I was listening to a semi private hedge fund call and the manager certainly was along board with this view. He was a VERY sharp guy and the thing that gets me is that Doc, Mish, and him are all super smart people that looked at the facts and do their own DD on one side of the trade while all of the CNBC lemmings are on the other side. One one side of the trade you have people who thing that housing can only go up, oil can only go up, ( stock markets only go up) etc...
He was on board with deflation... Said bonds will outperform stocks for the next 10 or so years... He said on a contrarian viewpoint he even likes LONG bonds...I want to say even in the next 5 or so years, he brought up how Gartman or somebody else said stocks will be flat for the next 7 years ( although maybe up and down but they will be at these levels in 7 years)... He talked about debt levels, demographics etc... seemed to be thinking more long/macro term than... ( the PPI is UP! ETC.
1st, Harry Dent is NOT an economist, he works with demographics. 2nd, in his last book "The Next Great Bubble Boom: How to Profit from the Greatest Boom in History: 2006-2010" he predicted the Dow to be 40,000 in 2009. You call that spot on?? Is that just a finer detail?? Was 2006 the start of the Greatest Boom in History as the title indicates? Harry Dent is very good at putting quotes in books and his newsletters that he can draw on as being right no matter what happens much like a psychic reading. When he has made big calls to the extent of making it the title of a book, he was dead wrong. Both AIM and Mass Mutual once had mutual funds based on the Dent philosophy and were sub-managed by him. Both have gone bust as being some of the worst performing mutual funds in recent history. If you followed his investment advise over the last 5 years you would be flat broke by now. Good thing you were just recently turned on to him Doc.
<<Paul Krugman (Bleeccch!!)
We finally agree on something. >>
You are letting Doc off the hook far too easily here.
It wasn't more than a few weeks ago that Doc was trumpeting Krugman's philosophy which was at the same time he was putting out Chanos' copycat bearish opinion on China.
So I find it more than a little disingenuous that Doc would be saying he was against Krugman now.
BTW, Doc, you still haven't answered my question as to where you stand on govt policy so now is your chance to make it clear to all of us as to where you really stand on these issues.
Are you for Krugman-type tax and spend policy now or not?
I know what you think about the Laffer curve(LMAO) WRT how you think higher taxes always mean higher govt revenues so I hope you'll atleast be consistent with that opinion now.
FYI, Christine Romer did some research into this subject of taxation and the evidence was quite clear. Higher taxes hurt GDP and the economy and tax policy that is used to support more govt spending does not provide nearly the same multipliers as a reduction in taxes.
Here's an interesting quote from the past:
<<In a speech urging passage of the 1981 tax cuts, President Ronald Reagan made the following argument:
Over the past decades we've talked of curtailing government spending so that we can then lower the tax burden. Sometimes we've taken a run at doing that. But there were alawys those who told us that taxes couldn't be cut until spending was reducd. Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance.>>
In other words, starve the beast.
So Doc, you really want to let this administration (or any other in recent memory) feed the beast some more?
Take a stand!
The Bush tax cuts brought in more revenue than was predicted. The Lauffer curve in theory and in practice works. If my tax rate is 75% I will go to the top tax guy to avoid taxes, and if I have to change my behavior I will. If my tax rate is 40% I might not go through extreme trouble.
On one hand you argue we are Japan ( I agree), but if it was up to the Republicans on the board they wouldn't go through with the stimulus.... Which I agree with. But then you say these people worry about inflation but don't worry about deflation.
So what does Fed Chairman Doc propose? If I was the chairman of the Fed I'd do what Jim Rodgers would do. Fire everyone and then quit. Central style central planning isn't a good idea. No disrespect to Greenspan or Bernanke, but they are attempting to do an impossible job.
Bill Gross per Barron's roundtable a few weeks ago,
"I recommend high-quality sovereign bonds in the U.S. and Germany. These markets will see slower growth and next-to-zero inflation. Ten-year U.S. Treasuries yield 3.37%, and the German 10-year is at about 3%. They aren't raging buys, and yields won't drop, nor will prices rise, substantially. But as you're assured payment, they represent decent value. Quality corporate bonds yield closer to 5%. Bond mutual funds have been the recipients of flight-to-quality money, while stock funds aren't getting inflows. Historically that would be a negative indicator for bonds and a positive one for stocks, but the new normal isn't a risk-asset-friendly environment. We see similar gains of 4% to 5% this year in stocks, high-yield bonds, commercial real estate and other risk assets. There is no asset that glistens, promising double-digit returns."
<It also quite clearly says they are doing it to PUT SOME INFLATION into their economy.>
More like that they are attempting to.
<The article I linked to says advocates of monetization want it in order to DEVALUE THE YEN.>
Again, that is the goal.
<The writer at your link also says that's a motive.>
Yes, he does. That is the goal, but what is the result?
<In other words, the exact things you keep denying are the result of debt monetization.>
You are with Keynes and Paul Krugman (Bleeccch!!) on this one Ilap.
Does that look like the yen is going down in value to you?
I understand the theory, Ilap. You have the central bank monetize the debt such that the government spends a ton of money on goods and services such that demand returns to the marketplace, and prices rise/ you get inflation. It just has never worked.
The problem is unless you have a 100% tax rate, government spending pales in comparison to consumer spending.
It has not worked in Japan, and Bill Gross says it is not going to work here. You can also add Mish and David Rosenberg to the list. Gross changed his mind. The interesting part is if you will too.
Finally, I think people get the idea that deflation is lower prices, and that is fine. It isn't, not by a long shot.
Inflation causes recessions. Deflation can lead to depressions.
<That is absurd. Show me the raw data.>
It looks like I am going to eat some crow on this one. I lost the battle but won the war.
So income tax revenues were down huge in 2009. However, the larger point that lower tax rates lead to higher income tax revenues is absurd.
Both Bush and Clinton raised taxes in the 90s and income tax revenues soared. W cut taxes in 2001 and revenues fell.
Still, the overall bottom line is that tax revenues reflect GDP and overall economic activity much more than tax rates.
Still, I am puzzled as to what part of income is due to an individual's tax on income versus capital losses and gains. That amount, which appears to be included in income, is highly variable.
<I'll go with Bill Gross. He says get out of US bonds.>
Sorry, Ilap, he changed his mind.
Got Nixon right, Ilap and even the reason. Demand was exploding in the U.S. because of the younger population. Instead of waiting for supply to catch up, Nixon did the dumbest thing possible and put in price controls. That led to no one looking into increasing supply (because it didn't pay to do so) while demand soared. Once the price controls were removed, prices exploded and there was a huge rush to get supply.
And this is from Zero Hedge, "In a speech before the Lower House Budget Committee Shirakawa said that not only will Japan continue monetizing its debt (at least unlike Bernanke, he admits it), but that they will happily accelerate this action if it means killing the Yen and creating a glimmer of hope for inflation. Carry traders everywhere rejoice.
"Overcoming deflation and returning to a sustainable economic recovery path under price stability remain a vital issue for the BOJ. We will continue injecting ample liquidity into financial markets to overcome deflation."
Shirakawa noted that monetization is happily chugging along: "We are buying JGBs in order to inject ample funds into financial markets in a stable manner and we are buying Y21.6 trillion of JGBs annually" and he made it clear that adjusting for scale differences, the Japanese monetization program is three times faster than the Fed's Treasury QE - in other words assume that Japan has bought the equivalent of nearly $1 trillion of its own bonds, adjusted for something or another."
It just kills me how many people say the U.S. is not like Japan. The U.S. is doing EXACTLY what Japan has done.
<Income tax revenue dropped 44% from a year ago.>
<Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago.>
"That is absurd. Show me the raw data."
"I doubt that, Ilap, but what is and has always been the most variable item with regards to tax collection?"
LOL YOU DOUBT THAT? I just quoted from an article in USA Today. You think they made it up? Course reporters have been known to make things up, but still. Or the American Institute for Economic Research made it up. I'll just go with your opinion eh?
"Income has been steady and that means taxes on income should be steady as well."
WHEN was it steady? Show me the raw data.
"What all you inflationists don't get is that you can't call for there to be massive inflation without calling those buying T bills and bonds right now massive idiots."
I'll go with Bill Gross. He says get out of US bonds.
"Where do you disagree with the tea partiers, Ilap? Everyone of your posts is Republicans right, Dems wrong. Can you post the Republicans have ever done anything wrong?"
What's that got to do with anything? Also, this may surprise you but Republicans and Tea Partiers are actually not the same thing!
"Speaking of which, do you know what caused the inflation and who was most responsible for it? I will give you a hint. He was a Republican."
Inflation exploded during Jimmah's administration. It got reigned in during Ford's years, causing a recession and getting Jimmah elected. But for the sake of argument let's say a Republican, Nixon let's say, was responsible - his wage and price controls were a joke. What's that got to do with what we're discussing?
<<I don't have a problem with the government going into debt to spend a lot of money right now. ....
When you borrow money, the goal should be to get a higher return. That means the government should be spending money in such a way to grow the economy and enhance future tax revenues, and they are not doing that, not by a long shot. >>
OK, You are either for THIS govt spending more to support the economy or not. Which is it?
There is only one govt in power now and we've seen how they spend.
What'll it be?
You want to give you and future generations' wallets to this govt in order to temporarily boost the economy?
If there's anything in this govt's long term strategy that you support in terms of spending, I'd like to hear about it.
Personally, I'd like to keep my wallet in my pocket cause I think I can get atleast three times the value for a $ spent than the govt can and that's good for the economy.
You know why?
<I don't think there's information out there on revenue over that last 12 months.>
Income has been steady and that means taxes on income should be steady as well. Yes, unemployment will hurt income tax revenue.
<Income tax revenue dropped 44% from a year ago.>
That is absurd. Show me the raw data.
<Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago.>
I doubt that, Ilap, but what is and has always been the most variable item with regards to tax collection?
<I'm bookmarking this! Hey why don't you start a newsletter?>
It is not news, Ilap. A ten year T bond rate of 3% means the bond market is saying inflation will be <3% for the next ten years. What all you inflationists don't get is that you can't call for there to be massive inflation without calling those buying T bills and bonds right now massive idiots.
<I want a nice little docjoe convoluted explanation that incorporates some reference to the Tea Partiers. I find them entertaining.>
Where do you disagree with the tea partiers, Ilap? Everyone of your posts is Republicans right, Dems wrong. Can you post the Republicans have ever done anything wrong?
< I bet you didn't know we had recession and inflation simultaneously in the 70's.>
Speaking of which, do you know what caused the inflation and who was most responsible for it? I will give you a hint. He was a Republican.
<So you're in favor of the tax increases then, right?>
No, I actually previously posted that I think raising taxes at this time is among the most stupid things that can be done. It is funny how both you and Winny rushed to the same straw man conclusion.
But from an investing POV, higher taxes in 2011 is the cold hard reality, and one reason I see 2011 being a horrible year for the stock market overall.
Right now, everyone agrees that it is important to get more money in the hands of the consumer. However, this administration does not believe that lowering taxes is a way to do that. They want to redistribute wealth and buy votes. IOW, they want everyone to know that THEY gave the public more money.
I don't have a problem with the government going into debt to spend a lot of money right now. What I have a problem with is how it is being spent. The Keynesians like Paul Krugman have argued that it doesn't matter how it is spent as long as it is spent. I think that is nuts.
When you borrow money, the goal should be to get a higher return. That means the government should be spending money in such a way to grow the economy and enhance future tax revenues, and they are not doing that, not by a long shot.
<<This is a huge problem with the current administration. Instead of cutting spending and letting people keep more of what they earn, they are going to raise taxes >>
You agree with Laffer now?
What do you really mean?
You for raising taxes or not?
"That's basically what happened with the large Reagan and George W. Bush tax cuts, both of which were followed by large budget deficits. Yes, spending has a lot to do with that, but the bottom line is unequivocal: In both cases, government revenue was lower than it would have been without the tax cuts."
"Neither the Reagan nor the George W. Bush tax cuts were "self-financing," as the Laffer disciples like to argue. According to The Economist -- my former employer and no bastion of left-wing thought -- the current Bush Administration's top economist, Gregory Mankiw, estimated that decreasing taxes on labor would generate enough growth to recoup only about 17 cents for each lost dollar; a tax cut on capital is better, paying for more than half of itself. Still, the bottom line from the Bush Administration itself is that tax cuts reduce Uncle Sam's take."
And probably the best line, "I'm simply pointing out that we can't pretend that tax cuts won't require reductions on the spending side to balance the budget. In fact, you can disregard every other argument in this column and think about one thing: If Laffer were right, lower taxes would never require any spending sacrifice. We could pay a mere one percent of our income in taxes and still fund all of our government spending -- and maybe more! Do you think that's really possible?"
One of the things that Mish has been pounding home has been how pig like government workers have become. There pay is outrageous in comparison to private sector workers.
I haven't heard any outside of Ron Paul talk about cutting government spending. This is a huge problem with the current administration. Instead of cutting spending and letting people keep more of what they earn, they are going to raise taxes and give them money back through bogus instruments like HAMP.
The current adminstration is all about redistributing wealth and then telling people how they owe them. Witness BP. The Mineral Management Service was just as corrupt under this president as the last one. Yet when he gets $20 billion, money that would not have been needed had the MMS done its job, he expects praise.
Mr. Change we can believe him is taking money that is not his and using it to attempt to buy votes. That is not change; it is business as usual.