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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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For one thing BK your math is shoddy, though I am too tired to do the homework at the moment I will say that single filer with 40k adjusted gross income will pay 6,188 which is not 10% but 15.5%, and your assumption that employers will be all too happy to give us a raise amounting to what they formerly paid on our behalf in payroll taxes is outright bat shit, I would be very surprised if even 10% of that money were shared with labor. Even if it were the Feds would then be taking a flat 20% of all the bump we get from not having to pay in payroll taxes; but the real point is that 20% of labor's share of national income (wages and salaries now account for 52% down from 58% a few years back, the rest is "earned" by capital) and even at 20% of 10 trillion you only generate 2 trillion in revenues even as you carve off all payroll taxes. That would be a huge drop in overall revenues from the current system. How do you pay for Social Security? Medicare? If payroll taxes end those things have to come directly out of the general revenues already in deficit. They go from net provider of funds to total drain on funds that were not adequate for general government in the first place.
I do not think I would ever be convinced of the fairness of so called flat tax plans but I know I will not tolerate them without several preconditions, one, income taxes should NEVER be the cause of a person dropping into poverty, the first $20,000 of income for any person should be non taxable, other than that there should be zero deductions, adjustments, exemptions, you get a W-2 stating your gross earnings less 20k and then you use that and ONLY that as the number upon which you pay a flat tax. And there should be one filing category, self only, if you had earnings you file as a CITIZEN not as a married bitch, or head of household, or jointly while the single people always pay a lot more on the same amount. (on 40k single is $6,188 while married filing jointly is 5,166, so why do I have to pay a thousand more than you because of your lifestyle choices?)
Sadly, in order to run the government we now have essentially on income tax alone using a flat FAIR tax as I outlined above, would require a lot closer to a 50% flat tax. You can cut spending in half with your 20% proposal and still run huge deficits, bigger than now. I assure you there is no math which a flat tax works at less than 40% without higher taxes from other than income like a sales tax, or god forbid making corporations pay a fair share.
We need a far more highly progressive income tax than we now have with a minimum rate for all incomes over $500k per year. Cut out about one third of spending and do that we might get back to break even, but otherwise you are just trying to blow sunshine up our skirts.
This, like every other plan I've heard about to simplify the tax code or make the burden fairer, appears to be targeted at those with wage or salary income. We can propose all the alternatives to the current system that we want, but for someone with only wages or salary, plus maybe a littel interest or dividend income, the tax code is fairly straightforward.
But what about the person or married couple that has a rental property? They wouldn't fit into some neat little flat tax plan. Does anyone know what percentage of the tax code deals with income other than wages/salaries? Even interest and dividends have special cases, like muni bond income of foreign-source dividends.
I'd be for a national sales tax (if constitutionally limited), but then what about the retired person? Or the unemployed, living off of past savings? With ZIRP no retiree has any significant income from a lifetime of savings. Would it be moral to levy a national sales tax a person who already paid taxes when that money was earned?
I see no solution under the sun. Fairness and equality are in the eye of the beholder. We as a nation are way too far in debt, and fixing the tax code is equivalent to rearranging the deck chairs on the Titanic, to borrow a phrase.
Therefore: let us make tax-paying voluntary. Everyone can contribute what they want and even specify where they want the money spent.
"I would be very surprised if even 10% of that money were shared with labor."
Exactly! I have no hope that business will be this fair with anyone, since they've proven time and again they're incapable of it.
"Past behavior is predictive of future behavior."
Yep, Bruce is normally pretty good, but a cut in FICA is going nowhere but the employers bottom line...
No Tax? Mad Max.
Good posts Bruce.
In 1950, corporations paid $1.50 in taxes for every $1.00 an individual paid. Now corporations pay $0.25 for every $1.00. Thats why your taxes are so high.
Yes that's how the system works. The people who make rules set an example follow the rules and then slowly stops following them less and less while your stupid ass follows them more and more. Government used to follow it's own rules too.
Corporations collect taxes...they don't "really" pay them.
They get their profit from products & services that people purchase...raise corporate taxes and you are just raising them on yourself...its a pass through.
A flat tax at point of sale is really the only way to tax people.
The "progressive" income tax system is actually regressive in my opinion. You tax people at a higher percentage rate for being more productive. Really?
Its stupid.
Many have seen where someone turned down more overtime or more profit because their actual take home pay lessens per hour over the limit or dollar earned. This is the progression in "progressive" taxation.
Wrong, what determines price they can sell their services and goods? It is the market....are all businesses working at razor thin margins? How about Exxon, of their taxes double, would that increase price of oil? Isn't price of oil determined by a world market based on supply and demand? Hasn't Exxon happily sold oil at $20 a barrel and $140 barrel, their tax burden, cost of employees, did not change the price they could charge for oil, the market determined the price.
If a business is selling something at razor then margins and it can be easily replaced, any cost increase could put them, and their industry sector out of business, increased costs could due to increase price of fuel, increased price of labor due to shortage, increased cost of cement, or increased taxes. But this is not the case with all or even most businesses.
Businesses were making money when oil cost them $20 barrel in 2002, and many still made money in 2008 when it was $140 barrel...some like airlines lost big time due to fuel prices but most continued as profitable, and the price of their goods were based on market, that responds to many factors, competition or lack thereof, demand etc.. Cost of raw goods, labor, taxes, can effect profitabilty and can even put a business out of business, but to say all cost increases of a business is automatically reflected 1:1 in the price they charge for goods and services is just plain ignoring reality, prices businesses charge are way more complicated than that.
How stupid would a business be if it did not charge the maximum price the market would bear for its goods or services, and instead just sold everything at razor thin margins? Does the NFL sell its TV rights for less or more depending on it's costs? No, it bids its entertainment value to Fox and ESPN, gets all the money it can, and then pays it's bills, argues with players about how much of that revenue they should get etc and NFL tries to keep those bills as low as possible to maximize profits. Do they raise or lower ticket prices based on cost? Nope, NFL charges as much as it can while still filling the stadium. Have NFL prices on tickets gone up because of costs? No their profits are huge compared to 40 years ago, so costs have decreased compared to revenues, rather the tickets have gone up in price because of popularity, demand, and constricted supply.
Dbl post
Mr. Mozillo was quite productive?
Wages and salaries have little to do with the efficient allocation of resources.
Some people are paid enormous amount of salary just because to keep them in the fraud and shut their mouth. It doesnt mean that they are more productive.. So at some point you have tax high.
Actually there's way more truth to this than you realize. Employers are our tax collectors. Without employers as such our federal system would collapse immediately. Wall Street knows this "and tells the government what to do." in the age of bailout nation however "we've got a problem." since we are in the middle of a massive imperial expansion (the probability that our withdrawal from Iraq will lead to a bigger war is quite high) deciding "we're not gonna pay" is simply not an option. I personally enjoy the politics--but all we're doing is going to the Kennedy Center to watch a show when we talk about it.
"Employers are our tax collectors. Without employers as such our federal system would collapse immediately."
Yes they are our tax collectors...but it doesn't have to be that way and it doesn't have to collapse. At least from lack of taxation.
Doing away with income taxes in favor of a flat tax at point of sale captures the black market as well. The drug dealers (whatever anyones position is on drug usage doesn't matter) income is taxed when he spends. Same with the crooked banker who hasn't been caught yet. Same with properous businessman who has done nothing wrong.
The real upside is the damned politicians can't buy votes by making concessions through the tax code as everyone pays the same rate...pauper to prince.
Something to kick around the borg collective and see what everyone thinks.
I'm out...seeya.
I agree completely! Craigslist nation bitches!
Jamie Dimon is more productive than I am?
You lost me right there.
Individuals can consume, save or invest with their money.
Perhaps letting companies raise their prices due to increase in tax rates would make consumers save and invest more? That is what we need right?
Also, putting the bulk of tax on personal income depresses demand for consumption because people have less money to spend, save and invest.
Would you hazard a guess that if tax was shifted to companies, then consumption might be a wash but savings and investment would increase?
PS: Correct me if I'm wrong, but if corporations are people, then equal protection under the law would imply the same rules and rates no?
Corporations are groups of individuals who come together voluntarily to do productive stuff. Individuals do not lose their rights because they associate. Screwing corporations is screwing individuals; both the creators and the investors.
Everything else you posted is government central planning.
nmewn:
Of course, in the longer term, this drives production out of the continental US to other countries, where the "corporate tax rate" is lower.
So has the effect of driving out jobz (which is what is intended imho).
- Ned
{and Occupy Boston is bitchin' about no jobz while getting arrested for Horse sales in the presence of a juvie.}
"Of course, in the longer term, this drives production out of the continental US to other countries, where the "corporate tax rate" is lower."
Taken to the inth degree, yes.
Corporations (the hidden taxes they collect from us) are another revenue stream for government. Without people who can afford to purchase their products & services (beause of elevated prices due to taxation) they move to where they can produce those same products & services and maintain a profit. Not much point in producing without compensation for time, labor & material.
Its pretty well established that perfume makers have a higher profit margin than nasty ole oil companies but they smell sweeter...lol.
"Occupy Boston is bitchin' about no jobz while getting arrested for Horse sales in the presence of a juvie."
Saw that.
So now we have...socialists, "anarchists" (whatever the hell that winds up meaning), college professors & their brain dead arts & literature students in debt up to their eyeballs begging for more "education", Elizabeth Warren saying she invented it or sumpin, rats crawling through tents in San Diego, women groping criminals on the lamb being busted for...ya know...groping women and having outstanding warrants, mentally unstable trust fund babies posting on youtube and some guy crapping in the gutter next to a squad car.
The gangs all there...just like the Tea Party...ROTFL!!!
No one from the TEA Party purposefully shit on a cop caddy. Someone may have risked a fart and there was a little accidental 'blowback', but we do that to ourselves all the time.
"No one from the TEA Party purposefully shit on a cop caddy."
The entire paragraph was a satirical jab...no, they are nothing like us outside of being frustrated & pissed.
But hey!...they got Bill Ayers on board now so things are lookin up...lol.
http://www.youtube.com/watch?v=2E1hKn7v9bs&feature=player_embedded
I’m also in favor of a progressive tax code where those with high incomes pay more.
With due respect, go fuck yourself.
Problem isn't the tax code (which is code for the allocation of the tab of expenditures by others). The problem is the expenditures.
If you make $2M a year and pay 15% in taxes, but the bloke making $30K a year pays 7% in taxes, that would be both progressive and acceptable. Problem is that the runaway spending demands that 15% be more like 75% and the 7% more like 25%. Still progressive, but everyone's suckin' pondwater. Point is, progressivity of taxes is not in and of itself the end of the world.
And BTW, FICA taxes are regressive. They end at something like $106K or somethin'. Just guessin' here, but you don't see that little uptick in your paycheck, do you?
From this I conclude that you would like to see a regressive system. What planet do you live on? (with due respect).
I live on the planet where progressive taxes are passed on to individuals via higher prices, less jobs, etc.
"I’m also in favor of a progressive tax code where those with high incomes pay more."
Must punish the successful...must punish the successful....must punish the....
Equality under the law. Remember? An individual is an individual with inalienable rights to property, life, liberty and the pursuit of their happiness.
Inalienable. Remember? It's not, you have a right to keep only a government-approved amount of your property. It's, you have a right to property. Period.
As I always say, if you want the rich to pay more for government services, make the support of government voluntary. Those with the most to lose will pay for more of the protection our government is constitutionally supposed to provide.
As long as the idea is that the government is some entity separate from the people then we can will the monster to die. But the government represents the collective will of the people of the country. Yes it does in the long run. And in a democracy in the shorter run as well. When that is understood, then it is not so hard to think of the people, through their government, enacting rules that keep the boom/bust tendency of capitalism under control. Progressive taxes are one way of doing this.
Monopoly, the board game, was created as a warning of the dangers of unfettered capitalism. In the Monopoly game it is the most aggressive player, with just a touch of luck, who has all of the cash at the end of the game. The only reason that modern capitalists don't have all of the money is that they petition the government to create more money so they can get that as well. If there were no money creation the poor would be so poor as to revolt and physically take or destroy the wealth of the wealthy to the detriment of all. There must be a mechanism for wealth re-distribution that takes advantage of those "superior wealth creators" for the good of all. Just as the employer takes advantage of his most productive workers to keep the company humming. We all know how this works.
gh
Monopoly was a warning lesson, but it falls down badly in one respect, every player has the same amount at the start of the game, if all players are good and aggressive then it actually boils down to who goes first. If you want to make your next monopoly game a far better lesson in how capitalism really functions try this, start the game (6 players) by giving two no money to start with but a bill for 100 bucks they have to pay before they can move, give two 50 bucks to start with, give one 200 to start, and give the last $2,000, half the properties and make him the banker.
The right of the government to tax is also in the constitution. Just sayin.
Let's clarify that. The right of the government to levy a DIRECT TAX is in the Constitution.
There is no government right, under the Constitution, to levy an INDIRECT TAX.
A gas tax for road maintenance and improvement is a DIRECT Tax.
Income Tax to support a war industry, social welfare, and other government programs are an INDIRECT Tax and are unconstitutional.
States, however, have their own Constitutions and most have the right to levy Indirect taxes, some have these taxes approved by citizen vote, others by state legislatures. States are supposed to have the actual power versus the Federal Government. Only specific duties are delegated to the National Level. Foreign relations, war, weights and measures, etc. That's why we have so many experiments and failures at the State level.
"Income Tax to support a war industry, social welfare, and other government programs are an INDIRECT Tax and are unconstitutional."
If those taxes are unconstitutional, what word would you use to describe the taxes that are used to impose a police state on the people paying those taxes?
"Treason" for one, with the traditional cure.
Referencing the Constitution as justification for taxation does not make it right. At best it's an exercise in legal positivism....at worst it is justifying theft.
The Constitution is an inferior document IMO. The Articles of Confederation were a much better contract....but I don't mean to change the subject.
GOD why can't the whiney little bitches around here shut the fuck up and just pay your goddamned taxes? You are not going to get out from under reasonable taxation even if you would call ANY tax unfair. But Jusus fucking Christ on a Crutch! Give it a rest just for one day will you? Better yet, refuse to pay so you can shack up in Leavenworth for a few years.
We got out from under reasonable taxation over a hundred years ago.
Here is a great idea, get rid of the income tax, and estate tax, and corporate tax, payroll taxes, and get close to 4 trillion in revenues from just preoperty taxes exempting the first 50,000 in value. That is a FAIR tax because it is like sales taxes (a use tax), don't buy you don't pay. Of course to run government it would have to tax an average house at about 30,000 per year. One hundred thirty two million residentail properties to generate 4 trillion to pay for government. Of course rich folk in the big houses will pay a LOT more than some grandmother in a trailer park.
There is no way around it, government gives us what a civilized society must have and private parties will not provide. It has to be paid for. Tough shit. You want a flat low tax paradise move to Tijuana.
It's not the only mistake the framers made but there were so few and on balance they gave their progeny the best the world had ever known.
And then came the progressives.
"And then came the progressives"
Jefferson and Franklin?
Pretty dumb question. Jefferson and Franklin were in favor of the US Constitution, in fact was instrumental in founding the country. Them progressing beyond their fundamental core beliefs is absurd. Your progressives, to name a few, W. Wilson, both Roosevelts, LBJ, Nixon, Bush 2, Obama, Harry Reid, Fienstien, you get the picture, the ones who have gone around the Constitution to destroy Liberty and Freedom for the individual. But as all true progressives think, it's for the good of the people.
Perry:
For a man that is around firearms, it is astounding that he can keep shooting himself in the foot.
20% for the Wal-Mart worker? 20% for the guy that works 2 jobs to still go backwards? 20% for the Wall Street typhoons?
For a man that is involved with the Christian Religion and keeps it exposed. It is astounding that he wants to shoot fellow, poor Christains (and poor non-Xmen) in the foot.
This is the worst Perry puts yet. Has the heard of Ireland and the other tax incentive Nations where American companies run away to so they don’t have to contribute to their own Nation?? Duuuhhhhh. So Super Rich are gonna pay 20% flat. NO. Not as long as they own Congress. And that is not going away.
At this point Perry looks as bad as Obama.
You and claude make a pair BK
Great post...not so sure about this being a strong gold AND strong dollar story though.
Great post,
Me too - gold up, EURUSD up. Eventually
Love your posts, Bruce.
Scary as it is, some Libs can still think, but those are Old Democrats, not the Marxists of today.
Why shouldn't those that enjoy the most support, not pay for it?
I had to quit reading when I hit the statement, "I’m also in favor of a progressive tax code..."
You know, Bruce, you can make every excuse in the world why "We have to do something!", yet you'll never make it past the truth that ALL taxation is theft.
Do you really believe that society is better off with this system? Or do you just fail to see a realistic alternative?
From reading your articles, I see that you're slowly evolving beyond conventional wisdom, but seriously, anyone who advocates taxation as a workable social system is either delusionally ignorant or inherently evil.
There has to be some taxes. There has to be a role for local, state and federal government.
How much is a matter of debate. I favor a small government with limited military bullshit.Zero is not the right number.
Yours Truly,
Delusional, Ignorant and Evil
Bruce, when our government was kept within its constitutionally mandated duties, we did not have all of the taxes we pay today. Our federal government raised revenue before without robbing We the People, and it can do it again. No, zero is not the right answer, but zero from individuals is.
Brucey,
I had to re-read this like 3 times, 'cuz this may be the first political post you've ever made that I don't disagree with. You may want to check your temperature or start worrying about yourself Bruce. A Conservative for a progressive tax??? I must be hallucinating.
Dup.