Don’t be surprised to lose if you don’t make an effort at being competitive. And if you go out of your way to make yourself less competitive, expect to lose. This is simply common sense.
But for years, the US has been enacting tax policies that sabotage its global economic competitiveness.
It’s like trying to get in shape for a marathon on a McDonald’s diet. (Speaking of McDonalds, check out this funny video spoof of what their commercials should really look like.)
Here are two major reasons why the US is lagging in the global economic marathon:
The US has the highest effective corporate income tax rate in the developed world (see chart below).
Unlike most other countries, which only tax domestic profits, the US taxes the earnings of foreign subsidiaries of US companies when the money is transferred back to the US. This has had the effect of US corporations keeping over $1.9 trillion in retained earnings offshore to avoid the crippling US corporate income tax.
These “worst in the developed world” tax policies are clearly hurting the global competitiveness of American companies.
Being deemed a “US Person” for tax purposes is like trying to swim with a lifejacket made of lead.
It should come as no surprise that an increasing number of productive people and companies are seeking to shed this burden so they can keep their heads above water.
At this point, it’s more than just a trickle—it’s an established trend in motion.
And I don’t see anything that would reverse it. On the contrary, given the political dynamics—ramped-up spending on welfare and warfare policies, as well as an “eat the rich” mood—taxes have nowhere to go but north. And that means the exodus will continue.
Three Cheers for Walgreens
Over the past couple of years, dozens of high-profile US companies have moved abroad (or seriously considered it) to lower their corporate income tax rate and to access their offshore retained earnings without triggering US taxes.
Among them are Medtronic, Liberty Global, Sara Lee, and Omnicom Group—the largest…
August has been a spectacular month in which we ignored the most bad news ever ignored by a species that is still not extinct. With any luck, an asteriod will head straight for us next month and we can rally the markets another 5% in anticipation of more Fed easing on impact. The asteriod struck the other side of the Earth this morning as Russia Invaded Ukraine and Euro Zone Inflation plunged to 0.3%, miles below the 2.0% target considered "healthy".
This is, of course, GREAT NEWS, because it means Super Mario is free to go ahead and do something – like he always says he will do but never does. That doesn't stop people from believing it because they WANT TO BELIEVE – they want to think someone is going to save them and make all their hardships go away. 11.5% of the people in Europe are still out of work, double the rate in the US. Over 25% of the people under 25 are out of work, about the same as the US. These are horrific figures – of course people are eager to hear the words of a potential savior.
Since it's Friday, we're not going to debate the merits or discuss what a farce it all is – we've done that this week. Today we'll talk about making money.
On Tuesday, in the morning post, I suggested the TNA Sept $72.50/76.50 bull call spread at $2, selling the Sept $68 puts for $2. 10 of those would not have cost you a penny (since it netted out to $0), though about $7,500 in margin on the short puts. Today the spread is $2.50 and the short puts are $1.15 for net $1.35 or +$1,350 in 3 days, which is an 18% gain on the committed margin despite the fact that TNA has essentially gone nowhere.
I don't point this out to brag, we have plenty of trade ideas that have done much better – I point this out because it was a free trade idea, right in the morning post which anyone could have done and it…
Dollar-Weighted Volume (DWV) is a short-term indicator. Generally the DWV and the price index run pretty close together, with tops confirming tops and bottoms confirming bottoms. What we look for are positive/negative divergences and for instances where volume doesn't confirm price, meaning that volume either leads or lags price. When this happens, look for a change in the short-term price trend. Right now we are seeing a divergence between DWV and price on the Dow Jones Industrials. Currently price is moving up faster than volume. This tells us that volume is drying up and support for the rally in the short term may be falling away.
Buffalo Wild Wings Inc. (Ticker: BWLD) shares are in positive territory in early-afternoon trading on Thursday, reversing earlier losses to stand up 0.50% on the session at $148.50 as of 12:15 pm ET. Options volume on the restaurant chain is running approximately three times the daily average level due to heavy put activity in the October expiry contracts. It looks like one or more traders are buying the Oct 140/145 put spread at a net premium of roughly $1.45 per contract. As of the time of this writing, the spread has traded approximately 3,000 times against very little open interest at either striking price. The put spread may be a hedge to protect a long stock position against a roughly 6% pullback in the price of the underlying through October expiration, or an outright bearish play anticipating a dip in BWLD shares in the next couple of months. The spread makes money at expiration if shares in BWLD decline 3.3% from the current price of $148.50 to breach the breakeven point at $143.55, with maximum potential profits of $3.55 per contract available on the trade in the event that shares slump 5.7% to $140.00. Shares in Buffalo Wild Wings last traded below $140.00 back in May.
All over the world stocks are rising. In the US, the S&P 500 rose over the 2,000 mark for the first time in history. The Dow is over 17,000.
And if you want to buy a share of online TV network Netflix, Inc. (NASDAQ:NFLX), you will pay $144 for every dollar the company earned over the last 12 months.
If you bought the company outright, in other words, you’d have to wait until 2158 to earn your money back.
But this story is playing out from Timbuktu to Taiwan to Texas. Here’s the latest from Bloomberg:
Shares worldwide added more than $2.2 trillion in value since Aug. 7, according to data compiled by Bloomberg. Optimism that central banks will support economic growth sent the MSCI All-Country World Index up 3.8 percent from its low this month. The S&P 500 has risen for 10 of the last 13 days and the Nasdaq Composite Index is about 10 percent from an all-time high.Global markets are surmounting crises in Ukraine, the Gaza Strip and Iraq as investors renew bets that stimulus will revive growth. The Stoxx Europe 600 Index posted its biggest two-day gain since April after European Central Bank President Mario Draghi signaled policy makers may consider introducing an asset-buying plan. Japan’s Topix index is near its highest level since January, rebounding from losses earlier this year.
Put them all together, and publicly traded equities are now worth more than $66 trillion – just shy of total world GDP. That’s $12 trillion more than they were worth in the beginning of 2013… and it’s $30 trillion more than they were worth 10 years ago.
Stocks Up… Growth Down
What has happened during the last 10 years to make stocks so much more valuable?
We remind readers that shares are titles to ownership of real assets and the earnings they produce. And in a competitive economy, they shouldn’t be able to diverge too far from the cost of creating those assets.
XRT/Scott – I think pump ahead of dump. Seems so unsustainable. Speaking of clothing, Juicy Couture was clearing out of our local mall. I think there's just too many of these things to survive, probably because, 10 years ago, we were prosperous and willing to indulge our kids but now money is tight and it just doesn't make as much sense to fill closets with clothes they either grow out of or go out of fashion by next year anyway. Our school went to uniforms, mostly because it wasn't fair to the poor parents to have to try to keep up with what the other kids were buying. Doesn't really fix the problem – they still accessorize, etc and then there are parties and weekends, but better than forcing people to come up with a month's worth of outfits for school.
Unsaid/Shadow – Not when a joke is hanging right there!
MCD/Scott – No thanks, not cheap enough. $85 would get me excited, not $95.
Here you go Diamond:
And my favorite:
RIG/Scott – Protection or someone short selling?
2%/Angel – Why does that not seem like an impressive number to me?
The German business climate index tracked by the Ifo Institute declined more than expected this month, making it the 4th drop in a row.
The Guardian: – German business sentiment dropped for a fourth straight month in August as concerns about the Ukraine crisis and the effect of sanctions against Russia swept through corporate boardrooms in Europe's largest economy.
The Munich-based Ifo thinktank's business climate index, based on a monthly survey of about 7,000 companies, fell to 106.3 from 108, below the Reuters consensus forecast of 107.
A large part of the decline was of course due to the Ukraine crisis, but that was not the only cause of Germany's deteriorating private sector growth. Slowing exports to the rest of the euro area nations due to weaker demand as well as persistent economic headwinds in China (see discussion) have contributed as well.
This means that Germany is unlikely to support any further sanctions on Russia and will make a concerted effort to stabilize the situation (in spite of any pressure from the US).
The market reaction was swift, with the 10-year Bund yield hitting another record low.
Investors also piled into the three-year government notes, sending those yields into negative territory for the first time since 2012. The German government is now getting paid to hold your euros for three years.
In fact the nominal yield curve is in the negative territory all the way through the three-year point and showing signs of inversion – with the 1-year yield higher than the 3-year.
The euro dropped below 1.32, with rising expectations of diverging monetary policies between the US and the Eurozone. This was fueled in part by the Jackson Hole conference where Janet Yellen's speech was not as dovish as some had expected. The currency weakness will deliver some much needed relief for the euro area by helping the exporters and by providing some support to import prices. Currency weakness is one way to arrest deflationary pressures – the Japanese way.
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
Here is a update in response to a standing request from a couple of sources that I also share with regular visitors to my Advisor Perspectives pages.
The request is for real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq Composite. In response, I maintain two overlays — one with the nominal price, excluding dividends, and the other with the price adjusted for inflation based on the Consumer Price Index for Urban Consumers (which is usually just refer to as the CPI). The charts below have been updated through the August 29th close.
Buffalo Wild Wings Inc. (Ticker: BWLD) shares are in positive territory in early-afternoon trading on Thursday, reversing earlier losses to stand up 0.50% on the session at $148.50 as of 12:15 pm ET. Options volume on the restaurant chain is running approximately three times the daily average level due to heavy put activity in the October expiry contracts. It looks like one or more traders are buying the Oct 140/145 put spread at a net premium of roughly $1.45 per contract. As of the time of this writing, the spread has traded approximately 3,000 times against very little open interest at either striking price. The put spread may be a hedge to protect a long stock position against a roughly 6% pullback in the price of the underlying through October expiration, or an outright bearish play anticipating a dip in BWLD shares in the next couple of months. The spread makes money at expiration if shares in BWLD decline 3.3% from the current price of $148.50 to breach the breakeven point...
Gradient Senior Analyst Nicholas Yee reports on six companies that are using a variety of techniques to shift pretax profits to lower-tax areas. Featured in this USA Today, article, the companies include CELG, ALTR, VMW, NVDA, LRCX, and SNPS.
Mt Gox may be long gone in the annals of bankruptcy, but its founder refuses to go gentle into that insolvent night. And, as CoinDesk reports, the disgraced former CEO of the one-time premier bitcoin trading platform has decided to give it a second try by launching new web hosting service called Forever.net and is registered under both Karpeles’ name and that of Tibanne, the parent company of Mt Gox.
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This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
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Author Helen Davis Chaitman is a nationally recognized litigator with a diverse trial practice in the areas of lender liability, bankruptcy, bank fraud, RICO, professional malpractice, trusts and estates, and white collar defense. In 1995, Ms. Chaitman was named one of the nation's top ten litigators by the National Law Journal for a jury verdict she obtained in an accountants' malpractice case. Ms. Chaitman is the author of The Law of Lender Liability (Warren, Gorham & Lamont 1990)... Since early 2009, Ms. Chaitman has been an outspoken advocate for investors in Bernard L. Madoff Investment Securities LLC (more here).
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
I just wanted to be sure you saw this. There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.
If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.
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This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.