Tag Archives: Gainesville

How the Wealthy Keep Themselves on Top

Breughel-The-Kermess My Comments: I’ve expressed my opinion, in earlier posts, that among the challenges facing my children and grandchildren will be the disparity in this country between what we call the “haves” and the “have nots.” If they allow this disparity to get too great, then they are dooming their children to eventual social chaos.

This social phenomena has manifested itself in the Middle East recently. Power and the lack of it, held by a few and wanted by many, is driving social chaos. In the west, this is going to be driven by economic forces first, since we have a reasonable, so far, mechanism for distributing power: frequent elections that are supported by almost all of us.

But human nature is going to step in and re-arrange the status quo unless we are aware of the possibility and maintain that awareness. How many of you here in Gainesville noted the recent articles in the Gainesville Sun about who gets paid most at the University of Florida and in Gainesville itself? Someone else is sensitive to this issue.

By Tim Harford

The more unequal a society, the greater the incentive for the rich to pull up the ladder behind them

When the world’s richest countries were booming, few people worried overmuch that the top 1 per cent were enjoying an ever-growing share of that prosperity. In the wake of a depression in the US, a fiscal chasm in the UK and an existential crisis in the eurozone – and the shaming of the world’s bankers – worrying about inequality is no longer the preserve of the far left.

There should be no doubt about the facts: the income share of the top 1 per cent has roughly doubled in the US since the early 1970s, and is now about 20 per cent. Much the same trend can be seen in Australia, Canada and the UK – although in each case the income share of the top 1 per cent is smaller. In France, Germany and Japan there seems to be no such trend. (The source is the World Top Incomes Database, summarised in the opening paper of a superb symposium in this summer’s Journal of Economic Perspectives.)

But should we care? There are two reasons we might: process and outcome. We might worry that the gains of the rich are ill-gotten: the result of the old-boy network, or fraud, or exploiting the largesse of the taxpayer. Or we might worry that the results are noxious: misery and envy, or ill-health, or dysfunctional democracy, or slow growth as the rich sit on their cash, or excessive debt and thus financial instability.

Following the crisis, it might be unfashionable to suggest that the rich actually earned their money. But knee-jerk banker-bashers should take a look at research by Steven Kaplan and Joshua Rauh, again in the JEP symposium.

They simply compare the fate of the top earners across different lines of business. Worried that chief executives are filling their boots thanks to the weak governance of publicly listed companies? So am I, but partners in law firms are also doing very nicely, as are the bosses of privately owned companies, as are the managers of hedge funds, as are top sports stars. Governance arrangements in each case are different.

Perhaps, then, some broad social norm has shifted, allowing higher pay across the board? If so, we would expect publicly scrutinised salaries to be catching up with those who have more privacy – for instance, managers of privately held corporations. The reverse is the case.

The uncomfortable truth is that market forces – that is, the result of freely agreed contracts – are probably behind much of the rise in inequality. Globalisation and technological change favour the highly skilled. In the middle of the income distribution, a strong pair of arms, a willingness to work hard and a bit of common sense used to provide a comfortable income. No longer. Meanwhile at the very top, winner-take-all markets are emerging, where the best or luckiest entrepreneurs, fund managers, authors or athletes hoover up most of the gains. The idea that the fat cats simply stole everyone else’s cream is emotionally powerful; it is not entirely convincing.

In a well-functioning market, people only earn high incomes if they create enough economic value to justify those incomes. But even if we could be convinced that this was true, we do not have to let the matter drop.

This is partly because the sums involved are immense. Between 1993 and 2011, in the US, average incomes grew a modest 13.1 per cent in total. But the average income of the poorest 99 per cent – that is everyone up to families making about $370,000 a year – grew just 5.8 per cent. That gap is a measure of just how much the top 1 per cent are making. The stakes are high.

I set out two reasons why we might care about inequality: an unfair process or a harmful outcome. But what really should concern us is that the two reasons are not actually distinct after all. The harmful outcome and the unfair process feed each other. The more unequal a society becomes, the greater the incentive for the rich to pull up the ladder behind them.

At the very top of the scale, plutocrats can shape the conversation by buying up newspapers and television channels or funding political campaigns. The merely prosperous scramble desperately to get their children into the right neighbourhood, nursery, school, university and internship – we know how big the gap has grown between winners and also-rans.

Miles Corak, another contributor to the JEP debate, is an expert on intergenerational income mobility, the question of whether rich parents have rich children. The painful truth is that in the most unequal developed nations – the UK and the US – the intergenerational transmission of income is stronger. In more equal societies such as Denmark, the tendency of privilege to breed privilege is much lower.

This is what sticks in the throat about the rise in inequality: the knowledge that the more unequal our societies become, the more we all become prisoners of that inequality. The well-off feel that they must strain to prevent their children from slipping down the income ladder. The poor see the best schools, colleges, even art clubs and ballet classes, disappearing behind a wall of fees or unaffordable housing.

The idea of a free, market-based society is that everyone can reach his or her potential. Somewhere, we lost our way.

Correction Seen as Welcome

investmentsMy Comments: You should first note the date when Jeff Benjamin posted these comments. For whatever reason, I saved them and decided this morning would be a good day to bring them to the table again.

What is happening to the DOW and the S&P500 and Russell 2000 is a good thing. In the short term, it makes people uneasy, especially since the debacle of 2008 is always in the back of our minds. However, what’s happening now is an opportunity to take advantage of the dip and then smile as it turns around and starts back up again, as it most assuredly will.

Pullback would likely trigger next big run-up in stocks

By Jeff Benjamin | Mar 24, 2013

By a variety of measures, the U.S. equity market is poised for some kind of a pullback, but that isn’t necessarily a bad thing — a fact that underscores the kind of momentum driving stocks these days.

“I don’t know what it will take to trigger a pullback, but as soon as we get a correction of 3% or 4%, it will be short-lived because that will be an opportunity for more investors to get in,” said Kevin Mahn, president and chief investment officer of Hennion & Walsh Asset Management Co.

Even as stocks showed signs of volatility last week, and with most major U.S. equity indexes at or near record highs on a nominal basis, analysts and professional investors such as Mr. Mahn insist that things are progressing in a normal pattern.

“Right now, investors are looking for any crack or any kind of reason to start taking some profits before the long-awaited pullback,” Mr. Mahn said. “I think investors should reset their expectations in terms of how much more stocks can grow from here.”

In essence, at this point in the cycle a small correction is likely and maybe even necessary, but it isn’t a reason to panic.

“Medium to longer term, I’m pretty comfortable with the stock market, but in the short term we’re going to have some kind of pause,” said Chris Wallis, chief executive and chief investment officer of Vaughan Nelson Investment Management LP.

Although stocks could undergo a sudden correction, the market is already “trying to pause through some consolidation and choppiness that lets it correct with time rather than price,” he said.

In the absence of a major trigger to start a pullback, choppiness will have to do, Mr. Wallis said.

Early last week when the government of Cyprus threatened to tax savings deposits in an effort to help finance a bailout of the nation’s financial system, initial concerns were that such a move could spark a stock market reaction in the United States.

PULLBACK NOT UNEXPECTED

“We’re beginning to hear some whispers and questions of whether, when the Fed finally pulls away the punch bowl, the economy will be able to stand on its own,” Mr. Anderson said. “It’s been more than 500 days since we’ve had a correction of 10% or more, so to have any kind of pause at this point would not be unexpected.”

Paul Schatz, president of Heritage Capital LLC, also thinks that a “healthy correction” is in order, but he calculates as “even money” the chances of the stock market gaining or losing between 5% and 8%.

“I don’t think there are enough warning signs to warrant a full-fledged correction of 10% or more, but we certainly should be closer to one of those garden-variety healthy pullbacks,” he said. “We are getting to the point where emotion and a manic state takes hold, and the higher you push from here without a pullback, the more dangerous and ugly will be the ultimate downside.”

How the Mortgage Interest Deduction Could Change

real estateMy Comments: As someone who has a home mortgage, I’ve long enjoyed the abilty to write off the interest I pay against my taxable income. If these folks are right, I’ll be eligible for a tax credit instead of an expense item and I may very well enjoy a higher benefit.

But if you think the real estate industry is going to roll over and play dead, think again. I’m inclined to think their argumet in favor of no change is a spurious one, but I’m a lonely voice. It’s similar to the arguments in favor of a flat tax; the number of accountants and tax folks who depend on a complicated tax code to sustain their standard of living is huge. They are not going to roll over and play dead either.

By Mark Koba | CNBC – Tue, Jul 9, 2013

Congressional action on the U.S. tax code could dramatically alter one of its sacred cows: the mortgage interest deduction. And the change could come in 2013.

House Ways and Means Committee Chairman Dave Camp (R-Mich) held tax reform hearings in April to eliminate loopholes. He said he’s “carefully looking into revising” the popular provision that many in the real estate business consider crucial to the industry.

Camp said he’d like a total tax reform package before the year is out.

One analyst says the time is ripe to change the deduction-in existence since 1913- which is costing the U.S. government billions in tax revenue while doing little to help home ownership.

“It costs at least $70 billion a year in lost tax revenues,” said Will Fischer, a senior policy analyst at the Center on Budget and Policy Priorities, and co-author of a study released last month that called for changing the mortgage interest deduction intto a tax credit.

“It only benefits about half of homeowners that pay interest,” Fischer said. “I think there’s real interest in reforming the mortgage interest deduction to help more people, while bringing in more tax revenue.”

Right now, taxpayers who itemize their deductions can deduct up to $1 million of the interest paid on their mortgages, plus up to $100,000 of the interest on home equity loans, a type of loan in which borrowers use the equity in their home as collateral. Homeowners can do the same on a second home.

In his paper, Fisher states that in 2012, 77 percent of the benefits from the mortgage interest deduction went to homeowners with incomes above $100,000. Close to half of homeowners with mortgages-mostly lower and middle-income families-received no benefit from the deduction, according to Fisher.

Only about 30 percent of eligible taxpayers actually use the mortgage interest deduction each year.

“You can make the case for the deduction, but it really does promote home ownership for mostly upper income levels,” said Mark Goldman, a real estate professor at San Diego State University.

“And I’ve never had a deal happen or not happen because of the deduction,” added Goldman, who is also a real estate broker.

Fischer’s study points to several bipartisan panels that have looked into changing the deduction into a tax credit.

They include the Simpson-Bowles fiscal commission, as well as a tax reform group during the first term of president George W. Bush, and a debt reduction commission headed by former Democratic White House official Alice Rivlin and former New Mexico Republican Senator Pete Domenici.

Continue Reading HERE...

Egypt: Persistent Issues Undermine Stability

EgyptMy Comments: This article comes from Stratfor, a reliable source of information about global politics and economics. The conclusion is not a good one. And if you happen to wonder why a financial planner is Florida gives a tinker’s damn about what is happening in Egypt, it’s because it will influence how life plays out over the next few decades for my children and grandchildren. And yours too!

The facts on the ground in Egypt are dominating the news and with good reason. And there’s very little we can do about it.

But an understanding of what is happening and why will go a long way to help you make better investment decisions over the next several years. The dynamics of what is happening in Egypt make it clear that while such a crisis will not happen in the US, demographics and financial opportunities for our children and grandchildren will greatly influence the lives they live in coming years.

Summary
Egypt’s crisis goes much deeper than the recent political chaos. With the leader of the Supreme Constitutional Court taking over the presidency at the behest of the military, the new government will likely represent a coalition of interests facing many of the same challenges that brought about Mohammed Morsi’s downfall. Egypt’s population has grown well beyond the means of the state to support its needs, and even a strong state will struggle to ensure sufficient supplies of basic staples, particularly fuel and wheat.

Analysis
Underlying the question of what political structure will emerge from this week’s crisis, the fundamental fact is that Egypt is running out of money. Dwindling foreign reserves point to a negative balance of payments that is sapping central bank resources. At the same time, Egypt’s reliance on foreign supplies of fuel and wheat is only growing. Egyptian petroleum production peaked in 1996 and the country first became a net importer in 2007. Government fuel subsidies are an enormous burden on state finances and, throughout the past year, failures to pay suppliers and a shortage of foreign exchange available to importers have caused supply shortfalls and price spikes throughout the country.

The government has a few options, including backing off subsidies in hopes that higher prices will help reduce consumption and therefore cut down on the net drain on state finances. That route carries a high risk of a major political backlash, so it is more likely that the government will continue, if not increase, its commitment to using state funds to guarantee sufficient supply and low prices.
Continue Reading HERE...

Happy 4th of July !

flag USThis expression is unique to America. With it we celebrate the declaration of independence from Great Britain with fireworks and such.

As someone born in Great Britain, but now a certified citizen of these United States, the 4th of July is an established part of psyche.

But memories of my childhood include the celebration of Guy Fawkes Day. This event celebrates the day that Guy Fawkes, in 1605, attempted to blow up the Houses of Parliament. The objective was to rid the country of the King and establish instead a Catholic monarchy in England.

To this day, some in Britain celebrate Guy Fawkes Day, and the survival of the King, with bonfires and fireworks.

I’ll be back on Monday, July 8th. Have a great weekend!

In Snowden’s Privacy Fight, the Spies Are Likely to Win

My Comments: I just can’t seem to get worked up about the probablility that my privacy is being invaded by the government. Yes, I do have interactions with people and places that need to remain private, but none of them to my knowledge have anything to do with national security. So the fact that they are out there in cyber space somewhere, being rejected as irrelevant leaves me with no heartburn.

I want to echo the comments of George Barnett who last Monday had a great commentary in the Gainesville Sun. I know George personally and generally agree with much of what he says, especially since he says it so well.

I do understand why there is concern about the government entering areas of our lives where they have no business being. But I think commercial enterprise is probably already there, and their motives are less pure, and not necessarily intended to be in my best interst. So I’m prepared to live with whatever the NSA is doing, and good luck to them.

By Gideon Rachman | The Financial Times | June 10, 2013

Most people accept there are legitimate reasons for states to monitor cyber space.

Edward Snowden makes a good first impression. In his interview on YouTube, he comes across as a thoughtful boy-next-door type. Unlike Julian Assange, the twitchy narcissist behind WikiLeaks, Mr Snowden looks like somebody you would be quite happy to see date your daughter.
First impressions matter because – unless you are a hardline libertarian or a cold-blooded securocrat – Mr Snowden’s exposure of the cyber snooping of the US government will leave you feeling ambivalent. Nobody likes the idea of their emails and internet activity sitting on some giant supercomputer in Maryland or Cheltenham. On the other hand, most people accept that there are legitimate security reasons for governments to monitor what is going on in cyber space.

By temperament, I am on the complacent end of the spectrum when it comes to privacy. I know people who genuinely worry about the number of times they will be caught on closed-circuit television cameras as they wander around London. I cannot say it bothers me. Similarly, while I do not like the idea of all my email being liable to inspection by the American or British governments, it still feels like a fairly abstract concern.

This is not because I am a “law-abiding citizen” with “nothing to fear”, to use the official formulation. Off the top of my head, I cannot think of any recent acts of lawbreaking on my part. But I would like to believe that I have a zone of privacy that extends considerably beyond anything that might be deemed outright criminal.

The reason that I remain relatively relaxed about the thought that somebody could read my emails and scan my Google searches is not because I have “nothing to hide”. It is because, so far, I have never seen or felt any real-world consequences from this theoretical vulnerability. Nor has anyone I know. And nor can I think of any prominent news story in which the snooper state has ensnared or blackmailed some innocent party.

Of course, it could happen. And, if it began to happen, then I – like many other people – would be swiftly jolted out of my complacency. By then, we are sometimes warned, “it will be too late” – whatever that means. But there is a limit to the amount of pre-emptive panicking I am prepared to do.

By contrast, I have recently become much more concerned about my personal cyber security. In the past six weeks, my private email account has been hacked – apparently by somebody in Jordan. My credit card has been hijacked online. And the Financial Times website was also hacked. I have no idea who exactly is behind all these nefarious acts. But I am pretty confident that it is neither the US nor the British government.

I suspect my increasing awareness of cyber security is fairly typical. It used to be the kind of thing that only bothered tiresome people in the IT department. Now all those injunctions to keep changing my password feel more justified.

Why is any of this relevant to the Snowden case? Because internet crime bears out the official argument that cyber space is an increasingly perilous zone. Alongside all the people “liking” cat videos and friending each other on Facebook, distinctly unfriendly criminal networks and terrorists also operate in cyber space. It is the legitimate business of the state to try to keep tabs on the dark side of the internet.

Indeed, while much of the post-Snowden commentary has focused on the security services’ efforts to track terrorists on the internet, the most dangerous threats of the future may not resemble the terrorist spectaculars of the past. Security types, in both the public and private sectors, are increasingly worried about our societies’ utter dependence on a functioning computer network. They worry about the havoc that could be wreaked if a virus were introduced that prevented a major bank from reconciling its books. Or about the chaos that could be caused if the computer systems that run our power systems or traffic lights were disabled. These attacks would come from cyber space – and they might not be the work of a state.

If and when such a cyber assault occurs, the focus of public concern would switch very rapidly. Suddenly, people would not be worrying about security-service intrusion into the private domain. They would be demanding to know why the government had not been able to anticipate and blunt a cyber assault of this nature.

This does not mean I think the questions that the softly spoken Mr Snowden raised are illegitimate. He is right that there should be more public discussion of where to draw the line in cyber snooping. When he says, “these things need to be determined by the public, not by somebody … hired by the government,” I am inclined to agree.

The difference is that I suspect a better-informed public debate could end up in a different place from where Mr Snowden hopes. He says his biggest fear is that – despite all the information he has revealed – the cyber situation will remain unchanged. I suspect that is exactly what will happen. Unless and until somebody can show that security agencies are not only gathering mountains of information but are also actively abusing it, I think this is a debate that western governments can win.

Stuck in the Mud: Beyond America’s Fiscal Trench Lines

world economyMy Comments: I recall a conversation I had some three years ago where someone asked me if I followed Keynes or did I follow the Austrian approach. Not knowing at the time just what this person was asking, I responded “Keynes” since I knew more or less how Keynes mind worked and had no idea yet about how Hayeks mind worked.

Today that boils down to a political chasm between Democrats and Republicans. It need now be so but it is. And who is ulitmately right or wrong remains to be seen. Perhaps neither to the degree that today they are almost polar opposites. Meanwhile, the folks in Washington, those whom we presumably elected to represent us and every other citizen of this country, are mired in ideology and incapable of looking beyond their own narrow vision. Wish it were not so but …

By Edward Luce | The Financial Times | May 12, 2013

When historians look back on the meltdown of 2008 they will conclude that the country that triggered it – the US – was among the least bad in its continuing monetary and in its initial fiscal response. What a frustration, then, that the US finds itself endlessly relitigating the debate between Keynesians and anti-Keynesians.

In the past few weeks, the intellectual tide has turned sharply towards the former following revelations of errors by Kenneth Rogoff and Carmen Reinhardt. This has been assisted by the IMF’s change of heart about the merits of short-term stimuli. Moreover, austerians, such as Niall Ferguson, the Harvard historian, continue to aid their own discrediting by dredging up the canard about John Maynard Keynes’s “childless vision” – linking his homosexuality to an alleged reckless disregard for the long term.

Yet for all the academic sound and fury, US politics is unchanged and apparently unchangeable: mild fiscal contraction is set to dilute the US recovery for at least another year. Democrats are impotent against Republican stonewalling in the House of Representatives. And Republicans can do nothing about Barack Obama’s veto – or Democratic control of the Senate. Which means we are condemned to at least another year of hypothetical fiscal debates. Here, vindicated though they may be on counter-cyclical fiscal policy, Keynesians are guilty of sins of omission.

Like Gresham’s law, the fiscal debate tends to drive out others. Keynesians want bigger deficits. The Tea Party wants smaller government. The more dominant these battle lines, the harder it is to craft ways out. New federal investment may be off the menu. But US companies are sitting on almost $2tn in cash reserves and have almost the same again parked offshore – a multiple of any possible federal investment. Public action could crowd-in private investments without troubling the taxpayer. And the resultant boost to productivity would reduce the burden of future obligations. “What we need is not bigger or smaller government for growth, but narrower and stronger government,” says Paul Romer, the growth economist.

Might there still be ways in Washington around these entrenched positions? Next week, John Delaney, a freshman Democratic congressman, will test that proposition when he launches a bill designed with an eye both on what is economically useful and politically sellable. The Rebuild America Act would give companies that repatriate foreign earnings a tax break on whatever they invest in a new infrastructure fund. Unlike a public bank, the fund would underwrite bonds to fund state, local and municipal projects – there would be no new federal bureaucracy.

It is hard to see how Republicans could object on substance to a bill that gave tax breaks to companies to improve US infrastructure. We shall see if they treat it on merit or politics. It will also be interesting to see how many other Democrats, and Keynesians, embrace its logic. Mr Delaney, who had a long career in private equity, has an accurate diagnosis of US politics. “Intransigent partisanship is getting in the way of our country having a proactive, pro-growth government,” he says. “Our tired fiscal impasse is not only a daily headache in Washington, it’s become a real competitiveness issue for our economy.”

To be sure, his biggest challenge – and that of almost any legislator taking any initiative – will be to get around the scorched-earth caucus in the Republican party, that opposes anything that could be seen as a success for public action. But there are cynics on both sides. Last month, Barack Obama appointed an industry insider, Tom Wheeler, as the next head of the Federal Communications Commission. People who have donated generously to Mr Obama’s campaigns were happy with Mr Wheeler’s nomination. Others less so.

The FCC could make simple changes to stimulate more investment in the cable and wireless sectors, which would help return US average internet speeds to the top of international tables. Mr Wheeler could also accelerate the FCC’s dilatory schedule for auctioning off public spectrum. “In just the same way that mergers result in job losses, creating and licensing multiple platforms for technology will create jobs,” says Reed Hundt, who was Bill Clinton’s highly successful FCC chair in the booming 1990s.

Defenders of Mr Wheeler say he will be keen to establish his distance from an oligopolistic industry that hired him as their advocate. They make the same argument, too, for Mary Jo White, the new chair of the Securities and Exchange Commission, who has spent her career representing Wall Street. Recent SEC moves give little cause for cheer. In isolation, bills such as Mr Delaney’s, or the rulings of federal agencies, do not match the importance, or scale, of the fiscal debate. But the US budget is stuck in the mud. And there are other sources of growth.

It is worth remembering that Keynes was a champion of the “middle way”. Yet foes, and occasionally friends, reduce him to a free-spending caricature. “I suggest that the state encouragement of new capital undertakings by employing the best technical advice … and by lending the credit and the guarantee of the Treasury to finance them more boldly, is becoming an inevitable policy,” Keynes wrote in the 1920s. These are the thoughts of an economist looking to the long term. With the possible exception of the final clause, they are also a good description of Mr Delaney’s bill.

In Britain, Our Sex Scandals Petraeus

My Comments: This whole episode is so mindbogglingly stupid that I simply shake my head in dismay. Yes, I know, hormonal activity is not something easily brushed aside, but this is a man with an allegedly iron will whose self discipline is legendary.

But, since this is Friday, I’m still exhausted by the recent election, and I come originally from Britain, where this article was written, I decided I ought to share with you what folks across the Atlantic are saying.

By Robert Shrimsley for The Financial Times

There is so much to enjoy in the Petraeus sex and society scandal convulsing the US establishment at the moment that one hardly knows where to begin; perhaps with a warning. There are people who look at incidents such as Gen Petraeus’ adultery and resignation as personal tragedies; they think of the families, the wives, the children and see nothing entertaining in it. If you are among that group, you may wish to read no further since this notebook takes the distasteful position that the whole thing is a rollicking great soap opera, complete with socialites, sex, jealousy, intrigue, betrayal, hubris and spies. Yes there are children but if their parents weren’t prepared to let that fact spoil their fun, why should we let it spoil ours?

As with many such events there will be red herrings and false trails. We are not at all sure whether the second general did, in fact, have an affair. Some strongly worded denials have been issued. We do not really know what exactly the second woman, Jill Kelley, might or might not have done, although we can certainly enjoy the sideshow of the glamorous socialite twins from Tampa, at least one of whom spent so much to become a “social ambassador” to the military that she could not meet her mortgage payments. The pair look like a subset of Kardashians and may yet secure their own mini series, Keeping up with the Kelleys. We would dearly love to know more about the “shirtless man” – the so far anonymous FBI agent whose initial investigations were the first push on the tower that has now toppled.

There is the delicious irony of the head of the CIA being unable to conjure up a more sophisticated method of covert communication than a shared Gmail address with his lover, Paula Broadwell. One shudders to think about the other great tradecraft they deployed. Was there a sophisticated number code in which 1 was A, 2 was B and so on? Did they have codenames such as snookiepoops and big bear? Did he wear a false moustache for illicit meetings or use spook euphemisms to obscure what was going on. “Snookiepoops@gmail.com: Target is on the move, wearing a halter-neck top and a lace-number. Expected to rendezvous: 1900 hours.”

But mostly, one simply watches the magnitude of this soap opera with a sense of awe at its sweep and scale, and reflects that we Brits are simply no longer in the game when it comes to this kind of thing. Yes, we can rustle up the odd bit of adultery but it’s either terribly low grade – mostly involving a middle-aged chap and his secretary – or genuinely sordid, involving rent boys, prostitutes or dead dogs. The principals are rarely glamorous. We haven’t had a world-beating sex scandal since Profumo. The royal family did its bit to maintain British viability during the 1990s – Diana, Princess of Wales certainly kept us on the world stage – but truthfully, we simply cannot deliver the richness, texture and panorama of a top US scandal. We are Ken Loach to America’s Steven Spielberg.

This is just one more symbol of our national decline. It is salutary to consider how this scandal might have looked in Britain. Instead of twins in Tampa holding huge parties for the troops we would be talking about spinsters in Aldershot organising cake sales and dances at the church hall. The affair itself might have taken place in a grace and favour residence but more likely it will have been at a Premier Inn off the M25.

We may have put on a good show during the Olympics but we should not delude ourselves that this puts us back in the big league. The UK has, at one time or another, invaded 90 per cent the world’s countries but when it comes to the bedroom front we can’t muster a surgical incursion worthy of international coverage.

What makes this harder to stomach is that we are also falling behind our European allies. France, for example, is still managing to strut its stuff on the world stage. Even when the scandals are less than scandalous they have an élan about them that shows the political class recognises its duty to boost national prestige. The former justice minister has just filed a paternity suit against a hotel tycoon; the president’s complex love life makes for good copy and, of course, he got the job only because the frontrunner was Dominique Strauss-Kahn. In Italy meanwhile, Silvio Berlusconi … need one say more? This, then, is one more challenge for David Cameron. We do not need him to take it on personally but somewhere, someone senior needs to make the ultimate career sacrifice. The country’s honour is at stake.

8 Stock Market Omens That Influence Investors

My Comments: For years I’ve sort of paid attention to omens; how else are you going to justify the bizarre outcomes that invevitably happen and influence how much money my clients end up with over the years. The tempatation, no matter how professional you try to be, is to respond to the advice of those whose skills you respect and whose track record is at least respectable.

A few years ago I decided that enough was enough and I found an approach that ignores omens. The single key ingredient of the approach is the ability of each program manager to evaluate what is happening on any given day, week and month and determine if the odds are better for being invested or staying in cash. Then add the ability to go short and/or leveraged, and the results have been nothing short of phenomenal.

If you’re tired of omens, give me a call.

This article comes from AdvisorOne.com and was written by Dan Berman.

Stock traders might like to believe markets rise and fall based on logic and cold facts, but deep down they know the truth is far more complicated. Emotions, a snippet of news about the economy and myriad other factors can send prices plummeting or rocketing skyward.

While some emotions are driven by the news and other information that has some factual basis, there are some “indicators” followed that are best called omens, or maybe superstitions. These are based on some observed phenomena seen as causing the markets to move.

A well-known example is trotted out every year as the Super Bowl nears. It holds that if the team from the National Football Conference wins the market will rise and vice-versa. There’s no reason this should be true, of course, but the statistics are trotted out each year.

And lest you think the upcoming presidential election has some predictive value, the data shows that whether the Republicans or Democrats win likely has no affect on the price of stocks.

There may not be anything substantive to stock market omens, but they are fun to think about. Here are AdvisorOne’s 8 Stock Market Omens That Influence Investors:
Continue Reading HERE...

Obama’s Next Task is to Split the GOP

My Comments: I have absolutely no idea how the next four years are going to work out for any of us. I am optimistic that it will be OK because for me the glass is always half full. It’s not in my nature to get wrapped up in woe and gloom.

For better or worse, Obama is in the White House, and if we want a solid future for our children and grandchildren, we have to take an adult approach to what are clearly adult problems. Picking up your ball and taking it home with you, whining all the way, is not going to cut it.

If Obama can find a way to work with whatever rational leadership there is in the GOP, then we can move forward on immigration, on reforming the tax system, and getting the deficit under control. My thinking is he can.

By Edward Luce | Financial Times

Last week the US equity markets gave their verdict on the election, ending the week more than 2 per cent down from the start. The market’s pessimism was clear: the probability rose on Tuesday night that the US will go over the fiscal cliff. To put it another way, Barack Obama’s win sharply reduced the Republican appetite to avert a fiscal crisis. Which seems about right.

There are occasions in a nation’s politics when the overhang of decisions can no longer be contained. In the case of America’s governability, this is the key equation: there is no path back to a half-decently functioning Washington that does not involve either a dramatic change of heart by the Republicans, or, less unlikely, a deepening split within it. Steep as they are, the stakes go far higher than the impending fiscal cliff.

Should the GOP remain united in opposition to Mr Obama (who has a broadly centrist approach to America’s economic challenges), the US will become cripplingly ungovernable. Look at California over the past generation. Alternatively, should the Republican party lose its iron discipline, and no longer reflexively act as a blocking minority in the Senate and a blocking majority in the House, events could turn out much better.

The difference between gridlock and a restored climate of pragmatism is stark. Were the GOP to continue to block everything Mr Obama proposes, America’s relative decline will accelerate. Conversely, if enough were regularly to dissent from their party’s suicide pact, all sorts of possibilities would open up. Think of immigration reform, a cleansing of America’s byzantine tax system, upgrading of US infrastructure, and even action on global warming.

There can be little doubt this is also Mr Obama’s prognosis. There are two reasons why his only realistic chance of success is to aim for a GOP split. The first is the reaction of most Republicans to last Tuesday’s defeat – a prospect that few, including Mitt Romney, had entertained. Many have observed that the Republican party is in denial. Republican strategists blame the loss on everything from media bias to Hurricane Sandy.

But the quandary runs far deeper than denial. Among the conservative Tea Party groups, Tuesday’s vote only confirmed that the US is heading rapidly in the wrong direction. In their account, Mr Obama’s Democrats have bribed enough of the undeserving poor with taxpayers’ money to fall into their camp. As it happens, most of them are non-white. Rush Limbaugh, the influential radio host, fretted last week that “we are outnumbered”.

Quoting Corinthians on her Facebook page, Sarah Palin crystallised the belief that the election was a call to arms, rather than a moment for reassessment. “We are persecuted, but not forsaken, struck down, but not destroyed,” the 2008 vice-presidential nominee wrote. This is the nativist wing of the Republican Party. Having in Mitt Romney fielded yet another Rino (Republican in name only), the party was punished for straying from its principles.

It is a view shared by other powerful strains in the party, including the anti-tax powerhouse led by Grover Norquist. Last Friday, Mr Norquist said that any Republicans thinking of wavering on their anti-tax pledge would “be punished even for impure thoughts”. Mr Norquist cited two of the four Republicans in the bipartisan Senate “Gang of Eight”, who are up for re-election in 2012, as “eminently primary-able” – vulnerable to conservative challenges.

The second thing going for a Republican split is there are also many who grasp the gravity of their party’s direction. Ronald Brownstein, the Washington journalist, captures the GOP’s demographic reality with his 80:40 rule. If Democrats win 80 per cent of the non-white vote and 40 per cent of the white vote, they are undefeatable. That is roughly what happened last Tuesday.

At the Republican convention in August a clock showed the national debt. It should have kept demographic time. In Texas, the bastion of today’s Republican party, the majority of schoolchildren are Hispanics. Each election, more will reach voting age. Some Republicans understand the import of this, among them probably John Boehner, the speaker (and figures such as former Florida Governor Jeb Bush).

Mr Obama’s goal will be to make it easier for Mr Boehner to argue for pragmatism within his party. But the US will first have to go over the cliff. Mr Boehner faces his own speakership election in January. He will not wish to jeopardise his grip by compromising on taxes before then. After the expiry of all the Bush tax cuts on January 1, he will be better placed to persuade some Republicans to vote for what would be packaged as a tax cut for 98 per cent of Americans – leaving the cause of the rich to another day. Thus, the US probably will go over the cliff. Whether, or how quickly, it will yo-yo back is harder to forecast.

As a Roman once said, the victor is not victor if the vanquished do not agree. Last week’s outcome left Washington’s division of spoils unaltered – Mr Boehner’s Republicans were returned to the majority. Through brinkmanship and seduction, Mr Obama must try to persuade enough Republicans to accept reality and then act on it. Whatever does happen, the next few months will offer gripping theatre. By February or March, we will be far wiser on the future of US governability.