The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

Too funny:

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Hat tip Make Use

Hat tip Doug Kass

Today is the (extended) deadline to get you taxes filed — and for me to get the last of my related tax posts up for the foreseeable future.

This beauty below comes to us via the Thirdway, a breakdown of where your federal tax money actually goes. Punch in the exact amount of dollars you paid in Federal taxes (including FICA, withholding, etc.)  and it will tell you exactly how much you spent on various federal programs:

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click for interactive table

Hat tip Ezra Klein

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Source:
The Deficit Is HELPING the Economy, Not Hurting It, David Levy Says

As a frame of reference for what S&P did on the outlook for the US sovereign debt, back on May 21st 2009 S&P put the UK’s sovereign AAA debt outlook to negative from stable. On the day before, the 10 yr Gilt yield closed at 3.58% and rose to 4.02% in the month to follow but was back to the 3.55-3.65% range by mid Aug ’09 (vs 3.57% today). This occurred at the same time the Bank of England was in the midst of their quantitative easing program. On the day of the S&P move on the UK, the FTSE fell 120 pts but got that back in the two weeks that followed. It took almost a year but the UK government responded with a very austere budget. The key for us of course is what bells get rung in Wash, DC, what they do about it and where US interest rates go in response. Without this being a partisan comment at all, because both parties are fully responsible for our current debt plight, the initial comment from the Austan Goolsbee, the President’s Chairman of the Council of Economic Advisers, was not encouraging as rather than saying we will get down to business and cut our debts and deficits, he instead said he disagreed with what S&P did.

There is an old Wall Street joke about analysts: “You don’t need them in a Bull Market, and you don’t want them in a Bear Market.”

Which brings me to Standard & Poor’s. They put a “negative” outlook on the U.S. AAA credit rating, citing rising budget deficits and debt.

To which I say “Who Cares?”

Its not that I disagree with their assessment — I do not — but I pay it little heed. It was much more important to me as an investor that PIMCO’s Bill Gross was out of Treasuries a month ago (and indeed, is short) than what S&P says. That was all any bond investor needed to know — no ratings agency necessary.

If ever there was an organization more corrupt, incompetent, and less capable of issuing an intelligent analysis on debt than S&P, I am unaware of them. Why do I write this? A huge part of the reason the US is in its awful financial position is due to the fine work of S&P.

Consider what Nobel Laurelate Joseph Stiglitz, economics professor at Columbia University in New York observed:

“I view the ratings agencies as one of the key culprits. They were the party that performed that alchemy that converted the securities from F-rated to A-rated. The banks could not have done what they did without the complicity of the ratings agencies.”

Hence, the “negative outlook” of US debt has come about because the inability of Standard & Poor’s to have performed their jobs rating mortgage backed securities. Ultimately, this enabled the entire crisis, financial collapse, enormous budget deficit and now political over the debt ceiling.

Of course there is a negative future outlook. Its in large part the work product of S&P and Moody’s.

Why we even have  Nationally Recognized Statistical Rating Organization (NRSRO) any longer following their payola =driven corruption, their gross incompetency and their inability to discharge their basic duties is beyond my understanding.

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Countries with S&P Triple AAA Credit Ratings

Click for larger table

Source: Bianco Research

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Previously:
Ratings Agencies Abject Failure (April 30th, 2009)

Long Awaited Fixes for Credit Ratings Agencies (May 14th, 2010)

Regulation AB: Downgrading the Ratings Agencies (September 5th, 2010)

Calpers: Rating Agencies to Blame for Huge Losses (July 15th, 2009)

Time for Legal Liability for Rating Agencies (June 18th, 2010)

The post credit crisis recovery has been anemic in terms of GDP and soft in terms of job creation — despite the massive Fed stimulus this entire time.

Given the stock of excess housing built up during the boom, and how leveraged home-owners became during that period, it is no surprise that Housing remains an under-performing sector today.

Exactly how much that is impacting the economy can be seen in a recent study:

“Residential investment, which includes new-home construction as well as renovations and broker commissions, accounted for 19% of GDP growth on average in the first two quarters of postwar recoveries, according to Harvard’s Joint Center for Housing Studies. In turn, GDP growth during those periods averaged nearly 7% at an annualized pace.”

Hence, the current recovery is likely to remain sub-par for the foreseeable future . . .

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Source:
Recipe for Recovery Lacks Housing’s Spice
Kelly Evans
WSJ, APRIL 18, 2011
http://online.wsj.com/article/SB10001424052748703648304576265302479318880.html

Bob Lefsetz is a music industry observer, and publisher of the Lefsetz letter:

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Everything old is new again.

So I’m in the bar at the Royal York in Toronto and I’m introduced to the Sennheiser rep.

I do what any obnoxious denizen of the cultural landscape would do. I ask her about Beats.

I tell her I’m a dedicated Sennheiser fan, they’re my headphones of choice, I have both studio and portable models, but everywhere I go I see that red cord.

She said it all came down to marketing. That Sennheiser wasn’t going to spend those dollars. That they were in it for the long haul. Had I heard the HD 595? I needed to check ‘em out. If I wanted, she could send me a pair…

That’s hard to turn down.

They came yesterday, but I didn’t uncrack them. I was once involved with a woman who would be so eager to wear what she’d bought that she’d often parade around with the price tag streaming off, albeit unknowingly. I’m the opposite. If I get something important, I wait…

But you can’t wait forever. And I had to let this woman know I’d received the headphones.

So I just got the scissors, cut the tape and extracted the headphones and then plugged them into my Mac Pro, which has a jack right on the front.

And after setting the System Preferences to get sound, I was jetted back to the seventies, the era of stereo.

People reminisce about shopping in record stores, I miss going to the hi-fi emporium, checking out the new gear, listening to the Mobile Fidelity half-speed mastered records.

I’d buy a product a year. A Sansui integrated amp. A top of the line Yamaha tuner. A Nakamichi tape deck. And when I hooked them up I’d spend the rest of the day, the whole weekend, spinning all my old records, to see how they sounded now.

I decided to visit my iTunes playlist, the one containing my Top 200 most played tracks.

Suddenly, James McMurtry was singing just to me. That banjo on that Keith Urban record was just to my right, the electric guitar exploded to my left, I was taken away.

They say it’s not the same. That you can’t finger the album covers. That everybody multitasks. But this music was stopping me in my tracks, forcing me to spread my wings and fly. It was the same as it ever was.

Everything sounded good. It was like my favorite tunes had been scrubbed of all the detritus and were now pristine.

And I was afraid the spell would fail. I’d switch cuts and it just wouldn’t be the same. But track after track was a revelation. I dialed up Spirit’s “So Little Time To Fly” and I could have closed my eyes and been lying in the dark on the floor of my childhood home. Randy California may be dead, but in my ears, he was positively alive. And the history of rock and roll is ploughing through my brain. The fact that the famous riff from “Stairway To Heaven” is a direct lift of a Spirit cut.

Then that live take of “You Oughta Know”, from the Grammys. They never sell this stuff, you’ve got to steal it, but it’s so damn good. Slowed down, with an orchestra, you remember it, right? Back before Napster when the music landscape was still comprehensible and this twenty one year old came along during the summer of 1995 and blew us all away, took hold of the mainstream and owned it!

Then I pulled up Little Big Town’s “Bones”…you know, the one that sounds like classic period Fleetwood Mac. It was like the four members were singing in my ears, literally.

And I’m scanning my library, wanting to hear more than I have time for. Like John Grant’s “I Wanna Go To Marz”. And Crosby & Nash’s “Carry Me”.

I was in such a terrible mood. Soldiering on in order to prevent collapsing in a heap. I’d just broken out the headphones to make sure they worked, so I could thank the sender, I had no idea my world was about to go from black and white to color.

Sometimes you think the past is history. Frozen. Unreachable. Untouchable. But listening to these tracks on these headphones makes me feel like I can touch down in any of the last forty five years, my popular music consciousness.

It’s a solitary experience. That unites you with the creator, the performer, that makes you feel included even though you’re alone. And it’s so good that you’re drawn to the gig, like a lemming, like a zombie in “Dawn Of The Dead”, where you join the mass of people who feel exactly like you. It’s not about money, it’s not about fame, it’s about sound. A religious experience more powerful than any that takes place in a traditional house of worship.

All because of a simple piece of gear. Opening up new vistas,

I almost expect my college buddies to come walking through the door, my high school crush, my summer camp loves. You may look at me and see somebody old, but I feel the picture of youth, as alive as one can be.

While some Greek and EU officials are in denial over the need for Greece to default and restructure the debt that is impossible for them to service, the market continues to mount the pressure as yields are spiking again. The 2 yr yield is rising 150 bps to 20% and the 10 yr yield is up by 65 bps to 14.50 %. Yields are jumping also in Portugal and Ireland and moving sharply higher in Spain too. Spain sold 12 and 18 month paper at yields well above those sold one month ago. Also adding uncertainty to the situation is the election results in Finland, one of the few AAA credits in the region. The party against any bailout gained ground in parliamentary elections and an EU agreement to extend funds to a member has to be voted on unanimously. In Asia, most markets traded lower after China raised RR another 50 bps to 20.5% but the Shanghai index itself actually bounced a touch on the ‘soft landing’ belief. The RR rise comes just days after the 5.4% CPI print and the yuan is also up at a new high. Property price gains in Shanghai and Beijing did moderate in March as has been hoped for.

Here are the key bullet points from the S&P move to lower the US sovereign credit outlook to negative from stable: “Because the US has, relative to its AAA peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long term rating to negative from stable…We believe there is a material risk that US policymakers may not reach an agreement on how to address medium and LT budgetary challenges by 2013; if an agreement is not reached and meaningful implementation is not begun by then, this would in our view render the US fiscal profile meaningfully weaker than that of peer AAA sovereigns.” “Our negative outlook on our rating on the US sovereign signals that we believe there is at least a one in three likelihood that we could lower our long term rating on the US within two years.”