Saturday, May 28, 2016

Tim Taylor on corporate stock ownership

Tim Taylor - most corporate stock is in untaxed hands. Quote:

It used to be that most US corporate stock was held by taxable US investors. Now, most corporate stock is owned by a mixture of tax-deferred retirement accounts and foreign investors. Steven M. Rosenthal and Lydia S. Austin describe the transition in "The Dwindling Taxable Share Of U.S. Corporate Stock," which appeared in Tax Notes (May 16, 2016, pp. 923-934), and is available here at website of the ever-useful Tax Policy Center.

The gray area in the figure below shows the share of total US corporate equity owned by taxable accounts. A half-century ago in the late 1960s, more than 80% of all corporate stock was held in taxable accounts; now, it's around 25%. The blue area shows the share of US corporate stock held by retirement plans,which is now about 35% of the total. The area above the blue line at the top of the figure shows the share of US corporate stock owned by foreign investors, which has now risen to 25%.

Great. So with the corporate tax system shot full of loopholes, and with capital gains essentially untaxed, who's left carrying the entire US tax load?

John Cochrane's not an uneducated economist, he's a right-wing economist

Noah Smith - 101ism, overtime pay edition. He extends John Cochrane a professional courtesy where none is warranted:

John Cochrane wrote a blog post criticizing the Obama administration's new rule extending overtime pay to low-paid salaried employees. Cochrane thinks about overtime in the context of an Econ 101 type model of labor supply and demand. I'm not going to defend the overtime rule, but I think Cochrane's analysis is an example of what I've been calling "101ism".


In the Econ 101 model of labor supply and demand, there's no distinction between the extensive and the intensive margin - hiring the same number of employees for fewer hours each is exactly the same as hiring fewer employees for the same number of hours each. But with overtime rules, those two are obviously not the same. For a given base wage, under overtime rules, hiring 100 workers for 40 hours each is cheaper than hiring 40 workers for 100 hours each, even though the total number of labor hours is the same. That breaks the 101 model.

With overtime rules, weird things can happen. First of all, base wages can fall while keeping employment the same, even if labor demand is elastic. Why? Because if companies fix the hours that their employees work, they can just set the base wage lower so that overall compensation stays the same, leading to the exact same equilibrium as before.

Overtime rules can also raise the level of employment. Suppose a firm is initially indifferent between A) hiring a very productive worker for 60 hours a week at $50 an hour, and B) hiring a very productive worker for 40 hours a week at $50 an hour, and hiring 2 less productive workers at 40 hours a week each for $25 an hour. Overtime rules immediately change that calculation, making option (B) cheaper. In general equilibrium, in a model with nonzero unemployment (because of reservation wages, or demand shortages, etc.), overtime rules should cut hours for productive workers and draw some less-productive workers into employment. In fact, this is exactly what Goldman Sachs expects to happen.

Now, to understand the true impact of overtime rules, we probably have to include more complicated stuff, like unobservable effort (what if people work longer but less hard?), laws regarding number of work hours, unobservable hours (since the new rule is for salaried employees), sticky wages, etc. But even if we want to think about the very most simple case, we can't use the basic 101 model, since the essence of overtime rules is to force firms to optimize over 2 different margins, and S-D graphs represent optimization over only 1 margin.

Using 101 models where they clearly don't apply is 101ism!

Um, Noah, I think John Cochrane knows all this. He's not ignorant of economics; he's simply pretending to be ignorant in order to convince the uneducated to support radical right-wing kleptocratic policies like opposing overtime pay for the poor. That's why he says "most economists" agree with him when you've quite easily demonstrated that they don't.

There's a reason his post came out right after Obama proposed new overtime regulations.

You should quit extending professional courtesy to queers from the Cato Institute who write "economics"-based right-wing disinformation. Professional courtesy is for professionals only.

Thursday, May 26, 2016

News catchup continued

Bonddad - hooray, sort of, for new home sales. He notes the numbers do tend to get severely revised later. But still, here's the interpretation from someone who actually fucking knows the business cycle and doesn't dwell on fucking semi book-to-bill bullshit:
As you probably already know, April new home sales blew out to the upside, making a new 8 year high at 619,000 annualized. *If this holds up,* it is very important positive economic news, since new home sales tend to peak even before housing permits, so much so that they are more of a mid-cycle indicator than a long leading indicator! In fact, it would be the single most positive news of the year to date.
Thus the market goes up.

Calculated Risk - chem barometer increased in May. Another input to the US economy showing strength.

Tim Duy the Finance Guy - more on the Fed raising rates. And yet, Tim, one month of economic news will change the story entirely. That's what happens when the inflation target is set at the top of the noisefloor.

Reuters - "Darkies oot" campaign maintains lead in UK. By the way... since we know Cameron is against leaving the EU, we can assume that a successful leave vote won't mean the UK leaving the EU. As a Canadian, I'm familiar with bullshit spineless separatist populism, and so I predict a successful leave vote will simply be followed by Cameron offering to negotiate a "new deal with Europe that's fairer to UK interests and also keeps the fucking darkies out".

Reuters - IMF, EU, Greece reach debt deal. Hm... wasn't it leaked a month ago that the Germans were going to try to precipitate a crisis in the EZ by sabotaging the debt deal come July? Maybe they're scared of an imminent depressionary shock due to the coming Brexit vote?

Reuters - new Fed survey lays bare economic divide. Half of Americans can't pay an unexpected $400 bill. By the way, things end up this way because right-wing economists refuse to recognize the existence of the entire demand side of the economy. Because demand side management is Keynesian, and therefore sociamalist. Enjoy your eternal economic depression, fucktards.

New home sales

Astoundingly, I got 33/35 on my actuarial test. I say astoundingly, because I spent 40 minutes on one single question and still didn't get the right answer. I guess the teacher is just extremely generous with marks.

Now we're moving on to bond and equity valuation, which is more fun. Strange that I'm learning more economics in actuarial math than I am in economics, eh?

Anyway, catching up on some news:

Calculated Risk - new home sales increase sharply. If there's new sudden strength in US equities, it certainly ain't because of stupid fucking semiconductors; housing is a much larger share of US GDP. It's also a large chunk of US investment, and investment is the part of GDP that really drags the whole rest of the economy around.

So if housing's going to print a new post-crash high, that means the S&P has a long way up to go yet, and there's a year and a half of equity selling that's now revealed to be wrong-footed.

No reason to sell US equities til you hear Kyle Fucking Bass is 200% long S&P 500.

Tuesday, May 24, 2016

Bonddad on Mexico

Bonddad - Mexico and trade and Trump.

Something to think about next time you want to slag Mexicans.


Fortune - Kyle Bass sucks. Quote:
While Bass made 212% returns on his bets against subprime mortgages in 2007, his bet on the oil market isn’t doing nearly as well. Two years ago, the hedge funder began buying into several oil producers with the hopes that the price of oil would rebound in 2015 and 2016. Prices did come back a bit at the beginning of this year, but they have been dropping again lately. As of Monday, U.S. oil slipped to $48 a barrel amid a persistent supply glut that began in 2014. Meanwhile, Iran and OPEC in general have still yet to agree on cutting production.

For Bass, the low prices have resulted in a 7% loss in his main fund this year, and the biggest losing streak in the history of his Hayman Capital, the Wall Street Journal reported.
Well, at least he's done better than the S&P 500, right?
In the same period, the S&P 500 has gained 1.3%.

Well, he's probably in this position for the long-term, right? I mean, he must have known oil was going to go this low, he just had to move a lot of money in:
“I had no idea crude would fall so low,” Bass said in an interview with the Journal,

Well, I guess at least he can feel assured that even though he loses money hand over fist for his idiot investors, at least he can still collect the same old 2% & 20%, y'know, as long as his investors don't flee his shitty funds en masse, right?

Where's my massive repudiation of debt as a dishonest system comes apart at the seams, Gary?

New Deal Demoncrat - road to the next recession. He explains what to monitor for a recession signal. Quote:
So a reasonably likely road map to the next recession looks like this:
1. Interest rates continue to fail to make new lows.
2. House prices and stock prices stop meaningfully appreciating.
3. Inflation picks up to 2% or more as energy prices begin to go up again.
4. Maybe - the Fed raises rates in response to increased CPI readings, perhaps enough to invert the yield curve.
5. Corporate lending stalls, housing turns down, and consumer spending begins to turn down, resulting in a recession.
Or you could just read Gary Wordsalad's blog. I mean, he called the massive repudiation of debt and the coming apart at the seams of a dishonest system back in June 2013, didn't he? I guess that explains why he quit advertising his newsletter's performance around that time. Can't have anything to do with him failing to make a fucking penny during a 2-year S&P bull market.

on the EU dying

Simon Wren-Lewis - I don't think the EU is dying. Then again, "dying" doesn't mean "flying apart as the result of a crisis": Rome was dying long before Larry & the Visigoths. In the EU's case, it's slow suffocation at the hands of the Germans that'll put the EU to sleep.

Hell, maybe I'm too much of a pessimist: maybe the EU will find new life as a transnational fascist dictatorship once Germany and France ultimately follow the lead of Hungary, Poland, Finland, and Austria.


FRB Atlanta - on how their very own nowcast sucks big wobbly donkey dick. I think they know what's causing it:
An optimistic interpretation is that the string of one-sided misses are the result of bad luck—an atypical sequence of shocks that neither GDPNow nor private forecasters could account for. A more troubling interpretation is that there have been structural changes in the economy that neither GDPNow nor the consensus of private forecasters have identified.
Hey: you guys already know how to aggregate GDP numbers for the quarterly GDP reading, don't you? Well, why not just do that same thing for your nowcast? I mean, if you're comparing one made-up number to another, it helps if both are the same methodology, right?

Some news

Some stuff for your Tuesday morning:

New Deal Demoncrat - weekly indicators. Real estate purchase applications, real estate loans, M1 & M2, and sorta tax withholding all look good. Pay attention to upcoming housing news for more on real estate, which if you'll recall is basically the entire US business cycle.

Econbrowser - duelling nowcasts. And as it turns out, Fed nowcasts are also kinda worthless, or at least so damn noisy that they're worse than worthless.

Tim Duy the Finance Guy - June meeting is significant. He feels that Fed comments suggest a rate hike is definitely on the table. Pay attention to housing, I'd say.

Much more later, the news is getting interesting.

Sunday, May 22, 2016

Some weekend news


Calculated Risk - comments on existing home sales. Apparently OK.

New Deal Demoncrat - no, the yield curve is not flat. Um, did anyone think it was? Oh wait - okay, Alhambra thought it was, and whoever recommends you read shit from Alhambra is a fucking idiot.

Calculated Risk - LA port traffic declined in April. Dooooom!

FT Alphaville - funny how bitcoin turned out to be just another boring old valueless asset whose price depends entirely on who's left to take it off your hands, eh? In other words, how the hell are you supposed to have a digital "currency", goldbugs, when it's threatened by extreme counterparty risk? Turns out bitcoin is just another way to buy meth or smuggle money out of Guangdong.

der Spargel - Austria's goin' full Nazi again. Actually, it's not that big a deal, they've been ruled by fascists for decades. But it brings up a question: why is it that people who live in mountainous regions are generally right-wing hatemongers?