Capital Commerce
-
Paul Debuts His Economic Plan
Continue reading… 12 CommentsBetter late than never, GOP presidential candidate Ron Paul has released his economic plan. A few highlights:
Tax Reform: Reduce the tax burden and eliminate taxes that punish investment and savings, including job-killing corporate taxes.... Spending Reform: Eliminate wasteful spending. Reduce overseas commitments. Freeze all non-defense, non-entitlement spending at current levels.... Monetary Policy Reform: Expand openness at the Federal Reserve and require the Fed to televise its meetings. Return value to our money.... Regulatory Reform: Repeal Sarbanes/Oxley regulations that push companies to seek capital outside of US markets. Stop restricting community banks from fostering local economic growth.
-
4 Thoughts on the GOP Debate
Continue reading… 15 Comments1) John McCain seemed to have no idea what the President's Working Group in Financial Markets is—in response to a Ron Paul question—even though the "plunge protection team" has been in the news aplenty since last August's credit crisis and a fave topic for the more conspiracy-minded folks out there. (More to come on this.)
2) Again, no one seemed to notice that Mitt Romney's tax plan—eliminating investing taxes for the middle class, basically creating a progressive consumption tax—is really every bit as radical and sweeping as Mike Huckabee's Fair Tax. I'm sure the Democrats will notice and attack it for favoring capital income over labor income.
-
McCain, Paul, and the ‘Plunge Protection Team’
Continue reading… 30 Comments"I'm very well versed in economics" is how John McCain responded to a Tim Russert question at last night's GOP presidential debate that referred to a past, possibly self-deprecating statement McCain made about his lack of economic expertise. Yet McCain really seemed to have no clue what Ron Paul was talking about when Paul asked him a question about the President's Working Group on Financial Markets—the so-called Plunge Protection Team—consisting of the Treasury secretary, the Fed chairman, and government regulators—that meets at a principals level during times of financial crisis. Some have conspiratorially speculated that the team has nudged Wall Street banks to buy shares to prop up the U.S. stock market. Here is the exchange:
REP. PAUL: My—my question is for Senator McCain. This is an economic question that I wanted to ask. It has to do with the President's Working Group on Financial Markets. I'd like to know what your opinion is of this and whether you would keep it in place, what their role would be, or you would get rid of this group. And if you kept the group, would you make sure we would see some sunlight and know what they're doing and how they're being involved in our markets?
-
Stickin': Businesses Refuse to Shed Jobs
Continue reading… 1 CommentWhen this number tanks, then I really go to DEFCON 1. But initial jobless claims were essentially unchanged at 301,000 in the week ending January 19, and the four-week average dropped from 328,750 to 314,750, the lowest since early October. So far, according to Action Economics, initial claims are averaging 307,000 in January, well below prior averages of 344,000 in December, 339,000 in November, 327,000 in October, 313,000 in September, and 325,000 in August. The current phase of megapessimism really began with the weak December jobs number, a preliminary figure that is so unreliable that the Labor Department might really want to consider delaying its release until more complete data can be gathered.
-
Using 401(k) Plans for Fiscal Stimulus
Continue reading… 8 CommentsVenture capitalist-blogger John Ellis offers up an original fiscal stimulus plan:
Well, it's not mine, actually. It's the brainchild of one Leonard Yablon, my neighbor and friend and the former CFO of Forbes. And it goes like this:
1. Allow individual 401K withdrawals of $12,000 for the next 100 days.
2. Individual withdrawals up to $12,000 will be tax free.
3. The result should be an immediate infusion of $120-$180 billion into the economy.
4. Which should stabilize the markets. There are other plans out there. But the Yablon Plan seems the easiest to get done fast.
-
$200 Billion in Stimulus May Pass Next Month
Continue reading… 2 CommentsPolitical analyst Greg Valliere of the Stanford Group maps out where fiscal stimulus is heading:
Something around $200 billion now seems likely, which would represent close to 1-1/2% of GDP. The final package should pass by mid-February, and rebate checks could be distributed by early April—an amazingly fast process by Washington standards. Democrats will prevail in their insistence that virtually everyone will get a check, not just taxpayers, with bigger checks going to families with children. That could lower the amount of checks sent out per person, but something in the $500-$800 range seems likely.... Since this stimulus bill won't be paid for, lawmakers may load on other provisions that need to be passed this year. Instead of fighting over the annual band-aid on the Alternative Minimum Tax, a fix which keeps millions of families from being indexed into that tax, Congress may pass it now. The research and development tax credit, which wasn't extended last year, also may be included in the package.... The stimulus bill also will include more spending for unemployment insurance, food stamps, housing aid, etc.
-
A Bit of Cheer: Dow 15,000 by Year-End
Continue reading… 4 CommentsSuperbulls Brian Wesbury and Bob Stein over at First Trust Advisers are still upbeat despite all the market chaos of recent days:
There is little to no sign of the kinds of economic imbalances that preceded past recessions. Inventory-to-sales ratios are razor thin. And during the past four years, businesses have invested a smaller share of their profits than during any four-year period since the 1960s. As a result, there is no massive overhang of plant and equipment investment like there was after the Y2K-related surge in 2000. Corporate profit margins remain high and labor compensation remains relatively low, meaning firms are still in a position to hire and bid up wages. ...
Yes, the home building industry is a man-made disaster area, with the level of housing starts down more than 55% from the peak two years ago. But home building has been declining for so long that it now comprises too small a share of the economy to, by itself, push the economy into recession. ...
The only plausible scenario for recession is a major pullback by consumers. Here, the pessimistic worldview gets downright circular, claiming consumers will slow their spending because they will lose jobs due to consumers having slowed their spending. But incomes grew more than 3% above inflation last year, even after taking out income taxes as well as monthly obligations such as mortgages, rent, car loans/leases, property taxes, and debt service on credit cards. ...
With the economy picking up steam in 2008, our forecast is that the Dow moves up as well and our year-end 2008 forecast is 15,000, with the S&P 500 at 1625. Once recession fears prove unfounded, US equities will soar. Those who maintain their appetite for risk will be richly rewarded sooner than they think.
-
Bernanke Finally Gets Into the Game
Continue reading… 3 Comments"We stand ready to take substantive additional action as needed to support growth and to provide additional insurance against downside risks." Federal Reserve Chairman Ben Bernanke said those words on January 10, about 1,000 Dow points ago. Today, the Fed finally took action by cutting short-term interest rates by three quarters of a percentage point. It should help tamp down the panic and start to put a floor under the stock market.
See, what's been going on in the markets has been a crisis of confidence, and Bernanke seemed to be instilling little of that precious commodity. And this weekend's profile of him in the New York Times magazine didn't do much to create any, I would guess. Two troubling passages:
-
Plunging Markets: 3 Reasons to Stay off the Ledge
Continue reading… 2 Comments"Collective fear stimulates herd instinct, and tends to produce ferocity toward those who are not regarded as members of the herd." —Bertrand Russell
Yes, markets around the world are tanking. But look, I'm going to play the bullish side of the recession trade until the data tell me different. (And I felt that way even before the Fed jumped in with a cut of three fourths of a percentage point in the fed funds rate this morning.)
Most of my fellow ink-stained wretches may have displaced dread about their own industry onto the larger economy, but I am not going to join them. Indeed, a study by the Business & Media Institute found that television news programs, for instance, have consistently reported that a recession is a done deal, even though most economists have not been saying that. The negative psychology—whether caused by the media, falling house prices, or, now, a falling stock market—can, as JPMorgan economist Bruce Kasman says, "easily become self-fulfilling, as it induces greater caution and thus a contraction in spending among corporations and households."
-
Talkin’ ’bout a (Chinese) Revolution
Continue reading… 0 CommentsPeople who want China to let the yuan strengthen dramatically against the dollar tend not to appreciate both the negative impact of a rapid currency rise on its economy and the negative impact of a markedly slower economy on that country’s political stability. So how will a U.S. slowdown affect China? Don Straszheim over at Roth Capital attempts to tell us:
We see real GDP slowing to 8.9% in 2008, the slowest since the 8.3% rate in 2001, and versus 2002 = 9.1%, 2003 = 10.0%, 2004 = 10.1%, 2005 = 10.4%, 2006 = 11.1% and 2007 = 11.5% (preliminary). Growth has averaged 9.7% for the last 28 years. This 2008 slowdown will make Beijing nervous and trigger new steps to address it. But 2008 growth should still be strongly positive. Most individuals will not notice a great difference if their income grows by 8% in 2008 versus growing 10% in recent years. That would still be a good bump and not the stuff of revolution and riot.
