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Monday, September 19, 2011


Class Warfare Redux

After the lead balloon "jobs plan," today comes the deficit plan, otherwise to be called "class warfare redux." Now, in addition to allowing the Bush tax cuts to expire for those couples in the $250,000 and up income range, Obama suggests eliminating the lowest dividend and capital gains rates for those in the million and over bracket. Presumably, by emphasizing the latter, he figures we might abide the former. But the GOP will never OK severing the higher income Bush cuts from the middle income cuts, and that means neither will happen.

As for raising the tax on dividends, well Ok, it was ordinary income not so long ago, I can live with that. Raising the tax on capital gains (presumably this is the Buffet tax, since gains constitute most of his income), that's just stupid economics. First of all, it won't raise any revenue, as has been shown many times before. Second, it murders stock prices, which only reduces growth, revenue, everything all good things.

The one thing I agree with the President about, as readers know, is ending the tax favored status of hedge fund managers' carried income.

If you want to increase capital gains rates, and increase the amount of double taxation of corporate profits in the system, you just have to adjust those gains for inflation. In fact, as an investor, I would gladly exchange the low rate for inflation indexing. Most of my taxable gains would disappear.

As for the rest of the plan, all of the savings were phony, from the unidentified cuts to be "found" by the special deficit committee, to the projected military wind downs, to the always rescinded provider cuts for medicare. Every day, this President sounds more desperate, more repetitively political, and just inept. He should be an easy mark in 2012. The recent Republican wins in the two special Congressional elections are all the evidence you need to know that the Dems' downward spiral continues.

But Republicans still need to settle on a viable candidate. I have said for a while that their most capable and electable prospect, Governor Daniels of Indiana, seems determined not to run. Of the current crop, Governor Perry has the lead, but I don't believe that will stand up. In baseball terms, we would say he has little upside. He can add the Bachmann voters, and Palin holdouts if any are left, but I think that's it. So of those actually running, I am more and more inclined to join the Romney bandwagon, warts and all. I think he's electable, he's reasonably conservative without being crazy (he was the McCain alternative in 2008 in case you forgot), and he will bring good and capable people to Washington with him to actually run the show. I might be inclined toward Huntsman, but he can't seem to gain any traction, and it's actually getting late in the process.

Of course, if you still want Daniels, or Christie, or whoever, you can hope for an old fashion convention deadlock. It would make for great TV, but it's been a long time since that happened.

What can be done about the Euro bank and sovereign debt crises? Interestingly, I don't think the "richer" Euro countries can solve it on their own. If Germany bails out Greece, who bails out Germany in 5 years? My instinct tells me the solution does not lie there.

An interesting aspect of the world financial situation is that despite the teetering governments and banks, there is an awful lot of cash sloshing around idle. Some of it is in corporate accounts; some of it is in investors' cash allocations. Much of it is in the BRICS countries and others developing quickly.

The salvation of insolvent sovereign funds and undercapitalized Euro banks is, in my opinion, to simply pay up for the cash they need. For governments, they need to pay enough interest to make the risk of loaning to them worthwhile. It might also be possible to post collateral in the form of hard assets they control but which yield no income. That could mean land, buildings, rights, licenses, etc. For banks, I think they should seek equity financing. They will have to give up some control, but having Chinese or Brazilian partners is preferable to being forever under the gun.

If the European markets are so attractive, why wouldn't the BRICS countries and well heeled investors from all over the planet be interested in investing in them? But they will have to give up some of their socialist tendencies and restore free market opportunities. Same here. Obama's socialist lurches just have to be reversed in the next administration.


We went to the Jets game yesterday, and it was a love-in as the Jets enjoyed a rare laugher. This after being so fortunate to escape the Dallas game. In that one, it looked like 2010 in that the Jets were dominated on both lines of scrimmage only to win the game thanks to their special teams and turnovers. Yesterday, at least the Jets defensive line held its own. The offensive line continued to struggle, especially at right tackle where there hasn't been much attempt to even impede the other side let alone block anyone. Actually, the game was won largely by the Jet secondary.

As much fun as MetLife Stadium is, I think the fans enjoy tailgating before and after the game more. There is even a section of the parking lot devoted to huge campers! And everyone was in green (except the Jets themselves who wore throwback NY Titans blue). It used to make me laugh to see St. Louis Cardinal fans all in red, but wearing the team colors and uniform shirts has become the routine for fans at pro games.

At Birdland Wednesday night, we were treated to the increasingly rare appearance of trombonist Wycliffe Gordon appearing with the Louie Armstrong Centennial Band. Increasingly rare because Mr. Gordon has been leading various groups at venues all over the tristate area recently.

The highlight of the show was when Wycliffe was featured on Basin Street Blues. He played a chorus, then sang, moving in mid-chorus to accompany himself on the piano (with one hand while holding the mic in the other), then a two handed solo (accompanied by lone drum) then a scat solo. Returning to the main mic and resuming his trombone, he played it out while the rest of the band (laying out) looked on in delighted awe, and the audience cheered and sang along. I've said it before - Mr. Gordon is quite simply a force of nature.

The jazz scene in New York is heating up this week with a Coltrane salute at Birdland, Helen Sung at Smoke, Brandon Wright at Iridium, and many other venues worthy of your money and attention. Next week, Bill Charlap brings his trio to the Vanguard. And another of my favorites comes to Birdland in October, the Nicholas Peyton Sextet.

We are still buying. On 9/9, we bought 200 shares of SEIC, a zero buy, at 16.06. On 9/12, we bought some more TIPS for the IRA, 20 shares (TIP) in the ETF at
116.40. On 9/14, we bought 1600 shares of Hauppauge Digital (HAUP), a very risky value buy at 1.33. Don't try that one at home. On 9/16, we bought 50 shares of Honeywell (HON), a zero buy at 46.99. All of these transactions were in the IRA. Remember, all securities and transactions are recorded here, but they are not to be considered recommendations, and this blog does not dispense investment advice.

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