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Thread: Two Economic Developments Every Investor Should Be Aware Of

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    Default Two Economic Developments Every Investor Should Be Aware Of

    from Graham Summers at Phoenix Capital Research ...


    (snip)"Last week I outlined the reason why we are very likely going over the fiscal cliff: there are little if any political incentives for the GOP or Dems to fix the problem; the best option politically is to let us go over the cliff and then offer targeted tax breaks in late 2013 early 2014 as part of their 2014 Congressional campaigns.


    With that in mind, corporations are now rushing out special dividends to shareholders in an effort to beat the coming tax hikes on dividends.

    Between Nov. 1 and Dec. 5, 349 companies moved up their dividends or paid special dividends, according to Silverblatt. That is higher than the 314 irregular dividends paid last year in all of November and December. Silverblatt expects the pace of early dividends to pick up if Washington keeps dawdling.

    Many companies go beyond moving up ordinary payments. They are declaring special, one-time dividends to take advantage of the lower tax rate while it lasts.


    This is a serious red flag for the US economy’s future: all of the capital being paid out to shareholders will not be going into corporate expansions or hiring. This, when taken along with the recent rush of capital into savings accounts ($150 billion was shifted into savings accounts following Obama’s re-election), indicates that big money is either going into hibernation or being paid out to shareholders.

    In simple terms: none of these funds will be used to grow the US economy or create jobs. Which means the US economy will be taking an even sharper nose-dive than expected in 2013.



    On the other side of the pond, the EU as a whole is in recession. However, recent data coming from Germany indicates things are going to be getting significantly worse.

    Month over month, German industrial production fell 2.6% in October. It fell 1.3% the month before. This contraction has resulted in the Bundesbank lowering its 2013 GDP growth projection to just 0.4%.

    The entire EU bailout process has been based on the notion that Germany will write the check to fund various bailouts/ interventions. If Germany enters a recession then politically it will be much harder for German politicians to push for additional aid to the rest of the EU.

    Remember, Chancellor Angela Merkel is up for re-election next year. So she will be turning her attention increasingly towards her campaign. And running on the idea of more bailouts when the German economy is contracting is political suicide.


    Thus, we have something of a capital freeze occurring in the US at the very same time that the primary pillar of EU stability (Germany) will very likely begin to pull back from providing additional aid (case in point, Greece is still waiting on receiving proposed aid from six months ago).

    All of these items point towards what will be a particularly ugly 2013."(snip)

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    Default Re: Two Economic Developments Every Investor Should Be Aware Of

    The real question is what kind of an idiot base their investment decisions reading zerohedge?

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    Default Re: Two Economic Developments Every Investor Should Be Aware Of

    ^^^ irrelevant ... the content comes from Phoenix Capital which is normally a paid subscription service. The zerohedge repost was 'free' to all.

    And regardless of source, it is an irrefutable fact that a huge amount of corporate 'cash' is presently being diverted toward stock share repurchases, special dividend payments, and other measures which are geared toward increasing investor 'earnings' for 2012 and NOT geared toward future business expansion / jobs creation. It is very arguable that these are being precipitated by the high probability that capital gains, dividend, and personal income tax rates will by raised to much higher levels in 2013 ... PLUS the enacting of a new ~4% Obamacare tax on investment income after the first of the year.

    The really important point is that private sector business direction / policy is in fact set by ' 1%ers ' ... who own major blocks of stock, who have seats on corporate boards etc. Actions beget reactions ! And a short term investor is able to profit from those reactions !!!

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    Default Re: Two Economic Developments Every Investor Should Be Aware Of

    Obama has been talking to Fortune 500 CEO's who are lobbying for tax breaks for their companies while letting small business take it in the neck. The very folks who do most of the hiring and new job creation.

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    Default Re: Two Economic Developments Every Investor Should Be Aware Of

    here's the latest Gallup Poll of small businesses ...


    (snip)"U.S. small-business owners' net capital spending intentions for the next 12 months plunged to -14 in November, the lowest level in more than two years, according to the Wells Fargo/Gallup Small Business Index. This is down from net capital spending intentions of -1 in July and suggests the nation's small-business owners are likely to pull back on their business investments even more, given their negative expectations for the next 12 months.

    The -14 November score is based on 20% of small-business owners saying they expect to increase their capital spending over the next 12 months and 34% saying expecting to decrease their capital spending. The 20% "increase" reading is down from 23% in July and the lowest level since July 2010. The 34% "decrease" reading is the highest since July 2010. In the current survey, 45% of owners expect no change in their capital spending.

    The current negative net capital spending intentions mark a significant shift from the positive double-digit scores seen prior to 2008. Positive net spending intentions reflect how small-business owners usually expect to grow their businesses and take advantage of advancing technologies to help them do so. However, this has not been the case since the recession and financial crisis of 2008-2009, with net capital spending intentions reaching a low of -23 in November 2008. Small-business-owner capital spending expectations were slightly positive during the first two quarters of 2012, before turning neutral in July, and then plunging in November. The last time net capital spending intentions were lower than they are today was in July 2010, at -20.

    Owners' Net Capital Spending Down Over Past 12 Months

    The survey also asks small-business owners to report on their capital spending over the past 12 months. In November, more owners reported decreasing their capital spending (40%) than increasing (18%) it, resulting in a net capital spending score of -22. This is down from the -11 of July and the similar prior two quarterly measurements of 2012. Net capital spending over the past 12 months is now about where it was in October 2011, at -24."(snip)

    with additional commentary from Mike Shedlock ...

    (snip)"Positive Spin

    Gallup attempted to paint this in a positive light noting an "enormous level of pent-up demand for such investments and a potential for explosive capital spending by the nation's small businesses whenever the U.S. economy can return to a sustainable growth path that permits owners and lenders to grow their companies."

    When is that?

    I suggest no time soon. The US is back in recession or certainly headed there (take your pick). Regardless, given souring consumer attitudes coupled with a death of jobs except part-time jobs resulting from Obamacare artifacts, there is no reason for most small businesses to expand.

    Indeed, for most companies, expansion at this point would be suicidal."(snip)


    from


    Circling back on topic ... I would add that, with the exception of buying stock in corporations which operate franchises, there is no way for small time passive 'investors' to really participate in small business profits. And even then, the franchised corporation stock share investment is not a 'pure play'. Obviously, to directly participate, it requires a a large personal financial investment plus far more than a passive participation level i.e. buying a partnership share in a small business venture.
    Last edited by Melonie; 12-13-2012 at 03:21 PM.

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    Default Re: Two Economic Developments Every Investor Should Be Aware Of

    Phoenix capital 'research' -- the guys who make so much money with their investment, that they have to sell newsletters of doom porn to clueless zero hedge users. If you haven't noticed, Any idiot can shoot doom porn and host it on zero hedge these days.

    Seriously, how stupid you really have to be to take advice from zero hedge?

    As an exercise, research on this Phoenix capital research and you'll know how zero hedge has made an industry out of servicing a gullible, paranoid, mostly clueless, gold bugs.

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    Default Re: Two Economic Developments Every Investor Should Be Aware Of

    actually, I've made a fair amount of profit thanks to advice from Phoenix Capital / Graham Summers. But that's beside the point. And the point of course is that financial decisions are being made, and financial actions are being taken ( or not taken ), by both large and small businesses that do not bode well for the US economy in 2013.

    Whether any particular investor chooses to give weight to the corporate stock share buybacks / special dividend payments etc. that ARE happening, or chooses to give weight to the Gallup survey of small business owners, is entirely up to them. My purpose in posting this thread was simply make dollar den readers aware of the fact that these developments are happening, since reporting in mainstream financial media has been 'subdued' to say the least.

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