1/19/12…capital and Capitol gains

TB Saiz: “united we stand, divided we fall” (memo to GOP…better try centrist approach!)

 

Bloomberg Top Stories:

*Morgan Stanley Reports Smaller-than-Expected Loss on Trading; Shares Rise

*Morgan Stanley Raises Investment Bank Compensation Pool 3% to $7.2 Billion

*Bank of America Swings to Fourth-Quarter Profit as Lender Rebuilds Capital

*U.S. Index Futures Rise on Banking Profits as European Stocks , Euro Gain

*Dimon Joins Blankfein Predicting Markets to Rebound as Rivals Pull Back – right or wrong?

*S&P 500 Climbs Most Since ’87 as Bernanke Economy Weathers Europe Concern

*Treasury Repo Rates Surge Amid Increase in Debt Supply – can Fed reign it in?

*Banks Flush With $623 Billion ECB Cash Beating Sovereigns – that is risk averse!!!

*BlackRock Fourth-Quarter Net Income Falls 16% as Markets Drive Fees Lower

*RBS Says Former Trader in Singapore Sought to Manipulate Libor for Profits – swell!!!

*Kodak Files for bankruptcy as Shift to Digital Undermines Pioner of Film

*Nike Gets Prime Central Athens Shop Space for 43% Less Than Former Tenant! Deflation?

*Builder Confidence, Shares Bolster Case for U.S. Housing – if only people could afford it!

*Phoenix Housing Prices Rise as Canadian Buyers Seek 55% Discount in the Desert

*Santorum Won 34 Votes More Than Romney in Iowa, Des Moines Register Says

*Obama’s Rejection of Keystone Pipeline Permit Sets Up Election-Year Battle

*Freshman Applications at Top U.S. Universities Fall Amid ‘Impossible’ Odds  

 

Volume rose to an average 4.07B shares from 3.56B on a strong session except Utilities which were unchanged. Tomorrow is options expiry! NYSE stocks executed on the Big Board slipped further to 798M shares from 811M shares, still about 200 million short of the twelve month average and raising questions of whether yesterday’s rally was options expiration driven. 432 of the last 46 sessions have been less than 1B! Advance/Declines were very positive: +3.9:1 vs +1.5:1 vs -1.9:1 vs +1.7:1 vs +1.2:1 vs +3.3:1 on NYSE and +3.3:1 vs+3.3 vs +1.2:1 vs -2.1:1 vs +1.5:1 vs +1.5:1 on Nasdaq. Breadth was similar: +6.9x vs +1.1x vs -3.2x vs +1.4x vs +2.1x vs +4.2x on NYSE and +4.5x vs +1.4x vs -1.8x vs +2.1x vs +1.4x on Nasdaq. New 52 week highs were slightly lower at 225 from 242 while new lows dipped to 35 vs 47. The ratio is now about 7x positive. The S&P VIX reversed Tuesday’s rise closing 20.89 -1.31.

Here are the results of the past five sessions: Dow +0.8% vs +0.5% vs -0.4% vs +0.2% vs -0.1%; Transports +1% vs -0.1% vs -0.6% vs +0.3% vs +0.5%; Dow Utilities FLAT vs +0.2% vs -0.1% vs flat vs -0.4%; S&P 500 +1.1% vs +0.4% vs -0.5% vs +0.2% vs flat; Nasdaq Composite +1.5x vs +0.6% vs -0.5% vs +0.5% vs +0.3%; Nasdaq 100 +1.4% vs +0.9% vs -0.4% vs +0.4% vs +0.2%; Russell 2000 +1.8% vs +0.2% vs -0.8% vs +0.4% vs +0.3% vs +1.5%%; NYSE Financials +1.6% vs +0.1% vs -0.8% vs +0.6% vs +0.6%. NYSE Leaders:  BAC +4.9% vs -2.1% vs -2.7% vs -1.2% vs +3.6% vs +5.7%!!! vs 1.5% vs -2.1% vs +8.6%; C +2.9% vs -8.3%!!! vs -2.7% vs +1.1% vs +4.2%; JPM +4.7% vs +-2.9% vs -0.8%; GE +1.5% vs -0.7% and yes it is really a financial stock!

 

Global equity markets stronger: FTSE +0.6% vs -0.1% vs +0.9% vs -0.3% vs +0.2%; CAC40 +1.7% vs -0.2% vs +1.6% vs +0.8% vs +1%; DAX +0.8% vs +0.2% vs +1.9% vs +0.1% vs +1.2%; Nikkei +1% vs +1% vs +1.1% vs +1.4% vs -0.7%; Hang Seng +1.3% vs +0.3% vs +3.2%!!! vs +0.6% vs -0.3%; Korean KOSPI +1.2% vs flat vs +1.8% vs +0.6% vs +1%; Indian Sensex +1.2% vs -0.1% vs +1.7% vs +0.7% vs -0.9%. U.S. Futures modestly higher: DOW +40; SPX +5 ; NDQ +10. Bonds weaker and falling: 10’s and 30’s still well below 2% and 3% respectively. 10 yr 1.94% -5/16. RECORD low 9/23 of 1.6855%; 30 yr 3.00% -7/8; Long TIP 0.74 -1-1/2!!! 0.57% at high. The 5 yr TIP yields MINUS 1.01%; 10 yr -0.17%. 3 mo. Libor 0.56%, and 0.79%, steady. Bills 0.02% 1 month; 0.03% 3 months, 6 months 0.06%. Reverse Repo 0/25%

Gold closed higher again, well above the 200 day ($1638) and has been above $1600 for SIX straight sessions. It closed at $1659.90 +$4.30. The high was $1670, highest since 12/13 and it is now $1662.40 +$2.50. The record high is $1923.70, a buying climax on 9/6. RES is $1678, the 50 day, support $1652, the 40 day m/a, all rolling over. Crude closed slightly lower at $100.59 -.12. It is now $101.90 +$1.31. Support is $100, then the 40 day (99.29) and the 50 day (99.05), major support.

 

…just when you thought Romney had things sewn up, the social conservatives of S.C. threw a monkey wrench into the works…time to head for Florida. Two out of three are now effectively ‘dead heats.’ Florida should go to Romney…or will it?

 

Since sadly the GOP believes that having wealth is indicative of building the economy, and places little value on earned income, perhaps it is time for the to reevaluate capital gains as they wage their war towards achieving the Capitol. Not only is that battle in serious doubt, due to their own blunders, so is their control of the House, or at least that is what the polls indicate…and remember redistricting takes effect, which will give both parties pause.

 

Capital gains need to be redefined…especially the ‘carried interest’ exemption which flies in the face of the rest of the tax code: it is ordinary income not capital gains and should be taxed accordingly…this represents billion of lost income as hedge fund operators benefit from this farce. By the way that is not just TB’s opinion, but tax experts he has contacted.

 

Put no tax on capital gains on new businesses for the first five years that do two things: produce something, and create jobs! At the end of five years the adjusted value of the business would become the tax basis of the company.

 

Next comes the dividend tax treatment…this one is more complex, and TB concurs with the late Franco Modigliani, Nobel laureate, who had more sense than most other economists combined. Tax dividends as ordinary income…after all they are strictly PASSIVE income, BUT eliminate corporate taxes…a hard sell but most don’t pay any anyway. This would do to things: eliminate the double taxation of dividends and force companies to examine expenses, like that corporate jet that is the toy of CEO, while keeping the ones that get high use.

 

Larry Kudlow did us a disservice (as has Arthur Laffer), in misrepresenting to Congress that millions of Americans own stocks that pay dividends…true…but with the exception of the wealthiest, most of it is in IRA’s and 401(k)s which will eventually be taxed as ORDINARY income, thus benefitting the wealthy in what is clearly passive income.

 

Eliminate the farm subsidy and especially ethanol while eliminating the tax on imported ethanol from Brazil which is produced efficiently and at the same time adopt a new energy policy, something every president over the past fifty or more years has failed to do, due to oil interests, which have made us dependent on imported oil. At the same, time, natural gas is about as cheap as it has ever been, it is cleaner and more efficient and we have huge supplies with it. That and our shale oil, could make a huge dent in the balance of payments.

 

A second part of this would be a program to build natural gas pumps at stations across the country which would create massive jobs and be an infrastructure investment. We need loads of that…not bridges to nowhere, but improved highways and of course the energy grid. Why isn’t this being done?…these are things that would increase jobs and create positive tax flows.

 

Perhaps you have some ideas…these are just a few of TB’s favorite things…

 

. . .   – – –  . . . note that the same old SOS applies…perhaps more so!

TB has said several times that it is disgusting to blame Obama for things beyond his control when there are enough things he has done wrong that they don’t have to make them up.

 

The most disgusting is the GOP’s continual blaming of the deficit on him when in fact it was created by George W. Bush and the GOP controlled Congress for eight years. How many times have you heard an interviewer ask a GOP ‘leader’ to correct this and they refuse? Second, is their willful destruction of any form of universal health care despite the fact that Obamacare isn’t that far away from many of the prior GOP proposals. No, it has been their insistence that the private sector does it better and that the states are better suited to do it that is misleading. First, if free market capitalism truly existed…the key difference is in looking at long term effects on companies and not profiting from short-term ill-designed ventures at the expensed of long-term shareholders: the principal recipients being the management which only serves for a few years, has NO skin in the game, and is rewarded generously for failure. Instead, we have crony capitalism where they have bought the government and thus it does nothing to impede greed.

 

To TB, who voted for him, Obama stopped being a changer, on Inauguration Day, has failed to try to gain the support of  the GOP, ( if that was ever possible once the Tea Party emerged), and thus failed to be a leader at a time we desperately need a leader. Sadly, TB can’t point to one true leader out there…Jon Huntsman might have been that man but now we will never know…or at least not for four more years. Preservation of the status quo is a goal that will result in its demise…you can’t change perception from reality…far too many people are suffering.

 

Have a great day!

 

 

TB

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