Monday, January 18, 2010
Pivotal Tuesday
My first stockbroker used to say that Tuesday was actually the day the market would set its trend for the week. He called it "pivotal Tuesday."
Tomorrow, there is a special election to fill Teddy Kennedy's US Senate seat from Massachusetts. It could well be a pivotal Tuesday for US politics. In this blog space on Sunday, the 10th, we advised readers to watch this race closely, since Republican Scott Brown was threatening to make a race of it in a state so blue, it went for George McGovern in 1972. The last GOP U.S. Senator from Mass. was Edward Brooke, an Afro American, in 1975 or so! In a way, it is too bad that the media discovered there really was a race going on because Brown might have sneaked off with it without anybody looking. As it is, the usual gobs of advertising money have now been let loose, in a last ditch effort by Dems to hold the seat. Good luck with that.
The latest polls show a statistical dead heat, or Brown slightly ahead. Momentum is running his way still, despite the usual smear tactics Dems are rolling out at the last minute. But Martha Coakley's career is one big self - inflicted smear. She was among the worst of the overzealous attorneys in various AG offices who built a name and career around the child sexual abuse cases of the 80's, where children were encouraged to testify to obviously imagined or made - up tales in cases against innocent school and day care center operators. In the most notorious case of all, Ms. Coakley kept Gerald Amirault in jail for a decade after his innocence had been demonstrated. This has long been an embarrassment for Massachusetts voters, and no "advice" to the contrary from Obama or anyone else is going to change that.
Of course, Coakley's campaign strategy was to not campaign, hoping to gain the seat by the Dems' divine right to it, I guess. When she finally did debate Brown, she was massacred and that made it no longer possible for either side to keep the race under wraps. We all know that wild horses won't be able to keep Brown voters from the polls. Have the last minute desperation tactics by Dems succeeded in similarly energizing Coakley voters? We'll find out tomorrow night.
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The ultimate irony of this contest is that Brown has the opportunity to become the
41st Senate vote needed to scuttle Kennedy's life long dream of government run health care. Washington Dems took time out from debating how to rig the bill for final passage to consider what to do if Brown wins. I think they have discarded the idea of squeezing in a vote using the lame duck appointed Senator from Mass. while waiting for Brown's win to be "certified." instead, the tactic now favored seems to be to take the Senate bill as is, and force it down the throats of House members. This would avoid a Senate vote, but it causes two major problems in the House, one on the left and one on the right.
On the right, the abortion federal spending prohibition is not as air tight as the House bill's. Several House Blue Dogs voted for the bill only after achieving that prohibition. They may not come along for the Senate version. However, it was always the White House plan to run with the Senate version anyway.
On the left is a bigger problem. Rather than raise taxes on the "rich" as in the House bill, the Senate bill extracts a tax from so called Cadillac health plans, those whose premiums are above a certain amount because of rich benefit packages. Unfortunately, for the Dems, it turns out that over half of these plans are union negotiated, and unions have bought and paid for their party. The leadership negotiators had concluded that they needed to exempt plans reached through collective bargaining (i.e. union plans) for an extra five years, leaving only non-union shops to pay the tax. Aside from the obvious unfairness of this payoff, this created a funding problem - there simply are not enough non-union Cadillac plans.
Now the problem will be bigger for Dems, since if they have to adopt the Senate bill, the provision is to tax all Cadillac plans, including the union ones. So the game plan is to pass the Senate bill, and change the Cadillac tax plan provision as part of budget reconciliation, requiring only a 50 vote majority.
You have to admire the resourcefulness of the Dems, not to mention their utter lack of shame, as they go through these ethically challenged permutations. Why not simply admit that the public wants them to start over, or better yet, forget about health care reform until the economy is back on track? Or simply do the reforms everyone agrees will help - end pre-existing conditions, make all policies guaranteed renewable, limit medical malpractice suits? In fact, that is the message of the Brown campaign. It may be that win or lose, the message has finally gotten through to enough Blue Dogs: continuing to support the administration's health reform effort will end their political careers. Ms. Pelosi may find that as of Wednesday, she can't drum up a majority for any health care bill.
-----------------------------------------------------------------------------
That cheer you hear in Gotham is one that hasn't reverberated since Chad Pennington's year of glory, and before that, the miracle of 68-69. J-E-T-S Jets, Jets, Jets! Yesterday, 3000 miles from home against a favored team with 11 straight wins, a solid defense, a high powered offense, and a reliable kicking game, the Jets prevailed using old fashioned hard - nosed football, reminiscent of their great co-tenant Giants teams. After a while, none of the strengths referenced above were in evidence on the San Diego side and the Jets measured off a 17-14 win. Can they beat Indy, who overpowered the Ravens Saturday? Another long shot, but now one must believe anything is possible given the Jets strength at the line of scrimmage on both sides of the ball. The Colts should be about an 8 point favorite, but New Yorkers will be watching with hopes high.
In the other conference, New Orleans scored at will against Arizona and the Vikes blasted the Cowboys, who were also supposed to be hot but didn't really show up. I give the Saints a slight edge against the Vikes and they should be favored by about 2 and a half points.
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We remained in selling mode last week. On Tuesday, we sold 200 shares of Marine Max (HZO) at 9.98. These were purchased on 10/22/08 for 3.01. On Thursday, we sold 200 shares of LFUS at 34.50, that were purchased 10/20/2000 for 27.125. In those days we would have said 27 and an eighth. By the way, the next time someone tells you that it is unfair for capital gains to be taxed at lower rates than "earned income," just point to transactions like this one where tax will be collected on what are basically nominal gains, made up entirely of inflation.
There's a different discussion when the subject is the rates paid by hedge fund managers on carried interest. Carried interest is really a fee, not a capital gain, and this is one time I agree with those who say the higher regular income tax rates should prevail. More on that controversy in a future post.
In any event, it appears that higher gains tax rates are coming, along with the possibility that Obamacare, if it passes, will need to be funded by applying the medicare tax to gains as well as earned income. So 2010 may be a good year to take gains and postpone losses.
Tomorrow, there is a special election to fill Teddy Kennedy's US Senate seat from Massachusetts. It could well be a pivotal Tuesday for US politics. In this blog space on Sunday, the 10th, we advised readers to watch this race closely, since Republican Scott Brown was threatening to make a race of it in a state so blue, it went for George McGovern in 1972. The last GOP U.S. Senator from Mass. was Edward Brooke, an Afro American, in 1975 or so! In a way, it is too bad that the media discovered there really was a race going on because Brown might have sneaked off with it without anybody looking. As it is, the usual gobs of advertising money have now been let loose, in a last ditch effort by Dems to hold the seat. Good luck with that.
The latest polls show a statistical dead heat, or Brown slightly ahead. Momentum is running his way still, despite the usual smear tactics Dems are rolling out at the last minute. But Martha Coakley's career is one big self - inflicted smear. She was among the worst of the overzealous attorneys in various AG offices who built a name and career around the child sexual abuse cases of the 80's, where children were encouraged to testify to obviously imagined or made - up tales in cases against innocent school and day care center operators. In the most notorious case of all, Ms. Coakley kept Gerald Amirault in jail for a decade after his innocence had been demonstrated. This has long been an embarrassment for Massachusetts voters, and no "advice" to the contrary from Obama or anyone else is going to change that.
Of course, Coakley's campaign strategy was to not campaign, hoping to gain the seat by the Dems' divine right to it, I guess. When she finally did debate Brown, she was massacred and that made it no longer possible for either side to keep the race under wraps. We all know that wild horses won't be able to keep Brown voters from the polls. Have the last minute desperation tactics by Dems succeeded in similarly energizing Coakley voters? We'll find out tomorrow night.
------------------------------------------------------------------------------
The ultimate irony of this contest is that Brown has the opportunity to become the
41st Senate vote needed to scuttle Kennedy's life long dream of government run health care. Washington Dems took time out from debating how to rig the bill for final passage to consider what to do if Brown wins. I think they have discarded the idea of squeezing in a vote using the lame duck appointed Senator from Mass. while waiting for Brown's win to be "certified." instead, the tactic now favored seems to be to take the Senate bill as is, and force it down the throats of House members. This would avoid a Senate vote, but it causes two major problems in the House, one on the left and one on the right.
On the right, the abortion federal spending prohibition is not as air tight as the House bill's. Several House Blue Dogs voted for the bill only after achieving that prohibition. They may not come along for the Senate version. However, it was always the White House plan to run with the Senate version anyway.
On the left is a bigger problem. Rather than raise taxes on the "rich" as in the House bill, the Senate bill extracts a tax from so called Cadillac health plans, those whose premiums are above a certain amount because of rich benefit packages. Unfortunately, for the Dems, it turns out that over half of these plans are union negotiated, and unions have bought and paid for their party. The leadership negotiators had concluded that they needed to exempt plans reached through collective bargaining (i.e. union plans) for an extra five years, leaving only non-union shops to pay the tax. Aside from the obvious unfairness of this payoff, this created a funding problem - there simply are not enough non-union Cadillac plans.
Now the problem will be bigger for Dems, since if they have to adopt the Senate bill, the provision is to tax all Cadillac plans, including the union ones. So the game plan is to pass the Senate bill, and change the Cadillac tax plan provision as part of budget reconciliation, requiring only a 50 vote majority.
You have to admire the resourcefulness of the Dems, not to mention their utter lack of shame, as they go through these ethically challenged permutations. Why not simply admit that the public wants them to start over, or better yet, forget about health care reform until the economy is back on track? Or simply do the reforms everyone agrees will help - end pre-existing conditions, make all policies guaranteed renewable, limit medical malpractice suits? In fact, that is the message of the Brown campaign. It may be that win or lose, the message has finally gotten through to enough Blue Dogs: continuing to support the administration's health reform effort will end their political careers. Ms. Pelosi may find that as of Wednesday, she can't drum up a majority for any health care bill.
-----------------------------------------------------------------------------
That cheer you hear in Gotham is one that hasn't reverberated since Chad Pennington's year of glory, and before that, the miracle of 68-69. J-E-T-S Jets, Jets, Jets! Yesterday, 3000 miles from home against a favored team with 11 straight wins, a solid defense, a high powered offense, and a reliable kicking game, the Jets prevailed using old fashioned hard - nosed football, reminiscent of their great co-tenant Giants teams. After a while, none of the strengths referenced above were in evidence on the San Diego side and the Jets measured off a 17-14 win. Can they beat Indy, who overpowered the Ravens Saturday? Another long shot, but now one must believe anything is possible given the Jets strength at the line of scrimmage on both sides of the ball. The Colts should be about an 8 point favorite, but New Yorkers will be watching with hopes high.
In the other conference, New Orleans scored at will against Arizona and the Vikes blasted the Cowboys, who were also supposed to be hot but didn't really show up. I give the Saints a slight edge against the Vikes and they should be favored by about 2 and a half points.
--------------------------------------------------------------------------------
We remained in selling mode last week. On Tuesday, we sold 200 shares of Marine Max (HZO) at 9.98. These were purchased on 10/22/08 for 3.01. On Thursday, we sold 200 shares of LFUS at 34.50, that were purchased 10/20/2000 for 27.125. In those days we would have said 27 and an eighth. By the way, the next time someone tells you that it is unfair for capital gains to be taxed at lower rates than "earned income," just point to transactions like this one where tax will be collected on what are basically nominal gains, made up entirely of inflation.
There's a different discussion when the subject is the rates paid by hedge fund managers on carried interest. Carried interest is really a fee, not a capital gain, and this is one time I agree with those who say the higher regular income tax rates should prevail. More on that controversy in a future post.
In any event, it appears that higher gains tax rates are coming, along with the possibility that Obamacare, if it passes, will need to be funded by applying the medicare tax to gains as well as earned income. So 2010 may be a good year to take gains and postpone losses.
