America’s Professional Elite: Wealthy, Successful and Miserable - The New York Times
......And finally, workers want to feel that their labors are meaningful. “You don’t have to be curing cancer,” says Barry Schwartz, a visiting professor of management at the University of California, Berkeley. We want to feel that we’re making the world better, even if it’s as small a matter as helping a shopper find the right product at the grocery store. “You can be a salesperson, or a toll collector, but if you see your goal as solving people’s problems, then each day presents 100 opportunities to improve someone’s life, and your satisfaction increases dramatically,” Schwartz says.
Monday, February 25, 2019
Three New Governors Face Three Old Pension Disasters - Bloomberg
Three New Governors Face Three Old Pension Disasters - Bloomberg
...New Jersey has the worst business climate in the nation, which encouraged top taxpayers like David Tepper of Appaloosa Management to move to Florida. Connecticut and Illinois were among the few states to experience a net population decline in the year through July 2018, Census data show.
...Illinois has a whopping $134 billion in unfunded pension liabilities, while Connecticut has $35.5 billion. Both governors released plans last week that acknowledge the need to make full contributions to the retirement funds and recognize that returns will most likely be lower in the future.
...Because of the current state of the U.S. economy, the leaders in these states might have the last chance to get these funds back on track. The prospect of a recession looms large, which could spell the end of the long move higher in stocks. A relentless rally in risk assets has helped allay some of the underlying issues. Sustained market losses could be a death knell.
...New Jersey has the worst business climate in the nation, which encouraged top taxpayers like David Tepper of Appaloosa Management to move to Florida. Connecticut and Illinois were among the few states to experience a net population decline in the year through July 2018, Census data show.
...Illinois has a whopping $134 billion in unfunded pension liabilities, while Connecticut has $35.5 billion. Both governors released plans last week that acknowledge the need to make full contributions to the retirement funds and recognize that returns will most likely be lower in the future.
...Because of the current state of the U.S. economy, the leaders in these states might have the last chance to get these funds back on track. The prospect of a recession looms large, which could spell the end of the long move higher in stocks. A relentless rally in risk assets has helped allay some of the underlying issues. Sustained market losses could be a death knell.
Saturday, February 23, 2019
Recession: Are We There Yet? | Mauldin Economics
Recession: Are We There Yet? | Mauldin Economics
...In Italy the recession argument is over because they are officially in one. That got lost in other news but it really is happening. The Italian economy shrank 0.2% in the fourth quarter, following -0.1% growth in Q3. That is about as mild as a recession can be, but it counts. Germany may not be far behind. Europe’s largest economy contracted -0.2% in last year’s third quarter. Reports suggest the fourth quarter was no better and possibly worse.
...In Italy the recession argument is over because they are officially in one. That got lost in other news but it really is happening. The Italian economy shrank 0.2% in the fourth quarter, following -0.1% growth in Q3. That is about as mild as a recession can be, but it counts. Germany may not be far behind. Europe’s largest economy contracted -0.2% in last year’s third quarter. Reports suggest the fourth quarter was no better and possibly worse.
Meanwhile in Asia, China is not in recession and nowhere near one, if we believe government data.
...all this is subject to macro risks. All bets are off if China weakens too much or the UK makes a hard Brexit. As of now, however, nothing is exploding in a way that would set off a worldwide recession.
Wednesday, February 20, 2019
High-Tax Countries Make More People Pay Taxes - Bloomberg
High-Tax Countries Make More People Pay Taxes - Bloomberg
The clearest differentiator between the U.S. and the high-tax countries, though, may be taxes on goods and services. All the OECD countries but the U.S. have a value-added levy that taxes goods and services at every stage of production.
...Lots of economists like consumption taxes because they don’t discourage work and investment. The taxes do, however, tend toward regressivity.
...How about taxing wealth directly? There are so few outright wealth taxes in the world (France had one but ditched it as of last year) that the OECD instead tracks taxes on property, which includes taxes on net wealth but also taxes on real estate, gifts and inheritances, and financial and capital transactions.
...U.S. property taxes are mostly taxes on real estate. At 4 percent of GDP, they aren’t huge, but in some high-tax localities, they really add up. These are wealth taxes that, as my Bloomberg Opinion colleague Noah Smith pointed out last month, weigh more heavily on the middle class than the rich, because “rich people hold most of their wealth in stocks instead of houses.” Still, they are wealth taxes, and they’re higher in the U.S. than in all but two OECD countries, and much higher than in the high-tax Nordic countries.
The clearest differentiator between the U.S. and the high-tax countries, though, may be taxes on goods and services. All the OECD countries but the U.S. have a value-added levy that taxes goods and services at every stage of production.
...Lots of economists like consumption taxes because they don’t discourage work and investment. The taxes do, however, tend toward regressivity.
...How about taxing wealth directly? There are so few outright wealth taxes in the world (France had one but ditched it as of last year) that the OECD instead tracks taxes on property, which includes taxes on net wealth but also taxes on real estate, gifts and inheritances, and financial and capital transactions.
...U.S. property taxes are mostly taxes on real estate. At 4 percent of GDP, they aren’t huge, but in some high-tax localities, they really add up. These are wealth taxes that, as my Bloomberg Opinion colleague Noah Smith pointed out last month, weigh more heavily on the middle class than the rich, because “rich people hold most of their wealth in stocks instead of houses.” Still, they are wealth taxes, and they’re higher in the U.S. than in all but two OECD countries, and much higher than in the high-tax Nordic countries.
Eastern Europe Feeds on a Shrinking Ukraine - Bloomberg
Eastern Europe Feeds on a Shrinking Ukraine - Bloomberg
...The giveaway is that data from neighboring countries show that large numbers of Ukrainians are moving, especially to eastern Europe, and more have been tempted to do so since the EU introduced visa-free travel in June 2017.
... Eurostat says 662,000 Ukrainians, more than any other nationality, received EU residence permits in 2017. ...Most of the inflow went to Poland
...Ukrainians are already the biggest community of legally resident foreigners in the Czech Republic — 117,000 out of a total population of 10.5 million.
....Migrant remittances, which last year amounted to 13.8 percent of Ukraine’s economic output, according to the World Bank, are perhaps the best measure of the Ukrainian population outflow.
... a growing number of Ukrainians are working outside their home country, and their number is likely higher than the 5.9 million estimated by the United Nations in 2017.
...The eastern European resistance to accepting refugees isn’t anti-immigrant sentiment per se: it’s anti-Muslim and often racist, and it’s based on a common perception that immigrants from outside Europe won’t want to work or blend in.
...The giveaway is that data from neighboring countries show that large numbers of Ukrainians are moving, especially to eastern Europe, and more have been tempted to do so since the EU introduced visa-free travel in June 2017.
... Eurostat says 662,000 Ukrainians, more than any other nationality, received EU residence permits in 2017. ...Most of the inflow went to Poland
...Ukrainians are already the biggest community of legally resident foreigners in the Czech Republic — 117,000 out of a total population of 10.5 million.
....Migrant remittances, which last year amounted to 13.8 percent of Ukraine’s economic output, according to the World Bank, are perhaps the best measure of the Ukrainian population outflow.
... a growing number of Ukrainians are working outside their home country, and their number is likely higher than the 5.9 million estimated by the United Nations in 2017.
...The eastern European resistance to accepting refugees isn’t anti-immigrant sentiment per se: it’s anti-Muslim and often racist, and it’s based on a common perception that immigrants from outside Europe won’t want to work or blend in.
Sunday, February 17, 2019
In Germany, the Green New Deal Actually Works - Bloomberg
In Germany, the Green New Deal Actually Works - Bloomberg
...Here’s how the case against Germany goes: Despite a sustained effort to boost sustainable sources of energy, carbon emissions haven’t fallen in recent years because the country hasn’t been able to kick its coal dependence. At the same time, renewables subsidies have helped to drive up energy bills to make them the highest in Europe, hurting business competitiveness and consumers.
...Here’s how the case against Germany goes: Despite a sustained effort to boost sustainable sources of energy, carbon emissions haven’t fallen in recent years because the country hasn’t been able to kick its coal dependence. At the same time, renewables subsidies have helped to drive up energy bills to make them the highest in Europe, hurting business competitiveness and consumers.
Though the numbers in this argument are correct, ...They have helped transform Germany into the world’s most energy-efficient economy. It has also remained one of the world’s most competitive, in part because it adapted to higher energy costs.
...the energy price differential between the U.S. and Germany — where power is two and a half times more expensive...despite Germany’s coal habit.
Friday, February 15, 2019
Undefeated, ISIS Is Back in Iraq | by Aziz Ahmad | NYR Daily | The New York Review of Books
Undefeated, ISIS Is Back in Iraq | by Aziz Ahmad | NYR Daily | The New York Review of Books
...During our discussion, he reflected on a prewar era when sect or ethnicity barely mattered. “We lived in peace,” he said. He pulled back a sleeve to reveal a scar that he claimed was caused by an electric drill used in torture by Shia militiamen after sectarian tensions exploded during the civil war unleashed by the US invasion.
...His sense of disenfranchisement led him to the Islamic State, or ISIS, the terrorist group whose claim to address the grievances of Iraq’s Sunnis acted as a rallying call for many who were not attracted purely by ideology.
...During our discussion, he reflected on a prewar era when sect or ethnicity barely mattered. “We lived in peace,” he said. He pulled back a sleeve to reveal a scar that he claimed was caused by an electric drill used in torture by Shia militiamen after sectarian tensions exploded during the civil war unleashed by the US invasion.
...His sense of disenfranchisement led him to the Islamic State, or ISIS, the terrorist group whose claim to address the grievances of Iraq’s Sunnis acted as a rallying call for many who were not attracted purely by ideology.
Now, more than four years after the black-clad men conquered Mosul, a major city in northern Iraq, a third of the country remains pulverized, both physically and socially. Overlaid across territory that has been reclaimed from the Islamic State is a patchwork of various sectarian militias that now claim fiefdom.
...Iraq has foolishly declared the Islamic State defeated, as though its threat were now confined to the country’s past. But the signs of the ISIS’ resurgence are troubling, and the sense of grievance that fired it in the first place remains just as palpable—and just as unresolved.
...It has adapted to the antipathy found among the millions forced to flee their homes or chafing under the yoke of Shia militia rule, certain of the Islamic State’s inevitable return. Mosul, for instance, is exactly where ISIS wants it to be, filled with popular resentment that will gradually push locals back into the group’s orbit without its active intervention. ISIS has instead put its resources into a campaign at the village level, in rural areas where security is nonexistent at night—and that has paid off. Through 2018, dozens of village chiefs have been killed across northern Iraq in assassinations, bombings, and kidnappings....The assassins travel in small groups under the cover of darkness and know exactly which houses to target.
...Around Kirkuk and in Hawija, some 700 fighters have regrouped to abduct Kurds and Arabs for ransom and target power lines and oil trucks, as well as police units defending critical infrastructure.
...And it is not just the state security forces that are the cause of local alienation. Sectarian militias operating independently of Iraq’s weak government again loom large. Round-ups by militias following ISIS ambushes are commonplace:
...unwilling or unable to rein in Shia militia rule, ISIS is winning the war for hearts and minds.
...It matters less to occupy the country’s northern provinces with enough government forces than it does to remove the causes of the unending grievances that enable the group to flourish.
...Today, more than fifteen months since Mosul was liberated, not a single claim by ISIS victims—whether Arabs, Kurds, Christians, or Yezidis—has been settled. Religious leaders complain bitterly about the absence of a clear process for locals to file claims.
Net zero-energy homes will transform US real estate market
Net zero-energy homes will transform US real estate market
...The cost of each home is typically between $350,000 and $450,000 — and carries an additional $10,000 over the cost of De Young's comparable non-zero energy properties.
...making a home energy efficient usually costs an additional $10,000 before adding solar panels, which makes the home zero energy. Purchasing a solar system outright could add between six to 12 percent to the price, De Young said. The company has a partnership with Tesla which offers zero-down leases on its solar panels, among other financing options. In 2017, 41 percent of residential solar was owned by a third-party, which includes monthly leases and power purchase agreements, or PPAs, that allow customers to pay per kilowatt-hour of generation.
...The cost of each home is typically between $350,000 and $450,000 — and carries an additional $10,000 over the cost of De Young's comparable non-zero energy properties.
...making a home energy efficient usually costs an additional $10,000 before adding solar panels, which makes the home zero energy. Purchasing a solar system outright could add between six to 12 percent to the price, De Young said. The company has a partnership with Tesla which offers zero-down leases on its solar panels, among other financing options. In 2017, 41 percent of residential solar was owned by a third-party, which includes monthly leases and power purchase agreements, or PPAs, that allow customers to pay per kilowatt-hour of generation.
Growing number of Californians considering moving from state: Survey
Growing number of Californians considering moving from state: Survey
At 12.3 percent, California led the 50 states in 2018 with the highest top marginal tax rate, according to the Federation of Tax Administrators. And that doesn't include an additional 1-percent surcharge for those Californians with incomes of $1 million or more.
At 12.3 percent, California led the 50 states in 2018 with the highest top marginal tax rate, according to the Federation of Tax Administrators. And that doesn't include an additional 1-percent surcharge for those Californians with incomes of $1 million or more.
Monday, February 11, 2019
Dubai princess - Today's WorldView from The Washington Post
Today's WorldView from The Washington Post
...• The New York Times reports on the worrying case of Sheikha Latifa bint Mohammed al-Maktoum, a Dubai princess who failed in an attempt to escape a stifled life in the palace and has not been seen since:
...• The New York Times reports on the worrying case of Sheikha Latifa bint Mohammed al-Maktoum, a Dubai princess who failed in an attempt to escape a stifled life in the palace and has not been seen since:
“Like the young women who have fled Saudi Arabia’s restrictive regime, Sheikha Latifa has made sure no one can forget how few freedoms are allotted to women in the Middle East’s most conservative societies — or how costly crossing Dubai’s ruler can be.
"For all its megamalls, haute cuisine and dizzying skyscrapers, Dubai can flip at speed from international playground to repressive police state. It has drawn headlines in the West for detaining foreigners for holding hands in public and drinking alcohol without a license.”
Sunday, February 10, 2019
What Iran Means to the Arab World - Bloomberg
What Iran Means to the Arab World - Bloomberg
...With the 2003 invasion of Iraq and overthrow of the Saddam Hussein regime, the U.S. unwittingly set in motion developments that may be propelling Iran to regional-superpower status.
...With the 2003 invasion of Iraq and overthrow of the Saddam Hussein regime, the U.S. unwittingly set in motion developments that may be propelling Iran to regional-superpower status.
Saddam's Iraq was the bulwark blocking Iran's strategic access to the rest of the Middle East. But with Saddam and the old Sunni-dominated Iraqi state and army gone, Iran's influence spread.
...Iran is undoubtedly a problem for the Arab world. It might even be the biggest single external problem. But the internal problems remain the greater challenge.
Much of the Arab world would be a mess with or without the Iranian revolution that happened 40 years ago.
Saturday, February 9, 2019
Globalization in transition: The future of trade and global value chains | McKinsey
Globalization in transition: The future of trade and global value chains | McKinsey
...Not only is trade in services growing faster than trade in goods, but services are creating value far beyond what national accounts measure. Using alternative measures, we find that services already constitute more value in global trade than goods. In addition, all global value chains are becoming more knowledge-intensive. Low-skill labor is becoming less important as factor of production.
...services create roughly one-third of the value that goes into traded manufactured goods. R&D, engineering, sales and marketing, finance, and human resources all enable goods to go to market...In the future, the distinction between goods and services will continue to blur as manufacturers increasingly introduce new types of leasing, subscription, and other “as a service” business models.
... YouTube’s video content for free, and billions of people use Facebook and WeChat every month. These services undoubtedly create value for users, even without a monetary price.
...The growing emphasis on knowledge and intangibles favors countries with highly skilled labor forces, strong innovation and R&D capabilities, and robust intellectual property protections. (Some
trade in intangible assets is captured in trade statistics through intellectual
property royalties, which are influenced by tax considerations. But the
creation (rather than final ownership location) of intangible assets takes
place in countries with talent, legal protections, and innovation ecosystems)
...The share of value generated by the actual production of goods is declining (in part because offshoring has lowered the price of many goods).
... China exported 17 percent of what it produced in 2007. By 2017, the share of exports was down to 9 percent. This is on a par with the share in the United States but is far lower than the shares in Germany (34 percent), South Korea (28 percent), and Japan (14 percent).
...Overall, we estimate that automation, AI, and additive manufacturing could reduce global goods trade by up to 10 percent by 2030, as compared to the baseline.
...Before investing, companies should consider the full risk-adjusted, end-to-end landed costs of location decisions—and today many do not account for all of the variables.
...Not only is trade in services growing faster than trade in goods, but services are creating value far beyond what national accounts measure. Using alternative measures, we find that services already constitute more value in global trade than goods. In addition, all global value chains are becoming more knowledge-intensive. Low-skill labor is becoming less important as factor of production.
...services create roughly one-third of the value that goes into traded manufactured goods. R&D, engineering, sales and marketing, finance, and human resources all enable goods to go to market...In the future, the distinction between goods and services will continue to blur as manufacturers increasingly introduce new types of leasing, subscription, and other “as a service” business models.
... YouTube’s video content for free, and billions of people use Facebook and WeChat every month. These services undoubtedly create value for users, even without a monetary price.
We estimate that these three channels collectively produce up to $8.3 trillion in value annually—a figure that would increase overall trade flows by $4.0 trillion (or 20 percent) and reallocate another $4.3 trillion currently counted as part of the flow of goods to services. If viewed this way, trade in services is already more valuable than trade in goods.
...over 80 percent of today’s global goods trade is not from a low-wage country to a high-wage country. Considerations other than low wages factor into company decisions about where to base production, such as access to skilled labor or natural resources, proximity to consumers, and the quality of infrastructure.
... In the future, however, automation and AI may amplify this trend, transforming labor-intensive manufacturing into capital-intensive manufacturing....The growing emphasis on knowledge and intangibles favors countries with highly skilled labor forces, strong innovation and R&D capabilities, and robust intellectual property protections. (Some
trade in intangible assets is captured in trade statistics through intellectual
property royalties, which are influenced by tax considerations. But the
creation (rather than final ownership location) of intangible assets takes
place in countries with talent, legal protections, and innovation ecosystems)
...The share of value generated by the actual production of goods is declining (in part because offshoring has lowered the price of many goods).
... China exported 17 percent of what it produced in 2007. By 2017, the share of exports was down to 9 percent. This is on a par with the share in the United States but is far lower than the shares in Germany (34 percent), South Korea (28 percent), and Japan (14 percent).
...Overall, we estimate that automation, AI, and additive manufacturing could reduce global goods trade by up to 10 percent by 2030, as compared to the baseline.
...Before investing, companies should consider the full risk-adjusted, end-to-end landed costs of location decisions—and today many do not account for all of the variables.
Friday, February 8, 2019
Thursday, February 7, 2019
German Cartel Office Gets It Wrong on Facebook - Bloomberg
German Cartel Office Gets It Wrong on Facebook - Bloomberg
...According to Marc Al-Hames, general manager of Cliqz GmbH, a German developer of data-protection technology, every fourth website visit is monitored by Facebook – but Alphabet tracks 80 percent of all page loads.
...Getting platforms and websites to comply with the GDPR, instead of merely pretending to, is a legal battle with cleanly drawn lines. The cases should be argued out before individual countries’ data protection authorities and then before European courts to form a body of regulatory and judicial practice that will dictate how the GDPR is applied.
...According to Marc Al-Hames, general manager of Cliqz GmbH, a German developer of data-protection technology, every fourth website visit is monitored by Facebook – but Alphabet tracks 80 percent of all page loads.
...Getting platforms and websites to comply with the GDPR, instead of merely pretending to, is a legal battle with cleanly drawn lines. The cases should be argued out before individual countries’ data protection authorities and then before European courts to form a body of regulatory and judicial practice that will dictate how the GDPR is applied.
Final sliver of ISIS territory will fall within days, Trump predicts | Euronews
Final sliver of ISIS territory will fall within days, Trump predicts | Euronews
...the head of the Britain-based Syrian Observatory for Human Rights, says IS still has 4,000 to 5,000 fighters, many likely hiding out in desert caves and mountains.A United Nations report circulated Wednesday said Islamic State extremists "continue to pose the main and best-resourced international terrorist threat."
...the head of the Britain-based Syrian Observatory for Human Rights, says IS still has 4,000 to 5,000 fighters, many likely hiding out in desert caves and mountains.A United Nations report circulated Wednesday said Islamic State extremists "continue to pose the main and best-resourced international terrorist threat."
Tuesday, February 5, 2019
Andrew Cuomo Announces $2.3 Billion Revenue Shortfall | National Review
Andrew Cuomo Announces $2.3 Billion Revenue Shortfall | National Review
...New Yorkers affected by the loss of the SALT deduction are now filing their income taxes in other states or using other means to circumvent their tax liabilities,
...New Yorkers affected by the loss of the SALT deduction are now filing their income taxes in other states or using other means to circumvent their tax liabilities,
New York has a giant tax problem its leaders don’t want to face
New York has a giant tax problem its leaders don’t want to face
...Cuomo partly gets what’s going on: “‘Tax the rich! Tax the rich! Tax the rich!’ We did. Now, God forbid, the rich leave,” he said. He noted that the top 1 percent of New York earners provide 46 percent of the state’s personal income tax revenues, and cited anecdotal evidence that wealthy locals are heading for lower-tax states.
...Cuomo is talking about cutting back the $176 billion spending plan he released last month, calling the tax shortfall as “serious as a heart attack.”
...Cuomo partly gets what’s going on: “‘Tax the rich! Tax the rich! Tax the rich!’ We did. Now, God forbid, the rich leave,” he said. He noted that the top 1 percent of New York earners provide 46 percent of the state’s personal income tax revenues, and cited anecdotal evidence that wealthy locals are heading for lower-tax states.
...Cuomo is talking about cutting back the $176 billion spending plan he released last month, calling the tax shortfall as “serious as a heart attack.”
But he’s not raising the issue of long-term reforms to address the problem — other than vowing to “fight the loss of the SALT deduction and do everything possible to protect taxpayers.” Everything, that is, except taxing them less so they don’t leave.
Cuomo says declining NY tax revenue stems from Trump's ‘economic civil war’ | TheHill
Cuomo says declining NY tax revenue stems from Trump's ‘economic civil war’ | TheHill
(NY) ...personal income tax receipts in December and January that is projected to plunge $2.3 billion below previous estimates.
...“I’ve been starting to see New Yorkers as Florida’s new foreign buyer,” real estate appraiser Jonathan Miller told the Journal. “If they were already on the fence, I think the tax law has changed the calculus for some.”
(NY) ...personal income tax receipts in December and January that is projected to plunge $2.3 billion below previous estimates.
...“I’ve been starting to see New Yorkers as Florida’s new foreign buyer,” real estate appraiser Jonathan Miller told the Journal. “If they were already on the fence, I think the tax law has changed the calculus for some.”
New Jersey reported a 35 percent drop in tax revenue for December, compared to the previous year, and Connecticut Comptroller Kevin Lembo (D) warned last week that tax law changes and a sluggish stock market could bring down state revenue there as well.
Harvard’s top astronomer says an alien ship may be among us — and he doesn’t care what his colleagues think - The Washington Post
Harvard’s top astronomer says an alien ship may be among us — and he doesn’t care what his colleagues think - The Washington Post
... In the meantime, he’s doubling down, hosting a Reddit AMA on “how the discovery of alien life in space will transform our life,” and constantly emailing his “friends and colleagues” with updates on all the reporters who are speaking to him.
In a matter of months, Loeb has become a one-man alternative to the dirge of terrestrial news.
“It changes your perception on reality, just knowing that we’re not alone,” he says. “We are fighting on borders, on resources. . . . It would make us feel part of planet Earth as a civilization rather than individual countries voting on Brexit.”
...Russian billionaire Uri Milner once walked into his office and sat on the couch and asked him to help design humanity’s first interstellar spaceship — which he is now doing, with a research budget of $100 million and the endorsement of Mark Zuckerberg and the late Hawking.
... In the meantime, he’s doubling down, hosting a Reddit AMA on “how the discovery of alien life in space will transform our life,” and constantly emailing his “friends and colleagues” with updates on all the reporters who are speaking to him.
In a matter of months, Loeb has become a one-man alternative to the dirge of terrestrial news.
“It changes your perception on reality, just knowing that we’re not alone,” he says. “We are fighting on borders, on resources. . . . It would make us feel part of planet Earth as a civilization rather than individual countries voting on Brexit.”
...Russian billionaire Uri Milner once walked into his office and sat on the couch and asked him to help design humanity’s first interstellar spaceship — which he is now doing, with a research budget of $100 million and the endorsement of Mark Zuckerberg and the late Hawking.
Monday, February 4, 2019
Why Italy’s Debts Are Europe’s Big Problem
Why Italy’s Debts Are Europe’s Big Problem
A populist government prone to infighting and at constant odds with the European Union is what makes the current situation so dicey. It needs to sell more than 400 billion euros a year to keep the show on the road, a situation that forces domestic banks to buy even more debt.
The connection between a weak economy and weak banks, many of which are still vulnerable despite three years of declines in bad loans, has a name: the doom loop.
Saturday, February 2, 2019
What Should We Then Expect (From Investing)? | Mauldin Economics
What Should We Then Expect (From Investing)? | Mauldin Economics
...Ed just updated his data for 2018, so here’s the latest.
...As Ed says, “Starting valuation matters.” If you overpay you will likely underperform. And if you bought into stocks prior to December, you probably overpaid. The time to buy is, like the saying goes, when blood is running in the streets. And that’s not now, last quarter’s volatility notwithstanding.
...Ed just updated his data for 2018, so here’s the latest.
If you buy when the orange valuation line is high, returns for the next 10 years (the green bar directly below) are generally less than impressive and sometimes dismal.
Empty Quarter
You can look at this in other ways, too. Rob Arnott’s team at Research Affiliatescalculates 10-year expected returns for many asset classes based on expected cash flows and changes in asset prices, instead of extrapolating past returns.
Research Affiliates further calculates expected volatility, which lets them produce the classic risk-reward scatterplot below. The vertical axis is expected return, the horizontal axis is expected volatility. The ideal investment (high return, low volatility) would be in the upper left quadrant. Unfortunately, that area is blank.
...
Source: Research Affiliates
Instead, we see a wide variety of asset classes clustered in the lower left, indicating low returns and low volatility. Rob’s forecast is pretty bleak if you want more than about 4% returns over the next decade. Some major pension plans (which assume 7% or more) will be in serious trouble if this is anywhere close to correct.
...a disciplined risk-management process. In most cases, that means removing emotions from the equation. But how?
There are all kinds of methods, but here’s one very simple one as an example. The 200-day moving average identifies an asset’s long-term price trend. You can use it to stay on the right side of the trend. Stay exposed when the current price is above the 200-day MA, get out when it drops below.
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