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Who Rules America?

Professor William Domhoff has updated his excellent study of wealth distribution in America and the results are just as sickening than they were in 2005!

We looked at the uneven distribution of incomes when I wrote "The Crisis of Middle-Class America" earlier this month and I’ll re-post the main chart here as it’s important for the readers to get a fix on where they really are on the economic food chain.  When I talk about the need for more taxes, I’m generally (like our President) referring to the top 1%, the 1.4M people in this country who earn more than $393,000 a year - where 10% more tax ($40,000) may force them to skip a vacation vs. the alternative of taxing the bottom 90%, who earn $30,000 a year, which would force them to skip heat, food, clothing, etc.  

The chart above EXCLUDES capital gains, which are over 70% of the top 0.01%’s incomes so it grossly understates the situation but it does give you a clearer idea of what was going on in the lower brackets leading up to the crisis.  Go ahead, do the math – adding up the total wages of the bottom 90% against the total wages of the top 10% give you a real idea of what a "fair and just" system we’re participating in:

14,836 people earn $17,271,381 in average annual income ($256Bn), 133,525 earn $2,569,388 ($343Bn), 593,444 earn $760,680 ($451Bn), 741,805 earn $393,583 ($292Bn), 5,934,440 earn $188,513 ($1,119Bn) and 7,418,050 earn $117,688 ($873Bn) while the the wages of the bottom 90% are 133,524,900 people earning and average of just $30,173 ($4,029Bn).

So interesting fact number one is that the 13M people in the top 10% earn (not including capital gains, which make up the bulk of their true income) salaries of $3.3Tn while the other 133M schlubs earn $4Tn.    

We are NOT going to be able to "fix" this country until we recognize that this is fundamentally unfair.  Even for those of us in the top 10%, we need to recognize that those other 133M people are our customers, in the very least.  If they have more money to spend, then we will, in theory, be able to make more money serving them.  What’s really gone wrong in this equation is that the top 0.01%, including our multi-national corportate citizens, who control 34.6% of our nation’s wealth (very good chart series here) have already effectively pulled up anchor and are sailing away to warmer waters. 

In Robert Frank’s excellent book "Richistan," he points out that "The wealthy weren’t just getting wealthier — they were forming their own virtual country. They were wealthier than most nations, with the top 1% controlling $17 trillion in wealth. And they were increasingly building a self-contained world, with its own health-care system (concierge doctors), travel system (private jets, destination clubs) and language. (”Who’s your household manager?”) They had created their own breakaway republic — one I called Richistan."  I gave my take on this crowd in 2007′s "The Dooh Nibor Economy (that’s "Robin Hood" backwards!)."

The top 1% and the multi-national corporations they control care as much about America as you do about Guam when you are selling them some knick-nacks from your own company.  It may happen to be an important market for them but it’s a declining one and they have, for the most part, already decided to just squeeze it dry while it lasts while they put their real efforts into China, India – wherever the next wave of growth may take them.  Meanwhile, their MSM PR flacks whip as many Americans as possible into a xenophobic frenzy because they don’t want YOU seeking opportunity in the growing global markets – that’s THEIR territory.  Better you should stay here and fight over the scraps that are left

Here are some of the more salient of Prof. Domhoff’s charts to give us a quick picture of where we are in America today although it should be noted that things have gotten significantly worse for the bottom 99% in the past few years so the data points are lagging, but staggering nonetheless:


Share of capital income flowing to household categories

          Top -1%           Top 5%         Top 10%     Bottom 80%
1979 37.8% 57.9% 66.7% 23.1%
1981 35.8% 55.4% 64.6% 24.4%
1983 37.6% 55.2% 63.7% 25.1%
1985 39.7% 56.9% 64.9% 24.9%
1987 36.7% 55.3% 64.0% 25.6%
1989 39.1% 57.4% 66.0% 23.5%
1991 38.3% 56.2% 64.7% 23.9%
1993 42.2% 60.5% 69.2% 20.7%
1995 43.2% 61.5% 70.1% 19.6%
1997 45.7% 64.1% 72.6% 17.5%
1999 47.8% 65.7% 73.8% 17.0%
2001 51.8% 67.8% 74.8% 16.0%
2003 57.5% 73.2% 79.4% 12.6%
Adapted from Shapiro & Friedman (2006).


Table 2: Wealth distribution by type of asset, 2007
  Investment Assets
Top 1 percent Next 9 percent Bottom 90 percent
Business equity 62.4% 30.9% 6.7%
Financial securities 60.6% 37.9% 1.5%
Trusts 38.9% 40.5% 20.6%
Stocks and mutual funds 38.3% 42.9% 18.8%
Non-home real estate 28.3% 48.6% 23.1%
TOTAL investment assets 49.7% 38.1% 12.2%
  Housing, Liquid Assets, Pension Assets, and Debt
Top 1 percent Next 9 percent Bottom 90 percent
Deposits 20.2% 37.5% 42.3%
Pension accounts 14.4% 44.8% 40.8%
Life insurance 22.0% 32.9% 45.1%
Principal residence 9.4% 29.2% 61.5%
TOTAL other assets 12.0% 33.8% 54.2%
Debt 5.4% 21.3% 73.4%

Our friends in the top 10% already have 93.3% of the business equity and own 98.5% of all Financial Securities (in case you ever wonder why "Main Street" doesn’t give a damn about "Wall Street") but they only have 79.4% of the trusts so they love to use "Death Tax" to appeal to the little people who do sometimes get an inheritance.  Due to 401Ks, the poor do own 18.8% of the stocks although that number has been dropping all year as they flee the markets and the wealthy already own 87.8% of all non-residential real estate so nothing left to steal there.

The gap between the top 0.01% and everyone else hasn't been this bad since the Roaring Twenties

What can a rich man do to increase his pile of cash?  Well the bottom 90% still have 42.3% of all the cash on deposit so not paying them interest is a good way to start.   They also have 40.8% of the money in Pension Accounts because, as the top 1% know, pensions are for suckers.  The bottom 90% also own 61.5% of the nation’s residential wealth and that is being taken away from them as quickly as possible with 5M foreclosures already in progress and another 5M homes 90 days or further behind on their mortgages with the HAMP program helping a grand total of 37,000 of them last month – what a joke!

Another joke is the one they like to tell about income mobility.  In a recent OECD report, USA came in 3rd from the bottom in lack of opportunity for the bottom 99% to change their stars.  In "Understanding Mobility in America," it is pointed out that Children from low-income families have only a 1 percent chance of reaching the top 5 percent of the income distribution while Children born to the middle quintile of parental family income ($42,000 to $54,300) had about the same chance of ending up in a lower quintile than their parents (39.5 percent) as they did of moving to a higher quintile (36.5 percent). Their chances of attaining the top five percentiles of the income distribution were just 1.8 percent.

The "middle class" of this country plays a game where their children have a 50/50 chance of winning or losing (weighted towards losing, actually) an their children have barely a better chance of cracking the top 5% ($188,000 income) than the people all the way at the bottom – effectively the 1 in 100 random chance of "winning" a better lifestyle.  For the middle class, an increase in income volatility has led to an increase in the frequency of large negative income shocks, which may be expected to translate to an increase in financial distress. 


Hard work no longer gets you ahead either: Households whose adult members all worked more than 40 hours per week for two years in a row were more upwardly mobile in 1990-91 and 1997-98 than households who worked fewer hours. Yet this was not true in 2003-04, suggesting that people who work long hours on a consistent basis no longer appear to be able to generate much upward mobility for their families.

I know not many people reading this are trying to make ends meet on the average salary of the bottom 90% ($30,000 – keep in mind the chart on the left includes the top 10% in calculating averages, which is ridiculous when the top 10% earn 10x more than the bottom 90% per person.  It also does not include mortgages and rents.) if you were, it’s doubtful you would have either the money to worry about investing or the time to worry about any economy outside your own household.  One of our Members commented that one of the problems with the system is that families have fallen apart and that people should take personal responsibility for their situation, to which my response was:

You are right that family has fallen apart but of course they are going to fall apart when the bottom 90% of FAMILIES make $30,000 a year. Do you think you would have some stress in your life if you were trying to live on $30,000 a year?  Do you think your kids would be perfect angels on the $10 a week allowance ($520 a year x 2?) that you would be able to shell out or do you think they might be tempted to make money illegally that may ultimately lead them into trouble.  Or would they take on legitimate jobs that takes time away from their schoolwork and healthy socialization?   No vacations, no travel, no college savings, not able to buy all the cool stuff they advertise on TV because that’s a life you can’t possibly afford.  Retirement is a joke and if you get seriously ill, the deductable alone could wipe out your life savings.   That is reality for 133M wage earners in this country and the 3.2 people in their average families. 

Income inequality IS a problem.  It can destroy the cohesiveness of a society when it surpasses certain limits. People lose their self-esteem when they see that they are relatively worse off (even though not necessarily poor), especially when their position in society isn’t completely their own fault, which is often the case. People’s income, even in supposedly meritocratic societies such as the U.S. and the U.K., depends heavily on their family and social environment, and not only on their own achievements. Income inequality therefore becomes a problem of justice, social justice. And it can also become a problem for democracy, in which case it becomes a human rights issue. assuming one believes democracy is a human right, of course – or is that just all talk when it’s convenient?  On top of that, people tend to be healthier and to live longer in more egalitarian societies but, of course, those gains come from improving the lot of the bottom 90% to bring up the average so why should rich old bastards here give a crap about that?

It may be a surprise to many readers that a Tulane University study found that: "increased income (or wealth) generally does not increase … happiness significantly, and to the extent that it does, relative income plays a greater role than absolute income. In light of this … redistribution, via a progressive income tax, will increase people’s utility (happiness) by improving their relative incomes."  Until a generation ago, many Americans and their representatives argued vehemently that the wealthy ought to pay more in taxes, but that position has drastically declined in popularity.

In his book, The Great Tax Wars, Steve Weisman sets the debate in the context of the battle between those who invoke justice—progressive taxes create equity and hence justice—and those who invoke virtue—the belief that hard work should be rewarded and taxing higher income at an elevated level creates a disincentive to the hard work we should promote.

Leaders of a century ago invoked justice in remarkable language that is unimaginable today. President Woodrow Wilson called paying taxes "a glorious privilege." Supreme Court Justice Oliver Wendell Holmes Jr. observed that "taxes are what we pay for civilized society." In 1942, President Franklin Roosevelt said, "In this time of grave national danger, when all excess income should go to win the war; no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000." That $25,000 is the equivalent of $323,208 in today’s dollars. Can you conceive of a modern president suggesting that no American should earn more than $323,000 after taxes? (President George W. Bush went to war twice without once calling for such a common sacrifice to pay for it.) And President Harry Truman in 1948 vetoed a broad-based tax cut, even in the face of an expected and eventual congressional override, and then asked for a tax increase following his upset victory.

From "Tax Fraud" by Eliot Spitzer:  But President Ronald Reagan transformed our conversation about government and turned taxes into the enemy of progress. It is commonly thought that President George H.W. Bush’s violation of his "read my lips" pledge cost him re-election and President Bill Clinton’s 1993 tax increases cost him control of Congress.

Central to the intellectual debate about marginal tax rates has been the question of whether higher rates discourage people from working. President Reagan is famously reported to have observed that, as an actor, once he hit the top marginal rate—then 91 percent—he stopped making movies for the rest of the year. The result of sky-high marginal rates, this anecdote was supposed to prove, was declining productivity and economic growth.

Is this true? Let’s look at a graph of the nominal top marginal tax rate in any given year and GDP growth in that year.

A caveat—obvious but critical—is in order. Simultaneity does not equal causation. Annual growth rates are a consequence of many factors, macro and micro, and the isolated impact of marginal tax rates on growth is hard, if not impossible, to discern from these numbers alone.

That said, it’s obvious that there is no correlation between higher marginal tax rates and slowing economic activity. During the period 1951-63, when marginal rates were at their peak—91 percent or 92 percent—the American economy boomed, growing at an average annual rate of 3.71 percent. The fact that the marginal rates were what would today be viewed as essentially confiscatory did not cause economic cataclysm—just the opposite. And during the past seven years, during which we reduced the top marginal rate to 35 percent, average growth was a more meager 1.71 percent.

More sophisticated efforts to analyze this relationship also produce decidedly murky results. An excellent review of this in the Yale Law Journal, "Why Tax the Rich? Efficiency, Equity, and Progressive Taxation," concludes that there is scant, if any, legitimate academic support for the proposition that moderate, as opposed to dramatic, increases in marginal rates have any impact on the willingness of the wealthy to participate in the economy.

So where does this leave us? Probably with Weisman’s conclusion—that the debate between justice and virtue will continue for years to come. But this debate may be little more than a Rorschach test—an inkblot into which we read our underlying values about income distribution and social welfare. Those who see taxes as the bane of progress will still claim that higher marginal rates are the enemy of economic growth. Those who favor greater progressivity will say there is no evidence of such a claim. They will conclude—and they will be right—that the wealthier can afford to pay more, with no harm to the nation’s economic growth.

Clearly there is no logic in a democracy for the bottom 90% to vote to maintain the status quo.  Yet the chance of a Congressman being voted out of office is only about 20%, despite all the calls to "throw the bums out."  Perhaps generations of replacing the old bums with new bums has made the voting public apathetic and that is certainly the way to the rulers of America want it to be because the only thing the bottom 90% have going for them is numbers.  The Conservatives have done a great job of mixing religious divisions into politics to keep the people from seeing their choices as part of a class struggle rather than a moral/political division

During 2003, over 450 economists, including 10 Nobel laureates, argued against the Bush II tax cuts. Their letter stated: "Passing these tax cuts will worsen the long-term budget outlook, adding to the nation’s projected chronic deficits. This fiscal deterioration will reduce the capacity of the government to finance Social Security and Medicare benefits as well as investments in schools, health, infrastructure, and basic research. Moreover, the proposed tax cuts will generate further inequalities in after-tax income."  

In November 2009, The Economist estimated the additional federal tax revenue generated from eliminating certain tax deductions, for the 2013-2014 period. These included: employer-provided health insurance ($215 billion), mortgage interest ($147B), state & local taxes ($65B), capital gains on homes ($60B), property taxes ($33B) and municipal bond interest ($37B). These total $552 billion. A fuel tax of $0.50 cents per gallon would raise another $62 billion. This would reduce the projected deficit at that time by half while The CBO estimates the Bush tax cuts cost the Treasury about $1.8 trillion over 10 years if extended.    

Reduce our deficit by $552Bn a year or increase it by $1.8Tn more over the next 10.  It amazes me that we have to have a "debate" about this issue but there’s your answer to who rules America – whoever has the gold is making all the rules


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  1. Charts / Phil – might be a different philosophy altogether is needed (Up The Revolution!). As a semi-Korean and confucian, I found chart 12 in your link to 16 charts very interesting. That graphic confirms my eyeball impression over the years of Korea, and is part of the reason I find it to be a such a livable place now – they have come so far over the last decades in part because the development has been even-handed; a confucian society would never consider doing it otherwise.

  2.  Phil – Just this morning I came across these quotes from an libertarian investment advisor who is helping wealthy clients hide assets and leave the country.  A few excerpts:  
    "I’m working hard to make sure you can either mitigate the risks or avoid them altogether. First, I’m hosting this year’s Alliance conference in Switzerland, where we will meet with leading emigration attorneys. Not many people know that with the right connections and a reasonable amount of capital, you can get a Swiss passport, which is still the world’s best.

    "I realize that not everyone will consider leaving the country. (But just wait until the Treasury market collapses, the dollar becomes nearly worthless, and the food-stamp crowd starts rioting…) If your net worth is more than $5 million and you’re not going to move, you should take several steps right now to ensure OBAMA! and his crowd don’t end up getting 55% of your estate. I’m working with leading estate planners in the U.S. to put together a simple solution that can shelter 100% of your assets from state and federal estate taxes. I’ll be announcing a meeting in New York about the topic at some date in the fall. Whatever you do, if you’re under the age of 75, don’t allow the feds to take your assets. You don’t have to let them."
     That is the patriotism of many people in the top 1% right now.  They want to succeed from the Union and move to a "socialist" country like Switzerland!  So maybe the top 1% aren’t against socialism after all!  

  3. Phil:
    So………. What is the REAL SOLUTION to all these problems short of a REVOLUTION.  My beginning solution is a very simple one…. CANCEL the passports of the top .01% with the message of….. "Don’t let the door hit you in the a** on the way out", since, you like it abroad so much… Stay there….On the board and in the press, we hear a lot of criticism and out right mean spirited remarks of Obama, the Treasury etc etc… In my opinion, the wrath should be directed at the long standing senators and representatives who have allowed this situation to be created by passing laws which have been destructive or stood in the way of passing laws to correct the situation.  So as not to be political… two faces that come to mind are John Boehner from Ohio and Chris Dodd of Connecticut and there are ……………………… many more. We no longer have statesman ONLY politicians. 
    revtodd64/ these "financial planners" have been selling these wares for many years, some of them with or without credentials.  They are just trying to "get their hands" on these "5 million and up" net worth clients for control of theiir assets for large fees and commissions.  I am sure they are "selling" off shore trust accounts with ownership of foreign corporations with nominee trustees directing investment of assets using a "wish list of instructions" for guidance by the US Citizen trustor (you cannot directly control off shore assets without notifying the IRS-look at your tax return).  Right now, one of the biggest scams is the use of small charitable organizations to hide income…… the federal and state government organizations don’t have enough man power and resources to follow-up on them.

  4.  Phil, here’s an interesting EEM/SPY volatility matching trade I thought you might like.
    Basically – EEM: sell the Dec-39 put, buy the 35 put and then sell a SPY Dec 128 call. I come up with 0.72 net out of pocket with 4.28 max gain, so this is exactly 500% disaster hedge (given Friday close prices). Maybe there is some arbitrage in the volatility difference between SPY and EEM, but not really sure if I buy the argument.

  5. Please excuse my ignorance, but  I do not understand the thought process that prevails on this board when I read stuff like revtodd64 has just uttered.. If some guy has worked his butt off his entire life, and has accumulated a lousy $5 mil, and has paid all the taxes that was due when he earned it – then why should he not be able to keep his money and protect it from the scab attorneys and parasite politicians that want to seperate him from his money.  Remember IT IS HIS MONEY, and his money alone. It is not the government’s money so why should somebody think otherwise.  This is the mind set that prevailed in Germany pre-WW 2, when the government confiscated the honestly earned resources of so many, and we all know how that turned out.  I am not Jewish, but I sure do feel for their horrific treatment in Europe during this period of time. With all due respect, revtodd64, I do believe you have joined a misinformed, radical group of folks that support this same thinking that dominated Europe in the referenced time period.  OBAMA – yes, I believe he is not only in support of this concept of " redistribution " of wealth and income through political fiat, but he is following the same pattern of those who were politically in control in Germany pre war.  Having two passports is probably one of the best decisions any prudent citizen could possibly have in his possession.  If he wants to take his legally earned resources to another country – that is his decision, and nobody else should even have the gaul to question it.  HE IS THE OWNER OF THE STUFF – not the government.He earned the money, and did not rent it.  This fear that prevails with the kind of talk that is now mainstrean, that the "rich guy" is some kind of a crook or whatever, will have the worst effect on our already declining economy, as the investment capital will leave the country quicker than the government ever imagined,, resulting in only the government financing the entrepreneurial needs. Good luck with that wonderful idea – it has been tried before by Joseph Stalin and now is contemplated by Obama, in my opinion.  Revtodd64 – where am I wrong?

  6.  Gel1 
    You`re just an idiot!
    How on earth do you compare the plight of a wealthy person asked to pay a portion of his income to the government to the plight of  a race that a government EXTERMINATED in order to take ALL their assets? Anyone who makes that kind of argument is a fool and does`nt need to be refuted. I AM Jewish! 

  7. Yeah Gel you crossed the line on that post. That was a truly dumbass thing to say.

  8. Ben… no I am not an idiot – I am an informed historian who recognizes a a similarity between what has transpired in the past to what is obviously taking place in the present.  I am not talking about the desrcration of a race – I am speaking only ( and I made this very clear ) of the CONFISCATION of ones property.  Jewish or not is not the issue. Why should anyone be subject to the practices that took place in pre war Germany ( again I hope you understand my very clear wordage – Confiscation of their property ). Many were bankers, physicians and financially successful citizens ) but because they had accumulated wealth, they were the ENEMY is the eyes of the government regime and through their state controlled  media it was sold to the people of Germany as the best path to follow ( sound familiar ). The citizens of Germany bought this horrific blastphemy.  For  you to interpret my statement as a comparision of CONFISCATION of wealth to EXTERMINATION of a race is bizzare and you should read, and then re-read my comments as you are not understanding what was written, and have attached an interpretation that is nowhere the intent of the statement.  I will accept your apology for the misinterpretation of my statement – I’m not an idiot, or a fool,  any more than Phil is a dumbell!

  9.  Gel
    You DID compare the two situations. No one y did not desecrated a race, they EXTERMINATED it. You are not an informed historian, you are a person that uses this forum to pontificate on subjects you don`t understand. People like you, who use a captive audience to spew garbage like that post or the one about the "cultural issues" in Detroit are the lowest of the low.
    I did not apologize. Phil is not a "dumbbell" and you  are a fool! 

  10. I’m not sure what the answer is to solve our econmic issues.
    I can see that what folks call "trickle down economics" is not perfect but I certainly believe based on what I have seen over the years that "trickle down government spending"  is worse. I do believe we should have mechanisms in place to care for those who are unable due to disability to care for themselves but I also believe in "personal responibility" for everyone. 
    I think that the heart of our troubles has nothing to do with economics but with personal responsibility and how we treat each other. The family has fallen apart and folks just don’t seem to want to take responsibility for the decisions they make no matter what economic strata to which they belong.
    Until we fix our morales all our other problems are impossible to address.

  11. Ouch--I come here for trading advice and that’s pretty much it and not trying to stir up a hornet’s nest but Phil have you seen the nasty thread about you over on Denninger’s site? As usual the apocalyptic crowd there likes to generalize, meaning if they disagree with you politically you are an idiot or to use their language a "shithead" maybe--I’m not registered to post on their board, tried to but I dont think Denninger wanted me to as I had several email discussions with him about  itwhere he kept telling me to click on some "button" (button?) on his website that didn’t even exist…BUT…if I could post I would tell them about the 15% return I had using PSW in July and the 4% I had this past week alone.  Bit better return than cash in a jar next to my cans of tomato soup next to my laptop displaying survivalist  blogs.  Most of the people posting there thought by now we would all be living in caves and eating each other alive, and are just waiting for their ship to finally come in while they hold naked puts on the phone book. Phil--keep up the good work!! ( Now back to our regularly scheduled programming)

  12.   Gel

    For our informed historian who loves to compare the current administration to Joseph Stalin (how many times have you made that informed reference?).
    Stalin is believed to have killed between 40-60 MILLION people during his reign of terror.
    A couple of million in taxes to 40 MILLIION murders.  I`d say that`s an equivalent argument.

  13. Taxes / gel  – I guess I’m a little confused, gel. You surely aren’t suggesting that your hard working wealthy hypothetican keep all his hard-earned dough, not giving any of it to the government? I do think helping to maintain the community on which we all depend, through taxes, is an essential part of living anywhere, and regardless of how hard this fellow worked, the community did play a role in sustaining him – and some of that support was indirect and therefore not obvious to invisible, but was important nonetheless. It takes a lot to get me to gainsay the old Oliver Wendell Holmes, "Taxes are the price we pay for a civilized society." To the extent we pay for things I personally disagree with, such as a bloated war industry, I also find paying distasteful, but on the other hand we also get things like the Peace Corps and my research on pesticides and Parkinson’s Disease, so…..guess you gotta take what you like with some that you don’t like and figure that’s the price. And hope everyone else is paying their share. Unless you’re like myself & Rev Todd, hiding our capital gains inside our IRA’s ;-)

  14.  Gel
    You desecrate a synagogue, you EXTERMINATE a race. Do you think the Germans ONLY killed the rich Jews? They killed ALL the Jews they could get their hands on. 
    If you were rich they killed you. If you lived in a dirt floored shack in Poland they killed you. 
    How does that fit into your informed tax argument?
    Why did you try to make it fit?

  15. I just don’t  know how all this rhetoric is going to help me make money.

  16.  Gel,
    I`ll tell you why you throw the German/Jew or Stalin/Hitler references into your arguments. Its because you don`t have a clue what Stalin`s or Hitler`s fiscal policies were or how they compare to the current US policies. But you think its an exclamation point on your inane arguments and makes you look smart. Well brother, this is one person who thinks you look a fool.
    How are you going to make money. the markets closed? Where were your objections when these arguments were being made during trading hours?

  17. some people here need a chill pill; i find posts which become personal very counter-productive.  Cursing and name calling discredits the post and poster.

  18. gel1
    I agree, all this ‘fairness’ BS is predicated on SOMEONE becoming the arbiter of who has ‘enough or too much’.
    IT AIN’T NONE OF YOUR FRIGGIN" BUSINESS!!!!!!!!!!!!!!!!!  I have been ‘poor’,  middle class, and I have been, and am,  ‘wealthy’.  I do not give a rats ass if someone is poor,  BECAUSE IT DOESN’T HAVE TO BE A PERMANENT CONDITION!!!!   The ‘poor’ in this country are BETTER off if they have ‘RIGHTS’  to become  whatever they choose to become than if someone GIVES THEM SOMETHING THEY HAVEN’T EARNED.  If they choose to do nothing, TOUGH SHIT,  they have earned the right to have NOTHING!!!!  They still have the right to ‘PURSUE’ happiness in this country; NOTHING ELSE. 
    It used to be that families and friends and local communities would help out decent folks who need a hand up, and it still is that way around where I live, because we care about each other!!  The government DOES NOT GIVE A DAMN ABOUT YOU!!!!  The people in gov are mainly just worried about their jobs,  they CANNOT CARE ABOUT EACH PERSON THEY SERVE, and if you think that they DO care about you, YOU are a damned fool, too.
    The ‘RICH are greedy?? Just because they want to keep or pass on THEIR wealth.  Well, excuse me, HERR DICTATOR,  first. you give them YOUR MONEY, AND KEEP YOUR GRUBBY SOCIALIST HANDS OUT OF MY POCKETS!!!  Because, for every rich greedy bastard in this country I can show you 100 lazy-assed people who will  TAKE ADVANTAGE of any freebie the GOV or ‘NON-PROFIT’ will provide them. 
    I am all for helping good and decent people, PRIVATELY, because, I  care about DECENT, HARD WORKING, LAW ABIDING people who take care of themselves, their property, friends, and family.  I try to pass it on, because others have helped me , too. AND THAT IS THE AMERICA I WANT FOR ALL PEOPLE. 
    It’s NOT greedy to want to keep what’s yours but IT IS  wrong to take what is NOT yours, even if you want to redistribute it. 

  19.  humvee4me 
    Come on, let it rip, its the week-end!  I called out Gel on a bullshit argument that offends me. Why do I have to bite MY tongue? Go for it, rip me. Defend him.
    That` right, let`s see what people really feel!
    I love that!

  20. As they say, the  market never sleeps;  and that’s why i’m here.  None of this political arguing ever changes anyone’s mind and I’m here trying to get investing/trading ideas to MAKE MONEY for myself.  There are lots of other venue to get political debate.

  21. Let the facts…history, data, reason do the shouting.
    The basis of all freedom has and will always be the right to one’s lawfully gained property.
    Just because there are greedy folks at the top and at the bottom is no real reason to deprive the hard working middle class or any for that matter of their lawfull gained property.
    Anyone on this site is free to give away all his substance "to feed the poor" at anytime, but to do it by confiscation in the name of wealth redistribution violates all hope of a civil society…
    Just my 2 cents worth…

  22. ben… I must say you are still laboring under the impression I am comparing CONFISCATION of wealth to the anillation of a race. I’M NOT. I am saying ONLY that the historical beginnings ( and you should know this ) of the dastardly brutal treatment of the Jewish population living in Europe BEGAN with the media ( supported by the Natzi’s ) admonishing the bankers ( mostly Jewish ) and then expanded to the physicians, and other successful professionals ( mostly Jewish ). This was the BEGINNING of what was to follow. My thesis is we have the same dynamic in play, at this moment, in this country. The media is fully behind the Obama administration in its effort to "bastardize the bankers" and to create all the ingredients for a class warfare. THAT IS MY COMPARISON. – ONLY. I will give you analogy – If a physician sees a pre-cancerous lesion on a patient,  the physician knows this can develop into a very serious condition that will make the pre-cancerous lesion look like a walk in the park, compared to what could later develop into a life-threatening situation. I believe we are at the gates of what I could describe as a "life threatening situation", because all of the indications are following similar historical events, that turned out very badly.  Disregard the indications, and, yes, a fool to use your terminology, might regret  being oblivious to the obvious indicators that are everywhere.  Some of the most hidious diseases do not "just appear", but do always have subtle indicators, sending a signal,  that something is wrong. Take the warning signals seriously if you are prudent.. Confiscation of Jewish assets took place long before the all-out war on Jewish people, as a race, so this all out war on " people of wealth "  is for me a signal of what is the "fomenting catalyst", that is the beginning of Obama’s "redistribution of wealth" mantra that he still has not identified, but surely  has the seeds well implanted.  Remember ben… I speak of where it began, and not where it ended up, as that is my point.

  23.  Gel,
    That WAS`NT your comparison. Now you`re spouting a bunch of mumbo-jumbo to confuse what you originally said.
    The "dastardly" treatment of the Jews in Europe began in the Middle Ages. 

  24.  bps2002 
    Can`t say it any fairer than that. No bullshit there.
    Come on!  You are one of the most opinionated posters  on this board and your politics shout out. your beliefs. Why pretend you  are`nt a big part of this boards political debate? If someone makes what I feel is an offensive post., I`m calling him out whether you like it or not. I don`t pay my money to soft-shoe around that crap

  25. Gel,
    You are right. The wealthy were at first demonized and then many were given the option to "leave" with about 5% of their wealth. The Jewish bankers were first but this did propogate to all well to do and educated classes who were not on board with then Nazi agenda… The ones that saw what was coming early had much of their wealth, other than lands, of course, sent out of Germany, they began to be deminized when the Nazi’s began to catch on.
    Barton Biggs does a good job of this history in "Wealth, War and Wisdom"; it is a good read.

  26. I do not have any motivation to offend anyone – my only desire is to warn those that may be blinded by the bull shit that encompases most of all our media and then becomes "fact in the minds of many". I am not as skilled as so many that post their thoughts, so I must defer to Jerry’s comments ( jkorf2) as he took words out of my mouth and expressed in far better terminology the direction of my thoughts.

  27. What a lively discussion this morning… this dialogue is so meaningless because it is all generic polarized criticism.  In my opinion comparing Obama to a socialist is extremely ignorant. The data provided by Phil regarding the impact of the current laws or lack of laws and direction of "capitalism" is what it is….. it is not serving the health of the citizenry or the country. Maybe, if John McCain and Sarah Palin were at the helm wewould be much better off….. a continuing government of the Bush policies, another one or two wars and the Act goes on.  This country needs to reign in the insurance and drug industry and the money center banks.  Because Obama attempted to address these issues… kill the messenger.  The problem is the Congress.    
    My significant other is a woman who lives in Russia (Kaliningrad).  Her family was of royal lineage of Old Russia… her grand parents were killed in the Revolution.  She has lived under the Soviet rule for 1/2 of her life and worked for a trade company in  Afganistan during the war and has lived in Putin’s Russia….. SHE KNOWS SOCIALISM…. Obama’s agenda is not Socialism… this is truly laughable.  She has lived in western Europe and Asia and traveled much.  We have discussed differences many times.  The biggest difference as DKGuy refered to is in this country’s DNA.  America is all about Individualism and many European countrys are about family and the community.     
    There is a tendency by a few on this board to classify people who have less monetary means as less than….. Many people can work their a** off, be of high character, not expect a handout and still be "behind the eight ball".  Everybody on welfare, food stamps or a form of the government assistance is not a "lazy and worthless Son of a B**ch.  Sometimes Sh^t happens to good people… especially, in the economic environment  Most of these "less than people" are embarassed to be on any governement assistance.  Even the GREAT RUSH LIMBAUGH lived on governemnt assistance at one time in his life.  
    As for Phil…… he can take care of himself.  At least Phil has facts and solutions to problems.  If Phil is being discussed on Denninger’s Website…. it just means it’s a form of flattery. For myself, Phil is a breath of fresh air and an extremely informed person with great intellect.  It’s nice to concerse with someone of his caliber…. All those other people only have opinions…. AND YOU KNOW what they say about people with only just opinions…… they are like ……. everyone has one…..  

  28.  bps2002
    Biggs is also author of the 2008 book Wealth, War and Wisdom . In this book, Biggs has a gloomy outlook for the economic future, and suggests that investors take survivalistmeasures such as looking into "polar cities" as safe refuges for future survivors of global warming. In the book, Biggs recommends that his readers should “assume the possibility of a breakdown of the civilized infrastructure.” He goes so far as to recommend planning adaptation strategies now and setting up survival retreats: “Your safe haven must be self-sufficient and capable of growing some kind of food,” Mr. Biggs writes. “It should be well-stocked with seed, fertilizer, canned food, wine, medicine, clothes, etc. Think Swiss Family Robinson. Even in America and Europe there could be moments of riot and rebellion when law and order temporarily completely breaks down.”[
    Now that`s a guy I can believe in. Great sourcing on the history of Europe!

  29. Hey, I HATE the political diatribes  (see  original post)  and I am sorry for writing one myself,  because I am here to learn ONLY the info about stocks/ option/ etc.  I think Phil should banish any political  banter from the site…. (INCLUDING HIS) during the week because it takes too long to sift through all the BS to find the nuggets.  If Phil didn’t have to answer,  the rants about HIS rants, there would be more time for the NUGGETS like WHY did he pick THAT COVER/MONTH/ STRIKE TO COVER THE PORTFOLIO.  I am interested in that, what stocks he favors and why,  how he learned on his grandpa’s knee about stocks, etc.   I think we all like that part of his genius and THAT, my fellow PSW readers is WHY we came.  Inciting rancor and divisiveness doesn’t help us in that regard, and it is a distraction for all who came here for a different reason.

  30.  Gel
    Jerry`s post was honest and did`nt include bullshit allusions to the holocaust. I respect that post..
    I`m very upset with you because you showed a real lack perspective by including allusions to victims of genocide in an argument about taxes.

  31.  jkorf2
    I`ve been a member five weeks and hate the political posts. But I am so sick of people spouting off on issues they don`t have a clue about. Gel1 is one of the biggest offenders and he stepped on MY toes this time and its the weekend and after this I`ll go out and get a beer, but the next person who equates taxes and the holocaust is going to get the same earful. 

  32. ben1be
    While I am not betting on a total breakdown of wester civilization, only a fool would not at least consider the possibility and a plan for surviving it …right?
    Societies can turn ugly and at the heart of the ugliness are ideas…ideas about how resources should be allocated, ideas about the role of government…ideas about private property.
    So if in out calculation of risk we think there is a 5% chance of seeing a societal upheaval in our liftime, perhaps it would be prudent to dedicate 5% of our saving/investing/hedging capital to that type of protection.
    In my opinion, at the heart of all this is central bankers (they control governments/currency all over the world) have caused most of the social unrest in the last 150 years…

  33. Ben, you live on nazi Germany or communist Soviet Union? I think not. Many nations lost more % peoples before and after WWII times, but we dont speak every day, that we are victims and all world  owes something for as. I can also speak, that west countries sell as to Russia, but its history.  I think all peoples are equal, but you and some peoples think, that some nations are better. Gel have some understanding about history, but its his problem. This site for trade ideas and for racial debate are other sites.

  34. Well, the article that Phil wrote to which all these posts are attached is political…right?
    What is wrong with discussion, it makes us all wiser. Now I will admit some of you guys get rather personal.
    Cases are best put forth with facts and reasoning and weak cases almost always give themselves away with namecalling, insults, misquotes of each other and shouting. This is not productive or necessary.

  35. The issues being debated here are matters of viewpoint, so nobody can be proven an idiot. I have often wondered if you could lop the top 30 or 40% off the income of the top two groups, if the liberals would be happier because the gap was narrowed. The problem is that the average american is making little or no progress in terms of family income, and demonizing the rich does not do a thing for them. I have always believed that the rich do not matter, and exactly how rich they are makes no difference in my circumstances. Phil, I don’t know why you keep presenting data on the rich. I mean, nearly every day for quite a while? I think it just pisses you off. I’m pretty sure you have more than I do, but it doesnt bother me at all. Why is that? Maybe I’m an idiot?
    I made what I made, and I am satisfied that I can still bleed a nice income from this bizarre market. I can’t be worrying about my much richer neighbors, or the statistical freaks in the top 0.01%.

  36. I will count myself among those who joined the site to try and advance my trading ability and knowledge- not for political posturing or arguments. If some choose to do so on the weekends that is certainly their choice and right but PLEASE keep it to the weekends so that all of us can garner what we originally joined the site for and maintain a willingness and desire to help each other with knowledge and information relative to trading and benefit from it- just my .02 worth.

  37. I’m new here, as well, and I really like the articles and the political debate, in addition to the trading ideas and theories.  
    It’s Phil’s site, and if he wants to focus on these issues, that’s fine with me.  I think he’s saying what needs to be said. This site is quite different because of its viewpoint; I’m sure there are hundreds of conservative sites you can go to if that’s the bias you would like.
    And, to echo what others have said today, and we please have a ban on equating whatever it is some of you dislike about the Obama administration (tax rate increases, health care reform, whatever) with Nazi Germany?  It’s just not appropriate or accurate, and it just raises the ire level.

  38. OH SORRY GUYS……………….I thought this was the Phil’s Stock site.
    Now I see it’s the PPW ( Phil’s Political World) site……. MY MISTAKE….sorry….

  39. Confucian/Snow – But didn’t Confucius argue for a more static society in a time of great wars?  I’d hardly say we’re going to find inspritation in his writings to spark a revolution…  8-)

    Taxes/Rev – That’s kind of the problem, we’re already at the end-game where the wealth has been transferred to the top 1% and now they can take all their toys and go elsewhere, which is the prevailing attitude.  I have joked here about us finding a nice private island to escape to because there are many scenarios in which this all ends badly for America.  While there are many people (including me) who still think we can unscramble the omlette and get this country back on a path to sustainable prosperity, there may be too many rats leaving the ship to leave us with a viable crew in the end.  There has been a massive transfer of wealth over the past decade from the bottom to the top and our choices are:

    1. Status Quo – Leave tax cuts in place, force austerity on the masses until we implode anyway as the weight of $15Tn worth of debts will never allow the government to do anything more than pay off China and Bill Gross’ notes.
    2. Austerity and Tax increases – Good way to piss everyone off and accomplish nothing (see Greece)
    3. Tax increases and Stimulus – Redress the great imbalance of the last 30 years (see chart above as marginal rates collapsed from 80% to 35% and debt went from $3Tn to $15Tn) and deal with the fact that many of our wealthy will leave (but that means our poor will be free to earn the money they leave behind so "ta-ta") and, of course, do whatever it takes to get 133M people from $30,000 average incomes to $45,000 average incomes and push $2Tn into the system from the bottom up, where it will do the most good. 

    Short of Revolution/Acorbra – Well you took out my favorite choice!  I don’t find it productive to engage in trying to find ways to get our $12Tn back – it’s been taken and will not be returned (see RevTodd’s example) as smart top 1%’ers know about my "take the money and run" system – in this case taking it right out of the country.  The only way to address that is throgh regulation and, again, this is why I think a VAT is important.  If you want to make sales in America – you pay tax in America, plain and simple.  US corporations pay it in virtually every country in the World EXCEPT America and they haven’t gone bankrupt or imploded nor have the people in those countries gone insane or starved to death.   The reason corporations don’t want a VAT is because it removes 90% of the loopholes they use to hide income and avoid taxes. 

    As I keep saying, this country, this economy, makes more than enough money to cover it’s operating costs.  We have a $15Tn GDP and a $3.5Tn budget but that includes stimulus and a $1Tn military budget so a 20% VAT or whatever that collects $3Tn of that $15Tn plus some sensible cutbacks will balance our books. 

    EEM/BDC – Well,  there is some presumed decay in EEM that you have to watch out for and, of course, SPY $128 is a very long shot but I’m not sure I want to tie up $1,000 in margin to get $200 (10 contracts) just to offset a bull put spread.  I’m confused with how this is a disaster hedge because EEM is an up fund so if you sell the Dec $39 put for $2.10 and buy the $35 put for $1.10, you are in for net $1 credit (plus the .20 you collect off SPY) so maybe I’m reading this wrong.  Oh I see, it’s BUYING the $39 puts and selling the $35 puts for net $1 and then SELLING the SPY call for another .20.  Why are we doing this? 

    How about going for the Dec SDS $28/32 bull call spread at $2.20 and selling the SPY Dec $77 puts for .80 and the SPY $121 puts for .95, which is net .45 on the $4 spread?  We assume, as it’s a hedge, that if the S&P hits 1,200 you’ll be happy enough to roll the callers along.  Since the SDS spread is deep in the money already, anything but up on the S&P will be a 788% win all the way down to 770 so if we dip below 900 you may want to add some more downside protection. 

    Taxes/Gel – I’m certainly not in favor of confiscating anyone’s existing wealth, that never ends well but, Gel, be warned that that is how it does tend to end when the wealthy refuse to address the concerns of  the majority, especially when wealth disparity is as extreme as it’s getting today.  All this intense rhetoric gets us nowhere.  My intent is simply to try to get the top 10% to understand that we need to make the system more fair GOING FORWARD.  We all played a game, the rules gave too much advantage to one team and the losing team doesn’t want to play anymore unless the rules are changed.  Now, if the winners continue to flaunt their victory and try to force the losers to keep playing under the unfair rules - then they shouldn’t be surprised if the disadvantaged decide to make up their own rules and steal their own victory – this is what revolution is all about. 

    Jews/Ben – Well that’s a very good point, the rounding up and extermination of a minority (and it wasn’t just the rich ones as anyone who read Anne Frank’s Diary or at least saw Cabaret would know) is not at all the same as asking the people who control 80% of our nation’s wealth to kick in a little when our nation is in trouble, is it? 

    Gel – I’d use the Romanov’s next time you need a cultural example or the Chinese that were purged under Mao or maybe even the French but, then again, they were all rich dumb-asses who were blind to the plight of their people until a knife was put to their throats while the Jews in Germany were typical middle-class and upper middle-class citizens who were singled out for execution while other, equally wealthy Germans, were not touched. 

    Trickling/DK – A lot of government spending is, of course, wasted.  A lot of IBM’s spending is wasted, a lot of GE’s spending is wasted.   I am very sick of (not you) talking to people who yammer on about government spending that don’t have a clue in the world what it means to run a $3.5Tn corporation where the board has more power than the CEO and constantly exercises it and the workers and the customers need to be constantly placated.  You are right that family has fallen apart but of course they are going to fall apart when the bottom 90% of FAMILIES make $30,000 a year. 

    Do you think you would have some stress in your life if you were trying to live on $30,000 a year?  Do you think your kids would be perfect angels on the $10 a week allowance ($520 a year x 2?) that you would be able to shell out or do you think they might be tempted to make money illegally that may ultimately lead them into trouble.  Or would they take on legitimate jobs that takes time away from their schoolwork and healthy socialization?   No vacations, no travel, no college savings, not able to buy all the cool stuff they advertise on TV because that’s a life you can’t possibly afford.  Retirement is a joke and if you get seriously ill, the deductable alone could wipe out your life savings.   That is reality for 133M wage earners in this country and the 3.2 people in their average families.  Please forgive them if they take your personal responsibility lecture and scalp you and carve it into your forehed…  8-)

    The personal responsibility that needs to be taken is OURS, the people in the top 10%, who control 80% of the wealth of this nation and WE need to decide how much of it we should be contributing to improve that situation for the bottom 90%.  We can address it slowly, through taxation or we can find more immediate ways of improving it but doing nothing and allowing this to continue (and it’s getting worse every year) is downright criminal, IMHO. 

    Denninger/Chip – I didn’t realize he was such an ass!   Well, anyone who is interested can go to Raging Debate, where I did respond to him and please feel free to give him thumbs down and add your own stuff as I got bored playing with him.  When I refused to keep arguing the point he was blowing out of proportion (as it’s a nit-picking issue referring to a 1960 Supreme Court decision that I already agreed in our chat that did overturn the point I made in the post in question), he asked that the moderator take down my comments on taxation saying: "I call for a moderator’s intervention in this matter if Jason would like me to continue."   WTF?  And this guy is a blogger? 

    I agree Dflam – people better get this crap out of their system before Monday. 

    "For every rich greedy bastard in this country I can show you 100 lazy-assed people who will  TAKE ADVANTAGE of any freebie the GOV or ‘NON-PROFIT’ will provide them."/Jkorf – Well that’s a good thing since the average person in the top 0.01% makes 1,000 times more money than the people in the bottom 90% and a million times more than people in the bottom 10% so I damned well hope you can show that at least 10% of those people are lazy and not just being taken advantage of.   I am glad you are comfortable in your position of deciding who deserves help and who does not – it must be a very tough job that gives you many restless nights.  I do not belittle personal charity, it is a great virtue but as a person who has done a share of fundrasing – I will tell you that charity is a very limited commodity in this country and poverty is almost limitless.  You may not call it poverty because even the poorest people can afford a six-pack and cable but, as I said above – you deprive them and their children of the American dream as surely as if you shackle them in chains, whip them all day and deny them books at night.  There is no America for all the people – that’s the point of the studies I’m sighting in this post, the bulk of the people have been thrown so far down the ladder there is no hope yet you keep benefiting from your position of power and your children will and thier children will as well but nothing for the generations born into wage slavery.

    Nice Acobra – very interesting re. your wife, I’d love to hear her perspective on things…

    Political bankter/Jkorf – It is supposed to be banished during market hours actually. 

    5%/BPS – I agree.  Please make all checks payable to the "Philligan’s Island Fund."   Actually, better make it gold coins only!   8-)

    Data on Rich/Barf – Sorry but I’m still doing my DC homework and YES, it pisses me off.  I’ll be done next week and hopefully we can take a political break until October, when politics will be hard to avoid again.  My trip to DC last week was about working to find solutions to better the lot of the Middle class in America and the biggest barrier to getting things done is the LACK of awareness on the part of the public, especially the top 10%, that there is a problem so ignoring it until things are so bad that we”re all in a shelter in the North Pole is not a path I’m choosing to follow. 

    Good article on Taxes I’m going to be using in this post later:

  40. Hi Phil,
    If political banter is supposed to be excluded during the day, can you remind the purveyors of banter to stop, and / or don’t respond to them….OR….. yeah…. I LIKE THIS….. don’t rile us up in the first place, then you won’t have to tell people ‘ don’t let the door hit you in the ass on the way out’ … blood pressure will come down……you’ll have MORE members….we’ll all have more money/ pay more taxes..AND THE COUNTRY IS SAVED!!!!!!!!!!  We do all need to chill!! 
    Thanks for your time,

  41. Irony – I seemed to have touched off an unexpected firestorm with my morning post about a newsletter regarding wealthy people figuring out how to move everything out of the country.  I think my main point was lost.  I just thought it was very ironic that the author wanted to go to Switzerland, a society that flourishes in part because of greater equality in taxation and a more socialized economy than our own.  It seemed odd that after all the rants and socialism rhetoric about Obama, that wealthy libertarians would want to go to Switzerland (where my wife’s family actually has lived for 30 years.)  Maybe I will stick to IRA posts in the future (not the Irish kind.) :-)  
    gel – you and I may have some points we can debate and find common ground or differences.  We probably disagree on a lot but I imagine you are a decent guy.  In fact, you would probably agree with my Dad about many things, and he and I argue all the time.  But for any debate to happen I think the words Fascism, Hitler and Stalin need to be removed from all of our vocabularies.  I’m not sure why people on the right and left have to compare everything they don’t like to Hitler, but it only inflames and never clarifies.  There are over 100 countries on the planet and I’m sure we can all find economic situations to make our points without Nazi or Stalinist references.  Likewise, I will try to avoid painting all wealthy people as the same.  I admire what Warren Buffett and Bill Gates and many others have done with their wealth and I am here because I want to build wealth as well.  There are points I would like to debate, but I will wait until tempers cool a bit here. 

  42. Phil… OK, I have expressed my views in the form of a rebuttal to what the majority of the contributors believe is correct policy. My intent was just that… not to start a WAR.  We must remember, however most wars or revolutions are started because of religious convictions, or economic disparity issues. I believe it was 240 years ago we went through this same debate over taxation. I have to say, I am surprised by the response to my post.  I have consistently paid over 50% of my income to taxation over the years, and saved the balance. I guess now,  the opinion of most – probably over 90% including the majority of the membership of PSW,  believe I need to give most of my savings to the benefit of those that chose not to save or conserve for the future, and probably paid little in taxes along the way.  I now feel much better that I have a second passport, as the idea of confiscation is popular, and is likely becoming a reality, supported by the overwhelming majority.  Phil, this might be a good time to look into that idea of a private island, as what you hope for, may become reality.

  43. Confucian /Phil – lol, good point, that’s what the man said. However, in Korea, in 1392, a General Yi overthrew the buddhist koryo dynasty and brought in confucianism. It was in good part a rebellion against the chinese yuan dynasty – ie the mongols – but it meant the loss of the old kogoryo territory (the liaodong peninsula and a good-size chunk of manchuria). My wife’s father’s family is the chun family – for those of you who know characters, that’s the chun that means ‘whole’ or ‘entire’ – but before 1392 their family name was ‘wang’ – the rulers. When they were defeated, in their shame they put on hats and retreated down the peninsula to the country – and that’s what they did with the character for their family name as well, put on a hat. If you compare the ‘chun’ and the ‘wang’ characters you can see the hat…great stuff, pictographs. So the people from those two southwestern provinces, the cholla or jeonra provinces, tend to be distrusted to this day, and have been hotbeds of revolution. Fortunately, my wife is kept on the straight and narrow by being the matriarch of her mother’s clan, the min family.
    You wold think all this ancient history and irrelevant, but to this day the liaodong peninsula is a contentious area, and there’s a strong movement amongst young koreans to consider themselves people of kogoryo, which has some serious territorial implications.

  44. revtodd64   well said.  I, in my effort to draw analogy to my point, used very poor reference points. I believe it inflamed emotion, and that was not my objective. I’ll be more careful in the future!  Sorry to all, if it was offensive.

  45. Korean names – sorry, the characters might be a little hard to look up with the latest version of romanized korean. ‘Chun’ is nowadays spelled ‘jeon’
    and wang, of course, is no longer a korean name at all

  46. Phil,
    5%/BPS – I agree.  Please make all checks payable to the "Philligan’s Island Fund."   Actually, better make it gold coins only!  
    You can alway move south SE USA that is…islands are just well…so confining and when the locals get restless whre you gonna go?
    A little gold can’t hurt can it?

  47. Wow…now this is a weekend post.  Here is a good, politically motivating video.…just follow the money. 


    I enjoy reading all the views, whether I agree or not.  Perspective is a nice thing to read.  Just leave the name calling at the playground….we are all adults.

  48.  The annual PSW bash sure will be interesting after-hours when the booze flows a little more loosely…. hahaha
    what a great thread….


  50. PHIL,
    You wanted someone to remind you to take a look at the dividend payers over the weekend. You said you would check and see which ones looked the most interesting.  This is the reminder!  :)   Thank you

  51. Like Pharm says- "now this is a weekend post"
    To think I missed this yesterday by sitting on my boat- on a lake – on a beautiful sunny day- with my wife – catching fish.
    Bam, Pow, Socko, Whoosh – angry, bitter lefties vs. righteous righties- Holy Bipartisanship Batman!
    I read through the Denninger/Phil discourse (see Phil’s link above). If any have not, I recommend it highly. Lot’s of arcane legal mumbo jumbo but so very informative and also extremely revealing, if you know what I mean.
    After that, I was all set to make some snide comment regarding the continued failure of misplaced trust and faith in the state until I read this report.,17459/
    Now I just feel bad to have so completely let them down. :)

  52.  All
    I think that tax simplification is a must, as I no longer have any confidence in our system. Getting an answer on how to pay taxes on options trades, real estate transactions and corporate buyouts, all of which I have been involved in, has required looking for IRS "opinion" letters. When our tax system relies on opinions and not rulings or decisions, we’re obviously in trouble. I have not researched the issue, but in general would have no problem with some sort of VAT, as that would at least be based on actual transactions, rather than appraisals of property, income etc, all of which seem to have too many variables and loopholes to lend themselves to fairness, simplicity or transparency. 
    I appreciate the political debate that takes place on the site, but we should keep it gentlemanly and conversational so we can actually add value. I don’t think either party has it right, and we’ll either need new parties or continue our decline, as neither has enough loyalty or clear agenda to get anything productive done any longer.
    On the Vegas front – I think we’re stuck at 30, which does not get us there. If you’d be interested in making the Phil trip in vegas a reality – please speak up – need 20 more attendees to make it real. Let me know & thanks,

  53.  BTW – was there any investment discussion on the site this weekend? I’m liking naked put sales in Jan 11 ADP 37.5′s at 1.85, and DD 36′s at 1.9. Comments anyone?

  54. Hey, Deano, You want investment ideas?  I have one after reading all the shootings in this post!
    Are you still seriously organizing a PSW meet at Vegas?  When that happens, buy SWHC!  People will shoot with real bullets!

  55. Chaps- if you are around today- a question on your short strangle strategy re: AAPL; GOOG; etc- selling 3-4 mos out. Do you find put vertical insurance to be needed? If not , why not? Don’t recall if you addressed this earlier.

  56. I wrote an entire response to JKorf and then the computer blinked or something and I lost it.  I will try to quickly hit my basic points again-  I have heard the argument that poverty does not have to be permanment but I’m not sure that I buy it.  How does the poor person get out of poverty when he is making $12.00 and hour (I use $12 and not $8 which maybe is the equivilent in some areas of the country).  The person would work two shifts a day seven days a week and thereby take home a good paycheck (but doing nothing else but work).  The person is out of poverty.  If he wants to join the ranks of the wealthy, then after X number of years the person might have enough saved to start a business of his own.  He would have to do this a couple of times since most start up businesses fail.  
    But I want to make the argument that the person who is wealthy has done so to a degree on the back of society in general.  I know a person who owns a fence installation company and to my knowledge he is wealthy.  He pays his workers minimal wages and no health benefits.  Has that wealthy owner earned his outsized profits fairly and without the benefit of subsidies from society?  The answer is no.  What happens when the owner’s workers get sick? They must obtain government subsidized health care services.  Thus society in general has subsidized a portion of that wealthy person’s profits- that portion that would have paid for health insurance for his workers.  The wealthy owner enjoys the use of cheap gasoline that does not account for the environmental damage caused by its use.  Here again, the wealthy owner’s profits have to a degree been subsidized by society in general which must ultimately shoulder these environmental costs.  There are probably better examples.  But these are the types of imbalances that tax policy should redress.  Absent this, you have a transfer of wealth from society in general (the poor and middle) to the wealthy.  The income disparity between rich and poor becomes greater and greater.

  57. Poverty/Football/all – here’s a good article from the LA Times – there are places and people in LA with which I have no acquaintance, and a reminder of what’s going on out there in the really tough places is good. Also, my son played high school football, so I gotta hooked on that level of play – it was a lot of fun (he played free safety).,0,6146342.column

  58. Phil – I understand there is also waste in corporate spending. I was a corporate guy and fought the waste everyday. But the difference with corporate waste is that the corporation can suffer the ultimate consequence and evenutally go BK if they continue to act irresponsibly. In the case of the government waste, they just raise more money by raising taxes. There are no consequences that I can see. They have all done it and there is no responsibility for it on their part. Sure you could say that they could lose an election. Yeah right, like Pelosi or Behner are ever going to lose ???
    Speaking from my own experience, when I was making less than $30,000 a year I had less stress in my life than when I was making a million. Now, that may be different than your experience but when I was poor I had far fewer problems and enjoyed what I did have more. When I was earning alot I kept looking over my sholder as to when it was all going to end. It was far more stressful than when I had nothing to lose. By the way I never got an allowance ( my folks were both factory workers). I wasn’t always a good kid but I also knew better than to break a law since my head would get broken by my father :-)
    The personal responsibility lecture, as you put it,  to me is at the heart of our problem and exists in all strata of our society. We can raise all the taxes you want and redistribute all the money you want but that will not address what is really going wrong in this country.
    Sorry, I can’t accept your premise that the reason the family is falling apart is solely becasue of money. Or that if we gave everyone a "fair" distribution of income that suddenly our problems get soo much better. It just doesn’t work that way. Only my 2 cents and thanks for you patience while I vent my confusion.

  59. Phil / All: On Friday we had some discussion on what to do with the cash portion of a portfolio since cash instruments have return close to zero, and since bonds at this point carry their own risk a this time ( interest rate risk, bond bubble?)
    There were several comments from members about what constitutes their cash: for example doing conservative long term margin strategies or buy / writes.
    One of my thoughts is that cash deployed in a conservative strategy position, no matter how conservative, is no longer cash but is now capital at risk (CAR).
    Many of us have high cash levels, as high as 90% (which I think is what Kinki said). Well if one were to have a $100,000 portfolio, with 10% invested and 90% in cash, and you were to earn 0.2% on your cash portion, and lets say a whopping 100% on the invested portion ( which I think is beyond most, but not all of us), then the total return for the portfolio would be $10,180, or a 10.18% return. A 50% return on that same invested amount would be a total return of 5.18% on the total $100,000. And I would add that many of us will get less than 50% on invested capital.
    So, I guess I just wanted to hear what you, Phil, and other members think about how to handle cash. I haven’t heard much discussion on it, but think it’s an important topic to our overall investment success.

  60.  Jbur
    Instead of cash I like long term dividend paying stocks – JNJ, MCD, WMT etc. While I know these are not cash, I think that there is little chance of bankruptcy, and there’s return on my investment. Bonds in these companies may be an even better choice but I’ve not done my homework there and will defer to others.

  61. DKGUY:  what’s wrong with this country:   I agree 110% that until what is wrong with the foundation of this country is reversed which may never happen, that tax policies will never really correct things. 
    It’s not that capitalism is bad, but it is bad without an moral considerations; those considerations have to come from within the person not be imposed by an external force.  The legal system used to be the fall back device (secondary to community/religious norms and pressure which became internalized to the individual) to maintain a humane society, now it is the primary device.  Who hasn’t heard someone say,  "well maybe it wasn’t right what I did, but it wasn’t illegal"; that’s what wrong with our country, IMO

  62. hmuvee – I agree. I think we have become morally corrupt and the lines between right and wrong have become very grey.

  63. Deano:
    I agree that is a good use of cash, and I have a number of blue chip, high dividend paying stocks eg. PM, MO, VZ, T. In the big draw down a couple years ago, having certain blue chip dividend payers didn’t help, USB, WFC, PFE, GE all axed or significantly reduced their dividends. Could happen again.  Also, as Gel and several others have pointed out, tax advantages on dividend income are going bye-bye or are going down.
    Several years ago I had a significant portion of my cash in Auction Rate Securities which were AAA rated, and supposedly nuclear proof. Well, when the credit market crashed, I was locked out for a year, couldn’t get my cash, didn’t know if I was ever going to get my cash. A lot of sleepless nights… over cash "safe" cash!!  I eventually I was made whole, but to this day, there are tens of billions $ that investors have not been able to get back.. just sharing my thoughts.

  64. Phil- Since it is Sunday and there is nothing on TV I will choose to reply to your article. although I fall firmly in the camp of those who are here for investment purposes and not to solve the problems and inequities of society as we know it. First and foremost most of the top 1%, which I am happy to have become part of through hard work and the blessing of a reasonable amount of intelligence, have no problem with helping others. It is the manner in which we help. You state that surely one could do without an extra vacation or last luxury and you are correct. It is a fact, however, that I work a little harder so that my family and myself can have the luxury, if we choose, to take that extra trip. I have no trouble helping but I prefer to choose how I help rather than have the corrupt government, which we have, waste my tax dollars. This past week, I had a family with a flat tire in my parking lot at work. When I looked at their tires all 4 were bald. I gave them the money, much to their surprise and amazement to go buy 4 new tires. They truly were a family in needand I was more than happy to share my good fortune. 
    When I read those who espouse redistribution of wealth theory, several thoughts come to mind. First, when 1 in 8 births in this country is due to an illegal alien, is it the responsibility of the wealthy to support not only less fortunate Americans but also anyone who chooses to enter this country illegally? Where does one’s social responsibility end?
    I also find it fascinating that those who espouse redistribution of wealth so conveniently forget the teachings and truths of Darwin. Does Nancy Pelosi not understand that even if you redistribute the wealth, it is only a matter of time before the more intelligent, who are willing to work harder, will have it back. From the earliest days of the caveman the reality of mankind has been. and will continue to be. " survival of the fittest, and prevailing by the strongest". The greatest gift my father bestowed upon me besides his DNA was the teaching and understanding that life is not fair and "get over it"!
    We can certainly choose through taxation to attempt to redistribute wealth but it will fail here as it always has throughout the history of mankind. We can slow the process of the strongest surviving but we cannot change mankind. I have a client who just sold his business for some $85,000,000. After living off the income for life he will leave it all to his church. It is only through the goodness of the heart for those who have it, and not the misguided efforts of goverment, that mankind will choose to sucessfully help his neighbor!

  65. @fjd10595
    You write,
    "….you have a transfer of wealth from society in general (the poor and middle) to the wealthy."
    No you don’t.  You have a transfer of income from the middle to the poor and the wealthy. That’s what you have.

  66. PS Am I fortunate- you damned right- am I blessed- you damned right- will I continue to work hard for myself, my wife and my children- you damned right- will I contiue to help those less fortunate than myself- you damned right- and I will continue with my dieing breath to figure every legal way not to send my hard earned dollars to Washington!

  67. JT…I’m with you 100%! 

  68.  Jbur
    While  I know that certain dividend payers cut their dividend, I think that the biggest issue was with he financials – 3 of the 4 you mention being financial firms (if you call GE a financial, which I do). The fourth, PFE, I believe cut due to an acquisition. I think carefully watching the firms you invest in, cutting out the financials which are a black hole, pulls out much of the risk. That said, I wouldn’t go there with all my cash, but its a start.

  69. JT,
    Well said. 
    I’m not sure exactly what the threshold of top 1% is, but I’m guessing that I’m border line one of them with my income given the pass through of the S-corp.  Funny thing is, I still have to go to work every day to pay the bills and I don’t live an extravagant lifestyle.   So I’m not sure where they’re coming up with this stereotype image of the top 1%ers living the country club lifestyle with the only problem they face is where to spend their money. 
    Like you, I no problem helping the needy.  My issue is exactly what you pointed out.  First you get the government creating a dependency class of people, then they become the self appointed  caretakers of the dependent……with taxpayers dollars.  It would be one thing if they spent the money somewhat effiecently, but we all know that that’s not the case.
    Incidently, the politicians are part of the dependency class.  These career politicians make me sick and they’re going to be the demise of this country.
    Does anyone know if it’s true that 50% of the people in this country do not pay taxes?  I keep hearing this but find it hard to believe that it is true.

  70. EXEC    - It is absolutely true- believe it and like you I have to pay my families bills every mnoth and there are months that that is tough!

  71. I would like to drop this subject PLEASE but in the interest of clearing up a very ugly sterotype that is being perpetuated – Jews only comprised 0.9% of the German population in pre-war Germany.  There were 600,000 of them in the whole country, Germany had to outsource to find the other 5.4M to track down and slaughter.  There were only 100,000 Jews in France and 45,000 in Italy at the time.  While Jewish tradition strongly emphasizes education and Jewish religious study is based on the study of law (the Torah is essentially, a lawbook and is debated as a matter of course) which led to many Jews natuarally excel at studies, they were not the majority of any kind of professional class.  Also, since the Jewish religion did not take issue with charging interest on loans – Jews ended up often being money-lenders, which was an unloved but very profitable profession. 

    One of Hitler’s favorite books, that became very popular in Germany, was was Der Büttnerbauer (The Peasant from Büttner), in which a German peasant becomes indebted to a Jewish moneylender. The peasant’s land is foreclosed. And, losing the soil that had nourished his life, he hangs himself — end of story.  Let’s please drop that topic there, thank you.

    Taxes/Gel – You STILL do not get it.  You paid a lower tax rate based on the Social Security contributions of the bottom 90% (where they pay a MUCH larger portion of their earned income than you in SS taxes) that were used to pretend that the government could afford to charge you a much lower tax rate.  This was CLEARLY a lie.  A war was waged without taxes being raised by a political party you support – also unaffordable, also hidden from the budget – another lie.  This lie enabled GBII to cut YOUR marginal tax rates (which increased YOUR wealth) and spent Trillions of dollars this nation could not afford.  That then led to a massive destabilization of the economy which destroyed the assets of the bottom 90%, including the Social Security money they have worked their whole lives "saving" in the belief it would help fund their retirement.  Now that we are faced with a clearly unsustainable system and facing a choice between the end of America as we know it or rolling back the tax cuts – you sense the party is over and, rather than stay and help clean up, you want to leave and find the next place with free beer – that’s understandable.  Not commendable but understandable…

    Korea/Snow – That’s the part that is near China and Japan?

    Islands/BPS – Other than actually getting billions together and forming a whole country, I’ve actually decided I kind of like the Isle of Man, which is a self-governing British holding or the Isle of Wight, fully British but separate (with nicer weather than Man) as they are self-sustaining but out of the way (in case of war), fairly defendable and, assuming things don’t fall completely apart, we can count on the UK to provide protection (remember the Fauklands).  As they are mainly farmlands, they are not rich enough to be invaded with any serious effort.  Outside the UK, I like Greece’s Cyclades (but Greece will go down fast and hard if things hit the fan – so the proximity is disturbing) and Great Exuma seems like it could survive a lot.  Hawaii is very nicely self-sustaining and it has an army if things hit the fan but it seems like they are far too pivotal in the Pacific and would always be a point of contention if governments start to fail.  By the way, my assumption is that these are places to set up a 2nd home and escape to in times of strife so their currrent tax rates are not an issue, it’s about do you feel you can take what you have and protect it there if things really fall apart and can you see yourself living there for a prolonged period of time. 

    That’s a good point about all this talk about letting the World go to hell and living on an island – think about the big picture.  What will you use for money?  Where will you keep it?  Can you protect yourself, your home and your family or would you need a security force?  Do you have any actual skills that would be useful if the global economy collapses?  What’s your plan for heat, hot water, electricity, transportation, food, medical care?  We all like to think we’d do great if the World falls apart but if you watch Survivor a few times you realize it’s very hard to live without our usual infrastructure.  This is one of the reasons I’d rather fight to preserve this country than take my chances somewhere else because, if America goes this decade, it’s not very likely the rest of the World doesn’t go with it. 

    Follow the money/Pharm – Not exactly a shocker but a good video!

    Bash/BDC – The highlight will be Cap and I in the center ring

    Dividends/Z4 – My next post. 

    Government/Pastas – "And the fact that American Idol is still the No. 1 show on television doesn’t exactly make our government burst with confidence." – how true!

    "This is the same American populace that failed to prevent us from deregulating the banks that almost caused a complete economic meltdown last year," Sen. Jim Bunning (R-KY) said. "Year after year, they elect terrible officials who make terrible decisions on their behalf. The fact that I, Jim Bunning, am a two-term U.S. senator really shows you just how far Americans have gone off the rails."

    "I wouldn’t trust anyone who voted me into office," he added.

    ADP/Deano – They are not that cheap to me and they did flop to $26.24 in the flash crash so I’d at least wait to see real signs of jobs turning around.  $32 would be a really good long-term price and $37.50 is not a terrible entry.  Note from their earnings press release: "Increased investment and higher expenses related to increased sales and service started during the second half of 2010 are expected to pressure the company’s earnings growth in 2011." 

    Good points/FJD – Also, don’t forget that the primary (legal) path out of poverty is ladder-climbing but how much of that goes on when M&A shrinks the number of jobs available at the top 10% of the Pyramid and those managers seek only to DECREASE the number of salaries paid below them which translates to more work being pushed down to less workers who fight for fewer promotion spots.  Lack of competition also means lack of movement and having people putting off retirement for 5 years takes another 10-15% of the available positions at the top off the table for the next 5 years.

    Football/Snow – Cool, I love it that kids are still driven to play.

    Waste/DK – I’m not excusing all government waste, just saying that waste is a part of any large organization and sometimes government waste is blown way out of proportion.  What do CEOs have to do the get fired?  What do bankers need to do?  Auto executives?  AIG?  What’s worse, a little government waste or running companies into the ground while losing Billions of dollars with idiot shareholders (just as bad as idiot voters) who have NO SENSE OF PERSONAL RESPONSIBILITY to reign in the madness that goes on in Corporate America and just elect the same slate over and over again.  You were lucky your father was around to smack you in the head – many people do not have that luxury. 

    A more fair distribution of wealth doesn’t solve all of our problems but getting back to core values that our citizens deserve life, liberty and the pursuit of happiness is a good start if we can agree that life means a place to sleep, good nutrition and health care and liberty and the pursuit of happiness means the freedom to work hard to get ahead which means all children should have access to an equal education and that our citizens who work their whole lives can look forward to retiring in dignity, with that same place to sleep, good nutrition and health care we promise our children.  Observe those basic human rights and then you can lecture people on taking personal responsibility. 

    Cash/Jbur – I think I mentioned there are high-probability, high margin plays that generate a good ROI on cash.  IWM Sept $48 puts are .12 and if you want to make 1% on $100,000 cash this month you can just sell 80 contracts and collect $960 on $5,624 in margin.  Are you risking 8,000 x $48 ($384,000)?  In a sense, yes.  If the Russell falls past more than 20% between now and Sept. expiration you are SOL and if it falls all the way to zero, you will lose $384,000 but if that happended I’m sure your money in the bank would be just as gone.   The assumption is (and it’s easier with 10% brakes on market drops now) that you can take the calls off the table, even in a catastrophe for no more than $1 (even that would have to be one major disaster and, of course, you can roll to the 2012 whatevers that are $1 ($35 is the lowest they have at $2.50). 

    Would it suck to lose $8,000 when you were trying to make $960?  Of course it would.  Is that at all likely – of course not.  Meanwhile, would it be great to have $92,000 worth of cash on hand after the RUT drops 20% – yes it would!  Cash in the market is never going to be safer than cash in the bank but cash in your investment account is not much less safe than cash in the bank and if the choice is between collecting 2% or or 10% – you have to decide what is worth your while (and most brokers pay something on cash anyway). 

    AA Jan $6 puts can be sold for .10.  50 of those raises $500 and uses $1,875 in margin.  Worst case is you own 5,000 shares of AA for net $29,500.  That $500 is a 5% annualized return on over $40,000 in cash, so way better than the bank, and your downside is owning AA for 43% off.  Is your $29,500 at risk?  Yes!  That’s the whole reason it pays so much better but you have to weigh these things against NOT puitting your money to work in a potentially inflationary environment.

    Good point Humvee.  I’ll tell you another thing that is profoundly wrong with society.  When we were kids (the 70s for me), if we were hanging out at the shoolyard and drikikng some beers, even if there was a very large group of us, if a single adult came up to us and said "Hey you kids, get outta here" – we would have ran our asses out asap.  Today, it’s not too likely an average adult would approach even a couple of kids doing the same.  That loss of respect is a lot of what’s wrong with society.  I’m not sure how we lost it and I’m not sure how we can get it back.

    Securities/JBur – That’s a good point.  I never used to advocate not diversifying to other instruments but the last crisis has taught us there is no point.  Anything can fail at any time, safety is a total illusion so why not get paid for risk?

    Wealth/Jthoma – Very nice but if the system you benefit from impoverishes the family in the first place and you help on of the 100 whose combined incomes fall short of yours – are you benefitting society or just your conscience through random acts of kindness?  Perhaps it is my own fault for getting involved with Food Bank projects in NYC but I am acutely aware of the bottom rungs of our society as well as how easy it is for the bottom 60% to fall there and how difficult it is for anyone to climb back out.  To me, it’s a systemic failure.  Sure, you can restrict immigration more closely (even though immigration is what made us a great country in the first place) and only help pure-bred Americans if that’s the kind of nation you want to vote for but to deny the 7 out of 8 children (and I totally dispute that figure but have no time to check) children who even your research says were properly born in this country the chance to be able to build their own future – then you may as well just call the police and have them fine that family for camping out on your lot illegally.   I don’t even disagree with you on the Dawinism thing, some people will always have "it" and some people never will but, if that is

    the case, then why do you fear having the playing field leveled?  If a group of adults play a group of children in tackle football, they will have a clear advantage simply because they’ve lived longer and have gained more mass, much like the mass of capital accumulated at the top.  The children can try and try but their efforts to bring down an adult, even a fat, useless, out of shape one – are generally going to be futile while the massive adults, who have no particular skill of their own – can decide any time to carry the ball into the end-zone and drag as many children as necessary with him.   You play this game as an adult and you deem it "survival of the fittest" as if your ability to crush those who never had a chance should bestow on you a Darwin award?  No, the game is completely unfair and unless rules are written to redress the imbalances, it will remain unfair forever more. 

    Life may have never been fair (see wealth gap chart above) but it’s 4 TIMES MORE UNFAIR than it was in our glorious childhoods for the bottom 90%.  You may be happy to play that game and you may want your childrend and their children to play that game because they will always start out at the top but don’t ever fool yourself into thinking that it’s fair or has anything to do with evolution – it’s the lot of being born a serf or a noble and it’s exactly what this country was originally founded to prevent.

    Transfer/Flips – Actually, other than the very small amount of people in this country who are poor and do not work.  Any payment for human labor below the mean is a profit benefit to the rich.  You may not notice it but the guy who wipes your window a the car wash and the migrant worker picking your tomatoes in the field for less money per year than you spend on a TV set are contributing to your lifestyle.  Just because they don’t give you cash, doesn’t mean you don’t benefit from their poverty. 

  72. I stated in my post " life is not fair" never has been and contray to anyones efforts never will be I certainly don’t wish for a Darwin award but I will continue to provide for my family as well as I can with my god given ability and don’t think you are the only person who has gotten involved with a soup kitchen.

  73. Phil et al: Here is an article regarding charitable giving citing a few university studies which may give some insight to the discussion.  The summation supports what I read many years ago.  Both my parents passed away in the last 15 months.  They lived as farmers in the midwest with ten children (yes, they were Catholic but needed a cheap labor force for the farm). Twenty years ago, I established an estate plan which minimized the estate tax…. part of the plan was establishing a Charitable Remainder Trust….. we are now terninating this trust and sending several hundreds of thousands of dollars to five charitable organizations who aid the poor and disabled.  My parents lived very modestly but gained from the appreciation of land prices.  
    As to those who "can’t understand that 50% of people pay no taxes"…… run a tax return for an income of $30,000 with owning a modest house with 2-4 children and it becomes very clear…. why they do not pay federal or state income taxes, of course they pay SS and Medicare taxes….

  74. pstas/put verticals: No, I don’t use put verticals. The reason is that being 4-6 months out makes strangles less responsive to market swings, IMO. In "Greek terms," gamma is lower. I’ve had them on through all the hoopla of earnings on these companies, and the strangles are pretty complacent.
    On SPX short strangles, I always maintain put verticals on front-month puts, but, as I’ve mentioned, I usually have trades on in the next month as well. I usually start putting put verticals on those put when they roll within the six-week window. Nothing particularly, scientific about any of that. But then, trading seems to be as much an art (improved through experience and practice), as a science.

  75. acobra65- hats off to your folks- may choose to help in their own way

  76. many as opposed to may

  77. pstas/put verticals follow-up: On a related subject, long-dated strangles are quite sensitive to changes in volatility (vega.) So I never enter too many at one time. I spread them out over time, and don’t do any in what I consider an environment where the VIX is relatively low. I also take the money and run whenever anything I sold on either the put or call side can be bought back for $.50. If I want to then stay in a strangle on that stock, I’ll adjust both legs to a new strangle.
    I also keep it limited in terms of the amount of my portfolio I do these on, in aggregate. Short strangles can be dangerous.
    You could end up an unhappy camper if you entered a lot of them at the same time and have the VIX go up 15% on you in conjunction with a market crash. You can always roll out of it. But, like anytime where you sell too many options at too low a price (before a crash and volatility increase), you can tie up a lot of your margin over a long period of time working out the trades.
    This is assuming you don’t want to take assignment on a market downturn from the puts you sold. If you’re willing to take assignment, you don’t care about volatility and price swings. Then the trade is similar to an artificial buy-write where you’ve also shorted the underlying through selling the call to garner more premium.
    Seems there’s no silver bullet in investing. :)

  78. "can be bought back for $.50". I meant bought back for $.50 per $1 sold

  79. @Phil
    I don’t personally ‘benefit from their poverty’ as I mow my own grass, have never hired a migrant worker for anything since I LIKE to get my hands dirty. I’ve built more dry stone walls, home remods, garages, and window replacements than I care to think about and am silly with pride that they are still standing. So since I didn’t pay someone else to do all that work (that I continue to do), have I exploited the poor who would be willing to do the work for $30.00 an hour, plus health insurance, life insurance, retirement and free cell phone,  too. Wait….I think I know your answer, straight from the commie manifesto.
    You’ll need to explain why any payment ‘below the mean’ is a net benefit to anyone but the receiver. I don’t quite get why any payment to anybody at any price they will work for is not a net benefit to them, the receiver, and always a net ‘loss’  no matter how minuscule, to the payer.

  80. To all those on the board who are "SO IMPRESSED with their talents and abilities"…. here is a "news flash"….. All people are not created with the same talents, insights AND the same opportunities etc.  In society, if we were all the same in talents, abilities and opportunities those of you so impressed with yourselves would not be such a bright shining star in the sky……… If, the not so bright stars were not so dull…..You wouldn’t be so bright LOL……… Philosophy 101… your own specific situation does not make for the general rule…… 
    Phil:  A man who owned a consulting company in DC for non-profits and profits for the past 40 years has lived in about 40 + different countries.. some very friendly…. some not so friendly…….. several years ago with this experience and the forsight to see the economic downturn coming….. he needed to decide where to retire (still does business on the IT)…. his conclusion was Panama as opposed to Mexico and other Latin American countries.  Even though Panama City is much like Miami today, the other part of Panama in the highlands with many Americans and Western Europeans you need no heat or air conditioning (very moderate temps).  With technology today, you could create your own electricity.  Food in Panama is locally provided by agriculture, the Carribean or Pacific for seafood and the people truly like Americans.  By the way, he has studies on demographics (his field of study) which show the largest group of persons immigrating away from the states is not oler retired people but those between the ages of 25 and 35………..    

  81. jthoma
    Having been a member of PSW for nearly two years, and learning so much, both in the exciting world of option trading which is our prime overall objective, I must say two of the most meaniful posts I have been exposed to on "off topic" discussions are those that were made by you @ 1:29 and 1:44 today.  I know my posts are sometimes "controversial" but I make them anyway, in order for those that have a certain idealogical "bent" to see how others, with a different educational and "life experience" background might look at our problems, and the many choices for solutions.  Most often my suggestions are rejected, but I am not suprised, as I have recognized my whole life I am in a minority – and will be forever as my values and thought processes are based on my individual beliefs that include the principle of - " you are what you are thinking".  If you believe you are deserving of a free ride, than you will support  all that it encompases.  If you are motivated to be the best – you might very well reach that goal.  Effort and hard work are two of the requirements, but unfortunately these two ingredients are no longer at the forefront of the mix, as they have been replaced by entitlement and reliance on others for your needs.  Success today is equated tin how many entitlements you have in your possession, and it is a victory if you have more than your peers.

  82. pstas/short strangles: Forgot, I do maintain disaster hedges using SDS to cover short strangles I have on individual stocks. I haven’t worked out any coverage formula, but I buy them when I can get them cheaply enough.

  83. Exec……very sad……like I said…..the politicians will be the demise of this country.

  84. @Phil
    I guess you don’t agree with her:
    "You know you are on the road to success if you would do your job, and not be paid for it." —Oprah Winfrey

  85. Phil
    Your post today which places so much emphasis on " fairness " – Just what in the hell is "fair"?   As in defining "beauty", one must inject his own subjective definition as the definition can be very different among so many. You have a different subjective definition of "fairness" than I,  when it comes to taxation and wealth distribution.  OK, fine, but I look beyond the typical liberal thought process when defining "fair".  I must ask – when two people are born into the world as equals, and are given the same opportunity to receive education and opportunity, then one would think they equally have an "obligation" to support the common community they benefit from.  However our current system does not embrace this opinion.  Our system penalizes those that put forth effort to succeed and be productive ( through marginal tax policy ), and conversly rewards those that do the opposite with entitlements and tears.  When 40% of our community consumers pay no taxes whatsoever, and the burden of their share is picked up by the others ( 10% paying well over 50% ) then, I do believe we have breached the conventional meaning of "fairness" .

  86. IRA Plot / Phil / revtodd64
    Need a bit of help thinking about covered calls, guys – for JWN & WFMI. I have a fair stack of October calls written already on other stocks – shall I go October with these as well, or do I want to spread things out more? Also, I’m not yet seeing Nov or Dec calls….those do happen, right? Or do options do like my old office used to and vanish between Halloween and New Years? And I assume a close ATM call would be what I write on those two…

  87. Chaps- thanks for the answers.
    Just for reference- and if you don’t mind – can you give me a current position / strangle on an individual stock which you have sold and the SDS hedge?
    I can better understand these things using specifics.

  88. It seems to me the the weak equities will continue to be the driver for all asset classes right now, and with the close of last week, I think it will continue.
    The S&P chart remains weak, and I believe it may trade towaards 1003 in the days/weaks ahead.. The disappointing data is never-ending. – Philadelphia Fed reporting weak components, jobless claims rising to a level not seen since late 2009, back up to all time highs. The housing market continues to look dismal – builder sentiment continues to drop.
    Going into next week, the dollar, I believe will continue to stay strong, and I am long the ZAR and HUF against the USD.
    I am looking forward to September/October, as the currencies are notoriously volatile in this period, and we will see some very attractive currency plays that should make uo for the "blahs" in the equities.

  89. Snow –  I’m getting connected late tonight and packing for a trip tomorrow.  I’ll look more closely when I arrive home.  Yes, there will be options show up on these stocks, but they may not be as highly traded so they don’t show up till you get closer to time.  In general, how often do you write covered calls on your stocks?  Are you trying to capture dividends?  In general in my IRA, I write in-the-money calls and force a call-out every month or at least have downside protection, since there is no tax value in holding the stock longer. 
    We have a storm going on here, and the Eastern Shore stinks for internet service.  I’ll be back in NY tomorrow and can actually get to something to look at the options.  Till then?

  90. Gel — good post way up top. 
    FWIW,  I don’t believe you crossed the line and I believe I know what you were meaning to say and that you were not comparing the Holocaust to economic circumstances today.  You were merely addressing similarities in the mindset of confiscating property then and now, but I did not read you to be comparing today’s confiscate-o-crats to Nazi’s with all that implies.
    The Holocaust was a unique display of unfettered evil and genocide.  It is always dangerous to invoke that as a comparison to other events because of the unqueness of the depravity and evil perpetrated by the Nazis.  I understand exactly what you meant, and I see you wrote another post clarifying just that. 

  91. oops… correction that is long the USD against the ZAR and HUF. My stop on the HUF is 214.00 and profit at 234.00. Stop on the ZAR is 7.165 and profit at 7.800.

  92.  Snow/WFMI-JWN  -  From a technical perspective I don’t like WFMI as a new covered call write at the moment.  If you already own the stock and want to write a call that is different.  It is below both the 20 MA and the 50 MA right now and I like to write stocks that are moving back up.  I tend to not bottom feed on short term covered calls, because I don’t know how far down is.  I like Whole Foods as a company, and would love to have one near me, but others could tell you the fundamentals better than I.  The premiums aren’t rich enough for me for a new buy write, especially without better technicals.  
    JWN also has a bad technical picture right now, far below both moving averages and the volume was high during the sell-off.  I’d stay away from it on a short-term buy write.  Please note that there may be other reasons to own these stocks.  They might be good long term bargains and you could make good money on them.  But since I focus on 1 to 2 month buy writes, I would make them prove themselves more.
    If you already own both stocks and think they have good long-term prospects, consider writing out of the money calls further out.  I’m not good enough guessing the long term fundamentals on either one.  I just wouldn’t do a short term write until they show more of an uptrend.  Hope this helps.  

  93. Cap… I relieved. I thought that I may have unintensionally given the wrong message.  I was trying to imply there are signals in the early stages that might metasticize into results that are devistating to our society. These signals are quite prominant, and are clearly evident in our media.  Better to identify and handle the problem now, before it becomes larger than us.

  94.  Snow – I’m trying to slip this in through poor connections tonight.  Basically I like to write stocks that are looking strong and above their 20 and 50 day moving averages and both JWN and WFMI are below those right now.  If you already own the stocks and want to pick up some income on them, I would write out of the money and let them recover, especially if you feel good about the fundamentals on them.  But I would not initiate a new short-term buy write on either one right now.  I’d make them prove themselves first.  I want to write stocks in a more stable uptrend.  
    That said there could be many compelling reasons to own both stocks, but not for the short-term in-the-money calls I would like to write in my IRA.  In my margin account, I might do a PSW style buy-write selling calls and puts over the long term to go bargain shopping, but would defer to Phil and others if they are good stocks for bottom fishing right now.

  95. Phil, was reviewing the Buy List. What do you think about UYG Jan 35/50 selling Jan 41 puts for net $5. Hedging with FAZ Jan 16/23 spread for $1.40?

  96. Phil; I am not buying at all your arguments about fairness.   Fairness is that everyone pays.  Fairness is that everyone pays the same rate.  Fairness is not "progressive" taxation.  Fairness is the flat tax.
    I am not buying your assertions that somehow the top 1% or 10% need to be made to "understand" the country’s economic situation and "pay up" so that everyone else can freeload from them.  I am not top 1% and probably not top 10%, but I have what I earned; no one gave it to me; no one willed it to me; and the gov’t didn’t hand it to me either.
    The parties most at fault are the Political Class.  Those that feed off the taxpayer.  Those that only care about electability and power.  Those that run up our country’s deficits and pass along mistakes of their corporate cronies to us the taxpayer.  Those are the ones who need to be made to understand the situation and act MORE RESPONSIBLY.
    Your views on taxes, I am aftraid to say, are a cop out to the financial responsibility that is required of government.  It is not the responsibility of the taxpayer to bear the burden, or in your view, a subset group of taxpayer.
    As I have suggested many times, feel free to pay more in taxes than you are required.  What’s stopping you ?  What’s stopping Soros ?  Gates ?  Whomever.  Lead by example.  There are plenty in the top 1% that can VOLUNTARILY pay more and make a diffierence.  No increase on others necessary.   they need to stop telling others what they need to do, and do it themselves !
    Cut loopholes – fine;  go after tax cheats – fine; get rid of special targeted tax breaks – for sure !   But sock the people with more burden as their "responsibility" for electing a bunch of political crooks, liars and idiots ?  no thanks.
    The Obama / Democrat handout platform is nothing more than a culture of dependency.  Sort of like African Americans voting landslide Democrat ?  Why should they do that ?  And what have the Democrats delivered for the African Americans ?  Nothing.  Nothing but a cultrue of continued dependency.
    I too was in DC, this past weekend.  Just family; no politics.  Lots of driving and traffic to and from NY.  No time or inclination to meet w/ that bozo Timmy, the arrogant tax cheat.  No invite either – ha ha .  Picked up a copy of the Wash Post; most of the stuff in there was just nonsense.  Lots of pandering to minorities.  Like a big article on Women involved in Nuclear Arms reduction talks.   Just bizarre.
    As for spending, put me in charge of cutting spending across the government in all categories and I guarantee you results and you will be saying "what was so hard about that" ?  The net result will be more efficiency of government; it will be just as good or bad at providing whatever it does.

  97. IRA /revtodd – yeah, I do own both those, the Aug calls just expired. That said, you’ve started me thinking about your covered call tactics…your statement "in-the-money calls and force a call-out every month or at least have downside protection, since there is no tax value in holding the stock longer. " is a new notion to me. I’ve been thinking in terms of setting up a collection of long-term holds – already done a lot of that – from Phil’s various lists – and writing calls from those. Then either wait those out till expiration, usually 3 months, or roll them up if the stock rises. Rinse and repeat. That sounds different from what you’re doing. Anyway, no hurry on this at all. Catch you when you’re back.

  98. DKGuy … you got it right; no accountability to go along w/ the responsibility when it comes to gov’t spending.
    I don’t mean to come across as so exasperated by this issue; but the idea that these problems are solved by taxation are so absurd that it gets me all riled up.

  99. and taxation doesn’t redistrbute wealth anyway.  Are poor people being cut checks so that they now have higher incomes ?  Of course not.
    all taxation does is feed the foolish, wasteful and sometimes corrupt spending of the gov’t beast. 
    unless you believe that political payoffs and handouts to politically connected groups (like pork, special tax breaks, and member items) represent wealth redistribution.
    Wealth redistribution would take Gates money, say $10 billion, and give $50,000 to 200,000 different people.
    And do the same with Buffett; and so on.
    Getting some amount of people to pay more taxes to the government does nothing to improve the wealth of poorer people.

  100. I too am a big believer in giving one’s time and money to the charities of one’s choosing.  I am on the board of one such entity, that was started from scratch and delivers millions of dollars of bang for the buck each year.
    I get bigger satisfaction and impact in donating $ X per year to this charity (plus my time, energy, contacts, etc.) than  I could ever get or do by paying the same $X in more taxes to the government that would accomplish exactly nothing on an incremental basis except absolve Congress and the president from making responsible decisions with the people’s money.

  101. exec – extemely well said !

  102. Phil / Center ring …. ha !  
    But who is who ?  When I was a kid and played Star Trek, I was always Kirk; my friend Rob was Spock.
    But, you can’t be Spock – can you ?  You are so illogical politically that you could not possibly be Spock !
    Maybe a Ferengi ?

  103. Soros and Gates are doing just that, they are giving away most of their money to charity.  A system that does not impose the same restraints on all won’t work.  For example you can’t have ‘voluntary carbon capping’ because the next guy won’t cap his carbon and will put everyone else out of business.
    As I have suggested many times, feel free to pay more in taxes than you are required.  What’s stopping you ?  What’s stopping Soros ?  Gates ?  Whomever