Capital Commerce
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Housing Woes Tank Stocks Again
Continue reading… 0 CommentsRight now if the stock market were an open house, the real-estate agent would be sitting alone. The Dow industrials are down about 500 points since hitting 14,000 last Friday—including a huge drop today—mostly over concerns about the subprime mortgage market and whether problems there will spread to more borrowers and companies.
The big catalyst, of course, was comments from Countrywide Financial CEO Angelo Mozilo who said 1) the housing market won't turn around until 2009, and 2) borrowers with better credit records are starting to miss payments at a higher rate. (Widely followed economist Ed Yardeni called Mozilo's comments the "first piece of hard evidence that the subprime mess may be spreading.") And certainly not helping matters was today's news that new-home sales in June fell 6.6 percent and that the median home price was down 2.2 percent from a year ago.
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The World at $100 a Barrel
Continue reading… 0 CommentsOil prices have surged again, and investment bank Goldman Sachs thinks they have the potential to spike to near $100 a barrel by the end of summer unless Middle East production increases. How would a rise to, say, $95 a barrel affect the global economy? Some key take-aways from a new analysis by the bank:
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Global Warming Isn't an Economic 'Win-Win'
Continue reading… 2 Comments"This issue of energy and global warming has the promise of creating millions of new jobs in America. It can be a win-win, if we do it right."—Sen. Hillary Clinton, at last night's Democratic debate in South Carolina
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1980s Redux: Hillary Clinton and Industrial Policy
Continue reading… 0 CommentsQuick quiz: What does Hillary Clinton think is a "great organizing principle" for the American economy? Increasing our standard of living? Maximizing economic growth and economic freedom, maybe? Putting a chicken in every pot, perhaps? Nope, none of those. In a speech to the Chicago Economic Club last spring, she suggested that climate change would be a cool concept to organize an economy around.
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Are Democrats the Peak-Oil Party?
Continue reading… 0 Comments"We have to understand how weak [Iran] is," explained Sen. Joe Biden last month at the Democratic presidential debate in Nashua, N.H. "They import almost all of their refined oil. By 2014, they are going to be importing their crude oil." If Biden really meant to say what he said, that places him firmly in the camp of those analysts who believe in "peak oil" and predict that global oil production will soon decline even as demand continues to rise, with the results being ever higher oil prices and shortages.
Peak oilers contend that the Middle East oil reserves are vastly overstated. Some, the minority to be sure, even think that global oil production will fall so far, so fast, that western civilization will have to return to some sort of pre-industrial way of life. Here are some choice predictions from one well-known proponent of the theory, James Howard Kunstler:
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Fast Chinese Growth Sure to Alarm Trade Hawks
Continue reading… 1 CommentTomorrow, the Chinese government will release its second-quarter gross domestic product report. Economic growth for the period will probably come in between 10 percent and 11 percent. Another amazing performance, one not likely to go unnoticed on Wall Street or Capitol Hill, says the always-insightful Donald Straszheim, vice chairman of Roth Capital in Los Angeles, former chief global economist at Merrill Lynch and China expert:
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China's Safety Issues Could Be Deadly for Its Economy
Continue reading… 0 Comments"Is China trying to kill us?" seems to be a popular headline question on Internet message boards these days, rivaled only perhaps by the slightly more alarmist "Is China trying to kill us all?"
Sure, it's somewhat over the top, but enough deadly pet food, toxic fish, lead-painted trains, and poisonous toothpaste will make just about anyone a bit paranoid. The Chinese government seems to be taking all this pretty seriously, at least on the image front, sending lobbyists to Capitol Hill and hiring a U.S. public relations firm to get out its positive message. And earlier this month, the government executed its top food-and-drug regulator after convicting him on bribery charges.
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Global Economy Booms as Taxes Fall
Continue reading… 0 Comments"This is far and away the strongest global economy I've seen in my business lifetime," is how U.S. Treasury Secretary Henry Paulson recently described the current global boom. Hyperbole? Actually, that dramatic declaration probably understates things. Let's refer back to this piece of analysis from Paulson's old firm, Goldman Sachs: "If we and the consensus are correct, then the period 2003-2008 will have been one of the most powerful periods of economic growth globally since accurate data [have] been collectible for much of the world."
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Will Bush Agree to New Investment Taxes?
Continue reading… 2 CommentsAs I wrote in my blog yesterday, I think that efforts in Congress to raise the tax rates on private-equity firms that have gone public and on hedge fund managers presage a bolder assault on the current capital-gains-tax rate.
Look for proponents of a higher cap-gain-tax rate to argue that having a different tax on ordinary income and capital gains adds unnecessary complexity to the tax code and is somehow unfair to workers who get the bulk of their compensation through labor rather than investments. (One of several reasons for having a lower cap-gains rate is that it helps offset the effect inflation has on investment income.)
Plus, Democrats will be looking anywhere and everywhere for dough to pay for new spending programs without adding to the deficit. Already, difficulty in doing so is causing them to scale back efforts to eliminate the alternative minimum tax in favor of yet another temporary fix.
But first things first: Will Congress pass new taxes on Wall Street? It might either raise the tax rate from 15 percent to 35 percent on carried interest—the 20 percent cut hedge fund managers take from fund profits—or impose the "Blackstone tax," which would alter the tax status of publicly traded financial services partnerships, or PTPs. Here are a few cogent observations from political analyst Anne Mathias at the Stanford Group:
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Hedge-Fund Tax Really Attacks Capital Gains
Continue reading… 0 Comments"I have come here not to bury the capital-gains-tax rate, but to save it," was the de facto message delivered by Sen. Chuck Grassley at the U.S. Senate committee hearing I attended today on the wisdom of forcing hedge-, venture-capital-, and private-equity-fund managers to pay a higher tax rate—ordinary income rather than the cap-gains rate—on their 20 percent "carried interest" in the profits of their funds.
