"Today, Treasury is taking action to reduce the tax benefits of — and when possible, stop — corporate tax inversions. This action will significantly diminish the ability of inverted companies to escape U.S. taxation. For some companies considering mergers, today’s action will mean that inversions no longer make economic sense." And yet, to think: the US government would have spared itself so much jawboning effort and fake work if all the Treasury did was promise that the 10 largest shareholders of the "unpatriotic inversion offender" would get the "tea party" treatment by the IRS. Then watch as inversions end with a thud, never to be heard of again...
What has happened to America?
There is now less than one week of campaigning remaining before the Scottish Independence Referendum, which takes place next Thursday, September 18.
The pro-union ‘no’ vote campaign is back in the lead this week after the latest opinion poll from pollsters YouGov put them at 52%, marginally ahead of the pro-independence ‘yes’ campaign.
- Russia faces new U.S., EU sanctions over Ukraine crisis (Reuters)
- Glasgow pulls no punches in welcome to 'Save the Union Express' (Guardian)
- Pound Seen Tumbling Up to 10% on Scottish Yes Vote (BBG)
- Moscow stifles dissent as soldiers return in coffins (Reuters)
- Ukraine's leader sees no military solution of crisis, eyes reforms (Reuters)
- Venezuela Threatens Harvard Professor for Default Comment (BBG)
- Australia Raises Terror Alert to Highest Level in a Decade (BBG)
- Activist Investors Build Up Their War Chests (WSJ)
Treasury Secretary Lew's comments on tax reform yesterday indicate that in the absence of legislative activity to address the expatriation of US-based companies, the Treasury will lay out its own plans "in the very near future." Goldman interprets this to mean an announcement in the next couple of weeks. While the substance of the Treasury's forthcoming announcement is still unknown, Lew's comments seemed consistent with Jan Hatzius' expectation that the steps the Treasury will announce will be incremental and not enough to fundamentally alter the outlook for these transactions.
"...what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles. To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status...The privilege of having the world’s reserve currency is one America can no longer afford."
- former Chief Economist and Economic Adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team.
Say hello to the next financial crisis, brought to you courtesy of the dumbest new bill of the week: H.R. 5148: Access to Affordable Mortgages Act.
President Obama would have proudly proclaimed Warren Buffett a true patriot in his bailing out of the banking system with expensive loans and his 'realization' that those earning more than $1 million should be tax-tax-taxed. However, the "Buffett Rule" appears to have one caveat... if you are making over a $1 billion, you're good to go with tax-avoidance strategies. In one of his career's most hypocritical moves Warren "tax-me-more" Buffett has decided that putting his money where his mouth is no longer makes sense.. and is funding $3billion of Burger King's "tax-inversion" takeover of Canada-based Tim Hortons. Somewhere on a golf course, a Presidential Putter is being snapped across a knee...
This one is almost too sensational to be real. Almost. Jon Corzine (of MF Global) walks the streets a free man. Yet FinCEN is wasting taxpayer resources sending undercover agents to entrap some offshore casino, and they act as if they’ve infiltrated a major terrorist organization. Amid all the debt, graft, and incompetence that’s so prevalent today in government, this is another sad testament to the direction that things are headed.
- Just how many rats are there? Steven Cohen's Firm Loses Another Top Executive (WSJ)
- Iceland Sees a Potential Volcanic Eruption, and Airlines Cower (Bloomberg)
- Iraqi forces battle to drive jihadists from Saddam's home town (Reuters)
- Israel, Palestinians Agree to Extend Gaza Truce for 24 Hours (BBG)
- Pimco now buying junk (BusinessWeek)
- Pakistan arrests 147 in Punjab towns as protests in capital continue (Reuters)
- Ex-Rabobank Employee Pleads Guilty in Libor-Rigging Probe (BBG)
- Ebola Orphans Targeted by Aid Groups as Newest Victims (BBG)
- Two California youths accused of plotting high school shooting spree (Reuters)
- Only Rich Know Wage Gains With No Raises for U.S Workers (BBG)
Qatar, the world's richest nation per capita (and awkward home of US central command in The Middle East), has used its wealth to fund Hamas in the Gaza Strip, bankrolls (as we detailed here) Islamists fighting Syrian President Bashar Assad, and backed the Muslim Brotherhood and President Mohamed Morsi in Egypt - before he was deposed. As Bloomberg reports, they have additionally let other extremist groups raise money in Qatar, according to the U.S. Treasury Department - all in an effort to 'support' the gas pipelines that the tiny nation needs to maintain its uber-wealth. Qatar’s support for militants has angered its neighboring conservative monarchies... so, it is an intriguing shift that now, as Bloomberg reports, finds the terrorist-funding-nation mediating between Israel and Hamas to end the Gaza conflict.
Curious what pure, unadulterated government efficiency in practice, if not in theory, looks like? Then the following chart of USPS operating profits, pardon, losses over the past decade should be sufficient. The punchline: having generated revenues of nearly $700 billion in the past 40 quarters, the USPS has been bleeding red ink more or less consistently since 2006, and has now generated just over $47 billion in operating losses over the past ten years.
- So that's what Obama meant by "costs" - Italy Recession, German Orders Signal Euro-Area Struggle (BBG)
- Russia worries, weak German data weigh on Europe (Reuters)
- Hedge Funds Betting Against Banco Espírito Santo in Line for Big Gains (WSJ)
- Bankers Called Up for Ukraine War as Rolls-Royce for Sale (BBG)
- Double Punch for 'Inversion' Deals (WSJ)
- Statist Strongmen Putin-Xi See History’s Capitalism Clash (BBG)
- China bans beards, veils from Xinjiang city's buses (Reuters)
- BATS to Settle High-Speed Trading Case (WSJ)
- Second Ebola patient wheeled into Atlanta hospital for treatment (Reuters)
Roughly a month ago, we exposed CYNK Technology Corp. The CYNK bubble was, of course, the result of carefully planned deceit and clever promotion by a handful of people who stood to make a lot of money on the trade. But when you think about it, CYNK’s stock wasn’t really any dumber than owning US Treasuries. In the case of CYNK, it only took about a month for the bubble to inflate and burst. The Treasury bubble, on the other hand, was built on credibility earned over decades; but while previous generations earned the world’s trust, modern day politicians have blown through it. Now all they have left is their snake oil sales pitch. And a mountain of obligations that closed July 2014 at a record high $17.69 trillion.
Sadly for the central planners, while they succeeded in the first part of their plan, namely getting investors to flee from money market funds, they failed in getting the money to flow into the desired asset class: stocks. Instead, money market funds are rushing at an unprecedented pace into that other most hated by the Fed, after precious metals of course, asset: Treasurys. Most hated because declining yields disprove all the propaganda about an improving economy as they do, or at least did, imply deflation down the road: hardly the stuff robust 3%+ recoveries are made of.... But before we declare victory over central planning, don't forget that the "regulators", the Fed and the SEC, are already contemplating the next step: recall that as we reported in June, "the Fed is preparing to impose "exit fee" gates on bond funds, in what, the official narrative goes, is an attempt to prevent a panicked rush for the exits. Of course, this is diametrically opposite of what the truth is."