The Siskind Law Firm- Neil Siskind, Esq.-Licensing, Distribution, Real Estate, Business Law

http://siskindlawfirm.com/

Neil S. Siskind, Esq, pictured center, Holiday party, December 2016

Advertisements
Neil-Siskind-lawyer-picture

A Housing Slowdown May Not Be All Bad News- by NEIL SISKIND

Housing prices have been too high for too long. People bought low in 2011 and 2012, low interest rates have fueled speculation, and corporate buyers have entered the markets to rent out homes for income- depleting inventories for home-buyers.

Recent reports on housing starts are mixed- down 14% in the mid west, up 29% in the northeast … so, mixed.

The Fed has been raising interest rates. Most indicators seem to show that housing is slowing. Assuming this to be the case, it may not be the worst news.

If the Fed can coordinate a “slow” deflation of asset prices (housing and equities) that have been inflated by excess (or excessive) liquidity, while people are working, this could be an excellent result (i.e a soft landing). Moreover, as construction jobs slow, it will free-up the labor market for small businesses who need the kind of employees that have migrated to construction (i.e. laborers or blue collar) and mortgage and real estate brokering (sales and office administration workers).

So, housing may not result in a 2007-like popping of a bubble that takes down the entire economy and financial system- it may have a more muted, and even beneficial result, as it helps keep wage inflation low.

Of course, it’s not all good news. As housing prices go lower, so does household wealth and refinancing, which negatively affects consumer spending.

This is all separate from issues related to energy prices, trade disputes and tariffs, shadow banking, and the other affects of rising interest rates. When you take economic data and factors together, rather than individually, the picture, of course, can change. But, taking housing, alone, a slowdown, making homes more affordable as people are still working, while also alleviating pressures on wages as labor is freed-up from housing related businesses, is not the worst thing in the world- especially if the benefits of lower housing prices outweigh the negatives of higher costs of borrowing to buy a home- so that net, net, buyers can do a bit better as asset prices decline. At the same time, home owners who are not selling, will not really be negatively affected by the lower valuation (beyond their general personal net worth). Fairer, or more balanced prices for both buyers and sellers may mean a more active and healthy market- rather than no one being able to afford to buy a home because no one can afford to move because they can’t afford a different home.

If net, net, jobs are not lost, or are easily replaced, and there is no negative systemic affect on the financial system, then lower asset prices (houses and equities) can be a healthy outcome for all.

The Ominous Fact Hiding In September’s Tame Consumer Price Index Report- By NEIL SISKIND

Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.2 percent in September after rising 0.3 percent in August. (Owners’ equivalent rents nationwide is a little vague and difficult to measure, if you ask me.)

This lower rate of growth is a good thing, as oil and gasoline prices (a little lower in September than in August), interest rates, and tariffs, have been rising- while wages, largely, have not. At least, consumers get some reprieve.

But here’s the rub: Some people think that if home purchases (single family homes or condominiums) go lower, it means that rental demand and rents will rise[1]. And, if rents decline, they think that it means home ownership demand is strong. It’s a possible correlation at times, but it’s not, necessarily, true. It can simply mean there is a market imbalance- specifically, an oversupply.

Weak housing markets begin at the highest price-points, with homes that are owned by investors and second home owners (and those who bit off more than they can chew during good times) hitting the market- and with the weakness and growing inventories trickling down. This leads to investors and second homeowners capitulating and deciding to rent-out their homes while the house sits on the sale market. This adds to the rental inventory- starting at the highest points, and then hitting the markets below.

The lower than expected CPI may be and probably is, when combined with other recent housing, home loan, mortgage rate, and home-builder data, indicating a slowing housing market, with sales taking longer than expected for investors and second home owners, which is causing rental inventories to rise simultaneously with sales inventories-  rather than indicating that renters are deciding to buy.

It’s not only that inflation is tepid- underlying growth is slowing. You won’t hear many on “Wall Street” acknowledge that growth is already slowing (while many acknowledge a slowing to begin next year- and many have changed from 2020 to 2019 on that issue), because “Wall Street” ignores, or fails to understand the economics of real estate- which is how they, and we all, got into trouble in 2007- and why, even at this late stage in the cycle, investment funds are raising capital to buy office buildings and warehouses- at inflated prices and low cap rates that rents will not support.

__________________________

fn

  1. This can be true, but rents would only rise if rental inventories are low at such time. It depends on inventory levels- supply and demand.

 

Neil S. Siskind, Esq., President
The Siskind Law Firm
Tel: 646.530.0006

Neil Siskind is the Founder & Chairman of The Fatherhood Assignment
Neil-Siskind-photo
Learn more at:  http://www.neil-siskind-the-fatherhood-assignment.org/

Neil Siskind is the Conservator of the Neil S. Siskind Nature Preserve
Neil-Siskind-Picture

The Neil S. Siskind Nature Preserve is over 7 acres of environmentally-pristine waterfront land in a magnificent setting along New York’s majestic Hudson River. The Preserve includes a variety of species of animal and plant life, and is a precious example of the thoughtful maintenance of New York’s priceless open spaces. The land’s uses are limited to outdoor recreation such as hiking and climbing, and the study of ecology, nature and land use. The Neil S. Siskind Nature Preserve allows for the intelligent contemplation of our valuable natural resources and the most effective ways to maximize them and keep them protected.

Neil Siskind, Founder, “National Fatherhood Day” – March 29th

Neil-Siskind-pics
To encourage recognition of the needs of boys and girls who are living without fathers or father-figures in their lives.

Read about the non-profits and charities whose missions Neil Siskind supports and promotes: www.neilsiskindsupports.com
Caring is Free®

You can read what clients and associates say about Neil Siskind at: http://siskindlawfirm.com/neil-siskind-bio/.

Neil Siskind’s Volunteer Work:

– Memorial Sloan Kettering Cancer Center, Volunteer

– Memorial Sloan Kettering Cancer Center, My Fundraiser- Help Neil Siskindhelp children with cancer to be more comfortable: http://mskcc.convio.net/site/TR?px=3182108&fr_id=2632&pg=personal

– Make-A Wish Foundation- Help Neil Siskind make sick children’s wishes come true by creating your own fundraiser: Neil-Siskind/Help-Make-A-Child-Smile.htm

– DonorsChoose.org- Donate to one of my needy public classrooms: http://www.donorschoose.org/NeilSiskindGiving

– Champion Children– We seek to inspire people through stories of children who have overcome challenges: http://siskindlawfirm.com/neil-siskind-champion-children/


Neil Siskind’s Pro Bono
 Work:

– Saving Senior Citizens- Protecting New York’s senior citizens from fraud and financial abuse www.savingseniorcitizens.com

– Senior FreeStart Business– Pro Bono: We seek to help put senior citizens in the right direction so that they can face the challenges of the modern economy: http://siskindlawfirm.com/free-start-business/

– Veteran FreeStart Business– Pro Bono: We seek to help put Iraq and Afghanistan war veterans in the right direction so that they can face the challenges of the modern economy: http://siskindlawfirm.com/free-start-business/

– In development: The Neil S. Siskind School of Hope: A free school to teach inner-city youths the skills of entrepreneurship and importance of economic self-sufficiency.

Neil Siskind’s Government Work:

– Suffolk County District Attorney’s Office, Boston, MA, 1994, Intern
– Office of Senator Christopher J. Dodd, Newington, CT, 1992, Intern
– Hartford County Department of Probation, Hartford, CT, 1991, Intern

Neil Siskind’s Community Assistance:

Financed & operated a legal clinic providing low-cost legal services to struggling Long Islanders during the recession to help clients resolve debt, organize finances, and launch new businesses.

Neil Siskind’s Professional Curriculum Vitae: http://neilsiskind.com/

Sponsored Advertisements

Inventors, IP Owners, Manufacturers
Learn How To Bring Products To Market And To Expand Your Distribution Channels
The Complete Guide To The Ways To Manufacture & Sell Your Products

 

 

Lots Of “Bull” In The Bull Market- Let’s Look At What’s “Really” Growing- By NEIL SISKIND

BY NEIL S. SISKIND

Wall Street Bulls, including, analysts, CEOs, and asset managers from investment banks, continue to say that earnings and the stock market will grow into and throughout 2019, and into 2020, because the economy is getting stronger and is growing.

Really? The economy is growing?

Some of the bullishness is starting to sound … well … like bull.

What is it in the economy that is growing? The GDP? Consumer spending? Real wages? Home values? A positive trade balance? Earnings and guidance?

No. No. No. No No. And- we’ll see.

Let’s review the actual data we’ve seen in recent months to see if the economy really is “growing”:

  1. The most recent PPI print came in lower than expected.
  2. The most recent CPI print came in lower than expected.
  3. The most recent consumer spending prints came in lower than expected.
  4. The GDP is expected by all to be lower than in the second quarter. So, it’s growing- less and less. It’s expected to grow, less and less, in each quarter following Q2 of this year.
  5. Interest rates are rising on all ends of the curve.
  6. Housing is slowing. Home-building permits dropped in August by the most in seven years.
  7. The S&P Supercomposite Homebuilder Index just had its biggest annual drop since 2008.
  8. Non-defense capital goods orders excluding aircraft, which is considered a proxy for business investment, fell in August.
  9. Copper is in bear market territory.
  10. The breadth of equities that are rising is narrow.
  11. The EU announced it is weaker than expected (slower than expected growth in a major U.S. export market).
  12. China’s numbers are slowing- by its own hand and due to the new tariffs (slower than expected growth in, and a trade dispute with, a major U.S. export market).
  13. EM currencies and equities have been sinking (Turkey, Argentina, The Philippines, and others), with possible contagion risks.
  14. We receive data and earnings from public companies. But, earnings and stresses of private companies, often having less scale than their public counterparts, and which are, thus, more susceptible to input cost pressures, are, largely, unknown.

Here are the things that are “growing”:

  1. Consumer debt is growing. In May of this year, when the GDP hit 4.2% growth, consumer debt rose to a six month high. Overall consumer debt is now $618 billion higher than the previous peak of $12.68 trillion in the third quarter of 2008 (how’d things go after that?).
  2. Interest rates for businesses and on credit cards are growing.
  3. Mortgage rates for home buyers are growing.
  4. Corporate debt, and debt to cash ratios, are growing.
  5. The federal deficit and debt keep growing.
  6. Jobs with dead-end wages keep growing.
  7. The trade deficit is growing.
  8. Treasury sales to fund the federal deficit are growing.
  9. Energy prices are growing.
  10. Taxes (tariffs) on consumer goods are growing.
  11. Risks to China’s financial stability- and contagion risks to other Asian markets- may be growing.
  12. Investments in riskier corporate debt obligations are growing.
  13. Trade uncertainty and the effects on the economy are growing.
  14. Loans by unregulated “alternative” or “hard money” lenders to businesses and for real estate are growing. It’s estimated that 80% of mortgages today are from alternative (non-bank) lending sources.
  15. Large corporations taking all the available labor and leaving small businesses across America short-handed is growing.
  16. Large businesses scaling so large that small businesses can’t compete on price or on service and going out of business are growing.
  17. Economic inequality in America is growing.

Here are examples of Wall Street’s denials of realities that keep “growing”:

  1. Higher gasoline prices won’t matter to consumers until oil is $100.00 per barrel.
  2. The messages of the yield curve are different this time.
  3. Tariffs are not high enough to affect consumers or businesses.
  4. Oil prices are rising because of global economic strength.
  5. Earnings are all that matter (true- but, those earnings come from somewhere- from the real economy).
  6. We’re not in the late stages of a business cycle. It’s different this time. We extended the cycle.
  7. Because EM economies are so weak- America’s economy is very strong. (Really? Is this how it works?)
  8. The consumer will remain strong because of low unemployment. (Really? Wages, gasoline prices, credit card interest rates, tariffs, and debt don’t matter?)
  9. Wages are rising. (Real wages are not rising.)
  10. Interest rates are historically low, so the economy and stocks will stay vibrant. (Really? So, interest rates in 1985 control business planning today? What do rates in 1985 or 1997 matter to rates rising on the debt on corporate books today, or to business forecasts that are based on present yields? History is immaterial to business planning. Also, rising Treasury yields compress stock multiples, as rising yields for less-risky Treasuries may offer similar returns to what can be expected from risk assets under present and future conditions. So, it has nothing to do with history.)
  11. Fiscal policy is a tailwind going forward that will offset all other challenges, like monetary policy, stagnant wages, and tariffs.
  12. Companies will be able to pass-through rising input costs to consumers, because consumers have jobs.
  13. Job growth proves that the economy is growing. (Job growth is an element of the economy, but large companies taking on cheap labor, while small businesses can’t find people does not prove overall economic growth. Amazon and Home Depot grow, while small retailers across America close their doors.)

Are earnings “growing”?

Just be aware that earnings per share can be manipulated higher by companies repurchasing their shares or taking other measures to reduce their respective floats, making it look as if EPS has grown (Wall Street doesn’t like to talk about this too much). Share buybacks are at historical highs. Share buybacks can be good for shareholders (if such buybacks were the best uses of companies’ retained earnings and if no burdensome debt was incurred to make such buybacks) because they increase the values of the remaining shares. EPS has grown- but, this does not mean that the economy is strong, or even that that company has grown.

Even if revenues grow, remember that spending comes from income- as well as from debt. Consumers like to spend- but you also have to look at the debt they accumulate to achieve that spending and to cause those higher revenues.

Revenues of a business may show that consumers are spending, and such growth is not only by EPS growth due to share buybacks- it’s real growth. But, while sales revenues that come from debt is good for businesses (short term), it can be bad for consumers and the economy, and for everyone, in the long term (see 2007-2008).

The same goes for the GDP. GDP is a measure of spending, including by the government. The GDP can go higher and higher- it can grow and grow- the question is how much government debt-spending is in the number. Just ask China how this works. Ask the Soviet Union about its experience with this in the 1980’s. Or, just look at the Reagan-era deficits that had built up, leading to tax increases by Congress and the subsequent administration. Or, ask Greece.

In any event, with the PPI, the CPI, and consumer spending disappointments, and rising interest rates, tariffs, and higher gas and oil prices- let’s see how companies guide for future quarters. I expect that guidance, overall, will disappoint.

Semiconductor demand, or lack thereof, is a leading indicator for the economy- and memory chip demand is deteriorating.

Stocks’ sales-to-price ratios are at historical highs.

It’s rarely mentioned anymore that confidence surveys are often contrarian indicators.

Tight labor markets, rising energy prices, and a tightening Fed, all are markers of the late stages of a business cycle- so this tells us where we are in the cycle, and are signals not to be ignored. It can be argued that a low level of rising wages this late in the cycle would be less helpful to consumers than they would be damaging to businesses, as just another ding to margins- which could lead to layoffs. People have to realize that there is good inflation and bad inflation; and it’s not only the type of inflation it is that makes it good or bad- it’s also the timing of the inflation that matters. For example, wages rising early-on in a business cycle, as interest rates are low and as earnings and the GDP are growing, is a positive. Late in a cycle, wage inflation can do more harm than good, if, rather than being a demand side stimulus, it leads to layoffs as it accompanies other rising input costs and/or rising interest rates. (The cause of the inflation must also be understood. For example, increases in oil and gas prices can be due to economic growth, which, generally speaking, is good- or, price increases can be because of supply constraints, such as those due to sanctions or embargoes, which, at any point in a business cycle, is bad.)

The consumer and the S&P, which can track each other to a degree, have been strong this year- but interest rates were lower, gas prices were lower, and there were, relatively, few tariffs. All of that has changed.

And where is the trickle-down effect of the tax cuts? Analyses of capex investments are all over the map, but no significant capex has been proved- and certainly none that has led to higher real wages. Businesses certainly have invested in their own shares- but in the economy through capex? It’s not clear. Business investment is the most important element of GDP that we need to see grow right now- as opposed to more consumer and government spending on leverage. Trade disputes have no doubt hindered this endeavor for many companies.

Oil supply constraints due to sanctions on Iran at the same time as consumer product prices are likely to rise due to tariffs on Chinese products is too much for the economy to bear at a time when monetary policy is withdrawing liquidity from our economy and from the world through both target Fed funds rate hikes and quantitative tightening. Rising oil prices can be managed by an economy with low interest rates, an expanding GDP, and rising wages- but not with none of these. Oil prices and tariffs that are elevated due to policies will not alleviate with higher interest rates, as in a typical business and inflation cycle. Higher short term rates can collapse an economy experiencing rising consumer prices that are due to “non-growth” factors, by destroying demand, rather than steadily slowing the growth in prices to achieve price stability- because these aren’t demand issues.

We have been in a slow grind downward on the economic numbers, as challenged housing data, spending data, and political problems keep hitting the market. Stocks have been up-and-down, recently, while yields are on the rise all across the curve. China and the U.S.’s economic data have been slowing due to reductions in liquidity, per domestic policies, combined with trade concerns. Non-growth oriented inflation (tariffs and tight energy supplies due to sanctions) and higher interest rates are hitting world markets. Housing markets in China and the U.S. have slowed. Earnings and stocks have declined in China- and U.S equities are the Bulls’ last argument left to show anticipated economic growth. With all of the aforesaid, you’d have to be totally oblivious to economic matters to not see we are in the midst of an economic slowdown- solid growth in the S&P and FANG stocks this year, notwithstanding. That’s the past. Just as with the consumer- the headwinds are gathering, and the data show it.

I expect negative GDP growth to start (or, at the least, positive GDP growth to stop) during either the first quarter or the second quarter of 2019, unless there is a trade deal with China and significant capex- soon. Watch housing (because the Fed probably is), watch oil, watch for job cuts as input costs rise, watch consumer debt.

If we’re not going to see more growth at or near the same rate as heretofore, why has the 10-yr. Treasury yield been rising of late? The 10-yr. yield has, in fact, been climbing in the past week (something it has neglected to really do following earlier Fed hikes). Capital flows being re-directed from bonds into oil, energy stocks, and/or bank stocks and bank ETFs, as oil prices and interest rates rise, is more likely the reason (or much of the reason) for the rising yield than are any risk-on sentiments. These are, likely, inflation trades, rather than growth trades- perhaps compounded by concerns over increased Treasury offerings in the future, while the economy slows, combined with quantitative tightening. Investors may also be seeking equities of companies with pricing power that can benefit from, or at least shield themselves from rising prices. Finally, China’s holdings of 10-yr. Treasuries are shrinking. I would hesitate to conclude that rising yields are due to a wide belief in on-going organic earnings and economic growth in the U.S. or abroad. How can organic earnings rise while energy costs, labor costs, prices on consumer products from China, and the cost of money rise- all as consumer spending is in decline? Any inflation we are seeing in oil and interest rates and consumer products is U.S. policy-driven, and not demand-driven. It’s a distinction that makes all the difference- especially as the Fed raises rates.

It’s not demand-driven or growth-oriented inflation and higher interest rates that threaten the economy (i.e. typical inflation)- it’s rising political-oriented inflation (oil sanctions, tariffs) combined with rising rates, that will cause lessening of demand (and layoffs), or deflation. A sort-of stagflation (especially if the dollar weakens). (If these political-oriented inflation points reverse, or are effectively counteracted, my thesis of the timing of a slowdown or recession would be extended-out.)

If supply-constrain induced inflation (rather than growth-induced inflation), due to U.S. policy, is, in fact, the cause of curve steepening, the steepening should, eventually, reverse, due to demand destruction, or, in the case of oil, due to more supply coming online- or from risk-off re-asserting itself, moving investors from energy back to bonds (though, the movement from bonds to the energy sector by investors in order to protect against or benefit from policy-driven inflation is not what I would call risk-on). This said, the combination of quantitative tightening and growing Treasury auctions to fund the budget deficit could cause the curve to remain steep. This would be very bad news for the economy if rates on longer term obligations should remain elevated due to the deficit- rather than due to growth- when the economy needs them to decline, due to slowing.

To that latter point, how would the federal budget be funded if and when tax receipts to the government begin to decline? With interest rates so low, the Fed would have little room to help on the monetary side (which is probably why the Fed looks for any scintilla of inflation as a reason to raise rates). Certainly, fiscal stimulus has reached a high-water mark. We can’t keep selling bonds to fund the budget, and send longer term yields higher and higher. The budget has to be funded, largely, by tax income.

Such a scenario of tax receipts declining while the deficit keeps growing would leave only one option …

… Our tax rates would start growing.

_________________________________

endnotes

  1. Fed Chairman Powell was asked today what he and the Fed are “buying” by raising interest rates. As usual, the Chairman refuses to even mention the word “housing” in his statements or Q&A sessions as a consideration of the Committee in raising the target funds rate- even as it’s perfectly clear to everyone how sensitive housing is to interest rates (he did address mortgage origination standards). For me, his silence on this topic has been deafening. I believe he’s been reticent to discuss anything even remotely related to a housing bubble for fear of causing panic.
  2. A few things to note about advice from people on “Wall Street” (analysts, CEOs, and asset managers from the large investment banks) to keep in mind as you evaluate markets and the economy:
  • They either didn’t see or didn’t warn us about the 2007 housing crisis (while some investment banks were selling housing-related securities short).
  • They touted a “global synchronized growth” story for months in 2017 and 2018 that never panned out- it’s been quite the opposite.
  • They spent the latter part of 2017 and early 2018 recommending emerging market stocks and bonds to everyone. Great call!
  • You never see calls from investment banks about shadow banking risks (even China had enough sense … and transparency … to try to acknowledge, address, and reel theirs in). The whole shadow banking issue is addressed only by “Wall Street” when brought up by others (such as by Bloomberg’s first class anchors), and gets glossed-over by many financial industry interviewees. The alternative lending/hard money lending risks percolate below the surface, along with other non-regulated, high-return debt investments.

In light of the above, when “Wall Street”, over and over, stresses a 2020 slowdown in the economy and stocks – you can be sure that investment funds and asset and portfolio managers will not be waiting until 2020 to do something about it. In 2019- not in 2020- they will be getting themselves and their clients out of the market or diversified into risk-off assets long before “you” are out. So, don’t wait until the so-called “professionals” call the slowdown and alert you about it on TV. It will be too late. Look at the CPI, the PPI, expected GDP, consumer spending, consumer debt, copper, the federal deficit, interest rate trajectories, housing permit applications, energy prices and their effect on businesses and consumers … the slowdown is upon us.

3. Any PPI, CPI, or PCE increases from here would result from tariffs (higher consumer product prices) and sanctions (higher product prices resulting from higher energy costs)- rather than from organic economic growth and demand.

 

NEIL S. SISKIND, ESQ., PRESIDENT
The Siskind Law Firm
Tel: 646.530.0006

Neil Siskind is the Founder & Chairman of The Fatherhood Assignment
Neil-Siskind-photo
Learn more at:  http://www.neil-siskind-the-fatherhood-assignment.org/

Neil Siskind is the Conservator of the Neil S. Siskind Nature Preserve
Neil-Siskind-Picture

The Neil S. Siskind Nature Preserve is over 7 acres of environmentally-pristine waterfront land in a magnificent setting along New York’s majestic Hudson River. The Preserve includes a variety of species of animal and plant life, and is a precious example of the thoughtful maintenance of New York’s priceless open spaces. The land’s uses are limited to outdoor recreation such as hiking and climbing, and the study of ecology, nature and land use. The Neil S. Siskind Nature Preserve allows for the intelligent contemplation of our valuable natural resources and the most effective ways to maximize them and keep them protected.

Neil Siskind, Founder, “National Fatherhood Day” – March 29th

Neil-Siskind-pics
To encourage recognition of the needs of boys and girls who are living without fathers or father-figures in their lives.

Read about the non-profits and charities whose missions Neil Siskind supports and promotes: www.neilsiskindsupports.com
Caring is Free®

You can read what clients and associates say about Neil Siskind at: http://siskindlawfirm.com/neil-siskind-bio/.

Neil Siskind’s Volunteer Work:

– Memorial Sloan Kettering Cancer Center, Volunteer

– Memorial Sloan Kettering Cancer Center, My Fundraiser- Help Neil Siskindhelp children with cancer to be more comfortable: http://mskcc.convio.net/site/TR?px=3182108&fr_id=2632&pg=personal

– Make-A Wish Foundation- Help Neil Siskind make sick children’s wishes come true by creating your own fundraiser: Neil-Siskind/Help-Make-A-Child-Smile.htm

– DonorsChoose.org- Donate to one of my needy public classrooms: http://www.donorschoose.org/NeilSiskindGiving

– Champion Children– We seek to inspire people through stories of children who have overcome challenges: http://siskindlawfirm.com/neil-siskind-champion-children/


Neil Siskind’s Pro Bono
 Work:

– Saving Senior Citizens- Protecting New York’s senior citizens from fraud and financial abuse www.savingseniorcitizens.com

– Senior FreeStart Business– Pro Bono: We seek to help put senior citizens in the right direction so that they can face the challenges of the modern economy: http://siskindlawfirm.com/free-start-business/

– Veteran FreeStart Business– Pro Bono: We seek to help put Iraq and Afghanistan war veterans in the right direction so that they can face the challenges of the modern economy: http://siskindlawfirm.com/free-start-business/

– In development: The Neil S. Siskind School of Hope: A free school to teach inner-city youths the skills of entrepreneurship and importance of economic self-sufficiency.

Neil Siskind’s Government Work:

– Suffolk County District Attorney’s Office, Boston, MA, 1994, Intern
– Office of Senator Christopher J. Dodd, Newington, CT, 1992, Intern
– Hartford County Department of Probation, Hartford, CT, 1991, Intern

Neil Siskind’s Community Assistance:

Financed & operated a legal clinic providing low-cost legal services to struggling Long Islanders during the recession to help clients resolve debt, organize finances, and launch new businesses.

Neil Siskind’s Professional Curriculum Vitae: http://neilsiskind.com/

Sponsored Advertisements

Inventors, IP Owners, Manufacturers
Learn How To Bring Products To Market And To Expand Your Distribution Channels
The Complete Guide To The Ways To Manufacture & Sell Your Products

Avis Car Rental Cheats Me Again This Weekend

My problems with Avis Rent A Car continue. I was mailed a coupon for a free rental- based on the large amount of money I have spent with Avis. I reserved the car- by telephone- and they sent me a receipt and confirmation by email. I walked into the rental center at 310 E. 64th Street, with the confirmation, and the manager would not honor the rental. Instead of “free” per the confirmation, he said it will be $182.00. He went further to say that the free rental plus tax of $14.55 is just an “estimate”, and the actual rate is $182.00.00 (it was a like a quick trip to Pluto- all the other customers and employees in the store saw my confirmation and agreed with me … of course they did- I had the confirmation from Avis- there was nothing in dispute).

(I ended up getting the free rental after a horror of a morning).

Avis is perhaps the worst large company service I have ever seen. They booked me a reservation and then their location manager would not honor it. How much worse than that can service be?

What Business Is Amazon Really In?- By NEIL SISKIND

Is Amazon trying to build a huge company? Is Amazon in retail? Is Amazon trying to get into many other businesses?

People wonder how Amazon keeps growing- and if it can keep growing at the same, similar, or an even greater rate.

To understand how Amazon keeps growing, and if it can keep growing, requires an understanding of the business that Amazon is in.

Amazon’s primary business is not retail. Amazon’s primary business is not manufacturing. Amazon’s primary business is not production and distribution of content.

Amazon’s primary business- its core purpose and central business- is the business of changing how things have worked for decades. Amazon’s primary business is the business of changing how things are done by man … on and across planet earth.

Once you understand that, and once you assume that Amazon generates enough capital through the sales of products to be in that business, and once you assume that the public likes that business model and will continue to invest in it- then you will realize that Amazon’s growth has no limits.

Neil Siskind’s Poetry

That Homeless Woman

A peasant, she, who shares the street
with rats, and pillows of concrete?
The feral cats from alley beats
lick the food stuck to her feet.
Day and night she hunts for eats,
old clothes disposed become her sheets.
Neighbors, mayor, so discreet,
as all ignore this sore defeat.
Aid this woman- be “elite”,
show your class by being sweet,
tender food or stop to greet
a human drenched from summer’s heat
and frozen by the winter’s sleet-
a fate no woman dreamed she’d meet.

What Would Be Far Worse Than An Inverted Yield Curve? Read-My-Lips- By NEIL SISKIND

When the economy slows, tax receipts to the government, necessarily, will fall. At the exact time that we need, and expect, bond yields to move lower, they could do exactly the opposite.

As the economy slows, the government still needs to fund the budget, including paying interest on the national debt, defense expenditures, entitlements, federal employee pensions, etc. If tax receipts are not enough to fund these obligations, then the government will need to take on more debt by selling Treasury bonds to fund the obligations, which could cause yields to skyrocket, as investors demand more and more yield (and, perhaps, the term premium rises where capital is not being attracted), and as other investors discontinue viewing U.S. bonds as safe havens and move to other assets, including other select countries sovereigns that are unlikely to fall further, while offering good yields that justify the risk. The 10-yr. Treasury yield could completely disconnect from the economy (or from the needs of the economy at that time), and the yield curve could aggressively steepen- sending a slow economy into recession, or one that is already in recession- even deeper. Because of the government’s excessive and growing funding needs, even the floating 10-yr. yield would be out of the control of market dynamics and market demands[1]. The President recently, strangely, is beginning to publicly excuse and accept “deficits”.

Why are yields suddenly rising?

The 10-yr. yield is rising as economic data points in the U.S. are declining. Even as the economy slows- as we’ve recently seen lower than expected PPI and CPI prints, lower consumer spending, a rising target Fed funds rate and 2-yr. yield, higher consumer and federal debts and deficits, consensus expectations of lower GDP prints ahead, EPS buttressed by tax cuts and stock buybacks with less of these impetuses ahead, an increasingly challenged housing market; corporate debt is growing; much Dow and S&P growth due to rising interest rates and bank stocks and rising energy prices and energy stocks (these are taxes on businesses and consumers); and reports on capex (how much and what on) are mixed and unclear- there still may be a floor on the 10-yr. yield due to the need to fund deficits- and the yield curve (or yield curves) may never invert- even as recession looms or arrives. The safe-haven nature of the U.S. 10-yr. Treasury bond may be compromised by the deficit.

Are we experiencing economic growth- or, rather, a rise in inflation expectations? Stocks have been rising while yields have been rising. Many analysts, portfolio managers and market participants and observers are pointing to bullishness on the U.S. and beliefs in bottoming in select EM markets as the reasons. As oil and gas prices and interest rates have been rising, taxes (tariffs) on consumer goods from China have been announced, labor markets are tightening[2]- the U.S. dollar is weakening. This certainly sounds like inflation, or, at the least, inflation expectations. On the day President Trump announced his final decision on the most recent round of tariffs on China’s goods, yields spiked and the U.S. dollar sank.

The question is whether there is inflation- and growth. Growing economies with rising interest rates do not see their currencies weaken. Semiconductors can be leading indicators for the economy.

We will see what the next GDP print and upcoming earnings present. Remember that EPS growth is not net income or revenue growth- earnings can rise by decreasing stock floats. Even where there is revenue growth to exhibit true organic growth, consumer, corporate, and government debt-spending is what is helping create those revenues- and the cost of debt is rising. GDP and earnings show us levels of spending and revenue growth, but don’t explain the countervailing debt that was incurred to achieve these growth outcomes.

Regardless of why the 10-yr. is suddenly rising – anticipated earnings growth, China’s selling of U.S. Treasury bonds, inflation fears, quantitative tightening, expectation of growing U.S. Treasury bond offerings, re-allocations to EM assets, the tapering off of pension fund bond purchases, tariffs and product price inflation, or any mix thereof, the issue of the deficit (unless we grow out of it) remains, and will worsen as and when the economy slows. So any rises in yields will be in addition to the above reasons and will only be compounded if deficit concerns persist, and Treasury sales grow.

In any event, budgets and deficits can’t be funded by endless debt and bond offerings. The budget, by and large, has to be funded by income and tax revenues.

At the 1988 Republican National Convention, when accepting the Republican Party’s nomination as their candidate for U.S. President, George H.W. Bush famously made the statement, “Read my lips: No new taxes” to assure voters that his administration would not raise taxes on Americans. By 1990, rising budget deficits fueled by slowing growth and mandatory spending, greatly increased the federal deficits. As the result, on November 5, 1990, President Bush, grudgingly, signed The Omnibus Budget Reconciliation Act of 1990 that raised multiple taxes.

This decision was the equivalent of Present Bush signing his own political death certificate as Bill Clinton used this broken promise on taxes against Bush in the 1992 presidential campaign (yes- Bill Clinton actually used the issue of “truthfulness” against someone- and it worked; irony- and gall- in politics- and in life- never cease to amaze)[3].

President Trump may face a George H.W. Bush “Read my lips: No new taxes.” moment where, despite prior promises and actions, he, nevertheless, has to agree to raise taxes to fund on-going budget deficits- regardless of which party controls Congress- or else allow longer term Treasury yields to soar, especially where rate cuts by the Fed would be difficult if the Fed funds rate and related shorter term Treasuries are still low- one of the reasons (one of the main reasons) that the Fed points to any scintilla of inflation to use as an excuse to keep raising rates- as insurance for the future. The Fed would not be able to rescue the economy with rates cuts designed to stimulate growth- at least not without cutting to zero.

Hopefully, in such case, U.S. bonds would become more appealing to investors as tax hikes (hopefully) bring deficits under control, allowing rates to decline, and a new economic cycle to begin[4]. With higher taxes ad little room for the Fed to lower rates, it would be a challenge.

So, to the initial query:

What would be far worse than an inverted yield curve in a slowing economy?

Answer:

A steep yield curve in a slow economy where lower tax receipts to the government mean bigger deficits, causing higher costs of capital to businesses and consumers, accompanied by a weak dollar from sluggish or negative growth, and with higher taxes to follow … all at the worst possible time.

Everyone assumes that if we see a weak economy we will get low interest rates and low yields. But, just look around the world; if fiscal discipline is absent, it may not go that way.  Everyone assumes that higher interest rates and high yields mean a strong currency- but, just look at what is happening in the United States today.

_________________________________________

fn

  1. The U.S. dollar would be weak, even as yields climb, due to deficits and due to the expectation of low internal rates of return due to an economic slowdown.
  2. At this stage of the cycle, wage inflation may be more of an expense (rather than a demand side stimulus), and, anyway, is offset by the rising commodities costs (namely, energy) and higher interest rates (both of which, along with tight labor markets, appear late in business cycles). It’s unknown, and unknowable, how wage inflation earlier on in the cycle would have helped or hindered growth.
  3. It was, actually, the overall sluggish economy, probably combined with many American’s “Republican-fatigue” after twelve years of a Republican White House (all of which included Bush) that contributed to President Bush’s defeat- plus the possibility that many Ross Perot votes would, otherwise, have gone to Bush.
  4. Certain dynamics could offset rising yields, such as, at a certain point, high yields attracting yield-seeking capital that helps push yields lower.

 

 

endnotes

  1. A few things to note about people on “Wall Street” (analysts, CEOs, portfolio managers) to keep in mind as you evaluate markets and the economy:
  • They either didn’t see or didn’t warn about the 2007 housing crisis (as some investment banks were selling housing securities short).
  • They touted a “global coordinated” growth story for months in 2017 and 2018, that never panned out- quite the opposite.
  • They spent the latter parts of 2017 and early 2018 recommending emerging market stocks and bonds to everyone – Great call!
  • You never see calls from investment banks about shadow banking risks (even China had enough sense … and transparency… to try to step-in on and reel-in theirs. It’s only when asked – such as on Bloomberg TV- that Wall Street concedes to a possible problem. This whole shadow banking issue is addressed when brought up, but glossed over … and percolates below the surface, along with other non-regulated high return debt investments.

In light of the above, when “Wall Street” over and over, stresses a 2020 slowdown in the economy and stocks – you can be sure that they will not be waiting until 2020 to do something about it. In 2019- not in 2020- they will be getting their clients out of the market long before “you” are out. So, don’t wait until “they” call the slowdown and alert you. It will be too late. Look at CPI, PPI, expected GDP, consumer spending, interest rate trajectories, housing permit applications … the slowdown is here.

 

 

Neil S. Siskind, Esq., President
The Siskind Law Firm
Tel: 646.530.0006

Neil Siskind is the Founder & Chairman of The Fatherhood Assignment
Neil-Siskind-photo
Learn more at:  http://www.neil-siskind-the-fatherhood-assignment.org/

Neil Siskind is the Conservator of the Neil S. Siskind Nature Preserve
Neil-Siskind-Picture

The Neil S. Siskind Nature Preserve is over 7 acres of environmentally-pristine waterfront land in a magnificent setting along New York’s majestic Hudson River. The Preserve includes a variety of species of animal and plant life, and is a precious example of the thoughtful maintenance of New York’s priceless open spaces. The land’s uses are limited to outdoor recreation such as hiking and climbing, and the study of ecology, nature and land use. The Neil S. Siskind Nature Preserve allows for the intelligent contemplation of our valuable natural resources and the most effective ways to maximize them and keep them protected.

Neil Siskind, Founder, “National Fatherhood Day” – March 29th

Neil-Siskind-pics
To encourage recognition of the needs of boys and girls who are living without fathers or father-figures in their lives.

Read about the non-profits and charities whose missions Neil Siskind supports and promotes: www.neilsiskindsupports.com
Caring is Free®

You can read what clients and associates say about Neil Siskind at: http://siskindlawfirm.com/neil-siskind-bio/.

Neil Siskind’s Volunteer Work:

– Memorial Sloan Kettering Cancer Center, Volunteer

– Memorial Sloan Kettering Cancer Center, My Fundraiser- Help Neil Siskindhelp children with cancer to be more comfortable: http://mskcc.convio.net/site/TR?px=3182108&fr_id=2632&pg=personal

– Make-A Wish Foundation- Help Neil Siskind make sick children’s wishes come true by creating your own fundraiser: Neil-Siskind/Help-Make-A-Child-Smile.htm

– DonorsChoose.org- Donate to one of my needy public classrooms: http://www.donorschoose.org/NeilSiskindGiving

– Champion Children– We seek to inspire people through stories of children who have overcome challenges: http://siskindlawfirm.com/neil-siskind-champion-children/


Neil Siskind’s Pro Bono
 Work:

– Saving Senior Citizens- Protecting New York’s senior citizens from fraud and financial abuse www.savingseniorcitizens.com

– Senior FreeStart Business– Pro Bono: We seek to help put senior citizens in the right direction so that they can face the challenges of the modern economy: http://siskindlawfirm.com/free-start-business/

– Veteran FreeStart Business– Pro Bono: We seek to help put Iraq and Afghanistan war veterans in the right direction so that they can face the challenges of the modern economy: http://siskindlawfirm.com/free-start-business/

– In development: The Neil S. Siskind School of Hope: A free school to teach inner-city youths the skills of entrepreneurship and importance of economic self-sufficiency.

Neil Siskind’s Government Work:

– Suffolk County District Attorney’s Office, Boston, MA, 1994, Intern
– Office of Senator Christopher J. Dodd, Newington, CT, 1992, Intern
– Hartford County Department of Probation, Hartford, CT, 1991, Intern

Neil Siskind’s Community Assistance:

Financed & operated a legal clinic providing low-cost legal services to struggling Long Islanders during the recession to help clients resolve debt, organize finances, and launch new businesses.

Neil Siskind’s Professional Curriculum Vitae: http://neilsiskind.com/

Sponsored Advertisements

Inventors, IP Owners, Manufacturers
Learn How To Bring Products To Market And To Expand Your Distribution Channels
The Complete Guide To The Ways To Manufacture & Sell Your Products

 

Manufacturing, The “Only” Way to Achieve “True Wealth”- By NEIL SISKIND

While there are many ways to make good amounts of money- to become truly “wealthy”- one must “manufacture”- or make or create something from nothing where the final product is worth greater than the cost to make it. This concept, or theory, includes the right to distribute something that was made or created- and best to do it on an exclusive basis.

This applies even to companies like Google or Amazon. Google’s success is due to an algorithm it created and then distributed to others. Amazon manufactured or created a marketplace for the masses. It created something new and better.

A real estate developer- a truly wealthy one- took land or a small structure and manufactured or made it into a much bigger or better piece of land or structure.

Drug makers develop and “make” drugs that they patent and sell.

Commodities producers have exclusive rights to find and extract natural resources which they own and have the exclusive right to sell.

Even the film and television industries manufacture content at a cost, a program or movie, which they can sell for more than it cost to create and make- and certain companies distribute or broadcast those creations on an exclusive basis. Both can achieve wealth.

Even musicians create and manufacture a song that did not previously exist.

There are some exceptions to this rule: Those in finance, who buy and sell stocks or commodities- who invest (short and long term) in businesses that make things; lawyers who engage in class actions against large industries (this is a small percentage of lawyers who achieve “real” wealth this way); actors don’t create any “thing” (the production company makes something- but actors just help sell it, and can get wealthy this way; contractors, including environmental cleanup companies, for example, don’t create things or ideas, but they actually do the labor that manufacturers or land owners (including governments) need in order to make or improve things that they made or to which they own the rights (nevertheless, truly wealthy people either own the properties or have achieved wealth through government relationships or by having their companies trading on the pubic exchanges); banks borrow and lend and make the spread (though they did make or create that marketplace-their companies and distribution channels- to do that in a mass manner).

One can move money around or have their company stock trade on public exchanges to create real wealth. But, by and large, unless you intend to trade or list on a public exchange as your strategy to achieve wealth, create or make something, or own or obtain exclusive rights to something worthwhile, or be part of the process to get something made- these are the main paths to “real” wealth.

 

Neil S. Siskind, Esq., President
The Siskind Law Firm
Tel: 646.530.0006

Neil Siskind is the Founder & Chairman of The Fatherhood Assignment
Neil-Siskind-photo
Learn more at:  http://www.neil-siskind-the-fatherhood-assignment.org/

Neil Siskind is the Conservator of the Neil S. Siskind Nature Preserve
Neil-Siskind-Picture

The Neil S. Siskind Nature Preserve is over 7 acres of environmentally-pristine waterfront land in a magnificent setting along New York’s majestic Hudson River. The Preserve includes a variety of species of animal and plant life, and is a precious example of the thoughtful maintenance of New York’s priceless open spaces. The land’s uses are limited to outdoor recreation such as hiking and climbing, and the study of ecology, nature and land use. The Neil S. Siskind Nature Preserve allows for the intelligent contemplation of our valuable natural resources and the most effective ways to maximize them and keep them protected.

Neil Siskind, Founder, “National Fatherhood Day” – March 29th

Neil-Siskind-pics
To encourage recognition of the needs of boys and girls who are living without fathers or father-figures in their lives.

Read about the non-profits and charities whose missions Neil Siskind supports and promotes: www.neilsiskindsupports.com
Caring is Free®

You can read what clients and associates say about Neil Siskind at: http://siskindlawfirm.com/neil-siskind-bio/.

Neil Siskind’s Volunteer Work:

– Memorial Sloan Kettering Cancer Center, Volunteer

– Memorial Sloan Kettering Cancer Center, My Fundraiser- Help Neil Siskindhelp children with cancer to be more comfortable: http://mskcc.convio.net/site/TR?px=3182108&fr_id=2632&pg=personal

– Make-A Wish Foundation- Help Neil Siskind make sick children’s wishes come true by creating your own fundraiser: Neil-Siskind/Help-Make-A-Child-Smile.htm

– DonorsChoose.org- Donate to one of my needy public classrooms: http://www.donorschoose.org/NeilSiskindGiving

– Champion Children– We seek to inspire people through stories of children who have overcome challenges: http://siskindlawfirm.com/neil-siskind-champion-children/


Neil Siskind’s Pro Bono
 Work:

– Saving Senior Citizens- Protecting New York’s senior citizens from fraud and financial abuse www.savingseniorcitizens.com

– Senior FreeStart Business– Pro Bono: We seek to help put senior citizens in the right direction so that they can face the challenges of the modern economy: http://siskindlawfirm.com/free-start-business/

– Veteran FreeStart Business– Pro Bono: We seek to help put Iraq and Afghanistan war veterans in the right direction so that they can face the challenges of the modern economy: http://siskindlawfirm.com/free-start-business/

– In development: The Neil S. Siskind School of Hope: A free school to teach inner-city youths the skills of entrepreneurship and importance of economic self-sufficiency.

Neil Siskind’s Government Work:

– Suffolk County District Attorney’s Office, Boston, MA, 1994, Intern
– Office of Senator Christopher J. Dodd, Newington, CT, 1992, Intern
– Hartford County Department of Probation, Hartford, CT, 1991, Intern

Neil Siskind’s Community Assistance:

Financed & operated a legal clinic providing low-cost legal services to struggling Long Islanders during the recession to help clients resolve debt, organize finances, and launch new businesses.

Neil Siskind’s Professional Curriculum Vitae: http://neilsiskind.com/

Sponsored Advertisements

Inventors, IP Owners, Manufacturers
Learn How To Bring Products To Market And To Expand Your Distribution Channels
The Complete Guide To The Ways To Manufacture & Sell Your Products