Do Employment Patterns Of Highly Skilled People Explain Stock Bubbles?

Over the past forty years society has become a more class stratified environment where the highly skilled upper-middle class and upper class have a much higher earnings capacity and capacity to quickly find employment than do manual workers. The lower one’s skill set the harder it is to earn a living or find work. If stocks typically are bought by the top 10% of society and this class has gotten bigger percentage pay increases than moderate income people then perhaps this helps to explain the huge run up in stock prices since the low of August, 1982. As the affluent class has increased its ability to save and its financial self-confidence it has used these things to invest in stocks

2017-02-06T15:49:55-08:00February 6th, 2017|mayflowercapital blog|Comments Off on Do Employment Patterns Of Highly Skilled People Explain Stock Bubbles?

Personal Income Growth Has Been Distorted

Recently the Census Bureau published report showing a dramatic 5% increase in personal income in 2015 in one year. However, this increase was from an increase in interest income as calculated by the Census and an increase in IRA and 401k income based on withdrawals. This is wrong because yields have been relatively steady in recent years. The problem with counting 401k income is that it is based on withdrawals rather than on sustainable appreciation and yields inside of the account. An investor could gamble recklessly in junk bonds and boost his income but eventually junk bonds will crash thus reducing his total return. Thus a retiree should calculate sustainable retirement income from a 401k or IRA. The experts say

2017-01-10T23:32:52-08:00October 3rd, 2016|mayflowercapital blog|Comments Off on Personal Income Growth Has Been Distorted

Politics Is Turning Against Business: Will Investments Be Hurt?

The implications of Trump’s popularity is that the traditional Republican constituency of moderate income blue collar traditionalists who would vote for Republican politicians that cut taxes for the rich has faded away. As the economy weakens then more traditional non-rich Republicans may defect to vote for a high tax Democratic slate rather than vote Republican because of some sort of traditionalist issues like guns, religion, gays, etc. When the country goes through economic hardship then the key issue for voters will be the alleged ability to create more jobs by restricting foreign trade (leading to a trade war and trade treaty cancellations) and restricting immigration. The Republicans haven’t won a popular vote presidential election since 1988 except for Bush, Jr.’s

2017-01-10T23:33:01-08:00May 13th, 2016|mayflowercapital blog|Comments Off on Politics Is Turning Against Business: Will Investments Be Hurt?

Rising Political Turbulence Threatens The Economy and Stocks

The continued rise of political instability in the U.S. will undermine businesses’ confidence to expand. It will reduce consumer confidence for large purchases. Traditionally the weakest year in the cycle is right after the elections when it is the best time to raise taxes and impose new regulations. The economy has gone seven years since the last recession and eight years is a normal lifespan of cycles so early 2017 looks risky. Markets may not have priced in this risk of angry voters seeking big change. It is possible things will turn out OK like they did in 1948 when there were four political parties in the November election and the incumbent Truman looked sure to lose. Ultimately the voters

2017-01-10T23:33:02-08:00March 11th, 2016|mayflowercapital blog|Comments Off on Rising Political Turbulence Threatens The Economy and Stocks

Three Things Investors Must Know

  The first thing investors need to do is to avoid the temptation to panic when news articles are written about how 1970’s hyperinflation will somehow materialize out of nowhere and destroy bonds. The next thing investors need to do is stop thinking they are entitled to always get a 2.1% “real” return on the 10 year Treasury. The third idea investors need to know is to tune out the cliché that says “there is nothing else to buy since yields are low so just buy stocks”. If stocks go down 50% and stay down then you will be glad you made 2% in bonds while avoiding stocks. There is considerable evidence that stocks are overpriced, so even if the

2017-01-10T23:33:15-08:00August 3rd, 2015|mayflowercapital blog|Comments Off on Three Things Investors Must Know

Rising Loan Balances: A Sign of Growth or Irrelevant Data?

   Loan balances for business are increasing but what portion of that are solely for leveraged buyouts, share buybacks or cash to be used in lieu of importing cash from foreign subsidiaries?   Those uses will not result in economic growth nor in inflation and thus the raw data about the amount of increases in commercial loans isn’t, by itself, enough to conclude that the economy is expanding. The typical large business that is successful and growing has more cash then they need and is in many cases unwilling to expand plant and equipment so they don’t need a loan.    In modern times corporations keep more cash on hand then they need to reduce risk and they finance that

2015-05-05T06:19:00-07:00May 5th, 2015|mayflowercapital blog|Comments Off on Rising Loan Balances: A Sign of Growth or Irrelevant Data?