All things being equal...

Members present:
[tiny] Brian, [tiny] Danak, [GIANT] Bickford

Income inequality.

We started on the topic of income inequality, and specifically why it is bad. Obviously, we want people to be equal, but what is the benefit to society beyond just helping people?

We found an interesting article that outlines the problem. Basically, the situation is that the top one or so percent has a large share of the money in the economy. There is only so much money that one person can spend, even counting your proclivity to purchase thousand-dollar vintage craft beer. Additionally, higher income people tend to save at a greater rate. This means that one high-income person has the capital hundreds or more lower-income people. They may make one hundred times as much of someone else, but they may have one thousand times more disposable income. The idea is that there is a certain cost to being a human,and once you get past that, it is all disposable income. Since we are a consumer-driven economy,that one person has much more purchasing (and tax) capability then they would ever use, hence they can be viewed as a drag on the economy .

It is important to note that we are not saying that people shouldn't be fairly compensated for their innovation and hard work. We are simply looking at this in economic terms. Bickford drew an apology to littering. He said that the problem does not come from one person littering, but the cumulative effect of many people littering is what makes the Indian cry.

The economy has tried to use credit to keep the consumption level up in order to make up for stagnating wages. That is not necessarily a problem until we have an economic downturn and people lose their jobs and cannot keep that house of cards stacking.

These folks in the higher-income bracket are saving, but they want the money to do something with their money. The finance industry has filled this gap and come up with more creative ways for these people to generate capital. These are your crazy financial instruments like CDOs.

This got us on the topic of philanthropy. Is it possible that your school wouldn't need that grant if the government was able to collect enough revenue? It might be interesting to see is a socialist country like Sweden has a different philanthropic climate.

Obviously, this is a huge problem which won't be solved here, but it is useful to understand your world a bit more.

Also, check out this nifty and slightly terrifying Family Budget Calculator from the Economic Policy Institute:

http://www.epi.org/resources/budget/

For next week:
1. The bond market may be falling apart
2. financing home repairs and improvement

Profit!

Old Folks at Home

Members present: Brian, Bickford, Danak

A lackluster jobs report combined with the market being down for the year as of this month--ick.


We are the .01% of the 99%?

While hearing a group conversation about the 99% vs. the 1%, one of us wondered what these folks who are presumably locked into being part of the 99% were so vitriolic toward any sort of protest movement. They will never be billionaires, so it would be instructive to understand the psychology behind their resent. Perhaps it is the idea that they could become fabulously-well-to-do is the driving force, and perhaps it is the picture of patchouli-stinking, hippie campers, who contributer nothing nothing but jam band music and olfactory terrorism to the public discourse. Is it dreamy avarice or steamy resent?

Old Folks at Home

The market is currently flooded with investors that are going to retire at some point in the near future. They will need social security, but they will be leaving jobs. Perhaps this is going to be a good thing for the market, since all the jobs they left will need new people to gripe about them (whilst doing them), which might solve the social security problem, perhaps. This assumes that as people retire, they will be replaced by new people and not just phased out. Anecdotally, we all have heard about jobs being eliminated and increasing the burden of productivity on the remaining workforce. The next person who tells me to work smarter, not harder is getting a wet willie.

Additionally, there are a lot of people who have 401Ks as opposed to pensions. This means that the amount of retirement someone will receive depends on the whims of the market. Currently, with a Sherman's march to the sea-like decline in the markets, it is not a great time to retire if your revenue for the rest of your life is predicated on what kind of music they play during the market wrap up.

On the plus side for the markets, there will be people leaving the market as they cash in their retirements. This might decrease the volatility, since there will be less people with their fingers on the panic button.

Charts

EWZ: Check please?

When SPY was sucking, we held with it, and then it came back. It might be a good thing to hold on to EWZ while we're down--we missed our chance to sell, and the best thing is to wait and see. If we sold it, we could either hold cash and wait for it to drop more, or we could sell out of it and buy something else, but then what? Also, we should consider that EWZ is a country fund for Brazil, so it makes sense that it will come back. 

SPY

AT&T: Looking good. 

Norway

Fascinating reading here (Wikipedia), but here's the skinny: they are not part of the EU, they spend their oil profits with an eye toward the future, and did I mention that they are not part of the EU?--or OPEC, for that matter.

Here's a chart of their exports from Wikipedia:

Here's another take on Norway, but things still look pretty rosy. 

We will have to continue to look at it.

Next week, no Bickford, so Brian and Danak will take a look at Norway NORW.


Profit!