Archive for January 2015

The Friday File: While some argue that skyrocketing CEO pay is linked to performance, recent research suggests otherwise. Looking at CEO compensation across US firms, British academics find that firms that hired compensation consultants paid their CEOs 7.5% more than those that didn’t. It appears that hiring compensation consultants is how to better justify higher…

In calendar year 2014, the budget deficit was $488 billion, $72 billion less than in 2013 and the smallest deficit since 2007. Since the start of 2010, revenues have risen from $2 trillion to $3 trillion, while spending has been flat at $3.5 trillion. If revenues continue rising by $200 billion/year, which is very plausible,…

President Obama’s December Executive Order granting temporary immigration relief will boost GDP by 0.5% over the next decade, while the 2013 Senate-passed immigration bill would have boosted GDP by over 3%. Obama’s Order helps primarily undocumented immigrants, most with very limited skills, and their plight won’t much improve. Conversely, the Senate bill aimed to increase…

Before oil prices can rise, production must decline and/or demand must rise and demand won’t increase anytime soon with Europe, Japan and Brazil weak, Russia in recession and China slowing. That means supply must fall and that will probably require still cheaper oil. Recent research suggests that even at $40/bbl, only 1.6% of world oil…

While the economy created 252,000 jobs in December and 2.95 million last year, the most since 1999, and the unemployment rate fell to 5.6%, looks can be deceiving. The steep unemployment rate decline is because the labor force participation rate declined to 62.7%, a 37 year low, thus the combined number of persons employed and…

The Friday File: At age 50, the average man can expect to live an additional 29.25 years, while the average woman can expect 30.5 more years of life. Wealth plays a huge role. Among the poorest 10%, life expectancy beyond 50 averages 24.2 years for men and 27.9 for women. Among the wealthiest 10%, it’s…

Current oil prices will save US households $150 billion over the next year if they hold. But these benefits will come slowly. However, the decline in energy stocks which make up 8% of the S&P 500 and 12% of its dividends, 17% of the high-yield bond market and 12% of the investment-grade bond market is…

With so much global turmoil, the declining yields on US Treasuries isn’t surprising as investors across the globe pour money into to Treasuries given their status as the world’s safest investment. Another reason is that close to $800 billion in European sovereign euro-denominated debt, equal to almost 6% of all euro-denominated sovereign debt, offers investors…

While there are always potential economic problems that could harm our economy in 2015, the biggest is Europe. This is because of the chance, albeit remote, that the continent badly unravels. A combination of a Greek default or (maybe) exit from the euro, continued central bank paralysis and the rise of extremist political parties is…

While personal income tax reform sounds great, lower rates necessitate eliminating or reducing tax breaks. The biggest is the $207 billion exclusion for employer-sponsored healthcare plans. The next four are the $103 billion exclusion for employer-sponsored retirement plans, the $74 billion mortgage interest deduction, the $69 billion from lower taxes on capital gains and the…