Tuesday, January 01, 2013
Happy New Year - Bungee Cords on Hold
The deal reached by the Senate in the wee hours of the morning New Year's Eve is a very bad deal for conservatives and for the budget deficit that we are allegedly trying to fix. There are some taxes in the deal, but as we have discussed before, even less than in the original Democratic proposal which raised very little revenue compared to what's needed. If raising taxes on all income above 250 thousand was a mere trickle, imagine the ludicrousness of raising taxes at the 400 thousand dollar level, in the name of "fairness." Yet I can live with that result. I would also point out that the solution on the estate tax is the best part of the deal for conservatives, since it continues the exemption at the $5 million dollar level and raises the tax rate only marginally. Having said that, I wonder if GOP Senators had a little too much to drink by the time the vote was taken (the deal passed 89-8). I am also not sure what to make of Mitch McConnell's complicity in this typical Washington result which raises taxes while putting off literally all of the spending cuts.
This will leave Republicans in the very weak position of having again to use the debt limit device as the negotiating trigger to obtain any spending cuts. When they do that, their leverage comes from their ability to "shut down the government," which always plays lousy in the media. Strangely enough, it was that old Democratic warhorse Howard Dean who pointed the right way on the Sunday morning news panel. He advocated strongly for going over the fiscal cliff, saying that any last minute deal that comes out of Congress would merely kick the can down the road again, and I agree. The victory achieved by Republicans (for the good of the country) in the 2011 debt limit episode was the automatic spending cut represented by the admittedly blunt instrument of sequestration. Predictably, Senators were unwilling to allow sequestration to actually occur, when they derive so much power from their ability to direct spending to special interests and pet programs. Hence, the plank in the Senate deal that delays sequestration for two months, when it will be dealt with again as part of the debt limit discussions. If you think Dems will be any more likely to support those cuts in March than they are today, I have a bridge I can sell you.
So while House Dems make a show of teeth gnashing over their give on what income level to set the new tax rates, in order to characterize the deal as a compromise, I am sure that privately they are rejoicing. What a shock that House Dem leaders emerge from their meeting this afternoon with VP Biden, expressing their demand for an up or down vote on the Senate deal! We'll see, maybe by the time this post is done, whether Boehner gives them that. More likely, his conference will attach an amendment to the deal that Dems might have a hard time swallowing. If so, over the cliff we go, and that is the result that Howard Dean (and Redwave) would favor. If we're going to raise taxes to the Clinton rates, let's raise them on everybody. Maybe then, the middle and lower middle class will appreciate the tax cut gift George 43 gave them, and why those cuts were good for the economy. The Bush Administration, and the Obama Administration to an even greater degree have had a spending problem - and Congress always has that problem. Until we solve that, budget deficits will continue at a trillion or more per year.
That Senators were drunk last night is indicated by the fact that they did not even wait for CBO to score their deal. When CBO issued its score today, it turned out that the deal INCREASES the annual deficit, substantially. That's because the AMT fix, the ridiculous and unncecessary extension of unemployment benefits, and the other goodies in the deal are worth more than the piddling revenues from tax increases on the "rich." Seriously, do we really need a "compromise" deal that makes the deficit worse?
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Going into the football playoffs, one would look for the hot teams, but sometimes, a team is simply better. Clearly, Seattle, Minnesota, Washington, Denver, and Indianapolis are hot teams. Very good and therefore, dangerous teams would be Houston, New England and Atlanta. The inconsistency of teams like San Francisco, Green Bay and Baltimore has been puzzling. We'll see if they can play to their potential in the post season. Cincinnatti should be very pleased to make the playoffs but I don't see them advancing.
The only college game to catch my attention is the BCS Championship, and I make Alabama a decided favorite versus Notre Dame.
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2012 is history, and we will be reporting our investment results in a near future post. Despite the ineptitude of our lawmakers and bureaucrats, the stock market has been a rewarding place to invest. Our year-end transactions were less frantic, as we wound it down and avoided some of the thin trading sessions. On 12/19, we sold 100 shares of Schulman (SHLM) at 28.38. We bought those on 8/7/06 for 21.63. On 12/26, we sold 100 shares of Carmax (KMX) at 37.43. We paid 7.99 on 1/20/09. On 12/27, we bought 500 shares of Petroquest, a zero buy at 4.90. Finally, on 12/28, the 300 shares of Ceridian (CRDN) that we tendered as a result of its acquisition were sold. We got 35 per share. We bought these in 100 share lots for 15.96 on 11/3/09, for 37.80 on 6/15/11, and for 25.06 on 5/4/12.
This will leave Republicans in the very weak position of having again to use the debt limit device as the negotiating trigger to obtain any spending cuts. When they do that, their leverage comes from their ability to "shut down the government," which always plays lousy in the media. Strangely enough, it was that old Democratic warhorse Howard Dean who pointed the right way on the Sunday morning news panel. He advocated strongly for going over the fiscal cliff, saying that any last minute deal that comes out of Congress would merely kick the can down the road again, and I agree. The victory achieved by Republicans (for the good of the country) in the 2011 debt limit episode was the automatic spending cut represented by the admittedly blunt instrument of sequestration. Predictably, Senators were unwilling to allow sequestration to actually occur, when they derive so much power from their ability to direct spending to special interests and pet programs. Hence, the plank in the Senate deal that delays sequestration for two months, when it will be dealt with again as part of the debt limit discussions. If you think Dems will be any more likely to support those cuts in March than they are today, I have a bridge I can sell you.
So while House Dems make a show of teeth gnashing over their give on what income level to set the new tax rates, in order to characterize the deal as a compromise, I am sure that privately they are rejoicing. What a shock that House Dem leaders emerge from their meeting this afternoon with VP Biden, expressing their demand for an up or down vote on the Senate deal! We'll see, maybe by the time this post is done, whether Boehner gives them that. More likely, his conference will attach an amendment to the deal that Dems might have a hard time swallowing. If so, over the cliff we go, and that is the result that Howard Dean (and Redwave) would favor. If we're going to raise taxes to the Clinton rates, let's raise them on everybody. Maybe then, the middle and lower middle class will appreciate the tax cut gift George 43 gave them, and why those cuts were good for the economy. The Bush Administration, and the Obama Administration to an even greater degree have had a spending problem - and Congress always has that problem. Until we solve that, budget deficits will continue at a trillion or more per year.
That Senators were drunk last night is indicated by the fact that they did not even wait for CBO to score their deal. When CBO issued its score today, it turned out that the deal INCREASES the annual deficit, substantially. That's because the AMT fix, the ridiculous and unncecessary extension of unemployment benefits, and the other goodies in the deal are worth more than the piddling revenues from tax increases on the "rich." Seriously, do we really need a "compromise" deal that makes the deficit worse?
---------------------------------------------------------------------------------------------------
Going into the football playoffs, one would look for the hot teams, but sometimes, a team is simply better. Clearly, Seattle, Minnesota, Washington, Denver, and Indianapolis are hot teams. Very good and therefore, dangerous teams would be Houston, New England and Atlanta. The inconsistency of teams like San Francisco, Green Bay and Baltimore has been puzzling. We'll see if they can play to their potential in the post season. Cincinnatti should be very pleased to make the playoffs but I don't see them advancing.
The only college game to catch my attention is the BCS Championship, and I make Alabama a decided favorite versus Notre Dame.
----------------------------------------------------------------------------------------------------
2012 is history, and we will be reporting our investment results in a near future post. Despite the ineptitude of our lawmakers and bureaucrats, the stock market has been a rewarding place to invest. Our year-end transactions were less frantic, as we wound it down and avoided some of the thin trading sessions. On 12/19, we sold 100 shares of Schulman (SHLM) at 28.38. We bought those on 8/7/06 for 21.63. On 12/26, we sold 100 shares of Carmax (KMX) at 37.43. We paid 7.99 on 1/20/09. On 12/27, we bought 500 shares of Petroquest, a zero buy at 4.90. Finally, on 12/28, the 300 shares of Ceridian (CRDN) that we tendered as a result of its acquisition were sold. We got 35 per share. We bought these in 100 share lots for 15.96 on 11/3/09, for 37.80 on 6/15/11, and for 25.06 on 5/4/12.
