4/6/11…no hubris here

(Sorry about the delay, internet has been out all morning. TB)

Bloomberg Top Stories:

*Stocks, U.S. Futures Rise on Economy (?); Euro Gains on Outlook, Gold Sets Record High

*Bernanke May Have to Overcome Fed Split on Maintaining Stimulus Past June

*Portugal Taps Bond Investors as Clock Ticks Towards a Bailout

*Europe Diverges From U.S. in Downgrades Exceeding Upgrades

*Commerzbank Leads Slide in Risk of Bank Bond Defaults on Capital Increase

*KKR Barbarians Go Green as Buyout Firms Embrace More Profit in Less Energy

*Libya Rebels Pushed Back From Brega With NATO Criticized for Response Time

*Reviled Obama Health-Care Mandate Was Created by Republicans – oh now we find out!

Yesterday’s volume of just 830 million shares was only achieved in the final five minutes as at that time it stood at just 668 million…and that was with a whopping 408 million share day from Citi…there must have been something driving this surge right? Well if you can find it, it most certainly was not in the trading range of $4.42-$.48!. In fact Citi has been treading water for the last 12 sessions. Over the past 12 sessions volume has now averaged just 860 million shares – 300 million BELOW average and dropping! Still there were 507 new 52 week highs and just 51 new lows while advance/declines and breadth that were only slightly positive. The major indices were mixed and little changed, except the Russell 2000 small cap which advanced just 0.5%.

Ah but Volatility (VIX) still managed to drop further closing at a very  low 17.25 – .25.

Overnight, European equities are higher  about 0.5%),white Asia is slightly weaker with  the Nikkei is off 0.3%.  Hang Seng +0.5%; Korean Kospi -0.2%, Indian SENSEX -0.4%. Futures are weaker ahead of the open: DOW -27; SPX -5; NDQ -16. U.S. Bonds slightly higher in the long end with the 10 year +3.32 to 3.41% and the long bond 4.46% +1/4.

Gold is up $1.30 to $1459.80 after setting a new high of $1462.10 –Silver reached a 31-year high!; Crude is $108.38 +.04 after setting a new rally high yesterday of $108.78. Dollar drifting towards the 3/22 low of 75,249 –  now 75.64 -.30.

Bloomberg Quote of the Day: “Youth would be an ideal state if it came a little later in life.” – Herbert Henry Asquith

…you may not know it but TB takes to heart comments from readers. If you have written him you know that he will respond and not take your head off for voicing an opinion…after all that is exactly what he is doing so why be hypocritical? That is not to say he won’t defend his stance but he will not humiliate because you are doing what he sincerely wants you to do – think for yourself, which is becoming increasingly difficult in a world of one thought communication networks – especially cable! His ‘firing’ by a reader is discussed at the end of the column…without hubris but sadly and respectfully.

Have you seen the Republican Path to Prosperity proposal? If you want to know what is wrong with government you have to consider that this 72 page document could have been expressed in less than five without the rhetoric and false assumptions (just as those of all bills contain false assumptions to make them sound necessary.


This is not to say there are some good ideas in it but it repeatedly comes back to blame Medicare, Social Security, and Obamacare for the problems along with the problems of government waste. It ‘sort of’ puts ‘some’ responsibility on the GOP when it has more than its share of the blame. It also spends an excessive amount of time rehashing problems with FNMA/FHLMC without noting that 90% of the mortgages made today end up with them, while the banks grasp outrageous fees turn them over and still service them for 0.5%…now folks that is one hell of a deal…why isn’t Congress requiring them to hold some of these loans? Instead, it talks of privatizing both…yet after the damning things that have been said of them who in their right mind would buy them? Certainly not a Wall Street firm since there is no longer anywhere to go with the paper without the government guarantee! Oh, and don’t blame just the Dems for this as both contributed heavily to the movers and shakers on both sides of the aisle and got them to do their bidding for them…mostly Dems in the House (for funding), and GOP in the Senate (to prevent adverse regulation)…take your pick of which party was worse…it is moot! Also, the Dems are blamed for wanting every American to own a home yet George W. Bush himself endorsed this AND FNMA/FHLMC in a speech in 2004…so don’t get pious!

As for Obamacare, a Bloomberg article today cites Orin Hatch himself wanting to require ALL Americans to buy health insurance in 1993 when Clinton was proposing regulation to bring down health insurance costs. Hatch now says: it would be a violation “of the very liberties we fought for.” Which is it Orin? Chicken or tuna???

We have privatized health insurance…no made it FOR PROFIT…made hospitals FOR PROFIT. What happens when you do that? How many big donors to hospitals do you get? None, zip, zilch…who wants to be a benefactor to a for profit hospital? Think!!!

In the Path to Prosperity which replaces Contract with America II which was dead on arrival, Congressman Ryan, who TB believes has good intentions as he is already working on a bill with Alice Rivlin to modify Obamacare. Yet the one mandate that the GOP loathes is mandatory coverage yet in Massachusetts, the only state that has this it is essential to making insurers cut costs. The GOP has mocked Massachusetts but it is working there! Under the GOP plan insurers could operate in any state thus creating competition. Instead it would allow insurers to incorporate in the state with the most favorable laws and lax regulation…why do you think so many corportations are domiciled in Delaware???

On Social Security, Ryan admits to the fact that if social security is now bankrupt it is not because the trust fund is but because the money has been used by Congress and replaced by paper in the form of U.S. treasury bills (which are actually worsening the problem since they have been effectively earning ZERO percent for more than two years!). Yet he doesn’t want to lift the cap on contributions – TB believes it should be removed entirely and benefits should be means-tested…none of this is addressed.

But the main flaw…failure…in the plan is that there is a deepseeded lack of understanding of economics in the plan.  First, it would appear that nobody in the GOP has ever heard of the multiplier effect that means that for the loss of every government jobs 3-5 (if TB recalls) private sector jobs are lost…pretty basic, huh?

But by omitting this we are told that this plan will increase private hiring by one million jobs this year and 2.5 million by 2014 with an unemployment rate of just 4%!!! WTF???

This is back of envelope accounting and since as TB has shown while the labor force has grown by 30 million there have been NO net new manufacturing or service jobs. Ibn 1961 there were 15,011 manufacturing jobs, in 1989, 17,995, in 2010 17,755. If the government hadn’t been hiring unemployment would have risen dramatically even during the housing boom which by definition would have been smaller…right? Ah, no problem then…given the lax regulation, which is not included in the PTP proposal, it would still have been a problem but on a smaller scale.

The PTP says that sacrifices must be made for the greater good and longer term prosperity. But where are the sacrifices for those who can most afford it…not even increasing the tax rate from 15% for hedge fund operators and private equity? Just like the last GOP tax plan the benefits go to the wealthy…ah but that is because of the tax code and PTP would change that…really?

Yes, lower the corporate tax rate! For whom? GE and the other multi-natonals who pay NO corporate tax here? Why not take the tax to zero and tax dividends to individuals (this is not in the interest of TB or his clients but it is the right thing to do and must be done)? Gosh, wasn’t Jeff Immelt a great poster child for a commission to encourage small business development? Not!

Ah and simplify the personal tax code. Wait a minute…this has been proposed by every president at least since Reagan…do you think wealthy tax accountants, tax lawyers, H & R Block and others are going to allow this? Gimme a break! It will not and cannot happen. These too are huge contributors to campaigns and have powerful lobbies.

Lobbies…no addressing that…no recording of influence. No stopping the revolving door from Congress/administration/agency to the private sector as was done during the health care reform bill…you know the GOP one that prohibited Medicare buying prescription drugs…where the Senator in charge retired to head up the prescription drug lobby and several of the key staffers went there too. The GOP is going to fix government abuse? Pullease! This makes TB ill.

It also blames the rising price of oil on the government…beats TB how they can be making speculators drive the price higher…

Other than that it is a fine effort…ok, perhaps a few more things that you can write TB with…they would be much appreciated…as well as blowing holes in his arguments.

Just learned that yet another bill is targeting the ‘death tax’ which exempts the FIRST FIVE MILLION already from taxes and allows merely changing the basis so no tax is due until the asset is sold. This is the Steve Forbes B.S. that taxes have been paid. THEY HAVE NOT! No tax has been paid AND depreciation has been taken on assets. Once again the GOP shows its true colors…support their backers…the wealthy! Can you blame them? To hell with the rest of America. Sorry but this infuriates TB.

. . .   –  –  –   . . .

Now to the sad fact that TB lost a reader…and perhaps a friend. What shocked TB was that he, a tax accountant totally agreed with TB on how unfair the preferential tax rate was to hedge fund managers and private equity firms, and he said he had thoroughly researched the tax code and there was no justification for it. But he wrote:

“After reading today’s left-wing rant, I ask you to delete me from our daily political treacle. We have a completely different world view and mine has nothing to do with condescending (sic) to the ‘rich.’ Bill, despite trying to portray yourself as fair and balanced, you are hard core left wing. I do not know many others anywhere who are so far out there.”

TB is being as fair and balanced as can on an issue where the wealthiest class, of which he is one, cannot see that you cannot balance the budget by cutting things that are only to those NOT of interest to their class. This point was well made by Jeremy Stiglitz in the Vanity Fair piece. Why pay for education your kids won’t benefit from…they go to private schools…social security? Who needs it? Police protection? They have it. Health care? They can afford the finest care.

TB does not begrudge them this…but what they fail to see is that one percent cannot reap the benefits of any society at the expense of the other 90% (those in between tread water, but in the end will be punished as the pendulum swings back…TB does not say this gleefully).

Think it over and you decide…any and all comments gratefully accepted.

Have a prosperous day!




  1. Yarnman said

    TB- Am I correct in thinking that, if Citi has a 10:1 reverse split, NYSE trading volume will drop as much as by half?–Yarnman

    • traderbill said

      no a 1:10 reverse split reduces the volume by about 9/10’s since it is almost all flash trading that is going to really impact market volume!

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