I admit that when reading a Newscorp paper one should expect this and it has been a primary complaint of mine about the Wall Street Journal since Newscorp bought it.
But today, they slanted the news on something near and dear to my heart. The definition of a defaulted bond.
The facts were reported correctly. A Catastrophe Bond that protected an insurance company from loss claims arising from property damage caused by tornados is about to have principal reduced to pay such claims arising from the heavy tornado damage this past spring.
What I object to is that the WSJ repeatedly called this a default. My definition of a default is when a contractual payment is not made. The contract in this case says that the bond trustee will pay the insurance company the value of principal that the claims represent and the holders of the bond will have their principal value reduced. That is the deal and there is no failure to follow the contract. Therefore, it is not a default.
I never allowed Catastrophe bonds is my portfolios because you cannot predict the weather and no interest coupon compensates you for a loss of principal. Usually a loss of principal is a default but in this case it is not. Buyer beware of investment bankers promising you a good return on a portfolio of risks when you cannot assess the risk.
Wednesday, November 30, 2011
Monday, November 28, 2011
More Signs of Republican Priorities Favoring the Wealthy
Jon Kyl announced yesterday that he could not support the extension of the cut in Social Security Taxes. Now 1st let me say that I was never a big fan of this approach for reasons that have nothing to do with Economics 10 theory that I am about to review, but I have given in to this logic at this time since the Congress passed this in a bipartisan manner.
Now for what upsets me about what Jon Kyl said.
He wants to end this tax reduction because he believes it did not create any jobs. No tax policy creates jobs directly so this is not the proper analysis. Tax Policy affects Demand or Supply. Changes in Demand affect jobs.
So what does Senator Kyl propose? He wants to end this tax cut which does increase demand by giving every worker in the economy about $1000 more per year in their take home pay. Now while the higher income people probably just saved this additional take home pay (I know I did), lower and middle income people spent it. Reducing demand will reduce jobs.
Instead, he wants to cut the taxes of those who create jobs by limiting income taxes on the higher income people. But this will not stimulate demand. It will just increase the take home pay of the higher income people who will likely just save it as I did for my reduced FICA taxes. Higher income people do not change their base consumption patterns because their take home changes. Their savings rate goes up or down and perhaps their marginal luxury consumption changes.
What would incentivize a higher income person to create jobs? Well, demand for their products or services need to go up. It doesn't matter that their marginal tax rate is 28%, 31%, 35%, or 39%. They will create a job if demand for the product or service is there and if demand is not there, they will not create the job.
So what policies increase demand? The answer is policies that increase consumption of goods and services. This is classic Keynesian economics (and please remember I am primarily a believer in monetary economics in most instances) and our current situation is when Keynesian economics is to be relied upon. The government should be increasing consumption by spending money on infrastructure spending and paying for it by raising revenues from those who can afford it. We need less saving by the wealthy right now and they have been the primary beneficiaries of the Bush tax cuts. It is time for them to support the government that keeps them safe and provides the services that keep the country running.
Unfortunately, many of the unemployed need housing to come back. So the other thing that could be done is some comprehensive solution to the empty housing stock situation. I have seen a lot of ideas and I am beginning to think just knocking down any foreclosed house that has not been sold in 360 days is a good idea. RMBS holders might object however.
Finally, Grover Norquist who promotes this Republican nonsense gets 3 Pinocchio's from the Washington Post fact checker. It is rare that he gives out 3 noses.
http://www.washingtonpost.com/blogs/fact-checker/post/grover-norquist-a-misleading-accounting-of-recent-history/2011/11/27/gIQAAhER2N_blog.html?hpid=z3
Now for what upsets me about what Jon Kyl said.
He wants to end this tax reduction because he believes it did not create any jobs. No tax policy creates jobs directly so this is not the proper analysis. Tax Policy affects Demand or Supply. Changes in Demand affect jobs.
So what does Senator Kyl propose? He wants to end this tax cut which does increase demand by giving every worker in the economy about $1000 more per year in their take home pay. Now while the higher income people probably just saved this additional take home pay (I know I did), lower and middle income people spent it. Reducing demand will reduce jobs.
Instead, he wants to cut the taxes of those who create jobs by limiting income taxes on the higher income people. But this will not stimulate demand. It will just increase the take home pay of the higher income people who will likely just save it as I did for my reduced FICA taxes. Higher income people do not change their base consumption patterns because their take home changes. Their savings rate goes up or down and perhaps their marginal luxury consumption changes.
What would incentivize a higher income person to create jobs? Well, demand for their products or services need to go up. It doesn't matter that their marginal tax rate is 28%, 31%, 35%, or 39%. They will create a job if demand for the product or service is there and if demand is not there, they will not create the job.
So what policies increase demand? The answer is policies that increase consumption of goods and services. This is classic Keynesian economics (and please remember I am primarily a believer in monetary economics in most instances) and our current situation is when Keynesian economics is to be relied upon. The government should be increasing consumption by spending money on infrastructure spending and paying for it by raising revenues from those who can afford it. We need less saving by the wealthy right now and they have been the primary beneficiaries of the Bush tax cuts. It is time for them to support the government that keeps them safe and provides the services that keep the country running.
Unfortunately, many of the unemployed need housing to come back. So the other thing that could be done is some comprehensive solution to the empty housing stock situation. I have seen a lot of ideas and I am beginning to think just knocking down any foreclosed house that has not been sold in 360 days is a good idea. RMBS holders might object however.
Finally, Grover Norquist who promotes this Republican nonsense gets 3 Pinocchio's from the Washington Post fact checker. It is rare that he gives out 3 noses.
http://www.washingtonpost.com/blogs/fact-checker/post/grover-norquist-a-misleading-accounting-of-recent-history/2011/11/27/gIQAAhER2N_blog.html?hpid=z3
Sunday, November 27, 2011
Republican Consistency for No Fair Design for Deficit Reduction
Mr. Cain wanting to remain mainstream announced what he stood for today. Many other Republican candidates have voiced something similar.
Keep the troops in Afghanistan and do not pay for them by raising tax revenues.
How are they going to balance the budget? by cutting entitlements alone?
Keep the troops in Afghanistan and do not pay for them by raising tax revenues.
How are they going to balance the budget? by cutting entitlements alone?
Wednesday, November 23, 2011
Thanksgiving Musings
1st, I tried to copy a Bernie quote that shows he has been reading my blog, but as usual with technology challenges I failed. I don't usually have much in common with Bernie's thoughts but he does agree with me that a significant portion of the cumulative deficit over the last 10 years was caused by the unfunded war on terror and that it is wrong to pay for it on the backs of entitlements. Fix the entitlements and raise revenues to pay for the War on Terror. And it is OK to fix the tax code while raising the revenues.
For that I would be thankful this Thanksgiving. But it is unlikely to happen any time soon.
Some other things that people would be thankful for but are unlikely to happen any time soon.
Allow undocumented residents a path to citizenship and legality. Since most of them work and pay taxes, we will prevent GDP from sinking if 10% of the labor force suddenly disappears and that will make everybody thankful. Economics 10.
Control health care costs by doing sensible things that I have written about before. Everyone will be thankful except for those benefiting from the inefficiencies.
Bring some moderation back into political discussions. Both sides have good points when they stick to the middle. Government has a role but the primary responsibility is with the individual.
And libertarians have a point when they say drugs should be legal. Taking the profit out of the production and distribution will bring peace to many Latin American countries and inner cities. The profits can be used to pay for addiction treatment centers whereas today the tax payer pays for such treatment in jails. That will help many state budgets.
Have a nice holiday.
For that I would be thankful this Thanksgiving. But it is unlikely to happen any time soon.
Some other things that people would be thankful for but are unlikely to happen any time soon.
Allow undocumented residents a path to citizenship and legality. Since most of them work and pay taxes, we will prevent GDP from sinking if 10% of the labor force suddenly disappears and that will make everybody thankful. Economics 10.
Control health care costs by doing sensible things that I have written about before. Everyone will be thankful except for those benefiting from the inefficiencies.
Bring some moderation back into political discussions. Both sides have good points when they stick to the middle. Government has a role but the primary responsibility is with the individual.
And libertarians have a point when they say drugs should be legal. Taking the profit out of the production and distribution will bring peace to many Latin American countries and inner cities. The profits can be used to pay for addiction treatment centers whereas today the tax payer pays for such treatment in jails. That will help many state budgets.
Have a nice holiday.
Thomas Friedman Finally Adopts my View in Print
Obama has to push the country in the direction of the Simpson Bowles Commission. It is the most balanced path forward for the country and politically. Why he hasn't is a mystery to me.
http://www.nytimes.com/2011/11/23/opinion/friedman-go-big-mr-obama.html?ref=opinion
I just realized this a.m. that I have not been to a movie in over 3 months (I cannot remember what it was but it was at the Palace 9 in BTV) because of this moving and selling house stuff. I need to get out more.
http://www.nytimes.com/2011/11/23/opinion/friedman-go-big-mr-obama.html?ref=opinion
I just realized this a.m. that I have not been to a movie in over 3 months (I cannot remember what it was but it was at the Palace 9 in BTV) because of this moving and selling house stuff. I need to get out more.
Sunday, November 20, 2011
Confirming My View that $$$ Dominate Politics
60 Minutes ran a reaction to their story last week on Insider Trading by Members of Congress and their Staff's. Both Nancy Pelosi and John Boehner protested the story! I guess that is how everyone on the inside gets rich.
60 Minutes Profiling Grover Norquist
This is another thing that makes me angry. Not 60 minutes, but Grover Norquist.
He is so focused on Taxes that he is ignoring the need to pay for government. Osama bin Ladan forced the War on Terror after Bush II decided to cut taxes. But we have not raised taxes to pay for the War on Terror. We have borrowed the War on Terror and, by Grover's view, should pay for it by cutting spending on Social Security, Medicare and Medicaid.
Each of these have their own problems which need solutions specific to them without paying for the borrowed War on Terror.
If nothing else demanded voting Democratic I don't know what it is.
He is so focused on Taxes that he is ignoring the need to pay for government. Osama bin Ladan forced the War on Terror after Bush II decided to cut taxes. But we have not raised taxes to pay for the War on Terror. We have borrowed the War on Terror and, by Grover's view, should pay for it by cutting spending on Social Security, Medicare and Medicaid.
Each of these have their own problems which need solutions specific to them without paying for the borrowed War on Terror.
If nothing else demanded voting Democratic I don't know what it is.
Newt once favored "Compulsory Health Insurance"
Thank you Lexington, of the "Economist" for those of you who do not read it.
Now both Newt Gingrich and Mitt Romney are on the record as having favored that every individual be part of the health care system economically.
And the Republicans hate the Affordable Health Care Act because it says everyone should pay for the universal health care that the system already gives them.
This hypocrisy is the reason I write this blog with such anger some times!!!!!!
Now both Newt Gingrich and Mitt Romney are on the record as having favored that every individual be part of the health care system economically.
And the Republicans hate the Affordable Health Care Act because it says everyone should pay for the universal health care that the system already gives them.
This hypocrisy is the reason I write this blog with such anger some times!!!!!!
Pre-Thanksgiving Sunday Paper Musings
I have a lot to do today getting the most recent car load of stuff from VT into storage or off to Goodwill after we found what we could keep in the limited remaining apartment space. I fear that storage will run out of room today also. So I will be concise from here on.
The "Anybody But Mitt" news analysis today was most revealing in what it told me about conservative pundit reviews of Newt's Freddie Mac employment. Imagine what Fox, Bill O'Reilly and Rush Limbaugh would have said if this were payments to any Democrat. Fox, ignored the news focusing on Newt's polling numbers. B O'R called it "reasonable and normal". Rush blamed the media for releasing the news. My take away is that these guys have no principles as it relates to traditional financial relationships between the government and conservatives. They just object when it is someone non-conservative who gets the money. No wonder the Tea Party and Occupy Wall Street people are angry. If only there were more transparency on who exactly gets all this money. I assure you it is not most of the people who work in finance.
Ezekiel Emanuel has produced a fine series on that it will take to truly control health care costs. Unfortunately, it is a little hard to find on the NY Times website. But briefly, the last two articles focused on the two big areas of savings: (i) centralized billing to the insurance industry so there is not duplicative efforts for either the provider or the payor; (ii) paying for chronic care by "bundling" (that is a fixed price for service). This week he discusses how the latter will reduce the cost significantly (up to $80 billion per year; more than the $10 billion from malpractice reform which would help also). AND YES, BOTH OF THESE ARE INCENTIVIZED IN THE AFFORDABLE HEALTH CARE ACT THAT IS SO CRITICIZED BY REPUBLICANS AS FAILING TO ADDRESS COST CONTROLS.
Why do the Republicans focus on malpractice reform rather than changing fee for service to bundle payments? May I suggest following the money that fee for service provides to where it goes for political campaign contributions! It is always about the money.
So now for my cynical comment of the day. The absolute hatred for Obama is based upon his understanding that corporate america dominates the donation stream and corrupts policies to keep the flow government funds heading toward corporate america. This has pervaded the Supreme Court with Citizens United which codified Corporations as Individuals and now you almost have complete control of the system by Corporate money except for the President. If Obama is reelected he may be able to appoint a sufficient number of justices to overturn Citizens United. If Obama is defeated, it is almost certain that the Republican would appoint a sufficient number of justices to keep Citizens United in place for decades, if not forever. Any I still expect Governor Romney who has already stated unequivocally that Corporations are Individuals to be the Republican nominee. And we know Governor Romney respects Big Money since it made him wealthy.
And lastly, Thomas Friedman's column is "How About Better Parents". Well dah!!! RSL has been talking about the difference parental involvement makes in the class room for 35 years. For my younger readers, remember this "15 year old students who parents often read books with them during their early years show markedly higher test scores than students whose parents did not read to them". I have nothing more fondly remembered than reading to my son because I enjoyed it and he seemed to also, but it is nice to know there was another benefit.
The "Anybody But Mitt" news analysis today was most revealing in what it told me about conservative pundit reviews of Newt's Freddie Mac employment. Imagine what Fox, Bill O'Reilly and Rush Limbaugh would have said if this were payments to any Democrat. Fox, ignored the news focusing on Newt's polling numbers. B O'R called it "reasonable and normal". Rush blamed the media for releasing the news. My take away is that these guys have no principles as it relates to traditional financial relationships between the government and conservatives. They just object when it is someone non-conservative who gets the money. No wonder the Tea Party and Occupy Wall Street people are angry. If only there were more transparency on who exactly gets all this money. I assure you it is not most of the people who work in finance.
Ezekiel Emanuel has produced a fine series on that it will take to truly control health care costs. Unfortunately, it is a little hard to find on the NY Times website. But briefly, the last two articles focused on the two big areas of savings: (i) centralized billing to the insurance industry so there is not duplicative efforts for either the provider or the payor; (ii) paying for chronic care by "bundling" (that is a fixed price for service). This week he discusses how the latter will reduce the cost significantly (up to $80 billion per year; more than the $10 billion from malpractice reform which would help also). AND YES, BOTH OF THESE ARE INCENTIVIZED IN THE AFFORDABLE HEALTH CARE ACT THAT IS SO CRITICIZED BY REPUBLICANS AS FAILING TO ADDRESS COST CONTROLS.
Why do the Republicans focus on malpractice reform rather than changing fee for service to bundle payments? May I suggest following the money that fee for service provides to where it goes for political campaign contributions! It is always about the money.
So now for my cynical comment of the day. The absolute hatred for Obama is based upon his understanding that corporate america dominates the donation stream and corrupts policies to keep the flow government funds heading toward corporate america. This has pervaded the Supreme Court with Citizens United which codified Corporations as Individuals and now you almost have complete control of the system by Corporate money except for the President. If Obama is reelected he may be able to appoint a sufficient number of justices to overturn Citizens United. If Obama is defeated, it is almost certain that the Republican would appoint a sufficient number of justices to keep Citizens United in place for decades, if not forever. Any I still expect Governor Romney who has already stated unequivocally that Corporations are Individuals to be the Republican nominee. And we know Governor Romney respects Big Money since it made him wealthy.
And lastly, Thomas Friedman's column is "How About Better Parents". Well dah!!! RSL has been talking about the difference parental involvement makes in the class room for 35 years. For my younger readers, remember this "15 year old students who parents often read books with them during their early years show markedly higher test scores than students whose parents did not read to them". I have nothing more fondly remembered than reading to my son because I enjoyed it and he seemed to also, but it is nice to know there was another benefit.
Thursday, November 17, 2011
Occupy Wall Street is Losing Credibility
As I have written I am sympathetic with their anger at the Establishment for failing to manage the economy well which is the primary function of the Establishment. However, the OWS are showing their ignorance today and in general by continuing what they have been doing.
Today they hope to shut down the New York Stock Exchange. What are they going to do, pull the computer plugs out of the electric socket? Unbury the electricity lines from 150 feet under the street and cut them? Do this everywhere that stocks are traded? Don't they know the NYSE has lost a huge percent of its market share to computers somewhere else?
They have made their point. It is time for them to sleep at home, look for a job during the day and get involved in the political campaign of their choice to try and bring about change the only way it is going to occur; by getting politicians in office who can try and improve the management of the economy.
That is one of the primary roles of government and the one that the Republicans do not believe in and the role they failed to do during the Bush Administration causing this mess.
Today they hope to shut down the New York Stock Exchange. What are they going to do, pull the computer plugs out of the electric socket? Unbury the electricity lines from 150 feet under the street and cut them? Do this everywhere that stocks are traded? Don't they know the NYSE has lost a huge percent of its market share to computers somewhere else?
They have made their point. It is time for them to sleep at home, look for a job during the day and get involved in the political campaign of their choice to try and bring about change the only way it is going to occur; by getting politicians in office who can try and improve the management of the economy.
That is one of the primary roles of government and the one that the Republicans do not believe in and the role they failed to do during the Bush Administration causing this mess.
Wednesday, November 16, 2011
Herman Cain saw my last post
And today he endorsed State's Rights for Medical Marijuana.
I had something more profound to write tonight after a news report driving to VT today, but dinner with RedState caused me to forget what it was.
Maybe it will come back tomorrow.
I had something more profound to write tonight after a news report driving to VT today, but dinner with RedState caused me to forget what it was.
Maybe it will come back tomorrow.
Sunday, November 13, 2011
Thursday, November 10, 2011
Selling a House These Days is a Drag
RSL and I never wanted to have two homes and it only came about when the best job opportunity, after being downsized because I knew how to find a job, was in the lovely city of Burlington. This year we decided that another winter in BTV while working in a depressing situation could be improved on by retiring, selling our house and getting on with our lives in NYC.
Two weeks before we put our house on the market in March, an inferior house was listed for $560,000 and sold within two weeks. We later found out it sold for $530,000. So we listed for $575,00 and figured we'd be negotiated down, but our upgrades and view would get us an offer that we could negotiate with and be out of here by August 1.
Well, everyone loved our house but they had to sell something. Months go by and nothing sells. More units in our development come on the market undercutting us on price but they were not as nice. Nothing sells.
Finally, in August we start to hear that our potential buyers are getting offers and we might start to see some action. We lower our price by 3% to show we are willing to negotiate. No one makes us an offer because they think our price is fair but they have been so beaten up that they want to buy something for $400,000. Finally, someone offers us $475,000 and we tell them it needs to have a 5 handle to be considered. They offer $500,000 and we counter dropping another 2% trying to get to the middle which would be $525,000. They disappear and are never heard from again. A long time interested buyer sells their place and is so depressed by the process they buy a place, without giving us an offer, which when they are done fixing it up will be only $20,000 or so less than the $500,00 we would have taken at that point.
We decide that we have to get on with our life in NY so we hire a mover and schedule a move for early November while dropping our price to $524,000. Dreams of traveling Indonesia end to end are replaced by the issue of it is time to start looking for a job in NY.
Well, as the movers are packing the truck, we get an offer from someone who has been looking around for 3 weeks or so. $500,000; so we ask if there is any room to negotiate. No, take it or leave it. We take it but all ego in our superior value to that sale in March is trashed. The good news is we have an offer. The bad news is, of course, there are things to be addressed and I need to be in both NY and VT. So back & forth I will go.
I tried not to have too much invested in any particular price, but I did really want to go to Indonesia and that will have to wait as we did not get the price to make that a go. And my recommendation to anyone looking to sell. Make sure your home is attractive relative to the others around it. We are the only sale since that one in March because we had the nicest one and showed price flexibility. It got us the next sale. And do not get your ego tied up in any particular price. It is a buyer's market and they don't care whether it's your home or some desperate family somewhere else in your locale.
Bottom Line. 8 months on the market. Sale price 14% below asking. Trend for comparable sales (last vs this one) -10% but it has been a long time since something comparable was on the market.
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