June's Top Reads from Pathlight Investors
Pathlight Investors’ Top Recommended Reads - June 2013
Ready for more great articles? Here's some of the best we've found around the web during the last month. Enjoy!
US tax reform – Roll Call highlights how the two most important people in Congress when it comes to tax matters, Rep. Camp and Sen. Baucus, have committed to working on the issue. “Where they seem to be heading is a model like the historic 1986 tax overhaul that lowered the top individual rate from 50 percent to (effectively) 33 percent and the corporate rate from 48 percent to 34 percent, closing dozens of loopholes to accomplish the feat” (http://goo.gl/cUvNs). (recall over the weekend the Washington Post wrote about how Republicans were doing to deemphasize entitlements going forward and instead focus on changing the tax code http://goo.gl/pAFdt).
Bonds vs. stocks – is the great rotation finally happening? "We've been waiting for the great rotation out of fixed income… everything we see in fixed income is all risk and no return - people are starting to wake up…. I think they're [investors] coming back to their senses, which is one of the reasons we're seeing that great rotation - these large asset allocations out of fixed income into equities - look for that to continue going into the rest of the year” – CNBC http://goo.gl/3i3NC
Don’t fear tapering – “On Second Thought ... Maybe Fed Tapering Won't Be So Bad” – “The Fed's eventual throttling back on the liquidity injections might indicate a much stronger economy—and that could be good for cyclical stock” – CNBC http://goo.gl/7HVnn
Mortgage rate increase could actually help housing – “Surge in U.S. mortgage rates could force buyers off the fence” – CNBC http://goo.gl/OIx43
Rising economy shifts ’14 election landscape. The backdrop could benefit Democrats and challenge Republicans. Politico http://goo.gl/lgpCS
Debt ceiling debate is likely going to be pushed to Sept or Oct as a result of higher Fannie/Freddie payments – Politico http://goo.gl/Pvpsp
Central banks – big overview article in the NYT looking at the Fed, ECB, BOJ, and BOE. All the world’s central banks have embarked on massive rounds of accommodation but growth so far remains tepid. The article’s tone was dovish, implying that the Fed would be slow to withdraw its easing while other banks, such as the BOE, are looking at doing more. The ECB has been among the most cautious of the big global CBs although it too is looking at ways to help spur growth. The article on the whole doesn’t have a ton of incremental information although it does highlight the limits of central bank power. NYT http://goo.gl/F6vYo
Germany is embracing deficit spending – according to Der Spiegel, Berlin is shifting its tone re austerity and increasingly is looking for ways to drive growth throughout Europe. "If we don't act now, we risk losing an entire generation in Southern Europe," say people close to German Fin Min Schäuble. Merkel and Schäuble are willing to abandon ironclad tenets of their current bailout philosophy. In the future, they intend to provide direct assistance to select crisis-ridden countries instead of waiting for other countries to join in or for the European Commission to take the lead. http://goo.gl/arqCm
Fed issued warnings – a group of bankers that advises the Fed (the “Federal Advisory Council”) has issued warnings over farmland prices and student loan debt balances. “Agricultural land prices are veering further from what makes sense… members believe the run-up in agriculture land prices is a bubble resulting from persistently low interest rates”. “Recent growth in student-loan debt, to nearly $1 trillion, now exceeds credit-card outstandings and has parallels to the housing crisis” – Bloomberg http://goo.gl/KXeRQ
Demographics – positive Barron’s cover story – the Millennial generation could help drive economic growth and higher stock market prices. The Millennials aren’t as hopeless as many fear and over the coming years will be saving more (which will help drive stocks higher) and forming families. The Millennials total ~86MM and are ~7% larger than the Baby Boom generation. http://goo.gl/iyTeT
And On A Lighter Note…
Businessman pays $398,500 for Belgian racing pigeon: http://goo.gl/o5vq