Thirty years ago, the USSR was better known as the "Evil Empire." Fast forward to today, when its successor Russia, is apparently the "Tax Free Empire", and less socialist than France, at least to infamous millionaire expatriate Gerard Depardieu, who as reported previously has paid €145 million in taxes over 45 years, and who demonstratively decided to give up his French passport in the wake of France's socialist 75% millionaire tax (subsequently ruled unconstitutional), and as of today, has just been granted Russian citizenship.
In the spirit of the holidays and hope for a more prosperous 2013, we thought readers might appreciate a little humor to partially offset the relentless 'cliff' doom and gloom. So please, don’t take this too seriously. But if you happen to stumble across a ‘paperbug’ or two over the holidays, perhaps you could share some of the points made here. Humor sometimes helps people realize just how hopelessly misguided they are... Quantitative easing changes nothing. Remember, the PhDs are in charge of our economies and they know exactly how much our money should be worth. Those of us concerned that our money might lose purchasing power are just being paranoid. Choice is dangerous. Think Adam and Eve and you’ll get my point. Those arguing in favour of monetary freedom, of choice in money, of repealing legal tender laws, they’re just like that nasty snake Lillith in the Garden of Eden, the source of all trouble I tell you. ‘Tis the season to borrow and spend folks, as indeed it has been since 1971.
Presenting Dave Collum's now ubiquitous and all-encompassing annual review of markets and much, much more. From Baptists, Bankers, and Bootleggers to Capitalism, Corporate Debt, Government Corruption, and the Constitution, Dave provides a one-stop-shop summary of everything relevant this year (and how it will affect next year and beyond).
I attempt to craft something that has a chance of working.
Warren Buffett is one of America’s biggest bailout beneficiaries, having profited hugely from buying into firms whose assets were subsequently bailed out. Shortly after the crisis began in 2008, Warren Buffett loaned money to, and bought options from, Goldman Sachs, seemingly with the knowledge the bailout of AIG — a counterparty to which Goldman had massive, massive exposure — would take place. Dimon as Treasury Secretary would intend more of the same. Dimon and Buffett and others like them believe in having their cake and eating it. Buffett and Dimon surely have in mind more cronyism, bailouts and free lunches, but the reality of the next four years and beyond may be very different indeed.
It must be pointed out that gold is certainly no longer the bargain it was at the lows over a decade ago (at which time Warren Buffett undoubtedly hated it just as much as today). This is by no means akin to saying that there is no longer a bull market in force though. What seems however extremely unlikely to us is that the long term bull market is anywhere near to being over. After all, the people in charge of fiscal and monetary policy all over the globe are applying their 'tried and true' recipe to the perceived economic ills of the world in ever bigger gobs of 'more of the same'. Until that changes – and we feel pretty sure that the only thing that can usher in profound change on that score is a crisis of such proportions that the ability of said authorities to keep things under control by employing this recipe is simply overwhelmed – there is no reason not to hold gold in order to insure oneself against their depredations.
Three months ago many were angry and surprised (or not at all, as realistically this was a perfectly logical move), when Bernard Arnault, head of LVMH and the richest man in socialist France, decided he had had enough, and would move to Belgium to avoid Hollande's punitive taxes on France's wealthiest. The indignant media's mocking response in France was fast and furious, with many delighted to see the billionaire leave. We wonder how the media will respond as more and more wealthy Frenchmen decide, now that the seal has been broken, to do just that and leave France to its grassroots movement where it is only "fair" that those who have more income and/or wealth, pay more than everyone else to keep the myth of the ponzi scheme formerly known as the welfare state alive and well. Such as one of France's most popular actors, Gerard Depardieu, who is the latest high profile departure to leave his native country and go to Belgium to avoid the second coming of the "fairness doctrine" (the first one of course, doing less than spectacularly with that whole USSR thing).
When Warren Buffett claimed that a lot of secretaries pay higher tax rates than the super-wealthy, JPMorgan's Michael Cembalest wanted to take a closer look, and sure enough Buffett’s assertion is only the case in a minority of situations (like his own). We would therefore not expect to see large revenue estimates from an analysis of the fiscal impact of the proposals in the Fair-Share Act of 2012, since there are not that many people that would be impacted by a minimum 30% effective tax rate. Sure enough, the incremental revenue raised by the Fair-Share Tax Act is around $8 billion per year. This is real money and may be sound public policy, but in the context of a $1 trillion budget deficit expected for FY2013, it’s a rounding error. To convey this zoologically, we show two animals whose volume is proportionally the same (125 to 1): a hippopotamus, and its symbiotic companion, the yellow-billed oxpecker. We would like to think that elected officials and political commentators would avoid grandstanding and not mislead anyone on the fiscal impact of their proposals, but right now, there are some people who need help distinguishing between birds and hippos.
Great and wondrous things seem to be afoot among the righteous bankers of the world. A few months ago Matt Zames was named to get JPMorgan's CIO office out of trouble - and also happens to be the Chairman of the all-powerful Treasury Borrowing Advisory Committee. Just yesterday, Mark Carney completed Europe's full-house of ex-Goldman Sachs alum running the region's monetary policy. Today we hear Lloyd Blankfein will be sidling up to Obama tomorrow. And now this; from the never-crony-capitalist himself, billionaire Warren Buffett has publicly blessed Jamie "apart from the failure of control" Dimon as the best man for the top job at the Treasury. "If we did run into problems in markets, I think he would actually be the best person you could have in the job," Buffett added (sounding more like the 'we' meant he) and dismissed the London-Whale "failure of control" with sometimes "people go off the reservation." With Zames running the Shadow Treasury and Dimon running the Real Treasury, is it any wonder that inquiring minds are asking who really runs America (and for whom)? Of course, in the pre-Fed era - over 100 years ago, JPMorgan Sr. 'bailed-out' America before...
- OECD slashes 2013 growth forecast (FT)
- Fiscal Cliff Compromise Elusive as Congress Returns (Bloomberg)
- China’s PBOC Chief Search Spurs Focus on Finance Regulators (Bloomberg)
- Elected, but Still Campaigning (WSJ)
- Pentagon Readies Options for Afghanistan Force After 2014 (Bloomberg)
- Greece Wins Easier Debt Terms as EU Hails Rescue Formula (Bloomberg)
- Monti presses Cameron for EU referendum (FT)
- Welcome, Mr Carney – Britain needs you (FT)
- Argentina seeks halt to $1.3bn debt order (FT)
- Asean chief warns on South China Sea disputes (FT)
- South Korea Tightens FX Rules to Temper Won Surge (WSJ)
Several months ago, an ad hoc consortium of self-proclaimed millionaires, sent a letter to Obama, Reid and Boehner, demanding that "For the fiscal health of our nation and the well-being of our fellow citizens, we ask that you increase taxes on incomes over $1,000,000." This grass roots initiative sprung up into existence in the aftermath of Warren Buffett's, since defunct, proposal to impose a "millionaire tax" rule. Luckily, as all these very much informed millionaires know quite well, the US Treasury has a dedicated section, named simply pay.gov, which allows anyone: billionaires (here's looking at you Mr. Buffett), millionaire, or even thousandaire, to make a donation which is used directly to pay down the US debt. Because in the absence of the government mandating rich people pay their "fair share" (as determined by a subcommittee of course) for now at least, there is always that other alternative: voluntary action, as per the auspices of something called free will.And not only that, but the US Treasury also provides the general public with a running tally of just how much "Patriotic Millionaire" initiatives have given so far to paying down said debt. As in talk is cheap, signing petitions even cheaper, but putting money where your mouth is actually does go to the bottom line. The bottom line so far in 2012? $7.7 Million - this is how much has been volunteered in total gifts to pay down the US debt. The $16.3 trillion in US debt.
In an attempt to break the now ubiquitous narrative that "its all about income tax rates", and to challenge the ridiculous new support for QEternity; 'The Bears' that brought you 'The Bernank' are back. In this cartoon, they explain how the bailouts made people like Warren Buffett far wealthier than they should be and exposes who actually benefits from all this QE. The Bears, The Buff-ate, and The Bernank - simply perfect.
Recall from Warren Buffett's 2011 letter to investors: "Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion....You can fondle the cube, but it will not respond. " This is what said gold cube would look like, with distinctions for the various types of gold currently in existence:
- Weeks before U.S. election, Mideast gives Obama perfect storm (Reuters)
- Clashes intensify near US embassy in Cairo (Al Jazeera)
- Puppet governments in trouble: Mursi Risks Rift With U.S. or Voters as Islamists Rally (Bloomberg)
- Protests Put Egypt Relations on Edge (WSJ)
- Fed insists politics had no role in decision (FT)
- UBS "rogue trader" fraudulently gambled away $2.3 billion, court told (Reuters)
- Obama Holds Lead in Three Key States (WSJ)
- China's Xi recovering from bad back, could appear soon - sources (Reuters)
- Japan voices anger over Chinese incursion after vessels entered waters around disputed Senkaku islands (FT)
- Goldman Scales Back Junior-Analyst Program; No Contracts for College Hires (WSJ)
- China commentary slams Romney's "foolish" China-bashing (Reuters)
- Aging Baby Boomers Face Losing Care as Filipinos Go Home (Bloomberg)