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Monthly Archives: May 2013

Fixing Income Inequality

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There’s no doubt that income inequality is finally getting the attention it deserves.  President Barack Obama assailed it in his second inaugural address saying we can’t succeed “When a shrinking few do very well and a growing many barely make it.” Ben Bernanke decried inequality for “creating two societies.” Pope Francis famously tweeted his opinion.  Even Goldman Sachs CEO Lloyd Blankfein called for “some redistribution” to create a stable and just society. But for all the talk, not much is happening.  Why is that?

It turns out that the solutions to income inequality are difficult and rather long-term.  There are also signs that the population really doesn’t care yet, meaning there is no pressure on our leadership.  But there are a few things that we can do to start improving income distribution and create genuine opportunity today.

It’s a Barataria tradition to not complain without offering solutions.  Don’t like these?  Please suggest your own!

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Restructuring, Revisited

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How is that economic recovery going?  It may not feel like much, given that it’s progressing far more slowly and cautiously than after any other postwar recession.  One of the themes we’ve been discussing for over four years is that given that the downturn was of a different kind, the upswing will be different as well.  The term offered was “restructuring”, meaning that the economy we’re evolving towards is going to be very different from the one that spent the 2000s sputtering and failing.  That takes time and effort.

The term is starting to catch on outside of Barataria as investors find opportunity in the new industries that are going to grow and prosper in this new world.  That’s great progress.  But as we’ve noted many times, the real restructuring takes a broader social, political, and legal reformation and agreement that has been woefully slow to develop.  Enter Niall Ferguson, a Harvard History Prof and conservative bad boy to offer some new ways of looking at the growing malaise in the developed world in his forthcoming book, “The Great Degeneration: How Institutions Decay and Economies Die.”  His points are worth discussing, especially on the left, because they offer some new perspective and potentially more fruitful debates than we’ve been having so far.

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Urbi et Tweeti

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Can twitter save the world?  Probably not.  But when the tweets are “Urbi et Orbi” it’s pretty likely they will be retweeted.

Over the last six weeks Pope Francis (@Pontifex) has delivered 140 characters of worldly homily nearly every day, but none of them have been as noticed as his message for 2 May – “My thoughts turn to all who are unemployed, often as a result of a self-centred mindset bent on profit at any cost.”  A small firestorm was created on the ‘net … well, the usual internet people behaved in an internet way about it and got their 140 getback.  Whatever.  But what matters is that Pope Francis is emerging as a leader for the rights of the downtrodden at a time when such leaders are needed – and is emphasizing things that reach out to embrace a slightly bigger world of the meek.

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Buy in May, Let it Play?

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It’s May Day, and it’s more than the traditional first day of (real) Spring and the worker’s holiday.  It’s also the day that the old stock market adage “Sell in May and go away” kicks in.  Why is that?  It’s hard to say exactly why, but Wall Street traditionally takes a long summer break.  The S&P 500 since 1928 has risen on average 1.83% from May to October, but 4.98% from November through April.  The summer is also a period of high volatility and danger, so smart investors often skip the warm seasons.

Not this year.  The huge rise of 9.3% in the S&P 500 so far in 2013 might be enough to scare some people into profit-taking, getting out while the getting is good, but many advisers say you should stay in this year.  That includes Nouriel Roubini, better known as Dr. Doom, the New York University Econ prof who famously predicted the housing crash.  The faith in the stock market is impressive, but is it realistic?

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