Bill Owens: Confounding And Confusing Events 4/12/21

Secretary Yellen is pushing for a global minimum tax rate for multi-national corporations.  This is all part of the discussion regarding President Biden’s $2.3 trillion infrastructure program.  Many countries, such as Ireland, have very low tax rates which obviously draw multi-national corporations to their shores to take advantage of these rates, and in particular, intellectual property can easily be parked in those jurisdictions with royalties paid by the parent entities to the Irish corporation, and thus, we see dramatically reduced overall tax bills associated with these transactions.  Taking Ireland as an example, would it agree to a minimum tax rate which was significantly higher than the one they currently utilize to attract business, seems somewhat unlikely to me unless there is another carrot out there which is being offered.  The pitch being made by Ms. Yellen is best summarized in the following quote from her subsidiary: “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in the central public goods, and respond to crisis, and that all citizens fairly share the burden of financing government.”  This is certainly a lofty proposition, and it will be interesting to see how it is not only received, but acted upon, or not to.

Even the President of Israel believes Mr. Netanyahu has, at best, a long shot of forming a new government since he only brings 30 seats to the party, and with his normal group of collaborators he only gets to 52 seats, which means he needs another 8 seats in order to form a government.  It seems unlikely that this will happen, and that creates ongoing chaos.  One of the surprising aspects of this, of course, is Mr. Netanyahu is under indictment and on trial for corruption, but at the same time the government, generally speaking, is functioning at a reasonable level of performance.  One never knows, and we will have to wait to see what happens, but they are certainly an important player on the Middle East stage.

Andrew Giuliani announced that he was considering a run for Governor, although he is a “political novice”, he has worked, to some extent, on the Trump campaign in the administration, and obviously, his father has a long, if confused, political career.  The other potential nominees include Rob Astorino, who ran in 2018, and Lee Zeldin, a Congressman from Long Island.  Absent from that group is Ms. Stefanik who has been the most vocal critic of Mr. Cuomo in recent months.  She was called out recently by the Times Union for attacking Mr. Cuomo, but having nothing to say about Congressman Gaetz, that is also consistent with her behavior as she sees no need for consistency in her bipartisan attacks. 

In the publication “Dairy Herd Management” this past week there was a discussion of what will be the export activity of the dairy industry in 2021.  In 2020, the industry exported more than $6.5 billion of dairy products despite COVID.  The article discusses the fact that the US dairy industry is very efficient, and is, therefore, set up more than many other countries to become engaged in significant export activity.  This would certainly help bolster milk prices in the US since the export of the product should help supply decrease in the US and thus, prices should rise.  Let’s hope that this article is accurate and that our dairy farmers see a significant increase in milk prices. 

The US trade deficit jumped 4.8% to $71.1 billion in February of this year.  The impact of a trade deficit is always considered a negative, although if, in fact, both exports and imports are growing, that is a net good sign.  Maybe not as healthy as we would like, but it is a step in the right direction, and let’s hope the trend continues for both import and export increases. 

The Federal Reserve Bank of New York recently did an analysis of how households are using their stimulus checks with some interesting results, particularly when one looks back over the three stimulus programs.  The facts that are of particular interest are the average percentage spent, the average percentage saved, and the average percentage used to pay down debt.  The first category, average percentage spent, went down from June of 2020 from 29.2% through January and the latest is down to 24.7%; while the average saved started at 36.4% and increased to 41.6% for the most recent stimulus; and the average paid toward debt moved around a bit, it was 34.5% last June, 37.4% in January and 33.7% in March.  The utilization of the funds obviously has an impact on the economy, and raises a question as to whether or not these payments will have the desired effect of jump starting the economy, or continuing its upward trajectory.  Certainly, the idea of saving is good because people at this point are somewhat unsure as to how this is going to continue to unfold, at least for the rest of 2021.  In any event, interesting information and it is beneficial to be able to review it even if the conclusions are not clear.

Last week over 700,000 people applied for first time unemployment benefits.  This is a little bit confounding because the week before over 900,000 jobs were filled.  So clearly the economy is moving in every direction, up, down and sideways. 

An archeological discovery of some significance was made recently when the City of Luxor was discovered by archeologists in Egypt.  This city is approximately 3,400 years old, and was built by Amenhotep III, but abandoned by his son and contains stunningly preserved remains as reported by National Geographic.  These discoveries always fascinate me, and what is gleaned from them continues to amaze.  As we learn more about ancient civilizations, the better we are prepared to move forward with our own.  It is a worthy read. 

It appears that Joe Biden is appointing folks, not lots, but some who are more indoctrinated than one might have anticipated from him.  He has made a number of other surprising moves, not the least of which was his announcement that he is prepared to negotiate significantly on the infrastructure bill but is not prepared to wait.  We can only look back at Mr. Trump’s administration which had the capacity to do the same thing but because of the chaos within, it took him a greater period of time to shove things down Democrats throats.  Nonetheless, that is exactly what they did, and now they are whining.

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