9/24/14…don’t tax corporations…tax people?

Quote of the Day from the Friars Club Encyclopedia of Jokes: “Not only is there no God, but try getting a plumber on weekends.” – Woody Allen

Bloomberg Quote of the Day: “Jealousy is the tribute mediocrity pays to genius.”

– Bishop Fulton J. Sheen

Bloomberg Top Stories:

*Yellen Warning About Unpredictable Rate Timetable Is Ignored by Investors – mistake!

*S&P 500 Index Futures Signal a Rebound as European Stocks Rise – dead cat bounce!

*Pfizer Still Pursuing Inversions Shows Companies Not Deterred by Treasury – see commentary

*Moscow Trading Desks Split by War as Stocks Eclipse Atrophying Bond Market

*Saudi Stocks Lead Middle East Declines on Concern Over Islamist Reprisals

*Lust for IPhone Revives Underground U.S. Device Market as Inventory Lags – lust???

*Wal-Mart Moves Deeper Into Banking With Green Dot Checking-Account Offer – pass!

*Putin Market Freeze Eases After Nine Auction Cancellations – let them suffer!

*Goldman Sachs Currency Trader Parikh said to Join Hedge-Fund Balyasny

*BlackBerry Debuts Square Passport Phone as Chen Seeks Business Customers

*Never Mind What Jack Lew or Bill Clinton or Dave Camp Say – at their own peril

*Potential Ebola Cure ZMapp Sat Dormant Within U.S. Bureaucracy From 2010

*Obama Embraces Role of Indispensable U.S. Confronting Islamic State, Ebola – indispensable?

*Khorasan Group’s Recruiting in U.S., Europe Propels It as Terrorist Threat

*Three French Islamists Fee After Police Waited at Airport 534 Miles Away – ???

*Hillary Clinton Leads $600 Million Education Push for Disadvantaged Girls


Tuesday’s Market Summary:

Yet another bad day and once again on above average volume – NYSE stocks AND those traded on the NYSE floor! All indices down led by the Russell 2000 -0.9%, and closely followed by Dow Transports -0.8%…and get this: next was the Dow 30 -0.7%! The rest were down from 0.2% (NDQ 100) to -0.6% (S&P 500). A/D’s and Breadth were negative again, and new 52 week highs came very close to their low of the year: 39! New lows slipped a tad but to a still very high 293! The VIX went on a tear hitting 14.94 then closed just .01 below that! Bearish!

Total NYSE Volume stable at an above average 3.27B shares vs 3.3B vs 4.65B (3rd highest of last 12 months) vs 3.2B vs 3.14B. Real NYSE Volume rose to an above average 719M shares from an average 697M vs 1.85B – highest since 3/21 – vs 676M vs 668M. Only the second 700M+ day in 27 sessions! There have been just five sessions above 800M since 4/28! The 12-month average is a historically weak 696M shares. Since 4/30 the average volume is just 662M and that boosted by Friday’s volume. 12 month high is 2.06B shares on 9/20/13!

A/D’s were negative for a third session! NYSE: -2.4x vs -4.7x! vs -1.5x vs +1.6x vs +1.1x; Nasdaq -2.3x vs -3.9x! vs -1.9x vs +1.5x vs +1.3x. Breadth was similar: NYSE -2.5x vs -5.4x!!! vs -1.6x vs +1.2x vs +1.1x; Nasdaq -2.3x vs -4.4x!!! vs -2.2x vs +1.7x vs +1.6x. New 52 Week Highs plunged again to an extremely weak 39!!! vs 63 vs 222 vs 205 vs 146 vs 84 vs 59 – recent range is now 39-580!!! New Lows however rocketed to 329!!! vs 237! vs 159 vs 125 vs 186 – recent range is 24-260! S&P VIX hit 14.94, closing just below at 14.93 +1.24 (+9.1%!). Only Friday and Monday have been below ‘13’ in the last 17 sessions. Note yesterday’s range: 13.83+14.94. Takes out last Wednesday’s double top at 14.53!

U.S. bond market rallied: 10 yr 2.53% +5/16; 30 yr 3.25% +13/16; the long TIP recovered from Monday’s bruising, closing at 1.07% (low was 0.87%!) +1-1/2. Slightly weaker overnight: 2.54% -3/32; 30’s 3.25% -1/8; and long TIP 1.08% -1/4.  

Libor update: 0.236% 3 mos.; 0.330% 6 mos., both remain near their record lows, set recently: 0.222% and 0.320% respectively! The Fed Funds rate has averaged 0.09% since 5/22/13 and remains 0.08%-0.10%, where it has been for weeks! T-Bills range from zero, one-month, to just 0.09% one year!!! Foreign bond yields slightly lower ex-Greece for a 3rd day (benchmark is the 10yrs): Germany 1.00% -1; UK 2.48% -1; France 1.33% -1; Italy 2.37% -3; Spain 2.15% -4; Portugal 3.17% –; Greece 6.06%!!! +11! – losing ground again from the recovery low: 5.42%; Crisis high: 12.57%. Japan: 0.52% -1. Bonds remain ‘risky business’!

Gold closed slightly higher at $1222.00 +$3.20, with a high of $1236.10. This follows Monday’s new low of $1208.20, lowest since 1/6/14. This marks it’s 26th straight sub-$1300 close. It is way below the 40/50 and 200 day m/a’s. 7/17’s session high was $1346.60, highest since March 19th!!! 6/9’s $1240.20 was lowest since 1/31/14!!! RES is the 40 day at $1273, then the 50 day at $1280 and the 200 day at $1284 – incredibly tight and falling! Recent high was $1392.60 on 3/17, highest high since 9/4/13. Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is $1221.40 -.60 in an ‘inside session’. Silver remains weak with Monday’s new low of $17.33 – lowest since 2/26/2010!!!

Crude closed little changed at $91.56 +.04 – coming off a low of $90.58, just above last Thursday’s low of $90.43 – lowest since 6/28/13! There have been SEVENTEEN handles since peaking at $107.73 on June 20th. 6/20’s run to $107.73 was highest since 9/19/13 (a huge down session which put it in freefall. The record high of $147.27 was on 9/30/08, the low since on 12/30/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($95.16!!!), then the 50 day ($96.63), and lastly the 200 day (99.67) – all declining, especially 40/50! The range is $85.61-$112.24 since 3/1/12. Overnight it is $91.30 -.26 in an ‘inside session’.


Global equity markets mixed: UK -0.1% vs -1.6%! vs -0.7% vs +0.6% vs 0.4%; France +0.5% vs -2%!!! vs –0.1% vs -0.2% vs +0.6%; Germany +0.1% vs -1.5%! vs -0.1% vs +0.2% vs +1%; Japan -0.2% vs closed vs -0.7% vs +1.6% vs +1.1%; Hang Seng +0.4% vs -0.5% vs -1.4% vs +0.6% vs -0.9% vs +1%; Korea +0.3% vs -0.5% vs -0.7% vs +0.3% vs +0.2%; India -0.1% vs -1.6% vs +0.4% vs -0.1% vs +1.7%. U.S. equity futures bouncing back (dead cat?) with now opening gap and at session highs – prior 4 sessions were ‘rare’ opening gaps: Dow +39 (range 53); SPX +4.90 (9); NDQ +10.75 (13).


Some random thoughts:

…if you recall, TB has discussed what Nobel laureate Franco Modigliani proposed two decades ago: a ZERO corporate tax rate! Well, it may be that its time has come. This after the IRS announced a crackdown on U.S. companies moving their headquarters (in name only) abroad to avoid U.S. taxes. That announcement sent Medtronics in the skids yesterday It peaked at $67.11 on Friday fell to $63.11 yesterday after ‘gapping down on the open, and closed at $64.08, -4.5% from Friday’s high. Will Burger King follow suit? It traded to $34.20 on 9/3 following its similar announcement and closed yesterday at $30.33, -11.3% from the high. That company has a problem too because unlike Medtronics, it relies on retail customers who could…and should boycott this tax scam. Time will tell. They have every right to pursue a lower tax rate abroad…but why should we subsidize them doing so? Why should we subsidize WalMart’s (and other big companies) paying their employees so little that they collect food stamps?

So in exchange for no taxes, as Professor Modigliani explained to TB in London years ago, there would be NO more subsidies. Aha! That’s the key…that and since dividends would no longer be ‘double-taxed’, but would instead be taxed as ‘ordinary income’ – which they should because the vast majority of Americans get no benefit since they are in IRA’s and 401(k)’s. Just one more perk of the wealthiest Americans! Kill it!

Let’s look at some of the subsidies? Archer Daniels Midland’s farm subsidies exceed its bottom line! …ethanol is subsidized when it is not even efficient. The list goes on…and on.

Yesterday, former House Ways and Means Chairman, Pat Toomey, proposed a zero rate as outlined above. He said every time he brought it up in Committee, lobbyists called him to say he would destroy their business…and their point is? Of course, this will be an uphill battle, fought by lobbyists, tax lawyers and accountants (including tax preparers who fight any simplification of the tax laws.

Oh, and one last point Professor Modigliani made: companies would then have to evaluate spending on REAL returns not with the added benefit of reducing taxes. Do you think GE should have been allowed to pay NO taxes for the last three decades? …or that the top 200 corporations should pay an average 9% effective tax rate? As an accountant friend once told TB: “show me a company that pays the maximum tax rate and I will show you a company with a bad accountant.

By the way, even Grover Norquist can’t argue against that!

Have a great day!



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