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Blog Topics 2017
January Trumponomics Part 2
February The Keystone Pipeline Revisited
March Border Adjustment Tax
April Are Liberal Prof's.....
Blog Topics 2016
January Should Insider Trading be Legalized: Part 2
February The Presidential Election & the Economy
March Does Narcan Increase Heroin Use
April Is NOAA destroying the American Fisherman
June Will California Style Power Outages Happen in New England
July Textbooks, Inflation & the FTC
Sept Economic strangulation by Regulation
Oct Is this the Best we have?
Nov The High Cost of Prescription Drugs
Dec Trump, the Economy & Animal Spirits
Blog Topics 2015
January Does Implementation of the Death Penalty lead to higher costs
February Less Competition and Higher Hospital Costs
March Millionaires Who Get Subsidies from the Affordable Care Act
April The Unintended Obama Legacy
May The NY Times and $15 Minimum Wage
June Are Disability Payments Bankrupting Social Security
August Seattle's $15 minimum wage and it's Surprising Consequence
October The Great Stagnation: The Obama Legacy
November Poverty in the United States
December Should Insider Trading be Legalized: Part one by Olivia Marchioni
February Less Competition and Higher Hospital Costs
March Millionaires Who Get Subsidies from the Affordable Care Act
April The Unintended Obama Legacy
May The NY Times and $15 Minimum Wage
June Are Disability Payments Bankrupting Social Security
August Seattle's $15 minimum wage and it's Surprising Consequence
October The Great Stagnation: The Obama Legacy
November Poverty in the United States
December Should Insider Trading be Legalized: Part one by Olivia Marchioni
Blog Topics 2014 blog topics for 2013 are at page bottom
January Will Lake Meade become another Aral Sea
February Does Taxing the rich hurt the economy
March The Cause of the Great Depression
April Temporary Agricultural Subsidies lead to wealthy Farmers and Higher Prices
May The Presidents Stance on Gun Control leads to Increased Gun Ownership
June Is there really a Gender Pay Gap
July Did the Supreme Court decision in Roe v. Wade lower the crime rate
August Department of Education and wasted Money
October The Financial Follies of the EPA
November Social Security and Portfolio Diversification
December The White House and Terrorism
February Does Taxing the rich hurt the economy
March The Cause of the Great Depression
April Temporary Agricultural Subsidies lead to wealthy Farmers and Higher Prices
May The Presidents Stance on Gun Control leads to Increased Gun Ownership
June Is there really a Gender Pay Gap
July Did the Supreme Court decision in Roe v. Wade lower the crime rate
August Department of Education and wasted Money
October The Financial Follies of the EPA
November Social Security and Portfolio Diversification
December The White House and Terrorism
May Jobs Report
Nonfarm payrolls increased by 138,000 in May, significantly lower than the expected growth of 185,000. Wage growth also disappointed, with average hourly earnings rising at a 2.5 percent annualized pace. The average work week was unchanged at 34.4 hours. In May, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.22. In May, average hourly earnings of private-sector production and nonsupervisory employees increased by 3 cents to $22.00.
The unemployment rate nation wide dropped to 4.3%, a rate not seen since the 1990's. However, this is misleading since it is a function of the labor force participation rate that dropped to 62.7%, a rate not seen since the 1970's (chart below). Among the major worker groups, the unemployment rate for Whites edged down to 3.7 percent in May. The jobless rates for Blacks (7.5 percent), Asians (3.6 percent), Hispanics (5.2 percent), as well as those for adult men (3.8 percent), adult women (4.0 percent), and teenagers (14.3 percent), showed little or no change. The unemployment rate is inversely rated to education rate. American Asians have the highest rate of education with 50% of adults over age 25 have at least a bachelors degree. I
To calculate this percentage (labor force participation rate) simply divide the total civilian labor force into the total number in the civilian non-institutionalized population, multiply by 100 and express as a percentage.
The unemployment rate nation wide dropped to 4.3%, a rate not seen since the 1990's. However, this is misleading since it is a function of the labor force participation rate that dropped to 62.7%, a rate not seen since the 1970's (chart below). Among the major worker groups, the unemployment rate for Whites edged down to 3.7 percent in May. The jobless rates for Blacks (7.5 percent), Asians (3.6 percent), Hispanics (5.2 percent), as well as those for adult men (3.8 percent), adult women (4.0 percent), and teenagers (14.3 percent), showed little or no change. The unemployment rate is inversely rated to education rate. American Asians have the highest rate of education with 50% of adults over age 25 have at least a bachelors degree. I
To calculate this percentage (labor force participation rate) simply divide the total civilian labor force into the total number in the civilian non-institutionalized population, multiply by 100 and express as a percentage.
Updates/Advisories 6-23-2017
The Dow is on a 4 day loosing streak but has only dropped 134 points in that period, only down 2 today to finish the day and week at 21,395. In spite of a looming glut, oil was up again today to finish at $43.17/barrel which helped to stabilize the markets in general. Health-care shares are marginally down following a rally Thursday. Republican senators released a health-care bill draft that includes cuts to Medicaid and the elimination of penalties for people who don’t buy health insurance. There are currently 4 Republican Senators that are against the Bill in its current form. In order for the bill to pass, only 2 Republican Senators can vote against it. I suspect the Republicans will us the same tactics that Dem's used to pass Obamacare, bribe the Senators by giving their states certain perks (see below). In economic news, new home sales rose 2.9 percent in May, below the expected increase of 3.7 percent.
Treasury yields have fallen from their 2017 highs recently, with the benchmark 10-year yield trading around 2.15 percent. In March, it traded around 2.6 percent. The dollar weakened slightly to $1.12/Euro, gold gained slightly to $1257/oz and the price of a gallon of regular gas nationwide is down yet again to $2.276.
Treasury yields have fallen from their 2017 highs recently, with the benchmark 10-year yield trading around 2.15 percent. In March, it traded around 2.6 percent. The dollar weakened slightly to $1.12/Euro, gold gained slightly to $1257/oz and the price of a gallon of regular gas nationwide is down yet again to $2.276.
Here is what was used to buy Senators to vote for Obamacare in 2010:
Florida: Coverage for seniors cannot be cut even if it is cut in other states.
Louisiana: up to $300 million in federal aid.
Massachusetts: sharing $1.2 billion in Medicaid money with Vermont
Montana: Received expanded Medicare coverage for victims of asbestos exposure in a Libby, Montana, mine.
Nebraska: The state will not have to contribute to Medicaid (All states received a 3-year exemption, Nebraska's is permanent. Also, non-profit health insurance companies will be exempt from federal taxes.
New York: See Florida.
North Dakota: Part of a "frontier state" plan that reimburses Medicare at higher rates due to low density population.
Pennsylvania: See Florida.
South Dakota: See North Dakota.
Utah: See Montana. The state's two senators are Republicans that were not part of the decision worked out by the Nebraska Senate delegation as the state meets the definition of a frontier state
Vermont: sharing $1.2 billion of Medicaid with Massachusetts plus an investment of $10 to $14 billion for community health centers.
Wyoming: See Utah.
Unions given $60 billion tax break until 2018
Florida: Coverage for seniors cannot be cut even if it is cut in other states.
Louisiana: up to $300 million in federal aid.
Massachusetts: sharing $1.2 billion in Medicaid money with Vermont
Montana: Received expanded Medicare coverage for victims of asbestos exposure in a Libby, Montana, mine.
Nebraska: The state will not have to contribute to Medicaid (All states received a 3-year exemption, Nebraska's is permanent. Also, non-profit health insurance companies will be exempt from federal taxes.
New York: See Florida.
North Dakota: Part of a "frontier state" plan that reimburses Medicare at higher rates due to low density population.
Pennsylvania: See Florida.
South Dakota: See North Dakota.
Utah: See Montana. The state's two senators are Republicans that were not part of the decision worked out by the Nebraska Senate delegation as the state meets the definition of a frontier state
Vermont: sharing $1.2 billion of Medicaid with Massachusetts plus an investment of $10 to $14 billion for community health centers.
Wyoming: See Utah.
Unions given $60 billion tax break until 2018
Updates/Advisories 6-22-2017
CHART from Ameritrade
After dropping 54 points yesterday, the Dow dropped another 12 points today to finish at 21,397. Health care stocks advanced more than 1% on the heels of the Republican health care bill passed by the Senate. As you can guess there was much pontificating by Senate democrats, but these are the same Senate democrats who doubled the national debt to $20 trillion from $10 trillion during the Obama administration.
The bill would continue to offer reimbursements to health insurance companies for subsidies for at least two years. It would also do away with current Obamacare taxes and would phase out Medicaid's expansion program. The Senate is expected to vote on the bill next week (CNBC).
Crude prices were up over .5% today at $42.81/barrel after a one week swoon. However, many analysts are attributing this to a dead cat bounce since there are still concerns of a glut after weekly oil inventories increased more than expected. The energy sector dropped 3% for the week and is the worst performing sector for the year and is down 14% for the year and 43% for the past 3 years. "Oil is becoming less important since it only makes up about 6 percent of the S&P 500", said Maris Ogg, president at Tower Bridge Advisors. "In the overall context of things, we know that oil is the new coal and gas is the new oil. Crude just isn't a commodity in short supply."
In other news, it appears that American banks are giving financially healthy new meaning after a recent FED stress test. All 34 major institutions, including Bank of America (BAC), JPMorgan Chase (JPM), and Citigroup (C), would be able to continue to lend to even under grim economic conditions -- a 10% unemployment rate, a sharp decline in housing prices and a severe recession in the Eurozone.
The yield on the 10 year is down to 2.15%, both gold and the dollar were relatively constant at $1.11/Euro, $1253/oz and the price of a gallon of regular gas nationwide is down again to $2.28.
The bill would continue to offer reimbursements to health insurance companies for subsidies for at least two years. It would also do away with current Obamacare taxes and would phase out Medicaid's expansion program. The Senate is expected to vote on the bill next week (CNBC).
Crude prices were up over .5% today at $42.81/barrel after a one week swoon. However, many analysts are attributing this to a dead cat bounce since there are still concerns of a glut after weekly oil inventories increased more than expected. The energy sector dropped 3% for the week and is the worst performing sector for the year and is down 14% for the year and 43% for the past 3 years. "Oil is becoming less important since it only makes up about 6 percent of the S&P 500", said Maris Ogg, president at Tower Bridge Advisors. "In the overall context of things, we know that oil is the new coal and gas is the new oil. Crude just isn't a commodity in short supply."
In other news, it appears that American banks are giving financially healthy new meaning after a recent FED stress test. All 34 major institutions, including Bank of America (BAC), JPMorgan Chase (JPM), and Citigroup (C), would be able to continue to lend to even under grim economic conditions -- a 10% unemployment rate, a sharp decline in housing prices and a severe recession in the Eurozone.
The yield on the 10 year is down to 2.15%, both gold and the dollar were relatively constant at $1.11/Euro, $1253/oz and the price of a gallon of regular gas nationwide is down again to $2.28.
Updates/Advisories 6-20-2017
OIL 1 YEAR CHART
After advancing 144 points on Monday to set a new record high at 21,528, it is down 33 with an hour left in the trading day. What spurred yesterday's run were rally's in both the tech and biotech sectors. Also rallying were financials with a 0.98 percent rise after New York Federal Reserve President William Dudley said U.S. inflation was a bit low but should rise alongside wages as the labor market continues to improve, allowing the Fed to continue gradually tightening monetary policy. Banks tend to do better with higher interest rates. For those of you who remember your Principles of Microeconomics, this is indicative of an inelastic demand for loanable funds. The S&P technology sector finished up 1.7 percent after its second straight weekly decline, which was triggered by fears of stretched valuations. Tech stocks have led the S&P 500's 9.6 percent rally this year.
Hurting the market today is the energy sector as oil sank to $43.34/barrel. The energy sector has been the worst performing sector for the year and was down another 1.1% today on fears of oversupply amid signs of rising production. It is at a 7 month low and more than 20% off it's 52 week high and hve officially plunged into bear market territory.
Investors also kept an eye on Washington as they digested remarks from House Speaker Paul Ryan on tax reform. He said the government is cutting back on regulatory red tape and that changes to the tax code must be permanent. Ryan later spoke with CNBC's "Power Lunch," saying the U.S. can't hit 3 percent growth with tax reform (CNBC).
The dollar strengthened against the euro at $1.11/euro, gold is down to $1243/oz, the yield on the 10 year is down to 2.16% and this is keeping mortgage rates low despite the recent FED interest rate hike and the price of a gallon of regular gasoline nationwide is down again to $2.285. The price of gas is bucking the trend since it typically rises during the summer vacation driving season. Inventory figues are due out tomorrow and this will have a significant effect on price.
Hurting the market today is the energy sector as oil sank to $43.34/barrel. The energy sector has been the worst performing sector for the year and was down another 1.1% today on fears of oversupply amid signs of rising production. It is at a 7 month low and more than 20% off it's 52 week high and hve officially plunged into bear market territory.
Investors also kept an eye on Washington as they digested remarks from House Speaker Paul Ryan on tax reform. He said the government is cutting back on regulatory red tape and that changes to the tax code must be permanent. Ryan later spoke with CNBC's "Power Lunch," saying the U.S. can't hit 3 percent growth with tax reform (CNBC).
The dollar strengthened against the euro at $1.11/euro, gold is down to $1243/oz, the yield on the 10 year is down to 2.16% and this is keeping mortgage rates low despite the recent FED interest rate hike and the price of a gallon of regular gasoline nationwide is down again to $2.285. The price of gas is bucking the trend since it typically rises during the summer vacation driving season. Inventory figues are due out tomorrow and this will have a significant effect on price.
Updates/Advisories 6-19-2017
The average return for the S&P 500 over the past 50 years, with dividends is 11%/year. Without dividends it's about 10% and it has already met that goal for the year; it then begets the question, does the market still have legs? It appears that it does. After advancing 25 points on Friday, the Dow is up another 75 points and the S&P is up another 8. Both averages are in record high territory.
What's on tap for today is 2 FED presidents are speaking in various locations in the US and analysts will be following the speeches closely for any indication of what future FED policy may have. After raising short term interest rates .25% last week, they may be looking at another 2 rate hikes this year. There is no major economic data being released today and President Trump will be meeting with the president of Panama. The markets are also benefiting from the "investigations" on Trump seeming to be going nowhere.
In other news, oil is up slightly to $44.85/barrel, the yield on the 10 year is 2.17%, the dollar lost some strength at $1.12/euro, gold is down to $1252/oz and the price of a gallon of regular gas nationwide is following oil down at $2.293.
What's on tap for today is 2 FED presidents are speaking in various locations in the US and analysts will be following the speeches closely for any indication of what future FED policy may have. After raising short term interest rates .25% last week, they may be looking at another 2 rate hikes this year. There is no major economic data being released today and President Trump will be meeting with the president of Panama. The markets are also benefiting from the "investigations" on Trump seeming to be going nowhere.
In other news, oil is up slightly to $44.85/barrel, the yield on the 10 year is 2.17%, the dollar lost some strength at $1.12/euro, gold is down to $1252/oz and the price of a gallon of regular gas nationwide is following oil down at $2.293.
Updates/Advisories 6-15-2017
To no surprise the FED raised the federal funds rate yesterday to 1% which was followed by the major banks raising the prime rate to 4%. The prime rate is the rate that the biggest banks charge their best customers on short term loans. It is also the rate for a Home Equity Line of Credit loan (HELOC). The FED feels that this will keep its target inflation rate of 2%, well below that level. It also stated that it will reduce its balance sheet by buying government bonds. The policy of buying bonds reduces the money supply which is a contractionary monetary policy that is used to fight inflation. It also stated that it is planning another rate hike this year, and 3 more for 2018.
Fed officials voted to move forward with both moves despite some wobbly economic data lately indicating that growth won't reach the lofty 3 percent projections from the Trump White House. Retail sales data have indicated a still-struggling consumer and payrolls growth has slowed considerably over the past few months (CNBC). As I've stated previously, I don't think that inflation is a problem and the FED is overreacting. It is no surprise that the FED is often accused of taking the punch bowl away when the party is at its wildest. It is also predicting a GDP rate of 2.2% for the year, up from its March prediction of 2.1%.
Despite the rate hike, the Dow set a new record yesterday as it advanced another 46 points to close at 21,375. With 3 hours left in the trading day, it has given back 25 points at 21,351.
Oil is currently trading at $44.51/barrel, a 6 week low, as US inventories, supplied by the EIA (Energy Information Administration) came in higher than expected and there are doubts that OPEC will maintain production cuts. Inventories are near record highs in many parts of the world, and many traders expect further price falls. With the interest rate hike, the dollar gained strength and is trading at $1.11/Euro, gold is down to $1255/oz, the yield on the 10 year is bucking the trend and is down to 2.17% and the price of a gallon of gas nationwide is down to $2.318.
Fed officials voted to move forward with both moves despite some wobbly economic data lately indicating that growth won't reach the lofty 3 percent projections from the Trump White House. Retail sales data have indicated a still-struggling consumer and payrolls growth has slowed considerably over the past few months (CNBC). As I've stated previously, I don't think that inflation is a problem and the FED is overreacting. It is no surprise that the FED is often accused of taking the punch bowl away when the party is at its wildest. It is also predicting a GDP rate of 2.2% for the year, up from its March prediction of 2.1%.
Despite the rate hike, the Dow set a new record yesterday as it advanced another 46 points to close at 21,375. With 3 hours left in the trading day, it has given back 25 points at 21,351.
Oil is currently trading at $44.51/barrel, a 6 week low, as US inventories, supplied by the EIA (Energy Information Administration) came in higher than expected and there are doubts that OPEC will maintain production cuts. Inventories are near record highs in many parts of the world, and many traders expect further price falls. With the interest rate hike, the dollar gained strength and is trading at $1.11/Euro, gold is down to $1255/oz, the yield on the 10 year is bucking the trend and is down to 2.17% and the price of a gallon of gas nationwide is down to $2.318.
Updates/Advisories 6-13-2017
At the noontime hour, the Dow is up 77 points and is at a new intraday high of 21,314. Today is also at the start of a 2 day FED meeting. There is a snap back rally in technology that is helping all the indexes. Investors seem to be saying that after a brief spate of profit taking, many of these stocks are attractive and they are bottom fishing. Technology stocks have easily outperformed this year, with the S&P information technology sector advancing 17.6 percent. By comparison, health care — the second-best performer in the S&P — had risen 12.1 for 2017 entering Tuesday's session (CNBC). All eyes are now turned towards the Federal Reserve as the FOMC begins it two day policy meeting and investors are wondering if there will be an interest hike after May's disappointing job numbers (see above). In economic news, the National Federation of Independent Business' (NFIB) small business optimism index came in unchanged at 104.5 for May. but this still a record high and appears to be a function of Trump's proposed policies even tho his disapproval rating is at record highs. The PPI, Producer Price Index which measures inflation at the wholesale level, remained unchanged last month as energy costs has their greatest drop in a year.
In other News:
CNN had a very good article on how there is a "bloodbath" of bankruptcies in the retail sector, compliments of online purchases. Over 300 companies, big and small, have filed for bankruptcy this year; most have filed Chap 11 which means "They'll be back", at least in the short run. Most notable have been Payless Shoes and Radio Shack.
The 10 year yield is up slightly at 2.22%, oil is up slightly at $46.27/barrel, and bot the dollar and gold are stable at $1.12/euro and $1265/oz while the price of a gallon of regular gas nationwide is down to $2.329.
In other News:
CNN had a very good article on how there is a "bloodbath" of bankruptcies in the retail sector, compliments of online purchases. Over 300 companies, big and small, have filed for bankruptcy this year; most have filed Chap 11 which means "They'll be back", at least in the short run. Most notable have been Payless Shoes and Radio Shack.
The 10 year yield is up slightly at 2.22%, oil is up slightly at $46.27/barrel, and bot the dollar and gold are stable at $1.12/euro and $1265/oz while the price of a gallon of regular gas nationwide is down to $2.329.
Updates/Advisories 6-12-2017
1 Month OIL CHART
The Dow finished the day at 21,236, down 36 points. The big story was in the tech heavy NASDAQ as that index had its biggest 3 day loss since December, compliments of the continuing meltdown in the tech sector. Apple was down 2.5% with further losses in Amazon, Alphabet (Google) and Netflix. There's an absence of fundamental information to get people more engaged in these names," said Scott Kessler, technology analyst at CFRA. "It's not like earnings season is around the corner." Also, the Technology Select Sector SPDR ETF (XLK) broke below its 50-day moving average for the first time since April 18 (CNBC). The big news later this month will be the FED's FOMC meeting and investors are evenly divided as whether there will be an interest rate hike or not since inflation is at the FED's target (roughly 2%) and economic data is mixed.
In other news:
Obamacare continues to self destruct, as enrollment is down to 10.3 million according to an article by CNN. The Administration blames the drop on the high cost of plans brought about by the lack of competition as more and more Insurers flee what they believe to be a sinking ship. Also hurting enrollment is the executive order that eliminated the penalty tax if someone doesn't have health insurance. What is left is the enrollees, about 90%, who are receiving government subsidies.
CNN reports a factory owner in California (where else) is complaining that he lost 10% of his workers after an Immigration raid. Maybe if he didn't hire illegals he wouldn't have that problem.
The 10 year treasury's yield was relatively constant at 2.21%, as was oil at $46.07/barrel, the dollar $1.12/euro and gold at $1267/oz. The price of a gallon of regular gas nationwide is down to $2.336.
In other news:
Obamacare continues to self destruct, as enrollment is down to 10.3 million according to an article by CNN. The Administration blames the drop on the high cost of plans brought about by the lack of competition as more and more Insurers flee what they believe to be a sinking ship. Also hurting enrollment is the executive order that eliminated the penalty tax if someone doesn't have health insurance. What is left is the enrollees, about 90%, who are receiving government subsidies.
CNN reports a factory owner in California (where else) is complaining that he lost 10% of his workers after an Immigration raid. Maybe if he didn't hire illegals he wouldn't have that problem.
The 10 year treasury's yield was relatively constant at 2.21%, as was oil at $46.07/barrel, the dollar $1.12/euro and gold at $1267/oz. The price of a gallon of regular gas nationwide is down to $2.336.
FICO SCORES
Fair Isaac Company reports that it's FICO scores (FICO being an acronym for Fair Isaac Co) reports that the average FICO score in the US has reached an all time high of 700 nationwide amongst adults. The share of consumers who are viewed as the riskiest from a credit perspective (these are sub-prime and have a score lower than 640) reached a new low of about 40 million — or 20 percent of adults in the U.S. that have FICO scores. according to the Wall St Journal. A lot of you may be asking what is a FICO score, how is it calculated and how it affects me. Fair Isaac uses use information provided by one of the three major credit reporting agencies – Equifax, Experian or Trans-Union. From this, they have a formula to get a credit score which can be as high as 850. The biggest part is your payment history, followed by how much you owe, credit history, credit mix and new credit (see chart). Next, how do you interpret your FICO Score: anything > 800 is excellent (and gets you low interest rates on loans and credit cards), 740-799 is very good, 670-739 is good, and anything less than 670 is considered not good and sub-prime (chart). Lastly, as no surprise, the older you are, the better your score (chart)
Fair Isaac Company reports that it's FICO scores (FICO being an acronym for Fair Isaac Co) reports that the average FICO score in the US has reached an all time high of 700 nationwide amongst adults. The share of consumers who are viewed as the riskiest from a credit perspective (these are sub-prime and have a score lower than 640) reached a new low of about 40 million — or 20 percent of adults in the U.S. that have FICO scores. according to the Wall St Journal. A lot of you may be asking what is a FICO score, how is it calculated and how it affects me. Fair Isaac uses use information provided by one of the three major credit reporting agencies – Equifax, Experian or Trans-Union. From this, they have a formula to get a credit score which can be as high as 850. The biggest part is your payment history, followed by how much you owe, credit history, credit mix and new credit (see chart). Next, how do you interpret your FICO Score: anything > 800 is excellent (and gets you low interest rates on loans and credit cards), 740-799 is very good, 670-739 is good, and anything less than 670 is considered not good and sub-prime (chart). Lastly, as no surprise, the older you are, the better your score (chart)
CURRENT TAX RATES
Trump Tax Plan I
The tax plan has a long way to go and there are still a lot of ifs. It reduces the tax brackets to 3, 15%, 25% and 35% but doesn't state what dollar amounts put you in each bracket. It eliminates virtually all deductions except for mortgage interest and charity (state and property taxes are no longer deductible), retirement plans still appear to be tax deferred (401, 403, 457, IRA etc.), and it abolishes the AMT(Alternative Minimum Tax) which was instituted about 50 years ago but was not indexed to inflation. On the plus side for the market, there was a proposal to reduce the corporate tax rate to 15% from 39.6%, the highest in the world. The White House added there will be a "one-time tax" on the trillions of dollars held by corporations overseas. However, Treasury Secretary Steven Mnuchin said the rate for that tax has yet to be determined. The Administration is that the plan is supposed to be revenue neutral and will not add to the deficit. There's still a long way to go and I will be mildly surprised if its complete by August which is the president's time table.
The tax plan has a long way to go and there are still a lot of ifs. It reduces the tax brackets to 3, 15%, 25% and 35% but doesn't state what dollar amounts put you in each bracket. It eliminates virtually all deductions except for mortgage interest and charity (state and property taxes are no longer deductible), retirement plans still appear to be tax deferred (401, 403, 457, IRA etc.), and it abolishes the AMT(Alternative Minimum Tax) which was instituted about 50 years ago but was not indexed to inflation. On the plus side for the market, there was a proposal to reduce the corporate tax rate to 15% from 39.6%, the highest in the world. The White House added there will be a "one-time tax" on the trillions of dollars held by corporations overseas. However, Treasury Secretary Steven Mnuchin said the rate for that tax has yet to be determined. The Administration is that the plan is supposed to be revenue neutral and will not add to the deficit. There's still a long way to go and I will be mildly surprised if its complete by August which is the president's time table.
The Trump Tax Plan II
In addition to lowering personal income taxes, possibly to a maximum marginal rate to 28-35% from the current 39% The big driver is a corporate tax cut from the highest in the world, 39.6%, to his opening gambit of 15%. A number of analysts on CNBC have said that this would probably double profits since it would stimulate businesses to invest more in capital goods which will most likely increase the top and bottom lines. A good example of this would be the Reagan tax cuts of the 1980's where the top marginal rate went from 70 to 50 to 28%. As a result, your wealthy businessmen invested more (have you ever seen a poor man/woman hire someone), and the amount of taxes the top 1% paid has gone from 17% to 24%, of all personal income taxes collected, at the end of the Reagan presidency to 35-40% now. (chart). Earnings season carried on, with PepsiCo, United Technologies, Procter & Gamble and Twitter all posted a better-than-expected profit. Twitter's stock popped about 12 percent after reporting. There were no major economic data reports released Wednesday, but Wall Street looked ahead to Friday's first-quarter GDP report. (CNBC).
In addition to lowering personal income taxes, possibly to a maximum marginal rate to 28-35% from the current 39% The big driver is a corporate tax cut from the highest in the world, 39.6%, to his opening gambit of 15%. A number of analysts on CNBC have said that this would probably double profits since it would stimulate businesses to invest more in capital goods which will most likely increase the top and bottom lines. A good example of this would be the Reagan tax cuts of the 1980's where the top marginal rate went from 70 to 50 to 28%. As a result, your wealthy businessmen invested more (have you ever seen a poor man/woman hire someone), and the amount of taxes the top 1% paid has gone from 17% to 24%, of all personal income taxes collected, at the end of the Reagan presidency to 35-40% now. (chart). Earnings season carried on, with PepsiCo, United Technologies, Procter & Gamble and Twitter all posted a better-than-expected profit. Twitter's stock popped about 12 percent after reporting. There were no major economic data reports released Wednesday, but Wall Street looked ahead to Friday's first-quarter GDP report. (CNBC).
What do Rising Rates mean to you and the Economy
As interest rates rise as a result of FED policy, there are both good and bad effects. Firstly, the Fed's move affects all short term rates. It has no direct effect on mortgage rates which is a function of the yield on the 10 year US Treasury bond, however, they are highly correlated (above chart). What affects the yield is the price of the bond (yield and bond prices are inversely related). As bond prices decrease, the yield increases and why would bond prices decrease? Bonds tend to be a defensive play when the economy is doing poorly; hence, investors only have so much money and they will buy bonds instead of stocks. Conversely, when the economy is doing well, investors will buy stocks and sell bonds which depresses the bond price but raises the yield. The rate on the 30 year fixed mortgage is generally 1.25% to 2.75% higher than the yield on the 10 year(Chart).
Who Benefits
As rates increase, banks generally benefit. The demand for money is inelastic and when banks loan money, they will make more on those loans. Conversely, borrowers suffer from the higher cost of money, but since the economy is doing well, more people are working, real wages tend to increase and the blow of the higher cost of money is mitigated. Savers who have minimal debt also benefit, as the FED raises interest rates, rates on Savings, CD's and money markets generally increase which helps this particular segment.
Who is Hurt
Generally, borrowers are hurt. Generally, the payments on all short term loans increase. If you take a college loan, a personal loan or a boat loan, rates will increase. The Prime Rate increases, it is generally 3% above the Federal Funds Rate and it is the rate the biggest banks charge their best customers on short term loans. If you have a HELOC (Home Equity Line of Credit), this will increase also and it is generally the same rate as the prime rate. However, the short term loan that is not affected is the car loan. Generally there is so much competition in this area, that a loan on a new car can range from 0%(not all the time) to a little over 4%.
As interest rates rise as a result of FED policy, there are both good and bad effects. Firstly, the Fed's move affects all short term rates. It has no direct effect on mortgage rates which is a function of the yield on the 10 year US Treasury bond, however, they are highly correlated (above chart). What affects the yield is the price of the bond (yield and bond prices are inversely related). As bond prices decrease, the yield increases and why would bond prices decrease? Bonds tend to be a defensive play when the economy is doing poorly; hence, investors only have so much money and they will buy bonds instead of stocks. Conversely, when the economy is doing well, investors will buy stocks and sell bonds which depresses the bond price but raises the yield. The rate on the 30 year fixed mortgage is generally 1.25% to 2.75% higher than the yield on the 10 year(Chart).
Who Benefits
As rates increase, banks generally benefit. The demand for money is inelastic and when banks loan money, they will make more on those loans. Conversely, borrowers suffer from the higher cost of money, but since the economy is doing well, more people are working, real wages tend to increase and the blow of the higher cost of money is mitigated. Savers who have minimal debt also benefit, as the FED raises interest rates, rates on Savings, CD's and money markets generally increase which helps this particular segment.
Who is Hurt
Generally, borrowers are hurt. Generally, the payments on all short term loans increase. If you take a college loan, a personal loan or a boat loan, rates will increase. The Prime Rate increases, it is generally 3% above the Federal Funds Rate and it is the rate the biggest banks charge their best customers on short term loans. If you have a HELOC (Home Equity Line of Credit), this will increase also and it is generally the same rate as the prime rate. However, the short term loan that is not affected is the car loan. Generally there is so much competition in this area, that a loan on a new car can range from 0%(not all the time) to a little over 4%.
Strangulation by Regulation:
The tax code is 77,000 pages, under Obama there were 4000 new EPA regulations (info from CBS) Dodd-Frank imposed somewhere between 310-500 new requirements on banks(various analysts CNBC) and Obamacare has over 20,000 pages of regulations (Washington Post); and people are complaining because Trump is trying to streamline government. He has signed the "2 for" executive order that mandates all agencies to do away with 2 regulations for every one they pass. I can run my life and spend my money, much better than the government and I applaud Trump's efforts in doing away with economically ruinous legislation.
In one of the presidential debates, Hillary Clinton stated that supply side economics of lower taxes and regulation doesn't work. She needs better economic advisers. If you look at the attached chart, GDP soared after the Reagan stimulus and the average GDP post stimulus was 4.83 (a 40 year average is about 3.2); whereas post Obama stimulus, increased taxes and regulation, was a meager 2.23%. We have not been above 3% during his entire presidency and this has been the slowest recovery since the great depression.
UNH Study Results 5-31-2016
In other News:
First, a little history. In 1800, 90% of the adult population were farmers (lots of factory child labor), by 1900, 25% of the population and currently, about 2% as a result of technology garnering greater yield/acre. As a result much farmland from the 19th century is no longer. In a recent study out of UNH, it was found that 75% of the farmland from the mid 19th century is now covered by trees and this is contributing to warmer winters. Trees causing higher temperatures you say; how is this possible? It is very simple physics. In the winter in NH (and most other states), farm pastures are covered with snow, and this reflects sunlight, and heat, into space. Now that 75% of these pastures are covered with trees, the dark trees absorb the heat and it permeates into the atmosphere causing a general warming and milder winters. If you've ever wondered what a stone wall was doing in the middle of the woods, those woods were once pastures and delineated borders that contained live stock.
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A number of people have asked me about Bernie Sanders tax plan and he is in the same fantasy land as Obama. First, it would never pass a republican Congress and early indications are that the Republicans will definitely maintain control of the house.
He wants to make all state university's free; let's just look at NH. At UNH there are 14,500 students of which 45% are out of state. Just tuition, not including room and board for out of state students is $30,000 and in-state $17,000. If you do the math that's a total of $331,325,000, and that doesn't even include Plymouth, Keene and Granite state which are also part of the state University system. Do that for every state and it is an astronomical cost that his proposal doesn't even begin to cover. I hesitate to do the cost for California that has 38 million people as opposed to NH's 1.6 million.
What I find particularly disconcerting, is all the people who are buying this.
A number of people have asked me about Bernie Sanders tax plan and he is in the same fantasy land as Obama. First, it would never pass a republican Congress and early indications are that the Republicans will definitely maintain control of the house.
He wants to make all state university's free; let's just look at NH. At UNH there are 14,500 students of which 45% are out of state. Just tuition, not including room and board for out of state students is $30,000 and in-state $17,000. If you do the math that's a total of $331,325,000, and that doesn't even include Plymouth, Keene and Granite state which are also part of the state University system. Do that for every state and it is an astronomical cost that his proposal doesn't even begin to cover. I hesitate to do the cost for California that has 38 million people as opposed to NH's 1.6 million.
What I find particularly disconcerting, is all the people who are buying this.
Just as a reminder from my blog of October 2013, Carbon dioxide composes only .0387% of our atmosphere (in decimal form that’s .000387), and of all the CO2 currently being produced on the earth, man only accounts for 3.4% (.034 in decimals). Therefore, if you want to calculate the amount of CO2 in the atmosphere caused by man, you would multiply .034 x .000387 to get .0000131 or .00131%.
For the 2nd day in a row, United Healthcare an
For the 2nd day in a row, United Healthcare an
California Drought of 2015
California is in the middle of a drought; it must be global warming or now the more politically correct term, climate change. In case you haven't noticed, the climate is always changing. It is in a constant state of flux. If you notice the chart below right, California has had a number of mega-droughts during the medieval ages and this was considerably worse than it is now; and as far as climate change, it's obviously not an exact science(click on pictures below).
California is in the middle of a drought; it must be global warming or now the more politically correct term, climate change. In case you haven't noticed, the climate is always changing. It is in a constant state of flux. If you notice the chart below right, California has had a number of mega-droughts during the medieval ages and this was considerably worse than it is now; and as far as climate change, it's obviously not an exact science(click on pictures below).
The Congressional Budget Office predicted this week that more than 2 million people will leave the labor force because of Obamacare. Specifically, more people will leave the labor force or reduce their hours, to stay under the cap for federal subsidies. If you are a family of 4, and household income is under, WAIT FOR IT, $94,000, you are eligible for a federal subsidy. The number of part time/temporary workers has already increased by 35% since Obamacare was passed in 2010.
For a good laugh on Obamacare, go to this web site and watch this video; http://www.youtube.com/watch?v=qpa-5JdCnmo. It shows the president on 36 different occasions stating that if you like your healthcare plan you can keep it. Obviously there are 1 of two explanations for this misunderstanding. He was ill advised on the 2700 page, 4500 provision Affordable Care Act, or he knew about it and lied. According to a study by Forbes magazine, the ACA will increase premiums to men under 27 by 77%, 40 year olds, 37% and 64 year olds by 37%.
"We have to pass the bill ..."
http://blog.heritage.org/2010/03/10/video-of-the-week-we-have-to-pass-the-bill-so-you-can-find-out-what-is-in-it/
When Obamacare was 1st released, The Congressional Budget Office predicted that it would cost $900 billion over 10 years. At the time, I made a prediction to my students that I estimate the final cost would be closer to $3 trillion. Three years later, the CBO has raised it's estimate to $1.6 trillion. At this rate, we are on pace to reach the $3 trillion mark.
www.healthcare.gov, the official website to sign up for Obamacare had an original cost of $100 million. That cost is now up to $2.6 Trillion and rising. If the government can't manage the costs on a web site, and these costs have trippled since it opened on October 1, how can it possible manage a 2700 page, 4500 provision bill. The words of Nancy Pelosi (see above) are acting as a harbinger of doom: "We have to pass the bill, so we can find out what's in it."
When Obamacare was 1st released, The Congressional Budget Office predicted that it would cost $900 billion over 10 years. At the time, I made a prediction to my students that I estimate the final cost would be closer to $3 trillion. Three years later, the CBO has raised it's estimate to $1.6 trillion. At this rate, we are on pace to reach the $3 trillion mark.
www.healthcare.gov, the official website to sign up for Obamacare had an original cost of $100 million. That cost is now up to $2.6 Trillion and rising. If the government can't manage the costs on a web site, and these costs have trippled since it opened on October 1, how can it possible manage a 2700 page, 4500 provision bill. The words of Nancy Pelosi (see above) are acting as a harbinger of doom: "We have to pass the bill, so we can find out what's in it."
More on Obamacare
In a recent survey by the New York FED on businesses, the median increase in healthcare premiums is expected to be 10%. More than a quarter of the manufacturing and service firms surveyed said they either have or will boost prices for goods and services "because of the effects that the ACA is having on your business." About 20 percent of respondents said they were reducing their number of workers and/or raising the share of part-time workers as a result of the ACA. His is in stark contrast to the presidents remarks earlier this year that healthcare costs are decreasing.
Maybe CEO's were right when they said the president "Just doesn't get it".
Commentary on Minimum Wage
The main argument concerning minimum wage is that it will help to alleviate poverty. That is clearly not the case. As you can see from the chart at the left, the poverty rate dropped dramatically in the 1960's. This was a function of great society legislation; specifically, increase in Social Security benefits in addition to the inception and implementation of Medicare and Medicaid. Since then, the poverty rate has fluctuated between 9-15% and is highly correlated with the unemployment rate. The vertical grey area's in the graph represent periods of recessions in the US. As can be expected, unemployment rises during recessions and peaks at the end (unemployment is said to be a lagging indicator). As you can also see from the chart, so too does the poverty rate. There is no indication whatsoever that the poverty rate is affected by increases in the minimum wage. Generally, this is quite the contrary. As can be evidenced from the below left chart, increases in minimum wage can contribute to unemployment and as we can infer from the above chart, as unemployment increases so to does poverty. If you look at NH, they have the lowest state poverty rate in the nation and it generally parallels the national unemployment rate. By raising the minimum wage, you increase business costs. As a result; businesses either pass these costs onto the consumer (in which case inflation nullifies any wage increase), substitute capital for labor, or simply go out of business. If you look at the chart below right, UAW (United Auto Workers) membership has decreased in the late 1970's from 1.5 million to 350,000 in 2009. The reason for this is simple. Detroit isn't making fewer cars, they are making more, but they have made their assembly lines more robotic and have substituted capital for labor, which became cheaper in the long run. This can also happen to those fast food workers who want a $15 minimum wage. There is currently a machine on the market that can make 300 burgers/hour. In other words, capital can be substituted for labor. Someone please e-mail me and explain how someone is better off unemployed at $10-15/hour as opposed to being gainfully employed at $7.25/hour
You cannot legislate equality. If you want to decrease poverty, implement policies to insure that higher levels of education is available to all.
You cannot legislate equality. If you want to decrease poverty, implement policies to insure that higher levels of education is available to all.
BLOG Topics 2013
January Do Protected Seals lead to Depleted Fish Stocks
February Prohibition: Profits to Cartels & Increased Violence for Americans
March Increased Minimum Wage & Extended benefits lead to Higher Unemployment
April Ethanol from corn & Agflation
May Cash for Clunkers lead to Higher Used Car Prices & Wasted Tax Dollars
June The Affordable Care Act; Anything but Affordable Part 1
July The Affordable Care Act; The poster Child for False Advertising
August Detroit: Higher Taxes + Liberal Benefits = Bankruptcy
September No Keystone Pipeline leads to more pollution
October Global Warming! Or is it Global Cooling!
November Poverty & Benefits
December Does Affirmative Action lead to Reverse Discrimination?
February Prohibition: Profits to Cartels & Increased Violence for Americans
March Increased Minimum Wage & Extended benefits lead to Higher Unemployment
April Ethanol from corn & Agflation
May Cash for Clunkers lead to Higher Used Car Prices & Wasted Tax Dollars
June The Affordable Care Act; Anything but Affordable Part 1
July The Affordable Care Act; The poster Child for False Advertising
August Detroit: Higher Taxes + Liberal Benefits = Bankruptcy
September No Keystone Pipeline leads to more pollution
October Global Warming! Or is it Global Cooling!
November Poverty & Benefits
December Does Affirmative Action lead to Reverse Discrimination?
iOMe Challenge 2012
The United States has amongst the lowest savings rate for all technological nations. The iOMe challenge is a nationwide competition between Colleges where teams submit a 10,000 page essay on how Americans can improve their savings rates. In addition, teams must produce an approximate 60 second video which complements the essay. If you click on the iOMe logo above, it will take you to Bentley University's 2012 video submission. The faculty adviser for the challenge is John Tommasi and is offered during his Fall EC 351 course, Contemporary Issues in Economics.
I'm pleased to announce that on February 15, Bentley was declared the winner of the iOMe video portion of the contest. Congrats to the team members and great job! |
EC 3900 Energy Economics
EC 3900, Energy Economics and International Markets, is a 3 credit, Short Term Program, that is offered during Spring semester. After 7 weeks of lecture, the class takes a 10 day educational/cultural tour to France where 80% of their electricity is produced by nuclear power. During the 10 day trip, students travel to, and tour various nuclear facilities Last year's class visited; Marsailles, Aix en Provance, Lyons, Brest and 4 days in Paris.
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Unintended Consequences
If there were ever words that can strike fear into the hearts of any man women or child, it's: "I'm from the Government and I'm here to help". On a monthly basis my blog, from an economic standpoint, will explore government laws, decisions and actions, which while well intentioned, had inadvertent results that were either disastrous, or made a bad situation worse. It wouldn't surprise me if you reached the conclusion that congress does two things well, nothing and overreact; and you may ask yourself, do Congressional members vote for what is best for the economy, or what will get them re-elected.
iOMe Challenge 2012 - Video |
iOMe Challenge 2011 - Video |
