The Bureau of Labor Statistics released the September employment report today. The headline numbers are an increase in non-farm payrolls of 114,000 and an unemployment rate of 7.8%. The payroll number was in-line with estimates for subdued jobs growth, but the 7.8% unemployment rate was a shocker to economists. According to Bloomberg, the average economist was looking for the unemployment rate to tick up a tenth of a point in September. Employment growth of only 114,000 is barely enough to keep up with growth in the labor force. In fact, the labor force increased by 418,000 last month, more … [Read more...]
The Peril of a Monetary Politburo
We’ve written plenty about the Fed and QE-infinity on this site over recent days, so we had planned to lay things to rest for a while, but then Minnesota Federal Reserve Bank President Narayana Kocherlakota came out with one of the most perilous ideas yet from the Fed. Kocherlakota was formerly viewed as an inflation hawk. In fact in April of this year, during a speech to the Southern Minnesota Initiative Foundation, Mr. K said “My own belief is that we will need to initiate our somewhat lengthy exit strategy sometime in the next six to nine months or so, and that conditions will warrant … [Read more...]
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