Sweden's government collected the highest share of national income of all rich countries, with neighbouring Denmark a close second, according to figures from 2006. In general, government claims a bigger slice of national income than a generation ago, says the OECD. The tax burden in Europe in 2005 was above the OECD average of 36.2% of GDP, which itself had leapt up from 29.5% in 1975. Ireland, where the government claimed 31.7% of GDP, is a comparative tax haven, due partly to a light touch on companies. America paid less than 30% of its income in taxes. Mexico is the least-taxed country, taking 20.6% of GDP in 2006.
10/31/07
Globalization is alive and well
Small, rich and stable countries tend to be the most globalised, at least according to an index of 72 countries by A.T. Kearney, a consultancy, and Foreign Policy magazine (click on table to enlarge). The index uses 12 measures which cover economic integration, personal contact, political engagement and technological connectivity. Singapore and Hong Kong make the top spots, boosted by the larger weighting given to the economic variables of trade and foreign-direct investment as a percentage of GDP. America, not entirely convincingly, scores poorly on the economic measures. Jordan comes in ninth, helped by its top ranking for political engagement as a result of its involvement in UN peacekeeping missions. The index may be most useful for starting debates.
10/27/07
Yield curve, business cycles, and stock sectors
I am a firm believer of the predictive features of the yield curve. In my The Peter Dag Portfolio I use it to forecast the direction of the economy.
A steepening yield curve is followed after 6-12 months by a stronger economy. A flattening yield curve is followed after 6-12 months by an economic slowdown.
The Hussman Funds website is consistently showing stimulating research. A recent paper by W. Hester discusses how the global yield curve is also correlated to earnings. This is not surprising since earnings depend on economic growth. What makes the paper unique is that Mr. Hester relates the recent shape of the global yield curve to stock sectors.
I have been a firm proponent of using trends in economic growth to select asset classes and stock sectors in particular. The bottom line is if the yield curve is predicting a slower economy and earnings, investors should be in defensive sectors. If the yield curve predicts a stronger economy and earnings, investor should be exposed to aggressive sectors.
I will discuss in detail how sectors are related to business cycles in Pittsburgh on November 13 (for more information please call Larry at 412-741-3674) and at the AAII national meeting in Orlando on November 8-10 (please call 800-428-2244 for more information).
I recommend you read the complete article by Hester on http://hussmanfunds.com/rsi/globalycurve.htm
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
AAII bearish sentiment soared
The most recent release of the AAII sentiment survey shows that last Friday's drop on the 20th anniversary of the '87 crash seems to have struck a nerve with investors. Bearish sentiment rose to its highest levels since May.
The S&P 500 over the last five years performed well following high levels of bearish sentiment.
Enjoy!
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
10/25/07
Dark Ages America? A review.
As we age we grow disappointed by how the world works. Dark Ages America by M. Berman is a recap of all we seem to be doing wrong. A challenge.
The underlying theme of the book is the USA has entered a period similar to the decline of the Roman Empire (starting in 200 AD) which signalled the beginning of the dark ages in Europe.
The Roman Empire dissolved slowly. As Rome grew powerful it started to conquer new lands, train local armies, welcome to Rome immigrants to perform the humble jobs while the Romans grew complacent. The barbarians gradually absorbed the Roman culture without providing new life to it. Rome weakened because the Romans forgot what being a Roman meant. The outcome: decadence on all fronts.
Is this what is happening to the US? Mr. Berman seems to think so. We are growing contented and these are the main themes of the book. Just food for thought.
1. We are an empire. We have fought almost every country. We have troops, ships, planes, bases, proconsuls all over the planet. We fight and destroy to bring Pax Americana (read: democracy). Yet we have supported the most ferocious dictators (such as Hussein).
2. We need an enemy to fuel our drive to conquer. First there was Russia, now we have the terrorists. This is an enemy we use to control the oil in the Middle East, an endeavor which started in 1908. The history reported is interesting and eye opening (for me).
3. We are not told what is going on and what the US policies are. The chapter Axis of Resentment is particularly interesting in this respect.
4. Our education system is in shambles and we cannot compete in the global economy when our students fall miserably close to the bottom of international rankings.
5. Our civil liberties and value system are being dramatically eroded in the name of fighting terrorism.
6. Our thirst for war in the name of bringing democracy around the world is the road to the collapse of the US empire as it was the beginning of the end of the Roman empire.
[Ed: Russia and China are watching.]
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
(and still having fun with it)
10/22/07
Good news from the action of the dollar and bonds
The dollar and bonds point to a more stable market following the disastrous and emotional decline of last Friday.
This morning the dollar is strong across the board. Global capital is flowing into dollars seeking opportunities. This is good news for equities.
Bond yields are slightly higher. Money is not moving into safe investments such as Treausry bonds and is willing to go into higher risk investments.
Bottom line: it looks like the financial markets are stabilizing.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
10/18/07
Time to enjoy....and to profit
The US economy will suffer further damage from the downturn in the American housing market, Hank Paulson (US Treasury Secretary) warned.
The implosion of the housing bubble will have negative repercussion on the economy, on consumers, and on the financial system.
Are you panicking yet? Well, do not.
The Financial Times raises the issue of what will the Fed do.
How can they be so naive. The Fed will do what is supposed to do. They will add liquidity into the banking system, they will come up with everything humanly possible to protect the banks from going under. This is their job.
My friends, this is spectacularly bullish for the markets.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
10/17/07
Crises are bullish for stocks
Housing starts are down more than 10% from last month....bullish for stocks.
Financial stocks are weak again as credit issues become widespread....bullish for stocks.
The Beige Book is bearish on the economy....bullish for stocks.
Trading volume has increased substantially as the Dow weakened in the past five days....bullish for stocks (Dow closed at 13892.54).
Bond prices are soaring....bullish for stocks.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
10/14/07
An interesting view by Dr. Robert Reich (http://robertreich.blogspot.com/)
I’ve got a way to reduce global poverty, decrease the number of workers crossing our borders illegally, save American taxpayers money, and cut your supermarket bill -- in one fell swoop. How? Get rid of US farm subsidies and tariffs.
They were supposed to be a temporary remedy for small farmers during the Depression. But, renewed every five years regardless of which party controls Congress, farm subsidies keep going and going. They've been costing taxpayers some $11 billion a year. The Senate is now considering the latest version, and it's hardly better than what's come before.
Look, I have no problem insuring small farmers against major losses. But farm subsidies go mostly to big agribusinesses that hardly need them.
But the big problem isn't just the waste of taxpayer money. Americans -- including the US media and even Washington politicos -- tend to regard agriculture policy as the exclusive domain of legislators from farm states. Yet our farm policy is the single most damaging thing we're doing to the world's poor. Ending farm subsidies and tariffs would be the single most important thing we could do to reduce global poverty.
Fewer than 2 percent of Americans even work on a farm. Yet about half the population of the developing world depends on farming for their livelihoods. They can’t earn what the global market would otherwise pay them because America’s subsidized farm exports keep prices artificially low.
American cotton growers, for example, export cotton for just over half what it costs them to produce it. Which means more than 10 million African cotton farmers are stymied. If we stopped subsidizing our cotton businesses, world cotton prices would rise, increasing the value of cotton exports from Africa by some $300 million a year.
Meanwhile, the average American tariff on agricultural imports is 18 percent – much higher than the 5 percent average tariff on other imports. So not only do the world’s poor suffer because of our outdated farm policies, but Americans get hit with a double-whammy – we’re subsidizing US agribusiness with our tax dollars while paying some $35 billion a year more for our food than we’d pay if we didn’t also protect agribusinesses.
Our farm policies are even encouraging illegal immigration into the United States. That's because many of the world’s poor who can’t earn enough by farming are desperate to immigrate – legally or illegally – to richer countries like America.
Message to the U.S. Senate: You want to fight global poverty and illegal immigration? You want to reduce the budget deficit? You want to give American consumers a break? There's no simpler first step to accomplish all these things than to end farm subsidies and tariffs.
10/12/07
Toward a China-ASEAN free trade area
The Chinese government has approved plans for the country's fourth harbor area with preferential tax rates in a major step towards a free trade zone with the Association of Southeast Asian Nations (ASEAN).
The State Council authorized the Yangpu Bonded Harbor Area in the Yangpu Economic Development Zone, south China's Hainan Province, covering 9.21 sq km and to be completed in three stages.
By 2010, China and Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand, will impose zero tariffs on most products, while China and the four newer ASEAN members of Cambodia, the Laos, Myanmar and Vietnam will do the same in 2015.
The China-ASEAN free trade area has a population of 1.8 billion and two trillion U.S. dollars in gross domestic product (GDP). It will become the third largest global trading region after the European Union and the North America Free Trade Zone.
Bottom line: We need to recognize that Asia is here to stay and is going to be a major competitor. Protectionism will not help us. Congress will have to continue to follow pro-growth and pro-wealth-creation policies.
Investments in Asia, meanwhile, will continue to produce above average returns because of the pro-growth policies followed by the Asian countries.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
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