Tag Archives: Stock Market
Gøsta Esping-Andersen’s The Three Worlds Of Welfare Capitalism, from 1990, explains the historical backdrop of democracy and different tax regimes:
«The first major welfare-state initiatives occurred prior to democracy and were powerfully motivated by the desire to arrest its realization. This was certainly the case in France under Napoleon III, in Germany under Bismarck, and in Austria under von Taaffe. Conversely, welfare-state development was most retarded where democracy arrived early, such as in the United States, Australia, and Switzerland. This apparent contradiction can be explained, but only with reference to social classes and social structure: nations with early democracy were overwhelmingly agrarian and dominated by small property owners who used their electoral powers to reduce, not raise, taxes (Dich, 1973). In contrast, ruling classes in authoritarian polities were better positioned to impose high taxes on an unwilling populace.»
USA: Poor vs Rich – or rather a question of moral values?
HT: darrylzuk & Paul Kedrosky.
At the time, the average individual investor expected that the stock market would return about 10 percent a year over the next 10 to 20 years — or about 7 percent after inflation — according to surveys by the University of Michigan’s Survey Research Center, as well as UBS and Gallup.
The Wall Street Journal is considering how the new congress will affect different market segments:
“Watch out for anyone who tells you “divided government is good for the stock market.” The historical basis for this – such as data since 1949 via the Stock Trader’s Almanac-is meager. You can’t extrapolate universal rules from such a small amount of data. The results are too heavily skewed by the Reagan (1981-86) and Clinton (1995-2001) booms under divided governments. “The mantra that gridlock is good for the markets is not borne out by the evidence,” says Bob Johnson, senior managing director at the CFA Institute, a trade organization for professional investors.”
You find the details here.
“The nearby chart depicts how the stock market over the last year and a half has followed a path eerily similar to that of 1937. This week corresponds on the chart to mid-August 1937, when the cumulative effects of massive hikes in personal and corporate tax rates, severe monetary tightening, and aggressive business-bashing by the Roosevelt administration tipped the economy into the “depression inside the Depression.” From there, stocks were in for the longest and second-deepest bear market in history.”
Full story from The Wall Street Journal: The Trade and Tax Doomsday Clocks.
“He argues that the current secular Bear market will end ~18 years after the last secular Bull market ended in March 2,000. I cannot place the end of the Bear that precisely, but I figure its coming sometime this decade.
Ironically, the route Jeff takes to get to $38k uses an approach similar to Prechter’s: Long historic cycles that impact group psychology, with regular wars that lead to massive government interventions and big inflation (so far so good). As the chart below shows, major global wars were followed in the 20th century by high inflation and 500% market moves over the following decades. Note huge 1447% Dow move from 1982 – 2000 — the theory being it was caused by an outsized 207% CPI inflation.”
[via The Big Picture]
The poll result from The Wall Street Journal so far:
“More and more investors aren’t bothering to pore through corporate reports searching for gems and duds, but are trading big buckets of stocks, bonds and commodities based mainly on macro concerns. As a result, all kinds of stocks—good as well as bad—are moving more in lock step.”
Vote and share your opinion here.
If Nassim Taleb, author of The Black Swan, was confronted with a choice between investing with Warren Buffett and billionaire investor George Soros - he said to BusinessWeek that he would probably pick the latter:
“I am not saying Buffett isn’t as good as Soros,” he said. “I am saying that the probability Soros’s returns come from randomness is much smaller because he did almost everything: he bought currencies, he sold currencies, he did arbitrages. He made a lot more decisions. Buffett followed a strategy to buy companies that had a certain earnings profile, and it worked for him. There is a lot more luck involved in this strategy.”
Soros became famous in the 1990s when he reportedly made $1 billion while betting against the British pound. Get the details and the comments he made about Obamas economic strategy during a Montreal visit here.
Crestmont Research published a report that shows a disconnect between the development in the stock market and the performance of the economy:
“Some of the best decades for U.S. economic growth were some of the worst decades for stock market performance. In turn, some of the best decades for stock market performance actually happened after economic growth slowed. Just look at the 1910′s vs. the 1920′s, or the 1970′s vs. the 1990′s.”
Grab the story from The Business Insider here.
“In the prior near-miss recessions of 1967, 1985, 1995, 1998 and the 2003 near- double-dip, the S&P 500 delivered an average return of 15% from the start of September to January-end. Once recession fears subside, we believe the global cyclicals – Energy, Materials, Industrials and Technology — should rally the most, as they are best positioned to benefit from exceptionally low rates in the US and healthy global growth. They are also the sectors most exposed to healthy US business spending. We reiterate our overweight on Technology, Energy and Materials and equal weight on Industrials.”
The Business Insider has more via Bank of America Merrill Lynch here.
“These two charts are arguably the most important of all the charts I’ve shown over the years, since they are predicting what could prove to be biggest political realignment of the American electorate in modern times. It’s going to begin in just two months, if not sooner, and it could have an extremely positive impact on the outlook for the economy and the equity market.”
Read the rest of Scott Grannis Blog Post here.
John B. Helmers, hedge fund principal at Swiftwater Capital Management, found three reasons why the U.S is not heading for a Japanese recession:
“1) Magnitude: In 1989 Japan had massive twin bubbles — both real estate and equity. The Japanese stock market was in the stratosphere with an earnings multiple well north of 100.
Japan’s real estate bubble was so ludicrous that the Imperial Palace in central Tokyo (only about 5 miles in circumference) was deemed to have the same value as the entire state of California. Now that is a bubble!
The 2007 property bubble in the U.S., by comparison, was residential-focused and less dramatic. While it is true that aspects of this bubble had ripple effects into other markets (commercial real estate, credit markets and equities), the magnitude of overpricing was nothing like Japan of 1989.
2) Demographics: Japan’s demographics are abysmal when compared to the U.S. As a primarily mono-cultural society, Japan cannot easily use the immigration lever to counteract the natural graying of a wealthy society.
The U.S., on the other hand, has a lower average age, a higher birth rate and a history of embracing immigration. All these factors should keep U.S. demographics from having the same deflationary impact as Japan’s did.
3) Monetary Policy: Japan suffered from severe policy error. The Bank of Japan (BOJ), understandably, did not appreciate the magnitude of the economic and financial problems it faced as the twin bubbles burst.
Monetary policy was clearly not aggressive enough.”
Get the detailed arguments on CNBC here: Three Reasons Why We Are Not Going to Become Japan.