It was all rate hike, all day as I spoke with Neil Cavuto on Fox News concerning the likelihood of a rate hike and its impact on the economy. Please excuse the hair – I have no bloody idea what the hair/makeup department was thinking! Apparently they thought I needed more body – perhaps this was a bit of an overshoot!?
Hopefully I was able to deliver some thoughtful comments that could override the astounding helmet head!
With the Fed rate hike decision looming, on December 15th I had the great pleasure of being on Mornings with Maria (Bartiromo) for the entire three hours of her show. She is one incredibly talented and elegant woman, not to mention my new level of respect for being able to sit on set for three hours straight, starting at 6am. That meant being at the studio by 5:15am, which naturally demanded plenty of coffee; a beverage choice I came to understand as a serious oversight around the 1 hour 45 minute mark!
But I digress…
With the Fed’s decision and a rate hike hitting the markets the next day, there’s was plenty to discuss concerning the wisdom of to hike, or not to hike. There are signs of the economy weakening, with many indicators at levels not seen outside a recession: 3 month moving average for retail sales, Durable Good orders, and manufacturing is in contraction.
For those who say manufacturing doesn’t matter… the ISM Purchasing Manager’s Index very closely correlates to year-over-year changes in the S&P 500.. and it is flashing warning signs. The chart below shows the ISM Purchasing Manager’s index versus the year-over-year change in the S&P 500 – think there might be a relationship!?
All that being said, with how much the Fed has been talking up a hike, we’ve hit the point where the Fed must act or lose enormous credibility.
Speaking with Wall Street Journal Chief Economics Correspondent Jon Hilsenrath and Wilmington Trust Chief Economist Luke Tilley
I have written extensively about the efforts of the recording industry to squeeze blood from the streaming music industry stone by attempting to get allies in Congress and the White House to increase the royalty rate paid by streaming companies like Pandora , Apple ([stock_quote symbol=”AAPL”]), Amazon.com ([stock_quote symbol=”AMZN”]), Spotify, Google ([stock_quote symbol=”GOOGL”]) Play Music, and other companies. The battle royale over the future of music streaming has taken a strange and potentially dangerous turn over the past month.
By the end of the year, the Copyright Royalties Board (CRB) at the Library of Congress will determine the new royalty rate streamers will have to pay record labels and artists. The CRB has been charged under statute to “establish rates and terms that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller.” An attempt by a federal agency to set rates that accurately mimic what a competitive marketplace would yield is no easy task, however the CRB has before it approximately 30 privately negotiated royalty agreements between streamers (willing buyers) and record labels (willing sellers). These voluntary, in-market deals provide a roadmap to what the price of music should be.
This morning I spoke with Neil Cavuto on Fox Business about the Fed’s decision to not raise rates earlier this week; my view, Fed policy is the problem!
An economy grows when good ideas are able to get funding, find talented people to work on them and are able to operate in an environment that is conducive to their success; that means limited laws, regulations, and a tax code that are all easy to understand and not costly to follow.
All the QE (Quantitative Easing) and ZIRP (Zero Interest Rate Policy) have kept interest rates super low. That forces people to put their money into riskier investments than they’d like. Riskier investments by definition have to generate higher rates of return to compensate for their higher level of risk. High levels of risk are also associated with ideas, that normally wouldn’t get funding, but manage to get it by promising really high rates of return. If investors are pushed into more higher risk/higher potential return investments than they’d normally like, that means more of these potentially bad ideas get funding.
This means the economy experiences a higher failure rate than would normally be the case. That means more investors lose their money and more resources get wasted, draining the economy. Add in that the U.S. economy is getting more and more complicated with respect to legislation, regulation and a tax code that even the IRS doesn’t understand and ever great ideas struggle under the burden of trying to jump through all those extra government hoops that just make it that much harder to be successful.
In my discussion with Neil I refer to how we have a record high level of job openings. The chart below is from the Federal Reserve, but can be researched in depth by looking up the JOLTS report from the Bureau of Labor Statistics.
I also mentioned how the percent of the population actually employed is where it was nearly 40 years ago. This data is also from the Federal Reserve.
This morning I had the great pleasure of joining Maria Bartiromo in studio for the last hour of her show on Fox Business. We discussed a wide range of issues from the Federal Reserve to removing the restrictions on oil exports, but given where we are in the election cycle, the subject of Hillary and her emails naturally came up. The question is, should voters focus on growth or trust? We spoke with Don Baer, former President Bill Clinton Communications Director, about what he thinks are the key issues for voters.
Spoiler alert – I disagreed! Shocking I know, me, having an opinion…
The economy is facing some enormous challenges with the number of job openings continuing to be at record highs, while at the same time more and more people are giving up and leaving the workforce, thanks to a deeply structural skills mismatch. We have a tax code that is so insanely complex that more people are employed in the tax preparation industry than in the auto industry – not exactly a recipe for a productive economy! We have a regulatory regime that has become so burdensome that many small business owners simply give up or never even get their idea off the ground.
All that being said, I cannot evaluate a political candidate based solely on what they say. Hillary Clinton put our nation’s security at risk based on her claim that it was more convenient for her. For the love of Pete! You carry a purse! Cell phones aren’t that big and you have an entourage that could carry them both for you should you choose. Many of the rest of us manage to survive the horrors of carrying two mobile phones. Her excuse sounds pretty weak to me, which leaves me wondering what the real reason was and calls into question my ability to trust what she says. So even if she did have compelling ideas for improving the economy, how could I know she’d follow through. The rest of the nation already views those in D.C. with well place suspicion, we don’t need more reasons to doubt the legitimacy of those we elect to govern.
There has been a push by many politicians of both parties in Washington to beat up on Wall Street generally and hedge funds in particular. One need to look no further than Republican presidential candidate Donald Trump who claims hedge fund managers are not paying enough taxes. In a tirade that received accolades from liberals Warren Buffet and Sen. Elizabeth Warren, Trump claimed that the hedge fund operators “are getting away with murder” by alleging “ they’re paying nothing.”
This is nothing new as hedge funds have been a popular target for populist rhetoric. President Obama was quoted in a Bloomberg story titled “Obama Says Hedge Fund Managers Are ‘Society’s Lottery Winners” as saying “if we can’t ask from society’s lottery winners to make that modest investment, then really this conversation is for show.” President Obama wants to increase taxes on hedge fund managers and investors to pay for more federal education funding.
This morning I had the great pleasure of joining Stuart Varney and his team for an hour in New York. One of the topics we discussed was the fallout Hillary Clinton is facing over her use of a personal server for communications in her capacity as Secretary of State. She claims she used a personal server so that she didn’t have to carry two phones. Seriously? And she wants to be President? She is going to risk national security for her personal convenience yet believes she’d be a great leader of the most powerful nation on earth? Where does one start?
As hard as it may be to believe, MicrosoftMSFT -4.88% remains in a dispute with the Internal Revenue Service (IRS) over an audit from ten years ago. The extensive audit by the IRS stems over how tax is calculated for income made by Microsoft overseas. Granted Microsoft is large international company with revenues of nearly $94 billion last year and more than $60 billion in cash on its balance sheet at the end of June. Normally, tax law allows three years for an audit to be conducted. In this case, however, the IRS requested the company to waive the time period resulting in an almost decade long audit. Read More >>
NEW YORK (TheStreet) — Over the last few weeks, there has been a steady uptick in skepticism and uncertainty against a backdrop of slowing global growth and earnings. All the major indexes were down in single digits last week and U.S. markets opened today down sharply, following the lead of Asian and European markets.
There is little debate that patent law is a complicated subject, yet the idea of protecting intellectual and private property is a centerpiece of American free market capitalism. Congress is once again contemplating changes to patent law to help consumers by cracking down on costly and abusive patent lawsuits. Seeing an opportunity, lobbyists for big drug companies are trying to attach a proposal that would do the opposite – harm consumers, American competitiveness and is a special interest provision that is tantamount to cronyism. Read More >>