Category: Economics & Business

Click here to access IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. You may apply for the extension electronically.

Excellent, manageable review of Thomas Piketty’s Capital in the 21st Century from the new Vox (Matthew Yglesias in this case). The book is all the talk. Good introduction if you’re not planning on reading the 700-page book anytime soon.

Why is it that you can buy $50 or $60 worth of gasoline with a credit card without showing anyone the card or signing, but still have to sign, say for $15 worth of pizza?

There’s actually a reason. The credit card companies have exempted certain categories of merchants from the signature requirement and, after all, those gasoline purchases are authorized electronically.

Credit card companies do not require you to show ID. In fact, their rules prohibit a merchant from denying a credit card transaction because you refuse to show ID. They do require your card to be signed and they do expect the cashier to verify some commonality between the card signature and the signature on the receipt (ha, good luck with that).

Putting “Ask for ID” on your credit card instead of your signature is not acceptable and your card should not be accepted without a signature according to the credit card companies. Besides, who wants to be flashing their driver’s license (with your address, etc.) to every Tom, Dick and Sally that asks for ID? You don’t have to according to Visa, Master Card, etc. The credit card companies discourage the use of ID because the ID and the card taken together provide not only the card number but, more than likely, the billing address. And nearly everyone these days has a camera in their pocket if they get a moment with the card and ID out of your sight.

None of the above applies at Best Buy however, which requires a DNA sample for a credit card purchase.

“… but Disney stock was up 3 percent Thursday on news of a possible Disney-Pixar deal that would make Pixar’s (and Apple’s) Steve Jobs the biggest individual shareholder of Disney.”

NewMexiKen, January 19, 2006

Apple stock closed at $64.56 the first day I mentioned it here, January 11, 2005. It split 2:1 shortly thereafter, so $32.28 a share seven years ago today.

Close yesterday: $423.24.

The Dow Jones industrial average closed above 2,000 (2,002.25) for the first time 25 years ago today (January 8, 1987).

An excerpt from Beat the Press, always a good source for understanding the day’s economic news:

So we’re supposed to be happy about 200,000 jobs in December?

Another way to think about this is that we currently have a shortfall of around 10 million jobs. If we generate 200,000 jobs a month, then we are cutting into this shortfall at the rate of 100,000 a month, since we need 90,000-100,000 jobs a month just to keep pace with the growth of the population. This means that in 100 months we should expect to be back to full employment. So the champaign bottles for that happy occasion will be dated 2020.

Okay, but this puts too bright of a picture on the data. The 200,000 jobs number reported for December was distorted by unusual seasonal factors, the most obvious of which was the 42,200 job growth reported in the courier industry. This is primarily companies like Fed Ex and UPS who hire additional workers to deal with holiday demand.

But on Tuesday, we heard something different. American Airlines, once the largest airline in the United States, declared bankruptcy. This is not surprising news for the beleaguered airline industry; what is different is what is emerging from the wreckage. Gerard J. Arpey, American’s chief executive officer and chairman, resigned and stepped away with no severance package and nearly worthless stock holdings. He split with his employer of 30 years out of a belief that bankruptcy was morally wrong, and that he could not, in good conscience, lead an organization that followed this familiar path.

Read more about A Departing C.E.O.’s Moral Stand.

“A $1 investment in the S&P 500 Index at the beginning of 2000 was worth just 91 cents 10 years later after ‘the worst decade in stock market history,’…”

Harvard Business Review

Reacting to Tom Friedman is knee-jerk unless you’re smart enough not to bother. Dean Baker reads Friedman for us — his running debate is which Times columnist is sillier, David Brooks or Friedman. You really should be following Baker everyday. Today Baker’s take is Thomas Friedman Is Upset That President Obama Is Not Kicking the Elderly.

Thomas Friedman joined the ranks of the Peter Peterson deficit hawks and criticized President Obama for not wanting to beat up the elderly. Specifically, he is upset that President Obama did not propose cuts to Social Security and Medicare.

Apparently Friedman is not aware of the upward redistribution of income over the last three decades. Nor does he seem to understand that the government just needs to spend money to create jobs now.

The current crisis is the result of the collapse of a housing bubble that he and his deficit hawk friends allowed to grow unchecked. The construction and consumption demand created by the bubble was driving the economy. Now that the bubble has collapsed there is nothing to replace this demand.

In the short-term this demand can only come from the government. In the longer term it will have to come from more a smaller trade deficit as domestic production replaces foreign production. This will only come about from a lower-valued dollar.

The long-term deficit is driven entirely by the broken health care system in the United States. If the United States paid the same amount per person for care as people in any other wealthy country we would be looking at large budget surpluses, not deficits.

Social Security is already largely in balance. According to the Congressional Budget Office it can pay all scheduled benefits until the year 2038 with no changes at all. After that date it can pay more than 80 percent of scheduled benefits indefinitely. A tax increase equal to 5 percent of the wage growth projected over the next three decades would be sufficient to allow it to make all scheduled benefits indefinitely.

According to The Inflation Calculator it would cost $1000 to buy what you could get for $82.88 the year NewMexiKen was born.

Even so, you can get a much better value in a plasma TV these days.

Top chart, equities drop (which means investors are selling stocks), and bottom chart, U.S. Government bond interest rates drop (which means investors are buying bonds because they consider treasuries the safest place to be).

(The fact that the top chart above is also S&P is incidental. The S&P 500 is just a good measure of the market.)

15-year fixed 3.5%.

Doug Short has been charting the stock market using the S&P 500 stock index since it peaked at 1565.15 on October 9, 2007.

Here is his Current Market Snapshot.

Bottom line, but not counting dividends, after 46 months, and including the 2008-2009 bloodletting, the index is down 25.1% (and that’s after today’s 4.6% bounce).

Which is probably better than your house has done.

As reported by the San Francisco Fed.

88.5% of American consumer spending is for products and services made in the U.S.A.

• 67% of the money we spend is for services, and almost all services are local; 96% in fact.
• We spend about 10% on durables: cars, furniture, appliances. About two-thirds of the durables we buy are made in America.
• The remaining 23% of our expenditures are for nondurables: food, clothing, gasoline, electricity. About three-quarters of these are made in America.

And even of the 11.5% we spend on foreign goods, more than a third is spent for American based transportation, wholesale and retail services. For Chinese made goods, the U.S. cost of the price is 55%. (Higher wholesale and retail margins on clothing, shoes and electronics account for this.)

Our economy is much, much more self-contained than generally understood.

… biggest down days on Wall Street percentage-wise since 1950 have been in the last week.

-6.7% on August 8th
-4.8% on August 4th
-4.4% today

Based on S&P 500 stock index.

And got out of stocks two weeks ago.

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The S&P 500 — which tracks 500 stocks rather than just 30 like the Dow — was down 80 points today, its 4th worse point loss ever and its 10th worse percentage loss (-6.65%).

The S&P 500 has lost 16.2% in two weeks.

“Carnage in stock markets as I write — and all of the headlines I see attribute it to S&P’s downgrade.

“They really are trying to make my head explode, aren’t they?

“Once again: S&P declared that US debt is no longer a safe investment; yet investors are piling into US debt, not out of it, driving the 10-year interest rate below 2.4%. This amounts to a massive market rejection of S&P’s concerns.”

Paul Krugman

To the point, money is coming out of the stock market and being invested in U.S. debt, still considered by actual investors the safest investment in the world.

“5 of the 19 companies getting the lowest scores on the American Customer Satisfaction Index are pay TV providers. In 3rd, it’s Time Warner, 4th, Comcast, 5th, Charter, 17th, Cox, and 18th, Dish.”

The Consumerist

The Consumerist thinks it is because these companies are monopolies (or near monopolies). I agree, but also think the dissatisfaction is in part because for many of us we now are expected to pay $100 a month for something that used to be free.

But then I would. I don’t pay for TV.

There are a hundred different ways of looking at the economy, and a million different statistics. But if you wanted to focus on just one number that explains why the economy can’t really recover, this is the one: $7.38 trillion.

That’s the amount of wealth that’s been lost from the bursting of housing bubble, according to the Federal Reserve’s comprehensive Flow of Funds report. It’s how much homeowners lost when housing prices plunged 30% nationwide. The loss for these homeowners was much greater than 30%, however, because they were heavily leveraged.

. . . But, on average, American homeowners lost 55% of the wealth in their home.

Most middle-class families didn’t have much wealth to begin with — about $100,000. For the 22 million families right in the middle of the income distribution (those making between $39,000 and $62,000 before taxes), about 90% of their assets was in the house. Now half of their wealth is gone and it will never come back as long as they live.

Excerpted from Rex Nutting – MarketWatch