{"id":8123,"date":"2011-07-05T09:04:30","date_gmt":"2011-07-05T13:04:30","guid":{"rendered":"http:\/\/www.technologyinvestor.com\/?p=8123"},"modified":"2011-07-05T14:34:45","modified_gmt":"2011-07-05T18:34:45","slug":"time-to-edge-back-in","status":"publish","type":"post","link":"https:\/\/www.technologyinvestor.com\/?p=8123","title":{"rendered":"Time to edge back in."},"content":{"rendered":"

Maybe it was the\u00a0 great weekend.\u00a0 My daughter and son-in-law visited. Maybe it was Francis’s great party and super-great fireworks? Maybe it was the nice, warming book I read? (See below.) Maybe it was the set I got off Skip? Maybe it’s this nice piece from the Wall Street Journal.<\/p>\n

But I feel more confident about the stockmarket — especially as we move into second quarter earnings season, now coming up.<\/p>\n

Companies aren’t stupid. They see a tough U.S. economy. They’ve cut expenses, increased productivity. They see burgeoning overseas markets and they move more sales there.\u00a0 Hence today’s\u00a0 Wall Street Journal piece:<\/p>\n

Profits Thrive in Weak Recovery<\/strong><\/p>\n

While the U.S. economy staggers through one of its slowest recoveries since the Great Depression, American companies are poised to report strong earnings for the second quarter-exposing a dichotomy between corporate performance and the overall health of the economy.<\/p>\n

Two years after the official end of the recession, a range of indicators show that the economic recovery has been the worst, or one of the worst, since the government began tracking such data after World War II: Unemployment is too high, bank lending necessary to spur spending is too low, home prices are depressed while household expectations for financial well-being are near record low levels. Many economists predict the sluggish rebound may continue for years.<\/p>\n\n\n\n
Now reporting:
\n<\/strong>Track the performances of 150 companies as they report and compare their results with analysts’ estimates. Sort by date and industry.<\/span><\/p>\n

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Profits Thrive in Weak Recovery<\/p>\n

While the U.S. economy staggers through one of its slowest recoveries since the Great Depression, American companies are poised to report strong earnings for the second quarter-exposing a dichotomy between corporate performance and the overall health of the economy.<\/p>\n

Two years after the official end of the recession, a range of indicators show that the economic recovery has been the worst, or one of the worst, since the government began tracking such data after World War II: Unemployment is too high, bank lending necessary to spur spending is too low, home prices are depressed while household expectations for financial well-being are near record low levels. Many economists predict the sluggish rebound may continue for years.<\/p>\n

How Have the 10 Largest U.S.-Stock Funds Done So Far? <\/strong>Because one of my managers did so miserably in the first half, I was fascinated with this piece from Morningstar on how the big funds had done. Pretty well is the simple answer.<\/span>
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Morninstar commented on all the funds. Here’s what they ssaid about the best performer:<\/p>\n

7.<\/strong> \"\" Fidelity Growth Company<\/strong><\/a> (FDGRX<\/a>) 10.2% return, 3% percentile rank<\/strong>.
\nSteve Wymer’s fund is the star performer of our group of 10 for breaking into double digits. He got there by taking on more risk than any of the other funds on the list, and it paid off. The closed fund sports names, such as \"\" Lululemon<\/a> (LULU<\/a>), \"\" Salesforce.com<\/a> (CRM<\/a>), \"\" Red Hat<\/a> (RHT<\/a>), and \"\" Alexion<\/a> (ALXN<\/a>), that you won’t see in the other portfolios. Not surprisingly, the fund also led this group of giants in the snapback year of 2009. Wymer buys [more] smaller, faster-growing companies than you’ll see in the other funds here.<\/p>\n

Wondering about Greece. <\/strong>The Europeans are still futzing about Greece. Without huge new money, Greece could hurt the European Union and the Euro. This piece from the New Yorker’s James Surowiecki explains much.<\/span>
\n<\/strong><\/span><\/p>\n

The Financial Page
\nDodger Mania
\nby James Surowiecki July 11, 2011<\/p>\n

Greece is a fairly small country, but for the past year it has been causing an awfully big uproar. Burdened by a pile of government debt that could force it into default (and the European banking system into a meltdown), Greece has had to adopt ever more stringent austerity plans in order to secure a bailout from the European Union. Explanations of how Greece got in this mess typically focus on profligate public spending. But its fiscal woes are also due to a simple fact: tax evasion is the national pastime.<\/p>\n

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According to a remarkable presentation that a member of Greece\u2019s central bank gave last fall, the gap between what Greek taxpayers owed last year and what they paid was about a third of total tax revenue, roughly the size of the country\u2019s budget deficit. The \u201cshadow economy\u201d\u2014business that\u2019s legal but off the books\u2014is larger in Greece than in almost any other European country, accounting for an estimated 27.5 per cent of its G.D.P. (In the United States, by contrast, that number is closer to nine per cent.) And the culture of evasion has negative consequences beyond the current crisis. It means that the revenue burden falls too heavily on honest taxpayers. It makes the system unduly regressive, since the rich cheat more. And it\u2019s wasteful: it forces the government to spend extra money on collection (relative to G.D.P., Greece spends four times as much collecting income taxes as the U.S. does), even as evaders are devoting plenty of time and energy to hiding their income.<\/p>\n

Greece, it seems, has struggled with the first rule of a healthy tax system: enforce the law. People are more likely to be honest if they feel there\u2019s a reasonable chance that dishonesty will be detected and punished. But Greek tax officials were notoriously easy to bribe with a fakelaki (small envelope) of cash. There was little political pressure for tougher enforcement. On the contrary: a recent study showed that enforcement of the tax laws loosened in the months leading up to elections, because incumbents didn\u2019t want to annoy voters and contributors. Even when the system did track down evaders, it was next to impossible to get them to pay up, because the tax courts typically took seven to ten years to resolve a case. As of last February, they had a backlog of three hundred thousand cases.<\/p>\n

It isn\u2019t just a matter of lax enforcement, though. Greek citizens also have what social scientists call very low \u201ctax morale.\u201d In most developed countries, tax-compliance rates are much higher than a calculation of risks would imply. We don\u2019t pay our taxes just because we\u2019re afraid of getting caught; we also feel a responsibility to contribute to the common good. But that sense of responsibility comes with conditions. We\u2019re generally what the Swiss behavioral economist Benno Torgler calls \u201csocial taxpayers\u201d: we\u2019ll chip in as long as we have faith that our fellow-citizens are doing the same, and that our government is basically legitimate. Countries where people feel that they have some say in how the state acts, and where there are high levels of trust, tend to have high rates of tax compliance. That may be why Americans, despite being virulently anti-tax in their rhetoric, are notably compliant taxpayers.<\/p>\n

Greeks, by contrast, see fraud and corruption as ubiquitous in business, in the tax system, and even in sports. And they\u2019re right to: Transparency International recently put Greece in a three-way tie, with Bulgaria and Romania, as the most corrupt country in Europe. Greece\u2019s parliamentary democracy was established fairly recently, and is of shaky legitimacy: it\u2019s seen as a vehicle for special interests, and dedicated mainly to its own preservation. The tax system had long confirmed this view, since it was riddled with loopholes and exemptions: not only doctors but also singers and athletes were given favorable rates, while shipping tycoons paid no income tax at all, and members of other professions were legally allowed to underreport their income. Inevitably, if a hefty chunk of the population is cheating on its taxes, people who don\u2019t (or can\u2019t, because of the way their income is reported) feel that they\u2019re being abused.<\/p>\n

The result has been a vicious circle: because tax evasion is so common, people trust the system less, which makes them less willing to pay taxes. And, because so many don\u2019t chip in, the government has had to raise taxes on those who do. That only increases the incentive to cheat, since there tends to be a correlation between higher tax rates and higher rates of tax evasion.<\/p>\n

Even while dealing with protests and open riots, the new Greek government is trying to change things. It is rationalizing its tax-collection system. It has simplified taxes and done away with some of the loopholes. And it has stepped up its enforcement efforts in ways large and small\u2014tax officials have, for instance, been sending helicopters over affluent neighborhoods looking for swimming pools, as evidence of underreported wealth. These efforts have made some difference: the self-employed seem to be reporting more of their income, and the evaders have had to step up their game. (There\u2019s now a burgeoning market in camouflage swimming-pool covers.)<\/p>\n

But a social inclination toward tax evasion, once established, is hard to eradicate. One fascinating study, by the economist Martin Halla, showed that tax morale among second-generation American immigrants reflected their country of origin. And getting tough can backfire. Research suggests that overemphasizing enforcement can actually weaken tax morale, by making taxpaying seem less like a freely chosen part of the social contract.<\/p>\n

The reason tax reform will be such a tall order for Greece, in sum, is that it requires more than a policy shift; it requires a cultural shift. Pulling that off would be quite a feat. But the future of the European Union may depend on it. \u2666<\/p>\n

Favorite recent New Yorker cartoons.<\/strong><\/span><\/p>\n

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Harry Newton who loved this book. It’s a big plug for Zappos and its philosophy of success. But heh, it worked. He sold Zappos to Amazon for $1.26 billion. The book is worth reading.<\/p>\n

\"\"<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Maybe it was the\u00a0 great weekend.\u00a0 My daughter and son-in-law visited. Maybe it was Francis’s great party and super-great fireworks? Maybe it was the nice, warming book I read? (See below.) Maybe it was the set I got off Skip? Maybe it’s this nice piece from the Wall Street Journal. But I feel more confident […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-8123","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/posts\/8123","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8123"}],"version-history":[{"count":0,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/posts\/8123\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8123"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8123"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8123"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}