I had to go all the way back to the 1955 song “Sixteen Tons” to come up with a fitting line for this blog post. And consistent with my normal theme of railing about public policy topics that many (and certainly the media) no longer seem to care about or have forgotten, I thought I would revisit our national disgrace- the $17 trillion+ federal debt.
But you may ask, didn’t we “solve” the federal debt problem with the substantial income tax increases at the end of year 2012, the expiration of the payroll tax cuts and the mandatory cuts thru sequestration to 2013 government expenditures? After all, didn’t the CBO just lower its FY 2013 budget deficit forecast to $600 billion (from $845 billion in February) which is significantly lower than the past 4 years of $1 trillion+ per year deficits?
Unfortunately, the answer is that our long-term debt problems have not gone away. In the short run (e.g. FY 2013), U.S. deficit numbers will be better than originally expected for 2013 but most of this is due to greater than expected increases in government revenues. While mandatory cuts in discretionary government outlays (e.g. sequestration) was the subject of much political grandstanding and apocalyptic talk, as some of us noted at the time, this was ultimately a small budget item. In fact, total government outlays (including non-discretionary items such as Social Security, Medicare, Medicaid etc.) thru the first nine months of FY 2013 (which ends Sept. 30th) fell only about 1 percent and probably will total only about a $50-60 billion net reduction in total outlays out of about a $3.5 trillion budget for the full FY 2013.
However, government revenues have increased significantly. For the first 9 months of FY 2013 total receipts have grown by 14 percent or $263 billion and will likely increase by $300 billion+ for the full year 2013. In addition, instead of government funding going to FNMA and FMAC (for the housing bailout programs) as was the case still in 2012, FNMA and FMAC actually have paid back the federal government some $82 billion thru June of 2013. Thus , for FY 2013 in total, there will be about $400 billion+ increase in revenues which explains the vast majority of the deficit decline from over $1 trillion in FY 2012, to about $0.6 trillion projected this year.
It would be great if we could count on this one-year trend to continue. However, it is unlikely to continue for long:
- Most of the gains in revenues were due to the increase in tax “rates” that occurred with the tax changes instituted at the end of 2012. This included the increase in marginal income tax rates for wealthier taxpayers (and the more rapid phaseout of deductions), the increase in capital gains and dividend tax rates and the increase in social security payroll tax rates (after a portion of these taxes were suspended for the previous couple of years). There will be some further increases in revenues due to these factors at the beginning of FY 2014 (i.e. the last three months of 2013) BUT thereafter there will NO LONGER be much in the way of significant increases relative to FY 2013.
- A significant portion of the revenue increase in FY 2013 are due to “one-time” factors which are not likely to be replicated in the future. In fact, we can expect these revenue sources to FALL in future years. This includes (1) payments from FMAC and FNMA back to the government during FY 2013 (which are likely to decline or be eliminated as higher interest rates begin to choke off the housing recovery) and (2) capital gains and special dividends which were taken by individuals at the end of 2012 in order to avoid the higher tax rates in 2013. (Past experience strongly suggests that the actual amount of capital gains taxes paid by individuals will likely decline in FY 2014 because most of these gains were already taken at the end of 2012).
The combination of these factors means that we can expect less robust growth in tax revenues in FY 2014 from FY 2013 and beyond than the CBO assumes (i.e. CBO currently assumes that tax revenues will grow by almost 10 percent per year between FY 2013 and FY 2017 which is a high rate of growth by historic standards).
Even so, the most recent long-term projections of the CBO (Feb. 2013) have the deficit reaching a low of $430 billion in FY 2015 but then growing thereafter to about $800 billion by 2020 and again reaching $1 trillion by 2023. These long term projections, as unsettling as they are, are VERY OPTIMISTIC because they are based on some unlikely assumptions:
- CBO assumes that inflation rates will remain at about 2% for the next ten years. This is laughable. With the massive money printing that have taken place in the US and around the world, history strongly suggests that the prospects are for much higher inflation. My own view is that we will be lucky to have “only” 4-5% inflation, while double-digit inflation is probably in our future in the next few years. Higher inflation than assumed by CBO means that Social Security, Medicare, Medicaid and other government pension payments will rise more rapidly and the gap (or “deficit”) between government outlays and tax revenues will widen more rapidly.
- CBO projects that 3 month treasury bill rates will increase from near zero today to 2 percent between 2015 and 2018 and 4 percent between 2019-23. Again, this is very optimistic. Historically, short term treasuries have generally been very similar to inflation rates (in the long-term). Thus, interest rates will probably be at least 5 percent and likely considerably higher in just a few years. CBO projects that the federal government will be paying almost $0.7 trillion in interest by 2020. My calculations suggest that this number will probably be $1 trillion or possibly even more by 2020.
- Lastly, the CBO assumes that GDP will grow a robust 3.5 percent per year during 2014-18. This is substantially above recent long-term rates of growth and is hard to imagine in a U.S. economy with relatively poor underlying fundamentals in the future. This includes increasing inflation, increasing interest rates, falling per capita personal consumption due to demographic shifts to an older population, and long-term deleveraging of the still overextended US consumer. Of note, the CBO assumption of high GDP growth results in a doubling of corporate income tax receipts in only 5 years. Never mind that corporate profit margins are higher than they have ever been and that reversion to long-term average profit margins and hence lower levels of corporate profits and corporate tax receipts is far more likely.
My conclusion is that our debt problem will continue to grow and that we will back to $1 trillion+ deficits in just a few years. The bottom line is that we are far from fiscal sanity in the US and that we need to make some difficult fundamental changes in order to preserve the long run US economy and give our children the same economic opportunities that we have had. My hope is that our leaders haven’t forgotten the huge importance of this issue.
Forget the IRS, Benghazi, Justice department, NSA et al. government scandals for the moment, and let’s consider a government financial “scandal” that has been going on for more than two decades. It has an impact on every one of us, whether we are on social security, pay income taxes or are collecting welfare or disability payments. Of course, this scandal is producing NO headlines but is probably costing Americans trillions of dollars in higher taxes and lower benefits. More importantly, it appears to be a very deliberate policy, albeit one that is very stealthy. (Imagine the hysteria generated if the government simply announced it would cut Social Security and raise taxes yet again!) .Of course, the financial “scandal” I am referring to is (Drumroll)……How the government has been measuring the consumer price index (CPI) and the change in this index over the past 20-30 years.
I know talking about inflation is dull enough that it puts most of us to sleep, and I expect you yawned when you read the last sentence. But the reality is that the government has been taking money out of people’s pockets simply by the way it calculates inflation. In addition, it has been overstating the growth in the economy and in real incomes. This is because by understating the rate of inflation the federal government is:
(1) providing less benefits for social security, welfare and other programs than it should to let people keep pace with “real” inflation
(2) effectively raises taxes more than it should as tax brackets that are by law, indexed for inflation do not keep up with the “real” rate of inflation.
(3) showing more real GDP growth than is actually occurring, and showing greater improvement in real personal incomes, because both of these measures are adjusted downward by the government’s understated rate of inflation.
Why would the government want to do this?
Well, it’s pretty obvious isn’t it. We’ve known for years that programs such as social security and other guaranteed and inflation indexed pensions are grossly underfunded and with aging US demographics, benefits would inevitably have to be cut or these programs will default. No politician wants to support cutting benefits even if its 20 years or more from now. However, if we could stealthily cut benefits without requiring a single vote of Congress, well that’s quite a different matter.
We’ve also known that we need more income tax revenues, and even prior to the recent 2013 income tax increases on the “wealthy”, more than 90 percent of tax revenues came from less than 10 percent of the population. Clearly, a significant middle class tax hike is needed in order to raise any significant additional revenue. Almost no politician, R or D, would ever vote for this. However, with our progressive tax rate system and the tax rate thresholds indexed for inflation, the government’s understatement of inflation means for example that a taxpayer in 10 percent bracket may effectively move to a higher 15 percent bracket and pay more taxes even though in “true” inflation adjusted terms, his income has not increased at all.
Understating the true rate of inflation is also in the government’s interest, because it makes ALL the key economic numbers look better. Real GDP growth and real personal income can be shown to be growing rather than declining and the faux-CPI rate can be shown to be low so the Fed can keep printing money with abandon!
So how is the government understating the rate of inflation? Here is some background:
First, back in the good old days of the 1970s and 1980s and for many decades before, inflation was calculated using the “market basket” approach. This method took the average consumer’s expenditures into account and created a typical market basket on a weighting for each expenditure. For example, in 1980, if the average consumer spent 25 percent on gasoline, 25 percent on rent , 25 percent on clothing, 25 percent on food. If gasoline prices went up 12 percent, rent by 4 percent, clothing by 2 percent and food by 10 percent, then the government would calculate inflation equal to 7 percent. ((12*.25) + (4*.25)+(2*.25)+(10*.25)=7) . Of course, the market basket was considerably more detailed with thousand of products , but the general concept was pretty simple – take the typical consumer market basket and its various weighted products and use it to determine the CPI and the increase in CPI.
However, some economists correctly noted that inflation calculated with this metric was overstating inflation (though only somewhat). They argued that consumers would change their consumption patterns in response to higher prices (e.g. drive less if gasoline prices go up too much, buy less coffee and drink more tea when coffee prices spike, or buy more hamburger when steak prices rise). This is referred to as the”substitution effect” by economists. Second, economists also recognized that inflation was an imperfect measure because the value or “quality” of products changes in some cases significantly over time (e.g. desktop computer in 1990 versus today is of very different “quality”).
To deal with these issues, the government (or more specifically the Bureau of Labor Statistics(BLS), developed models that simulated the substitution effects and adjusted CPI downward for “quality” improvements. In principle, this sounds fine but in so doing they overcompensated substantially for these factors:
- The use of the “substitution” effect is not an accurate portrayal of cost of living. The problem inherently is that the BLS assumes that substitution does NOT involve a “loss” to consumers when in most cases it clearly does. (e.g. switching to hamburger from steak involves a loss in consumer welfare which is not captured by the BLS in its measures). Thus. for most consumers, the substitution effect adjustment will result in an understatement in the increases in “their” cost of living over time.
- Second, the “quality” adjustments are ONLY used to adjust prices downward. For some products that’s OK , but not so for others. (Can anyone argue that the “quality” of a plane flight has done anything other than get worse over the past 10-20 years?).
- Third, quality adjustments made by the BLS assume that ALL consumers want them. But in fact, many do not. For example, suppose I pay $1000 for computer with x gigabytes of memory, but the computer companies eliminates this model and instead gives me 1.2x of memory with this new computer costing $1100. The BLS measure of CPI would NOT calculate 10% inflation for this item but something much less or maybe even a price decline due to the higher “quality”, even though I may NOT want or even need the additional memory.
- Fourth, some of the data used by the BLS is simply wrong or weighted incorrectly (or is subject to an INCREDIBLE amount of quality adjustments). As Peter Schiff, President of Euro Capital reports in his article “Inflation Propaganda Exposed” in January 2013: “Another stunning example is found in health insurance costs, which is a major line item for most families. According to the BLS we can all breathe easy on that front because their “Health Insurance Index” increased a mere 4.3% (total) in the four years between 2008 and 2012. Interestingly, over the same time, the Kaiser Survey of Employer Sponsored Health Insurance showed that the cost of family health insurance rose 24.2% (5.5 times faster). But even if the BLS had reported higher costs, it wouldn’t have made much of a difference in the CPI itself. Believe it or not, health insurance costs are assigned a weighting of less than one percent of the overall CPI. In contrast, the Kaiser Survey revealed that in 2012 the average total cost for family health insurance coverage was $15,745, or almost one-third of the median family income.”
The bottom line is that the CPI is no longer an accurate gauge of the true cost of living increase that consumers face each year. As Schiff notes: “Finally, all of these changes take the CPI away from what it originally was intended to do , which is to calculate how much my cost of living goes up for my market basket of goods given the price increases of these products”. For this, we need to go back to a simple cost of living increase formula using something much closer to the fixed market basket approach used in 1980.
******************
So how much is the government understating the inflation rate? …A LOT, based on the available evidence.
First, there is Shadow Statistics, an organization which has spent a number of years collecting an analyzing data (summary data and graphics are available on their website at shadowstats.com) on inflation and other macroeconomic statistics. Their conclusion is that real inflation (using the market basket approach) is increasing at roughly 3 percent per year faster than the reported CPI if one merely goes back and uses the methodology employed in 1990 (which is closer to the fixed market basket approach). In other words, between 2009 and 2013, while official CPI has grown by about 2-3 percent per year on average , Shadow Stats estimates about 5-6 percent inflation using the 1990 BLS methodology. Using the 1980 BLS methodology (which is a pure fixed market basket approach), Shadow Stats estimates even higher inflation on the order of 8-10 percent during this same period.
Second, in the previously noted Peter Schiff article, Schiff evaluated price increases in a basket of 20 randomly selected goods (e.g. milk, electricity, prescription drugs, new car, bread, eggs, gasoline, beer etc.) from two 10-year periods—1970 to 1980, and 2002 to 2012—and compared them to the reported government CPI during those periods. The results are pretty astounding. Schiff’s inflation measurement from 1970 to 1980 outpaced the official government measure by only 5 percent, (117 percent versus 112 percent) which was probably due largely to his statistical sampling error of the 20 goods he selected. However, in the more recent 2002-12 period, there was a much bigger difference. Schiff’s measurements showed a price increase of 52.1 percent from 2002 to 2012, compared to the CPI figure of just 27.5 percent. Schiff’s measurements outpaced the government’s by almost 100 percent in the last decade! Using another 20 randomly selected goods, the numbers again showed drastically understated inflation by the government in this more recent period.
Finally, I did a bit of my own analysis of inflation statistics using available commodity price statistics and commodity indices and several other major consumer goods for which I had some anecdotal information. The results shown here for the last 4 years (2009-2013) were even higher than I thought they would be:
- Commodity Metals (Both precious and non-precious)- 13% per year
- Commodity Fuels (oil, natural gas, gasoline, diesel etc.)-17% per year
- Commodity Food and Beverage (grains, meats, milk etc)-7% per year
- Commodity Agricultural Raw Materials (lumber, wool etc)-12% per year
- Commodity Price Index (weighted of above four)- 14% per year
- Rents (Nationwide average)—6% per year
- National Minimum Wage–9% per year
- Base price of a Ford F-150, the best-selling US passenger vehicle–7% per year
- Family Health Insurance—6% per year
In other words, a 2% CPI inflation rate doesn’t pass the laugh test. We are more likely already at 5 or 6% inflation (and maybe even higher). Yet, this low 2%inflation number is the basis that Bernanke, Krugman and other neo-Keynesians are using to argue for continued money printing at a record rate in the US (as well as running large budget deficits for many years out into the future) . “No inflation, no problem” seems to be the mantra. However, I continue to believe that this strategy is lunacy!!! In the end, we are going to end up with very high inflation with very negative consequences for the US and world economies. Also, as noted above, we are already seeing greater inflation particularly in commodity prices.
However, don’t expect the government to ever change the CPI back to the older and more accurate methodologies which would give us a true cost of living index. After all, no one wants to tell the Emperor he has no clothes.
1968 was an interesting and tumultuous year for US politics, music and for me personally. It was the end of my last year of junior high at Friends Seminary in NYC, and the beginning of living away from home at Taft school in Connecticut. In the political world, there was greater violence with the King and Kennedy assassinations, inner city riots, and a violent end to the Democratic convention on the Chicago streets. Change and conflict was the hallmark of 1968.
1968 was also an important change year for rock music. The Byrds, Mamas and Papas, Frankie Valli and The Four Seasons, Association, the Seekers, Herman’s Hermits, Hollies, Gary Lewis and the Playboys, Lovin’ Spoonful, Peter and Gordon, Johnny Rivers, and Petula Clark and their folk-rock or softer-rock sound of the mid-sixties had largely disappeared from the pop charts by 1968. ( The exceptions being the Association’s “Everything that Touches You”, the Four Seasons cover of “Will You Love Me Tomorrow” in early 1968, and Mama Cass’ solo of “Dream a Little Dream of Me”). The Beach Boys surf rock sound which had been a staple from 1962-67 was no longer in vogue , though the Beach Boys did have an excellent single “Do It Again” in early ’68 which spoke longingly about the group’s past. ( In fact, “Do It Again” was a bit of a throwback even for the Beach Boys which had strayed far from their original sound with Brian Wilson’s complex and very different “Heroes and Villains” single and “Smiley Smile” album of 1967). The Monkees pop-rock sound and TV show had dominated the popular music scene in 1966-67 courtesy of the excellent song writing of Carole King, Neil Diamond and Boyce/Hart. However, in early 1968, the group had its last top ten hit “Valleri” in February and their TV show was cancelled in the Spring. The group released a movie later in 1968 entitled “Head” which was bizarre (to put it mildly) and was ostensibly about the death of the Monkees. It was directed by none other than the new, up-and-comer Jack Nicholson.
There were a number of notable exceptions to this trend away from soft/ folk rock . This included most notably Simon and Garfunkel superb “Bookends” album with the hits “Mrs. Robinson”, “At the Zoo” and “Fakin’ It” and the lyrically and musically beautiful “America”. The Turtles scored with one of my favorite melodies “Elenore” which poked fun at themselves with lyrics such as ” I really think you’re groovy, let’s go out to a movie”. The Rascals upbeat “A Beautiful Morning” and the up-tempo “People Got to be Free” kept the group at the top of the charts. Frenchman Paul Mauriat had the instrumental top seller of the year with the soothing “Love is Blue”. However, my two favorite instrumentals by far were “Classical Gas” by Mason Williams (featuring great guitar work and orchestration by the Smothers Brothers show producer) and the eerie “The Good, the Bad and the Ugly” by Hugo Montenegro. Other soft rock vocal favorites of mine for the year included Merilee Rush’s “Angel of the Morning”, Fifth Dimension’s “Stoned Soul Picnic”, Judy Collins version of “Both Sides Now”, and Mary Hopkins’ “Those Were the Days”.
However, a hard rock and more electric sound was in ascendancy particular in Great Britain. The Who had their first American top ten single in late ’67/early ’68 with ” I Can See for Miles” which begins with an unforgettable electric guitar riff and later followed it with “Magic Bus”. The Rolling Stones had experimented with a softer, flower power sound (“Ruby Tuesday” and ” Dandelion” in 1967) and imitated the Beatles Sgt. Peppers with the psychedelic “Her Satanic Majesty’s Request” released in late 1967 ( which included the early 1968 hit ” She’s a Rainbow”). However, by mid-1968, they had returned to their hard rock roots with one of the greatest rock songs ever “Jumpin’ Jack Flash” with Keith Richards guitar driving the song. Jimi Hendrix followed up his album success of ” Are You Experienced” with “Axis: As Bold As you love” in 1968 and it’s hard rock version of Dylan’s “All Along the Watchtower”? And the two hard rocking singles from “Are You Experienced” in 1967, “Purple Haze” and “Foxey Lady”, became a staple on the newly emerging rock oriented FM radio during 1968. A new British group Deep Purple produced a hard rock classic “Hush” which epitomized the electric hard rock sound. A one-hit wonder from Chilton, England, the Crazy World of Arthur Brown released the bizarre and combustible “Fire”.
Back in the US, Big Brother and the Holding company burst onto the scene with their album “Cheap Thrills” and hits ” Down on Me” and “Piece of my Heart”. Their lead singer, Janis Joplin, introduced the world to an extraordinary female hard-rock voice. A new group Steppenwolf had two huge hits “Born to be Wild” and “Magic Carpet Ride” as well as “The Pusher” which was featured at the beginning of the movie “Easy Rider”. Steppenwolf “driving” electric guitars perhaps best epitomized the new hard rock sound in the US. Even Tommy James and the Shondells moved away from its pop sound in 1967 to the hard rock classic “Mony, Mony” in early 1968.
Hard rock jams and long songs were also relatively new in 1968. On the FM dial, Cream led this new trend with their double album “Wheels of Fire” and it’s hit “White Room” and the lengthy jams “Traintime”, “Crossroads” and “Toad”, the latter two which were over 16 minutes in length. Another new rock group Iron Butterfly took long songs to an excessive level with its 17 minute annoyingly repetitive “In-a-Gadda-da-Vida”. The Chambers Brothers had an AM radio version of “Time Has Come Today” one of my favorites of the year, and a very long 11 minute version of the song on their album which later became part of the soundtrack of the Jane Fonda/Jon Voight movie “Coming Home” in 1978. Creedence Clearwater Revival had their first hit song with”Suzie Q Part I”, but the whole song was over 8 minutes long and was featured on their first album.
Of course, the leader of these new trends was The Beatles. After the 1967 “thematic” and “psychedelic” albums, Sgt. Pepper and Magical Mystery Tour, the Beatles moved to a simpler, often harder rock and less ornate sound. This started with the rockin’ piano in McCartney’s “Lady Madonna” in the Spring and then was followed by the extraordinary two-sided hit “Hey Jude/Revolution”. Hey Jude is still one of my top ten favorite songs of all time and was the first very long song (e.g. 7 minutes) to be played regularly on top-40 radio. But it was “Revolution” in particular that best epitomized the hard rock trend (with some ferocious guitar playing) while lyrically symbolizing the 1968 tensions between the peace movement and the newer emerging, more violent protests.
The Beatles White Album, despite less critical acclaim than Sgt Pepper, was clearly album of the year and in my opinion, one of the Beatles best accomplishments. Unlike Sgt Pepper, there was far less collaboration in song writing BUT it remains an extraordinary showcase of the three singer/ songwriters of the Beatles. George Harrison had Savoy Truffle; Long, Long, Long; Piggies and perhaps his best single composition, While My Guitar Gently Weeps (which featured Eric Clapton on lead guitar). John Lennon had several excellent compositions most notably Happiness is a Warm Gun, Glass Onion , the slower version Revolution #1, Dear Prudence, Sexy Sadie, Julia and Cry Baby Cry. McCartney’s compositions were outstanding ranging from (1) the soft ballads of Blackbird, Mother Natures Sun , I Will and Martha My Dear (2) the country and western inspired “Rocky Racoon, to (3) the hard rockin’ Back in the USSR, Helter Skelter and Birthday. While not every one of the 30 tracks was good ( I ALWAYS skipped the Yoko Ono inspired “Revolution #9” on side 4), there were only a few that were not up to the Beatles usual standards.
Motown and soul music continued to shine. Sly and the Family Stone burst on the scene with the energetic and catchy “Dance to the Music” which remains their best single ever. Though not as successful as in the prior four years, the Supremes still had two excellent records with “Love Child” and “I’m Gonna Make You Love Me” (the latter it recorded as a duet with the Temptations in late 1968.). The Temptations showcased David Ruffin’s vocal talents in “I Wish it Would Rain” a beautiful soulful ballad, but then showed the world they didn’t need him (after he was forced out of the group due to drug problems) when they recorded near the end of the year, the up-tempo soul rocker “Cloud Nine” which featured all the Temps as vocalists. Stevie Wonder had a minor hit earlier in the year with “Shoo-Be-Doo-Be-Doo-Da-Day” (the first song he wrote in his career), then capped the year off with one of my favorite upbeat songs ever “For Once in My Life”. Marvin Gaye & Tammi Terrell had two excellent top 10 hits “Ain’t Nothing the Real Thing” and “You’re All I Need To Get By”. Marvin then finished the year with the great solo “I Heard it Thru the Grapevine” ( covering Gladys Knight and the Pips hit of a year earlier. ). Aretha Franklin had three excellent R&B songs with “Chain of Fools” , “Since You’ve Been Gone” and “Think” . ( The last song was later sung by Aretha in the 1980 “Blues Brothers” movie. ). However, the soul song of the year was the posthumous “Dock of the Bay” by Otis Redding ( he had died in a plane crash in December 1967). Unlike the rest of the year, this song was for relaxing.
All in all, it was a good year in music to “get your motor running”.
This post is a bit different, as all I have been thinking about is the great family trip we had in Ireland a couple of weeks ago.
On April 18th, Anne and I landed in Dublin and our adventure began. Over the first three days we stayed in or around Dublin, where I learned that in Ireland, there are three types of historical/ archaeological sites . There is “old” which is from the Renaissance/ late Middle Ages (circa 1500-1700 A.D.) ; there is “older” which is circa 800-1200 A.D when many of the Irish castles and cathedrals were originally built; and then there is “REALLY OLD” which is circa 2500-4000 B.C. when Neolithic man started farming and hunting in Ireland. I don’t exactly know why but for some reason I was particularly enamored by the artifacts and early tombs constructed by Neolithic man. Maybe it was because I felt so much younger by comparison. ( “No, Maryanne your dad is NOT old, now Neolithic man, he’s OLD”)
One of the highlights of the trip was the tomb/ astronomical observatory at Newgrange which is about 20 miles north of Dublin. A guide takes a limited number of people into the tomb every half hour and we had the benefit of getting a reserved time slot. So that afternoon, I found myself squeezing thru a very narrow rock passageway which was clearly designed for a much smaller Neolithic man. Once inside the relatively large central chamber, I was struck by the carefully laid boulders that comprised the walls and rose to the apex of the tomb. (One woman on our tour nervously asked if they had put in new supports in the chamber to keep it from collapsing over time. No, our guide said confidently, these were all the original boulders and rock that was laid some 5000 years ago!). This incredible structure seemed as if it were out of an Indiana Jones movie, even more so because on the three days around the Winter Solstice, the sunrise would light the central chamber thru that very narrow entrance. Early man in Ireland was apparently among the earliest astronomers in the world.
There were many other great sights on our trip ranging from castles to cathedrals and museums. We saw Kilkenny Castle which is my wife’s last name (though the castle did not belong to the Irish Kilkenny’s but instead an English noble named Butler, which somehow seemed fitting to me–for Anne, not so much). But by far the best part of the trip was linking up with our oldest daughter Kathleen at Dublin airport and then driving up to Northern Ireland to meet up with my youngest Maryanne who was on a work/study semester at the University of Ulster in Derry. From the time Maryanne went away to college almost 3 years ago, Anne and I have come to realize how precious family time together can be and for 3 days in Derry we had a real family reunion.
Going up to Derry (or “Londonderry” to the Irish loyalists) in Northern Ireland was a unique experience as well. There was so much history here, ranging from the walled city dating from the Middle Ages to the recent strife captured poignantly on so many painted walls and murals across the town. And there was a constant reminder that all was still not well in Northern Ireland, with Protestant parts of the territory “marked” with British flags and painted curbs. And as I saw this, I reflected on what I learned on our first five days of the trip in Dublin, Kilkenny and Rock of Cashel. Ireland was a place of constant change and turmoil which continues to this very day. There was the rule of the Celtic kings beginning in the Bronze Age circa 500 BC. There were the Vikings who invaded Ireland in the 8th and 9th centuries and were eventually defeated in the 11th century. Soon after, the Anglo-Normans arrived with Henry II declaring himself Lord of Ireland in 1171 and English rule began officially with the Treaty of Windsor in 1175. By the 16th century, a series of rebellions and wars began and continued well into the 20th century. This included the Second Desmond Rebellion in 1579, the Nine Years War in 1594, the Flight of the Earls in 1607, Irish Rebellion of 1641, the Irish Confederate Wars of 1642, the Battle of Carrickfergus in 1760 (the first French incursion into Ireland), the Irish Rebellion of 1798, the Second United Irishmen Rebellion of 1803, the Tithe War of 1831-36, the Easter Rising of 1916, the Irish War of Independence during 1919-1921, the Irish Civil War of 1922-23, and the “Troubles” beginning in 1969. If this wasn’t enough, Ireland seemed to plagued with periodic famines (such as the Famine of 1740 and the Great Potato Famine of 1840), diseases and plagues which led to constant emigration, most notably to the US. Makes me think twice now about complaining about a bad day, after all, the Irish had centuries of bad days.
Yet thru it all, the Irish people have remained resilient and haven’t lost their sense of humor or their general cheerfulness. One cab driver when I sat in the front seat announced “Riding shotgun, are ya?” And then proceeded to explain to me with a wry grin that I was in real “trouble” when it came to the bill at the “very nice” restaurant that I was going to with my wife and two daughters. When we were wandering around Dublin looking for the art museum, we asked a policeman if we were on the right track. He pointed to the nearby museum which we appeared headed towards and said it was the “dead zoo” and only “dead animals” were in there. (It was the natural history museum.). This led to a back and forth about my wife and his wife and how I might end up exhibited in that museum if I wasn’t careful. Then, there was the story from one of our guides about the political argument/negotiation that took 6 months to complete centuries ago, but then she noted “but in Ireland, this was a short argument”.
Of course, the trip did have its bumps “literally” when I hit the curb while driving on the left side of the road on one of the more narrow roads. (and I was very grateful upon our return to be able to drive on the right side again!). And the weather was cold and rainy a lot of the time. But the beer was always good and plentiful (In fact, the typical pub seemed to have at least 10 beers on tap including, strangely enough, Budweiser, wherever we went) and the sun came out for at least a brief appearance every day. All and all, it was a great and memorable trip.
While I had intended to blog about tax reform this week, it will have to take a backseat to news of the past several weeks, which has me thinking financial and economic Armageddon may be getting much closer at hand. (No, I am NOT going to talk about North Korea though that is obviously worrisome, as well). Consider in just the past couple of weeks, we have had the following rather negative economic news:
- Japanese Monetary Stimulus Announced –The Japanese have made it “official” and have joined the parade of nations, led of course by the good old USA, that are printing more and more currency to help “stimulate’ their economies. The Japanese have decided to DOUBLE the amount of yen in circulation in the next year, which has already resulted in the yen falling substantially in value over the past several months by some 30% versus the dollar (some of it in anticipation of the announcement). There is ONLY one likely outcome of such a policy in the long run, which has occurred time and time again since the dawn of modern civilization and paper currency and that is very high inflation. Of course, the US is even more culpable having almost quadrupled its monetary base since 2008 and the EU, UK and China are pretty close behind. The insanity continues and Wall Street barely shrugs and in fact, in most cases cheers.
- Cyprus Bank Failure and Near Bankruptcy of the Nation – Cyprus is pretty small so this really shouldn’t have spooked the markets. However, the notion that deposits held in any bank are subject to a sizeable haircut, is something we haven’t seen in the world economy since the bank runs of the 1930s. This is probably why world stock and bond markets reacted so badly for a couple of days. Further, it served as a reminder of the greater reality: the European economy is in very bad shape. Spain, Portugal, Italy and Greece are economies that are contracting and all have huge amounts of debt which appear unlikely to ever be paid off. The largest European countries (France and the UK ) are also in recession or are likely to be there soon (Germany). The ECB has been printing euros to bail out various countries’ banking problems and even the conservative Swiss have been printing Swiss francs so that they can hold their exchange rate steady with the rest of Europe. Europe’s debt problems are growing worse by the day.
- Obama 2014 Budget is Released and its Higher (Really?!) than 2012 – When I saw this item at first I thought it was a misprint, but I am afraid it is all true. The President is apparently serious as he proposes a significant INCREASE in the level of government spending between 2013 and 2014 to $3.78 trillion. This is a 7% INCREASE from 2012 actual levels of $3.54 billion. I have noted many times in this blog, that we must cut government spending NOW in order to deal with our enormous and growing debt problems. (We need to do other things as well, but this is by far the most important item). Cutting spending in the long-term is meaningless in a federal budgetary context. It is a bit like Lucy holding the football for Charlie Brown; it is a promise that is never kept. The only way to assure that you will make the long run progress needed is to start now. Somehow, the neo-Keynesian economists have managed to convince the Administration and many others including most of Wall Street that if we just keep stimulating the economy that eventually all our economic and debt problems will disappear. This misses the fundamental and structural problems with the economy and deficit that are pretty intractable today and will take many years to solve. The sooner we start down this path of solving these problems, the better off we will be in the future, though I think we are heading for a number of years of considerable pain irrespective.
- Labor Force Participation Rate hits New Low in March—While the news media often focuses on the unemployment rate or even the monthly new jobs numbers, for most economists the more meaningful statistic is the total labor participation rate which is simply those employed divided by the working age population (age 16 and over). Here, the news has been consistently bad since 2008 and only getting worse. After reaching peak levels of about 67% during 1998-2001, the labor force participation rate stabilized at above 66% between 2002-2008. However, since November 2008, the participation rate has hit the skids starting with the recession and continuing thru the recovery. As of March 2013 , labor force participation rate has hit a new low of 63.3% -the lowest level it has been since May 1979. The reason is that large numbers of workers are continuing to leave the work force or simply have given up looking for a job. However, even the worsening participation rate understates the severity of the economic and human problem that we face in the US, because many of those employed are now in part-time rather than more desirable, full-time jobs.
- Workers on Social Security Disability (SSDI) Continues To Rise— An excellent article in the WSJ (April 8, 2013) entitled “Growing Disability Rolls Stunt US Recovery” indicated that 4.8% of the population aged 20-64 years old was on disability in 2012 and this number has continued to grow in 2013. In 2003, the percentage was 3.5%. The trend is worrisome for the economy, because it reduces the productive potential of the workforce and means further increases in medical costs. At a human level, it is tragic. I spent three months on a paid leave of absence in 2000 due to severe back pain and would not want to see anyone have to endure this or any other disability. The psychological and physical trauma are horrendous.
- Stock Market hits new all time highs (S&P 1593 and Dow 14865 on April 11)– This has been greeted as good news and there is much celebration on Wall Street and in the mainstream media. The problem, however, is that the Fed thru its money printing and zero interest rate economy in the US is helping to inflate the next big bubble which is The US Stock Market. In my blog post “Cause I’m Free Fallin’ ” on February 4, I provide more details on the long run fundamentals for the stock market and why I think it will be in trouble soon. However, even in the short run, most analysts expect S&P 500 earnings to decline in the first quarter of 2013 which is hardly a positive development.
***************
And other bad economic news abounds. China’s growth is clearly slowing down and it has a massive housing bubble which is starting to burst (see excellent 60 Minutes segment on this topic from several weeks ago). Further, lest you think the declines in real family median incomes in the US over the past few years are bad enough, consider that these are measured using CPI (consumer price index) which runs about 2 percent per year today. However, the CPI is clearly grossly UNDERESTIMATING real inflation which is already at about 6% for the US. ( I’ll have more on this topic in a later blog post) meaning that real median incomes are falling even more in actuality.
Is there any good news out there? The US housing market has been stronger in the past year or so though most of this is likely due to the massive monetary/low-interest rate stimulus and the strength of the market has largely come from investors NOT first time home buyers and thus is probably not sustainable longer term, particularly once interest rates inevitably start to rise.
The Yanks won three in a row this past week so at least that’s good news (from my perspective at least). From now on, maybe I should stick to reading the Sports section.
1963 is a year in rock/ pop music that gets no respect. After all, it was before the British Invasion and Beatlemania which dominated U.S. music in 1964. So though it is the 50th anniversary of 1963, I was hesitant to write about it and celebrate the year until I realized that 1963 led to the rock tidal wave of 1964. It was what the Baroque period was to the Classical era in classical music. Some darn good music in the Baroque (Bach and Vivaldi, the most notable) and without it there would have not been the explosion of music of the Classical era ( from Beethoven to Mozart and many in between). 1963 ( and several years earlier) was really the rock era’s Baroque period and a pretty good one at that. Admittedly, I wasn’t listening to music much then. After all, I was only 9.
A big development in U.S. rock was the California surf sound made famous by The Beach Boys and Jan and Dean. The Beach Boys first really hit it big in 1963 with their second top 40 single “Surfin’ USA” song which rose to #3. The song epitomized surf rock and was followed shortly thereafter by the slow rock ballad “Surfer Girl” and the upbeat “Little Deuce Coupe” as a b-side. Next there was a third top ten smash “Be True to your School” ( complete with real cheerleaders and an homage to “On Wisconsin”) and the more cerebral and interesting slow rock classic “In My Room” that foreshadowed Brian Wilson’s eventual classic album “Pet Sounds”.
Meanwhile, Jan and Dean had been a largely forgettable early rock group with “Baby Talk” of 1959 being their biggest hit. Along came Brian Wilson who collaborated with Jan Berry to write the memorable composition “Surf City” and Jan and Dean had a #1 song in 1963.
Instrumental surf rock took a step forward with the Rockin’ Rebels “Wild weekend” released at the beginning of the year. Though a throwback to late fifties, saxophone- led, Coasters rock n roll, the song also featured the unique guitar sounds of surf rock. And by the summer of 1963, the Surfaris released “Wipeout” featuring a classic rock guitar riff and drum solos which later became a staple of late 60s and early 70s rock. The song was such a big hit in 1963 that it was again released in the summer of 1966 and was among my early 45 rpm purchases that year. At the time, I just couldn’t figure out why it wasn’t at least a top 10 hit on WABC in 1966. I only realized later that it had been a #1 hit three years earlier.
By the end of 1963, a new group, the Trashmen ushered in the era of garage-rock with “Surfin’ Bird” which was released in December. This was hardly a conventional surf rock song ( though it stole most of its melody by combining two less successful earlier singles “Papa-Oom-Mow-Mow” and “The Bird is The Word” by the Rivingtons). What is notable about the song is the almost violent drumming which sounded eerily similar to Dave Clark Five’s “Glad All Over” in 1964.
The Four Seasons were hardly new in 1963 but their sound was. In 1962, they hit it big with “Sherry” and “Big Girls Don’t Cry” which owed more to doo-wop than rock for its inspiration. But in 1963, “Walk Like A Man” broke new ground with its unique opening guitar riff and interesting rhythms and it is still one of my favorites of the 1960s and one of the top-selling songs of 1963. Meanwhile, the girl groups (Shirelles, Crystals and Chiffons etc.) were still at their peak and my favorite girl group song ever “He’s So Fine” hit #1 just a few weeks after the Four Seasons. (And if you don’t believe that this presaged 1964 rock, consider that George Harrison unintentionally plagiarized the music and harmonies in his iconic “My Sweet Lord” just seven years later.) I also loved Jimmy Gilmer and the Fireballs “Sugar Shack” as much for its unique guitar sound as anything else.
The Motown sound hadn’t reached its peak yet. This was to come during 1964-66 with the Supremes, Four Tops and Temptations reaching ascendency. However, 1963 was the year when four outstanding singers/groups came to prominence and arguably led the way for Motown in the future. First, there was Martha and the Vandellas “Heat Wave” which is hard not to hum in the summer, and naturally hit it big in August. Smoky Robinson and the Miracles after their initial success with “Shop Around” in 1961 didn’t break out again until 1963 which featured ” You’ve Really Got A Hold on Me” and “Mickey’s Monkey”. Then , there was the beginning of a long and storied career with Marvin Gaye’s “Pride and Joy”. But the true artist breakout which would revolutionize music for decades to come was a 12-year-old sensation named Stevie Wonder who sang and played a mean harmonica in “Fingertips” .
Folk was in full stride ( and it was later combined by Simon and Garfunkel, the Byrds and the Mamas and Papas to make American folk-rock) . “Walk Right In” by the Rooftop Singers was a #1 hit by this New York City group. Peter Paul and Mary scored two #2 hits with “Puff the Magic Dragon” and “Blowin’ in the Wind”. Even a catholic nun aptly named “The Singing Nun” had a folk French language hit “Dominique” which hit #1 in December. My sister bought her whole album, though I can’t say I remember her playing anything but the title song.
Of course, folk’s undisputed leader Robert Zimmerman a.k.a. Bob Dylan had his first critical and eventual commercial success with “Freewheelin’ Bob Dylan” released in 1963. The album included four notable Dylan songs “Blowin’ in the Wind”, “Don’t Think Twice, Its Alright” ( both covered by the aforementioned Peter, Paul and Mary), “Girl from the North Country”, and “A Hard Rain’s Gonna Fall” which later became Dylan standards.
Meanwhile, across the Atlantic a brand new group from Liverpool had three #1 hits in the UK “Please Please Me”, “From Me to You” and “She Loves You”. Yes , 1964 was going to be one helluva year…..
The day of reckoning for sequestration has come and gone and the small cuts have started to go into effect. To hear some of the rhetoric coming from the President and some of our other political leaders, you would have thought that we are now facing an economic Armageddon. I believe these fears amount to “inside the beltway” exaggerated concern over the importance of government spending to the economy. After all, the cuts of $85 billion (and only $43 billion this fiscal year) are still very small relative to the amount of federal spending (only about 2 percent of total federal spending in 2013) and only about 0.5% of total US GDP. More importantly, they pale in comparison to what will be needed to ultimately to balance the budget which will require budget cuts below current levels ( not the “fake” future cuts below inflated future levels that are often cited by many politicians as if they were “real” cuts) of on the order of $500 billion per year. (See “Let’s Get Fis-i-cal” post and early last year posts for more info on what we need to do.)
But somehow the thought of the ghastly sequester has had many leaders in Congress pretty confused. Consider the following dim-witted remarks in the past couple of weeks:
“It’s almost a false argument to say we have a spending problem” …Nancy Pelosi(D-CA)
” Is it a spending problem? No” …Senator Harkin (D-IA)
So since we seem to have two senior members of Congress having a “senior” moment, let me make this crystal clear . Our federal spending hasn’t just grown rapidly, it has literally exploded. In 2007, we spent $2.7 trillion and by 2011 we have spent $3.6 trillion or an eye-popping 30 percent growth in federal spending in only 4 years in a period when personal income growth was flat and inflation was very low. And in the spirit of bipartisanship, we have been growing the federal budget almost as fast during the Bush years from $1.7 trillion in 2000 to $2.7 trillion in 2007. The only good news seems to be that we actually cut outlays slightly (by $60 billion) between 2011 and 2012 ( the limited “real” cuts that occurred as a result of the 2011 budget deal plus lower interest costs due to the Fed’s huge monetary stimulus). However, by and large, this has been an aberration in a very long-term pattern. Spending also has grown across the board. Discretionary non-defense spending has grown 31 percent between 2007-11 , with defense growing 28 percent during the same period. Between 2000-07, defense spending grew the most rapidly due to the Iraq war and new homeland security expenditures, but discretionary non-defense spending also rose rapidly by about 54% during this period.
The consequences of these large spending increases is well documented. Tax revenues grew enough prior to the 2008 recession to keep the deficit from growing much (i.e. in fact, we managed to get the deficit down to about $200 billion in 2007). However, after the recession and the major increase in government stimulus, the annual deficit exploded and reached $1.3 trillion in 2010 and 2011. As a result, we are now saddled with more than $16.5 trillion in federal government debt which is more than 100% of the US GDP, an already dangerous level. And this doesn’t even count on the order of $100 trillion of unfunded liabilities for social security and medicare and other government pensions.
The complete denial of the magnitude, scope and real danger associated with the US debt on the part of some of our politicians means we are in more serious trouble than even I realized. Further, the complaining and moaning on the part of many politicians over a tiny cut in the federal budget does not bode well for the future where we will need to do much more to get our fiscal house in order. Unfortunately, we also have enablers of this fallacy such as Paul Krugman, Ben Bernanke and other Neo-Keynesian economists who insist that we should postpone any further cuts far into the future, allowing politicians to “kick the can down the road” in good conscience. We also have the supposedly unbiased, Congressional Budget Office issuing projections for the future which even though they show continued large deficits, use ridiculously optimistic assumptions such as more than 4 percent real GDP growth between 2014-17, interest rates that don’t really rise significantly until 2016 (and remain moderate throughout the period) and inflation remaining at 2 percent virtually forever. (and “forever” is a very long time!). These assumptions drive a very rosy picture of tax revenues almost doubling in just the next 5 years, while expenditures grow by only a bit more than 20% in the same period.
PUH-Leese! ….I went thru the CBO estimates and adjusted the costs for higher likely inflation and interest rates as well as lower likely growth in the economy. These more realistic assumptions suggest that we will continue to have deficits of about $0.8- $1 trillion per year or more and that our debt will swell to close to $25 trillion by the end of this decade. And probably several years before that, the US will learn what REAL ECONOMIC ARMAGEDDON means. Just remember, if we don’t cut our spending substantially (along with really reforming tax code to make it more revenue efficient) and really close our annual deficits to near zero, the markets will eventually come to the conclusion that the “full faith and credit” of the US no longer means much. Foreigners will sell their holdings of US treasuries, and the dollar will tank. To make matters worse, this will occur at the same time inflation and interest rates and interest costs are rising significantly (Thanks to the Fed’s policy of the last 4 years). As a result, we will probably go into default (though we won’t call it that) and there will very large layoffs in the government, along with massive cutbacks in social security and medicare payments when the government can no longer effectively borrow. You think it can’t happen? If we continue down our current path, I am quite confident it WILL happen.
So Rod Stewart didn’t really have it right after all, the first cut may seem like the deepest to some but it probably will be the “last” cut that is the deepest.
Next blog post, I will be more upbeat. I promise! But our not so fearless leaders, gave me no choice this time.
I had promised to explain why stocks are overvalued today and with the market approaching all time highs and the best January in the market in a couple of decades, this seemed like a particularly good time to warn you of the strong potential for a coming stock market implosion.
First, a few points about stock valuation. While there are a lot of complicated valuation models, at its core, the value of a company’s stock is simply the value of all discounted dividends received over the lifetime of the stock. In other words, if you buy Company X which provides you with a $2.00 per share dividend , and you project that the dividend will grow by 3 percent per year over a 40 year time horizon, then the value of the company stock will be all those future dividends discounted back to today using the risk-free interest rate ( which is usually equal the projected interest rate on short-term US treasuries). Individual stocks are subject to risk which means that individual stock values or prices are lower than this formula because there is great uncertainty around a company’ s future revenues, earnings and hence dividends. Thus, investors will usually demand to be compensated for such additional “specific risk”. (For more on this topic, see the Investments work of nobel laureate William Sharpe, who also was my favorite professor at Stanford Business School). Nonetheless, there are three main components that determine value of stocks and hence the price of stock market indices like the Dow Jones Industrials or SP 500:
(1) current dividends per share paid
(2) projected long-term per annum growth rate in dividends paid per share
(3) the interest rate on a “risk free” instrument such as an intermediate-term treasury bond
For most companies and the S&P 500 as a whole, the best predictor of the future dividends growth rate is their earnings growth rate since dividends are generally paid out of earnings per share and the two have tended to grow at about the same rate over time. (e.g. during 1980-2013, SP-500 dividends per share have grown by 5.1% and earnings by 5.5% per annum).
In order to get a read on how the market is currently valuing/pricing the S&P 500, I used a simple spreadsheet to take the earnings and dividends of the S&P 500 and assumed various discount and growth rates. What I found was interesting to say the least, and a compelling picture as to why the market may be substantially overvalued. Using my spreadsheet model, and solving for the current S&P 500 price of 1514 implies a somewhat slower long-term growth rate in dividends per share of about 4% per year (vs. the last 32 years 5.1%) , but also a continued very low 3% per year, long- term discount rate. However, there are several major problems with this implicit “market” assessment.
(1) Risk-Free “Treasury” Interest Rates/ Discount Rates are almost certain to rise substantially over the next few years. As I have noted in many previous posts, the enormous and growing US debt burden and the unprecedented and reckless dollar printing by the Fed will eventually result in much higher US inflation numbers and in even a more significant weakening of the US dollar. This in turn will force interest rates much higher. In fact, between 1966 and 2001, long-term, risk-free interest rates were almost always above 5 percent and for most years averaged between 6 and 8 percent . Thus, just moving back to more “normal” interest rates would be a huge rise from today’s 3% rates. However, we are likely to see the situation become much worse than that and at least resemble the situation in the late 1970s and early 80s where we had long-term treasury rates between 8 and 16 percent!
(2) Dividends Per Share and Earnings Per Share are in a Short-Term “Bubble”. Since the 2008-09 financial crisis, most major US companies have managed to reduced their costs significantly thru layoffs and some improvements in productivity and perhaps most importantly, thru reductions in their interest costs as rates have continued to fall. Most of these savings have gone to the bottom line in terms of higher earnings and particularly dividends. The problem is there is only a limited ability to cut these costs further for S&P 500 companies. Instead, interest costs, health care costs, pension costs, and taxes are all expected to climb significantly. This is hardly a recipe for robust growth in earnings and dividend payouts. In the long run, inflation will increase the underlying costs of goods sold resulting in a profit margin squeeze as well.
(3) Long Term Economic Growth Will likely be Much Slower Affecting Long Term Earnings and Dividend Growth–The combination of negative demographics (e.g. aging of population affecting consumption patterns negatively as the baby boomers become lower consuming retirees), slow productivity growth, higher federal, state and local taxes and medical costs and slow US population growth, means that economic growth is likely to be signficantly lower than the 3% per year real GDP growth we’ve experienced over the past 3 decades. Notably, even with enormous monetary and fiscal stimulus over the past 4 years, we have only been able to grow US GDP by around 2%. In other words, we may be lucky to see 1-2% GDP growth over the next decade with all the headwinds noted above.
Bottom line: I ran my spreadsheet with lower dividend growth and higher interest/discount rates. Depending on my assumptions, I found the market was worth only about 20-50% of todays levels. This isn’t to say that the market will crash 50-80% tomorrow. There are too many people who have a vested interest in talking the market up and keeping the participants optimistic. As long as market optimism remains high and the Fed can keep interest rates down in the short-term, the market may increase somewhat more and become even more overvalued. However, once we truly see that we are headed into a “stagflation” world and it becomes clearer that the US is in very serious financial shape, I believe we are in for quite a bit of “free fallin’ “. Will it happen by the end of 2013, 2014 or even 2015??? I can’t say BUT I do know that I am not waiting around to find out.
New Year’s resolutions are a tradition for many and I am afraid I am no different. So over the past couple weeks, I have carefully assessed what I want to resolve to do and not do in 2013. In the spirit of Woodrow Wilson’s 14 Points (which I can’t remember at all, except that there were 14 of them), herewith is my list of 14 resolutions:
1. I will lose 15 Pounds! !! Or at least 10 lbs. , give or take a few. How ’bout I lose the same percentage of my weight equal to the percent spending cuts the federal government makes in 2013 relative to 2012 levels? Yeah, pretty sure I can do that.
2. I will not eat desserts or sweet snacks. The exception to this will be chocolate which has been clinically proven to be good for you. and of course, I will have to make an exception on my own birthday. Further, since I don’t want to be a spoil sport, I will also make exceptions on my wife’s birthday, my two daughter’s birthdays and other important birthdays such as Washington’s, Lincoln’s , Eric Clapton’s, Jimi Hendrix’s, Paul McCartney’s, Derek Jeter’s etc.
3. I will exercise regularly as long as it is convenient and I feel like exercising.
4. I will limit myself to no more than 2 alcoholic drinks a night. However, I will have no limitations on wine or beer.
5. I pledge to tell my wife at least once a week ” You look mahhvelous!” Using my best Billy Crystal accent.
6. I will try to dress more fashionably this year so that my daughters no longer exclaim “Oh Dad?!” when they first see me. (My wife seldom complains anymore as she has largely given up). However, I refuse to go clothes shopping with my family.
8. I promise not to get too overtly upset ( no cursing!) when any of my favorite sports teams ( Yankees, NY Giants and OSU) loses. Thankfully, these teams win most of the time, otherwise I would probably have a coronary.
9. I am resolved to not worry about the future, be it my own future, my family’s future or the country’s future. Instead, I plan to worry that I am NOT worrying enough about the future.
10. I will love my enemies just as much as I love my family and friends during 2013. (However, I will still hope that they rot in hell.)
11. I pledge to enjoy life more and spend more time with my family and friends. ( I really mean this one.)
12. I plan to give back more thru volunteer activities in 2013. ( Likewise, I really mean this one, too)
13. I promise to continue my blog in an upbeat manner as possible as long as the President and Congress don’t do anything stupid. OK, so maybe I wont be that upbeat.
14. I resolve to NOT make 14 resolutions next year at this time.
So what are your resolutions?
Happy New Year to all.
It’s only two days before Christmas and with Christmas comes the onslaught of secular and religious songs and hymns. I have no complaint about Christmas carols and hymns. In fact, some of the best religious music is Christmas music such as standouts like “Joy to the world”, “Silent Night”, “Angels we have heard on high” and “Oh Holy night” or “Hallelujah Chorus” by Handel which might be the best single song of the Baroque period. I suspect many of the rest of you feel the same way. And there is a good reason for this. During the Baroque and Classical and even Romantic periods most of the top-flight music was largely religious and produced by the greatest composers of all time such as Handel, Bach, Beethoven and Mozart. Christmas carols were no exception with music from Mendelssohn “Hark the Herald” a prime example. It is not surprising that Christmas hymns and carols were among the most popular songs of their era.
But when it comes to popular, secular Christmas songs, the sheer quantity of songs or versions of the same song over and over and over again, doesn’t translate into quality in most cases. In fact, it seems like every popular music artist has recorded a Christmas album, which can result in sheer nausea in many cases. Fortunately, there are a few exceptions to the rule. So here is my Top 10 list of popular secular Christmas songs:
#10- “The Twelve Days of Christmas” John Denver and the Muppets— I know the Twelve Days of Christmas is your classic VERY REPETITIVE Christmas song which has a chorus which repeats TWELVE times. However, the Muppets version has to make you chuckle and that is enough to vault this song into The Braine Trust Top 10.
#9 – “Snoopy’s Christmas” -The Royal Guardsmen— Another light Christmas song with a continuation of the enjoyable Snoopy song series (I highly recommend you also listen to “Snoopy vs The Red Baron” and “The Return of the Red Baron”). And how many Christmas songs do you know where a guy with a bad German accent says to a dog “Merry Christmas, my friend”?
#8 – “Wonderful Christmastime” -Paul McCartney –I had to put a song on the list from one of my favorite singer/songwriters ever. However, I confess that my ulterior motive is that this song drives my wife crazy!
#7 -“Happy Xmas (The War is Over) ” -John Lennon–The best of the former Beatles Christmas songs and one that doesn’t drive my wife crazy.
#6 – “Little Saint Nick” – The Beach Boys— This original Christmas song showcases the Beach Boys great harmonies. And that’s good enough for this Beach Boys fan!
#5-“Run Rudolph Run”- Chuck Berry— I always remember the time capsule that the U.S. sent into outer space on the Voyager Missions in the 1970s which included music from Mozart and Beethoven as well as “Johnny B Goode”, a few other songs and other spoken messages. Supposedly, this was our way of communicating in the event that there really was intelligent life out there. The joke goes that the very first message that came back to the earth from alien life was “Send More Chuck Berry!”
#4– “Silent Night” – The Temptations — this unique soulful rendition of Silent Night reminds me that I love this hymn whether it is sung by The Vienna Boys Choir or by the Temps. (This is definitely not a “secular” song, but it was recorded by a very popular group)
#3(a)–“Santa Claus is Coming to Town” – Bruce Springsteen- Only Springsteen could turn this into a live rocker including a Clarence Clemons sax solo and Santa arriving at the end, and somehow pull it off.
#3(b) –“Santa Claus is Coming to Town”– Jackson 5- OK so I cheated and have two versions tied at #3. (However,it’s my list and I’ll do what I want to!). This very spirited and enjoyable version makes it sound like Michael believes Santa is really coming. Given that he was around 12 at the time, he probably did.
#2–The Christmas Song – Nat King Cole– What a great voice he had! There hasn’t been anything close to this song for setting the Christmas mood since it was recorded in 1961.
#1–Sleigh Ride- The Ronettes – This is an outstanding version of a great Christmas song, a well-sung and happy song which is really hard to resist at Christmas. (Honorable mentions: “Winter Wonderland” and “Frosty the Snowman” also by Darlene Love and the Ronettes, with the same great Phil Spector production)
***********************
Two obvious missing songs from this list: Jingle Bell Rock by Bobby Helms and White Christmas by Bing Crosby. However, these are songs that I have heard so many times that I have tired of them. Maybe in a few years, I’ll change my mind.
Finally, I should note that there are several very good instrumental collections of holiday music ranging from Windham Hill “new age” jazz to the Boston Pops. A broader collection called Charlie Brown Holiday hits by the Vince Guraldi Trio (which is mostly jazz piano) is also excellent.
So enjoy the music, whatever your favorites are. And have a Merry Christmas and a Happy New Year!
The Braine Trust 