What We're Reading

The topic of income inequality and its effects has been the subject of countless analysis stretching back generations and crossing geopolitical boundaries. Despite the tendency to speak about this issue in moral terms, the central questions are economic ones: Would the U.S. economy be better off with a narrower income gap? And, if an unequal distribution of income hinders growth, which solutions could do more harm than good, and which could make the economic pie bigger for all?

Given the decades--indeed, centuries--of debate on this subject, it comes as no surprise that the answers are complex. A degree of inequality is to be expected in any market economy. It can keep the economy functioning effectively, incentivizing investment and expansion--but too much inequality can undermine growth.

Higher levels of income inequality increase political pressures, discouraging trade, investment, and hiring. Keynes first showed that income inequality can lead affluent households (Americans include

My simplistic view of the stock market, the one my muddled brain is able to wrap around, is to imagine that of the waterfalls at the Continental Divide at Glacier National Park in Montana.  Numerous rivers, all converging into to one.  Hedge funds, pension funds, investment firms, your own 401k, option flows, you name it.........and share buybacks.

Throughout the recovery, the amount of cash being held on corporate balance sheets was in some instances, astounding, leaving many investors wondering if/when the cash would be deployed. 

Well if you haven't noticed, they have been deploying more and more.  Just imagine the many streams you see in this image to the right.  One is M&A which can be the acquisition of a company to compliment ones existing structure OR a direct competitor which is a plus for a stock by making your space that much smaller.  Another stream, a small one, is (hopefully) R&D, another stream represents cash being returned to shareholders via higher dividends and las

A view of the the NFIB survey and wage growth gives a hint of what may lie ahead in the wage sector.  Consumer spending dropped $7 in June which surprised many. 

(CLICK ON IMAGES TO ENLARGE)

While Americans' spending in June was generally on par or lower than their average May spending, this month's $7 drop is one of the largest recorded by Gallup during this time of year since 2008, when June spending fell by $10. The June 2008 spending average of $104 is still the highest average for that month in Gallup's six-year trend.

Can it be the new jobs being created (majority at the low end) is weighing on consumers pocketbook?  #shocker!  But what about the spending of the wealthy lifting all boats?  You know; that good old trickle down effect?

According to Econoday, the drop in daily spending among all Americans can largely be attributed to upper-income Americans spending less in June. Could the wealthy be running low on things to buy?  Yes sarcasm on my part but a drop is not what any

Here we go again but should anyone be surprised?  This is one of those days when people will come out and say "the market is not the economy" yet we all know job growth remains tepid at best and with that, one has to ask "where will the growth come from?"  See the ginormous infographic below.

World Bank has lowered its forecasts for developing countries, now eyeing growth at 4.8 percent this year, down from its January estimate of 5.3 percent. Signs point to strengthening in 2015 and 2016 to 5.4 and 5.5 percent, respectively. China is expected to grow by 7.6 percent this year, but this will depend on the success of rebalancing efforts. If a hard landing occurs, the reverberations across Asia would be widely felt.

There's always a BUT

Yet Variant Perceptions survey of small businesses (a proxy for future growth) shows the belief that wage growth will pick up for the rest of the year driven by much tighter labour market. (My thoughts: many of those who have left the workforce may not ret

You know those moments.......when you were at a family function or out for a few cocktails with friends when someone brought up the topic of the economy or stock market.  Those conversations were fairly easy to side step  and ensure you'd still be on speaking terms tomorrow.  The last five years, however it's an entirely new ballgame and avoidance is not becoming any easier.  I think the basic problem for the general public (and many small investors) is that they expected a snap back in jobs in 2-3 years, as is normal after a recession.  The problem isn't the current administration.  The problem is that we didn't simply experience a recession.  We experienced a global financial crisis which is a horse of an entirely different color.  

You really can't blame them for not understanding the difference between the two.  Most haven't been alive long enough or have knowledge of economic history to realize the ramifications.  According to a White House Crisis and Recovery in the World Economy

Todays post from Barry Ritholtz refers to an accusation that further stimulus is being put off until after the November elections; something I strongly believe in, and eerily similar to my previous post on 1931 European Depression Redux where Austrian officials are putting off their 2011 budget until after their Fall elections [an unconstitutional act by the way]. Will we see more of this posturing for political gains across the globe? Me thinks so. I look forward to your thoughts and comments below. For your StockBuz consideration:

“Now I’m looking at the political system turning itself into a paralyzed beast. A lost decade now looms as a much bigger risk. The Fed’s running out of powder; Its really powerful ammunition has been expended.”

-Alan Blinder, former vice chairman Federal Reserve, on whether the US could sink into a Japan-style quagmire

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Peter Goodman has a longish article in the NYT Week in Review, What Can Be Done to Cure the Ailing Economy?.

It is notable for a few r