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India's Supreme Court ruled that Vodafone PLC does not owe $2.2 billion in taxes on the acquisition of a majority stake in Hutchison Essar Ltd. The Indian tax authorites were directed to return 25 billion rupees ($500 million) which Vodafone had deposited. With declining foreign investment in India and a lower growth rate of about 7%, this tax case had assumed larger significance. The Supreme Court decision emphasized that taxing Vodafone "would amount to imposing capital punishment for capital investment." Vodafone had difficulties in its Indian operations- a $3.4 billion impairment charge in May 2010 because of strong competition. Vodafone is estimated to have invested $26 billion in India since 2007, and in the fiscal year ending March 2011 showed only $115 million in profit on sales of $3.86 billion.

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Bill Gross of PIMCO has increased holdings of mortgage backed securities issued mainly by Fannie Mae and Freddie Mac in Pimco's Total Return Fund. Holdings were 38% in Sept. 2011, holdings were 52% in Feb 2012. This bet on mortgage securities has enabled this bond fund to show a return of 2.88% in the 1st quarter of 2012. Mortgage bonds are doing well because of expectations that the Fed will setup another program to buy mortgage bonds because of a weak housing market in the U.S. In 2011 the Total Return Fund performance showed a 4.16% return compared to the Barclays Capital Aggregate Bond Index return of 7.84%. Gross has 37% in Treasurys in Feb. 2012. In 2011 Gross hurt returns by cutting back on Treasurys. He has also reduced exposure to emerging market debt and riskier corporate bonds. Holdings of high yield bonds were reduced by 1% to 3% in February 2012.

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The Case-Shiller quarterly U.S. housing price index for the 1st quarter of 2012, shows annual declines in housing prices for 13 of 20 cities. The national numbers for all metro areas in the U.S. showed a 1.9% decrease on an annual basis from the prior year, and decline by 2% for the 1st quarter of 2012 compared to the prior quarter.

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The asset bubble may be due to the huge infusion of liquidity in the economy. This inflates the value of financial wealth in stocks relative to real wealth in goods and services and businesses that produce them. Industrial production is down but stock prices are up. This leads to distortions that can show up elsewhere such as in the currency markets with depreciating dollar or in the stimulus being withdrawn too early.

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The current economic expansion in the U.S. in April 2014 is at 58 months from the beginning of recovery in 2009. In this exceptional account Josh Zombrun of WSJ compares the current expansion to previous expansions since 1950, with the views of experts such as Stan Hall of the NBER committee, which studies turning points. This expansion is forecast to go for 90 months into 2016 by the U.S. Federal Reserve, and 102 months into 2017 by the CBO. Sooner or later, says Stan Hall, some adverse unpredictable event takes place that ends the expansion. So far the expansion has been slow and protracted, as predicted by economists Reinhart and Rogoff from previous financial crises in the last century, giving it room to grow as corporate earnings continue to improve. Fed chairwoman's sense of slack in the economy also provides room for employment and incomes to grow in the later stages of the expansion. This is good news for the emerging market economies such as India and China, and for the European Union, faced with slowing growth. So how does this expansion compare with earlier ones. The expansion of the 1991-2001 of the tech boom was 120 months, 1961-1969 of the Sixties 106 months, 1982-1990 of the Reagan era 92 months. The controversial one on shaky foundations is the recent housing boom 2001-2007 of 73 months ending in a huge bust with the 2008 financial crisis. The shorter expansions are the 1975-1980 Post-Vietnam one for 58 months, and the 1970-1973 spurt before the OPEC price surge. Figures are from the NBER, CBO and the Federal Reserve's Summary of Economic Projections....

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The Case-Shiller Index shows a decline in housing prices of 4.2% in the first quarter of 2011. This follows a drop of 3.6% in the fourth quarter of 2010. Of the 20 cities in the index, 12 were at a post-bubble low in March 2011. The yearly drop for Minneapolis was 10%. Only Washington D.C. showed a rise in March and over the year. Housing prices are at 2002 levels. The Center for Economic and Policy Research estimates a decline of 6-8% for the rest of 2011. The excess supply of housing was estimated at 1.8 million units in April 2010 by the financial Blog Calculated Risk, which used 2010 census data for the estimate calculations. The Conference Board consumer confidence index fell to 60.8 from a revised 66 in April 2011.

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The surge in U.S. airline stocks in 2013-2014 as airlines gain pricing power.