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Muammar Monday – Forced Wealth Redistribution Cheers Markets
Muammar Monday – Forced Wealth Redistribution Cheers Markets
Libyan Rebels seem to have taken over the country.
In this morning's chat, I pointed out that Ghadafi has/had a $40Bn fortune in a country whose GDP was less than $80Bn and the per-capita income outside of oil money is just $5,000 a year. With the oil money redistributed to it's 6M people, that per-capita income jumps to $11,300 a year but let's not hold our breath for such an egalitarian system popping up overnight.
Of course, it was Ghadafi himself who first proposed that oil profits be shared equally by all Libyans, a ploy that bought him two more years in power, until people got fed up of waiting for their promised cut this spring. "Libyans, this is your historic opportunity to take over your oil wealth, power and full freedom. Why do you want to let the chance slip away from you?" - Ghadafi said to his people in February of 2009.
Here we are in August of 2011 and the Libyan people have risen up an forced their politicians to come through on their empty promises by force - something that is making other Dictators very nervous and something that should make all of the top 1% all over the World a bit concerned - especially in countries like America, where 1% of the people control 45% of the wealth. Throughout history, imbalances like this have not ended very well for the top 1%, have they?
Note the chart on the left which shows the wealth distribution in the US vs Sweden and vs and equal model. Sweden top 20% "only" have 40% of the Nation's wealth but the bottom 20% have 11% of the wealth - over 100 TIMES the amount the bottom 20% have in America and over 50 TIMES more than our next 20% have as well!
We discussed the idea of a more peaceful systems of redistributing wealth through taxation this weekend in "Problem Solving 102 - Taxes (Not Enough of Them!)" and it's funny to read the commentary by Conservative readers, who resist even the idea of having the top 1% pay a little more in taxes than the the rest - which is funny because, as we see from Sweden's model and Libya's Revolution - no one has even gotten to the core issue in America which is - should the top 20% make 84% of the money in the first place?
You don't need to redistribute wealth if income is fairly distributed right from the start, do you? In the US, the bottom 60% make just 4.3% of the income yet I spent the weekend listening to Conservatives spouting off in the MSM about how the bottom 50% are the ones that need to pay more taxes. If you don't think the bottom 180M people in this country are every bit as pissed off as the bottom 5M in Libya were - you are simply not paying attention!
What happens next in Libya will be critical. The WORST thing that can happen, from a global top 1% point of view, is for the new Libyan Government to ACTUALLY redistribute the wealth and make the Libyan people richer and happier.
That will be very likely to inspire other downtrodden people (maybe even in this country!) to rise up and do the same, so things are going to get very interesting - especially considering how inflexible the position of the top 1% in the US has been as far as giving back even something so small as the Bush tax cuts in this time of dire fiscal emergency.
Is wealth redistribution a bad thing? Not for the markets it isn't. Give the bottom 90% more money to spend and it will get pumped back into the local economy and create those jobs the "job creators" have failed to provide. Of course the "job creators" won't like the way the money is spent as the bottom 90% are far less likely to buy F-35 Fighter planes when given a real choice and they may (gasp!) spend their money at local, businesses that actually hire people and create jobs - as well as creating competition for the entrenched business interests and we certainly can't have that in a Capitalist society, can we?
Anyway, it's going to be a very exciting week as we eagerly anticipate Bernanke's Friday morning speech from Jackson Hole. On Friday I declared the market oversold but we won't get sucked into over-playing a weak bounce although that EWG trade idea from the morning post is looking good already as Germany pops 1.5% this morning. I imagine our short VXX play should play well also and, if XOM cheers up, that will be 3 for 3 on Friday morning's post and our week is off to a good start!
In Member Chat on Friday, we added an aggressive long play for HPQ in the $25KP and they are looking good this morning and I really like that long play on TIE and that TNA Sept $35/39 bull call spread (with the short $26 puts) at net .40 should be off to a rockin' start as well. I guess we were playing it pretty bullish but let's not forget we correctly aborted those safety puts because we expected this bounce but, if we begin to lose momentum, those are very attractive plays for a big downturn so keep the list handy!
As noted in this week's excellent Stock World Weekly, (FREE trial here) we are simply following the "W" pattern I had predicted two weeks ago, when we were bottoming so let's not go cuckoo over anything under those Must Hold levels. We had 4 violent up and down days on the left leg of this pattern so let's not be surprised if we have the same as we fill in the other side. Jim Cramer is on TV right now (9:10) saying he can't find a single analyst who is bullish at this point and that's kind of funny considering how much of my stuff he steals and he's had all weekend to catch up on my posts.
As usual, I am neither bullish nor bearish - I am simply rangeish and we are at the bottom of our range so we play it a little more bullish until and unless the range breaks. It's not complicated - even Cramericans should be able to follow this logic, right? Let's continue to be careful out there and we'll continue to look for fun places to put a little bullish cash to work - there's plenty of time to get in if we're going to have a real rally!
(Cartoon by Barry Ritholtz)
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The irony of a person who gets his income (Phil) from advice on trading options embracing "wealth" redistribution is richly amusing. Phil, trading is a parasitic activity, a zero sum game, so you might want to actually create real wealth through work and creativity a la say, Steve Jobs. Then you'll be free to give it away like the wonderful Buffett so it can be wasted by unproductiive agencies like the TSA, Dept. of education, Dept. of Defense, Medicare, Medicaid etc. It might suprise Phil to realized people don't care what happens to "other people's money" but they don't and never will-thus the awesome "efficiency" of government.
Maybe the government should try "surviving" on 20% of GDP for a change. Let me know if/when we ever reach that level again and we can talk taxes. I got my alert timer set to "when hell freezes over". When you trade you are trying to "steal" money from others-at least most real traders know this. Phil, did you sell me those C, GM and MS puts two months back? If so, thanks sucker! I'll take the other side of those TNA puts (i.e. long TNA, FAS puts) too, so check back in another month and let's hear how that trade worked out. Selling naked puts on a triple leveraged ETF is a good way to insolvency (ever hear of daily compounding slippage?)
Looks like the article is confusing "wealth" with "income"
From an article on Businessweek:
How does that fit into the reporting on "stimulus-euro-brent-drop"?
http://www.businessweek.com/news/2011-08-22/u-s-stocks-rise-on-expectati...
looks like the "humanitarian kinetic military action non- war, war" has provided the expected bansteritarian kinetic vapor bounce:
European shares bounce, led by ENI on Libya hopesthis just puts the exclamation point on what most here already knew. NATO and the UN are more than happy to trade hundreds, maybe thousands of Libyan lives for what will most likely be a very temporary and cosmetic boost to the euro markets. life is cheap to these parasites and this is just another example in a long list...
The rebels have tied up Lybia with a bow as a gift to the banksters and BP.
Because these rebels like to take it from behind real hard. What are they thinking? Right, they're not.
Banking cabal financed the rebels, the CIA trained the ragheads and BP is coming in through the backdoor to take Lybia's oil which is rightfully BP's and not from the Lybian people. Same playbook all the time. So predictable and so foolproof.
Having the rebels attempting to form a Central Bank BEFORE the civil war was even over told me all I need to know about what's going on in Libya.
I do not have a problem with paying higher taxes...the problem I have is that I do not trust the government to use the money properly. To me this is the big issue...many no longer trust government at all, and see what taxes they already pay wasted on redundent programs or spent so that the guys that created the problem we are in can take home their usual big bonus.
That is why after the revolution is over we need to set up some true democracy here. Switzerland has this wonderful thing where they can call up any law to a vote by the people. They can effectively veto any law their parliament creates. They use it far more than they use their initiative process. Their parliament usually makes changes to the law before it comes up for vote.
Abusive tribute-extortion scheme aka "the income tax" is just plain unethical. There is hardly a need for a GO fund to use at the discretion of the politician/big business axis. Start with sound money, free currency, and implement alternative funding mechanisms, such as user fees, to fund the federal government's specific functions, such as federal highway maintenance. Get rid of subjective forms of taxation.
Start by eliminating all the stupid shit that the Feds do. Constrain their activities to constitutionally described functions. That's a start. Not enough? Maybe divest ALL powers aside from defense to the states. Maybe a confederacy isn't such a bad idea after all, and I'm Yankee. Never gonna happen 'cuz most Americans want lots of stuff and are willing to sit on their fat asses if some "leader" tells them they can have it. "God bless the child" and so on.
And make a constitutional amendment forbidding soldiers from fighting off of US territory - no more offensive wars.
Every time the word 'redistribution' is used just insert the word 'steal', and at least you will be more honest.
I used to think like this too. I now see it differently. When you live in a system where there is nowhere to live and nothing to eat without money, and you're not the sharpest tool in the shed you're screwed. The sharpest tools, or at least the crookedest get the most money. They bribe and threaten representatives to protect their position of getting the most money, and again the one who is not the sharpest tool in the shed is screwed.
Meanwhile, the sharpest or crookedest use the infrastructure to create their wealth. Without the infrastructure, they could not have wealth. There is no wealth without society. It's just not right that the few can have so much and the many can have so little because of the rules and systems of society. If the rich want the society that allows them to be rich to continue, they must have some compassion and not just greed. The society will fall apart if they don't.
Finders, keepers. WORD.
I tried bouncing a dead cat once. It really doesn't bounce at all. j/k.
The pie chart of wealth distribution in the United States is just plain wrong. It does not include what is owed to the bottom half in benefits, pensions, medical care, disability, social insurance, welfare, food stamps, housing, and other state and Federal government benefits. This "generational debt" is just as real as T Bonds and has been estimated at over $60 trillion. In addition it is owed by top 50% who do pay taxes. If you factor in these "liabilities" the figures do not look so bad.
But I thought we are working to eliminate those entitlements. How does that fit into your calculus?
I don't get the envy of rich people. I am not in the top 1% and I don't have a obsessive desire to steal their wealth. Many rich people got that way because they were smart, took risks, invested wisely, and worked hard. I just don't get why we should punish success. It has always seemed like a stupid way to run a country/society.
Now...corporate welfare, privatizing profits and socializing losses, central bank ponzi schemes, I am all for doing something about those.
I really don't envy anyone, as the poet said: I do not mourn what I have not, God's gift,s enough for me!
The best way to get a real fortune is to choose the "right" grand Parents, those special people who worked hard and chose the right ancestors are guaranteeded to "do OK".
At Church this Sunday morning the Pastor was talking about money, who has it and who hasn't any, and in his opinion; While surely God loves us all, just like an earthly parent can have favorites in their family, the rich are God's favorites, that is why he gives them all the money! The proper Christian attitude is to respect the wealthy and beg their indulgence, they know God gave them their priviledge and they owe no one anything, yet, they are still human and they may allow a suitable supplicant to glean their fields!
BS! Poor is a STATE OF MIND! Ask and ye shall receive, knock and the door shall be opened unto ye.
Most people come to Gawd with a thimble for their prosperity, when they should show up with a dump truck!
So, who do you reckon is going to decide who's "wealth" is ill-gotten? You? Your party? Your leader? I'm curious.
It doesn't matter if it is ill-gotten or not. Nobody would have wealth without society. In the world without society, wealth spoils or takes work to maintain, so nobody has much of it.
The mob with the portable guillotine just now knocking on your front door.
I'll just drop this off here:
http://mises.org/daily/5550/Inequality-of-Wealth-and-Incomes
+1 for Mises
OT...
It may just be me..., but all the ZH articles seem to be at least 2 days old.
Where is everybody...., where did everybody go?
I feel like I just went one step beyond the outer limits of the twilight zone!
I'm starting to hyper-ventilate...
Get your boy Sherman to set the wayback machine to 1913 so you can bomb Jekyll Island -- problem solved!
Phew! Ok, it ain't just me...
CNBS reporting: US seized $37billion of Libya's loot back in February. Now to determine who gets it? Well the regime in DC is questioning whether the money was stolen?
Oooh, what does that mean? USSA of Bernank keeps the loot.
Pffffft!
$37billion doesn't even cover next week's auction.
Perhaps that money should be placed in something safe..., like US bonds..., until such time as we decide who has a legitimate claim.
;- )
Forced wealth redistribution is always a negative. The extremes of income distribution we are increasingly experiencing are a sign of corruption going deep into the core of the system. Attempting to right the wrong by forcefully redistributing resources does not address the issues and always smacks of vote-buying.
As for Qaddafi - let's not either demonize or lionize the guy. The reality is that he is a strongman who has successfully looked after his interests for a long time. Now his time has come because of a variety of factors, not the least of which is the outside influence.
The banksters will voluntarily give up some of their wealth when they are ready. Don't rush them. In the meantime, join me in enjoying this delightful stone soup I'm having.
You've got it right Spastic Rex, My Mother always said; When the rich have enough, then they will start looking after the "little" people! Rich people need all the money so they can create "jobs" only rich people can create jobs, we all know that it is on TV everyday, everyone's highest ambition should be to go to work for a rich person and help them get more money and then all the "little people" can have jobs, and such food and clothing as they need to do their jobs, economics is simple really, when you understand it!.
This type of whiny class-warfare BS is a result of your lifelong conditioning and has little to do with reality. Income inequality is not the enemy. Extreme distributions of income are symptoms of a bigger problem. Treat the disease not its symptom.
Thanks Phil, good luck on your QE3 for the bottom 90% wish.
Ha, LOL. Why being flat broke in Sweden still means a higher quality of life than in kramerica. Lemmings.