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If you haven’t booked your summer plans yet, brace yourself. There’s actually good news this year, for a change. Airfares to many popular U.S. destinations have dropped. This is according to the Wall Street Journal who earlier this week posted an insightful article detailing the best places to fly this summer. WSJ added an entertaining graphic as well which you can see below:
As for the airline industry, as many of you know Stocks on Wall Street has been very bullish the past two years. Most specifically when it comes to the five airline stocks we hold:
Allegiant Travel (NASDAQ: ALGT)
Boeing (NYSE: BA)
Delta Air Lines (NYSE: DAL)
Southwest Airlines (NYSE: LUV)
UAL Corp (NYSE: UAL)
For those of you who haven’t read any of our past articles on the airline industry, simply click on the links below:
Going forward, we think that the airline industry might have seen it’s best days. We will be going into more detail about our thoughts in our article next week so make sure to tune into SWS throughout the week to find out more!
Source: The Wall Street Journal
Here are three of the biggest risks and threats to your financial future and your wealth today. Also read for advice on how you can exert more control over each one and enjoy more of what’s yours.
Risk #1: Currency Fluctuation. The U.S. dollar has taken a real beating this past year and is expected to stay down over the long term. Having all of your assets in U.S. dollars (or any single currency) is not sound financial planning. You don’t have a diversified portfolio if all your assets are in one currency. By going offshore and holding portions of your assets in other currencies, you are truly diversifying and protecting yourself from the ups and downs of one currency.
Investing in currencies on your own, without an ETF, can be difficult. Most retail investors are better off with currency ETFs (exchange-traded funds) which track a single foreign currency or basket of currencies by using foreign cash deposits or futures contracts. Currency ETF’s allow investors to speculate in the currency market without the risk of investing directly in currencies and without entering the forex market. Some of the most popular currency ETFs are offered by Wisdom Tree Dreyfus, Rydex, PowerShares, Market Vector and Barclays. But you need to do your homework before diving in.
Risk #2: Rising Taxes. Beginning Jan. 1, 2013, all American citizens will experience significant tax increases, many in the form of hidden taxes and fees. At the same time, U.S. citizens with foreign bank accounts may pay a withholding tax of 30% on transfers of funds to and from these accounts (a provision of the recently amended and little-known HIRE Act). So, if you run your own business, it makes great sense right now to think about moving your business to a more tax-friendly environment offshore. Or, you could stay in the U.S. and keep an account offshore where it is free of U.S. tax obligations.
The key point is that, whatever you’re going to do, you should do it as soon as possible and well in advance of 2013.
Risk #3: Litigation. The U.S. is a litigious society; a new litigation suit is filed every 17 seconds. This may or may not affect everybody. But, if you’re a doctor, for example, or someone with a high profile who’s more susceptible to being sued, then you understand the increased risk. In this case, the best solution is to protect your assets by moving them offshore. Your offshore assets will be outside the realm of U.S. judgment and, therefore, far more difficult for creditors to get at. This should not be confused with the fact that U.S. citizens and green card holders will continue to be taxed on their worldwide income, no matter where they reside or hold their assets. Income tax is unavoidable other than legitimate tax reduction strategies. However, you can minimize litigation risk to your assets by going offshore.
With all the scandals coming from the banking sector over the course of the past few years, the average consumer has lost faith in their bank. This is not just the big banks we’re talking about, it trickles all the way down to your local bank and credit union. The big question left is have you lost trust in your bank? If so do you believe this is something that can be changed or forever will banks be viewed as greedy corporations not looking out for the best interest of their customers? Please share your thoughts below or on our Facebook Fan Page or our Twitter Page.
(Below is a poll illustrating the levels at which people distrust their bank)
Source: The Financial Brand
Throughout the past few years the airline industry has been completely reshuffled, through various bankruptcies and mergers have reduced the major U.S. airlines down to four mega-carriers. Stocks on Wall Street has been a huge supporter of the airline industry specifically five stocks we invested in. Their overall performance since we originally invested are listed below:
Allegiant Travel (NASDAQ: ALGT) ⇧86.13%
Boeing (NYSE: BA) ⇧19.21%
Delta Air Lines (NYSE: DAL) ⇧104.61%
Southwest Airlines (NYSE: LUV) ⇧36.35%
UAL Corp (NYSE: UAL) ⇧60.42%
To read our original article on the airline stocks, click on the link: Five Airline Stocks That Continue To Soar
Below is a chart to see how exactly the airline industry has shifted over the years and how America has now ended up with four major airlines.
click for ginormous graphic
For those who follow Stocks on Wall Street and have read our past articles, you know then that we have been big fans of the airline industry over the course of the past 17 months. More specifically it has been five airline stocks that we have continued to hold and follow and to date it has become one of our top performing sectors with all five-airline stocks totaling a combined return of 306.72%. Average that out over the five stocks and you get 60.42% each pick, not too bad for just 17-months. The five airline stocks are the following:
Allegiant Travel (NASDAQ: ALGT) ⇧86.13%
Boeing (NYSE: BA) ⇧19.21%
Delta Air Lines (NYSE: DAL) ⇧104.61%
Southwest Airlines (NYSE: LUV) ⇧36.35%
UAL Corp (NYSE: UAL) ⇧60.42%
As you can see, DAL, ALGT, and UAL have been the big winners with LUV recently joining the group after a strong 6-month rally of 30%. While it doesn’t have the flashy gains like the others, BA has still performed as we had expected a Large Cap Dividend Stock to perform.
Our Five Favorite Airline Stocks Section began back in August of 2011 when we first published ‘Five Airline Stocks Ready to Pop!‘, after a very successful year where we saw all five stocks soar to new heights we decided to reanalyze our positions on July of 2012 in our article ‘Five Airline Stocks That Have Soared to New Heights!’
After another strong six-month rally we are back at it again! This time pointing out what worked in the past, a look back at our past recommendation, highlighting the key factors we like going forward, and finally giving out 12-month price targets for each pick.
Allegiant Travel (ALGT) ⇧7.82%
From 2011 to 2012, Allegiant Travel was the big surprise stock rising over 78% in a little over a year. Going forward, it was no question that ALGT was due for a correction and some quiet times. That’s not to say that it’s still not a great company and a premiere airline stock. While only rising 7.82% since July 24th, we still see lots of potential going forward. ALGT has done an excellent job at growing their business and there still is lots of room to expand as they continue to acquire new loyal customers.
In our previous July 24th article we wrote:
“While this is great and all, some of you out there might want to consider taking a conservative approach and sell off some of your shares, take your profits, and play with the house’s money. “
This time round we don’t plan on playing it so conservative. In fact, we think ALGT’s a solid buy for several reasons. To start, ALGT has an exceptional PEG ratio of 0.48, not to mention they currently hold over $357 Million in the bank. What most stands out however is that 20.71% of ALGT’s Shareholders are Insiders.
This is a staggering number to take into account, and it’s usually noted that insiders don’t take that strong of a position unless they have a reason to back it up. This is a good indicator that good times are still ahead for ALGT.
While the surprise factor is no longer there, that’s not to stop ALGT from continuing to pump out great earnings along with higher revenue numbers resulting in them beating the street’s expectations.
If we’re looking at a 12-Month Price Target, expect ALGT to be trading around $95 per share, a total yield of 27.5%.
Boeing (NYSE: BA) ⇧3.55%
Boeing has been a safe and steady stock for some time now. After bouncing +40% from 2010 to 2011, shares have been very steady throughout 2011 and 2012. Boeing is one of the major aerospace and defense companies. Boeing’s biggest strength is the company as a whole. The fundamentals are strong from top to bottom. Their book of business is great as well. Some numbers that standout to us are there PEG Ratio of 0.20, P/S of 0.71, 62.75% ROE, and the fact they’re holding over $11 Billion in cash. Remember cash is always king and a cash flow positive company is always attractive for that reason.
In our previous July 24th article we wrote:
“Going forward we like Boeing and expect the stock to continue to steadily rise with a strong outlook ahead, bullish analyst coverage and upbeat expectations. We originally pegged it to rise to $95 and we’re sticking with that price target. With more huge contracts to come, a solid book of business top to bottom, no cash flow problems, and a great business overall the future looks great for Boeing.”
While BA didn’t quite pan out like we had anticipated rising only 3.55% over the past six-months, it doesn’t mean we have lost faith in the company overall. We are still firm supporters of BA going forward and the majority of the analysts covering the stock hold this same opinion.
Of the 25 analysts covering BA, 80% hold a BUY Rating or higher, 55% have BA pegged at a STRONG BUY. The 25 analysts breakdown like this: Strong Buy, 9 Buy, 4 Hold, and 1 Underperform.
If we’re looking at a 12-Month Price Target, expect BA to finally make its strong push very similar to when they jumped 40% from 2010 to 2011. We expect BA shares to be trading around $100 per share come one year from now, a total yield of 36%. Tag on a 2.60% dividend and you have a total net yield of 38.6%!
Delta Air Lines (NYSE: DAL) ⇧48.34%
Delta Air Lines has not just been one of the best airline stocks over the past 17 months, they have been one of the best stocks period. After soaring +56% the previous year many expected the stock to slip-up or stay situated, heck even we did.
In our previous July 24th article we wrote:
“They are one of the great success stories making such a strong comeback after their shaky past history dealing with bankruptcy and restructuring problems and failing to become relevant. Well they are relevant now! Don’t expect the stock to duplicate it’s amazing past performance nevertheless we’re still confident investors will see nice steady gains.”
DAL did the complete opposite of what everyone had expected, soaring another 48.34% over the next 6-months making their total net gain of +104% in a 17-month period. The famous trader, Peter Lynch would call this a ten-bagger.
Going forward you would expect the good times to be over for DAL right? Nope, in fact analysts couldn’t be more bullish about the stock as 93% of the analysts currently covering DAL issuing a BUY rating or higher. Breaking it down, of the 15 analysts covering DAL; 5 Strong Buy, 9 Buy, & 1 Hold.
If that doesn’t sell you then maybe this will. DAL holds a PEG Ratio of 0.20, a P/S of 0.32, and they have over $3.2 Billion in the bank. After panning out as our trendy pick in 2011, we went away from the fundamentals and as a result it cost us from capitalizing on DAL’s second big rally. Luckily we have learned from our mistakes and are fully set to ride out another great run by DAL.
If we’re looking at a 12-Month Price Target, expect DAL to be trading around $20 per share, a total yield of 44%.
Southwest Airlines (LUV) ⇧29.79%
Southwest is a proven winner, year in and year out the stock continues to perform. LUV continues to be America’s leading discount airline, a title that has made them a revenue machine and a great investment.
In our previous July 24th article we wrote:
“If you currently own the stock we recommend you to hold onto LUV but new investors don’t be jumping out to buy this one as we’d rather see you invest in Delta Air Lines. Nevertheless expect LUV to rebound and make a strong run.”
How has LUV performed since we wrote that? Quite well, up 29.79% so for the investors who stayed put they did quite well. When you compare LUV 30% rally to DAL’s 48% jump it doesn’t look as impressive but LUV still proved to be a solid investment.
Going forward we’re still holding onto LUV however new investors shouldn’t be jumping out to buy new shares unless they drop significantly. We like LUV’s 0.42 PEG Ratio, their 0.48 P/S, and the fact they have $2.97 Billion in cash. We don’t like the fact analysts aren’t that bullish about LUV as more analysts have a HOLD rating out for LUV than a BUY.
Nevertheless LUV is a great company from top to bottom and if we’re looking at a 12-Month Price Target, expect LUB to be trading around $14.50 per share, a total yield of 30%.
UAL Corp (UAL) ⇧18.16%
In our previous July 24th article we wrote:
“Like Delta Airlines, they were another stock working through some bankruptcy restructuring issues and having troubles with becoming relevant in the industry. They have done a fabulous job reinventing themselves and becoming relevant again. With the worst of their problems behind them and strong analyst coverage along with upbeat expectations expect UAL to continue to perform well throughout this year and into next.”
UAL once again delivered with a return of +18% over 6-months. Looking ahead it may be time to be cautious and shareholders should consider taking their profits after a 17-month run of 60.42%.
We recommend new investors to only buy UAL on a dip. Current shareholders hold UAL however don’t be hesitant to sell off your shares if UAL peaks. This isn’t to say UAL is not an attractive investment but more of being a cautious investor in what some say are turbulent times for the market going forward.
There are still some major factors that we like about UAL, for instance a 0.44 PEG Ratio, 0.22 P/S, 6.68 Billion in Cash, and the fact 11% of shares are held by Insiders. Analysts are mostly favorable towards UAL with 66% of the 15 analysts covering the stock issuing a BUY Rating or higher. The analyst breakdown is: 4 Strong Buy, 6 Buy, 4 Hold, & 1 Underperform.
Looking at a 12-Month Price Target, expect UAL to be trading around $32.50 per share, a total yield of 35%.
Who are the absolute worst chief executives of 2012? Sydney Finkelstein thinks he knows. The longtime professor at Dartmouth College’s Tuck School of Business is the author of 11 books with such titles asWhy Smart Executives Fail and Think Again: Why Good Leaders Make Bad Decisions, so he knows a thing or two about utter failure. He’s been putting out his list for three years now, and last year it included the chief executives of Netflix (NFLX), Research in Motion (RIM), and Hewlett-Packard (HPQ). Here’s the list (except where noted the companies didn’t respond to a request for comment):
1. Brian Dunn, who resigned as chief executive of Best Buy (BBY) in April after allegations surfaced that he had an inappropriate relationship with a much younger subordinate. That’s not why he’s on the list, though. Declining stock price, cratering same-store sales, loss of market share to more nimble competitors, and an addiction to share buybacks that cost the company $6.4 billion with little to show for it—that’s why he’s on the list.
2. Aubrey McClendon, the CEO of Chesapeake Energy (CHK) who apparently has trouble keeping his company’s finances and his own apart. According to Reuters, McClendon borrowed as much as $1.1 billion over three years in undisclosed loans against his stake in thousands of company wells and ran a $200 million oil-and-gas hedge fund on the side, an “obvious conflict of interest,” Finkelstein says. Use of the company jet (and company employees) for personal purposes and a corporate sponsorship deal for Oklahoma City Thunder while McClendon was an owner of the basketball team also didn’t help. Jim Gipson, a spokesman for Chesapeake Energy, declined to comment.
3. Andrea Jung, who stepped down as chief executive of Avon (AVP) in April but remains as chairman through the end of this year. Jung has been unable to fix the company’s operational problems, failed to groom a successor, and turned down a $10.7 billion offer from the beauty-care company Coty that, in retrospect, it should have leaped at. Since 2004, the company’s market value has fallen under her watch from $21 billion to $6 billion. And the company has had to spend $300 million in legal expenses related to allegations that it violated the Foreign Corrupt Practices Act, which bars bribery of foreign officials.
4. Mark Pincus, the CEO of Zynga (ZNGA), the mobile gaming company that brought the world Farmville,among other online distractions. Zynga stock is down 75 percent so far this year, and the company is losing top executive talent. Pincus has a fairly illustrious pedigree—he got a bachelor’s degree in economics from Wharton in 1988 and his MBA from Harvard Business School in 1993. But Finkelstein says he’s made some rookie mistakes, including hitching his company’s wagon much too securely to Facebook (FB), which Zynga relies on for a big chunk of revenue. And he hardly expressed confidence in the company’s prospects with his move to unload 16 million shares after the IPO lockup period ended. Joe Libonati, a spokesperson for Zynga, declined to comment.
5. Rodrigo Rato, who resigned as chairman of the Spanish lender Bankia (BKIA) in July. Rato is one of Spain’s former finance ministers and a former managing director of the IMF. He’s under investigation for fraud, price-fixing, and embezzlement in connection with Bankia’s spectacular collapse and bailout by the Spanish government. Rato has an MBA from the UC-Berkeley Haas School of Business. In 2011, Bankia announced profit of €309 million; after Rato resigned, it was restated to a €3 billion loss. Carmen de Miguel Hombria, a spokesperson for Bankia, declined to comment.
Two other executives—Mark Zuckerberg at Facebook and Andrew Mason at Groupon (GRPN)—almost made the list. The rap on Zuckerberg is his “massive ego,” while both men get demerits for immaturity and shares that move in only one direction, and not the right one. Says Finkelstein: “There’s no reason to believe they have the management skills to run a major public company.”
And don’t get him started on the hoodie.
Do you think these 5 CEO’s deserve to make the Worst List? Who else would you add to the bunch? We want to hear your opinions so please share them on both our Facebook Fan Page & Twitter! Also don’t be shy to leave a comment below!
Source: Bloomberg Businessweek
Which brands or companies come to mind when you think of the 10 Most Hated Companies in America? Write down your 10 Most Hated Companies & we will compare them later on. Even if you were unable to complete the list or didn’t try it doesn’t matter as today your getting bailed out by Marketwatch who has a list of the 10 most hated companies in America.
10 Most Hated Companies
- J.C. Penney
- Dish Network
- T-Mobile USA
- Research In Motion
- American Airlines
- Sears Holding Corp.
Individual Analysis on Each Company That Made The Not Top Ten
1. If you ask me about this list I am quite shocked. Is J.C. Penney really the most hated company in America? I know where not to go back to now.
2. Second on the list was Dish Network and this one I can understand as if there is anything that frustrates it’s when the tv channels, DVR, something isn’t working and of course it happens during all the crucial moments whether it’s a key sports game, season finale, you name it. So yeah I’m not surprised to see Dish at number two, as they must get endless amounts of complaints day after day.
3. Third went to T-Mobile USA and honestly I’ve never used T-Mobile don’t think any of my friends or family do either so I’ve never heard anything bad or good to defend them on, sorry.
4. Now the fourth spot is interesting, Facebook. Facebook is like the cocky jock in High School. Lots of people love him, but even more hate him. Also with recent studies showing how Facebook irritates the daily life of most Americans by making them feel down on themselves after seeing their friends traveling around the world and doing all these great things while they’re stuck at home. Maybe it needs an update Zuckerburg.
5. Fifth on the list is Citigroup and what’s not to hate, they are a greedy, overzealous bank that has a CEO everyone hates and not a great PR Image which all combined puts them at #5 on this list.
6. Sixth on the list is everyone’s least favorite tech company, Research in Motion aka RIM or as of today they will be switching their name to BlackBerry. Known for the Crackberry and for running an ineffective business for quite some time guess this is what now leads you to becoming America’s #6 most hated company.
7. Number seven goes to American Airlines. Do we even have to get into this one or do we all know why? From baggage screw-ups, to delayed flights, charging to check bags, pricy tickets, the list goes on and on of all the terrible things American Airlines does as a company and then you look at Southwest, a mirror opposite image and you then know why they deserve to join this list.
8. Number eight is Nokia, well shitty phones will never please the customer so this one doesn’t’ surprise me one bit.
9. Coming in ninth is Sears Holdings who from their ridiculous wait times for service trips, bad warranties, and weakening brand deserve to have a seat on this list.
10. Coming in at number ten is Hewlett-Packard and why to they make this list? Because there business is crumpling, their product is sub-par, and they are doing nothing to fix it.
What companies do you think deserve to be on the most hated list? We want to hear your opinions so please share them on both our Facebook Fan Page & Twitter! Also don’t be shy to leave a comment below!
Back in October, 2012 we published an article 80%-90% Of Financial Planners Don’t Even Beat the S&P 500, So Are They Worth Their Fee?
Barry went on to write:
This morning, the WSJ references Goldman Sachs research — it shows something similar. Their data showed 65% of U.S. large-cap stock funds trailed the benchmark index net of fees. (5 year average = 66%).
When they looked for funds that beat the index two consecutive years, they came up with an astounding number: A mere 10% of nearly 2000 U.S. stock funds beat their benchmark in both 2011 and 2012 (Source: Morningstar research).
This is why most people are better off putting money into inexpensive passive index funds.
If you want to at last have a fighting chance to pick a fund that actually has a shot to beat its benchmark, these 2 steps are a start:
1. Low Fees — look for funds with an expense ratio of 0.86% or below.
2. Avoid Closet Indexers — find funds with a low R-squared ratio.
The full article explains these in great detail.
I still think that for many people, especially those with portfolios under $250k, passive indexing is simpler, less expensive, and more reliable.
“An investor who pays a financial adviser to pick mutual funds either misses the point of planning or has a bad adviser. In fact, Blanchett said that the thing that surprised him the most about the research was the value of annual meetings, where clients and advisers tweak strategies, particularly as the consumers is entering or in retirement; both advisors and clients tend to focus on market results more than the benefits they get from having that sit-down.”
How can you beat the S&P 500? We’re a believer that astute investments in the global market are a better way to beat the S&P 500. What makes it hard for old school money managers at large investment firms to beat the S&P 500 is that in-depth analysis of promising global stocks is often lacking, even at the major Wall Street firms. The majority of global stocks that interest us do not show up on the lists of researched stocks at many large investment houses. Most huge investment firms do not provide much coverage of small and micro cap stocks. It’s only after some of these stocks appreciate 50-100% that big firms finally start to initiate coverage. And, even then, the analysis is sometimes still lacking depth or meaningful analysis.
It can be time consuming, but it’s certainly not too difficult to do your own research. Those who follow Stocks On Wall Street know that we’re a believer in the long-term growth of Asian and other select emerging market economies. In addition to the usual economic indicators, we’ve also honed our perspective to include an analysis of how the political and legislative environments will potentially affect the growth prospects of companies and countries.
Granted, taking charge of your own investments, especially in global and emerging markets, is not for the fainthearted. Don’t fool yourself about the risks. But, remember, the risk is not just on the down side. We, for one, remain a believer in the long-term economic global growth story relative to the U.S. economy and our almost insurmountable debt. That doesn’t mean we would shun U.S. investments. It simply means we will continue to skew our investment perspective toward global and emerging markets, which we believe will deliver greater returns over the long haul.
You may have seen this before, but it needs seeing again and again and again….. Here’s the USA’s fiscal problem made easy:
- U.S. Tax revenue: $2,170,000,000,000
- Fed budget: $3,820,000,000,000
- New debt: $1,650,000,000,000
- National debt: $16,440,000,000,000
- Recent budget cuts: $38,500,000,000
Let’s now remove 8 zeros and pretend it’s a household budget:
- Annual family income: $21,700
- Money the family spent: $38,200
- New debt on the credit card: $16,500
- Outstanding balance on credit card: $164,400
- Total budget cuts so far: $385
Got It? OK now here’s another way to look at the ‘Debt Ceiling’:
Let’s say you come home from work and find there’s been a sewer backup in your neighborhood….AND your home has sewage all the way up to your ceilings.
What do you think you should do???….. Raise the ceilings? OR, REMOVE IT?
The Government is Attempting to Force Former SAC Portfolio Manager, Mathew Martoma “To Flip Against Steve Cohen” on Insider Trading Allegations
FOX Business Network (FBN) senior correspondent Charlie Gasparino reports that government officials are trying to get former SAC Capital portfolio manager Mathew Martoma “to flip against” the fund company’s founder Steve Cohen on insider trading allegations. Gasparino goes on to report that Martoma has “refused past attempts” and that “at least for now shows no signs of giving into the government’s demands” as SAC “is now paying for his high-profile, and highly paid attorney, Charles Stillman.”
Excerpts from the report are below.
On government officials attempting to “flip” Mathew Martoma against Steve Cohen:
“Government officials had high hopes that Mathew Martoma, the latest former executive from SAC Capital to be implicated in the government’s burgeoning investigation of insider trading, could provide evidence that would finally implicate the probe’s ultimate target: Steve Cohen, the fund company’s billionaire founder. But people close to the investigation say Martoma has refused past attempts to provide evidence against his old boss and at least for now shows no signs of giving into to the government’s demands. And they say Martoma has a powerful incentive not to cooperate because SAC, which hasn’t employed him for about two years, is now paying for his high-profile, and highly paid attorney, Charles Stillman.”
“People who know Stillman say his fees aren’t cheap — his rate is as much as $1,300 a hour, they say. And while it is not unusual for companies to pay the legal defense of executives ensnared in criminal and civil probes based on standard employment contracts, legal experts say the practice always prompts the question of whether the firm is really paying for silence… But it’s unclear if the legal-fee arrangement is part of Martoma’s employment contract, or part of some other recently crafted deal with SAC. Martoma hasn’t worked at SAC since 2010, when he was fired for poor performance. He earned $9.4 million in 2008, a bonus prosecutors say was based on using inside information on trades.”
Source: Fox Business
The biggest worry on every Americans mind is continuously the state of our economy. People everywhere are always asking what are the biggest questions and concerns about the current state of our economy. While that is a rather broad subject, the Motley Fool recently did a great job at narrowing down that question and giving a great answer by providing us with five great questions about our economy.
1. What happens with the Fiscal Cliff?
The Fiscal Cliff is probably the single most important issue we’ve faced in the last three years. In the next 50 days, Congress and the president have the opportunity to A) put forth a legitimate deficit-reform bill that instills confidence in American businesses and consumers, or B) do nothing, go over the fiscal cliff, and throttle the economy back into recession (the Congressional Budget Office estimates unemployment will rise to 9.1% if we go over the cliff).
There could be a third option: a short-term deal that punts the hard deficit decisions down the road again. I actually think that’s the most likely outcome. But given Washington’s history of partisan flamethrowing and gridlock, the odds that something ugly will happen are uncomfortably high. What’s dangerous about the fiscal cliff is that the worst outcome will happen if Congress does nothing — which is the one thing our legislators are really good at.
The economy has moved in three long cycles over the last 100 years. From the early 1900s through the 1930s, workers did poorly while owners of capital did very well. From the 1940s through the 1970s, workers did great while owners of capital did so-so. And from the 1980s through today, workers have done poorly (most real wages have stagnated) while owners of capital have done extremely well.
I want to know: Are those three periods coincidental, or does the economy move in consistent cycles that favor labor in one, then capital in the next? If it’s the latter, then it’s possible that the next 50 years could be more favorable to workers and less to owners of capital.
There are so many complex variables involved here — globalization, taxes, innovation, productivity — that I don’t think it’s possible to predict what will happen. This could, however, become one of the most important trends of the next half-century.
Twenty years ago it was assumed that Japan would become the world’s economic superpower. It grew faster, was more productive, and had more ambition and potential than any other country in the world — just how we see China today.
Of course, Japan didn’t live up to expectations. One big reason was demographics. As Japan’s elderly took up a larger and larger share of its population, its labor force didn’t have the vitality necessary to keep economic growth booming.
China could face a similar dilemma. Due to its one-child policy, China’s working-age population is projected to decline by 200 million by 2050.
I want to know: How will relaxing the one-child policy and other shifts in China’s demographics play out over the coming decades? Answer that, and you’ll have a good idea where its economy is heading.
America is blessed with one of the youngest populations in the developed world. But we are getting older. Working-age individuals (age 15-64) currently make up 66% of the population. That’s expected to fall to 60% by 2050.
Not only will older Americans make up a larger portion of the population, but they are living much longer than before. Two weeks ago, BlackRock CEO Larry Fink noted that a healthy 25-year-old female can now expect to live close to age 100.
How will this change the economy? Will it mean the new retirement age is 80 instead of 65? And if people are living longer, will they need to save much more for retirement? What does it do to Social Security? If a lower portion of the population is of working age, will young Americans have an easier time finding a job? What does it mean for health care costs? Or pension fund obligations? Interest rates? It could affect so many things in so many different ways that it’s mind-boggling.
5. What impact will health care costs have on wages?
A big reason average wages have gone nowhere in the last decade is that rising health insurance premiums took up a larger share of compensation. Most employees were given a nice raise in recent years — it just came in the form of health insurance.
But there’s evidence that growth in health care costs has topped out. Annual growth is now near the lowest level in 50 years.
I want to know: Is that trend the reality or just noise? If it’s real, workers could see higher real take-home pay for the first time in years.
We all hear about the waste in Washington and the billions of dollars that go to waste every year due to ineffective policies. Well thanks to the Motley Fool, we have a list of the Top 10 Dumbest Ways the Government Wasted Your Taxpayers Money last year.
Dumbest Ways the Government Wastes Money
For those who greatly enjoy this little bit of humor and zest mixed in with economic figures, then you’ll be excited to read the Waste Book (link opens PDF), an annual summary of 100 ways the U.S. government is wasting taxpayer money, which is compiled by Oklahoma Sen. Tom Coburn and his political team.
This year’s version of Waste Book covers 100 purported wastes of taxpayer money totaling north of $18 billion. While this is but a blip compared to a $16 trillion deficit, it’s nonetheless a questionable use of your tax dollars.
Therefore, I want to once again highlight 10 of the dumbest ways in which the U.S. government wasted your taxpayer dollars in 2012.
1. There’s an app for that
So many wasteful programs, I hardly know where to begin! How about with $100,000 in prizes offered by the Department of Energy to develop an energy app that would help users track their energy usage in their home. It’s a novel idea as our energy resources are finite and the DOE has pushed both consumers and businesses to utilize the available green energy subsidies available to them. However, there’s just one slight problem with the DOE contest: Apps that do this already exist — at least five of them to be exact. Perhaps someone should invest in an app that tracks apps for the DOE?
2. Alms for the rich
Just because you made $66 billion in net revenue doesn’t mean you won’t take a handout when one is offered… right PepsiCo.? According to Coburn’s report, Pepsi and Theo Muller Group are teaming up to open a yogurt manufacturing facility at the Genesee Valley Agri-Business Park in New York. Unable to use the supplied municipal water in the yogurt-making process, or the $4.2 billion in cash on its balance sheet, Pepsi gladly accepted slightly more than $1.3 million in funding from the U.S. Department of Agriculture and the Department of Commerce to build a new aquifer-direct water supply system, a new road leading to the plant, and to improve the parks’ wastewater capacity.
Researchers at San Diego State University and the University of California Davis spent a portion of a $325,000 National Science Foundation grant to construct a robot squirrel to answer the question of why rattlesnakes rarely attack squirrels that wag their tails. Using a taxidermied squirrel that is housed with other squirrels so as to smell realistic, and coupled with heating wires in its tail and body, researches marched RoboSquirrel into the lion’s den, or should I say snakes’ garden, and determined that a heated and wagging tail does indeed play into their defense mechanism. According to researchers, RoboSquirrel 2.0 and RoboKangaroo are in the works. As for me, I can’t wait for RobotChicken!
4. From arts and crafts to World of Warcraft
For those of you that thought your grandparents spent the entire day quilting or quietly reading, think again. A research team in North Carolina used $1.2 million from a National Science Foundation grant to study 39 individuals, aged 60 to 77, to see how their cognitive function responded after playing Activision Blizzard‘s World of Warcraft for two hours every day for two straight weeks. The results showed no improvement for those who tested with high levels of cognitive function prior to the test, however some improvement was noted for those who tested with lower cognitive function. I guess we can tell Eli Lilly to move over as we no longer will be needing solanezumab or any of its other Alzheimer’s treatments for further testing as long as we have World of Warcraft.
5. Red planet pâté
Don’t let the small fact that NASA has absolutely no manned fleet at the moment stop you from thinking that it isn’t actively spending money on potentially fruitless programs. Take for instance the nearly $1 million spent annually on developing a so-called “Mars menu.” In order to stave off food monotony, researchers spend roughly $1 million each year to have test subjects simulate space conditions and rate the food being tested based on taste, their overall health, and the mood it puts them in. The only problem is that the first manned mission to Mars is likely two decades away at the earliest.
6. Because I’m the wiz!
Let me go on the record as stating that this one amused me the most. Michigan State Police, in an effort to deter drunk drivers from getting behind the wheel of a car, apportioned $10,000 in federal funds to purchase 400 talking urinal cakes from a Maryland-based company called Wizmark. The urinal cakes, when activated by a motion sensor, would encourage users at local bars to consider getting a cab if intoxicated and, of course, remind them to wash their hands! As Sen. Coburn’s report points out, for around $100 onAmazon.com. Michigan State Police could have acquired breathalyzers that they could have instead passed out to local bar owners instead of the urinal cakes. When will people learn that everything is cheaper on Amazon?
7. Shoot first and ask questions later
The Missile Defense Agency really, really likes to build things. According to Waste Book, the MDA has not once, but twice, begun the build-out of interceptor missiles without first finishing the research and testing that should have been completed prior to their construction. Not surprisingly, delays, failures, and system upgrades were needed to both generations of missiles, which have cost taxpayers at least $1 billion and caused costs on the project to soar fourfold.
8. Miniature golf yields a maximum confidence boost
Not to be outdone by RoboSquirrel, researchers at Purdue University in Indiana used part of a $350,000 National Science Foundation grant to examine the benefit golfers might gain if they used their imagination better. Researchers placed 36 participants in front of two different-sized golf holes and used optical illusions to make them appear bigger or smaller than they actually were. The findings showed that those who putted toward the smaller hole but perceived it to be bigger were more successful than those who perceived it to be smaller than its actual size. Shocking…
9. Ship mates?
It’s a great thing that our Navy is manned by some fantastic men and women overseas, because its leaders in Washington aren’t making it easy for future generations. In late 2010, the U.S. Navy split what could amount to $37 billion in contracts to build 55 new littoral (near-shore) combat ships between two companies, Lockheed Martin and Austal USA. While the thinking here is that two companies could build these ships twice as fast, they somehow failed to grasp that the defense systems, design, and software used on each ship would be different; meaning that crewmembers can’t simply be transferred from one ship to another without being retrained. This “boo-boo” is slated to cost taxpayers a minimum of $148 million.
10. What’s the buzz about?
Let’s end on a strong note, like a $939,771 experiment funded by the National Institutes of Health in Michigan and Texas that tested fruit flies to discover that male fruit flies are more attracted to younger female fruit flies than older ones. According to researchers, a hormone that female fruit flies produce wanes over time, which makes male fruit flies less attracted to them despite researchers’ countless efforts to test this theory even in the dark. The scary news is that this testing may soon be expanded beyond just fruit flies.
Source: Motley Fool
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