But on to other things, some interesting add ons to items I cover - speaking of inflation, one arguement bulls have is that most input costs into corporations are labor, not materials. Which is factually true in most industries, especially white collar - not so much in manufacturing of course. So how is labor doing? One thing lost in the rush of Kool Aid this morning was this factoid:
A separate report showed that higher prices and rising unemployment resulted in falling wages in March. After adjusting for inflation, average weekly earnings for nonsupervisory employees dropped 1 percent last month, compared to the same period a year ago. It was the sixth straight month that inflation-adjusted wages were down.
And this is the catch 22 ... while corporations will benefit for the inability for wage earners to ask for higher wages - the actual individuals will continue to suffer. So net net win for corporations - shocker right? I believe this is a long term, systematic trend - not a cyclical situation as I outlined long ago. [Do the Bottom 80% of Americans Stand a Chance?] It will ebb and flow, but over time the "median human" in the USA will continue to lose buying power. Now keep in mind the reports are saying "adjusted for inflation" - that means adjusting for government inflation of 3% or so, that people are losing real buying power. Just imagine how much buying power they are really losing if you substituted government inflation with real inflation. This is why I continue to believe we are in for a long secular decline in buying power for the average American. Until the next bubble pops up to temporarily distract he/she from his situation.
Meanwhile one of my favorite topics, the growing wealth discrepancy in America is further highlighted in this NYTimes story - Wall Street Winners Get Billion Dollar-Dollar Payouts. We've already discussed it many times, most recently last week [Apr 8: Hedge Fund Manager - Good Work if You Can Get It] but just amazing to watch the inequity grow - I continue to wonder to self at what point will the masses react to this in ugly fashion? I give it within 10 years if trends continue.
Now in the past we had some ultra rich but they actually created things, like banks or railroads - this current era (which heck, I want to become part of) is trading paper to create their unheard of wealth. And in the compensation system of hedge funds, all you really need to do is take outsized risks and hit 1 big home run, and you have generational wealth. And then if it implodes the next year - so be it. You, and generations of your family are set. Again, I am not anti-capitalist - but a rising tide needs to lift all boats, and it has stopped doing so for much of the past decade. Further, our compensation system in public corporations rewards those at the top whether they win or lose - thats what stuffing your board with friends from other companies (many of which are C level executives) will do for you - heads you win, tails you ... still win. And when you lose for years upon years... maybe you get fired. Maybe. And then you you get your golden parachute. What is derided in 3rd world countries where the government leaders, their crony friends, and the upper 0.5% elite get all the spoils while the rest suffer - is starting to sound mighty familiar, no?
- Hedge fund managers, those masters of a secretive, sometimes volatile financial universe, are making money on a scale that once seemed unimaginable, even in Wall Street’s rarefied realms. Hedge fund managers have redefined notions of wealth in recent years. And the richest among them are redefining those notions once again.
- Their unprecedented and growing affluence underscores the gaping inequality between the millions of Americans facing stagnating wages and rising home foreclosures and an agile financial elite that seems to thrive in good times and bad.
- Even on Wall Street, where money is the ultimate measure of success, the size of the winnings makes some uneasy. “There is nothing wrong with it — it’s not illegal,” said William H. Gross, the chief investment officer of the bond fund Pimco. “But it’s ugly.”
- With a combined $2 trillion under management, the hedge fund industry is coming off its richest year ever — a feat all the more remarkable given the billions of dollars of losses suffered by major Wall Street banks.
- In recent months, however, scores of hedge funds have quietly died or spectacularly imploded, wracked by bad investments, excess borrowing or leverage, and client redemptions — or a combination of those events.
- “To some degree it’s a very gigantic version of Las Vegas,” said Gary Burtless, an economist at the Brookings Institution.
- Since 1913, the United States witnessed only one other year of such unequal wealth distribution — 1928, the year before the stock market crashed, according to Jared Bernstein, a senior fellow at the Economic Policy Institute in Washington. Such inequality is likely to impede an economic recovery, he said.
- And Mr. Gross, the fund manager, warned that the widening divide among the richest and everyone else is cause for worry. “Like at the end of the Gilded Age and the Roaring Twenties, we are going the other way,” Mr. Gross said. “We are clearly in a period of excess, and we have to swing back to the middle or the center cannot hold."
- The Senate proclaimed a fierce bipartisan resolve two weeks ago to help American homeowners in danger of foreclosure. But while a bill that senators approved last week would take modest steps toward that goal, it would also provide billions of dollars in tax breaks — for automakers, airlines, alternative energy producers and other struggling industries, as well as home builders.
- The tax provisions of the Foreclosure Prevention Act, which consumer groups and labor leaders say amount to government handouts to big business, show how the credit crisis, while rattling the housing and financial markets, has created beneficiaries in the power corridors of Washington. It also shows how legislation with a populist imperative offers a chance for lobbyists to press their clients’ interests.
- Health insurance companies are rapidly adopting a new pricing system for very expensive drugs, asking patients to pay hundreds and even thousands of dollars for prescriptions for medications that may save their lives or slow the progress of serious diseases.
- With the new pricing system, insurers abandoned the traditional arrangement that has patients pay a fixed amount, like $10, $20 or $30 for a prescription, no matter what the drug’s actual cost. Instead, they are charging patients a percentage of the cost of certain high-priced drugs, usually 20 to 33 percent, which can amount to thousands of dollars a month.
- The system means that the burden of expensive health care can now affect insured people, too.
- No one knows how many patients are affected, but hundreds of drugs are priced this new way. They are used to treat diseases that may be fairly common, including multiple sclerosis, rheumatoid arthritis, hemophilia, hepatitis C and some cancers. There are no cheaper equivalents for these drugs, so patients are forced to pay the price or do without.
- ... the result is that patients may have to spend more for a drug than they pay for their mortgages, more, in some cases, than their monthly incomes.
- “This is an erosion of the traditional concept of insurance,” Mr. Mendelson said. “Those beneficiaries who bear the burden of illness are also bearing the burden of cost.” And often, patients say, they had no idea that they would be faced with such a situation.
Last, our favorite environmentalist, has finally come to the conclusion 7.5 years into his term that hmmm... maybe that global warming thing has something to it. Not that it's a political year, or this is a political move to help his party out... I would never be so cynical. (this being the same administration which a few years ago was censoring Beltway scientists from using such words in the official government views on global warming) But hey we have a new viewpoint now... just enough time to look "engaged", and "caring" but not enough time to work with Congress to get anything actually done... perfect!
- President George W. Bush today will set a goal for the U.S. to stop the growth of greenhouse gas emissions by 2025, an administration official said, as he tries to head stronger measures from Congress.
- In a speech at the White House later today, the president will outline a path for the nation to help curb global warming. Among the goals is letting power plant emissions peak over the next 10 years to 15 years, after which they must decline, the official said.
