2/18/11…down in the valley

…that was where you wanted to be last night if you were a Silicon Valley business – at the home of venture capitalist John Doerr who hosted a dinner for Barack Obama. Now take note of this: it wasn’t a political fundraiser, although he has solid support from Silicon Valley…excluding Carly Fiorina and Meg Whitman who went down to defeat in the November elections.

The significance is that these are people running businesses…ones that actually make things and much of it in America…entrepreneurs not people like the Koch brothers who run rustbelt industries and scoff at safety and environmental regulations. Nor are they like hedge fund operators (a VC is NOT a hedge fund…they create enterprise), who demand and get the same capital gains treatment of their income which adds zero jobs to the economy.

Eric Schmidt from Google was there, Steve Jobs of Apple, Mark Zuckerberg of Facebook, Cisco’s John Chambers, even the controversial Larry Ellison of Oracle. If anyone had something to lose by supporting Obama it would be these folks…all are now billionaires (ok, Zuckerberg only on paper so far), so why are they different?

TB believes it is because unlike those of us who whine and manufacture excessively high tax rates in our minds, these people know that you have to pay people…incent them to want to work and try to get ahead…you cannot do that with 17% of the population unemployed or marginally so! If the talk was to return to 50% plus tax rates neither they nor TB would support it but a mere 2% increase in the marginal rate above $250,000 to perhaps 5% on the top 1% of taxpayers who now pay an effective 22.7% tax rate, which is about the same at middle class Americans who are struggling to make ends meet.

So if you want to get America on track TB believes they have the right idea, not slashing the budget just to make a statement and creating more unemployment…remember a lost federal job also translates to lost private sector jobs tea baggers! It is for this very reason the tea party will self-destruct, as all ‘third parties’ do eventually…and this one isn’t even a legitimate party.

Adding to TB’s list of ways to cut the deficit would be to reinstate the estate tax with a $5 million exemption. Above that all liquid assets would be taxed but capital assets would carry the original basis…not be stepped up…and taxed as capital gain when sold or transferred. It is incredible to TB that people like Steinbrenner and the other two billionaires who died this year pay no estate tax when they were receiving incredible tax treatment while they were alive.

Now a couple of notes:

*Steve Jobs, to TB’s knowledge only made one major error with Apple…that was in not providing access of the source codes to enough programmers so that Microsoft got the bulk of the financial apps. He, or the current management since he is on medical leave, is now embarking on a second by demanding that retailers thru the Apple Store pay 30% of the profit to Apple…for what? If he were a bank and we still had usury laws (more on this later), that is just what this would be!

Today, we learned that the move is being investigated as a ‘possible’ anti-trust violation…which it clearly is to TB’s way of thinking.

*According to CBS local news, Premier Bank (sic) has stopped offering a 59.9% APR credit card! If you doubt the need for usury laws this is the epitome of greed. Where is the Congress on this ever since the Supreme Court ruled the usury laws unconstitutional? We have usurious mortgage rates, overdraft fees, check cashing…even for paychecks from recognized companies because some banks will not cash them if you are not a customer…and this leads to ‘payday’ loans as well as tax refund advances (while preparers were prohibited from doing this they bumped their tax preparation filing fees and are still reaping the profits for expedited service).

*While the GOP slashes education (for college)…at a time when to compete we need a better educated workforce..they have double cut Pell grants to keep the tea baggers happy, they scoffed at Obama’s suggestion to bypass the banks on subsidized student loans which are the bread and butter of the for-profit colleges which are ripping off the taxpayers by recruiting students just for the student loans…then saddling them with unthinkable debt. When they can’t pay it back the providers (banks) collect 100% from YOU!

*JPMorgan’s wunderkind Jamie Dimon says he had not seen the report by the bank on Madoff or that they were selling out of in in mid-2008 as he gets over 1,000 of these reports a year. How come people on top – like Rubin and Prince and O’Neal never seem to be aware of what is going on in their organizations…what to we pay them millions for? But as TB has pointed out there are far too many divisions in JPM, like Citi, that have been found complicit in fraud against investors, municipalities, etc, that a true leader would have sent a message rather than a handslap.

Dimon also blamed the financial crisis on FNMA and FHLMC ‘forcing’ them to make loans…B.S.! Nobody forced them and it was Wall Street’s securitization of loans that created the problem…and as the biggest holder of mortgages the agencies were more vulnerable than anyone else…not that management of both wasn’t corrupt and greedy in their pay and accounting practices. Simon Johnson wrote a piece on this about the audacity of this and that the bank holding companies who are fighting capital/leverage restrictions and would not exist today without being bailed out and the Fed keeping short term rates LOW so they can rebuild capital at the taxpayers expense and the credit quality of the U.S. Treasury!

*The SEC investigation into Galleon, the hedge fund that was trading on and exchanging insider information was 12 years in the making…it was that complex…get a rope…of 26 people from several firms that have been indicted…19 have already entered guilty pleas…TB wants to see them hit hard and destroyed…especially Galleon’s

*Google is on a hiring spree…6,000 people…but a record 75,000 have applied for them!

*Intel now has more people employed in Oregon than California! Taxes immediately come to mind but while there is no sales tax there, property taxes are high…offsetting this is the cost of land there versus Silicon Valley.

*Borders filing of Chapter 11 puts 17,500 jobs in jeopardy with 717 stores in al l 50 states! True, they blew it…it wasn’t due to the economy but their failure to recognize e-books soon enough. The publisher stand to collect perhaps 25% of what is owed to them…

Those are just a few of TB favorite gripes…we are living in a sick society that encourages corruption at all levels and as Sen. Grassley said, without accountability disdain for law is created. Send ‘em all to jail and throw away the key…then send our legistators home and start with a clean slate…but after what we are seeing from the tea baggers it might get worse!

Another dead day in the markets yesterday as 928 million shares, same as Wedesday marked the 12th straight day of below average volume…the entire month to date…people don’t bother whether it is up or down…it will eventually collapse under its own weight. When that happens the oversold bond market will represent an incredible buying opportunity…especially if we double-dip…the possibility of which increases every day – to TB at least.

Enjoy your weekend…even if it is a wet one here in California…while in MN it is in the 40’s!



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