Investing Thread

[ATL MU Warrior]

Not everyone can afford to invest in stock market. Many many many middle class struggling with every day needs, rent gas food energy.  They are spending all of their money on “life stuff”.  Depleting their savings, preventing many from buying homes, having their cars repossessed running CC debt up, dipping into retirement savings etc etc  rents for apartments are way up, can’t afford basics

You guys are out of touch with people who have less than most of us

None of these problems have ever existed until January, 2021. 

[TSmith34, Inc.]

From the NYT morning brief:

A new economics
A then-obscure think tank named the Roosevelt Institute released a report in 2015 that called for a new approach to economic policy. It was unabashedly progressive, befitting the history of the institute, which was created by trusts honoring Franklin and Eleanor Roosevelt.

The report called for higher taxes on the rich, a higher minimum wage, more regulation of Wall Street, more support for labor unions, more aggressive antitrust enforcement and more government investment in economic growth. National news outlets covered the report while also noting how much of a break it represented with decades of economic policy by both the Democratic and Republican Parties. There was ample reason to be skeptical that much would change.

But much has changed in the past eight years.

President Biden has enacted the biggest government investment programs in decades, two of which — in infrastructure and semiconductor development — received bipartisan support. Both the Biden and Trump administrations showed more interest in antitrust policy than their predecessors. Many states, blue and red, have increased their minimum wages. American workers have become more interested in unionizing, and labor unions in both the auto industry and Hollywood have recently won big victories. Even some Republican politicians speak positively about unions.

“It’s very surprising this all happened,” Felicia Wong, the longtime president of the Roosevelt Institute, told me. “For a long time, those of us who have been arguing for it were on the outside looking in.”

In today’s newsletter, I want to consider two questions: What explains the shift toward what Wong and her colleagues call (in a new report, released today) a New Economics? And is that shift likely to continue?

Unmet promises
The simplest explanation for the shift is that the old economic approach hasn’t worked very well for most Americans. Starting in the 1980s, the U.S. moved toward an economic policy that’s variously described as laissez-faire, neoliberal or market-friendly. It involved much lower taxes for the wealthy, less regulation of business, an expansion of global trade, a crackdown on labor unions and an acceptance of very large corporations.

The people selling this policy — like Milton Friedman, a Nobel laureate in economics — promised that it would bring prosperity for all. It has not.

Incomes for the bottom 90 percent of workers, as ranked by their earnings, have trailed economic growth, and wealth inequality has soared. For years, Americans have told pollsters that they were unhappy with the country’s direction. Perhaps most starkly, the U.S. now has the lowest life expectancy of any affluent country; in 1980, American life expectancy was typical.

Conventional wisdom rarely changes quickly. Friedman and his fellow laissez-faire intellectuals spent decades on the fringes, before the 1970s oil crisis and other economic problems caused many Americans to embrace their approach. But conventional wisdom can change eventually. And after decades of unmet promises about the benefits of a neoliberal economy, more people have grown skeptical of it recently.

Donald Trump also played a crucial role. He won the Republican nomination in 2016 while defending Social Security and Medicare and criticizing free trade and high immigration, two pillars of neoliberalism. By doing so, he proved that even many Republican voters had drifted from the views of Ronald Reagan and Paul Ryan.

As president, Trump often contradicted his own populist rhetoric. (His one big piece of legislation was a tax cut that mostly benefited the rich.) But he shattered so many basic norms of governance that Democrats came to think they too could discard long-held beliefs. As Neera Tanden, who is now Biden’s top domestic policy adviser, said to me in 2018, “Donald Trump has widened the aperture for policy discussions in the United States.”

Still vulnerable
Where does the New Economics go from here?

For all the progress it has made, the movement remains far from its biggest goals. In many ways, Americans are still living in the Reagan era. Taxes on the rich remain low. Corporations are much larger than in the past, and they can often prevent workers from forming unions even when most employees at a work site want to join one. Many progressive proposals, like universal pre-K, remain dreams.

In the short term, the biggest question is probably whether Biden can win re-election, given Trump’s lack of a consistent economic policy. One threat to Biden’s re-election is voters’ unhappiness with the economy’s recent performance, especially inflation.

Today’s high prices are mostly not Biden’s fault, as my colleague German Lopez has explained; inflation has also been a problem in other countries, related to Covid disruptions, the war in Ukraine and other factors. But Biden has failed to persuade voters that he is sufficiently focused on high prices, and they give his overall economic policy much lower marks than they give his specific policies, like the investments in infrastructure and semiconductors.

For all these reasons, the New Economics both has made surprising progress over the past decade and remains vulnerable to reversal.

[dgies9156]

Not everyone can afford to invest in stock market. Many many many middle class struggling with every day needs, rent gas food energy.  They are spending all of their money on “life stuff”.  Depleting their savings, preventing many from buying homes, having their cars repossessed running CC debt up, dipping into retirement savings etc etc  rents for apartments are way up, can’t afford basics

You guys are out of touch with people who have less than most of us

Brother Rocket:

Think again. If you have a 401(k), IRA or SEP plan, you are invested in the stock market. If you have a Defined Benefit pension plan, you probably are invested in the stock market. Some of the largest corporate debt and equity holders in the United States are pension funds and mutual funds that are supported with retirement dollars. That "corporate greed" that too many people wail about is what's funding a good portion of their retirement.

That said, there are some here who think the economy is "improving" and that the sitting President will be the beneficiary. Perhaps, but let's examine for a moment why the Cheeto is running neck and neck with the sitting President. First, is interest rates. Eighteen months ago, I bought a new home with the proceeds from properties I owned in Illinois and Florida. Chase offered me a competitive rate of 3.125 percent for a five-year ballloon mortgage. That same mortgage today has close to an 8.00 percent coupon rate. Young adults like my daughter, who are saving for their first, or second home, either have to wait or purchase far less home than they would have purchased just 18 short months ago.

My son a few years back purchased a new automobile. His credit union offered him a five-year loan for 2.00 percent. The rate on that car loan today would be closer to 7.00 percent.

President Biden would advocate to no end for lower interest rates and he's not the reason rates are where they are. But people blame the sitting President. Period. They just do.

Second, down here in Florida, regular grade gasoline prices were $1.79 to $1.99 per gallon when the sitting President took office. They're now $3.05 to $3.21 a gallon. We're not New York City or Chicago. People drive down here to get where they are going. That extra dolllar a gallon, even with more efficient automobiles, hurts. People see that everyday and somehow think the Cheeto might lower gasoline prices. They blame the sitting President.

Third is grocery prices. Again, inflation may be tapering off but the ability to adjust for it in wages is lagging. It will happen, but it takes time and people become aggravated. They blame the sitting President, no matter who he is.

For those of you who were around in the 1970s, look at what happened in 1979. Jimmy Carter was chased from office largely because of Paul Volecker.  Chairman Volecker stopped inflation by essentially choking the money supply. We whipped inflation but President Carter paid the price, deservingly or not. President Bush paid the same price for a recession in 1992 and even John McCain paid the price for the economic downturn in 2008 (as in, there's no damn way were electing a Republican in this mess).

I concur with many of you who believe the President's direct effect on the economy is comparatively modest in relation to how most Americans hold him accountable. In President Biden's case, the Porky Pig infrastructure bill and some of the energy/climate initiatives undoubtedly are inflationary, as was his unwavering support for the UAW during the Big-3 strike. But those are relatively modest compared to the costs of raw materials, capital investment costs, wars and unsettled global matters that are well beyond U.S. control. Look, for example, at the impact of the Middle East Oil Embargo of 1973 and the subsequent formation of the OPEC Cartel on inflation in the United States. It was ridiculous!

[MUBurrow]

Think again. If you have a 401(k), IRA or SEP plan, you are invested in the stock market. If you have a Defined Benefit pension plan, you probably are invested in the stock market. Some of the largest corporate debt and equity holders in the United States are pension funds and mutual funds that are supported with retirement dollars. That "corporate greed" that too many people wail about is what's funding a good portion of their retirement.

The best decision the "corporate greedy" ever made was to replace pensions with retirement plans and make every American's survival dependent on their middle-class-eradicating levels of success.

[dgies9156]

The best decision the "corporate greedy" ever made was to replace pensions with retirement plans and make every American's survival dependent on their middle-class-eradicating levels of success.

Brother Burrow:

Yes and no. For most of us, particularly when we were young, one had to stay at at employer for at least five years to be vested in a pension. Leave and you either can wait until you are 65 and collect a very small pension or move somewhere else and start over. The alleged benefit of 401(k)s and IRAs to the employee was portability. Once you were vested, you could take your the vested portion of it, which in my case, was very small.

The real benefit of portability was the ability to move around from job to job. So, if you had an employer who was shafting you, an employee could move somewhere else and continue on whatever retirement program he or she had. In my case, I eventually had a financial advisor who consolidated all of my 401(ks) into one managed SEP.

Ultrimately, the problem with defined benefit pensions was that companies were recapturing overfunding in pensions or were facing underfunding problems like those that confront the State of Illinois. In Illinois, the public pension deficit for state and local government probably is more than $200 billion. And neither Mayor Brandon or Governor Rich Boy are dealing with it. In the private sector, one would bankrupt the company and turn the obligation over to the government through the PGIF. Or, form LLCs out the ying-yang and move valuable assets into the LLCs, then declare bankruptcy.

Case in point:  When Delta Air Lines was on the verge of bankruptcy, dozens and dozens of its senior pilots retired and took a lump-sum pension payout. The payout was designed to avoid losing benefits during the bankruptcy. The result for Delta was hundreds of profitable, long-haul international flights were cancelled because they didn't have enough pilots qualified on 767s, 777s, A330s and similar aircraft.

[rocket surgeon]

Brother Rocket:

Think again. If you have a 401(k), IRA or SEP plan, you are invested in the stock market. If you have a Defined Benefit pension plan, you probably are invested in the stock market. Some of the largest corporate debt and equity holders in the United States are pension funds and mutual funds that are supported with retirement dollars. That "corporate greed" that too many people wail about is what's funding a good portion of their retirement.

That said, there are some here who think the economy is "improving" and that the sitting President will be the beneficiary. Perhaps, but let's examine for a moment why the Cheeto is running neck and neck with the sitting President. First, is interest rates. Eighteen months ago, I bought a new home with the proceeds from properties I owned in Illinois and Florida. Chase offered me a competitive rate of 3.125 percent for a five-year ballloon mortgage. That same mortgage today has close to an 8.00 percent coupon rate. Young adults like my daughter, who are saving for their first, or second home, either have to wait or purchase far less home than they would have purchased just 18 short months ago.

My son a few years back purchased a new automobile. His credit union offered him a five-year loan for 2.00 percent. The rate on that car loan today would be closer to 7.00 percent.

President Biden would advocate to no end for lower interest rates and he's not the reason rates are where they are. But people blame the sitting President. Period. They just do.

Second, down here in Florida, regular grade gasoline prices were $1.79 to $1.99 per gallon when the sitting President took office. They're now $3.05 to $3.21 a gallon. We're not New York City or Chicago. People drive down here to get where they are going. That extra dolllar a gallon, even with more efficient automobiles, hurts. People see that everyday and somehow think the Cheeto might lower gasoline prices. They blame the sitting President.

Third is grocery prices. Again, inflation may be tapering off but the ability to adjust for it in wages is lagging. It will happen, but it takes time and people become aggravated. They blame the sitting President, no matter who he is.

For those of you who were around in the 1970s, look at what happened in 1979. Jimmy Carter was chased from office largely because of Paul Volecker.  Chairman Volecker stopped inflation by essentially choking the money supply. We whipped inflation but President Carter paid the price, deservingly or not. President Bush paid the same price for a recession in 1992 and even John McCain paid the price for the economic downturn in 2008 (as in, there's no damn way were electing a Republican in this mess).

I concur with many of you who believe the President's direct effect on the economy is comparatively modest in relation to how most Americans hold him accountable. In President Biden's case, the Porky Pig infrastructure bill and some of the energy/climate initiatives undoubtedly are inflationary, as was his unwavering support for the UAW during the Big-3 strike. But those are relatively modest compared to the costs of raw materials, capital investment costs, wars and unsettled global matters that are well beyond U.S. control. Look, for example, at the impact of the Middle East Oil Embargo of 1973 and the subsequent formation of the OPEC Cartel on inflation in the United States. It was ridiculous!

  dogies-excellent summation, but repsectfully, what you are overlooking is the fact that middle class people cannot afford to invest in the market.  they don't have any money left after paying their living expenses.  yes, many of the middle class may be working for a company who contributes to a plan, but i will bet you dollars to credit card interest rates, they would rather take that money home with them.  they are scratching and clawing for everything they can get to pay for gas, food and bills

  without trying to be redundant, just look at the car repossession rates and the delinquency rates

[MUBurrow]

Good comments dgies.  You're right to call out the leverage that a pension system can give employers over an employee.  As you mention, that has a big impact on portability.  In addition, I'd be the first to complain about how a company going under (whether through shell gaming assets/liabilities or more legitimate business disruption) can screw folks relying on a pension.  In the latter case, I'd be yelling some sarcastic version of "just pay people and then they don't have to depend on their old employer's solvency for the rest of their lives."  We see some of that issue in employee ownership structures.

I do think we have a problem in that regular people are invested in the market for subsistence and are reliant in short term gains to their long term detriment vis-a-vis the very upper class.  But you're probably right the employment compensation level is not where to try to solve that.

[Pakuni]

  dogies-excellent summation, but repsectfully, what you are overlooking is the fact that middle class people cannot afford to invest in the market.  they don't have any money left after paying their living expenses.  yes, many of the middle class may be working for a company who contributes to a plan, but i will bet you dollars to credit card interest rates, they would rather take that money home with them.  they are scratching and clawing for everything they can get to pay for gas, food and bills

  without trying to be redundant, just look at the car repossession rates and the delinquency rates

Hate to inject some facts, but household spending power is pretty much back to prepandemic levels.

https://www.primerica.com/public/household-budget-index.html

[The Hippie Satan of Hyperbole]

Hate to inject some facts, but household spending power is pretty much back to prepandemic levels.

https://www.primerica.com/public/household-budget-index.html

Yeah, I know that rocket is all in on "Biden is destroying the economy," but it ignores that there have been significant reductions in inflation over the last 12 months.

[dgies9156]

Hate to inject some facts, but household spending power is pretty much back to prepandemic levels.

https://www.primerica.com/public/household-budget-index.html

Maybe, and nobody said it isn't. But it's buying a whole lot less. That aggravates people and causes them to blame the President.

The Cheeto is playing on this issue, big time.

[Pakuni]

Maybe, and nobody said it isn't. But it's buying a whole lot less. That aggravates people and causes them to blame the President.

No, it's not buying "a whole lot less." That's the point of that analysis. It measures buying power, and buying power is nearly at the same level today as it was three years ago.

[rocket surgeon]

No, it's not buying "a whole lot less." That's the point of that analysis. It measures buying power, and buying power is nearly at the same level today as it was three years ago.

  have you looked at the packaging of "stuff"  it's called "shrinkflation"

www.delish.com/food-news/a45724153/shrinkflation-food-getting-smaller/

[ATL MU Warrior]

  have you looked at the packaging of "stuff"  it's called "shrinkflation"

www.delish.com/food-news/a45724153/shrinkflation-food-getting-smaller/

And there is no blame for that phenomenon outside of the corporations that are doing it to increase profits.

[Pakuni]

  have you looked at the packaging of "stuff"  it's called "shrinkflation"

www.delish.com/food-news/a45724153/shrinkflation-food-getting-smaller/

[rocket surgeon]

And there is no blame for that phenomenon outside of the corporations that are doing it to increase profits.

 yes and no-except for the fact that some have been forced to increase their employee salaries in order to keep and maintain good workers.  rising fuel costs is a big killer, especially if the trend lasts longer than expected

otherwise there could be some gouging occurring as well-another-can't let a good crisis go to waste moment

[Uncle Rico]

 yes and no-except for the fact that some have been forced to increase their employee salaries in order to keep and maintain good workers.  rising fuel costs is a big killer, especially if the trend lasts longer than expected

otherwise there could be some gouging occurring as well-another-can't let a good crisis go to waste moment

Luckily, health care, dental care in particular has not gone up in the last few years. 

[rocket surgeon]

hope you invested in these companies cuz i missed it and glad i did-i'd fire my "wealth" advisor

  kraft-heinz stock-11/30/2018-$51.12    today $33.81

  cal-maine                               $47.04             $49.79

  conagra                                  $33.19             $28.08

[rocket surgeon]

Luckily, health care, dental care in particular has not gone up in the last few years.

 
  no, but dental insurance companies are still making a killing

not to mention hygiene salaries have f' ing skyrocketed from $30-35/hour to as high as $80/hour or more with stipends and extras thrown in

    we CANNOT raise our hygiene fees to cover while insurance companies just laugh at us
 

[dgies9156]

No, it's not buying "a whole lot less." That's the point of that analysis. It measures buying power, and buying power is nearly at the same level today as it was three years ago.

Brother Pakuni:

Candidly, that analysis makes no sense.

The mood of the country tends to support the notion that we may be spending more, but we don't have purchasing power parity. At least not yet. How else would you explain the general irritation about the economy?

If we had parity, our sitting president would be among the most popular ever. He's not -- by a long shot. The fact that he's running even with the Cheeto in four of the five battleground states suggests there's still a sour mood about how the everyday American's economic fortunes have decreased.

Income increases tends to lag price increases. That's been evident in past inflationary times and is one of the reasons why the Federal Reserve squeezed the money supply in 1979 -- to stop the ongoing inflation cycle caused by rising prices and rising wages. I'm sure the never-ending cycle of price and wage increases was a factor in the Federal Researve's decisions about interest rates in 2022 and 2023.

The UAW settlement notwithstanding, I question whether income and prices have kept pace. I also have grave concerns about the economy in the coming two years due to the current interest rate environment's impact on three-to-seven year balloon mortgages on commercial debt coming due (most of which were written in the hgih "3s" and "4s" and are now repricing to the "7s" and "8s" with limited improvement in underlying income). Add to that the commercial real estate defaults in our major urban areas across the United States coupled with banks that are facing significant margin compression and you have the stew for a recession in 2024 or 2025.

[The Hippie Satan of Hyperbole]

Brother Pakuni:

Candidly, that analysis makes no sense.

The mood of the country tends to support the notion that we may be spending more, but we don't have purchasing power parity. At least not yet. How else would you explain the general irritation about the economy?

The stat that Pakuni shared literally shows that we have purchasing power parity.  That's exactly what it measures.

The general irritation is around a couple things IMO. First, simply achieving where we were before is a nice trend, but its not progress by definition.  Second, perceptions about economic performance tend to lag the numbers.

We will see where things go in the next six to nine months.

[TSmith34, Inc.]

Right, both are true: the numbers show we are at purchasing parity, and people aren't feeling it yet.

I continue to believe the Fed has overshot. We are seeing interest rates start to come down because consumer demand is dropping. Rate CUTS are already baked into next year's economic forecast by many of the big houses, yet the Fed is still making noises about another possible increase.

[dgies9156]

Right, both are true: the numbers show we are at purchasing parity, and people aren't feeling it yet.

I continue to believe the Fed has overshot. We are seeing interest rates start to come down because consumer demand is dropping. Rate CUTS are already baked into next year's economic forecast by many of the big houses, yet the Fed is still making noises about another possible increase.

I agree with you about the Federal Reserve. The shape of the Treasury Yield Curve further supports your view about market interest rates. I think the real estate community (residential and commercial) is praying every day that we're right. Ditto for bankers and just about anyone else who relies on leverage.

Bankers are especially concerned given the increase in Accumulated Other Comprehensice Income ("AOCI") on bank balance sheets. AOCI is the adjustment in GAAP equity for debt securities losses in the "available for sale" portfolio. About 2.75 years ago, this was a premium and it's now systemwide about $370 billion underwater!

[4everwarriors]

"Biden wouldn't be my first, second or third choice if I could pick a president from an open field of candidates. Still, thank goodness we have a president who actually cares about Americans."


His approval ratin's have hit rock bottom. Can't exit stage left or right. Has released another $10 billon to Iran. Oh, and speakin' of crooks...
Shirley, even the most blue of the donkeys, can't be happy with the BOTUS. And, now we have MO and Gavin warmin' up in the bullpen,  aina?

[Coleman]

"Biden wouldn't be my first, second or third choice if I could pick a president from an open field of candidates. Still, thank goodness we have a president who actually cares about Americans."


His approval ratin's have hit rock bottom. Can't exit stage left or right. Has released another $10 billon to Iran. Oh, and speakin' of crooks...
Shirley, even the most blue of the donkeys, can't be happy with the BOTUS. And, now we have MO and Gavin warmin' up in the bullpen,  aina?

I am not a Biden fan but its a matter of choice between two options and he is much better than the likely alternative. Its how he got elected in the first place.

[4everwarriors]

If Biden were to be the nominee, any vote he receives, is a vote for Harris, aka BOTUS#2, aina?