I posted the other day on how Greek and French are not as hard working as say Germans. I have heard this but I wrote it without stats. I have now looked up some stats, and here they are from CNBC:
U.S.
Average hours per week: 33.8
Per capita income: $46,400
Average vacation days; 25
Tax range: 10-35%
Statutory retirement age: 65
Germany
Average hours per week: 35.5
Per capita income: $34, 200
Average vacation days: 30
Tax range: 0-45%
Statutory retirement age: 65
China
Average hours per week: 44
Per capita income: $6,500
Average vacation days: 21
Tax range: 5-45%
Statutory retirement age: men 60 women 50
UK
Average hours per week: 37
Per capita income: $35,400
Average vacation days: 36
Tax range: 20-40%
Statutory retirement age: men 60 women 55
Greece
Average hours per week: 42.4
Per capita income: $32,100
Average vacation days: 37
Tax range: 27-40%
Statutory retirement age: 65
France
Average hours per week: 38
Per capita income: $32,800
Average vacation days: 40
Tax range: 0-40%
Statutory retirement age: 60
There are a lot more countries covered at the site, which you can find here:
http://www.cnbc.com/id/36017324/Workers_Country_By_Country
So, if these stats are accurate, the U.S. work week is pretty short compared to most (I note it has grown shorter during the recession due to part time workers and cut back hours), but we get less vacation than most and are generally forced to retire later than most, though not all. Rumors of the Greek being lazy may not be accurate, though nothing here dispels information that tax cheating is rampant there. So much for rumor or word of mouth.
Disclosures: None
Saturday, August 20, 2011
Thursday, August 18, 2011
Dreaming of 2008
I note that the DOW was down over 400 points today but it was only the fourth largest decline this month. Lest you missed it, today was the 18th. Seems like 2008 all over again. Problem is, I think we had some advantages then over where we are today.
Let's go back in the way back machine to those frothy days in 2008. Lehman collapsed and confidence was lost. No one would lend to anyone else in the financial world and we were seemingly on the verge of complete financial meltdown. Fortunately, governments around the world had the resources to come in and save the day. They propped up failing "to-big-to-fail" institutions, gave out a lot of virtually interest free money and gave that can the biggest kick of its life.
I for one did not like the government reaction. More big institutions should have been dismantled. Some, who were pushed on other big institutions should have simply failed - just ask BofA laboring with its CountryWide acquisition. Moral hazard was not avoided; it was built up to enormous proportions. And those were the good old days.
Today, the very institutions that saved us from disaster are now the cause of the current problems. Sovereign debt is at unmanageable levels in much of the EU and getting there in the U.S. Banks, unfortunately, are still heavily exposed to losses, especially due to sovereign debt they own. This is not isolated to the EU banks. Yes, they have the direct exposure but U.S. banks have nearly as much indirect exposure on derivatives. We are all connected now.
So the banks are still in trouble and the governments that bailed them out are also in trouble. The bullets in the U.S. stimulus gun are spent (though I am still anticipating QE3, which will achieve nothing), and to add to the pain, we are cutting spending at a time when the economy is on the brink. The PIIGS, already in a recession, are being forced to do the same big time, which will certainly add to their problems over the short to mid-term. The economy in the EU is stagnant at best, with Italy showing the best performance at .3% growth. Japan - out of the question. China - cutting back. In short, trouble lies ahead however you spell it.
At its base, this is a confidence game. When the investors/speculators lose confidence, the money dries up for financial institutions and sovereign entities alike. And when that happens, it will not be pretty. I sense we are getting close. One major bad move in the EU, U.S., China or the like could push us over the line and destroy confidence, which is precarious at best at the moment. Confidence, like it or not, is fickle, and world economies being tied to it when S&P is on a downgrade tear is not a good thing. Perhaps they thought they were doing the principled thing in downgrading the U.S., but perhaps they were doing something even more stupid than giving mortgaged backed investments AAA status when they deserved FFF. S&P deserves all the government investigation they can get for their continued irresponsible ways.
Obviously part of the market turmoil today was due to Morgan Stanley saying the U.S. and Europe are on the brink of recession. Citigroup came out with a somewhat better forecast after the close, so we will see how the market digests that, though Asian markets are down as I write:
http://www.bloomberg.com/news/2011-08-19/u-s-gdp-growth-estimates-cut-at-citigroup.html
Let's Cover Some Ups and Downs Today
Unemployment up, existing housing sales down, inflation up, mid-Atlantic manufacturing down, gold up, markets down, mutual fund withdrawals up, Antartic ice down. Okay, that should be enough.
I am on the sidelines and plan to stay there for a while. After all, how many people are currently anticipating that the economy will take off and the stock market will climb significantly? Seriously, how many?
Disclosures: I have no positions in anything mentioned herein and do not anticipate taking any for at least 72 DAYS.
Disclosures: None
Let's go back in the way back machine to those frothy days in 2008. Lehman collapsed and confidence was lost. No one would lend to anyone else in the financial world and we were seemingly on the verge of complete financial meltdown. Fortunately, governments around the world had the resources to come in and save the day. They propped up failing "to-big-to-fail" institutions, gave out a lot of virtually interest free money and gave that can the biggest kick of its life.
I for one did not like the government reaction. More big institutions should have been dismantled. Some, who were pushed on other big institutions should have simply failed - just ask BofA laboring with its CountryWide acquisition. Moral hazard was not avoided; it was built up to enormous proportions. And those were the good old days.
Today, the very institutions that saved us from disaster are now the cause of the current problems. Sovereign debt is at unmanageable levels in much of the EU and getting there in the U.S. Banks, unfortunately, are still heavily exposed to losses, especially due to sovereign debt they own. This is not isolated to the EU banks. Yes, they have the direct exposure but U.S. banks have nearly as much indirect exposure on derivatives. We are all connected now.
So the banks are still in trouble and the governments that bailed them out are also in trouble. The bullets in the U.S. stimulus gun are spent (though I am still anticipating QE3, which will achieve nothing), and to add to the pain, we are cutting spending at a time when the economy is on the brink. The PIIGS, already in a recession, are being forced to do the same big time, which will certainly add to their problems over the short to mid-term. The economy in the EU is stagnant at best, with Italy showing the best performance at .3% growth. Japan - out of the question. China - cutting back. In short, trouble lies ahead however you spell it.
At its base, this is a confidence game. When the investors/speculators lose confidence, the money dries up for financial institutions and sovereign entities alike. And when that happens, it will not be pretty. I sense we are getting close. One major bad move in the EU, U.S., China or the like could push us over the line and destroy confidence, which is precarious at best at the moment. Confidence, like it or not, is fickle, and world economies being tied to it when S&P is on a downgrade tear is not a good thing. Perhaps they thought they were doing the principled thing in downgrading the U.S., but perhaps they were doing something even more stupid than giving mortgaged backed investments AAA status when they deserved FFF. S&P deserves all the government investigation they can get for their continued irresponsible ways.
Obviously part of the market turmoil today was due to Morgan Stanley saying the U.S. and Europe are on the brink of recession. Citigroup came out with a somewhat better forecast after the close, so we will see how the market digests that, though Asian markets are down as I write:
http://www.bloomberg.com/news/2011-08-19/u-s-gdp-growth-estimates-cut-at-citigroup.html
Let's Cover Some Ups and Downs Today
Unemployment up, existing housing sales down, inflation up, mid-Atlantic manufacturing down, gold up, markets down, mutual fund withdrawals up, Antartic ice down. Okay, that should be enough.
I am on the sidelines and plan to stay there for a while. After all, how many people are currently anticipating that the economy will take off and the stock market will climb significantly? Seriously, how many?
Disclosures: I have no positions in anything mentioned herein and do not anticipate taking any for at least 72 DAYS.
Disclosures: None
Wednesday, August 17, 2011
Is It Gerance or Framany?
Germany and France have been talking a lot and have a lot of talking to do. They are discussing closer ties in the EU, especially among the two of them as they seem to be largely calling the shots. Yet they are not yet proposing a single Euro bond to support the spending needs of all countries in the EU. In other words, the voters in Germany and France will vote their leaders out if such an overt move is made toward their countries bearing the burden for those PIIGS. Now I realize that folks in Germany may view Greeks as being lazy and over paid, but the French have never hit me as the hardest working individuals. I am not meaning this as an insult as long lunches, lots of vacation and a more relaxed work environment are perhaps beneficial to doing good work, but it is hard for the French to look upon the Greek as lazy.
We had an office in France and sent a manager over from the U.S. to figure out what was going on there. After a year, he could not figure out at all what three people did in the office. We closed it, even though that cost more than keeping it open due to French laws on what we had to pay to those we laid off. All the work from dozens of people in that office was transferred to another office and they did not have to hire anyone to take it. Just saying . . .
It is stuff like this that drives voters crazy in Germany. I just read today that jobs paying 70,000 euros in Germany pay 100,000 euros in Greece, and the Germans do a better job. Imagine that German worker now being asked to support the higher paid Greek when the higher paid Greek is complaining about perhaps having to deal with longer hours, less pay, fewer benefits, later retirement and the like (all of which are categories where the German worker is already behind the higher paid Greek). And it is no small secret that cheating on taxes is rampant in Greece. If we had a state in the U.S. that did this and looked to the federal government to be bailed out, I think a lot of other states would revolt.
Okay, let's visit this last thought for a moment. As I write this I am sitting in a house in Del Mar, California, that my family and some friends are renting for the week. Very reasonable at $1500 for the week. The house across the street with no ocean views is for sale for $2.3 million. Probably one out of five cars in this area cost over $50,000. The streets are clean as they clean them. Every major road has bike lanes. They have beautifully maintained parks and beaches. I have never seen so many cars in my life and so little public transportation. Indeed, I was in a traffic jam the other night on a highway that had eight - yes EIGHT - lanes going in my direction and it jammed as these were going down to seven. A fair percentage of these people have a fantastic life, but they also have a state deficit well north of $10 billion (assuming the revenues are as rosy as predicted).
So how would I feel if I were asked to have my tax dollars help bail out California? I would be totally pissed off, that is how. I know there is more wealth within 15 miles of me than in my entire state of New Hampshire, and this is not an overstatement in the least. Within 15 miles of me is San Diego, La Jolla, Del Mar and a host of other southern CA locations. San Diego alone has over three million people, which is nearly three times the number in all of New Hampshire and I suspect the real estate value of San Diego exceeds that of the entire state of New Hampshire by multiples - seriously.
Now if you are from California and fuming at my words, let me lay a bit more stuff on you to ponder. We do not have many bike lanes in NH, though we do have a lot of hiking and bike trails to use, numerous 4000+ foot mountains to climb, ski resorts, lakes, etc. We do not have hundreds of miles of beaches to visit, just 16 miles of coastline and access to Maine and Massachusetts coast. We have no income taxes and no sales tax, other than on prepared food. And you can get an excellent house in the best towns with the best schools, with a few acres to play on, for under $500,000. I dare say that the average citizen in NH gets by on half as much as the average citizen in CA, when you price in government spending.
So if we in the Granite State, with our great median income, low poverty, low unemployment and a well managed deficit, are called upon to help California, well they need to build into this package some hefty future paybacks. I look at this as akin to the relationship between Germany and Greece. Not saying the folks in California are like the Greek as I know they work hard, but their public spending is through the roof and I am not about to pay for it. I am not willing to pay for their lavish lifestyle.
Of course some of this is tongue-in-cheek. I have plenty of friends in California who work hard for modest lives and have no more to do with the CA deficit than I do with the federal deficit. Still, you can see where some in Germany or France are taking offense to supporting their less prudent neighbors.
I suspect folks in other states feel the same in dealing with the states that had the massive real estate and debt problems. Not our problem.
I guess therein lies the rub. It is in fact our problem. We can go down with the ship even if we did what we were supposed to do. And so, the sound thing to do is support our brethren - despite their foolish ways - and expect them to do the same for us, or perhaps somehow repay us in time, for our generosity. Germany and France have taken this attitude to date - because it serves their self-interests - but they are quickly butting up against sentiment that recognizes (or at least believes) they may weather the storm better without the weak links in the EU. I suspect this game ends relatively soon. This will not stretch out for decades as it has in Japan.
Disclosures: None
We had an office in France and sent a manager over from the U.S. to figure out what was going on there. After a year, he could not figure out at all what three people did in the office. We closed it, even though that cost more than keeping it open due to French laws on what we had to pay to those we laid off. All the work from dozens of people in that office was transferred to another office and they did not have to hire anyone to take it. Just saying . . .
It is stuff like this that drives voters crazy in Germany. I just read today that jobs paying 70,000 euros in Germany pay 100,000 euros in Greece, and the Germans do a better job. Imagine that German worker now being asked to support the higher paid Greek when the higher paid Greek is complaining about perhaps having to deal with longer hours, less pay, fewer benefits, later retirement and the like (all of which are categories where the German worker is already behind the higher paid Greek). And it is no small secret that cheating on taxes is rampant in Greece. If we had a state in the U.S. that did this and looked to the federal government to be bailed out, I think a lot of other states would revolt.
Okay, let's visit this last thought for a moment. As I write this I am sitting in a house in Del Mar, California, that my family and some friends are renting for the week. Very reasonable at $1500 for the week. The house across the street with no ocean views is for sale for $2.3 million. Probably one out of five cars in this area cost over $50,000. The streets are clean as they clean them. Every major road has bike lanes. They have beautifully maintained parks and beaches. I have never seen so many cars in my life and so little public transportation. Indeed, I was in a traffic jam the other night on a highway that had eight - yes EIGHT - lanes going in my direction and it jammed as these were going down to seven. A fair percentage of these people have a fantastic life, but they also have a state deficit well north of $10 billion (assuming the revenues are as rosy as predicted).
So how would I feel if I were asked to have my tax dollars help bail out California? I would be totally pissed off, that is how. I know there is more wealth within 15 miles of me than in my entire state of New Hampshire, and this is not an overstatement in the least. Within 15 miles of me is San Diego, La Jolla, Del Mar and a host of other southern CA locations. San Diego alone has over three million people, which is nearly three times the number in all of New Hampshire and I suspect the real estate value of San Diego exceeds that of the entire state of New Hampshire by multiples - seriously.
Now if you are from California and fuming at my words, let me lay a bit more stuff on you to ponder. We do not have many bike lanes in NH, though we do have a lot of hiking and bike trails to use, numerous 4000+ foot mountains to climb, ski resorts, lakes, etc. We do not have hundreds of miles of beaches to visit, just 16 miles of coastline and access to Maine and Massachusetts coast. We have no income taxes and no sales tax, other than on prepared food. And you can get an excellent house in the best towns with the best schools, with a few acres to play on, for under $500,000. I dare say that the average citizen in NH gets by on half as much as the average citizen in CA, when you price in government spending.
So if we in the Granite State, with our great median income, low poverty, low unemployment and a well managed deficit, are called upon to help California, well they need to build into this package some hefty future paybacks. I look at this as akin to the relationship between Germany and Greece. Not saying the folks in California are like the Greek as I know they work hard, but their public spending is through the roof and I am not about to pay for it. I am not willing to pay for their lavish lifestyle.
Of course some of this is tongue-in-cheek. I have plenty of friends in California who work hard for modest lives and have no more to do with the CA deficit than I do with the federal deficit. Still, you can see where some in Germany or France are taking offense to supporting their less prudent neighbors.
I suspect folks in other states feel the same in dealing with the states that had the massive real estate and debt problems. Not our problem.
I guess therein lies the rub. It is in fact our problem. We can go down with the ship even if we did what we were supposed to do. And so, the sound thing to do is support our brethren - despite their foolish ways - and expect them to do the same for us, or perhaps somehow repay us in time, for our generosity. Germany and France have taken this attitude to date - because it serves their self-interests - but they are quickly butting up against sentiment that recognizes (or at least believes) they may weather the storm better without the weak links in the EU. I suspect this game ends relatively soon. This will not stretch out for decades as it has in Japan.
Disclosures: None
Monday, August 15, 2011
Tired of that Kicking the Can thingy
Okay, I have used the phrase several times myself, but I am sick and tired of everyone referring to economic strategy around the world as kicking the can down the road. I have read it a hundred times this month. It is driving me crazy. Not because it is being repeated so much, but because it is true.
We all know where this will end up. If you do not, let me link here a nice discussion of it by John Mauldin - or you can buy his book on it.
http://seekingalpha.com/article/287238-europe-unraveling-u-s-on-the-edge-of-yet-another-recession
He seems to know what he is talking about. Let me point out what I think is one of the more meaningful aspects of his article; another, perhaps worse, recession is coming and virtually inevitable, but no one can say exactly when. As he points out, Japan dealt with a similar - though internal - situation and was able to kick the can for a couple of decades so far. But the current problem for the U.S. is international and interconnected and none of the other affected countries have the savings rate of the Japanese, so I would not expect decades to elapse before we catch up to this can. Indeed, it could well happen this year and I will be surprised if we do not get there by the end of 2012. Nonetheless, there is no way to time this too well. Just know it is coming, for largely the reasons I have noted here and summarized in John Mauldin's linked article.
Blame it on China - Not
There has been a good bit of China bashing over the past few years and many are pointing to China as a source of some of our economic woes. After all, they stole all our jobs - right? Well I read a study yesterday in the L.A. Times noting that a whopping 2.7% of our personal comsuption spending in the U.S. is on Chinese made goods. Virtually all we spend, as in over 88%, is domestic in origin. So get over it.
http://www.reuters.com/article/2011/08/16/us-markets-global-idUSTRE7725BC20110816?feedType=RSS&feedName=topNews&rpc=71
Moreoever, as noted in John Mauldin's article linked above, China has been allowing its currency to increase in value, which helps us, the EU and other struggling economies, while at the same time achieving the goal there of cooling its economy a tad. Short story, China is a part of the puzzle but not as big as some might think in terms of what has caused our problems.
Disclosures: None
We all know where this will end up. If you do not, let me link here a nice discussion of it by John Mauldin - or you can buy his book on it.
http://seekingalpha.com/article/287238-europe-unraveling-u-s-on-the-edge-of-yet-another-recession
He seems to know what he is talking about. Let me point out what I think is one of the more meaningful aspects of his article; another, perhaps worse, recession is coming and virtually inevitable, but no one can say exactly when. As he points out, Japan dealt with a similar - though internal - situation and was able to kick the can for a couple of decades so far. But the current problem for the U.S. is international and interconnected and none of the other affected countries have the savings rate of the Japanese, so I would not expect decades to elapse before we catch up to this can. Indeed, it could well happen this year and I will be surprised if we do not get there by the end of 2012. Nonetheless, there is no way to time this too well. Just know it is coming, for largely the reasons I have noted here and summarized in John Mauldin's linked article.
Blame it on China - Not
There has been a good bit of China bashing over the past few years and many are pointing to China as a source of some of our economic woes. After all, they stole all our jobs - right? Well I read a study yesterday in the L.A. Times noting that a whopping 2.7% of our personal comsuption spending in the U.S. is on Chinese made goods. Virtually all we spend, as in over 88%, is domestic in origin. So get over it.
http://www.reuters.com/article/2011/08/16/us-markets-global-idUSTRE7725BC20110816?feedType=RSS&feedName=topNews&rpc=71
Moreoever, as noted in John Mauldin's article linked above, China has been allowing its currency to increase in value, which helps us, the EU and other struggling economies, while at the same time achieving the goal there of cooling its economy a tad. Short story, China is a part of the puzzle but not as big as some might think in terms of what has caused our problems.
Disclosures: None
This Guy Could Be Your Next President?!
I admit that I am no friend of the Fed or helicopter Ben. I would not eliminate the prospect of some political agenda either, but have seen no evidence of same to date. And I am not in favor of what the Fed did leading up to the recession in 2008 or what it has done in response (though the former was worse than the latter and the former is mostly on Greenspan). Still, for Texas Governor Rick Perry, the latest to throw a hat into the presidential ring, to say it would be treasonous for Ben to do anything to stimulate the economy between now and the election - over a year from now - is in itself treasonous. Seriously, I do not like Ben or his policies but he should be free to do what he sees best to do to fit his mandate. Trying to exert political pressure on him to do otherwise is the pot calling the kettle black.
http://www.businessweek.com/news/2011-08-16/perry-says-fed-spending-before-election-would-be-treasonous-.html
Keep in mind that Ben was Chairman of Bush's Council of Economic Advisors and then became head of the Fed while W was in charge. I really do not think he has a political agenda (at least not one supporting Obama), but cannot speak for others in the Fed. I do think he is doing what he thinks he needs to do to stabilize, if not stimulate, the economy. While I disagree with the approach, I would not consider him continuing the approach he has done for nearly three years to be a politically motivated endeavor. Perry apparently feels otherwise.
Perry, I noted, unlike Ron Paul, is not promoting the idea of doing away with the Fed. Still, it is apparent he does not like them. I do not like certain members or what they have been doing, but I think they serve an important purpose if done right, so I think they are a necessary evil.
The point here is it is a bit disappointing for him to be playing the Fed as a political card and trying to stop them from doing what they think is right. It almost seems he is afraid the Fed will do something to actually improve the economy and hurt his chances of election. If that is his reason, how screwed up is that?
Disclosures: None.
http://www.businessweek.com/news/2011-08-16/perry-says-fed-spending-before-election-would-be-treasonous-.html
Keep in mind that Ben was Chairman of Bush's Council of Economic Advisors and then became head of the Fed while W was in charge. I really do not think he has a political agenda (at least not one supporting Obama), but cannot speak for others in the Fed. I do think he is doing what he thinks he needs to do to stabilize, if not stimulate, the economy. While I disagree with the approach, I would not consider him continuing the approach he has done for nearly three years to be a politically motivated endeavor. Perry apparently feels otherwise.
Perry, I noted, unlike Ron Paul, is not promoting the idea of doing away with the Fed. Still, it is apparent he does not like them. I do not like certain members or what they have been doing, but I think they serve an important purpose if done right, so I think they are a necessary evil.
The point here is it is a bit disappointing for him to be playing the Fed as a political card and trying to stop them from doing what they think is right. It almost seems he is afraid the Fed will do something to actually improve the economy and hurt his chances of election. If that is his reason, how screwed up is that?
Disclosures: None.
What He Said . . .
Hey, if Buffet says we should raise his taxes, who am I to disagree.
http://www.reuters.com/article/2011/08/15/us-buffett-tax-idUSTRE77E13V20110815?feedType=RSS&feedName=topNews&rpc=71
Note, he focuses on the super rich and not just those over $250,000. While it will raise less money, raising some is better than raising none, and given the vast disparity in wealth these days, with the squeeze on the middle-class, I suspect you would still get a lot of money raising taxes on those making over $1 million a year or companies making over $5 million a year. I am not saying go over board but when billionaires are paying just 17% I think getting them up to paying what the rest of us are paying makes some sense. Seriously, Buffet paying perhaps 30% to 35% might be fair, and he agrees. Certainly this move would be much tougher for the Tea Party to oppose and justify and it would erode a lot of the Republican base.
Disclosures: None.
http://www.reuters.com/article/2011/08/15/us-buffett-tax-idUSTRE77E13V20110815?feedType=RSS&feedName=topNews&rpc=71
Note, he focuses on the super rich and not just those over $250,000. While it will raise less money, raising some is better than raising none, and given the vast disparity in wealth these days, with the squeeze on the middle-class, I suspect you would still get a lot of money raising taxes on those making over $1 million a year or companies making over $5 million a year. I am not saying go over board but when billionaires are paying just 17% I think getting them up to paying what the rest of us are paying makes some sense. Seriously, Buffet paying perhaps 30% to 35% might be fair, and he agrees. Certainly this move would be much tougher for the Tea Party to oppose and justify and it would erode a lot of the Republican base.
Disclosures: None.
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