another site
3 months later and it appears hope has reverted (once again) to its new normal reality. “Just one more quarter,” we are sure, will be the clarion call from all asunder…
(it seems the hatchet has been taken to Q4 – one-off of course, due to the shutdown – which incidentally had no effect whatsoever on any survey or soft-data macro or the stock market)
(h/t @Not_Jim_Cramer)
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/QkM0mV8tGk0/story01.htm Tyler Durden
Submitted by Simon Black via Sovereign Man blog,
Just over 400-years ago today, a group of 13 conspirators were caught trying to assassinate King James I of England and blow up the House of Lords in what became known as the Gunpowder Treason.
If you’ve ever seen the movie V for Vendetta, you know the story. Guy Fawkes was found underneath the House of Lords with three dozen barrels of gunpowder… and to this day, his effigy is still burned annually in commemoration of the event.
Fundamentally, the Gunpowder Treason was about freedom. The English monarchy at the time was controlling nearly every aspect of the economy and their subjects’ lives– from what they could wear to how they could worship.
“Sumptuary laws” which regulated private behavior were commonplace. Elizabeth I, for example, re-introduced a beard tax on all facial hair grown in excess of two weeks.
She also published long lists, categorized by social class, dictating precisely what color and type of garment her subjects were required to wear.
It turns out these sumptuary laws were just an early form of state-sponsored corporate welfare; the English textile industry had paid Elizabeth huge sums of money in exchange for royal decrees about knitted caps and woolen socks.
As a consequence, a great deal of English labor and disposable income was misallocated towards silly garments instead of being put to more productive uses… and the country was in an almost perpetual state of stagnation.
Not to mention, English finances deteriorated under Elizabeth. By 1600, state expenditures were 23% greater than tax revenue, which would be the equivalent of a $550 billion budget deficit in the US today. Not exactly a trivial figure.
James I, Elizabeth’s successor, continued to spend extravagantly and indebt the English economy, often showering taxpayer funds on a handful of favored nobles.
By the time James’s successor Charles I came to power, the monarchy’s credit was running so thin that Charles had to force people to loan him money; those who refused were imprisoned and had their property confiscated.
Unsurprisingly, civil war broke out in 1642. Charles I was executed in 1649, and the genocidal dictatorship of Oliver Cromwell dominated England for the next decade.
When you think about it, this collapse was inevitable.
For decades prior, the entire English economy was under the control of a single individual who massively indebted the state, impeded growth, and reduced people’s individual freedoms. Not exactly a recipe for long-term success.
The Gunpowder Treason of November 5, 1605 may have been a failure for the conspirators, but given enough time, a system so screwed up, so unsustainable, was destined to collapse on itself.
We’re not so different in the west today.
We have our own sumptuary laws, regulating everything from tobacco consumption to what foods we can/cannot eat. We have our own state-sponsored corporate welfare. We’re comically indebted.
And just like the English monarchs, we have a tiny elite that controls absolutely everything about our economy– taxation, regulation, and the supply of money.
Needless to say, this is also unsustainable. And history shows that these types of unsustainable systems will always collapse under their own weight.
Is it wise to think that this time is any different?
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/82DJ3JBDgvI/story01.htm Tyler Durden
Submitted by Simon Black via Sovereign Man blog,
Just over 400-years ago today, a group of 13 conspirators were caught trying to assassinate King James I of England and blow up the House of Lords in what became known as the Gunpowder Treason.
If you’ve ever seen the movie V for Vendetta, you know the story. Guy Fawkes was found underneath the House of Lords with three dozen barrels of gunpowder… and to this day, his effigy is still burned annually in commemoration of the event.
Fundamentally, the Gunpowder Treason was about freedom. The English monarchy at the time was controlling nearly every aspect of the economy and their subjects’ lives– from what they could wear to how they could worship.
“Sumptuary laws” which regulated private behavior were commonplace. Elizabeth I, for example, re-introduced a beard tax on all facial hair grown in excess of two weeks.
She also published long lists, categorized by social class, dictating precisely what color and type of garment her subjects were required to wear.
It turns out these sumptuary laws were just an early form of state-sponsored corporate welfare; the English textile industry had paid Elizabeth huge sums of money in exchange for royal decrees about knitted caps and woolen socks.
As a consequence, a great deal of English labor and disposable income was misallocated towards silly garments instead of being put to more productive uses… and the country was in an almost perpetual state of stagnation.
Not to mention, English finances deteriorated under Elizabeth. By 1600, state expenditures were 23% greater than tax revenue, which would be the equivalent of a $550 billion budget deficit in the US today. Not exactly a trivial figure.
James I, Elizabeth’s successor, continued to spend extravagantly and indebt the English economy, often showering taxpayer funds on a handful of favored nobles.
By the time James’s successor Charles I came to power, the monarchy’s credit was running so thin that Charles had to force people to loan him money; those who refused were imprisoned and had their property confiscated.
Unsurprisingly, civil war broke out in 1642. Charles I was executed in 1649, and the genocidal dictatorship of Oliver Cromwell dominated England for the next decade.
When you think about it, this collapse was inevitable.
For decades prior, the entire English economy was under the control of a single individual who massively indebted the state, impeded growth, and reduced people’s individual freedoms. Not exactly a recipe for long-term success.
The Gunpowder Treason of November 5, 1605 may have been a failure for the conspirators, but given enough time, a system so screwed up, so unsustainable, was destined to collapse on itself.
We’re not so different in the west today.
We have our own sumptuary laws, regulating everything from tobacco consumption to what foods we can/cannot eat. We have our own state-sponsored corporate welfare. We’re comically indebted.
And just like the English monarchs, we have a tiny elite that controls absolutely everything about our economy– taxation, regulation, and the supply of money.
Needless to say, this is also unsustainable. And history shows that these types of unsustainable systems will always collapse under their own weight.
Is it wise to think that this time is any different?
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/82DJ3JBDgvI/story01.htm Tyler Durden
Having beaten consensus earnings and revenues, it seems that the momentum stock of the year is finally getting its come-uppance as it missed whisper numbers on earnings and deliveries:
This has sent the stocks down over 9% after-hours to 10 week lows… perhaps Musk was right after all.
Q4 outlook: We are continuing to expand production and plan to deliver slightly under 6,000 Model S vehicles in Q4, which increases our total expected deliveries to 21,500 vehicles worldwide for 2013. ASPs are expected to be relatively flat sequentially as we continue to see a rich mix of options on incoming orders.
Model S gross margin may continue to make slight improvements over the next several quarters as we continue to drive down manufacturing costs. While we expect to achieve our target of 25% non-GAAP automotive gross margin in Q4 (assuming no contribution from ZEV credits), further progress is likely if customers continue to purchase our vehicles with a high option take rate.
R&D expenses are expected to increase sequentially by about 25% in Q4 as we accelerate product development efforts on Model X and Model S enhancements. SG&A expenses are expected to rise sequentially by about 20%, driven by the growth in our retail locations, service centers and Supercharger facilities.
We expect our non-GAAP profitability to be about consistent with Q3, with approximately 139 million fully diluted shares outstanding based on the current level of our stock price. Free cash flow is expected to be close to breakeven.
We expect to spend about $75 to $85 million on capital expenditures for a total of approximately $250 million in 2013, as we expand our factory production capability and customer support infrastructure. All these investments, funded in part by our profitable operations, position us for further expansion of our product portfolio and global growth.
We are now producing 550 cars per week with improved process controls which consistently result in high quality cars. Consequently, we finished the quarter with a record of slightly over 5,500 deliveries, including over 1,000 deliveries to European customers.
Full TSLA earnings here (PDF).
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/fQsvciUPdbc/story01.htm Tyler Durden
Credit markets have been nervous for over a week. Treasury yields have been rising notably. The USD has been pushing higher and with all eyes focused on the momo name du jour (and indices ‘near’ all-time highs) it seems few have noticed US equities have actually had 3 down days in the last 5 days. Only NASDAQ managed a green close. Of course, this is merely an excuse buy moar with all the money on the sidelines but today’s move in Treasuries (and intraday volatility in stocks) suggest some anxiety is back that a flow-slowing Taper is closer on the horizon of hope than many believe. Oil and Gold lost ground on the day – though the latter is the best of the commodities on the week. The USD is back to unchanged on the week (with CAD and EUR weakness in charge). VIX diverged higher into the close with its first up-day in the last six.
Better-than-expected ISM sent stocks lower (good news is bad news) exaggerating early weakness on China ‘tightening’ suggestions…
Only the Nasdaq managed to close green…(depiste the Dow scrambling back to green intraday)
S&P futures blew through VWAP on POMO then faded all afternoon – despite an attempt at a ramp – ending teh day at VWAP…
Treasury yields blew higher with notable steepening… (worst day for 30Y in 2 months)
The USD reverted higher back to unch on the week
Credit markets remain entirely unimpressed…
Charts: Bloomberg
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/FVSG47GOekw/story01.htm Tyler Durden
Credit markets have been nervous for over a week. Treasury yields have been rising notably. The USD has been pushing higher and with all eyes focused on the momo name du jour (and indices ‘near’ all-time highs) it seems few have noticed US equities have actually had 3 down days in the last 5 days. Only NASDAQ managed a green close. Of course, this is merely an excuse buy moar with all the money on the sidelines but today’s move in Treasuries (and intraday volatility in stocks) suggest some anxiety is back that a flow-slowing Taper is closer on the horizon of hope than many believe. Oil and Gold lost ground on the day – though the latter is the best of the commodities on the week. The USD is back to unchanged on the week (with CAD and EUR weakness in charge). VIX diverged higher into the close with its first up-day in the last six.
Better-than-expected ISM sent stocks lower (good news is bad news) exaggerating early weakness on China ‘tightening’ suggestions…
Only the Nasdaq managed to close green…(depiste the Dow scrambling back to green intraday)
S&P futures blew through VWAP on POMO then faded all afternoon – despite an attempt at a ramp – ending teh day at VWAP…
Treasury yields blew higher with notable steepening… (worst day for 30Y in 2 months)
The USD reverted higher back to unch on the week
Credit markets remain entirely unimpressed…
Charts: Bloomberg
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/FVSG47GOekw/story01.htm Tyler Durden
When almost a year ago, we proclaimed the New Normal S&P abbreviation to stand for Stalingrad and Propaganda (or, alternatively, Poorski), little did we know just how far the references to Yosif Vissarionovich would stretch. Today, courtesy of the Fed’s Eric Rosengren and the Boston Business Journal, we find just how deep the Marriner Eccles’ Politburo fascination with its central planning idol, Iosif Vissarionovich, truly runs.
And we certainly wish we were making this stuff up.
Via the Boston Business Journal:
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/615r0HTepMA/story01.htm Tyler Durden
When almost a year ago, we proclaimed the New Normal S&P abbreviation to stand for Stalingrad and Propaganda (or, alternatively, Poorski), little did we know just how far the references to Yosif Vissarionovich would stretch. Today, courtesy of the Fed’s Eric Rosengren and the Boston Business Journal, we find just how deep the Marriner Eccles’ Politburo fascination with its central planning idol, Iosif Vissarionovich, truly runs.
And we certainly wish we were making this stuff up.
Via the Boston Business Journal:
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/615r0HTepMA/story01.htm Tyler Durden
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Ignoring the facts won't help us address the insolvency of pay-as-you-go social programs.
I was fortunate enough to be invited back on Max Keiser's Keiser Report for a wide-ranging discussion of Peak Retirement, currency wars and more. Since the topics Max raises are profound and not always that easy to summarize (if there is another media host who covers complex topics in such profusion and with such a diverse range of guests, he/she is unknown to me), I'm devoting the next few blog entries to offer context for the topics Max and I discussed.
Max's first question related to my entry on Peak Retirement (October 15, 2013) in which I showed that the ratio of full-time workers to Social Security beneficiaries has dropped to 2-to-1.
Why does this matter? It matters because our social programs are pay as you go, meaning that current workers pay current retirees' benefits. There is no "trust fund" and the proof is simple: now that Social Security is operating at a deficit, i.e. payroll tax revenues no longer cover benefits paid out, where does the U.S. Treasury get the money to pay the benefits not covered by tax revenues?
Social Security Ran $47.8B Deficit in FY 2012
It sells bonds, just like it does to fund any other deficit spending of the federal government. The Trust Fund is a politically useful fiction, period, end of story. The bonds in the bogus Trust Fund are non-negotiable, i.e. worthless. The Treasury funds Social Security deficits by selling Treasury bonds.
(Social Security reports "interest earned" on the phony non-negotiable bonds, but where does the U.S. Treasury get the money to pay the interest? It sells T-Bills, adding to the national debt. No matter how you slice it, the programs' deficits are funded by selling debt, i.e. T-Bills, just like all federal deficit spending.)
I bobbled my response to Max's question, so he helpfully stepped in and explained that social programs like Social Security and Medicare are paid by payroll taxes, not income or other taxes. Employers and employees both pay 7.65% of earned income/wages to fund these two monster programs–a total payroll tax of 15.3%. (12.4% is for Social Security and 2.9% is for Medicare.)
Those who receive no earned income (self-employment earnings, wages, salaries, tips, etc.) and only receive unearned income (dividends, capital gains, rents, etc.) pay no Social Security/Medicare payroll taxes. That's one reason why unearned income is so sweet: it avoids the 15.3% payroll tax right off the top.
(Those of us who are self-employed pay the entire 15.3%.)
This means these programs depend entirely on payroll taxes from employed people. The taxes collected are non-trivial: Social Security brought in $725 billion in cash and paid $773 billion for benefits and overhead expenses in 2012.
The Social Security Administration (SSA) publishes a helpful chart of all earned income reported on federal tax returns: Wage Statistics for 2012. This data will help us understand why the system depends not just on those with any old job but those with good-paying full-time jobs.
(Recall that high-income earners only pay payroll taxes on the first $113,700 in 2013 and $117,000 in 2014. So someone earning $1,000,000 a year pays the same Social Security tax as someone making $113,700.)
Let's illustrate the importance of the full-time job/beneficiary ratio by asking: how many workers does it take to fund one retiree's annual benefit? Since even a low-lifetime earnings debt-serf like me can get $2,100 a month in Social Security bennies (if I wait until 70 to collect), and higher lifetime earnings folks get $25,000 a year at full or even early retirement, let's ask: how many workers' payroll taxes does it take to fund one retiree getting $25,000 a year from Social Security?
Over 23 million people reporting earned income made less than $5,000 a year. The SSA reports their average compensation was around $2,000. The Social Security payroll tax is 12.4%, so 12.4% of 2,000 is $248 a year in Social Security payroll tax.
It takes 100 of these workers' Social Security payroll tax to fund one retiree.
Another 14 million workers earn between $5,000 and $10,000, with an average of $7,400. At $7,400, each worker pays $917 in Social Security payroll tax. It takes 27 of these workers' payroll taxes to fund one retiree.
About 12 million workers earn between $10,000 and $15,000 a year, with an average of $12,460. Their Social Security payroll tax works out to $1,545 annually. It takes 16 of these workers to fund one retiree.
Cumulatively, that's around 50 million workers, or a third of the entire workforce.These 50 million people earn about the same amount ($153 billion) as the 1.8 million people who earn between $85,000 and $90,000 a year ($156 billion) and considerably less than the 890,000 folks who earn between $200,000 and $250,000 a year ($197 billion).
Those earning $85,000 a year pay $10,540 a year in Social Security payroll tax, so it takes 2.5 of these workers to fund one retiree.
Those 1.8 million people pay as much Social Security payroll tax as the 50 million low-compensation workers. This reveals how the system depends on full-time, high-paying jobs to fund the program. Adding millions of low-paying part-time jobs simply won't generate the payroll tax revenues needed to keep up with the rising number of beneficiaries (57 million total).
If you want to be in the top 10% of those with earned income, you need to earn about $85,000 a year. Out of 153 million people reporting earned income, 140
million make less than $85,000 a year.
To make it into the top 5%, you need to earn $115,000 or more, and to reach that oft-mentioned 1% (it's really the 1/10th of 1% who holds the power), you need to make $250,000 or more.
As noted earlier, those earning rarefied compensation aren't paying any more Social Security payroll tax than someone earning the limit of $113,000.
We don't have enough workers earning enough and paying enough Social Security payroll tax to support 57 million retirees. There are only 13 million high-wage earners (above $85,000 annually), and those with very high incomes pay no more Social Security payroll tax than those earning $113,000.
This is not sustainable. The average Social Security benefit is $1,230 a month or about $15,000 a year. It takes the payroll taxes of roughly 10 million low-wage workers to fund 1 million retirees receiving $15,000. The system needs another 57 million decent-paying full-time jobs to be sustainable in it's current form, i.e. the ratio of full-time workers to beneficiaries needs to rise back up to 3-to-1.
Unless 57 million Martian workers agree to kick in 12.4% of their quatloos (and assuming quatloos are convertible into dollars), the system is a doomed Ponzi scheme.
System costs will be rising fast as the Baby Boom retires en masse. There is no guarantee Social Security payroll taxes will rise at the same rate. Indeed, a recession or stagnation in the job market could cause payroll taxes to decline even as benefit costs soar.
Ignoring the facts won't help us address the insolvency of pay-as-you-go social programs.
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/cCSvWG62fIc/story01.htm Tyler Durden
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Ignoring the facts won't help us address the insolvency of pay-as-you-go social programs.
I was fortunate enough to be invited back on Max Keiser's Keiser Report for a wide-ranging discussion of Peak Retirement, currency wars and more. Since the topics Max raises are profound and not always that easy to summarize (if there is another media host who covers complex topics in such profusion and with such a diverse range of guests, he/she is unknown to me), I'm devoting the next few blog entries to offer context for the topics Max and I discussed.
Max's first question related to my entry on Peak Retirement (October 15, 2013) in which I showed that the ratio of full-time workers to Social Security beneficiaries has dropped to 2-to-1.
Why does this matter? It matters because our social programs are pay as you go, meaning that current workers pay current retirees' benefits. There is no "trust fund" and the proof is simple: now that Social Security is operating at a deficit, i.e. payroll tax revenues no longer cover benefits paid out, where does the U.S. Treasury get the money to pay the benefits not covered by tax revenues?
Social Security Ran $47.8B Deficit in FY 2012
It sells bonds, just like it does to fund any other deficit spending of the federal government. The Trust Fund is a politically useful fiction, period, end of story. The bonds in the bogus Trust Fund are non-negotiable, i.e. worthless. The Treasury funds Social Security deficits by selling Treasury bonds.
(Social Security reports "interest earned" on the phony non-negotiable bonds, but where does the U.S. Treasury get the money to pay the interest? It sells T-Bills, adding to the national debt. No matter how you slice it, the programs' deficits are funded by selling debt, i.e. T-Bills, just like all federal deficit spending.)
I bobbled my response to Max's question, so he helpfully stepped in and explained that social programs like Social Security and Medicare are paid by payroll taxes, not income or other taxes. Employers and employees both pay 7.65% of earned income/wages to fund these two monster programs–a total payroll tax of 15.3%. (12.4% is for Social Security and 2.9% is for Medicare.)
Those who receive no earned income (self-employment earnings, wages, salaries, tips, etc.) and only receive unearned income (dividends, capital gains, rents, etc.) pay no Social Security/Medicare payroll taxes. That's one reason why unearned income is so sweet: it avoids the 15.3% payroll tax right off the top.
(Those of us who are self-employed pay the entire 15.3%.)
This means these programs depend entirely on payroll taxes from employed people. The taxes collected are non-trivial: Social Security brought in $725 billion in cash and paid $773 billion for benefits and overhead expenses in 2012.
The Social Security Administration (SSA) publishes a helpful chart of all earned income reported on federal tax returns: Wage Statistics for 2012. This data will help us understand why the system depends not just on those with any old job but those with good-paying full-time jobs.
(Recall that high-income earners only pay payroll taxes on the first $113,700 in 2013 and $117,000 in 2014. So someone earning $1,000,000 a year pays the same Social Security tax as someone making $113,700.)
Let's illustrate the importance of the full-time job/beneficiary ratio by asking: how many workers does it take to fund one retiree's annual benefit? Since even a low-lifetime earnings debt-serf like me can get $2,100 a month in Social Security bennies (if I wait until 70 to collect), and higher lifetime earnings folks get $25,000 a year at full or even early retirement, let's ask: how many workers' payroll taxes does it take to fund one retiree getting $25,000 a year from Social Security?
Over 23 million people reporting earned income made less than $5,000 a year. The SSA reports their average compensation was around $2,000. The Social Security payroll tax is 12.4%, so 12.4% of 2,000 is $248 a year in Social Security payroll tax.
It takes 100 of these workers' Social Security payroll tax to fund one retiree.
Another 14 million workers earn between $5,000 and $10,000, with an average of $7,400. At $7,400, each worker pays $917 in Social Security payroll tax. It takes 27 of these workers' payroll taxes to fund one retiree.
About 12 million workers earn between $10,000 and $15,000 a year, with an average of $12,460. Their Social Security payroll tax works out to $1,545 annually. It takes 16 of these workers to fund one retiree.
Cumulatively, that's around 50 million workers, or a third of the entire workforce.These 50 million people earn about the same amount ($153 billion) as the 1.8 million people who earn between $85,000 and $90,000 a year ($156 billion) and considerably less than the 890,000 folks who earn between $200,000 and $250,000 a year ($197 billion).
Those earning $85,000 a year pay $10,540 a year in Social Security payroll tax, so it takes 2.5 of these workers to fund one retiree.
Those 1.8 million people pay as much Social Security payroll tax as the 50 million low-compensation workers. This reveals how the system depends on full-time, high-paying jobs to fund the program. Adding millions of low-paying part-time jobs simply won't generate the payroll tax revenues needed to keep up with the rising number of beneficiaries (57 million total).
If you want to be in the top 10% of those with earned income, you need to earn about $85,000 a year. Out of 153 million people reporting earned income, 140 million make less than $85,000 a year.
To make it into the top 5%, you need to earn $115,000 or more, and to reach that oft-mentioned 1% (it's really the 1/10th of 1% who holds the power), you need to make $250,000 or more.
As noted earlier, those earning rarefied compensation aren't paying any more Social Security payroll tax than someone earning the limit of $113,000.
We don't have enough workers earning enough and paying enough Social Security payroll tax to support 57 million retirees. There are only 13 million high-wage earners (above $85,000 annually), and those with very high incomes pay no more Social Security payroll tax than those earning $113,000.
This is not sustainable. The average Social Security benefit is $1,230 a month or about $15,000 a year. It takes the payroll taxes of roughly 10 million low-wage workers to fund 1 million retirees receiving $15,000. The system needs another 57 million decent-paying full-time jobs to be sustainable in it's current form, i.e. the ratio of full-time workers to beneficiaries needs to rise back up to 3-to-1.
Unless 57 million Martian workers agree to kick in 12.4% of their quatloos (and assuming quatloos are convertible into dollars), the system is a doomed Ponzi scheme.
System costs will be rising fast as the Baby Boom retires en masse. There is no guarantee Social Security payroll taxes will rise at the same rate. Indeed, a recession or stagnation in the job market could cause payroll taxes to decline even as benefit costs soar.
Ignoring the facts won't help us address the insolvency of pay-as-you-go social programs.
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/cCSvWG62fIc/story01.htm Tyler Durden