Quarken
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« on: January 14, 2008, 04:29:40 PM » |
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I have always held that tax cuts do not create economic growth. I found a humorous post on Angry Bear that illustrates the point. 7 years of the stock marketIf in January, 2001 you had placed your investments in 3 month T bills and reinvested the income in 3 month T bills, at the end of December, 2007 your total returns would have been almost exactly the same as if you had invested in the S&P 500 with daily dividend reinvestment.  Way to go team Bush. |
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« Last Edit: January 14, 2008, 04:33:38 PM by Quarken »
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Fredledingue
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« Reply #1 on: January 16, 2008, 01:14:42 PM » |
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Yes, but if you had invested in 2003 and sold 3 months ago you would have earned much more than with T-bonds.
It's all about money management: Bad investment at a bad time leads poor results.
That being said, I agree that the stock market has not been very good in the last 7 years and that low risk investment performed much better.
Now please explain how and why tax cuts have been detrimental to the stock market...
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 Dr. Zoidberg is jewish (and an important AIPAC donator!)  |
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jpn of Seattle
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« Reply #2 on: January 16, 2008, 07:27:01 PM » |
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Fred, I may be wrong, but isn't it true that running massive deficits (which the tax cuts contributed to) tend to lead to higher interest rates? Which tends to limit economic growth? Isn't it true that if the deficit spending isn't being invested wisely in things like infrastructure, that it is just a liability which the economy has to support anyway? Are you suggesting that reckless and apparently endless deficit spending has no long-term cost?  |
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« Last Edit: January 16, 2008, 07:30:15 PM by jpn of Seattle »
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What you got is everything-and I mean everything—run by the political arm. It’s the reign of the Mayberry Machiavellis. --John DiIulio, former White House official
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Quarken
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« Reply #3 on: January 17, 2008, 01:02:16 PM » |
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There are several reasons why deficit spending is bad for the economy (and the stock market). One of the key reasons is that deficit spending weakens the US dollar (the govt is effectively putting more currency into circulation). That leasts to a disincentive to invest in dollar denomonated assets such as US stocks. As capital moves away from the US, stocks drop. That is largely what you are seeing now.
Of course, the debt service is also a drain on every part of the economy, including individuals & businesses alike. Sooner or later the debt has to be paid, and that cuts into profits, which lowers dividends, which lowers stock prices (defined as the sum of future dividends). That future tax burden is priced into a stock's present value.
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OswaldTheOsprey
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« Reply #4 on: January 18, 2008, 09:33:40 AM » |
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There are several reasons why deficit spending is bad for the economy (and the stock market). One of the key reasons is that deficit spending weakens the US dollar (the govt is effectively putting more currency into circulation). That leasts to a disincentive to invest in dollar denomonated assets such as US stocks. As capital moves away from the US, stocks drop. That is largely what you are seeing now.
Of course, the debt service is also a drain on every part of the economy, including individuals & businesses alike. Sooner or later the debt has to be paid, and that cuts into profits, which lowers dividends, which lowers stock prices (defined as the sum of future dividends). That future tax burden is priced into a stock's present value.
You have described one of one of the many evils of international capitalism. OswaldTheOsprey |
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Urbi et Orbi
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SouthernPlanter
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« Reply #5 on: February 02, 2008, 02:44:50 PM » |
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I have always held that tax cuts do not create economic growth. I found a humorous post on Angry Bear that illustrates the point. 7 years of the stock marketIf in January, 2001 you had placed your investments in 3 month T bills and reinvested the income in 3 month T bills, at the end of December, 2007 your total returns would have been almost exactly the same as if you had invested in the S&P 500 with daily dividend reinvestment. Way to go team Bush. There's no such thing as daily dividend investment and there is no way that T-Bills could achieve what you're talking about. Look obviously you're wrong. From 2003-2007 the growth of the S&P has been far considerably greater than that of T-Bills ... the only difference is that from 2001 we had a better economy that collapsed because of a recession. But ---- that is the strength of the markets; from one vantage point it seems it grows slowly but from the vantage point of those who continue to reinvest their dividends during down markets (2003) they make TREMENDOUS gains that are impossible in Bonds. This thread is trash... |
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SouthernPlanter
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« Reply #6 on: February 02, 2008, 02:48:08 PM » |
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Just to emphasize my point clearly and numerically:
T-Bills 2003 investment would grow from 100 to ~110 in 4 years.
Market investment S&P index fund would grow from 60 to ~120 in 4 years.
T-Bills had 10% growth over 4 years or about....1.5% growth rate....Compound annually.
Market has had 100% growth over 4 years or about 14-15% growth rate....
That is a tremendous difference...you're following the blind here.
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Quarken
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« Reply #7 on: February 08, 2008, 03:26:20 PM » |
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Except that we're not talking about 2003-2007, we're talking about 2001-2007.
Please try to pay attention.
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Fredledingue
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« Reply #8 on: May 10, 2008, 01:08:41 PM » |
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No, the S&P doesn't double in 4 years, you make some 10 ~ 15 % when you are smart while T-Bills are 3.6% per annum.
That's two completely different investments. Like apples and oranges.
Huge debt is a drainon the economy, no discussion about that, but tax cuts are a boost for the economy. If the debt increase by the same amount of the tax cut, there is of course liited benefit on the economy.
That's why tax cuts must come with spending cuts. cutting expenses on the occupation of Iraq would be a good start...
My bet is that the US stock market will seriousely rebound when troops returns from Iraq. In fact, they stated already and the stock market followed up.
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Dr. Zoidberg is jewish (and an important AIPAC donator!) |
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