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Tuesday, February 7, 2023

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Trillion Dollar Tuesday – More Free Money!!!

Thank you Republicans!  

The party of fiscal responsibility has strong-armed the President and what little is left on the Democrats in Congress to extend the Bush Tax cuts for another two years at a cost of "just" $830Bn to the little people who still have to pay taxes.  They accomplished this by allowing the Democrats to extend $56Bn of additional unemployment relief to the 2M families who were cut off on Friday and were about to go their first week without checks with just 17 shopping days left until Christmas.  Of course, the Democrats don't just bend, they BREAK and the Republicans also got a 30% reduction in the estate taxes that are projected to cost an additional $66Bn to the people who don't have $5M estates.  Merry Christmas, rich folks – Lloyd bless us, everyone!  

"But Phil," you may ask "who actually does pay taxes?"  When your deficit is about as high as your net collections – the answer is: No one really – or no anyone who matters, anyway.  As I've often told you, our Corporate Overlords actually pay just 2.4% of our GDP in taxes, just $138Bn last year which was less than the $6Tn in bailouts they collected by a factor of 43 – no wonder they are doing so well!  As you can see from the chart, Estate and Excise taxes are barely a point on the graph and Individual income taxes are barely 6% while Employment Taxes have jumped from 1.5% of GDP in 1950 to 7.5% today – that's a 400% increase but don't worry, it only affects your first $106,800 in income – after that, ZERO!  That way, if you earn $1M, the jump in payroll taxes from $1,250 to $6,250 is just 0.5% of your income vs the 5% increase borne by a person earning $100,000 or less.  

Imagine if all 140M US workers were given an even $6,000 break ($840Bn divided by 140M) on their take-home pay by just eliminating those SS deductions (it's not like they'll ever get that money back anyway)?  Why everyone would immediately be taking home $500 more per month.  Of course we know that the poor people would only "waste" it on food, shelter and clothing so our wise government has guided the bailout to the places it will do the most good, with $670Bn going to the top 5% and $160Bn trickling down to the rest of the tired, poor, huddled masses yearning to be able to pay their bills.  

Sorry poor people, sorry middle class, sorry anyone who doesn't make over $106,800 a year.  As Dr. Seuss said:  "They're finding out now that no Christmas is coming! They're just waking up, I know just what they'll do. Their mouths will hang open a minute or two, then the Whos down in Whoville will all cry, "Boo Hoo." 

And for the top 5%?  Well, to quote the film: "The avarice never ends! "I want golf clubs. I want diamonds. I want a pony so I can ride it twice, get bored and sell it to make glue."  Welcome to America, 2010 – land of the free ride for the wealthy and home of the downtrodden masses who will be paying $3 a gallon for gas to drive to the mall this weekend where they can look at $1,430 an ounce gold jewelry that they can't afford so they will pay $30 an ounce for the silver that was only $19 in September before Uncle Ben set sail on the QE2.  

Well, there's nothing we can do to save the poor – they are just screwed so let's just get ours while we can!  Obviously we can expect Friday's FAS and DBC plays to do very well as they were plays assuming there would be MORE FREE MONEY and we sure have that today!  All we need if for FAS to hit $25 to put us 100% in the money on a 3,233% play and DBC was "just" a 1,200% net upside with a $27 target but nothing gets those commodities going like free money, does it?  Those are perfect insurance against our bearish bets and our $10K to $25K Virtual Portfolio was up a very nice $1,825 in our first week back but we'll likely be giving up half of our gains as we gambled bearish into today on the expectations that either the EU, Congress or Ireland's Government would finally put their foot down and say no to debasing their currencies and plunging the working class people into a lifetime of debt.  Silly me – what the hell was I thinking?  

We'll be looking for upside trade ideas on lagging financials if we're going finally to break through the top of our range (Dow 11,500 is the big one) and C ($4.56) is one we're already in but would like more of.  BAC is still cheap at $11.79 and should be thrilled that the British have arrested WikiLeaks founder Julian Assange.  Secrets are once again safe and bloggers like me have been served notice that it's OK to mess around with the US Government (well Democratic ones) as Big Business likes them to look weak and ineffective but mess around with the Financial sector and you'll find yourself bound and shackled toot suite!  

While I still think this will all end in tears, we've been patiently waiting for our range tops to be broken at Dow 11,500, S&P 1,220, Nasdaq 2,600, NYSE 7,750 and Russell 725.  We should open this morning with all but the Dow over the line and, as we did in early November, we will sit PATIENTLY waiting for the Dow to confirm the move up, at which point we can safely go with the flow, using those numbers as our new breakdown watch levels.  

That's not too much to ask for is it?  Certainly not after the government drops another $1Tn on us just a month after The Bernank announce his $1Tn gift basked for bankers – that's $2Tn in two months – as much money as our Government collects in taxes in an entire year…  What could possibly go wrong?  So we're very excited to see what $2Tn buys us these days as it helps us plan our own holiday shopping.    The Fed spent $2.5Tn in 2009 and bought us a run from about 850 on the S&P to 1,150 so just about $100Bn per point is the going rate.  When the stimulus ran down, we dropped from 1,220 back to 1,110 in 90 days so we know what it costs NOT to pump up the markets, don't we?  Now we're basing off 1,050 and the Fed and Congress have decided to buy 200 more S&P points for $2,000,000,000,000 but we already anticipated all this and we're already up 175 points so we'd better watch that 1,250 line closely as I'm not sure we paid the price of admission to 1,300 yet (QE3 anyone?).  

Chris Kimble over at our Chart School points to our key Fibonacci levels on the major indexes and we'll be watching those very closely as we wait for Dow 11,500 (was kind of like waiting for Godot last time – he never came!).  Once we break 11,500 on the Dow, fundamentals are out the window (not that they've mattered much in the past month) and it's all about the technicals once we move above these lines:

 

CLICK ON CHART TO ENLARGE

 

Nobody wants to miss out on the big rally as all the rubes are being herded under the big top to pay for the freak show that is the Global Marketplace.  Ironically, Germany's refusal to fund additional bailouts in the EU led to a strengthening of the Euro against the Dollar last night and the Euro tapped $1.34 this morning, up 5% from last week's lows while the Dollar fell back to 79.65, a 0.5% drop from the open, which is usually good for a 1% boost to the markets.  What we're going to want to see as a proper show of strength in the markets is for the markets to begin ignoring the dollar and moving up on their own – something that hasn't happened in over a month.  

This whole house of cards could still come tumbling down if Ireland votes no today.  According to Rupert’s Journal, Ireland is expected to pass and the markets are reacting accordingly. The Irish are not raising corporate taxes off their EU-low 12.5% level and are instead taxing people who make up to $25,000 20%, where before they were exempt. It’s a brave, new World…  Ireland’s unemployment is (officially) 13.5% and the government is cutting back services severely too. We’ll see if this thing blows up down the road regardless: 

Ireland’s main political parties agree on the urgent need to fix the country’s fiscal and banking problems. Yet even after Tuesday’s budget vote, it is unclear whether some of Mr. Cowen’s austerity measures will reach fruition given his feeble hold on power.

Facing calls to resign and a revolt from his own political allies, Mr. Cowen recently agreed to hold new elections next year after the government’s budget effort finishes. His ruling center-right Fianna Fail party is widely expected to suffer in next year’s elections, thanks to popularity ratings that are lower even than those of Sinn Fein, a party with only four seats in Ireland’s 166-seat Parliament.

If Ireland’s two main opposition parties, Fine Gael and Labour, take the reins as expected, they could push for changes in the country’s austerity drive. Fine Gael has vowed to overturn the government’s move to lower the minimum wage, while Labour politicians have sought higher taxes for the wealthy.

One last stab at making some bearish profits for us (see Morning Alert) but, Overall, it looks like we’re going to have another up move in the markets unless Ireland surprises people with a rejection so let’s crank up the tunes and PARTY like it’s 1999!

 

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Phil:  YEN,  I am looking for a collapse of yen, time frame uncertain.  Looked at FXY bear put verticals on 2012 and 2013 LEAPS but the spreads are so high.  What suggestion to you have, perhaps shorter time frames with sales of calls.  Your suggestions, as always, appreciated.

 Calling the other side "Hostage Takers" is as bipartisan as it gets, Jrohema ?
 
Shirley you jest …

 Jobs / Phil …. yes, in my view, the Repubs should have not agreed to that unless tied to specific offsetting cuts in spending.
Both sides playing a game of chicken.
 
I hate politics and politicians.

Gel – I agree. Washington needs to be proactive and not reactive. Most of us knows why. It’s the how and when that I have little faith our politicians can figure out.

 And stop parroting the BS Dem talking points jrohema  — people earning 200k (single) and 250k (married) per year … before tax … are not "millionaires and billionaires".  (some may be net worth millionaires; but hardly the evil rich that you rail against).
The rhetoric does not match the reality.

Today demonstrates why I have such low prospects for the US moving forward.  No one can handle the pain.  The Repugnicans feign fiscal responsibility when they say we would be happy to extend unemployment as long as it’s paid for.  They are now allowing it by not only not paying for it but getting a handout for themselves.  And Obama can’t stand the thought of his poor down trodden masses having to fend for themselves.  No one is man enough to make the tuff choices in this country.  I admire the Irish for their effort.  The only way we will find our religion is when our bondholders point the gun to our head and say or else.  I think the dollar has a long way to fall.  Gold is still shiny to me and will be until deflation gets here.

Woops!

Sorry Phil, but I think you got chocolate on my peanut butter.  ūüôā

Anyone What corses the violent swing in the DOW ?

Would love to see a repeat of 6/22 tomorrow!

Phil / Spinless fools — No, I don’t think so. They just know who signs their checks. The political system is composed of elites so the laws then favor the elites. You need to watch that Monty Python clip again "I’m your King", "Well I didn’t vote for ya…".

Matt – deflation is here….just not in the daily grind of life (food and oil).  Houses, electronics, and all are all down…..down….down.  Even AAPL is getting into the discount game.  Cisco warned of the tides ahead (who listened the last two times Chambers shouted out?), and not as many people employed full time, part time, etc.    Deflation has too few people chasing too many goods.  Production runs are at 84%, so there is a ton of bandwidth there for ramping up without adding to the jobgrowth.

BTW, I’ve been able to short FAS all day today.  There seem to be plenty of shares available.  Plenty of bulls left get the ‘ol in out yet.

You guys talk about politicians like they have everyone’s best interest at heart, the ruling elite are controlled by the extremely wealthy…kind of like obedient dobermans doing the bidding of their masters.

TD CEO laughed his ass off when MB mentioned TD buying Chrysler credit…

Nothing can be priced correctly if there is no risk of losing your investment, these are strange days indeed

 yodi, rumor is the drop in the DOW was caused by the reuters headline that the Gov is widening its investigation into the banks/hedge funds, etc for insider trading stuffs….

Cap – one, do you have a problem with how I spell my handle? its JROMEHA, not jrohema, got it CPA!?l Now that we’ve got that out of the way – if you are single and make over 200k or married and make over 250k you should pay more in taxes. It’s not ‘undue hardship’ or ‘punishing the producers’ like you ‘independents’ say (who are parroting republican talking points). It’s about what is FAIR, and obviously there is a huge difference of what many people think is fair in this country. I know if I made over 200k I wouldn’t have a problem paying an extra 3%….

Pharm, I mean with commodities, too.  Homes have been, are, will be in the dump for years.  Electronics always come down in the price.  I think we are still being propped up by the Fed.  But their cheerleading is beginning to ring hollow.  When they’re rendered impotent, we will then have our true deflation.  But they can still bluff a majority of the folks.  I think we still have until QE3 for gold to ascend.

The tax talk should be about income earned greater than 250K.  A person earning $300,000 gets taxed 3% more on $50,000 ~ $1500.  Brutal yes but perhaps survivable.  Earn $500,000 and your taxes would go up $7500.  No rolex for the wife this xmas!    A move to Albania is advisable – 10% flat tax! 

After Hours, political post:
Jromeha:  You are living is a delusional reality, the political realities and that pesky constitution have prevented obama from doing what he wanted to do.  The fact that he has failed to get his agenda through doesn’t make him bipartisan; he failed.  Turns out he’s just a fantastic orator, not so good a political mind. Clinton was probably best politician of our lifetime; his ability to triangulate his opponents was second to none, Obama just can’t do it….sorry

Gotcha!  I think gold dives, and then I will be in it for the very long term.  The long bond is still a good buy as well.  TLT is getting attractive again.

Obama sold out to the insurance companies, pharma, and hired people like Geithner and Sommers.  Why is anyone surprised about this guy.

Oh they are good!  They closed FAS a penny, yes a penny, below yesterday’s open.  The bulls just got decimated today in FAS.  Kind of like how I got decimated on Thursday and Friday last week!  I should have gone much larger today.  But don’t worry folks.  Everything is going according to their plan of maximum shock.  The sky is definately NOT falling.

Does the insider trade probe change the underlying value of stocks or is it Wall Streets saying this is what we can do if you don’t get off our backs?

I don’t know why i’m feeling pensive, but it’s like I just got out of a really bad trade I made. November 4, 2008.
 
Have a great evening everyone. Time for a walk on the beach…..

Pharm, I’m not making a near term prediction.  You could very well be right and in fact I hope you are as I STILL don’t have a position in Au yet.  So by all means, lemme know when the coast is clear!

1020, the beach?  Where the hell are you?  Another world??  It’s friggin freezing ’round here!

Humvee – "that pesky constitution have prevented obama from doing what he wanted to do" WTF!?!!?!? Ok, Im to the point now where Im waving the white flag…. I dont even know what your statement means (or did you just hear that comment from a reporter off Fox News?) How exactly did the constitution prevent Obama from doing what he wanted to do?
The sad part is Phil posts actual STATISTICS/CHARTS/FACTS showing stuff like federal spending under Obama and how if you remove Global War On Terror costs (which Obama brought onto the books) then there hasn’t been a huge increase in spending….You all spout your angry talking points that have NO BASIS IN REALITY and somehow the masses fall for your spin (recent elections are a nice example). It’s pretty hard to be hard not to have a dim view of our planet’s future….

Matt – 65 and a sunny day in Pharm’s hood on the left coast…..

Johnson Rice Starts Hercules Offshore (HERO) at Overweight  Johnson Rice initiates coverage on Hercules Offshore (NASDAQ: HERO) with a Overweight.

The stock is up 2.8% to $2.77 today

Phil:
Let me know your thoughts on HHC.
 
Thanks!

 Phil –
What’s the investment play on sovereign default? 
I think that we should start a list of investment ideas based on this. 
Hedging for when the sh*t finally hits the fan.
Has anyone gone through "This Time is Different" and pulled out good investment ideas – I read a good part of it but had a hard time drawing any investment ideas from it. Don’t buy sovereign debt – anyone else? 

Thanks 1020~~~~~~~~~~~~~
 
There was an article in the WashingtonPost a couple days ago, sorry no link, on how the new class of freshmen Congressmen are following right in the footsteps of the ones they will replace.  They are allowing fundraising events to be thrown in their honor to repay the debts their campaigns have occurred getting them to Washington.  Problem is, the fundraisers are organized and attended by lobbyists.  All they do is show up, glad hand and accept the checks.  Until the lobbyists need something down the road.  They are being bought and paid for before they are even seated in Congress.
 
This is the fundamental flaw in our political system.  Money and the election process.  What we need is a new constitutional ammendment completely gutting our election process and campaign finance rules.  We need a do over in the Constitution to protect us from human nature’s wrath of greed.  Our system has been completely corrupted.  The Supreme Court made that very clear.  I think there could be a good chance of a well written ammendment passing.  It is our only hope.  Who will make this their cause?

incurred

Holy SH!T, unless Im reading it wrong OREX GOT APPROVED!?

NFLX dropping like a rock after hours.

Netflix announced the appointment of company finance veteran

David Wells as its CFO to succeed outgoing CFO

Barry McCarthy, who has expressed a desire to pursue broader executive opportunities outside the company. ?The change is effective December 10.

Jromeha:  read your posts and read mine, then tell you who is the angry one; you’re points are laughable.  I support a huge decrease in military spending, but you’re too busy projecting your anger that you don’t really want to consider what other people think. 

Is there more to the NFLX story.  Why would the stock drop if CFO departure was expected?

hi Phil : Back in July ,you suggested buy GE Jan .$14 C and sell Jan. $16 C paired with sale of Jan. $15 puts for net $.06 on $2 spread. GE now at $17.03 and  position is now net $1.71 Hold till expiration or do you have a suggested roll ? Thank you

OMG…the FDA is Congress wrapped into one…….that is not approval, that is just a panel saying ok.  FDA does not always follow the panel.  Look at DNDN, ITMN.  I will change my name to Farmboy if it does get approved (.  This is a total train wreck.  Their data was not as good as ARNA on the weight loss front….OMG, omg…oh my!

Matt:  you’re right on; the constitution needs an amendment to get special interest and their money out of washington; the framers desired a weak federal government and strong states, that concept went out the window after the civil war and even more so after the depressoin.

VVUS up 20%..wow

Hum – you didnt answer my question, Im not the one who stated " the constitution got in the way of the PResident’s goals." Maybe you should stop writing stuff that comes from your rectal databank…. Im not debating the fact that Im angry, but my point was Republicants/tea baggers feed off anger and are good at making broad statements like "reduce big Gov’t" etc to appeal to voters but those statements have no substance. Just like our debate, Im asking you to provide me SUBSTANCE ie PROOF of how the constitution has foiled Obama’s plans and you respond with "you’re the angry one"… 

NFLX CFO steps down!

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