Thoughts From The Frontline - All Comments

re: Killing the Goose

Barnhill — Sat, 10 Oct 2009 15:05:22 GMT

A huge amount of capital is locked up in IRA/401K retirement funds.

I propose allowing at withdrawal with zero taxes due of up to $1 million dollars but only for the purpose of buying a house.

Retirees could help their kids get into a house that is otherwise unaffordable. Retirees might buy a condo and give their house to their kids.

$1 million sounds like a lot in small midwest towns, but in Newport Beach, CA it won't purchase much of a condo.

re: Welcome to the New Normal

George F — Mon, 28 Sep 2009 13:24:02 GMT

The goal may be 5% full emplyment levels, but reality says that in the long run there is always regression to the mean. Therefore we should be happy to get back to the long term average.

re: The Elements of Deflation

travis199 — Tue, 22 Sep 2009 14:05:54 GMT

I guess you're correct. Paul Krugman does have a point, but naturally gets the conclusion totally backwards. Keynes does explain the framework of recessions better than Mises does. Unfortunately, Keynes' policies are responsible for more recessions than Mises. And even more unfortunately, the folly of Keynes is followed by more in the political class than any other, because it is the one economic theory that justifies their own usefulness (or would that be usefoolishness?).

If the political class had to rely upon Mises, they would be where they belong--unemployed. So I will fall on the side of saying, "My guru's better than Krugman's guru."

re: An Uncomfortable Choice

dragba — Sun, 30 Aug 2009 16:52:58 GMT

Dear Mr Mauldin,

Thank you for your great analysis.

I would like to know why some other options are not considered at all. In my opinion there are several ingredients in this crisis that are missed in every analysis.

- Inefficiency.

o Big corporations are becoming increasingly inefficient. The mismanagement and not the technology brings the productivity and profit down. The lion share of the remaining profit is then swallowed by bonuses and perks and only the smaller portion left to share holders. The profit is the major engine of progress and without healthy profit all other policies will fail.

o The government is even less efficient than corporations and getting worse. The more money is on their disposal, the less efficient the bureaucracy will be. The more regulation is taking place, the more *unproductive* government jobs will be created.

- Wealth distribution

o All left wingers are advocating that the progressive income tax is the only way to achieve so-called “social justice”. In reality it is complete nonsense, because it only makes the rich richer and is thinning the middle class. The key issue is the *minimal wage*. If that one goes up, many people would not need benefits. That would in turn lead to less steep progressive tax, better real purchasing power etc. The significant side effect would be that much less working force would be employed to distribute the collected (or printed) money to low wage families. Those employees would have to find some productive jobs, and that would increase the efficiency and competitiveness of the nation. (The low wages and high tax work as a subsidy to big capital. They make extra profit from low paid labour, which is in return helped by tax payers’ money to survive. It is in fact the siphoning of money from the middle class to big business.)

o Limiting the compensation of top corporate leadership for all firms that are on the gov life support. For others, the extra compensation should be allowed, but with the time lag of a few years. It would be paid only if the company does not need gov help or have loses in several consecutive years after the compensation has been earned. (I suggest four years.)

re: The Statistical Recovery, Part 2

mldimaria — Sun, 23 Aug 2009 16:28:05 GMT

Many thanks for the continued great reporting!

One of the indignities of aging is that I can no longer read the street signs from three blocks away.

Any possibility that the size of the charts in the reports can be increased significantly or add a PDF download option.

The employment numbers are grim indeed as you and others point out with civilian unemployment running something close to 17% and rising.

Maintaining little to no tariffs or quotas on China's products as we continue to de-industrialize; while maximizing short-term profits and significant commissions for the Investment banks who champion exporting industries seems unsustainable in the both the long-run and now the short-run.

If not for other countries' willingness to loan money to the Federal Government for various vote buying programs such as the "stimulus, clunkers, house rebates" and soon to be insolvent Medicare, Medicaid and Social Security etc, the very tough decisions would be upon us. Socialism has already failed in America.

Coupled with the current administration doing everything they can to Nationalize huge sectors of the economy while increasing the costs for private industry, one has to ask at what point is the camel's back broken? Do we have a second and potentially larger employment collapse with the FEDs moving in to scoop up new industries in additions to autos, banking, mortgage, retirement, insurance, medical etc.....

When the tough decisions come, it will no longer be the private sector and families making them, it will be the increasingly dominant and intrusive Federal Government.

What am I missing?

re: Six Impossible Things Before Breakfast

Andile Ramaphosa — Mon, 17 Aug 2009 00:52:11 GMT

What a great article! Another super-wave in the ocean economic debate around the importance ( or lack thereof) of EMH. Fanstastic.

re: Six Impossible Things Before Breakfast

JCHarper — Sun, 09 Aug 2009 14:25:11 GMT

I am not an economist. I do read and follow economist thinking but generally discarded it a nice academic rhetoric with little practical value back in the late 70s. I have gone from negaitve net worth to a comfortable retinement over the past 25 years. In 2008, I did not make as much as I spent but I did not lose any money in the market. Same goes for ytd 2009.

I believe the "efficient market" hypothesis is true only to the extent that everything is worth exactly what someone will pay for it right now. To try to build comprehensive investment theory around that one simple fact is impossible. Also, note that the time span for price (right now) is zero. That just isn't enough foundation to support any meaningful logical construct. End of EMH discussion as far as I am concerned.

The basic idea that has served me well over the years is that ther are only two reasons to buy anything: 1) to produce income or 2) to be consumed.

Investments are purchases to meet the first reason. The goal of investment defined by the second reason to buy. At least that is true for me as an individual.

Todays market is not being driven by the prospect of investment income. It is being driven by ideological and political forces that are not economic in nature. Applying economic investment principles to a market driven by ideology is a sure-fire loser, in my opinion.

For me at least, I think my time is better spent studying how past sudden ideological shifts similar to the one we are seeing now in the US develop and end. I'd be very interest in seeing your tentative comments on that type of study.

Cordially,

John Harper

re: The Statistical Recovery

prybs — Mon, 27 Jul 2009 14:39:48 GMT

One could cite employment levels in addition to un-employment levels, as the number of persons employed continues to fall and those with jobs are working less.

In a consumer driven economy, is this the stuff of rallies.

Looks like a false start, or as Mr. Maulding puts it, a bear market rally.

I am sure bullish readers will cling to the thought that employment is a lagging indicator though.

Consumer credit is withering away, just saying. . . be careful if you are long.

re: The Statistical Recovery

Andile Ramaphosa — Mon, 27 Jul 2009 00:56:18 GMT

FYI - According to FT (23/06/09) - " In an attempt to fight the economic crisis by boosting exports, China's ministry of commerce recently launched a campaign known as the “421 project”.

Its goal is to secure $42.1bn of machinery and electronics orders within three months by mobilising the resources of the state, including the deep-pocketed Chinese banks. "

Thanks. Fantastic article.

re: The Statistical Recovery

scott cain — Sat, 25 Jul 2009 09:10:08 GMT

It would be great if you could talk more specifically on what sectors/industries will grow the most in China, and what sectors/industries

in the U.S. will benefit from this growth.

Thanks for your five star writings!

Scott Cain

re: Europe on the Brink

Fred C — Sun, 19 Jul 2009 17:41:19 GMT

The big 5 investment are not listed correctly.Not JP Morgan, but Morgan Stanley. Doesn't change the story only a correction of the identity. JP Morgan was "given" the remains of Bear Sterns.

re: This Time its Different*

Melvin Hays — Fri, 03 Jul 2009 16:25:35 GMT

This is an interesting article written by a very knowledgable economist about the USA economy.

re: The New, New Normal

jal64 — Mon, 15 Jun 2009 15:27:07 GMT

A decidedly Larry Summers-like PC incorrect view regarding the quoted longevity statistics: aside from the risk in accepting raw numbers at face value a partial reason for the "low" number for USA is the high percentage of our population that historically (I almost said genetically) have shorter life spans.

re: The Paradox of Deficits

Tboydusa — Tue, 26 May 2009 13:33:58 GMT

OK so the worst is yet to come, regardless of what the media or the administration are implying. How can the average 'Joe the Plumber' prepare for the future? Where can I put my money to protect it from inflation and the avalanche of future taxes? Cash? Real Estate? In my 401k how safe are GIC's?

re: Faith-Based Economics

rmacy — Sat, 16 May 2009 20:37:28 GMT

Medicare and medical care future costs will be need to be solved in the social and political arena and not in any pie in the sky new medical treatment. New drugs cost on average 12 times generic. How will new drugs decrease future costs? Retired MD