Why tax at all?

David MoonBlog

Rather than debate how much the rich should pay in taxes, perhaps a more appropriate question is why any individual should pay income tax at all? In the past 12 months the U.S. Treasury has borrowed $4 trillion to fund various COVID-relief programs. The new relief package (signed into law on March 11) will add another $1.9 trillion to the national debt. Using the magic of central bank open market operations (don’t even try to understand this), the Federal Reserve has created another $3.4 trillion in COVID-related stimulus money. And this week the Biden administration announced plans for a $3 … Read More

Do rising rates threaten stocks?

David MoonBlog

After recently writing that the recent increase in interest rates did not present a threat to the stock market, the chief equity strategist for Goldman Sachs spent the next couple of days on television making the case that investors needn’t worry about higher rates. Goldman’s expert, David Kostin, was very clear. “Investors ask whether the level of interest rates is a threat to equity valuations. Our answer is an emphatic ‘no.’” Strangely, however, writing only a few weeks earlier, Mr. Kostin admitted that stocks prices “appear stretched based on virtually every standard metric,” but that looks are deceiving. “After taking … Read More

Advice for Zoom University students

David MoonBlog

Lockdowns have caused many people to relax their disciplines and standards, creating opportunities for those willing to intentionally avoid the path of least resistance. This is especially true for college students who can use the dysfunction of the past year to differentiate themselves and gain an edge over their classmates. It is easy to sit in a dorm room or apartment full of empty beer cans and coast through Zoom University. Grades (Bs, anyway) come easily, cheating is rampant and too many students are missing the most valuable part of a student’s academic life: engaging with professors. Effective communication is … Read More

Buffett on Pilot, Clayton and more

David MoonBlog

Warren Buffett published his annual letter to the shareholders of Berkshire Hathaway on February 27 and, as always, the letter is great reading for anyone interested in business, investing, human nature or the U.S. Here are a few items of note from this year’s missive. Buffett apparently thinks earnings are still relevant to the value of businesses. The word “earn” or “earnings” is used 25 times in the 13-page epistle. There isn’t a single reference to bitcoin, Trump, Biden, taxes or China. The only mention of COVID-19 is related to the record sales last year of Berkshire subsidiary National Furniture … Read More

Understanding crypto-craziness

David MoonBlog

Author and self-styled investment diva Kiana Danial was recently asked by a television interviewer about her expectations for bitcoin over the next 12 months. She replied, “I don’t give price predictions,” after which she predicted that the price would triple in the next year. Never let logical or linguistic consistency get in the way of a good story. The price of bitcoin, the most well-known of cryptocurrencies, has almost doubled this year, attracting attention from both serious investors and Uber-driving bartenders. What is bitcoin and how does it work? No matter how painful or boring it might be, it is … Read More

Can money buy happiness?

David MoonBlog

For years, conventional wisdom has held that increases in a person’s income result in increased levels of happiness, but only to a point. In 2010, a psychologist and economist published a study finding that happiness and income are correlated, but only up to $75,000. This concept was more succinctly described than could be illustrated by any academic theorist in 1969, when American sculptor and Kinetic Sculpture Racing founder Hobart Brown quipped, “Money doesn’t always bring happiness. People with $10 million are no happier than people with $9 million.” (Google Kinetic Sculpture Racing and you will more deeply appreciate Brown’s creative … Read More

Elon Musk’s rapid bitcoin flip-flop

David MoonBlog

In only a week, GameStop has been dethroned as the darling of millions of newbie day traders. Bitcoin regained that distinction, aided by the news that Elon Musk’s electric automobile company Tesla purchased $1.5 billion of the digital currency in January. In addition to making headlines on investment-oriented information platforms, news of Tesla’s purchase was widely broadcast in the general media. What wasn’t widely broadcast, however, was that a month prior to the company’s huge bitcoin purchase, Tesla co-founder and CEO Elon Musk appeared openly negative about the digital currency. On December 20, Musk, now the world’s richest man, tweeted … Read More

GameStop saga (sort of) explained

David MoonBlog

A bunch of small day traders recently took aim at some billionaire hedge fund managers by driving up the price of the failing video game retailer GameStop. Many of the small traders loosely organized their efforts via a Reddit message board and executed their plan on the free mobile trading platform Robinhood. GameStop stock increased 1,600 percent in January. Hedge funds who bet against the company have lost almost $20 billion. Observers have called it a victory of the small guy over The System, enabled by the free trading offered by upstart brokerage company Robinhood. But this story really isn’t … Read More

Not all stimulus spending equal

David MoonBlog

Through the end of December, the federal government had authorized $3.5 trillion in coronavirus related stimulus spending – every penny of it borrowed. President Biden’s proposed stimulus package would add an additional $1.9 trillion of new debt to that figure. Much of that new debt is paying for much needed societal insurance and repairs, somewhat akin to borrowing money to fight a military assault on our shores or to rebuild following a natural disaster. Almost $180 billion went to hospitals and healthcare providers. Another $18.8 billion was spent or earmarked for vaccine development and distribution. Federal funding of additional employment … Read More

Shutdowns reveal uneven vulnerabilities

David MoonBlog

It will take some time to learn whether COVID-19 has permanently changed aspects of our economy, accelerated inevitable changes or some combination of the two. But there is little doubt that haphazard shutdowns and stimulus benefits have revealed huge discrepancies in safety nets, productivity and the permanence of economic gains. When discussing economic matters, people often unknowingly switch back and forth from macro (the economy as a whole) issues to micro (the economics of the individual.) Federal stimulus checks don’t create economic growth; they merely accelerate future economic activity into the present. But at the individual level, a person without … Read More