By: Kent Engelke | Capitol Securities
I believe the mid-term elections will soon become the focus of the markets. I am certain the vitriol will rise to near unprecedented levels. The question at hand… will people listen outside of a concentrated group? Historically, the electorate votes their pocket books and if their pocket books are light, attention is then also focused upon social/cultural issues.
I would like to comment briefly upon President Obama’s remarks in South Africa. The President tentatively endorsed the idea of universal basic income (UBI). This is not the first time he’s spoken of such an initiative. UBI is a potential platform issue with some Democratic candidates.
Simplistically speaking, UBI is the government sending a check to its citizens to “provide dignity and structure and a sense of place and a sense of purpose in life,” according to Obama.
Obama, as with several others, has commented about the potential job losses because of increased technology. This is not the first time leaders focused upon technology and possible job losses in an election.
For example and perhaps most famous is the anti-technology movement led by Ned Ludd in the early 1800’s. His party was called the “Luddities” who believed technology… aka the cotton gin… was destroying jobs. The Luddites destroyed technology in an attempt to protect jobs under the simple premise that the ends justifies the means.
There are several billionaire tech barons who support UBI including Amazon’s Bezos and Facebook’s Zuckerburg. The irony is Amazon did not pay any federal taxes last year and it has been good at minimizing tax payments in Europe. Recently, Amazon vehemently fought Seattle’s employee head count tax, a tax that was deemed as a possible solution to Seattle’s growing homeless problem.
Those endorsing UBI point to Norway as a potential UBI model. The issue at hand, according to Bloomberg, is to have a fund similar to that of Norway, the US would need one totaling $33 trillion. The total net worth of all US households is $100 trillion. The wealthiest 0.1% of Americans holds 22% of the nation’s wealth according to UC Berkley.
Simplistically speaking, even a mass scale expropriation, which would be undesirable and unpopular at best, would not be enough.
Some supporters of the UBI have suggested a “Robot Tax” to pay for workers that are dislocated via technology. To write the obvious, this “robot tax” would predominately fall upon tech companies, some of which pay little or no taxes.
As noted, Amazon vehemently fought Seattle’s head count tax just as Facebook and others fought the Bay Area’s version of its head count tax.
As commented above, workers first vote their pocket book and social/cultural issues only become a primary issue if the pocket book becomes an issue.
A question at hand… will Silicon Valley’s unwavering support for progressive causes wane because of pocket book issues, aka increased taxes to pay for the causes they support vocally, but not financially?
Wow! If this does materialize, today’s tectonic change will take upon an entirely new dimension.
Radically changing topics, the markets were mixed led by gains in financials and industrials. The second day of FRB Chair’s testimony had little impact. Oil ended about 1.2% higher on conflicting interpretations of the inventory data. The 10-year was essentially unchanged.
Last night the foreign markets were down. London was up 0.17%, Paris was down 0.47% and Frankfurt was down 0.41%. China was down 0.53%, Japan was down 0.13% and Hang Sang was down 0.38%.
The Dow should open moderately lower. Some are pointing to trade concerns, others to the strengthening dollar, while others to mixed earnings reports and a strengthening economy, which signals higher interest rates. In my view, it is a combination of all the above. The 10-year is off 4/32 to yield 2.89%.