Posts Tagged ‘surpluses’

Dan Gross: When Deficits are a Good Sign

Dan Gross: When Deficits are a Good Sign

Courtesy of Joshua Brown, The Reformed Broker 

Dan Gross has been one of the more bullish voices in the econoblogosphere this spring/summer, and his latest piece for Slate is sure to be controversial.  In it, he explains how deficits and surpluses show up out of nowhere and disappear just as quickly…

The fiscal 2010 deficit—$1 trillion and counting—is an encouraging sign.

Let me explain. Federal tax revenues are highly leveraged to economic growth and to the performance of markets, corporations, and rich people. This means they can be volatile. When markets and profits boom, capital gains taxes, payroll and income taxes, and corporate income taxes flow like a mighty stream. As a result, it’s not uncommon for tax receipts to rise 6 percent or 7 percent in a year when the economy grows by 3 percent. This volatility works to the downside, too. When the economy contracts and markets crash, capital gains and corporate income tax revenues dry up. For example, corporate income taxes (click here and scroll down to Page 30) fell from $370 billion in fiscal 2007 to $304 billion in fiscal 2008 (down 18 percent), and then plunged to $138 billion in fiscal 2009 (down 55 percent). In fiscal 2009, a period in which the economy shrunk about 2.6 percent, government receipts plummeted 16 percent, from $2.5 trillion to $2.1 trillion. To aggravate matters, some government spending is countercyclical. That means that in good times, when tax receipts are high, less money is spent on stimulus and social welfare benefits. In bad times, when tax receipts are ebbing, more money goes out the door. And that’s why surpluses and deficits can materialize out of nowhere.

He goes on to point out how the deficit for 2009 came in below expectations as a result of asset price refaltion and other factors.  Without being a fan of long-term entitlements and debt, he makes an interesting case based on the numbers for a toning down of the deficit-hawk rhetoric.

Source:

The Miracle Deficit Cure?  Growth.  (Slate)


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China and Germany: The Perils of Vendor Financing

China and Germany: The Perils of Vendor Financing

Courtesy of JOHN RUBINO at Dollar Collapse

In response to Why Would Anyone Buy a Spanish Bond?, reader RAID 3000 pointed out that the U.S. has far more serious problems than Europe (no argument there!) and included a link to LEAP2020, a European site doing great work on this subject. One of its articles contained the following chart:

This got me to wondering if it would be possible to construct a similar chart for China and its main trading partners. (The U.S. would dominate that one.) From there it occurred to me that China and Germany are in more or less the same boat due to their practice of vendor financing. They’ve gone about it differently but the effect has been the same. Consider:

China lends money directly to the U.S. by using the dollars it receives from us to buy Treasury paper. This lowers U.S. interest rates and supports the dollar, which allows us to continue to buy Chinese stuff.

Germany, on the other hand, has lent its credit rating to the whole Euro Zone, allowing countries like Greece and Spain to borrow more and at lower rates than they could have otherwise. The borrowers use some of this money to buy cars, pharmaceuticals, and solar panels from Germany.

Now both China and Germany have discovered that their surpluses were based in part on bad loans to weak borrowers, and that some of the assets they thought they owned are 1) not really theirs or 2) worth way less than face value.

China has a lot of dollars, but can’t unload them without destroying the value of the dollars it retains. It’s trying to move out slowly, scaling back its purchases of U.S. debt and buying gold and oil resources, but it has to walk a fine line because spooking the markets would defeat its purpose. So it’s stuck with big dollar balances for the foreseeable future, while the U.S. is actively destroying the currency’s value.

Germany doesn’t own a lot of Spanish or Greek assets, but is now on the hook for what might end up being hundreds of billions of euros of PIIGS country debt. Which is to say it has to eat some of the loans it made during its vendor financing days.

Either way, those surpluses — and the balance sheets built on…
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Zero Hedge

Facebook, Twitter Deactivate Hezbollah Accounts After Kidnapping Video Published

Courtesy of ZeroHedge. View original post here.

Hezbollah's television and news network Al Manar has confirmed that on Friday the Lebanese paramilitary group's "War Media" accounts on Twitter and Facebook were closed without notice. Hezbollah is now accusing the social media giants of taking part in an American "anti-media campaign" against the group which has already long been designated a terror organization by the US government. 

...

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Phil's Favorites

Will Disney's Epic Buyout Of Fox Mark The End Of The Everything-Bubble?

Courtesy of John Rubino, DollarCollapse.com

As bubbles expand and hot money starts burning holes in corporate pockets, merger and acquisition deal terms begin to leave reality behind. Often one deal of such breathtaking size, scope and hubris is struck that - in retrospect – it heralds the end of the era.

The junk bond bubble of the 1980s, for instance, hit its apex with the December 1988 leveraged buyout of processed food conglomerate RJR Nabisco, which featured a prolonged bidding war by a Who’s Who of the corporate raider/LBO community. At $25 billion, it was seen as “staggering” at t...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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Digital Currencies

Crypto-Collapse Resumes After Japan's Largest Exchange Halts Account Creation

Courtesy of ZeroHedge. View original post here.

What started off as a hopeful week of broadening user adoption is ending on a sour note as Japan's chief regulator launched a probe of crypto-exchanges, prompting the largest to halt account creation sending the entire crypto space lower...

As CNBC reports, the order...



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Insider Scoop

Booking Holdings Is Playing Catch-Up In Online Travel Growth Areas, Analyst Says In Downgrade

Courtesy of Benzinga.

Related Benzinga's Top Upgrades, Downgrades For June 22, 2018 Booking Holdings CEO Has Some Winning Travel Tips For ...

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Chart School

Large Caps Feel the Heat as Semiconductors Struggle

Courtesy of Declan.

Yesterday, Small Caps led the rally as Large Caps lost ground. Today, those same weak Large Caps took another hit and dragged Tech indices with them.  Small Caps also suffered but they have plenty of wiggle room before they hit trouble.

The Dow sell-off didn't stop at its 50-day MA and is now on course to test its 200-day MA. Technicals, aside from Stochastics, are bearish.


Of greater concern was the hit to the Semiconductor Index. The attempt to hold 1,393 support was swiftly ...

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Biotech

Opioids don't have to be addictive - the new versions will treat pain without triggering pleasure

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

Opioids don't have to be addictive – the new versions will treat pain without triggering pleasure

shutterstock.

Courtesy of Tao Che, University of North Carolina – Chapel Hill

The problem with opioids is that they kill pain – and people. In the past three years, more than 125,000 persons died from an opioid overdose – an average of 115 people per day – exceeding the number killed in ...



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ValueWalk

Buffett At His Best

By csinvesting. Originally published at ValueWalk.

Bear with me as I share a bit of my history that helped me create SkyVu and the Battle Bears games. The University of Nebraska gave me my first job after college. I mostly pushed TV carts around, edited videos for professors or the occasional speaker event. One day, Warren Buffet came to campus to speak to the College of Business. I didn’t think much of this speech at the time but I saved it for some reason. 15 years later, as a founder of my own company, I watch and listen to this particular speech every year to remind myself of the fundamentals and values Mr. Buffett looks for. He’s addressing business students at his alma mater, so I think his style here is a bit more ‘close to home’ than in his other speeches. Hopefully many of you find great value in this video like I have. Sorry for the VHS...



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Kimble Charting Solutions

The Stock Bull Market Stops Here!

 

The Stock Bull Market Stops Here!

Courtesy of Kimble Charting

 

The definition of a bull market or bull trends widely vary. One of the more common criteria for bull markets is determined by the asset being above or below its 200 day moving average.

In my humble opinion, each index above remains in a bull trend, as triple support (200-day moving averages, 2-year rising support lines, and February lows) are still in play ...



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Members' Corner

Cambridge Analytica and the 2016 Election: What you need to know (updated)

 

"If you want to fundamentally reshape society, you first have to break it." ~ Christopher Wylie

[Interview: Cambridge Analytica whistleblower: 'We spent $1m harvesting millions of Facebook profiles' – video]

"You’ve probably heard by now that Cambridge Analytica, which is backed by the borderline-psychotic Mercer family and was formerly chaired by Steve Bannon, had a decisive role in manipulating voters on a one-by-one basis – using their own personal data to push them toward voting ...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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