Amid all the good news about earnings declines not being as bad as expected, there remains the puzzling effect of lower earnings - namely lower tax revenues:
Expect the federal deficit to be even worse than estimated. Much of the good news we've seen lately, like rising car sales from the "Cash for Clunkers" subsidy, represents the one-time effect of a massive fiscal stimulus. When the stimulus is gone, so is growth, and the bond market may not be able to absorb another debt-drenched stimulus. That means Fed quant easing as far as the eye can see.
Do Generations X-Z even know how much poorer they'll be for the rest of their working lives as a result of such macroeconomic foolishness? I'm an X'er who is positioned financially to benefit from this. Their missed opportunity is my gain.
Nota bene: Anthony J. Alfidi is long FXI and GDX (with short straddles) and long IAU (with covered calls).
The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.
Other figures in an Associated Press analysis underscore the recession's impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.
Expect the federal deficit to be even worse than estimated. Much of the good news we've seen lately, like rising car sales from the "Cash for Clunkers" subsidy, represents the one-time effect of a massive fiscal stimulus. When the stimulus is gone, so is growth, and the bond market may not be able to absorb another debt-drenched stimulus. That means Fed quant easing as far as the eye can see.
Do Generations X-Z even know how much poorer they'll be for the rest of their working lives as a result of such macroeconomic foolishness? I'm an X'er who is positioned financially to benefit from this. Their missed opportunity is my gain.
Nota bene: Anthony J. Alfidi is long FXI and GDX (with short straddles) and long IAU (with covered calls).
