Washington D.C. used to complain that Ronald Reagan employed a strategy of "starving the beast" – cutting taxes so that new spending was tough to legislate. Now, D.C. seems to employ the strategy of "gorging the beast" – spending so much that tax cuts are hard to pass.
The after effects of hurricanes Harvey, Irma, and Maria have done little to sway the opinion of Federal Reserve members that the economy is ready for further rate hikes. While leaving rates unchanged at today's meeting - as expected - they set the table for December.
The short-short list for new Fed Chair includes Janet Yellen, Fed Governor Jerome Powell and Stanford economist John Taylor, the author of the "Taylor Rule." Right now Jerome Powell – a former Wall Street executive at Dillon Reed – is the runaway favorite. Taylor and Yellen are a very distant second and third.
The Wall Street Journal says that funds given a top “star” rating by Morningstar won’t be top performers. But the Journal’s findings are neither new nor as conclusive as its article states.
For nearly 25 years, the EU has held together despite challenges from bankrupt institutions, separatist movements and members with widely divergent economic prospects. But that cohesion is being tested, according to Albert Edwards, by countries that are losing their competitiveness. But his greater concern is the impact the Fed-induced credit bubble will have on the markets.
While tax cuts grab the headlines, the bigger issue for long-term economic growth is government spending. Tax receipts are above their long-term average as a share of GDP, but the government is still spending over $650 billion more than it takes in. And this government spending crowds out private sector growth.
Congress took a big step last week toward enacting some sort of tax cuts and tax reform. That big step was the US Senate passing a budget resolution creating the room for ten years of tax cuts totaling $1.5 trillion with a simple majority vote. This procedure means there is no need to break a filibuster by getting to 60 votes.
If the pace of monetary tightening in the U.S. is any sort of leading indicator for policy tightening in the rest of the world, including Australia, then in Australian parlance, it will be “like watching grass grow.”
Morningstar’s Fund Manager of the Year is one of the most coveted awards in the mutual fund industry. Indeed, fund companies devote enormous resources to promoting award recipients. But should advisors invest their clients’ funds with those winners?
Next week, government statisticians will release the first estimate for third quarter real GDP growth. In spite of hurricanes, and continued negativity by conventional wisdom, we expect 2.8% growth.