Month: May 2017

The Moral Case for Tax Cuts: New at Reason

The ownership of tax money before the government confiscates it is a moral consideration, or at least ought to be.

A. Barton Hinkle writes:

Say you walk into a store one day and there’s a big sign inside: “Everything Now 20 Percent Off.” What is your reaction?

(a) “This is great! I am going to save some money today!”

(b) “This is terrible! I demand to know how the store is going to make up the revenue. And I am outraged, because people who are richer than I am buy more stuff, which means they will save more money than I do!”

If you are a normal person, your reaction is more likely to resemble (a). But a lot of people—including most members of the media—apparently have a reaction more like (b), at least when the subject turns to taxes.

View this article.

from Hit & Run http://ift.tt/2qlowRr
via IFTTT

After A Disastrous Quarter, Atlanta Fed Now Expects Q2 GDP To Hit 4.3%

Call it deja vu all over again.

Four months after the Atlanta Fed started off its Q1 GDP nowcast at 2.5%, then raised it just shy of 3.5% before eventually closing the books at 0.2%, slightly below where the BEA reported Q1 GDP, moments ago the Atlanta Fed released its initial GDP forecast for Q2, and it will probably not come as a surprise to anyone that it just happens to be a tad optimistic.

According to the regional Fed, best known for its initial euphoria, and subsequent tapering and accuracy, “the initial GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2017 is 4.3 percent on May 1. The advance estimate of first-quarter real GDP growth released by the U.S. Bureau of Economic Analysis on April 28 was 0.7 percent, 0.5 percentage points above the final GDPNow model nowcast released on the previous day.”

And this is how the Fed sees the breakdown in various components:

  • PCE contribution est. at 2.22%
  • Nonresidential equipment investment contribution est. at 0.58%
  • Nonresidential intellectual property products investment contribution est. at 0.17%
  • Nonresidential structures investment contribution est. at 0.15%
  • Residential investment contribution est. at 0.32%
  • Government contribution est. at -0.01%
  • Net exports contribution est. at -0.15%
  • Change in inventory investment contribution est. at 0.98%

Well, if the cheerful Fed hopes to be accurate this time around with its initial estimate, US consumers better start spending fast. Then again, if past is prologue, expect this number to end roughly 50% lower in three months when the first advance Q1 GDP report is released.

via http://ift.tt/2qljdS9 Tyler Durden

With Paulson Down Nearly Double-Digits, Here Is How Other Hedge Funds Are Doing

John Paulson’s relentless slide into P&L mediocrity was on highlight today courtesy of an extended profile by the NYT, which reports on the hedge fund manager’s “fall from stardom”, and details his surprisingly poor performance. Here are the highlights:

Paulson & Company, has recorded nearly double-digit losses in several of its larger funds as of the end of March… Mr. Paulson’s struggles come after a gut-wrenching 2016, when he recorded even steeper losses in those funds, partly because of several wrong-footed bets on drug makers, including the troubled Valeant Pharmaceuticals. That followed a painful 2015, when investors first balked and began pulling their money from his firm.

 

“While we are disappointed in performance in 2016, we believe we have a path to a recovery,” Mr. Paulson told investors in one letter.

 

But it has not been smooth sailing. In another letter to investors of a merger arbitrage fund that declined by 49 percent last year, Mr. Paulson called 2016 “the most challenging year since inception.” In May, Mr. Paulson will address his investors at a meeting in London at Claridge’s Hotel in London.

 

[Paulson’s] his assets under management continue shrinking. Paulson & Company manages just under $10 billion today, down from $36 billion in 2011. Nearly two years ago, some Wall Street banks began to recommend that investors redeem some of their money from the firm.

 

In another letter to investors of a merger arbitrage fund that declined by 49 percent last year, Mr. Paulson called 2016 “the most challenging year since inception.”

 

2017 is shaping up as another rough one for Mr. Paulson. The Advantage fund was down 9.7 percent as of the end of March and the Partners Enhanced fund continues to sink — falling just over 8 percent after last year’s 49 percent plunge.

Observing what we wrote last April, NYT repeats that over the last three years, Paulson’s Advantage has consecutively recorded double-digit losses. That follows earlier losses of 36% in 2011, 14% 2012, a modest 26% gain 2013, according to an HSBC industry report and people with knowledge of the firm’s performance. The losses were amplified in the levered Advantage Plus fund.

While Paulson suffered huge losses last year due to several concentrated bets on just a handful of pharma companies – Valeant alone cost Paulson $2 billion – and then there was Shire, Allergan, Mylan and Teva, his losses extended beyond those four names, and in a more troubling development investors pulled substantial amount of capital from the fund. As Forbes wrote recently,  in addition to P&L losses, Paulson suffered at least $2.5 billion in redemptions in 2016. As a result, according to the NYT Paulson’s AUM has continued shrinking, and today Paulson & Company manages just under $10 billion, down from $36 billion in 2011. “Nearly two years ago, some Wall Street banks began to recommend that investors redeem some of their money from the firm.”

Still, don’t cry for John:

Even after several years of losing money for his investors, Mr. Paulson remains one of the richest men in the world — with a net worth of about $7.9 billion, according to Forbes. But, as the financial magazine recently noted, he is now $2 billion poorer.

So it’s been a bad year for Paulson, but how is everyone else doing? As it turns out, not that well either. The following table breaks down the marquee hedge fund names’ performance YTD, and shows that merely beating the S&P500 continues to remain an elusive goal for more than half of the “smart money” out there

Finally, courtesy of HSBC, here are the top 20 best and worst hedge funds through the last week of April.

via http://ift.tt/2pnUIlR Tyler Durden

It turns out the early bird doesn’t get the worm

You’ve probably heard the saying “The Early Bird Gets the Worm. . .”

It turns out that expression is completely wrong, both literally and figuratively.

This morning I was watching these new baby chicks run around and play on the lawn.

If you’ve never seen chickens up close and personal, their lives are pretty simple; they basically just wander around all day pecking at the ground looking for some insect or seed to eat.

(At least, that’s what’s supposed to happen; most chickens destined for grocery aisles live in tiny cages and never see daylight.)

Every time one of them would find a seed or worm in the ground, the nearby chicks would immediately dash over and start tugging at the food.

One would steal the worm from the other and run off with it in its beak, upon which the other chicks would pounce and steal the worm again.

It was hilarious to watch, it just needed the Benny Hill theme.

But there was one chick who had it in her instinct to separate from the pack.

She didn’t have to go far– just far enough to be uninteresting to the rest of the chicks who couldn’t see past their own beaks.

Sure enough, after a while the solo chick discovered a treasure trove of worms nearby a compost pile.

While the other chicks were fighting over scraps, this one had a whole worm colony to herself.

That’s why the saying isn’t true. It’s not the early bird who gets the worm.

It’s the one who has the courage and independence of mind to avoid the crowd and go where everyone else isn’t.

Life, business, and investing aren’t so different than nature: we humans seldom succeed and prosper by following the crowd and doing what’s popular.

As I wrote to you last week, recent data show record numbers of small investors are piling in to stocks at a time when the market is near its all-time high.

Moreover, many of the biggest and most popular companies are in unsustainable financial positions.

Johnson & Johnson, for example, one of the largest companies in the S&P 500, had operating cashflow of $18.7 billion in 2016 according to its own annual report.

Yet the company spent far more than it earned– $22.8 billion– on dividends, share buybacks, debt repayment, and critical capital expenses.

This clearly doesn’t add up.

Similarly, AT&T’s 2016 report shows they generated a massive $39.3 billion in operating cashflow.

Yet the company spent even more– $44 billion– on dividends, debt service, and critical capital expenses.

Disney posted $13.2 billion in operating cashflow in 2016; but they spent $16.7 billion on dividends, debt service, capital expenses, and share buybacks.

And, pitifully, General Electric didn’t even have positive operating cashflow.

These are the honest to goodness results among some of the largest, most heavily weighted companies in the S&P 500 index.

And they’re representative of the much larger sample.

Iron Mountain is one of the hundreds of companies in the S&P 500 index that few people have ever heard of.

Yet the trend holds — Iron Mountain’s 2016 annual report shows operating cashflow of $544 million, but $835 million in capital expenses and dividends.

Stericycle is another small company within the S&P 500 index whose $547 million in 2016 operation cashflow was dwarfed by $2.1 billion debt service, capital expenses, and dividends.

While there are obviously some bright spots like Apple and Google whose businesses generate plenty of “free cashflow”, there’s clearly something wrong when so many companies are far out-spending what they make.

Yet this is precisely what people are buying when they dump their capital and retirement savings in the S&P 500.

Most rational investors probably wouldn’t buy even a single mature business that has negative free cash flow, let alone dozens or hundreds of them.

But for some reason it’s piling into an index fund that pools so many loser businesses together is considered some prized investment strategy.

Under these conditions in seems worth looking at different asset classes altogether.

Or even looking abroad.

Some friends of mine in the US recently told me that there’s a relatively new show called Criminal Minds: Beyond Borders.

Apparently each episode deals with some US citizen getting killed overseas… basically reinforcing the absurd stereotype that everything outside ‘Marica is inherently dangerous.

No doubt a lot of retail investors feel the same… that anything worth investing in is already in America, and that anything overseas is risky.

This is an incredibly short-sighted mentality that keeps people financially tethered to an irrelevant anachronism like geography.

The reality is that the world is a big place full of undervalued opportunities.

And there are plenty of big worms out there for anyone willing to put a little distance between you and the herd.

Source

from Sovereign Man http://ift.tt/2qppCsH
via IFTTT

Mnuchin: “You Should All Thank Me For Your Bank Stocks Doing Better”

Presented with little comment…

Live Feed:

Treasury Secretary Steven Mnuchin told an audience of Wall Street managers that they could thank him for financial deregulation.

“You should all thank me for your bank stocks doing better,” Mnuchin said at the Milken Institute Global Conference held at the Beverly Hilton, drawing laughs.

 

Who should “we” thank for this?

via http://ift.tt/2pAFTNj Tyler Durden

Foreign Banks Subpoenaed Over Alleged Treasury Market Manipulation

Federal prosecutors have subpoenaed several (foreign) banks as part of a criminal investigation into possible manipulation of the U.S. Treasuries market, according to people familiar with the matter.

U.S. authorities have been examining the U.S. Treasuries market for roughly two years. As Bloomberg reports, in November 2015, Goldman Sachs disclosed that U.S. authorities had sought information related to its trading of when-issued securities, which are among the least transparent instruments in the world’s largest debt market.

And now, the Justice Department issued subpoenas last month to banks including UBS, BNP Paribas, and the Royal Bank of Scotland seeking information on the $14 trillion market, said two people, who asked not to be named because the investigation is confidential. Read more here…

As a reminder, 'When-issued' securities have been a government-debt market fixture since the U.S. Treasury Department effectively authorized their use in 1975. Investors can buy them from a Wall Street bond dealer to guarantee they will be able to get their hands on a bond, bill or note once it’s auctioned by the government. When-issued securities act as placeholders for bills, notes or bonds before they’re auctioned. The instruments change hands over the counter, with lifespans of just days. There’s scant public information on trading volumes or the market’s biggest players.

When debt sells for less than when-issued prices indicate, traders say the auction “tailed.” Auctions tailed more than half the time in every type of security except for the 10-year note between 2010 and 2014, a Cleveland pension fund alleged in one of the lawsuits against the primary dealers.

 

The chances that a supposedly predictive market would be so consistently off, in a direction that favors the people selling the security, is lower than 1 percent, the fund alleged.

 

The banks selling when-issued securities are often the same ones that receive billions of dollars’ worth of client bids for those same auctions. That raises the concern — taken as a given in several of the recent suits — that information is being shared within and between banks.

Traders working at some primary dealers had the opportunity to learn about client auction bids ahead of time and in some cases talked online to counterparts at other banks, people familiar with these operations told Bloomberg News in June 2015. That report is cited in several of the lawsuits alleging collusion related to when-issued securities.

via http://ift.tt/2p0QEpf Tyler Durden

Why Is Everyone So Willing to Believe ‘Fake News’ About Sex Trafficking?

On the latest Libertarianism.org “Free Thoughts” podcast, I talk with hosts Aaron Ross Powell and Trevor Burrus about the conflation of consensual prostitution and sex trafficking in American culture and courtrooms, both in general and in terms of recent high-profile cases (such as The Review Board and “K-girl” agency bust in Seattle last year). How did we get here? Who’s driving the confusion? Who are the winners and losers in America’s quixotic crusade to “end demand” for prostitution? And why do so many people seem so willing to believe “fake news” about sex workers and human trafficking?

As a society, we seem to “desperately want to strip these women of agency [and think] that they’re forced into it,” observes Powell, “and it seems like it’s part of this broader attitude that, ‘I wouldn’t want to do job X, and I can’t imagine doing job X, and so therefore anyone who does job X must be doing it against their will.’ And so you see this in prostitution, but… it shows up in people arguing against ‘sweatshops,’ or Uber drivers, or hell it even shows up with stay-at-home moms…. It’s like we lack enough empathy to understand the choices of others, and therefore deprive them of agency.”

Download the audio on Libertarianism.org, or give it a listen below:

from Hit & Run http://ift.tt/2ql1YA6
via IFTTT

Democrats Have Finally Figured Out Hillary’s Loss: “Her Base Didn’t Turn Out”

After crunching numbers for months, a group of Democratic strategists have finally figured out why Hillary lost the 2016 election:  “her base didn’t turn out.”  Sure, it probably had absolutely nothing to do with all those criminal FBI investigations or the fact that Trump was able to flip some Midwest states that haven’t gone Red since Ronald Reagan.  Per McClatchy:

A select group of top Democratic Party strategists have used new data about last year’s presidential election to reach a startling conclusion about why Hillary Clinton lost. Now they just need to persuade the rest of the party they’re right.

 

Many Democrats have a shorthand explanation for Clinton’s defeat: Her base didn’t turn out, Donald Trump’s did and the difference was too much to overcome.

Ironically, while offering up the most ridiculous explanation possible for the outcome of the 2016 election, undoubtedly in an effort to erase all blame from Hillary herself (it wasn’t Hillary’s fault, her team just didn’t turn out the voters…they failed her), one strategist noted it’s important to “learn the right lesson from 2016” and not just the one “that makes us feel good at night.”

“We have to make sure we learn the right lesson from 2016, that we don’t just draw the lesson that makes us feel good at night, make us sleep well at night,” Canter said.

Sure, it couldn’t possibly be that Trump’s message just resonated better with voters in the Midwest…this map of Michigan is just the result of “voter turnout” problems…any suggestion to the contrary is just “fake news.”

 

And this one from Wisconsin too…

 

Meanwhile, one strategist suggested that it’s just time to give up on policy debates because “persuasion is harder and costs more than mobilization.”  Yes, because renting buses is way cheaper than crafting a message that actually resonates with voters.

That debate is complicated, she added, because some Democrats think winning over voters is already a lost cause.

 

“There’s still a real concern that persuasion is harder and costs more than mobilization, so let’s just triple down on getting out the people who already agree with us,” she said. “And I think there’s a lot of worry that we don’t actually know how to persuade anymore, and so maybe we should just go talk to the people we agree with.”

But at least some folks within the party are still willing to be honest with themselves.

Turning out the base, the data suggests, is simply not good enough.

 

“This idea that Democrats can somehow ignore this constituency and just turn out more of our voters, the math doesn’t work,” Canter said. “We have to do both.”

 

Democrats are quick to acknowledge that even if voters switching allegiance had been Clinton’s biggest problem, in such a close election she still could have defeated Trump with better turnout. She could have won, for instance, if African-American turnout in Michigan and Florida matched 2012 levels.

 

They also emphasize the need for the party to continue finding ways to stoke its base. Democrats can do both, said Guy Cecil, chairman of Priorities USA, a super PAC that backed Clinton last year and now is trying to help Democrats return to power.

 

“I really do believe that we should reject this idea that if we just focus on turnout and the Democratic base that that will be enough,” he said. “If that really is our approach, we’re going to lose six or seven Senate seats in this election.”

Nothing like a nice game of CYA…if folks within the Democratic party truly believe this is the reason that Hillary lost in 2016 then they deserve the follow-up shellacking that undoubtedly awaits again in 2020.

via http://ift.tt/2oYe4L3 Tyler Durden

Le Pen Gets Bump in Polls; Protesters Rage Throughout Paris in May Day Protests

Marine Le Pen will attempt to defeat Emmanuel Macron on May 7th, but the odds aren’t in her favor.

The former Rothschild banker, who literally had an affair with his teacher 25 years his senior when he was 15 (called pedophilia in most countries), eventually married her and moved in with her children that were his age and older, is set to become France’s youngest President ever. How wonderful.

In the meantime, ANTIFA, or whatever they’re called in France, are having a grande old time expressing their displeasure that Marine Le Pen exists on this planet.

It’s May Day after all, a day for violent debauchery — all in the name of democracy.

Here’s a live feed.

Content originally published at iBankCoin.com

 

via http://ift.tt/2qp49Qq The_Real_Fly

Oil Tumbles To $48 Handle Again After Libyan Output Surge

The dead cat bounce of early April is officially dead… again.

Following headlines proclaiming Libyan crude output exceeding 760k barrels per day – the highest since Dec 2014 – WTI prices have broken back beloe $49 and erased the entire move post-OPEC deal last year…

via http://ift.tt/2pApLLX Tyler Durden