The White House will soon make golf/country clubs extinct if

[J Sadowsky]

“Everybody has been looking for the next Michael Jordan, and they were looking on the basketball court,” Nike’s chairman, Phil Knight, said “And he was walking down the fairway all the time.”

The timing of the next boom is not the only thing the smart investor needs to predict. 

I can't decide to go with a "can't hit the fairway" joke or an infidelity one.

[John Kirk]

Now I am just a Golf Superintendent and so much of this thread is way over my head because smart guys like John are sharing their wisdom here and I appreciate that but I have a question.
So, you’re not going to use the 50K to hire someone, fair enough. But, you would hire someone if demand increased for your business? But, no increase in demand right now so instead you'd spend the money on golf or a vacation. Is it possible that spending could lead to job creation? If it increses demand in other areas like travel, recreation, luxury items, does it help the economy or is the money better spent by government?
And, on a following thread, Tom Doak agrees with you. But, you said you might join another club with that money.  Doesn’t that benefit golf, and in a roundabout way benefit Tom’s business?

Yes, that was the point.  By taxing people less puts more money in the taxpayer's hands, which increases demand for products and services.

[John Kirk]

http://www.politico.com/news/stories/1110/44798.html

If we're serious about fixing the debt, we have to raise taxes and cut spending.  Both.  Even Pat Mucci agrees with me.

Agreed.  As long as the additional taxes and savings in spending goes toward reducing the debt.  Do you think for a minute those in the White House would do such a thing?

Yes.

[Bill_McBride]

Now I am just a Golf Superintendent and so much of this thread is way over my head because smart guys like John are sharing their wisdom here and I appreciate that but I have a question.
So, you’re not going to use the 50K to hire someone, fair enough. But, you would hire someone if demand increased for your business? But, no increase in demand right now so instead you'd spend the money on golf or a vacation. Is it possible that spending could lead to job creation? If it increses demand in other areas like travel, recreation, luxury items, does it help the economy or is the money better spent by government?
And, on a following thread, Tom Doak agrees with you. But, you said you might join another club with that money.  Doesn’t that benefit golf, and in a roundabout way benefit Tom’s business?

Yes, that was the point.  By taxing people less puts more money in the taxpayer's hands, which increases demand for products and services.

I thought all that "trickle down," "voodoo" economics had been pretty thoroughly discredited!

There is no talk of tax cuts on the table now, merely continuing taxation at the same level (the Bush tax cuts of 2001 and 2003).  Obama wants to increase taxes on those earning over $250,000 to the pre-2001 rates.

[Jud_T]

Remember when the Health Care plan was sold to us as actually reducing the deficit? That should have only aired on the sci-fi channel or maybe the crime network....

[John Kirk]

Now I am just a Golf Superintendent and so much of this thread is way over my head because smart guys like John are sharing their wisdom here and I appreciate that but I have a question.
So, you’re not going to use the 50K to hire someone, fair enough. But, you would hire someone if demand increased for your business? But, no increase in demand right now so instead you'd spend the money on golf or a vacation. Is it possible that spending could lead to job creation? If it increses demand in other areas like travel, recreation, luxury items, does it help the economy or is the money better spent by government?
And, on a following thread, Tom Doak agrees with you. But, you said you might join another club with that money.  Doesn’t that benefit golf, and in a roundabout way benefit Tom’s business?

Yes, that was the point.  By taxing people less puts more money in the taxpayer's hands, which increases demand for products and services.

I thought all that "trickle down," "voodoo" economics had been pretty thoroughly discredited!

There is no talk of tax cuts on the table now, merely continuing taxation at the same level (the Bush tax cuts of 2001 and 2003).  Obama wants to increase taxes on those earning over $250,000 to the pre-2001 rates.

Bill,

I don't believe the increased demand from lowered taxes results in greater tax receipts.  Some do; I'm not buying it.

[mike_malone]

 Jud,

    I never use 12 month trailing and especially not projected earnings. The 10 year normalized p/e smooths out things and gives a truer picture of earnings. I find the earnings yield to be useless as a way to make money but it is a very valuable sales tool for investment firms trying to keep their assets under management.

[Jud_T]

Mike,

You may well be right in the short to medium term.  I always tend to be invested in select equities for the long term.  Based on the sample here, it seems everyone but me is pretty risk-averse and essentially out of the market.  So the contrarian trade may be up!   

[Phil McDade]

Jud:

Better investment -- 10 shares of Google at $620 a pop, or a 1945 Chateau Mouton-Rothschild Jeroboam?

[Jud_T]

The Mouton...I had a '47 Petrus once that I won in a bet that was one of the best experiences of my now not-so-young life....

[Alan Gard]

A question for our economic experts...How much do you believe the numbers quantify the cycle rather than simply reflecting the major changes in the underlying fundamentals?  

In other words and admittedly with no research, it seems the major economic expansions come not from "the numbers" but from some major development (e.g. industrial revolution, World War II, democatization of computers, the Internet, true globalization, fall of Soviet bloc communism, etc.).  The 80's and 90's had several (the last four of the ones I mentioned somewhat built on each other) of these major changes isolated over the course of 20 years.  People would have made money investing no matter what the economic condition was prior to these dramatic changes.  

So, for there to be true economic expansion where pretty much everybody wins in one way or another, my hypothesis is that we need at least one fundamental shift to come about that changes the way businesses operate or opens new markets that didn't previously exist.  Until that happens, it looks like a zero sum game of dollars being moved around with some winners and some losers.  

Thoughts???

[Jud_T]

Alan,

Equity returns equal GDP + Dividends + Inflation.  That sum is currently around 5%.  That's 4% REAL return without any siesmic changes.  The game changers you are referring to are what can provide outsize returns.  So unless you think we're going into a deflationary spiral, there'll be zero GDP growth and all companies are going to stop paying dividends, you are incorrect....

[mike_malone]

 Jud,

   You have stated your equation of  equity returns= GDP+Dividends+Inflation twice now. Does it matter what you pay for stocks ?What time frame? Is this an average return?

[Jud_T]

Jud,

   You have stated your equation of  equity returns= GDP+Dividends+Inflation twice now. Does it matter what you pay for stocks ?

Of course.  I was simply refuting the Casino argument...Which bring up the point that Massive Bull or Brutal Bear Market there are always some good individual stocks out there. 

[David_Tepper]

"Debt commission puts out preliminary proposals"

http://finance.yahoo.com/news/Debt-commission-puts-out-cnnm-2160229896.html?x=0&sec=topStories&pos=main&asset=&ccode=

[mike_malone]

 I'm confused. Are you talking about the market with that equation or individual stocks?  There are always stocks that work in bad markets. Unfortunately we  only know that in hindsight. And they generally are those stocks that are the most hated as they begin to outperform not the most loved.

[mike_malone]

 David,

   I see where the commission recommended shuttering all elite golf clubs. Thank god I'm not a member of an elite club

[Jud_T]

Ugh.  If you guys really think there's going to be zero growth and zero inflation indefinitely, I suggest you give up your day jobs, start a local militia, buy gold, horde food and keep your golf clubs handy for fighting off the mob.....And fyi, circa 2030, "I said hold the mayo" on my sandwich at the turn.....

[mike_malone]

 Jud,

   What I'm saying is that it matters what you pay for any asset. The entry price is the most defensible argument for future returns.  Pay too much and you lose; buy cheaply and you can hardly go wrong. Unfortunately this is bad for the investment business which can find all kinds of wacky ideas to keep the sheep in line so they can make money fleecing them year after year.

   I can find no reason why stocks must rise in price except when people are willing to pay a higher price. So when people aren't willing stocks suck. Today I read an article quoting an MFS survey of GenX and Y investors. 35% agreed with this statement "After what has happened in the markets the past few years, I'll never feel comfortable investing in the stock market". Older groups agreed at only 25%. I doubt you would have expected this result ten years ago. But ten years ago I expected to eventually see this attitude to be prevalent as a waystation to total hate which awaits us. It just seems to be the cycle of feeling about stocks.

[Jud_T]

Mike, I think we essentially agree.  As regards your earlier question, just to show that I'm not a complete idiot, my equity account is outperforming the indices by about 7% this year and my futures account by 40%....And I agree that folks should be very careful of a lot of the crap fee-laden insurance products and illiquid structured crap that get foisted on mom and pop by third string brokerage firms.  Disclaimer-I'm no expert on equities, I'm a bond guy.

[mike_malone]

 I agree about all of those high priced products but I'm not willing to forgive the investment community for convincing people that "stocks are the best long term investment" when that was only an observation of past results with no predictive merit and wasn't true for long stretches of time and certainly not true if you entered the game at expensive prices.

[Jud_T]

It's true that the long term can be VERY long....

[Steve_ Shaffer]

Here is the Committee on Fiscal Responsibilty's Draft Report

http://www.nytimes.com/2010/11/11/us/politics/11fiscal.html?_r=1&hp

[David_Tepper]

"Oddity in the bond market signals an economy on the mend"

http://www.investmentnews.com/article/20101110/FREE/101119984/-1/INDaily01&dailycount=11&issuedate=20101110

[JohnV]

Here is the Committee on Fiscal Responsibilty's Report

http://www.nytimes.com/2010/11/11/us/politics/11fiscal.html?_r=1&hp

That isn't the report, it is a strawman proposed by the two leaders of the Committee.

It is a great start at looking at what needs to be done.  Unfortunately everyone on the Committee except for the two leaders seems to be running away from enough of it to ensure it won't get far.  None (or very few) of our current or future members of Congress have the guts to make the budget cuts or tax dedcutions removed that are needed to cut the deficit and because of that, things will continue to spiral downward.  Even the beloved-by-many Tea Partiers are already looking for earmarks to love and other programs to save (See Rand Paul's comments on earmarks yesterday).