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Dis and Dat
On Cocktail Party Stocks
A chart of NFLX and some thoughts.
There are good and valid reasons for this 75% drop in 4 months. The stock deserved to have gotten crushed. But this is more than just bad company news. There are a bunch of other “names” that have been slammed to the ground of late (FSLR/MCP etc). Those who listened to the TV hosts, stockbrokers and “smart guy” talk over drinks deserve everything they get. But I have to ask,
“How much of the ‘air’ in NFLX was just a phony push caused by Ben Bernanke’s Fed?”
The answer is that Ben’s contribution to this stockholder debacle is not zero. All the Fed talkers have said again and again they want to force people to buy risk assets. They succeeded. And along the way those that listened to Ben got stepped on.
For sure this will happen again and again. When money has no intrinsic value due to ZIRP it will create froth in prices of stocks, commodities and bonds. I can’t think of a dumber policy than that. I hope that Bernanke followed his own advice and loaded up on NFLX.
On Flat Taxes
So Perry is out with his flat tax. The joke is that under his proposal one could either pay a flat rate or go back to the 1040 and do it the old way. This achieves a worst-case outcome. Less revenue and more paperwork.
I’m in favor of ripping up the tax code. I’m also in favor of a progressive tax code where those with high incomes pay more. The arguments from liberals are that with a flat-tax (or a 999) those in the lower brackets would pay more than they do today.
I don’t think that has to be the case.
The critical question when considering an alternative tax plan is what happens to FICA (payroll) taxes. The combined FICA is now 15.3%. In a flat tax world, that would be eliminated. Half would go to the worker via lower taxes. The other half would be retained by the employer. The employer could rebate that amount to the worker with a 7.65% salary increase. There would be no pre or post tax consequence for employers to do that. Their revenues/profits would not be impacted at all.
For a worker who makes $40k who today is subject to FICA AND pays 10% federal tax the numbers are:
Current treatment:
Pre tax = $40,000
Federal Tax = 10%
Take home including FICA (7.65%) = $33,000
With a 20% flat tax:
Old salary = $40,000
New Salary (7.65% increase) = 43,060
Take home = $34,448
A flat tax approach could be structured to achieve a neutral/positive tax result for the average worker. Liberals are fools not to embrace this. It is the most progressive tax approach out there. It would put money in the pockets of those making less than $100k.
On Rage
I got an email from a regular reader. This one is a full professor at a top Ivy League school. He had this to say:
One of my usually staid colleagues said to me the other day, "I am hoping for some violence." How odd.
How odd indeed. It would be a huge mistake to underestimate the level of anger in our society. Could this go from a relatively peaceful OWS to something far more ugly? You bet it could. All that would be required is some more bad economic news and an increase in gas prices……
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On FX
I’m hearing that many big players have stepped back from the FX market. The devaluation of the CHF a few months ago hurt some of the interbank hitters. Hedge funds have been whacked every which way and have also cut positions. The UBS rogue trader story scared a bunch of the prop traders at the big banks. They’ve scaled back too.
So without the usual dancers adding liquidity the FX market is reverting to good old supply and demand to set prices. As Zero Hedge has been reporting for some time, there has been liquidation of dollar based assets by EU banks. Some of the liquidity is being repatriated back into Euros in an effort to prop up weak balance sheets.As a result, there has been demand for EURUSD.
The strong Euro flies in the face of the crumbling and bumbling of what is actually happening. That does not matter. As long as there is Euro repatriation, the EURUSD will remain overvalued. It’s about day-to-day demand, not the backdrop of the news.
I can’t predict how long this will take to wash out. My guess is under a month. I think the Euro is a big short.
There is also a very big question growing for the Yen crosses. I’m betting we see some action by the BOJ before month end.
This is, net - net, a strong dollar story, the worst news for Obama, Geithner and Bernanke. It's also a strong gold story. I can see EURUSD = 1.3000, Gold = 1900, USDX = 82 by year end
Seatbelts on.
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With you on the Euro and for the reasons given. Euro is a long term short not just when repatriation eases up but when, inevitably, the ECB has to start printing. There is no option on the latter unless the Eurocrats want to give up on their pet project entirely.
On repatriation. ZH was a bit late to the party to bring that as a reason for Euro strength. This is exactly what happened during QE2 described well by Professor Mason.
Didn't Robo Trader flog NFLX as the perfect widows 'n orphans stock? Har har har
If Karl Marx calls for "a heavy progressive or graduated income tax," then, I call for a True Flat Tax.
Every household must pay the same $ amount to cover all government spending of the previous year.
Under my True Flat Tax plan every household in America must pay $30,543 in 2011 in order to pay for all the spending in 2010.
Oh, by the way, the current measure of poverty for a family of 4 is $22,350.
No more of this mambi pambi (false) "flat tax" being proposed by Perry or Cain.
Equal rights, equal tax!
Margaret Thatcher tried that idea in 1990. It was called the "poll tax." Her own party, the Conservatives, yanked her out of office.
Silver just got bombed down 70¢ in 3 minutes. Hmmm.
its been trying to break up the last few hours with out a similar move in gold. every time the computers win this way it is creating a stronger temporary celling. Expect the most extreme volatility.
edit) taking bets on a margin hike inthe next 0 to 72 hours. put me down for 4 hours or less from now.
That pretty much means that Bruce is a statist and that he is NOT in favor of the constitution.
In Hong Kong pre '99 there was little to no tax. Sure it was syphoning manufactured goods out of China with a 'most favored nation' status, but holy toledo batman, that place was alive.
Great article Bruce. I don't really see the USDX and Gold hitting those numbers by year end, but we all have our opinions.
As Gerald Celente says: When people lose everything, they lose it.
Whether you believe violence should happen or not is irrelevant. It's inevitable. History tells us so. If you believe otherwise, you're either a dumb-ass or one of the people that's going to get strung up.
World leaders still aren't listening. My guess is, they wont till one of their own is killed, buy that time it will be too late; and the mob will then not listen to them.
Www.1215.org/lawnotes/lawnotes/federalmafia.pdf
I liked the 'Monet.'
*shrug*
ben has only 1 mandate a devalued dollar; when the euro hits the fan he will do last qe & it will be big
Liberals are fools not to embrace this.
And just how are we going to get the "liberals" to do away with their most treasured social entitlement, Social Secuirty? This would be the result of nixing the payroll tax, wouldn't it? Seems like a complete non-starter to me. Let alone the idea that "liberals" would trust employers to hand over their half of the payroll tax to employees as a raise. Fantasyland.
Never mind the unfortunate Mr. Perry. I'll Make' it simple for ya'll. Here's what we'll do, after Civil War II: no business taxes. None. Not any. No personal income tax, cap gains, none, not any. No IRS. No CPA's. None, not any. 20% sales tax (food and shelter exempt), of which Fed govt gets 1/2. 1/4 to states. 1/4 to municipalities. People who consume more, pay more. People who consume less, pay less. No level of gov't permitted on any credit market. No public debt. No plastic money; usery=Death. State banks, but no Fed. Currency(s) backed by PMs. Stock, other markets? No leveredge, no buying anything on margin. No derivatives, no insurance on risk. Of any kind. If you can afford it, you buy it. If not, then not. In other words, complete de-Jewification.
Fascist:
No public education. None, not any.
No paved streets. None, not any.
No street lighting or sidewalks. None, not any.
No clean municipal water. None, not any.
No sewer systems to remove your poop, nor garbage service. None, not any (except that lacking such services people will do what they did before government provided services and dumps, put it anywhere they like).
No police or other emergency services. None, not any.
No hospitals. None, not any.
No libraries. None, not any.
No defense. None, not any.
Because unregulated trade cannot be made fair there will be no trade. None, not any.
If you think a 20% sales tax on items will provide even the most basic public goods in a brave new world where there is an economy would be a tenth the size of what we now have you are off your meds. Even with the modern consumer economy at 70% of GDP a 20% sales tax would not even run local government, in your utopia sales of non exempt items would be so close to nil there would not be enough revenue to pay the revenue collectors.
And I will not pay it because I will be living in Mexico, or Panama, simply because the world you think you are making would be a nightmare of unrelenting misery. Private industry cannot (will not) provide basic services at an affordable cost to all, that is why we have government, or at least why we had it till corporate bribery took it over. There are solutions to our problems but sales tax is not in that mix. It sounds fair and flat till you actually start doing the math and realize that it is a highly regressive tax on the poorest among us. Flat taxes will never work for the simple reason that the vast majority will rise up and kill those that foisted it upon us as soon as they realize how far their living standards have dropped and how far those of the wealthy have risen. It would also end full stop upward mobility as it concentrates ever more wealth in ever fewer hands. End upward mobility and thus the middle class and you end the American economic miracle that gave you every shittin dime you have.
Also, no futures on commodities unless you are willing to take delivery.
I'd also love to have it in our new constitution that we will not fight wars on foreign soil.
And I'd like to see no corporations. Business can still get done without limiting liability. People ought to be liable for what they do. This will also serve to keep businesses from growing "too big."
dis n dat
http://www.youtube.com/watch?v=YqCK7tcepTI
Corporate taxes are a sham and should be zero. Corporations are ROI machines. If they earn less than their after tax ROI needs, they raise prices, or cut costs. Since in most companies costs are 60%+ people, higher business taxes mean lower employment or low salaries. I'd rather see a zero Corporate tax, and a high marginal tax rate on the highest salaries, i.e. where salaries are >20x the avarage for that company (or something like that). That would stop the abuse and encourage middle class employment
So America started with a corporate tax and no income tax and will end with no corporate tax and an income tax? That's very poetic. Maybe we should eliminate both.
We also started with mortal corporations (charters limit the time they could exist) and seem to be ending with immortal corporations.
How can mortals compete against immortals?
Even the mortal corporations caused trouble. California added participatory democracy to combat the railroads taking over their government. Honestly, a world without corporations sounds better to me, but at the very least we should ban immortal corporations after the civil war.
Agreed - zero corporate taxes. It would also cut down on lobbying.
Only "entities" that vote should be taxed -- meaning only individuals. Individuals need to feel the full brunt of taxes in the most transparent way (the taxes they pay as customers and/or shareholders of corporations just hides the cost of government). Then those individuals might be a little less in favor of non-stop growth in government.
This would make sense if voting mattered. The real voting that happens in this country and most others is with money, not ballots.
But, not stop growth of corporations is as much of a problem as non-stop growth of government.
Bruce, there's not an employer on the planet that would "rebate" the fica savings to the employee. Why would they?
You can always trust the business community...can't we?
Our plan is to take any SS tax break and use it to make an additional company contribution into each employees 401K account. NO ONE is going to hire a new employee due to a one or two year reduction in company SS contributions.
Putting SS contributions in the employees personal 401K -- just maybe that would be better than giving it to the government. No, no - the last President proposed that and got shot down. And it would suggest people be responsible for themselves instead of looking to government for their care -- can't have that.
Why is it a good thing for everyone to be in the stock market? When "everyone" is in the market the market ceases to be market efficient. What I mean by that is that if the market starts to go down, and everyone is in that market, then there is huge political pressure to bail out the market. And this is precisely what has happened in recent years, is it not? Low interest rates, TARP, the list goes on.
gh
A. Didn't say anyone should "be in the market." Said giving money to employees' 401K accounts that woud normally go to the government - how can that be bad?. Alternatively, giving it to the government is an absolute 100% loser -- SS is broke. 401K participants can do with it whatever they want -- including short the market if that is what they think is best.
B. No bailouts for anyone - individuals or corporations -- for any reason. Everyone needs to stop being entitled victims. It is getting very old. Take personal responsibility for your own life and your family. Government needs to stop "solving problems" -- they just make them worse. Government needs to stop printing money.
If this was consider to be a good plan then there is always a way to achieve the desired results.
I don't think D.C. can force a company to rebate the savings. Screw them. Congress can pass laws to raise taxes. For those who do not pass the benefit along, there would be an equal and opposite tax.
This will not happen. D.C. can't do anything new and different.
Consumption tax is what you guys need.. GST .. VAT.. whatever you want to call it.
Exclude basic living items and raw foods, include everything else, simplify your existing code and you have a pretty fair, efficient tax.
When a company gets hit with a new tax on its raw material purchases, who do you think is going to pay it? The answer isn't the company.
There are a lot of things being bought out there other than yachts.
Companies don't determine price, consumer's do. Particularly in the current environment.
You get a bump in CPI for the year it is implemented. After that, it's business as usual, and the tax is invisible. Rich bastards and companies will scream that the world will end if you bring in a tax that is very hard to dodge, but once it's implemented they'll shut up and pay it like everyone else. (I know this from experience)
The purpose of such a tax is that it is fair: Spend more = pay more. Spend less = pay less. Essentials are excluded so that those with little are less impacted. It taxes those with discretionary income, who by definition can afford it.
And it is efficient- less administrative loss, and very difficult dodge.
This means that the absolute rate can be lower, meaning less impact on those that are vulnerable.
It is far fairer than income tax in my opinion, and far more efficient. But we've all been born into income tax, so it is accepted.
what happens to people in states with a high sales tax? do we tack on the flat tax? i can't see how this helps anyone except someone isn a zero sales tax state?
It is quite arguable that the "progressive" income tax violates Equal Protection rights under the Constitution. Of course, with federal judges' pensions dependant on the income tax.....
Free money puts air in Netflix, Amazon others, it causes market distortions and leads busy casual investor to lose savings (thank god talked mother in law away from Netflix stock).
Then assholes who benefit from Wall Street bailout who collude on price come here and urge us to short before they jam higher so they have a better price to short today. Assholes. This is what we get from Federal Reserve.
Bruce
ENSO update??
good idea!
I agree with all except the pipe dream that employers would rebate the tax savings in the form of pay increases for employees. Maybe some employers would kick back a small % but Puh-lease.
Now that's a contrarian position! Gold's been the anti-dollar. What you're describing is a mssive fligth to safety. If it comes true it will be most unpleasant for Europe. Fasten your seatbelt indeed.
Like it or not, both th EU and the Fed will be *cough* "forced" to print a massive amount of monopoly money in the coming 6 to 12 months. When the crushing effects hit those whose unemployment has now run out and those who can no longer live rent free in a foreclosed on house...the real fireworks will start.
Unstable systems break down in unstable ways.
The only real question is the time horizon - 1, 5, or 10 years from now, but it's coming and ain't nothing gonna stop it, save WWIII or Jubilee
you could have stopped there.
- Ned
How do you fight a world war when there's no way to pay for it? Nukes.
Progressive Taxation - A scheme invented by devious thieves to steal money under the color of the lie that it is "fair".
Bruce, if you like progressive taxation then I guess you wouldn't mind being progressive about all your purchases. We'll just place a bar code on your head representing your earnings. Then when you go to buy something we'll just scan your code and increase or decrease the price of your purchases accordingly. That $5 latte at Starbucks would be $10 for you and your $200 electric bill would be adjusted up to $400, and that $300,000 house is only $600,000 for you,etc. Ain't it wonderful and "fair" to be progressive.
+55 quadrillion. Logic, I love it.
Problems again of ceteris paribus.The professor assumes that univers ity funding will be exempt from problems and emerge unscathed.the probability is that once violence start seriously ,universities will be closed down as vital services become rationed and this professor will be begging on the streets.The old story ,you better watch out what you are wishing for. There is at least a 25% chance that the national election of 2012 will be the last in American history as the USA becomes Greece on armed steriods.I hope that I am wrong,but i am very, very worried
Those wishing for violence are the ones least capable of dealing with it...