June 24
Markets and Stocks
Under Biden, federal spending levels are elevated.
The economy is slowing but there will not be a recession anytime soon.
@carlquintanilla Disposable income is outpacing inflation.
Momentum is to the upside for the market. On Friday we should get a good core PCE inflation print of about 0.12%.
Treasuries should continue to rally. Earnings will continue to grow and the S&P 500 will grind higher.
My best guess is that Nvidia treads water for a time. The other largest technology companies will also probably move sideways for a time.
The broad market is very attractive, selling at around 16x. I would maintain positions in Nvidia and the other hyper size technology names, and with cash buy industrials and the large banks.
This week the Fed will release the results of its latest stress tests; how would banks fare under severe economic conditions?
Micron reports Wednesday after the close. Revenues should approach $6.66 billion up 78%. I like the stock.
French President Emmanuel Macron’s decision to call a snap election later this month caused investors to wake up to his nation’s chronic large deficits. The market is particularly worried that the new French government will ignore fiscal restraint and pour debt on debt.
Since the E.U. elections on June 9, French equity and debt markets have been under pressure.
What is happening in France is a siren for the U.S. fiscal situation and the deficit tendencies of both Biden and Trump, particularly in the context of the necessary negotiation about the expiration of the individual tax cuts of the TCJA of 2017.
Economics
The Wall Street Journal gives us a heads up on a new NBER working paper which will be published later today. (I will include the summary of the paper in tomorrow’s post.)
Rising healthcare prices have long eroded American wages. They are doing that by eating into jobs.
Companies shed workers in the year after local hospitals raise their prices, new research found. Higher hospital prices pushed up premiums for employees’ health insurance, which businesses help pay for.
The new study, scheduled to be published Monday as a National Bureau of Economic Research working paper, is a comprehensive look at one way companies manage those higher premiums: cutting payrolls.
“Employers that face increases in healthcare spending respond by laying off workers who they can no longer afford to retain,” said Zarek Brot-Goldberg, an economist at the University of Chicago and one of the researchers involved in the study.
The findings: As hospital prices went up 1%, so did the percentage of people who ended up out of a job. The layoffs dealt a blow to their communities. Income-tax revenue dropped and payments for tax-funded unemployment insurance increased 2.5%.
https://www.wsj.com/health/healthcare/hospital-healthcare-prices-increase-employee-layoffs-9a4b90f6
Politics
Not taxing tips is bad policy. Tax all INCOME. Taxes must go up on everyone. No free riding.
The New York Times reports: Taxes on tips, by the numbers
Donald Trump’s proposal to eliminate taxes on tips is meant to appeal to the country’s massive service sector work force, as he and President Biden pitch for working-class and younger voters in crucial swing states. But the plan would add up to $250 billion to the federal deficit over 10 years, according to a report that the nonpartisan Committee for a Responsible Federal Budget released this week. Here’s the story by the numbers.
22 percent: The portion of the work force employed in the hospitality industry in Nevada, the election battleground state where Trump first promoted the policy.
At least two: How many bills that would eliminate taxes on tips and have been introduced in Congress this month. While some Republicans have applauded the policy for reducing taxes, others have questioned why tipped workers but not low-wage workers, who don’t get tips, should be singled out for a tax break. Some have also criticized the potential cost of the policy.
$225 billion to $375 billion over 10 years: How much the policy could cost the federal government if employers and workers change their behavior so they can reclassify 50 percent more of their income as tips to avoid taxes, according to the Committee for a Responsible Federal Budget report.
$23 billion: About how much tip income went unreported to the Internal Revenue Service in 2006, according to an estimate by the agency cited in a 2018 report by the Treasury Inspector General for Tax Administration.
91 percent: Growth in tips reported to the I.R.S. between 2008 to 2018. One reason for the explosion of gratuity? Tablet payment systems that prompt customers to tip more often and at higher percentages.
40 percent: Portion of Americans who oppose suggestions from businesses about how much to tip, according to a 2023 Pew Research Center survey.
Mitch Daniels at the Washington Post writes: My home state’s citizens last month elected their next governor. No, I misspeak. Five percent of them elected him. Seven percent preferred a different candidate, and 88 percent never had a say in the decision.
The party now dominant in Indiana held its May primary, in which 12 percent of the 4.7 million registered voters participated. The winner captured 39 percent of that vote, or 5 percent of the electorate. November’s general election will be a laydown formality; the polls are basically closed, six months ahead of time, with a Republican assured of victory. This is “early voting” of a kind no one should advocate.
https://www.washingtonpost.com/opinions/2024/06/18/republicans-democrats-one-party-state-rule/
Mitch Daniels is the former governor of Indiana and President Emeritus of Purdue University, one of the country’s top engineering and science universities.
The most polarized vote in primaries. The overwhelming majority of voters do not. So, primary winners skew far right or left. Often in general elections, the majority voters face no good choice.
Become more engaged. Vote in the primary. In Collier County I encourage moderate Democrats to register as Republicans in order to bring the Collier County Republican Party back to the center. At the moment the party is hard hard right, frighteningly so.
Science
Since the James Webb Space Telescope began operating two years ago, astronomers have been using it to leapfrog one another millions of years into the past, back toward the moment they call cosmic dawn, when the first stars and galaxies were formed.
Last month, an international team doing research as the JWST Advanced Deep Extragalactic Survey, or JADES, said it had identified the earliest, most distant galaxy yet found — a banana-shaped blob of color measuring 1,600 light-years across. It was already shining with intense starlight when the universe was in its relative infancy, at only 290 million years old, the astronomers said.
The new galaxy, known as JADES-GS-z14-0, is one of a string of Webb discoveries, including early galaxies and black holes, that challenge conventional models of how the first stars and galaxies formed.
“This discovery proves that luminous galaxies were already in place 300 million years after the Big Bang and are more common than what was expected,” the researchers wrote in a paper posted to an online physics archive.
https://www.nytimes.com/2024/06/22/science/space/webb-telescope-cosmic-dawn.html
Amazing! I wish I had paid more attention in my high school physics class. I was a typical teenage boy, sports and girls grabbed my attention.