Tuesday, March 26, 2013

That's the news

Wall Street gains on economy, S&P 500 record still eludes

The data "supports the thesis that housing is indeed recovering, which is sensational news for the household balance sheet," said Todd Schoenberger, managing partner at LandColt Capital in New York. Equity markets "should continue to elevate for the foreseeable future."
Not to nitpick or anything, but I wonder how long it will take before people stop looking at the housing recovery as being a thesis.  Probably until the next crash, which shouldn't be too long given the rate at which housing is recovering.  Actually, any decline in housing prices will be used as "evidence" that housing isn't recovering.  Well, okay.  I don't really see this as a "recovery" either, but for different reasons.  I see it as more of a reinflation of the bubble.  I guess it really depends on your definition of recovery, but most people seem to think that home prices rising equates with recovery, and if this were a normal market, that's what I would think too.  This is not a normal market, though, home prices were supported by the Fed and federal government at a level that was above the historic trend.  But expectations of the general public can be changed, and the longer home prices remain high on a historical basis, the longer people will will have to adjust to the new normal.

The second part of the above quote, that equity markets should continue to elevate for the foreseeable future is not particularly earth-shattering either.  First, given that equity markets over the long term have always trended up makes that statement the most likely outcome.  Equities tend to rise.  But again, while the housing news is certainly a reason to think that equities might do better in the near term, there are more compelling reasons to think equities will rise.  Mostly due to the Fed's quantitative easing.  There just isn't anywhere to put money and expect a return that will even keep up with inflation, unless you've been following my advice and stocking your basement with whiskey.

Wealth Inequality Getting the Fed's Attention
What's more, there is still widespread disagreement among academics and economists on the exact causes of inequality. Is it globalization or tax policy or the decline of labor unions or CEO pay or Wall Street or "winner-take-all" markets? Or some combination of all?
 For what it's worth, I say it's a combination of all of the above, with the exception of the decline of labor unions.  Who needs labor unions when the federal government is busy being the ultimate labor union?  What could be better for labor than the government mandating wages and benefits?  I think that it is the federal government that has brought on the decline of labor unions.  Probably unintentional, but that's what is happening.

Payroll Tax Hike: The Doomsday That Wasn't

"Hours increased and employment increased, so more people had more money in their income even if taxes were higher," Curtin said.
I have to admit, I expected more of an economic hit from the payroll taxes.  I didn't expect the increased hours and employment.  Then again, it's still early.  And apparently, according to the article, there are a lot of people who either don't know how much they make and so didn't notice any change, or they don't know how to figure 2%.  But in the end, 2% of and average paycheck is just a few bucks a week, so on an individual basis, it probably is hardly noticeable.  On a macro scale, the picture could be quite a bit different.  I guess we'll just have to wait and see.

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