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Tax Hike Tuesday – Democrats Propose 5.5% More Corporate Taxes

26.5%.

That is the new Corporate Tax Rate if the Democrats get their way, up from the current 21% that none of them pay anyway.  On the personal side, if you are making over $5M per year, there will be a 3% surcharge but there will be no "Death Tax" increase so you can still take it with you when you go.  Oil and Gas Companies successfully lobbied to keep their tax breaks and Banks are still being given a full year to move money around to avoid taxes – something that was supposed to be stopped.  

Democrats plan a committee vote this week on the proposals, which would generate more than $2 Trillion that would go toward expanding Medicare, increasing renewable-energy tax breaks and creating a national paid-leave program, among other items.  They are also are looking elsewhere to cover the rest of the $3.5Tn spending and tax-cut agenda they aim to pass this fall.  Long-Term Capital gains are set to go from 20% to 25% but not the 39.6% Biden had asked for.  

The proposal will test Democrats’ willingness to raise taxes, and its pieces are designed to hit those above the $400,000 annual income dividing line that President Biden set during last year’s campaign.  Keep in mind, the Corporate Tax Rate in 2016 was 35% and we have more than doubled our National Debt since reducing it, so 26.5% is a half-measure at best.

The key takeaway is that, if this is passed, we are essentially chopping 5.5% off Corporate Net Income – that's going to sting – even after the cheating brings that number down further.  The goal of the plan is to pay for the Democrats' $3.5Tn 10-year spending bill but it "only" raises $1Tn from Corporations and $1Tn from individuals and, as usual, the normal BS about how the taxes and spending bill will grow the ecomomy and "pay for themselves".   Where have we heard that before?  

Everyone knows, if you want to grow the economy – unleash a Global Pandemic.  It certainly seems to be working so far, doesn't it?  

We are still rockin' a 100% gain in the market since the tax cuts were put into effect in 2017 but half of those gains are post-Covid – thanks to over $10,000,000,000,000 in stimulus that has been thrown onto our $20Tn economic fire.  Yes the partial withdrawal of tax breaks (not really increases) will roll back earnings somewhat but the big concern is still what will happen when 50% of our GDP isn't stimulus anymore?  

No need to worry this morning as the CPI was only up 0.3% in August, less than the 0.4% expected and the 0.5% in the July report.  Core CPI was just 0.1%, down from 0.3% previously.  Airline fares, used cars and trucks as well as motor vehicle insurance were the categories that declined to give us a lower number as the resurgence of Covid chased more people inside during August – so I wouldn't read too much into that number – but people will anyway…

As noted in Bloomberg, there's a lot of mis-pricing in the market:  Joby Aviation, which plans to begin an electric air taxi service in 2024, is worth more than Lufthansa, EasyJet or JetBlue.  Used-car sales platform Carvana is worth more than Volvo, Honda, Ford or Hyundai. Airbnb is worth more than Marriott and Hilton combined. Crypto-exchange Coinbase is worth more than the Nasdaq.  

Venture capital is cuckoo. After investing $120 billion in the 2000 dot-com frenzy, and just $16 billion in 2002, U.S. venture capital invested $130 billion in 2020 and then $140 billion in the first half of 2021. Startups these days raise money as “the Uber of gardening” or “Space as a Service.” Oh wait, the latter was WeWork’s pitch, whose founder Adam Neumann declared in 2017, “our valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.”

The Federal Reserve deserves most of the blame. Near-zero interest rates means the market has no true north to help compare stock valuations with reality. We are navigating turbulent seas with a spinning compass. So no, Fundamentals don’t matter.  Well, until they do… In 1989 Tokyo real estate sold for as much as $139,000 a square foot—350 times the value in Manhattan. At that price, Tokyo’s Imperial Palace was worth more than all the real estate in California. Not anymore. 

Yahoo was once worth $125 billion and AOL $200 billion during the dot-com bubble. Both are worth 99% less today. Tesla CEO Elon Musk recently tweeted, “I thought 1999 was peak insanity, but 2021 is 1000% more insane!” Remember, when the selling starts, fear of missing out turns into fear of losing everything as speculators jump like rats off a sinking ship.

Today’s negative real yields don’t reflect reality. The Fed has warned it plans on tapering bond and mortgage purchases later this year. Someone is at least reaching for the punch bowl. The compass may stop spinning soon. Until then and always, stick with Fundamentals.

 


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  1. Good morning!

    Lower CPI is boosting the markets:

       

     

    Oil hovering around $71.  /NG finally taking a break – WOW!

        

    The winds unusually died down in Europe so their wind power is off-line and that's causing a major draw on /NG.  

    Europe’s gas shortage could make the whole world pay more to get warm this winter

    Oil is still high due to another storm:

    Oil Rises to Six-Week High as Another Storm Heads for U.S. Gulf

    Tankers Flee Deeper Into Gulf as Nicholas Heads for Texas Ports

    In other news the markets can ignore:

    Goldman Sounds Red Alert Over The Debt Ceiling: "Upcoming Deadline Looks As Risky As The 2011 Debt Limit Fight"

    Over 2/3rds Of Investors See At Least 5% Correction By Year-End, Blame Vaccine-Beating Variants

    Top UPS Exec Warns Supply Chain Disarray Will Leave Permanent Scar

    China Evergrande Debt Woes Raise Financing Pressure on Peers

    China Vehicle Sales Fall Amid Chip Shortages as Companies Drive up Prices.

    Debt Load Threatens Latin America Jobs Recovery, World Bank Says

    Aluminum Tops $3,000 For First Time Since 2008 On Supply Woes

    Uranium Stocks Explode As WallStreetBets Goes Nuclear

    Buyback tax proposal could blunt a major driver of stock market returns, experts warn

    NYC’s Covid-19 Vaccination Proof Mandate for Restaurants and Dining: What to Know

    Data shows Covid booster shots ‘not appropriate’ at this time, U.S. and international scientists say. 

    Apple to announce new iPhones, Apple Watch and AirPods on Tuesday

    Kolanovic Says Time To "Reduce Tech" Just As Hedge Funds Finally Cover Their Nasdaq Puts

    Trump Slams Bush's 9/11 Speech: Man "Responsible For Death Of Perhaps Millions Of People" Shouldn't Lecture Anybody

    Counterfeit Capitalism: Why A Monopolized Economy Leads To Inflation And Shortages


  2. Good Morning.


  3. Phil, Thank you on the CAG question. Holding off…..


  4. Wow, so much for that rally….

    Once again, as soon as the real session starts, selling resumes – that's not a good sign.

       

    The consumer-price index rose 5.3% from a year before as supplies and labor continued to drive up prices. 5 min read

    Its own in-depth research shows a significant teen mental-health issue that Facebook plays down in public. Part 2 in a series offering an unparalleled look inside the social-media giant’s failings—and its unwillingness or inability to address them.104 Long read

    FB is just over $1Tn at $375 but they do make $40Bn, so very hard to short at 25x.





  5. Corrupt Oil Trader Turns On Colleagues in Massive Africa Bribe Case


  6. I wish FB would f-f-fade away…. They have become a stain on society… :(



  7. ICUs Are Filled With Covid — And Regret




  8. Facebook/all – I use Facebook to keep in touch with distant family and friends – old Peace Corps buddies. I was worried about a buddy from grad school, who did an epidemiology PhD at the same time as I. When he graduated, he returned to his country, Afghanistan, and held a number of very high government positions  – minister of health, chief advisor to the president, ambassador to Pakistan and Burma, president of a major university. We used to argue about the idea of building a theocracy in his country. He likes the notion of a religion-centered government, and I worried about all the problems, especially in a tribal area. He's been retired a few years, but still a prominent guy, and we keep in touch on FB. He usually posts at least once a week, poetry and homely health remedies. However, when the US exit happened he stopped posting – his last was July 31. Then yesterday he posted again. Whew! A fascinating poem essentially congratulating the Taliban while telling them to shape up, they're running the place now, so they better get their act together and not engage in in-fighting. Here it is (translated from the original Pashto)….

    And to the Mujahid Talib.

    *****************

    O ' Talib, listen to me Mujahid.

    Now that you have captured this land.

    You have become a hero in Asghar Jihad field.

    Be careful not to break Akbar Jihad in the head.

    I've seen forty years fights

    Warm jihads against Russians.

    The blessing of Jihad is free.

    This land that we wanted, O ' Abad.

    We used to do it every side.

    Whenever we die, we will fulfill our hopes.

    We will build an Islamic system.

    And we will make the government full spare.

    But when the pit is behind the government.

    That time, what happened to the nangs?

    There are differences between us.

    A lot of peace of strangers.

    Every group wanted to take places.

    Naked your hands after wheat.

    Peace is repeated in the war of Uhud.

    We have lost the right goal. Peace is the way.

    The accurate goals of Jihad are below.

    Under the mountains of the desires of the soul.

    Now if you can't overcome your souls.

    The Taliban of unity and patience.

    This result will be like you too.

    May God not do it, all your hard work will fail.

    I hope you will cool your conflicts.

    Take big conflicts with measures.

    The lusts of power and the lusts of chairs

    Tie your hands on the chain of Taqwa.

    When you came home with the help of God.

    Keep the hearts of the beliefs up.

    Do the forgiveness you have done.

    So that you don't make all the youngsters foreign.

    Martyrs will reach their d

    reams.

    When the Islamic system stands in the country.

    Hoping for peace and success.

    Dr. Faizullah Kakar

    Seven. 13, 2021

     

      ·


  9. snow – I miss the early FB when it was entirely about staying in touch with friends and family. 

     

    "Toto, we're not in kansas anymore"


  10. https://www.youtube.com/watch?v=YkibVmjEums

     

    Hard to believe my daughter is a Senior this year….


  11. The UC schools have six of the top eleven public universities in the United States.





  12. The Federal Government Sells Flood-Prone Homes To Often Unsuspecting Buyers, NPR Finds




  13. Gold with a nice pop.

     

    MORE FREE MONEY!!!

       

    F-f-fade/1020 – It faded for me, I've gotten so sick of it.

    The Who Adds 2020 U.S. Dates to 'Moving On!' Tour | Billboard | Billboard

    Things they do look awful c-c-cold 

    I hope I die before I get old 

    I love this one:  https://www.youtube.com/watch?v=sdHoI8yDIU8

    Very nice Snow.

    Senior/1020 – This is Jackie's first real year at school.  

    LVS and WYNN getting killed:

    Wynn Stock and Las Vegas Sands Are Sliding After Macau Asked for More Casino Supervision


  14. This is the first time in 20 years that we do not have to consider school sessions in scheduling. I now realize that September is a good time to travel ( for those without kids in school).


  15. CROX / Phil

    you were way ahead of your time in both stock value and fashion    :)


  16. PSW Investments is working on a project to sell $50M worth of Carbon Credit Futures so, if you know anyone who might like that – let me know.  Meanwhile, we can all play carbon credit Futures with KRBN, which has done nothing but go up and well it should:

    Global Carbon Allowance Market Highlights

    • According to IHS Markit, as of December 31, 2020 the global price of carbon was $24.05 per ton of CO2. It is estimated that carbon allowance prices need to reach $147 per ton of CO2 to meet a 1.5°C global warming limit.2
    • As of December 31, 2020, the three largest global carbon futures markets, tracked by IHS Markit’s Global Carbon Index, had a market size of $260.79 billion.1
    • In April 2019, The Financial Times reported that European carbon allowances within the European Union Emissions Trading System were the world’s top-performing commodity over the past two years.3,4
    • China’s emissions trading market is expected to launch by end of 2020. Once fully implemented, it will be the largest carbon allowance market in the world, which may provide an additional catalyst for the performance of the global carbon allowance market.4

    Through our New Age/One World partnership, we expect to control $500M worth of Carbon Credits (from hemp farms and hemp to plastic manufacturing) over the next 4 years but it's just a drop in the bucket of the still very small global market.  Demand is being mandated by governments and there simply aren't enough credits to satisfy demand.  

    KRBN has only short-term futures and they are thinly traded but I want to keep an eye on them so, in our Future is Now Portfolio, let's sell 10 of the Jan $37 puts for $2 ($2,000) as that's a line that should hold up well (the lower end of the rising channel) and we'll seek to establish a long-term position.  


  17. Phil / LMT – Kind of bouncing off the3 3% wild line….  I have some a couple of puts ( '23 $340 (45) was looking at adding a spread – but spreads for '24 aren't look kind of off… thoughts?


  18. carbon credits     remember green coin, again way ahead if its time. ( Biodiesel )   Meanwhile I discovered two interesting energy producers.

    EVA  they make energy pellets out of scrap wood.  Interesting   Steady and growing business but overvalue price and bad options.

    AES, all renewable carbon free energy, with a worldwide footprint.  Decent options and pays a dividend 


  19. School's Out/Randers:  I feel so ripped off that the kids are finally out of the house but now we can't travel!

    CROX/Stock – And I remember it was because I read some article in the NY Times about kids in Africa cutting the rubber off old tires and turning it into shoes so, when CROX came along, I thought – "Yeah, just like the do in Africa" so I thought it was a good idea from the start.  

    LMT/Batman – Biden not giving much love to contractors so people are bailing:

    $320 is a pretty solid long-term floor so nothing wrong with your puts.   LMT is $96Bn at $343 and they should be good for $7Bn in profit so fairly priced and a great long-term hold.  Just because 2024s are out, doesn't mean anyone is trading them so you have to make your wishes and see if they get filled.

    We can add an LMT play to the LTP as it is our Stock of the Century – we just sold it when it was near $400 and now we can get back in after the 20% correction we expected:

    • Sell 5 LMT 2024 $300 puts for $36 ($18,000) 
    • Buy 10 LMT 2024 $300 calls for $65 ($65,000) 
    • Sell 10 LMT 2024 $370 calls for $33 ($33,000) 

    That's net $14,000 on the $70,000 spread that's $42,000 in the money to start and we're THRILLED if it goes lower so we can sell more puts and spend that money rolling the $300s down to the $270s (now $84) for hopefully less than $15 ($15,000) and then we'd have a $100,000 spread for net $29,000 less whatever we sell 5 more puts for.  

    https://thefusionblog.quora.com/An-Analysis-of-Lockheed-Martins-Fusion-Effort

    Worth researching Stock, thanks.


  20. Swiss start-up Climeworks AG and Icelandic carbon storage firm Carbfix have partnered to create the world's largest plant that will suck up to 4,000 tons of carbon dioxide per year and deposit it underground.

     

    Reuters reports on the new development being equivalent to the annual emissions of 790 cars. Carbfix and the other 15 plants around the world capture 9,000 tons of C02 per year. There remains many more opportunities for new players as the International Energy Agency estimated that C02 emissions totaled 31.5 billion tons last year. 

     

    In the United States, the oil company Occidental is developing a facility that will capture 1 million tons of carbon dioxide per year near some of its oil fields in Texas. 

     

    Climeworks AG signed a 10-year agreement with Swiss Re for carbon removal and has also offered clients a subscription service for carbon removal.


  21. AAPL fading after the event. Likely will pull the rest of the marker 


  22. Carbfix/Stock – Sounds more like a diet pill.  So how much energy does the carbon-sucking machine use and how is that energy produced?  

    Ah, found it:  

    The main energy requirement associated with the Carbfix technology is the energy to pressurize CO2-charged water to 25 bar at 25 °C. The energy demand at 25 °C as a function of CO2 partial pressure for the pressurization of 1 tonne of CO2-charged pure water is approximately 75 kWh.

    In 2019, total U.S. electricity generation by the electric power industry of 4.13 trillion kilowatthours (kWh) from all energy sources resulted in the emission of 1.72 billion metric tons—1.90 billion short tons—of carbon dioxide (CO2). This equaled about 0.92 pounds of CO2 emissions per kWh.

    So it seems good but I don't like the wording of "1 ton of CO2-charged pure water" – water weighs a lot so the vast majority of that ton is water, not captured carbon.  The lack of straight-up statistics makes me think the net capture of this might not be so great (like Electric cars).


  23. AAPL event not thrilling.  They need Steve Jobs whipping the geeks to get the next new, exciting thing ready for the shows.

    Steve Jobs in heaven. A cartoonist finally gets it right. (Bors): funny

    Prices are down:

    The new iPhone lineup, by price


  24. To me, the huge effort on the presentation graphics underscores that they have only made incremental improvements though, as I've argued in the past, you can't expect game-changers every year.  

    Another not good finish for the indexes.  -1.35% on the RUT.


  25. Good morning, everyone. Here is the link to today's webinar.

    https://attendee.gotowebinar.com/register/1100974395956636428