Financial updates September 12, 2016
As we write this, the Dow, the S&P 500, and the NASDAQ remain at or near all-time highs. Of note is that the S&P 500 and NASDAQ are up less than 3%, and the Dow up just 1.4%, since their 2015 highs.
Dividend paying or value oriented stocks, as well as intermediate/long bonds, have been all the rage, in what appears to be a search for yield. Outside of those investment sectors, the market has not rewarded investors for the volatility they have experienced since last summer.
In business news, Liberty Media, owner of the Atlanta Braves, is purchasing part of the Formula One auto racing league, according to The Guardian. The Atlanta Journal Constitution says that Delta and its pilots are currently negotiating pay, with Delta offering a 27.3% increase over four years, and the pilots asking for 37.25% over three years.
Software testing firm Mindspark employs autistic adults, paying them between $16 and $30 per hour to work as analysts and senior analysts. Founder Evan Rochte found that their skills integrated well with those needed in the tech sector. This according to CNBC.
Legalist, partially funded by Peter Thiel, is a startup based on the model of financing litigation in exchange for a portion of the winnings. While we haven’t thought through this idea at length, it doesn’t, at first blush, impress us as an especially good idea.
President Obama is calling on U.S. allies to join forces against corporate tax avoidance. It remains to be seen what cooperation he will get, though most countries are hungry for tax revenue. Apparently it just won’t do for the sovereign entities of the world to get their financial houses in order. It’s probably just too much like work. Seems to be easier to print money, and tax everything that moves, (as well as most of what doesn’t) rather than make the tough decisions to balance budgets, and communicate those decisions to those who keep you in power. You can read the story regarding Obama’s remarks at http://www.reuters.com/article/us-g20-china-usa-tax-idUSKCN11B1LR.
In economic news, the Congressional Budget Office is revising the FY 2016 budget deficit to $590 Billion. This is $56 Billion higher than the CBO’s March forecast and represents the first increase relative to economic output since 2009. This $590 Billion is 3.2% of GDP, and is $152 Billion higher than FY 2015. GDP in the U.S. is $17.95 Trillion, and U.S. debt stands at $19.47 Trillion.
If current tax law remains unchanged, a substantial assumption going into an election, deficits are projected to increase. If tax law changes, we predict that deficits are projected to increase.
According to the Labor Department, the U.S. economy added 151,000 jobs in August, down from the 275,000 recorded in July. This was less than the 175,000 predicted by economists. The official unemployment rate remained unchanged, at 4.9%.
As you know from reading this commentary, we enjoy keeping up with business and the markets, and taking a skeptical view of government doings and promises. We don’t view life skeptically though. In fact, we are grateful for the life we have been given, the relationships that have come our way, and the opportunities in front of us. I was reminded of this recently, as I was going through some old files. In one file, I found an article written by David Brooks in April 2010.
In the article, published as an op-ed in the New York Times, Brooks encourages optimism. At the time, recent polls showed that 60% of Americans felt the country was headed in the wrong direction, that its best days were behind it, a fiscal crisis was unavoidable, and that the political system was dysfunctional. Our guess is that those percentages haven’t changed much in the last six years.
Brooks goes on to make a case for great optimism, concerning our country and its future. Friends, I happen to agree. Sure, the country has its problems. Think back though, over the conveniences you now enjoy, that weren’t available even fifteen years ago. And, to the quality of life we enjoy, and the gifts we have each been given. It is difficult, as we reflect, to be anything but grateful.
We firmly believe that the number and type of opportunities in front of us will continue to increase, and that the best is yet to come. We trust you feel the same way. You can read Brooks’ article at http://www.nytimes.com/2010/04/06/opinion/06brooks.html?_r=0.
And now, a few of our favorite quotes.
“Giving money to Congress is like giving whisky and car keys to teenage boys.”
“Anyone may so arrange his affairs so that his taxes shall be as low as possible. He is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase ones taxes.”
Judge Learned Hand
“I’ve read so much about the bad effects of drinking and smoking that I’ve decided to give up reading.”