Market Update — June 21
A few interesting numbers I came across today…
Keep twisting. The FOMC said they are extending their Operation Twist program by buying $267 billion in longer-dated securities by the end of 2012. The FOMC also said that they are “prepared to take further action,” a stronger sign that there may be a third round of quantitative easing, or QE3.
France wants to be the next Spain. French President Hollande has promised to raise the top income-tax rate to 75% while simultaneously reducing the retirement age from 62 to 60.
The expiration of the Bush tax cuts. The lowest income tax rate will increase from 10% to 15% and the highest will increase from 35% to 39.6%. The dividend tax rate would increase from 15% to 39.6% (for high income tax payers). The new health care law would impose a 3.8% tax on passive income (including dividends and taxes). As a result, the effective top rate on dividends would be 43.4%.
This is why we pay them millions. I read a great piece by Michael Mauboussin concerning share repurchases. Here was my favorite stat. In 2007, U.S. companies did $761.8 billion of share repurchases. In 2009, when stocks were significantly cheaper, they bought back $149.5 billion of stock.
This will JOLT you. The JOLTS survey refers to the Job Openings and Labor Turnover Survey. This survey showed that job openings fell to a five-month low in April and showed their sharpest percentage decline in about seven and a half years. It indicated 3.4 million job openings in April, an 8% decline from March.
As we wait for the Supreme Court to rule. U.S. Census data shows that 50 million Americans lack insurance coverage. A study released by the consumer advocacy group Families USA, estimates that a record high 26,100 people aged 25 to 64 died for lack of health coverage in 2010, up from 20,350 in 2005 and 18,000 in 2000.
Betting on the Supreme Court. Odds from an online market (Intrade) indicate an almost 80% likelihood that the Supreme Court will reject the individual mandate.
The ACA isn’t popular. The Kaiser Family Foundation finds that 44 percent of Americans view it unfavorably and 37 percent favorably.
Effects of the mandate. The CBO estimates that 16 million fewer Americans would be insured if the individual mandate is struck down. A separate study by the Rand Corporation predicted that only 15 million people would become newly insured if the individual mandate is struck down (while 27 million people would become newly insured if the individual mandate is upheld). Most economists believe that the Affordable Care Act will fail without the individual mandate.
Government employment. According to a study by Moody’s, if the government still employed the same percentage of the work force as they did in 2009, the unemployment rate would be a point lower. (Of course, Moody’s also studied some CDOs and that didn’t work out that well.) Similarly, Yale economists said that if state and local governments had followed the hiring pattern of previous recessions, they would have added at least 1.4 million jobs.
The check is in the mail? Between 2009 and 2011, the postal service lost more than $17 billion. Mail volume slipped from 177 billion pieces to 168 billion. (I don’t know if this includes lost mail.) High-margin first class mail has dropped by 25% since 2006. First class mail is expected to drop by an additional 30% during this decade (from 74 billion pieces in 2011 to 52 billion pieces in 2020).
The Postal Service feels so European. Labor contracts make it very difficult to lay off Postal Service employees. Labor costs account for 80% of total operating expenses. Jenny has been hinting that she wants to take a trip to Europe. I let her know that we can visit the Post Office and that’s probably as close as we’re going to get.
Have a great weekend.
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