What are the potential impacts of public confidence on the economy's recovery?

[WhoWee]

I think the short answer is that the economy would be much stronger, with a higher standard of living in general, if neither individuals nor government could overextend themselves by using too much (unsecured) credit.

Secured debt is completely different, since it results in net positive wealth creation instead of a drain on future wealth creation.

And government borrowing/spending is especially problematic because it uses as collateral an assumed future ability and willingness to confiscate private wealth that hasn't yet been created.

This is the concept that EVERY business student understands, but politicians don't - there are no guarantees of future revenue or earnings.

Politicians now talk about $Trillion spending bills as though it's ordinary. Worse yet, they increase spending in the middle of a recession they label as the worst since the Great Depression. For some reason they also believe every dollar spent is "stimulative" - maybe they haven't seen any of the scandal doumentaries on wasted spending? On the other hand, maybe they don't realize their cash flow decreases unless they borrow during these periods? That would be bad (if they don't know IRS collections are down).

There isn't a business on the planet that runs in such a way (and stays in business) s typically the business managers are fired (or prosecuted).

 

[Astronuc]

Still in recovery -

President Barack Obama will fly to California today to meet with three of America's most notable tech CEOs -- Apple's Steve Jobs, Facebook's Mark Zuckerberg, and Google's Eric Schmidt -- presumably to discuss job growth.

. . . . .

Google and Apple and Facebook have been doing tremendously well, generating a huge amount of wealthy and profits and products people like. But the dirty little secret here is that these companies actually don't create that many jobs. Google has less than 30,000 employees. Apple has 30,000 employees. Facebook just a few thousand total. Meanwhile, Apple's biggest contractor in China -- Foxconn -- has more than a million people working there. So these companies are creating wealth, not jobs here. And in Santa Clara county, the headquarters of all three firms, the unemployment rate is still above 10 percent.
. . . . .

http://marketplace.publicradio.org/display/web/2011/02/17/am-obama-to-meet-top-silicon-valley-tech-executives/

So just start you're own on-line social-networking, advertising service.

 

[czelaya]

Still in recovery -
http://marketplace.publicradio.org/display/web/2011/02/17/am-obama-to-meet-top-silicon-valley-tech-executives/

So just start you're own on-line social-networking, advertising service.

Indeed.

This is just one side of the coin. If American's tend to like cheap electronics than this is the means of doing it.

 

[Astronuc]

Stuck in Phoenix, the Epicenter of Housing Crisis
http://finance.yahoo.com/real-estate/article/113212/phoenix-epicenter-housing-crisis-marketwatch

In metropolitan Phoenix, two-thirds of all residential mortgages are underwater. Of these, some 200,000 are 50% larger than the current market value of the properties. Many homeowners have come to doubt whether they'll ever retrieve their lost equity.

In this city of 4 million, the 14th largest in the United States, the median home price is down 53% since the bubble peaked in 2006 to just over $120,000. Only smaller cities such as Las Vegas and Orlando have witnessed equally catastrophic drops.

. . . .

"Some local realtors dispute that pessimistic assessment. They point to strong existing home sales in June," but that is at prices well below what the previous owner paid.

The unexpectedly severe downturn over the last five years shows that nobody really knows the future direction of the housing market. Gary Shilling, a respected forecaster, is predicting that prices could fall another 20% nationally, on top of the 30% decline that has already occurred.

The fundamentals of the economy seem rather poor.

 

[klimatos]

Although the current recession may have been initiated by the bursting of the housing bubble, I think that it was coming all along. The fact of the matter is that we have too many workers for the number of low-skill jobs that are available. Moreover, these workers do not have anywhere near the skills that the future job markets will demand.

As President Clinton pointed out in a TV interview a while ago, there are more than three million high-paying jobs going begging in the US right now. These good jobs require mathematical, technical, and writing skills that today's high school students resolutely refuse to acquire.

If your math skills include algebra, spherical trig, and at least an introduction to calculus, then there are jobs out there looking for you.

The same is true if you are computer savvy with a solid base in data management. There are jobs looking for you (although you may have to compete with many Asians having the same skill set).


Finally, let's say that you are going about your business when you see a problem that you think can be corrected. If you can write a report that describes the problem, its probable origins, how to fix it now, and how to keep it from reoccurring in the future; they you are one in a thousand. If this report is properly spelled, properly punctuated, and grammatically correct, you are one in ten thousand. Lastly, if this report is both brief and readable; then if you don't already have a good job, the fault is yours.

What about those of you who are mathematically inept, scientifically uninformed, and not so hot at expressing yourself? All I can say is that I hope you like sleeping under bridges!

 

[mheslep]

Yes the unemployment rate for those with a BA/BS and up is 5.1%, compared to ~9% for the country at large.
http://www.usatoday.com/money/economy/employment/2010-12-06-collegegrads06_ST_N.htm

 

[klimatos]

Yes the unemployment rate for those with a BA/BS and up is 5.1%, compared to ~9% for the country at large.
http://www.usatoday.com/money/economy/employment/2010-12-06-collegegrads06_ST_N.htm

Yes. I would hazard that the bulk of those with college degrees who are also unemployed have degrees in fields that--while eminently soul-satisfying and worthy of study--are fields that do not meet the needs of today's markets.

 

[Astronuc]

Million-dollar-and-up homes are the fastest-growing segment of the U.S. foreclosure market, with banks seizing some 335% more such properties last year than they did in 2007.

http://realestate.yahoo.com/promo/5-super-expensive-foreclosures-for-sale.html

But more sobering -

http://marketplace.publicradio.org/display/web/2011/08/19/web-the-breakdown-radio-special/

And we examine the so-called "hour-glass economy," which describes the growing divide in America's workforce. The concept helps put into perspective what the future of the American job market might just be 9 percent unemployment and millions out of work.

and some more perspectives on the post-recession recovery, which really doesn't seem post-recession

Downgrades Felt at Local Level
http://finance.yahoo.com/banking-budgeting/article/113348/downgrades-felt-local-level-wsj?mod=bb-budgeting

To city officials in Manassas Park, Va., Standard & Poor's one-notch downgrade of the U.S. government's credit rating was relatively mild compared with what the firm sprung on them last month.

The tiny city's credit rating was reduced to triple-B from double-A minus—a five-notch tumble.

Hayek Is Wrong, And So Is Bernanke: The Coming Recession Will Be Deflationary
http://news.yahoo.com/hayek-wrong-bernanke-coming-recession-deflationary-225018903.html

Where Coca Cola is investing $4 Billion
http://news.yahoo.com/guess-where-coca-cola-investing-4-billion-015616584.html

 

[WhoWee]

Label this post IMO.
I'm familiar with dozens of unemployed manufacturing and construction workers (OH/PA). Most are/were union members and have previously enjoyed the best benefits. The extended unemployment benefits have been helpful - but are also a deterrent to accepting an available job at a lower pay rate and limited or no benefits. Unless a cash payment is offered for a day job (maintenance/construction) - these folks aren't planning to work until all possible benefits are exhausted and the "good" jobs come back. Some of these people have actually gone through 2 or 3 cycles now of (Gov subsidized) "re-training".

On a personal level, I understand their anger and dismay - why should an experienced machine operator stock shelves for minimum wage at the $1 store (selling imported junk from China)?

 

[Astronuc]

Employers add no [or few] net jobs in August, while unemployment rate was unchanged at 9.1 pct.

http://finance.yahoo.com/news/Employers-add-no-net-jobs-in-apf-4252098583.html

 

[mheslep]

...
Hayek Is Wrong, And So Is Bernanke: The Coming Recession Will Be Deflationary
http://news.yahoo.com/hayek-wrong-bernanke-coming-recession-deflationary-225018903.html

Thanks Astronuc.

Srinivas thinks it’s time for more fiscal stimulus, not less

Srinivas Thiruvadanthai is apparently a real, working economist, but I think this recommendation is the definition of insanity: repeating known actions and expecting a different result. It seems to me one could look to Japan for a well known decade long case of fiscal spending starting in the mid 90's and it got them http://www.google.com/publicdata/ex...im=country:USA:JPN&ifdim=country&hl=en&dl=en".


And here:

A Hayekian decline,” the economist says, “will destroy the social fabric ..."

Holding forth on what will or will not economically destroy society sounds like the words of the central planner, so it is no doubt that he's unaligned with Hayek, the ultimate critic of central planners everywhere. I really wish these guys would cease skipping back and forth between economic standard fare and philosophical pronouncements on the "social fabric", as if their expertise extended from one to the other.

 

[Astronuc]

Tough Times in the Second City
http://www.nytimes.com/2011/09/05/opinion/tough-times-in-the-second-city.html

. . . greater Chicago. Forty-five percent of mortgaged single-family homes are underwater, meaning people owe more on their mortgages than their homes are worth. Foreclosure epicenters like the Austin and West Englewood communities are checkerboarded with abandoned and decaying properties, many stripped bare by vandals for scrap. Joblessness among African-Americans exceeds 20 percent — almost 50 percent among black youths.

http://www.gao.gov/new.items/d1193.pdf

 

[WhoWee]

Tough Times in the Second City
http://www.nytimes.com/2011/09/05/opinion/tough-times-in-the-second-city.html


http://www.gao.gov/new.items/d1193.pdf

I wouldn't worry too much about Chicago. With President Obama's re-election campaign based there, Rahm Emanuel serving as Mayor, the Jackson's fully vested, and a strong union presence - their problems can't possibly be more than a speed bump - can they?

 

[mheslep]

There are several ideas on the table for improving the economy that do not include more spending stimulus: some from the various GOP Presidential candidates, some in bills already passed by the House, others proposed by center-right economists. http://www.usnews.com/news/blogs/rick-newman/2011/10/31/5-good-ideas-from-4-gop-economic-plans"

...Perry and Romney ... both favor changes to the 2002 Sarbanes-Oxley accounting reforms (signed into law by President Bush, after the Enron and Worldcom meltdowns) that would exempt smaller firms and spare them loads of paperwork they often lack the staff to complete. Some of the Dodd-Frank reforms could have similar unintended effects on firms that had nothing to do with the 2008 financial crisis.

Romney has proposed a set of reforms including deadlines for the approval of various types of business permits and a fast-track process when safety or public health aren't an issue. ...

Eliminate corporate tax deductions, lower the corporate tax rate. The deficit committee, that was commissioned by Obama who then ignored its recommendations, came up with the same proposal:

...General Electric, for example, earned more than $14 billion in 2010, but paid no U.S. tax on that income because much of it is parked overseas. GE's tax department alone, with a head count of nearly 1,000, is bigger than 99 percent of all U.S. businesses.

Virtually all the GOP candidates favor a lower corporate tax rate, and while Herman Cain's call for a 9 percent rate is probably too low to gain widespread support, Romney's preferred rate of 25 percent rate is more plausible. ... If done right, corporate tax reform would encourage U.S. multinationals to bring more of their overseas profit back home and invest it here, while giving other firms an incentive to set up shop in the United States instead of heading for other countries.

http://www.roadmap.republicans.budget.house.gov/UploadedFiles/Roadmap2Final2.pdf

...The overwhelming majority of America’s competitors rely to some degree on consumption based taxes, which, according to World Trade Organization rules, can legally be rebated
on products leaving a country for export and imposed on products entering that country. The United States happens to be the only major industrialized country in the world thatdoes not use a similar tax system and therefore cannot engage in the same practice.Hence, when Milwaukee-based Harley-Davidson makes a motorcycle it plans to selloverseas (to Japan, for example), the motorcycle is taxed once in the U.S. before beingshipped, and once again when it reaches the Japanese border. In contrast, when a Hondamotorcycle is shipped from Japan to the U.S., the Japanese government lifts the tax onthe motorcycle before export, and it arrives in the U.S. essentially tax-free.

Cut spending, balance the budget, as deficit spending equates to future taxes which people anticipate and react to today. Some Paul cuts:

Ron Paul's plan calls for eliminating 5 of the 15 cabinet agencies (Housing and Urban Development, Interior, Energy, Commerce, and Education) while slashing the budgets of most of the others. Such severe cuts are probably a non-starter in Washington, since those agencies all protect entrenched interests, including dozens of members of Congress who sit on oversight committees and direct spending toward favored constituencies. But Paul's general bent toward consolidating government has merit. At least new 5 Cabinet agencies have been created since 1945, and institutions that always grow and never shrink become bloated and inefficient by nature.

As a private-sector analogy, consider General Motors. For years, its leaders insisted that it needed all 8 of its divisions—an unwieldy and redundant structure that contributed to GM's descent into bankruptcy in 2009. In the aftermath, GM sold or killed half of its divisions—and is now nicely profitable [actually no it is not but the point is valid]...

Repeal and http://www.roadmap.republicans.budget.house.gov/Issues/Issue/?IssueID=8516" Obama Care. Employers fear additional health costs and/or compliance costs and consequently do not employ.http://thehill.com/video/house/190547-gop-calls-on-dems-to-back-house-passed-jobs-bills?page=3" and blocked or likely blocked by the Senate:

...overwhelming bipartisan House passage Thursday of legislation to repeal the requirement that governments at all levels withhold 3 percent of payments to government contractors, a bill that has White House support.

...The 15 bills include measures that mandate a major expansion of offshore drilling and faster permitting; block several recent or upcoming Environmental Protection Agency regulations; and thwart the Federal Communications Commission’s “net neutrality” rules, among other proposals.

List of bills passed by the House on jobs/economics:
"The Reducing Regulatory Burdens Act" (H.R.872)
"The Energy Tax Prevention Act" (H.S.910)
"The Clean Water Cooperative Federalism Act" (H.R.2018)
"Consumer Financial Protection & Soundness Improvement Act" (H.R.1315)
"Protecting Jobs from Government Interference Act" (H.R.2587)
"Transparency in Regulatory Analysis of Impacts on the Nation" (H.R.2401)
"Cement Sector Regulatory Relief Act" (H.R.2681)
"EPA Regulatory Relief Act" (H.S.2250)
"Coal Residuals Reuse and Management Act" (H.R.2273)
"Restarting American Offshore Leasing Now Act" (H.S.1230)
"Putting the Gulf of Mexico Back to Work Act" (H.R.1229)
"Reversing President Obama's Offshore Moratorium Act (H.R.1231)
"The Jobs and Energy Permitting Act of 2011" (H.R.2021)
"North American-Made Energy Security Act" (H.R.1938)
"Disapproval of FCC's Net Neutrality Regulations" (H.J.Res.37)
"3% Withholding Tax Repeal" (H.R.674)

 

[WhoWee]

The market continues to sort out the mess.

http://www.insurancejournal.com/news/national/2011/11/10/223680.htm

"The Charlotte, North Carolina-based lender faces many lawsuits over its disastrous 2008 acquisition of Countrywide, once the largest U.S. mortgage lender. Analysts now estimate that the $2.5 billion purchase has cost Bank of America more than $30 billion, including legal costs and writedowns."

 

[Astronuc]

Rather poor recovery in parts of the nation.

http://realestate.yahoo.com/promo/states-with-the-most-homes-in-foreclosure.html

Many of the states with the highest foreclosure rates experienced the worst of the housing crisis. However, analysis by 24/7 reveals that the primary driver of higher foreclosure rates is a lengthy foreclosure process.

Nearly all of the states with the highest rates also have the longest foreclosure periods. The average foreclosure process for the nation is 140 days. The average foreclosure process for the eleven states with the highest foreclosure rates is 220. As a result, many homes foreclosed in 2011 in these states were actually at the end of a process that began more than a year ago. New York, one of the states with the worst foreclosure rates, has an average processing period of 445 days.

. . . .

 

[OmCheeto]

Spent some hours looking at sepia colored maps.

Found the reference to the source. (boring as all get out)

Did some crunching on the above source, and the only thing that jumped out at me were Tortilla manufacturing and Tree Nut farming numbers. (ref. GDP by Industry. Numbers in millions)

 

[OmCheeto]

One of my facebook friends posted the link to the letter; "To the Shareholders of Berkshire Hathaway Inc."

So I skimmed through it.

One thing caught my eye, which was contrary to what I'd read from a previous annual report from another company a while back, so I made the following post:

GE should hire Buffet to write their annual report.

Buffet; "In total, our entire string of operating companies spent $8.2 billion for property, plant and equipment in 2011, smashing our previous record by more than $2 billion. About 95% of these outlays were made in the U.S., a fact that may surprise those who believe our country lacks investment opportunities. We welcome projects abroad, but expect the overwhelming majority of Berkshire’s future capital commitments to be in America. In 2012, these expenditures will again set a record."

Immelt; "At December 31, 2010, $94 billion of earnings have been indefinitely reinvested outside the United States. Most of these earnings have been reinvested in active non-U.S. business operations, and we do not intend to repatriate these earnings to fund U.S. operations."

Unless of course, I don't understand what all of this means.

Help me to understand this, financial wizards! Help me!

It's been 30 minutes now...

Am I missing something?

Am I really as naive as people claim I am?

 

[JonDE]

One of my facebook friends posted the link to the letter; "To the Shareholders of Berkshire Hathaway Inc."

So I skimmed through it.

One thing caught my eye, which was contrary to what I'd read from a previous annual report from another company a while back, so I made the following post:



It's been 30 minutes now...

Am I missing something?

Am I really as naive as people claim I am?

I'm not really sure what your confusion is, could you elaborate? Also could you post a link to Immelts comments, I feel that there should be more to what he said that would clarify his position a little better.
I can break it down fairly simply based on the above quotes. Bershire hathaway does a lot of their business through investments and securities. They feel there are plenty of businesses that they can invest in inside the US and turn a profit.
GE does many different things. They have taken some of their profit from inside the US and used it to invest in their business (or acquire businesses) outside the US. If they were to bring this profit back to the US (repatriate) they would have to pay taxes on all of it. A substantial portion of GE is in manufacturing, and the company probably feels that there are other places that it would be cheaper to do manufacturing in, then in the US.

Edit: the above post is mostly IMO. It is tough to say what exactly the reason(s) is that GE doesn't want to repatriate the money.

 

[OmCheeto]

I'm not really sure what your confusion is, could you elaborate?

The confusion arises from BH re-investing 95% of its funds in America, and GE investing none.

Also could you post a link to Immelts comments

http://www.ge.com/ar2010/pdf/GE_AR10.pdf, page 65.

, I feel that there should be more to what he said that would clarify his position a little better.
I can break it down fairly simply based on the above quotes. Bershire hathaway does a lot of their business through investments and securities. They feel there are plenty of businesses that they can invest in inside the US and turn a profit.
GE does many different things. They have taken some of their profit from inside the US and used it to invest in their business (or acquire businesses) outside the US. If they were to bring this profit back to the US (repatriate) they would have to pay taxes on all of it. A substantial portion of GE is in manufacturing, and the company probably feels that there are other places that it would be cheaper to do manufacturing in, then in the US.

Edit: the above post is mostly IMO. It is tough to say what exactly the reason(s) is that GE doesn't want to repatriate the money.

As I said, I've been accused of, and am apparently quite naive, so I'd really like some guidance on how to invest my five hundred million dollars over the next four years.

I read GE's annual report last year, and sold all of my stock in the company.

I read today's BH letter, and wanted to go find and hug Warren.

 

[Astronuc]

The US economy is still recovering:

Stocks Suffer Year's Worst Day on Jobs Report
http://news.yahoo.com/stocks-suffer-years-worst-day-jobs-report-201844063--abc-news-personal-finance.html

Apparently earlier job numbers (for March and April) were revised downward.
http://www.marketplace.org/topics/economy/jobless-unsurprised-todays-bad-report
http://www.marketplace.org/topics/business/weekly-wrap-dismal-may-jobs-report

The DOW finished today at 12,118.57 a change of -274.88(-2.22%). The DOW opened at 12,221.19 on Jan 3, 2012.

http://www.nytimes.com/2012/06/02/b...ed-69000-jobs-in-may-jobless-rate-at-8-2.html

 

[Astronuc]

Dow is vacillating/oscillating these days, however

on a more positive note - Beyond the Tried-and-True: Generating Cash in Later Life
http://finance.yahoo.com/news/beyond-tried-true-generating-cash-040100367.html

I don't plan on retiring because there is too many interesting projects to do in the world. I just like working on challenging and interesting things.

 

[OmCheeto]

Dow is vacillating/oscillating these days, however

My #1 stock oscillated up >50% today.
no 'however' necessary

on a more positive note - Beyond the Tried-and-True: Generating Cash in Later Life
http://finance.yahoo.com/news/beyond-tried-true-generating-cash-040100367.html

I don't plan on retiring because there is too many interesting projects to do in the world. I just like working on challenging and interesting things.

Do you plan on starting your own business?

 

[Astronuc]

Do you plan on starting your own business?

Possibly.

 

[Astronuc]

America's Bad Economy is Biggest Foreign Policy Threat
http://news.yahoo.com/americas-bad-economy-biggest-foreign-policy-threat-052513961--abc-news-politics.html

 

[Astronuc]

Moody's sees big banks' risks of 'outsized losses'
http://finance.yahoo.com/news/moodys-sees-big-banks-risks-040708171.html

. . . .
The banks "have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities," Moody's global banking managing director Greg Bauer said in a statement outlining the rationale for the downgrades.

The behemoth banks are all major players in the global stock and bond markets, which have become extremely volatile. Critics such as former U.S. Federal Reserve Chairman Paul Volcker argue that the stability of the financial system is threatened when banks' profits rely on proprietary trading desks that make high-risk bets on derivatives and other opaque financial instruments. Rich profits can be made from such trades but the losses can also be huge.
. . . .

If the banks simply move money around they are not investing in wealth - they are just moving it around - incurring a cost - that would seem to actually reduce wealth.

 

[OmCheeto]

I heard on the radio this morning that housing prices in my area have started going up, and the number of homes for sale has dropped 25%.

Zillow and Redfin seem to confirm this. Redfin reports that the number of homes for sale has dropped 31.7% over the last year.

 

[OmCheeto]

Moody's sees big banks' risks of 'outsized losses'
http://finance.yahoo.com/news/moodys-sees-big-banks-risks-040708171.html

If the banks simply move money around they are not investing in wealth - they are just moving it around - incurring a cost - that would seem to actually reduce wealth.

They were talking about the Defazio tax yesterday on the radio again. I pretty much only monitor the value of one of my stocks, and it looks to me like day traders have been playing with it for quite some time. It's been mostly going down over the last 2 years. One of the stock puppets was bragging about how he'd been so brilliant in shorting the stock. I suppose I should be thankful, as buying a thousand shares at $20 each would have been a lot more expensive than the $3 I've ended up paying. But overall, I think its stupid that people who don't really know much about a company should be able to control the price of the stock, simply because they've got billions to play with.

Anyone else sign one of the petitions?

Superfast trading has grown to account for 70% of the trades in some markets. We’re talking buying and selling the same stock within minutes, or even seconds, to chase a few cents of gain per share.

A New Source of Revenue

Equally important, this tax would raise at least an estimated $100 billion per year in federal revenue. Of that, 50% will be used to address the deficit and 50% to pay for rebuilding infrastructure.

http://www.taxfairnessoregon.org/action-emails/financial-speculation-tax/

 

[Astronuc]

US Economy Going From Bad to Worse: Roubini
http://finance.yahoo.com/news/us-economy-going-bad-worse-084304553.html

A robust and self-sustaining U.S. recovery is not on the cards, and we should now expect below trend growth for many years to come, according to Nouriel Roubini, the economist famed for his bearish views.

. . . .

Certainly locally, we do not see much of a recovery.

 

[JonDE]

US Economy Going From Bad to Worse: Roubini
http://finance.yahoo.com/news/us-economy-going-bad-worse-084304553.html

Certainly locally, we do not see much of a recovery.

Roubini has always been very bearish, its always the end of the world with him. Not that I am saying he is completely wrong, but at least part of his premise is false. He is also making a guess on what is going to happen, which I am also not saying is wrong, but I'm not sure it is correct either.

The wrong part

The fiscal cliff could knock 4.5 percent off 2013 growth if all tax cuts and transfer payments were allowed to expire and spending cuts where triggered, according to Roubini.

"Of course, the drag will be much smaller, as tax increases and spending cuts will be much milder. But, even if the fiscal cliff turns out to be a mild growth bump - a mere 0.5 percent of GDP - and annual growth at the end of the year is just 1.5 percent, as seems likely, the fiscal drag will suffice to slow the economy to stall speed: a growth rate of barely 1 percent," he wrote.

He is assuming the percent drop is based on this years growth. It is not. It is based on next years projected growth, which from what I have heard is around 4.4%, so worst case scenario is around a 0.1% decrease, which is still bad to very bad considering the times we are in.

Then there is the guess work. Who knows what spending and taxing will be next year? I don't imagine much getting done before the elections, and its anyones guess on how those will turn out. I seriously doubt that all the taxes and spending will expire, although I could be wrong.

In short its too early to tell. Personally I have some hope that July's job numbers will come out strong.