2. The Fed is nervous.
In August the Fed warned that the economy had weakened, and it unveiled its latest weapon in the war against deflation: using the proceeds from the sale of mortgages to buy Treasury bonds. That should drive down long-term interest rates. Great news for mortgage borrowers. But hardly something one wants to hear when the Dow Jones Industrial Average is already north of 10000.
Tuesday, August 31, 2010
Monday, August 30, 2010
Why Market Risk May Be Higher Than You Think: Reason #1 of 5...
1. The stock market is already expensive.
Stocks are about 20 times cyclically-adjusted earnings, according to data compiled by Yale University economics professor Robert Shiller. That's well above average, which, historically, has been about 16. This ratio has been a powerful predictor of long-term returns. Valuation is by far the most important issue for investors.
Stocks are about 20 times cyclically-adjusted earnings, according to data compiled by Yale University economics professor Robert Shiller. That's well above average, which, historically, has been about 16. This ratio has been a powerful predictor of long-term returns. Valuation is by far the most important issue for investors.
Saturday, August 28, 2010
Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis
On Friday August 27 the S&P 500 closed @ 1065, and that was...
-1.2% BELOW its 12-Month moving average which stood @ 1078.
-4.3% BELOW its 40-Week moving average which stood @ 1113.
-1.2% BELOW its 10-Week moving average which stood @ 1078.
Therefore, the INTERMEDIATE-Term trend IS NEUTRAL and the LONG-Term trend is NEUTRAL.
Friday, August 27, 2010
Chart of The Day - Average Monthly Gains for the Dow Since 1950...
Except for a brief counter-trend rally in July, the stock market has struggled since peaking in late April. Investors are concerned.
For some perspective, today's chart presents the Dow's average performance for each calendar month since 1950. As today's chart illustrates, it is not unusual for the stock market to underperform during the May to October time frame with a brief counter-trend rally occurring in July.
It's worth noting that the worst calendar month for stock market performance (September) is upon us.
Also, note that the best 3-month period for stocks runs from November through January.
Thursday, August 26, 2010
Anemic Home Sales Could Sink The Recovery...
With home sales plunging to their lowest level in 15 years, economists warn that a double-dip in housing prices is just around the corner, threatening to further slow the recovery.
Existing home sales sank -27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Two months after the end of the tax credit, sales are -34% below April's tax incentive-induced peak.
"Home sales were eye-wateringly weak in July," said economist Paul Dales of Capital Economics. "It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, things could get a lot worse."
The sales pace of all homes -- single-family homes, town homes, condominiums, and co-ops -- is at the lowest since NAR began tracking the figure in 1999. Sales of single-family homes, which account for a bulk of the transactions, are at the lowest level since May 1995. Inventory has also continued to climb, rising +2.5% to 3.98 million existing homes for sale. That represents a 12.5-month supply at the current sales pace, the highest since October 1982 when it stood at 13.8 months. A 6-month supply is considered normal.
The housing market and the broader economy are closely intertwined. When housing prices collapse, so does the overall wealth and confidence of Americans.
"Falling housing prices strain the overall confidence in the economy and discourage Americans from spending," Dales said. "They also mean that banks lose money on their investments and curtail lending, meaning there is less money out there to invest and boost the economy."
Existing home sales sank -27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Two months after the end of the tax credit, sales are -34% below April's tax incentive-induced peak.
"Home sales were eye-wateringly weak in July," said economist Paul Dales of Capital Economics. "It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, things could get a lot worse."
The sales pace of all homes -- single-family homes, town homes, condominiums, and co-ops -- is at the lowest since NAR began tracking the figure in 1999. Sales of single-family homes, which account for a bulk of the transactions, are at the lowest level since May 1995. Inventory has also continued to climb, rising +2.5% to 3.98 million existing homes for sale. That represents a 12.5-month supply at the current sales pace, the highest since October 1982 when it stood at 13.8 months. A 6-month supply is considered normal.
The housing market and the broader economy are closely intertwined. When housing prices collapse, so does the overall wealth and confidence of Americans.
"Falling housing prices strain the overall confidence in the economy and discourage Americans from spending," Dales said. "They also mean that banks lose money on their investments and curtail lending, meaning there is less money out there to invest and boost the economy."
Wednesday, August 25, 2010
Existing Home Sales Plunge -27%
The latest report from the National Association of Realtors (NAR) shows that purchases of existing homes plunged -27.2% to a 3.83 million annual rate. The pace compares with the median forecast of a 4.65 million rate, according to a Bloomberg News survey.
The number of previously owned homes on the market rose +2.5% to 3.98 million. At the current sales pace, it would take 12.5 months to sell those houses, the highest since at least 1999 and compared with 8.9 months in June. The months’ supply of single-family homes at 11.9 months was the highest since 1983, NAR said. Sales last month fell in all 4 U.S. regions. Foreclosures are boosting the so-called shadow inventory, and competing with owners trying to sell properties.
Home seizures increased almost +4% in July from the previous month, with 325,229 properties last month getting a notice of default, auction or bank repossession, RealtyTrac Inc. said August 12.
Residential real estate may keep struggling for the rest of this year, while into “2011 and beyond, it is difficult to determine,” Richard Dugas, chief executive officer at Pulte Group Inc., said in an August 20 interview with Bloomberg Television. Pulte is the largest U.S. homebuilder by revenue.
“Demand is low across the country,” Dugas said. “You have record-low interest rates and excellent pricing, but consumer confidence eased. We really need the economy to improve and job creation to take hold before people feel comfortable stepping into a home.”
The number of previously owned homes on the market rose +2.5% to 3.98 million. At the current sales pace, it would take 12.5 months to sell those houses, the highest since at least 1999 and compared with 8.9 months in June. The months’ supply of single-family homes at 11.9 months was the highest since 1983, NAR said. Sales last month fell in all 4 U.S. regions. Foreclosures are boosting the so-called shadow inventory, and competing with owners trying to sell properties.
Home seizures increased almost +4% in July from the previous month, with 325,229 properties last month getting a notice of default, auction or bank repossession, RealtyTrac Inc. said August 12.
Residential real estate may keep struggling for the rest of this year, while into “2011 and beyond, it is difficult to determine,” Richard Dugas, chief executive officer at Pulte Group Inc., said in an August 20 interview with Bloomberg Television. Pulte is the largest U.S. homebuilder by revenue.
“Demand is low across the country,” Dugas said. “You have record-low interest rates and excellent pricing, but consumer confidence eased. We really need the economy to improve and job creation to take hold before people feel comfortable stepping into a home.”
Tuesday, August 24, 2010
China's Per Person GDP is Woeful...
China just surpassed Japan as the #2 country in the world in total Gross Domestic Product (GDP).
But after adjusting for GDP (Purchasing Power Parity) on a per-capita basis, China (at $6,567 per person) has a long way to go before it achieves "Superpower" status, considering that it ranks #102 according to the CIA, #99 according to the IMF, and #92 according to the World Bank.
In fact, on a per-capita basis in 2009, China ranked behind Namibia, Jamaica, Belize, Thailand, El Salvador, and Albania.
U.S. per-capita GDP currently stands at $46,400, or more than 7 times that of China.
U.S. household income currently is in the $50,0o0 neighborhood, or more than 20 times that of China, whose household income is roughly $2,500 per year.
And the last time the U.S. had per-capita GDP of $6,567 was back in 1932.
But after adjusting for GDP (Purchasing Power Parity) on a per-capita basis, China (at $6,567 per person) has a long way to go before it achieves "Superpower" status, considering that it ranks #102 according to the CIA, #99 according to the IMF, and #92 according to the World Bank.
In fact, on a per-capita basis in 2009, China ranked behind Namibia, Jamaica, Belize, Thailand, El Salvador, and Albania.
U.S. per-capita GDP currently stands at $46,400, or more than 7 times that of China.
U.S. household income currently is in the $50,0o0 neighborhood, or more than 20 times that of China, whose household income is roughly $2,500 per year.
And the last time the U.S. had per-capita GDP of $6,567 was back in 1932.
Monday, August 23, 2010
Japan-Like Decade of Deflation A ‘Real Threat,' Experts Say
Pullback in consumer spending and reluctant lending by banks lay the foundation for a lost decade...
By some measures, deflation in United States is no longer a question of if, but for how long and how deep.
“In a lot of ways the economy is soft and there's absolute deflation in things like computers, food and energy,” said Barnaby Levin, managing director at HighTower Advisors LLC, which controls $16 billion in client assets.
Of course, any talk of deflation these days conjures up images of Japan, where businesses and consumers have been hoarding cash since the early 1990s while prices of goods and services have steadily declined.
“I think a Japan-like lost decade is a real threat here for all kinds of reasons,” said Mr. Levin. “After the 2008 market meltdown it scared the heck out of all of us and everybody is now pulling back their spending just like our grandparents did during the depression.”
Read more here...
Japan-Like Decade of Deflation A ‘Real Threat,' Experts Say
Saturday, August 21, 2010
Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis
On Friday August 20 the S&P 500 closed @ 1072, and that was...
-0.7% BELOW its 12-Month moving average which stood @ 1079.
-3.7% BELOW its 40-Week moving average which stood @ 1113.
-1.1% BELOW its 10-Week moving average which stood @ 1084.
Therefore, the INTERMEDIATE-Term trend IS NEUTRAL and the LONG-Term trend is NEUTRAL.
Friday, August 20, 2010
Pimco's El-Erian: Investors Should Prep for 'Major Structural Changes'
Investors should prepare for “major structural changes” as the economy shifts to consistently slower global growth, according to Mohamed A. El-Erian, chief executive officer at Pacific Investment Management Co.
“Forget about being hostage to mindsets that are very cyclical and look broader, because there are some major structural changes -- there's some major realignment both at the national level and at the global level,” he said in a radio interview today on “Bloomberg Surveillance” with Tom Keene. “When you are on a bumpy journey to a new normal, the unthinkable and the improbable become probable.”
Global growth will be below average during the next 3 to 5 years as developed economies struggle with mounting deficits and increased regulation in the wake of the 2008 collapse of credit markets, according to Pimco.
“Forget about being hostage to mindsets that are very cyclical and look broader, because there are some major structural changes -- there's some major realignment both at the national level and at the global level,” he said in a radio interview today on “Bloomberg Surveillance” with Tom Keene. “When you are on a bumpy journey to a new normal, the unthinkable and the improbable become probable.”
Global growth will be below average during the next 3 to 5 years as developed economies struggle with mounting deficits and increased regulation in the wake of the 2008 collapse of credit markets, according to Pimco.
Pimco's investment strategy has been to shift to higher- quality assets and pursue investments in different parts of the world, El-Erian said.
The $234 billion Total Return Fund managed by Pimco co- founder Bill Gross has returned +13% the past year, beating 64% of its peers, according to data compiled by Bloomberg.
The Federal Reserve's decision to reinvest principal payments on mortgage holdings into Treasuries didn't assuage investor concern, and the central bank may not have the appropriate tools to address all of the economy's problems, according to El-Erian.
“We should not over-depend on the Fed,” he said. “The Fed does not have enough instruments for what we're looking at. You need other agencies to get involved. We're not getting any structural solutions.”
The Fed reversed plans on August 10 to exit from aggressive monetary stimulus and decided to keep its bond holdings level to support an economic recovery that it described as weaker than earlier anticipated. Central bankers adopted a $2.05 trillion floor for their securities portfolio, pivoting toward a quantitative target for monetary policy.
Pimco, which has been synonymous with bonds for almost 4 decades, in the past year has created an equity mutual fund and a unit to invest in hedge, real estate and buyout funds. Newport Beach, California-based Pimco has also started 10 exchange- traded funds.
The company, which managed more than $1.1 trillion of assets as of June 30, according to its website, is a unit of the Munich-based insurer Allianz SE.
Pimco's El-Erian: Investors Should Prep for 'Major Structural Changes'
Thursday, August 19, 2010
Home Equity Loan Defaults Balloon
According to the American Bankers Association (ABA), lenders wrote off $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows.
So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter. Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar.
“People got 90 cents for free,” says Christopher A. Combs, a real estate lawyer. “It rewards immorality, to some extent.”
The amount of bad home equity loan business during the boom is incalculable and in retrospect inexplicable, housing experts say. Most of the debt is still on the books of the lenders, which include Bank of America, Citigroup and JPMorgan Chase.
“No one had ever seen a national real estate bubble,” said Keith Leggett, a senior economist with the American Bankers Association. “We would love to change history so more conservative underwriting practices were put in place.”
The delinquency rate on home equity loans was 4.12% in the 1st quarter, down slightly from the fourth quarter of 2009, when it was the highest in 26 years of such record keeping.
So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter. Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar.
“People got 90 cents for free,” says Christopher A. Combs, a real estate lawyer. “It rewards immorality, to some extent.”
The amount of bad home equity loan business during the boom is incalculable and in retrospect inexplicable, housing experts say. Most of the debt is still on the books of the lenders, which include Bank of America, Citigroup and JPMorgan Chase.
“No one had ever seen a national real estate bubble,” said Keith Leggett, a senior economist with the American Bankers Association. “We would love to change history so more conservative underwriting practices were put in place.”
The delinquency rate on home equity loans was 4.12% in the 1st quarter, down slightly from the fourth quarter of 2009, when it was the highest in 26 years of such record keeping.
Wednesday, August 18, 2010
Please - No More Stimulus!
Canada has been cutting spending and tax rates for the past decade or so. If Keynesians are right, the U.S. economy should be outperforming the Canadian economy now and Canada should have done better back in the 1980s and 1990s, right?
Wrong. It's the opposite.
The unemployment rate in Canada is currently 8% and has been below the U.S. level since October 2008, when government spending started to go crazy.
The lesson is clear: Less spending, less taxing and more freedom work.
Let's not stimulate anymore. The U.S. economy just can't take it.
Wrong. It's the opposite.
The unemployment rate in Canada is currently 8% and has been below the U.S. level since October 2008, when government spending started to go crazy.
The lesson is clear: Less spending, less taxing and more freedom work.
Let's not stimulate anymore. The U.S. economy just can't take it.
Tuesday, August 17, 2010
New Record for 30-Year Mortgage Rate
Here we go again setting new mortgage-rate records!
Freddie Mac's weekly report said the 30-year fixed rate slipped to 4.44% for the week ended Thursday, the lowest since it began tracking the rate in 1971. Last week's rates stood at 4.49%, and a year ago it was at 5.29%.
The 15-year fixed rate fell to 3.92% this week, the lowest since Freddie Mac began tracking it 1991, down from 3.95% last week and from 4.68% a year ago.
Adjustable-rate mortgages also declined, with the 5-year rate falling to 3.56% this week, the lowest since 2005 when the lender began tracking it.
Mortgage tracker Bankrate.com, which surveys large lenders across the country, said the average 30-year fixed loan sank to a record low for the fourth consecutive week, falling to 4.57% from 4.66% the previous week.
The 15-year fixed rate, which is a popular option for refinancing, also fell to the lowest level in the history of Bankrate's 25-year old survey, dipping to 4.06%, from 4.11% the week before.
While the 1-year adjustable-rate mortgage held steady at 4.8% for a fourth week, the 5-year adjustable-rate mortgage dropped to a record low of 3.92% from 3.95% the previous week.
Freddie Mac's weekly report said the 30-year fixed rate slipped to 4.44% for the week ended Thursday, the lowest since it began tracking the rate in 1971. Last week's rates stood at 4.49%, and a year ago it was at 5.29%.
The 15-year fixed rate fell to 3.92% this week, the lowest since Freddie Mac began tracking it 1991, down from 3.95% last week and from 4.68% a year ago.
Adjustable-rate mortgages also declined, with the 5-year rate falling to 3.56% this week, the lowest since 2005 when the lender began tracking it.
Mortgage tracker Bankrate.com, which surveys large lenders across the country, said the average 30-year fixed loan sank to a record low for the fourth consecutive week, falling to 4.57% from 4.66% the previous week.
The 15-year fixed rate, which is a popular option for refinancing, also fell to the lowest level in the history of Bankrate's 25-year old survey, dipping to 4.06%, from 4.11% the week before.
While the 1-year adjustable-rate mortgage held steady at 4.8% for a fourth week, the 5-year adjustable-rate mortgage dropped to a record low of 3.92% from 3.95% the previous week.
Monday, August 16, 2010
Most Seniors Confused About New Health Reform Law...
A survey by Harris Interactive finds most seniors are confused about many important aspects of the new health reform law, including how it will affect their own Medicare coverage:
22% understood that the new law would not cut their basic Medicare benefits.
14% were aware that the new law is projected to reduce the budget deficit.
14% knew that the law does not cut Medicare payments to doctors.
24% of seniors knew that it is projected to extend the solvency of the Medicare Trust Fund.
22% knew about improvements in chronic care.
28% knew that the law improves the availability of long-term care at home.
33% knew about the new, free yearly Medicare wellness visit.
Source: National Council on Aging
22% understood that the new law would not cut their basic Medicare benefits.
14% were aware that the new law is projected to reduce the budget deficit.
14% knew that the law does not cut Medicare payments to doctors.
24% of seniors knew that it is projected to extend the solvency of the Medicare Trust Fund.
22% knew about improvements in chronic care.
28% knew that the law improves the availability of long-term care at home.
33% knew about the new, free yearly Medicare wellness visit.
Source: National Council on Aging
Saturday, August 14, 2010
Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis
On Friday August 13 the S&P 500 closed @ 1079, and that was...
-0.2% BELOW its 12-Month moving average which stood @ 1081.
-3.1% BELOW its 40-Week moving average which stood @ 1114.
-0.6% BELOW its 10-Week moving average which stood @ 1086.
Therefore, the INTERMEDIATE-Term trend IS NEUTRAL and the LONG-Term trend is NEUTRAL.
Friday, August 13, 2010
USA Today Poll: Faith in Social Security System Tanking
WASHINGTON — Battered by high unemployment and record home foreclosures, most Americans seem to have lost faith in another fundamental part of their personal finances: Social Security.
A USA TODAY/Gallup Poll finds that a majority of retirees say they expect their current benefits to be cut, a dramatic increase in the number who hold that view.
And a record 6 of 10 non-retirees predict Social Security won't be able to pay them benefits when they stop working.
Skepticism is highest among the youngest workers: 75% of those 18 to 34 don't expect to get a Social Security check when they retire.
A USA TODAY/Gallup Poll finds that a majority of retirees say they expect their current benefits to be cut, a dramatic increase in the number who hold that view.
And a record 6 of 10 non-retirees predict Social Security won't be able to pay them benefits when they stop working.
Skepticism is highest among the youngest workers: 75% of those 18 to 34 don't expect to get a Social Security check when they retire.
Thursday, August 12, 2010
How the New Wealth Taxes Will Punish You - WSJ.com
The health-care bill that Congress passed in March contained two surprising new taxes to help pay for the changes: an extra 0.9% levy on wages for couples earning more than $250,000 ($200,000 for singles) and a new 3.8% tax on investment income on those same people (technically, people with "adjusted gross incomes" above those amounts).
Each tax signals a radical change in tax policy.
For workers, the extra 0.9% levy puts a progressive element in what used to be a totally flat tax.
The 3.8% tax on investment income also knocks down a longstanding wall by applying a "payroll" tax to unearned income.
Until now, FICA taxes for Social Security and Medicare have applied only to wages, not investment income.
Read more here...
How the New Wealth Taxes Will Hit You - WSJ.com
Each tax signals a radical change in tax policy.
For workers, the extra 0.9% levy puts a progressive element in what used to be a totally flat tax.
The 3.8% tax on investment income also knocks down a longstanding wall by applying a "payroll" tax to unearned income.
Until now, FICA taxes for Social Security and Medicare have applied only to wages, not investment income.
Read more here...
How the New Wealth Taxes Will Hit You - WSJ.com
Wednesday, August 11, 2010
The Retirement Outlook is Distressing for Many...
7 out of 10 (71%) of adults aged 25 and older said they were personally in control of their finances and make financial decisions themselves.
45% believe poor financial markets will leave them with less money in retirement.
Half of those who are not yet retired (48%) believe they will not have enough money to maintain their current lifestyle in retirement.
Half of those already retired (53%) are concerned about their current financial situation.
Half of those with 401(k)s have balances of less than $5,000!
7 out of 10 adults not yet retired (69%) say they have a lot more to do financially before they are ready to retire.
Tuesday, August 10, 2010
Quote of The Day: John Adams on The National Debt...
"There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt."
-John Adams, US President
-John Adams, US President
Monday, August 9, 2010
20 Million Underwater Mortgages by 2012?
More than 14 million borrowers were underwater as of Q1 2010, and with a further 10.8% decline in house prices expected relative to Q4 2009 levels, another 6 million borrowers are likely fall into negative equity by the end of 2011, according to commentary by Deutsche Bank.
The presence of negative equity goes hand-in-hand with an increased likelihood of strategic default, as borrowers may sometimes not be willing to pay the mortgage when the house has lost substantial amounts of value.
The firm noted that, even when strategic default makes economic sense, many borrowers resist on moral and social grounds, as well as from fear of legal consequences. The existence of recourse — when a lender is able to pursue a borrower's other assets — also acts as a disincentive against strategic default.
Deutsche Bank noted 11 states are considered non-recourse — though not all explicitly forbid deficiency judgments on homes or on purchase loans. Underwater borrowers are more likely to default in non-recourse states. The greater the negative equity, the higher the cumulative default rate.
"Walk away or strategic default from a house with negative equity makes economic sense, especially in locations that have less expensive rentals," Deutsche Bank researchers said.
Many existing academic studies model homeowners' default decision based on the theoretical hypothesis that a borrower would exercise a default when it is in-the-money, i.e., when the borrower's house has negative equity.
Therefore, a homeowner with negative equity would default even though they can still afford to make their mortgage payments.
The presence of negative equity goes hand-in-hand with an increased likelihood of strategic default, as borrowers may sometimes not be willing to pay the mortgage when the house has lost substantial amounts of value.
The firm noted that, even when strategic default makes economic sense, many borrowers resist on moral and social grounds, as well as from fear of legal consequences. The existence of recourse — when a lender is able to pursue a borrower's other assets — also acts as a disincentive against strategic default.
Deutsche Bank noted 11 states are considered non-recourse — though not all explicitly forbid deficiency judgments on homes or on purchase loans. Underwater borrowers are more likely to default in non-recourse states. The greater the negative equity, the higher the cumulative default rate.
"Walk away or strategic default from a house with negative equity makes economic sense, especially in locations that have less expensive rentals," Deutsche Bank researchers said.
Many existing academic studies model homeowners' default decision based on the theoretical hypothesis that a borrower would exercise a default when it is in-the-money, i.e., when the borrower's house has negative equity.
Therefore, a homeowner with negative equity would default even though they can still afford to make their mortgage payments.
Saturday, August 7, 2010
Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis
On Friday August 6 the S&P 500 closed @ 1123, and that was...
+3.2% ABOVE its 12-Month moving average which stood @ 1087.
+0.7% ABOVE its 40-Week moving average which stood @ 1114.
+3.5% ABOVE its 10-Week moving average which stood @ 1084.
Therefore, the INTERMEDIATE-Term trend IS NEUTRAL and the LONG-Term trend is NEUTRAL.
Friday, August 6, 2010
Why The Rich ARE Paying More Than Their Fair Share...
The top 5% of wage earners pay 60.6% of federal income taxes, while earning 37% of adjusted gross income.
The top 10% pay 71.2% of income taxes, while earning 48% of adjusted gross income.
The bottom 50% of income earners pay only 2.9% of federal income taxes.
The top 1% of income earners pay 40.4% of all federal income taxes, almost twice their share of adjusted gross income.
By contrast, the bottom 95% of income earners pay 39.4% of all federal income taxes.
That means the TOP 1% of income earners pay MORE federal income taxes than the BOTTOM 95%!
The top 10% pay 71.2% of income taxes, while earning 48% of adjusted gross income.
The bottom 50% of income earners pay only 2.9% of federal income taxes.
The top 1% of income earners pay 40.4% of all federal income taxes, almost twice their share of adjusted gross income.
By contrast, the bottom 95% of income earners pay 39.4% of all federal income taxes.
That means the TOP 1% of income earners pay MORE federal income taxes than the BOTTOM 95%!
Thursday, August 5, 2010
Senior Americans Have More Purpose, Focus & Vision
Older Americans report having more feelings of purpose, focus and life vision than younger Americans...
59% of a 45- to 74-year age group surveyed said their lives have purpose, versus 47% of those aged 25- to 44-years
62% of the surveyed 45- to 74-years-olds say they have focus, while only 45% of the age group 25-44 report having focus
55% of the older age group said they have vision for the future, versus 43% of the 25-44 year-olds
Source: Metlife Mature Market Institute
Wednesday, August 4, 2010
Strong Earnings Growth Doesn't Typically Foreshadow Significant Market Rallies
One reason why the current earnings season has not done much to push prices higher is from an historical standpoint, stock returns tend to peter out when earnings soar.
Contrary to conventional wisdom, Ned Davis Research shows that when year-over-year changes in the S&P 500 earnings are +20% or higher, the market gains just +1.5% per year.
However, when 12-month earnings growth has been between
-10% and -25%, stocks have soared at more than +26% per year.
Contrary to conventional wisdom, Ned Davis Research shows that when year-over-year changes in the S&P 500 earnings are +20% or higher, the market gains just +1.5% per year.
However, when 12-month earnings growth has been between
-10% and -25%, stocks have soared at more than +26% per year.
Tuesday, August 3, 2010
High-Yield Funds Take Big Inflows
High-yield bond funds took in nearly $1 billion for the week ending July 28 for the 3rd largest weekly inflow of the year, according to a report published by Lipper FMI.
Junk bonds funds took in $976 million for the week ending July 28, the third straight week of inflows. This brings the 4-week average to almost $700 million, the largest since May 2009.
High-yield funds have taken in a total of $3.64 billion for the year and have had positive flows for 5 of the last 7 weeks.
High-yield funds have taken in a total of $3.64 billion for the year and have had positive flows for 5 of the last 7 weeks.
Monday, August 2, 2010
Bleak Outlook for 2011
According to an Associated Press (AP) survey of leading economists, the U.S. economic recovery will remain slow deep into next year, held back by shoppers reluctant to spend and employers hesitant to hire.
The AP survey compiles forecasts of leading private, corporate and academic economists on a range of indicators, including employment, consumer spending and inflation.
Among their forecasts: Economic growth the rest of this year and early next year will weaken, to less than 3%. From January through May, the economy grew at roughly a 3.5% pace; the unemployment rate will be no lower at the end of the year than it is now; 9.5%.
A majority think it will be 2015 or later before the rate falls to a historically normal 5%. State budget shortfalls pose a "significant" or "severe" risk to the national economy. The loss of tax revenue has forced state and local governments to cut services and lay off workers.
The economists have turned more pessimistic since the recovery hit turbulence in May. Europe's debt crisis sent tremors through Wall Street, causing stocks to tumble and raising doubts about the durability of the rebound. Since then, businesses have been slow to step up hiring. Americans' confidence in the economy has declined, leading shoppers to reduce spending. And the housing market has weakened further with the end of a homebuyer tax credit that had buoyed sales earlier this year.
Consumers aren't leading this rebound, as they usually do, despite ultra-low borrowing costs. Their spending growth will weaken in the second half of this year and strengthen only slightly next year, a majority of economists said. They think shoppers' reluctance to spend more money poses a "significant" or "severe" risk to the recovery.
"It seems like we hit an air pocket in consumer spending," said survey participant Richard DeKaser, president of Woodley Park Research.
The AP survey compiles forecasts of leading private, corporate and academic economists on a range of indicators, including employment, consumer spending and inflation.
Among their forecasts: Economic growth the rest of this year and early next year will weaken, to less than 3%. From January through May, the economy grew at roughly a 3.5% pace; the unemployment rate will be no lower at the end of the year than it is now; 9.5%.
A majority think it will be 2015 or later before the rate falls to a historically normal 5%. State budget shortfalls pose a "significant" or "severe" risk to the national economy. The loss of tax revenue has forced state and local governments to cut services and lay off workers.
The economists have turned more pessimistic since the recovery hit turbulence in May. Europe's debt crisis sent tremors through Wall Street, causing stocks to tumble and raising doubts about the durability of the rebound. Since then, businesses have been slow to step up hiring. Americans' confidence in the economy has declined, leading shoppers to reduce spending. And the housing market has weakened further with the end of a homebuyer tax credit that had buoyed sales earlier this year.
Consumers aren't leading this rebound, as they usually do, despite ultra-low borrowing costs. Their spending growth will weaken in the second half of this year and strengthen only slightly next year, a majority of economists said. They think shoppers' reluctance to spend more money poses a "significant" or "severe" risk to the recovery.
"It seems like we hit an air pocket in consumer spending," said survey participant Richard DeKaser, president of Woodley Park Research.
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