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Is This Why Hillary Clinton Just Went Nuclear On Short-Term Capital Gains Tax?

Tyler Durden's picture




 

In her second economic speech as a Presidential candidate, Hillary Clinton is set to take on the "tyranny of the next earnings report," a nod to the destructive myopia and pervasive foolishness that dominates the collective mindstate of corporate management teams in the post-crisis world. 

Make no mistake, we are no fan of manipulated earnings. In fact, we’ve gone out of our way to detail how the combination of record low borrowing costs and a perpetual bid from yield-starved investors (both symptoms of ZIRP) has conspired with the market’s “what have you done for me lately” mentality and the prevalence of equity-linked compensation to create an environment where companies are encouraged to issue debt and plow the proceeds into buybacks, thus artificially inflating the bottom line at the expense of capex, long-term competitiveness, and wage growth. Here’s what this dynamic looks like visually:

And it’s not as though Clinton is the first person to notice this besides us. Here’s what SocGen had to say earlier this week:

Corporate executives, who are rewarded for achieving EPS and share price targets, typically in the form of stock options, are also experts in the art of creating a short-term positive market impression. And to great effect, given the (literally) incredible performance of some tech stocks last week. Positive price momentum is a powerful force and one that few corporates are likely to readily interrupt with bad news. So while 'prudence accounting' may inform GAAP earnings, it seems largely absent from many of the pro-forma figures corporates would like us to focus on.

For Clinton, the solution to this noxious, productive capacity-sapping, wage growth-impeding, scourge is higher capital gains taxes. 

Here’s WSJ:

Hillary Clinton will propose a revamp of capital-gains taxes that would hit some short-term investors with higher rates, part of a package of measures designed to prod companies to put more emphasis on long-term growth, a campaign official said.

 

At the center is Mrs. Clinton’s proposal to change capital-gains tax rates, the details of which are being finalized. The Democratic presidential candidate’s plan would create a sliding scale with at least three new rates that change depending on how long an investment is held, the official said.

 

Investments held for less than a year would continue to be taxed at regular income-tax rates, which can top out at 39.6% or more for the highest earners. For those held just a little longer—likely two or three years—the current capital-gains tax rate of 23.8% for top earners would rise. The Clinton rate, which hasn’t been finalized, would be higher than the 28% President Barack Obama proposed earlier this year for the highest earners. The Clinton campaign hasn’t ruled out taxing such investments at the regular income-tax rate.

 

The plan would include additional rates tied to the length that an investment is held, with the lowest rates for investments held the longest.

 

The former senator and secretary of state is diving into an area of significant debate about which policy steps could or should be taken to discourage what Mrs. Clinton calls "quarterly capitalism," meaning overly focused on the next earnings report.

So, as you can see, nothing too unusual there. A Democrat has proposed higher taxes in an effort to solve what’s being pitched as a Wall Street vs. Main Street problem and the entire issue is going to politicized in the extreme because after all, next year is an election year. 

If that were the whole story it wouldn’t be all that interesting other than as a vindication of our contention that the stock market is being held up by a perpetual bid from price insensitive corporate management teams (incidentally, just because we agree on the problem doesn’t necessarily mean we agree with the proposed "fix") who are taking advantage of low borrowing costs to plow money into buybacks. 

Fortunately, that’s not the whole story. Let’s go back to WSJ for a moment:

Activist investors, who generally take positions in stocks and then push for changes they believe would boost share prices, have in the past few years gained more influence and won more battles with larger companies. These investors, such as Nelson Peltz at Trian Fund Management LP and William Ackman at Pershing Square Capital Management LP, say they hold weak corporate managers accountable and help lift share prices for all holders.

 

Detractors, including Laurence Fink, chief executive at money manager BlackRock Inc., and Martin Lipton, a leading corporate-defense lawyer, say the typical activist wish list, including share buybacks, dividends and corporate breakups, diverts cash from long-term investments in plants or people to appease investors who want to sell out quickly.

 

In a recent paper, Clinton adviser Neera Tanden wrote that activist investors are hurting some companies’ capital investments. Company spending on buybacks and dividends surges in the five years after shareholders start putting pressure on a company, and capital investments fall, she wrote in a paper for the Center for American Progress, where she is president, along with Blair Effron of Centerview Partners.

 

Ms. Tanden suggested a sliding scale for capital-gains tax rates, where the longer an investor holds the asset, the lower the rate. Mr. Fink of BlackRock has suggested a similar scale, with a three-year holding period for basic capital-gains treatment, among other changes. 

 

Mrs. Clinton appears to be adopting a version of their idea.

Now that is interesting, especially considering last week’s argument debate between Larry Fink and Carl Icahn and it begs the following question: who is really pulling the strings here? 

For the answer, look no further than Cheryl Mills.

Mills was chief of staff for Clinton’s State Department and was general counsel to Clinton’s 2008 campaign. As Politico notes, Mills "has worked for the Clintons for years [and] regardless of whether there’s ultimately an official title on the [2016] campaign, hers will be a key voice." Earlier this year, The NY Post (in an admittedly hyperbolic piece) described Mills as Clinton’s "consigliere" who "knows where the [Benghazi] bodies are buried." Mills also serves on the board of the Clinton Foundation. 


Ok, so what? Now we know who Cheryl is, but what’s she got to do with anything? 

Good question. 

And for the answer, we’ll leave you with the following screengrab which should tell you everything you need to know about why Clinton is now going the nuclear route on capital gains taxes.

*  *  *

Bonus: BlackRock contributions to the DNC

Source: opensecrets.org

 

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Fri, 07/24/2015 - 12:32 | 6349391 THE 4th Quadrant
THE 4th Quadrant's picture

WTF is black ivy? Sounds poisonous and filthy at the same time.

Fri, 07/24/2015 - 12:36 | 6349409 y3maxx
y3maxx's picture

Mills was born in Kenya.

Fri, 07/24/2015 - 12:47 | 6349456 knukles
knukles's picture

Incestuous enuf, yet?

http://blackivygroup.com/

Fri, 07/24/2015 - 13:08 | 6349569 p00k1e
p00k1e's picture

Speaking of incest – looky at this trash:  1:06

This Woman Admitted Her Cousin Committed Arson On Live TV For The Most Redneck Reason Ever

http://uproxx.com/webculture/2015/07/woman-cousin-arson-ohio/

Fri, 07/24/2015 - 13:20 | 6349645 divingengineer
divingengineer's picture

Ghasp and Swoon!

I got the vapors!

How.......southern. 

Fri, 07/24/2015 - 13:33 | 6349691 Antifaschistische
Antifaschistische's picture

Let's see how much hatred I can invoke...

..for once, I agree with Hillary.

...I propose a hyper-short term Capital Gains Tax of 70% for all gains made in under 10 seconds.   This tax is applicable to all traders; personal, corporate, tax exempt, whatever.

Fri, 07/24/2015 - 13:54 | 6349811 zhandax
zhandax's picture

Is the point of taxes to raise revenue or modify behavior? 

Fri, 07/24/2015 - 14:09 | 6349892 Bogdog
Bogdog's picture

Yes.

Fri, 07/24/2015 - 15:08 | 6350193 Antifaschistische
Antifaschistische's picture

you left off, purely for spite

Fri, 07/24/2015 - 18:54 | 6351035 zhandax
zhandax's picture

Now let's take the pulse of the crowd.  SHOULD the point of taxes be to raise revenue or change behavior?

Fri, 07/24/2015 - 13:59 | 6349843 bfellow
bfellow's picture

https://www.linkedin.com/pub/jean-louis-warnholz/91/737/895

A quick Googling gives you the Soros connection. I'm sure the BlackIvy group, filled with Clinton/Soros people is COMPLETELY on the up and up. 

If this bitch wins, we are fucked as a country (if we're not already there).

Fri, 07/24/2015 - 14:33 | 6350023 KnuckleDragger-X
KnuckleDragger-X's picture

So, are you agreeing with her position last week, this week or next week since it tends to vary by whose writing checks......

Fri, 07/24/2015 - 16:23 | 6350502 11b40
11b40's picture

Since when is Ohio in the South?

Fri, 07/24/2015 - 17:12 | 6350659 A Nanny Moose
A Nanny Moose's picture

Whenever it is opportunistic.

Fri, 07/24/2015 - 13:49 | 6349785 knukles
knukles's picture

Dude, that is way too close to my old college days in southern Ohio.  The guy looks so Cincinnati/Ft Thomas meth-head.
I had forgotten just how creepy those folks really are.
So her cousin is mad because he can't bone her.  Seriously fucked up.   Say, a seat in the Senate awaits him!

Fri, 07/24/2015 - 12:40 | 6349430 thunderchief
thunderchief's picture

I looked at those two pictures of Hillary and that women and almost

Instinctively I thought..

Old Slick Willy ain't riddin the black girls too..

Fri, 07/24/2015 - 13:04 | 6349546 Atomizer
Atomizer's picture

Black ivory is a piano key playing planation songs in the minds of insolvent banking race baiting US President nitwits. 

André Rieu - Nearer, My God, to Thee

http://m.youtube.com/watch?v=v1mQT1u_45I

Fri, 07/24/2015 - 12:34 | 6349397 Bill of Rights
Bill of Rights's picture

So the scum have scum on the inside...my thats a lot of scum.

Fri, 07/24/2015 - 12:37 | 6349419 Obamamerica
Obamamerica's picture

I think you can get a shot to treat that....

Fri, 07/24/2015 - 13:38 | 6349724 monad
monad's picture

Sodium thiopental, pancuronium bromide & potassium chloride.

Fri, 07/24/2015 - 12:34 | 6349400 Omega_Man
Omega_Man's picture

so will Goldman pull the plug on funding this biotch now. 

Not a racist comment, but given that stocks are mostly owned by whites, is this a white tax?

Fri, 07/24/2015 - 12:37 | 6349417 Obamamerica
Obamamerica's picture

I wish we could tax stupid. Imagine the money we would raise just from Congress alone!

Fri, 07/24/2015 - 12:41 | 6349433 Ignatius
Ignatius's picture

Which is why I'm proposing a 110% tax on Bill and Hilary's speaking fees, which doubles as a tax on stupid.

Fri, 07/24/2015 - 13:11 | 6349585 ebworthen
ebworthen's picture

Hillary won't do a damn thing, this is just talk, fodder for the soccer Mom's and neutered male voting DEM's.

Hillary works for Wall Street, she won't do it any more than Jeb Bush would.

Fri, 07/24/2015 - 12:36 | 6349408 Obamamerica
Obamamerica's picture

Support the DNC - Abort a viable Black baby and harvest its organs. 

Fri, 07/24/2015 - 17:13 | 6350664 A Nanny Moose
A Nanny Moose's picture

Wouldn't that eliminated a portion of the DNC's base?

Fri, 07/24/2015 - 12:36 | 6349412 GeezerGeek
GeezerGeek's picture

She's just mad because she wasn't given early warning of the buybacks and given a chance to profit. Ain't nuthin' like a woman scorned...

Fri, 07/24/2015 - 12:40 | 6349432 monad
monad's picture

She's just mad. Tattooed her brain all the way.

Fri, 07/24/2015 - 12:38 | 6349422 Omega_Man
Omega_Man's picture

Hillary's white tax.... 

Fri, 07/24/2015 - 12:38 | 6349423 22winmag
22winmag's picture

Filthy whore.

 

Actually Billary is something worse. Filthy whores aren't all bad.

Fri, 07/24/2015 - 12:39 | 6349426 MFL8240
MFL8240's picture

Her idea must come directly from her trading cattle futures.

Fri, 07/24/2015 - 12:54 | 6349501 Cthonic
Cthonic's picture

When every trade is a winner, any tax rate under 100% must look like a bargain.

Fri, 07/24/2015 - 12:39 | 6349429 lester1
lester1's picture

Every time I see or hear about the liar be Hillary I want to puke.

Fri, 07/24/2015 - 12:41 | 6349437 autofixer
autofixer's picture

Isn't a Black Ivy bite fatal within one step or something? 

Fri, 07/24/2015 - 12:43 | 6349446 Thisisbullishright
Thisisbullishright's picture

Whatever it takes to get elected, right Hillary?  Get elected and then change everything up to serve your over-lord masters...

You keg leg nasty cunt!

 

Fri, 07/24/2015 - 12:44 | 6349449 BeerMe
BeerMe's picture

Why do short and long term capital gains get taxed at seperate rates in th first place?

Fri, 07/24/2015 - 13:28 | 6349671 Ness.
Ness.'s picture

Since the money being invested has already been taxed once, why capital gains tax at all?  Sooo, the Us has the highest corporate taxes in the developed world and now we're going for the highest capital gains taxes too.  This should really spur investments in the USSA - not.

Fri, 07/24/2015 - 12:58 | 6349457 Chalan
Chalan's picture

Higher taxes on short term capital gains is ridicules, the risk of holding stocks longer than a year in this topping markets it's not worth the reward going forward (it will force many pros out of the markets for good) but Berny Sander's tax of 3% each 100$ on any stock sale whether you have a capitals gains or losses it's even more stupid.

 

I mean nobody protects the small guy, so time retire from this racquet if said new laws are implemented

Fri, 07/24/2015 - 13:36 | 6349704 monad
monad's picture

Higher taxes is great for the black market. Ya damn rayciss.

Fri, 07/24/2015 - 12:46 | 6349458 Dr. Engali
Dr. Engali's picture

I think it's funny that Shrillary still pretends that she is somebody when in fact she is an old has been surrounded by dirty money and more baggage than an airport luggage carousel.

Fri, 07/24/2015 - 12:52 | 6349483 Yen Cross
Yen Cross's picture

   Airport, "lost and found" room Doc.

   Go ahead and kill ST cap gains, you stupid carbuncle infested, shape shifting, bingo winged bitch... I triple pinky twist dare ya.

Fri, 07/24/2015 - 13:14 | 6349608 shovelhead
shovelhead's picture

+1 for color.

Bingo-winged bitch?

Not sure what that is, but it works.

Fri, 07/24/2015 - 13:27 | 6349674 Yen Cross
Yen Cross's picture

  The arm fat that hangs off those old fat cackling bitches, when they're playing Bingo. (Bingo Wings)

Fri, 07/24/2015 - 12:47 | 6349461 corporatewhore
corporatewhore's picture

it's all about the money and whos paid the most.

why should it be any different than the previous 8 years in the white house

Fri, 07/24/2015 - 13:34 | 6349518 Lumberjack
Lumberjack's picture

Ashleymadison@hrc.com

I just made this link up.

The hrc is hillary's old server address.

Fri, 07/24/2015 - 13:00 | 6349532 Not if_ But When
Not if_ But When's picture

When contemplating what Blackivygroup actually does - think in terms of the John Perkins book "Confessions of an Economic Hitman".

Fri, 07/24/2015 - 13:16 | 6349619 Tsar Pointless
Tsar Pointless's picture

+1 for your literary taste.

If our educational system wasn't run by the tag team of Religions Nutcases and Corporate Schysters, I'd say that this book should be required to be taught in both Middle School and High School. I've read it, and it's fantastic.

Fri, 07/24/2015 - 14:07 | 6349885 Zerozen
Zerozen's picture

How exactly do you figure it's run by religious nutcases? There's a strict separation on that in this country. If anything schools these days are the opposite of resembling anything remotely religious (unless you consider left-wing PCism a religion).

 

The corporate shysters part I agree with. That's pretty out there in the open, publically stated, what the purpose of conventional education is...to make obedient workers.

Fri, 07/24/2015 - 13:13 | 6349603 Atomizer
Atomizer's picture

We aren't finished exposing the Clinton Foundation. 

Fri, 07/24/2015 - 14:06 | 6349689 monad
monad's picture

 

Trump - Gates 2016

  • Can't buy them.
  • Demonstrated performance.
  • They have their own intelligence. They won't depend on bankster sources.
  • They have their own security. They won't be "guarded" by foreign SS mercs.
  • Too much time on the short end of the political shtick to get gamed.
  • There will be no pardons for convicted traitors and spies.
Fri, 07/24/2015 - 14:09 | 6349880 monad
monad's picture

.

 

Fri, 07/24/2015 - 13:36 | 6349714 large_wooden_badger
large_wooden_badger's picture

Black ivy is what you'll find under her skirt

Fri, 07/24/2015 - 13:43 | 6349753 WillyGroper
WillyGroper's picture

No doubt this will affect on the taxes for "Global Initiative's."

Right...right?

Fri, 07/24/2015 - 14:07 | 6349884 Bogdog
Bogdog's picture

And the circle is complete.

Fri, 07/24/2015 - 17:21 | 6350694 xerxiesx
xerxiesx's picture

Great, in Kommiefornia we pay 13% top marginal rates on "LT" capital gains already, making the 2nd highest "LT" capital gains rate in the world.  Glad to see the solution here is to raise the "LT" capital gains tax even more, that way I won't even get to keep 50% of my investment income!

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