This piece is written by a third party because we think highly of the author and their perspective.
When Does the Game Stop?
To learn more about Epsilon Theory and be notified when we release new content sign up here. You’ll receive an email every week and your information will never be shared with anyone else.
Continue the discussion at the Epsilon Theory Forum
Participants
The Latest From Epsilon Theory
DISCLOSURES
This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results. Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results. Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
“The $150,000 joint AGI limit on stimulus checks is absurd”
It could be the other way around, that it is best to send stimulus checks to everyone, even Jeff Bezos. Why do such a seemingly mad thing? If the people who are wealthy enough not to need a stimulus check are a small enough percentage of the population (say 2% of the population), the administrative cost and delay of figuring our who is and is not to receive stimulus checks might be more than the cost of including the wealthy and the rich people stimulus checks. After all it only costs 2% more to include the most wealthy 2%.
Also it won’t change their spending by much, if at all, so it’s not going to increase inflation.
And if you really care, claw it back under the tax code. The wealthy and the rich will be filing tax returns anyway.
It should be indexed to the filing status (including children) and local poverty level or median income. 100k for a family in a major city isn’t rich. 100k for a family in a rural area most likely is. I agree your approach is also viable, not that we will likely get tax code reform soon.
I think derivatives are going to be the next MBS / CDO. It’s not that they’re inherently bad, but they obscure and multiply effects to an extreme level. If all transactions cleared instantly, perhaps not, but at high volumes we’ve shown they don’t.
Look at the GME / SPX movements during the heights of the squeeze. They invert themselves to a fair degree. This is a recently 2B company (< 30B at peak insanity) which seemed to have a measurable effect of a diverse set of industries with total market cap over 1,000 times the size (at 31T). That is not good.
“The $150,000 joint AGI limit on stimulus checks is absurd (at more than twice the median household income)!”
This is unbelievably cringeworthy. Imagine being so out-of-touch that you think a global pandemic isn’t brutal and decimating for an individual who makes $100,00+. As if making barely six figures somehow insulates your business, your profession, or your family from what happened.
It makes rational sense to either have a steep reduction to qualify for stimulus checks or pay everyone to save admin costs. After all $1000 is 10% of a McDonald employee income and .00000000% of Elon’s pile of equity.
However in the real world, sending checks to billionaires would not sell on the left and paying $1000 to “illegals” will get the right riled up.
Paying higher middle class earners stinky is a dog bone to preempt disgust from all those that think the Poors are nothing but lecherous minority welfare queens lazily feeding off the sweat of white suburban work ethic and enterpreneural sweat.
Often, the mathematically rational choice is politically harder than it looks.
An upfront apology for responding to a single issue rather than the article as a whole, but I think it is worthwhile in this instance.
The statement “The $150,000 joint AGI limit on stimulus checks is absurd” comes across as an opinion dressed up as fact in this article. Considering what is on the line, we should all ask for supportive facts before letting this assertion be upgraded to fact. Calling it profligate and irresponsible does not make it so.
I understand from this article that the author feels strongly that fiscal stimulus of this kind will lead to overheating of equity markets and the economy in general, but I am not clear on his evidence for thinking that it will. His further speculation that this will lead to higher interest rates sooner, is also speculation considering the new “average inflation” approach and requires further supportive facts in order to be taken seriously. It is not that I completely disagree, far from it. But the “fix” presented i.e means testing of some sort, is a cost and consequence-free alternative, and this is far from true.
The author clearly feels that government stimulus should have a strong element of “means testing” in order to be palatable to him. Considering that means testing has many, well-documented, real-world costs and disadvantages, we should make good use of our clear eyes and full hearts before allowing arguments based on a strong preference for means testing to be dressed up as fact-based fear of inflation.
Means tested government support is not just more expensive to run, it also encourages very expensive “gaming” of the system which leads to economically relevant decisions such as number of children, and absences from the work force (i.e. tax generation for the country). The fact that many of these “choices” are hard to track economically, is not an argument against them - but rather an argument for digging deeper than GDP when conducting research.
Perhaps more importantly, I think so certainly, means tested programs also become difficult to maintain politically, as those people with resources and motivation to involve themselves politically are excluded. The proverbial skin-in-the-game is removed, and hence the overall likelihood of success for any program. Surely we are past the point of thinking that different socio-economic classes are not inter-dependent…a certain virus comes to mind.
Considering where we are at this particular moment, where inequality of just about anything you can think of (opportunity, outcome etc. etc.) it seems like an odd time to be irrationally concerned with higher inflation and interest rates.
It may not be irrational at all, but if so, the assertion should at the very least be supported by facts. Without these facts, it looks a lot like a political conviction about the role of government and lack of empathy for existential-level issues (unrelated to interest rates) on both an individual and population level.