What Was THAT?

I think Louise has it about right. The bottom will be closer to Dow 10,600, and we are not quite there yet. We are almost there, but there are still a few optimists who need to throw in the towel.

^IXIC 1881 coming to a terminal near you

We’re going lower – much lower.

What can I say that I have not said before in this space.
The USA and the rest of the world is in dire straits with nowhere to turn. Barry, just because the market is down does not mean anything.
Time. That;s what we need to unwind all the ills of our society. And believe me, it is our society that uses too much energy, saves too little, feels entitles, thinks such sill thoughts as NYC real estate will never go down….too many wealthy Europeans buying those coop bargains. Yuck…how many times have we heard that the only place that I have ever made money is in my house. Wit until no one brags at the next cocktail party about anything other than their kids’ Little League team.
As my good friend Herb used to say…”don’t confuse a bull market with brains.”
Brian Belsky, are you still with Merrill. You are so young and so, shall we say, untried. In January after a road trip to Europe you wrote that it had to be THE bottom because those European investors were shaking in their boots. The next time Merrill sends you there, they may be out of work. And you will no doubt be gone as well. back to Minneapolis.
Merrill Lynch in the good old days in the 1960’s and 1970’s used to run a full page ad in the Journal and the Times which said that no one rings the bell at the bottom…Barry, I am not sure why you ask if we hit the bottom, because when our money is gone, the volume dries up, and no one cares about the market, that will be the bottom. A 5 billion share day is not the bottom…maybe a year or three from now.

And this is one reason –

Local oil company offers fixed price contract on heating oil for next season. Last year’s contract – $2.79 gallon max and if lower you get the lower price. This year – $4.79 fixed – and if it goes lower, you’re locked into the $4.79. For the average N.E. home that’s about +$2,000 more than last year for the season (!!!!). That’s not chump change for the masses – and they will cut back elsewhere – the consumer’s 70% will take a hit, among other issues. Look out below.

Is there really any reason to step in on the buy side beyond egotism or a few countertrend ripostes? I just dont see any big money being made on the long side with the long festering problems that are being exposed, day in and day out. Barton Biggs? Jeff Immelt is out a few bucks on the GE he bought. BofA and Countrywide. Citi bailers? Why follow a fleet of submariners.

Barry – maybe you have just discovered “The Barton Biggs contrary indicator”.

I think he was on CNBC just before the end of the year last year saying that ‘we are going to see the biggest short covering rally of all times in January’.

You know what happened to the mkg in January. If he made the prediction you mentioned above a month ago — maybe the mkt is now a buy ???

Nobody knows what to think or who to trust. They’re stuffing their money under the mattress. Seriously.

We are durable goods rich, but replenishable goods poor.

In other words, we have McMansions and SUVs but we don’t have the electricity to run the lights or the fuel to drive around.

Our “wealth” massive as it is, depends on a constant stream of food and water and energy to sustain life.

Austrians were starving to death in 1945 while Mississippi sharecroppers were not. Replenishables matter and are the limiting reagent of global population and the economy.

i fail to understand why is there only end of the world bearish comments?

imagine if we were not so bearish in Jan or march, we would have made some money.

i agree that i dont want to go long with all my money right now….but what about testing the water with 10%?

my reason why market may go up, there is a ton of money which needs to go somewhere….since yield from treasury is not enough to generate enough to beat inflation.

my guess is couple of trillions managed by hedge funds, mutual funds and pension funds…..which are basically OPM….is used to play the market irrespective of the fundamentals and macro conditions.

IMO stocks are way overvalued due to the ponzi scheme that it has been…..and to find a real bottom where investing in a stocks should be equivalent to 15% returns in terms of real cash profit, and the profit is returned to investor rather than wasted by management.

but the big question? where do we put our money to work….being in cash has not yielded much.

– Fed is irrevant but congress can give stimulus packages and bail-outs for Airlines, C, GM, F, AIG, BAC and more if needed.

– Dollar is structurly doomed — now that the world has seen how the wall street thugs and washington mafias run this country.

– $ One trillion dollars in write-down X some multiplier effect in credit contractions — and I would cut 30-40% easily — assuming world economies stay a little better and oil does not sky-rocket further.

– $ One Trillion Dollars in war against conquoring feer/terrorism (which btw planted the seeds of greed here at home in 2002/2003). Meaning rising interest rates in 2009.

# Possibility of a democratic win and hence higher taxes in 2009.

Combine this all and you are back to pre-war levels; and add a little bit of inflation — I would give 1065 to 1135 as a real possibilty on S&P 500 and Dow 9/10K range sometime in next 6-9 months. Rallies possible from/in July/1180-1250 range in S&P 500 if oil corrects a little bit. Earnings and guidance will be horrible so — indices can keep kissing the low end of the BB for a while.

-Never felt so confident about the berish side. Perhaps that is the only good news if you are a contrarian/bull.

If your looking for cause and effect check out the slosh report.
http://www.gmtfo.com/reporeader/OMOps.aspx

The federal reserve drained 26 from the system .

I do not understand why you keep bringing up Barton Biggs. Did he get anything right in the past few years?

I do not understand why you keep bringing up Barton Biggs. Did he get anything right in the past few years?

I do not understand why you keep bringing up Barton Biggs. Did he get anything right in the past few years?

I do not understand why you keep bringing up Barton Biggs. Did he get anything right in the past few years?

I do not understand why you keep bringing up Barton Biggs. Did he get anything right in the past few years?

I do not understand why you keep bringing up Barton Biggs. Did he get anything right in the past few years?

I do not understand why you keep bringing up Barton Biggs. Did he get anything right in the past few years?

I do not understand why you keep bringing up Barton Biggs. Did he get anything right in the past few years?

Herd mentality is a funny thing, everyone is a bear now which means it must be time to take the opposite position and start buying a little.

A couple of years ago, housing could never drop and people kept buying, now the market drops, people say it will never come up again and people won’t stop selling.

Very strange…

Do you see a clear path to recovery? No? Then this is not the bottom yet. It could be near but on the other side of a deep gorge.

I think we have to hit a global, short lived but deep recession first. Money is flowing elsewhere (emerging markets) because that is were the opportunity lives now but maybe not for long… this is the key point:

On Bloomberg TV today there was an interview with the Brazilian president, saying all is well and how bright the future is. But at the same time the government economic institute will stop issuing quarterly forecasts because, well, because inflation expectation is blowing the top of the high water mark (6.5%) into the 10% mark. Same goes for most places.

When you lose 10% of your gains to inflation and also expect the dollar to recover a bit at some point in the future… this could wipe out most of your much touted Emerging Market gains. When we get to this point, money will flow back to the US because that is the most unregulated and dynamic market, where you can make things happen even if it goes haywire sometimes.

That is, if the next US president allows it… If your candidate plans to increase taxation and regulate the life out of capital markets you can wave a fast recovery goodbye: it will happen elsewhere. So please, think hard and long before you vote.

Everybody says “buy when there is blood in the streets!” What do you do when its your blood? You lose money in the market, you lose buying power daily, stress in the workplace. I think things still get worse.

we’re close, July 1 should see a reversal.

Today June 26th, 2008 is just The Day the Economy Was Broken.

What we currently see is equities hit by the unability of corporations to run their business anymore.

The two problems double-whamming corporations are : a solvency problem and a consumption problem.

First, solvency : monolines are freezing dead on CDS defaults, and banks not making it to refinance, pass silently their solvency crisis to their former corporate borrowers before they have to be explicit about it on their quarterly results.

Second, halted cosumption : inflation (caused by fiat-money, speculative-oil surge) and subprime crisis have destroyed spendings, reducing corporate earnings under acceptable levels.

Equities are cracking in the depressurised markets from which any liquidity has been suddenly sucked out by the combination of halted consumption and halted credit.

But ponzi financials are still hiding on the sidelines to unwind.

So, next, we’ll get the inflation+ equities- spiral self reinforcing until…

^IXIC whatever, then…

The valueless fiat dollars meet the global bank solvency crisis. This is an oxymoronesque quantic puzzle to me… idea, anyone? Whowins : ? deflating credit, inflating dollar? or does the market simply not exist anymore?

I mean, the market could freeze dead at once monday, you know. A kind of “liquidity blackhole”.

What I’m quite sure of is that he massive obfuscation of sound macroeconomic data, an obfuscation this blog has systematically going after, is a major ingedient in that very ‘blackhole’ effect.

Also, financial deregulation and bank secrecy add up to the sauce. But maceconomics is the very depressurising ingredient.

Then, afterwards, oil speculation ultimately busts out as inflation leaves space for the ultimate deflation, hemorrageing the US debt back to the forced borrowers from China, Chile, Korea and Trinidad…

Finally, Imperium Americanum no More.

Or : the Fed has a B plan for this oxymoron moment. But, this would be conspirational for me to extend upon it.

Good night… and good luck!

The issue is that we have a lame duck president that is also incompetent. Now you couple tyhat with an iom potent Democrat party and that is a recipe for disaster. Just look at the gun control decision today and the exon Mobil decision yesterday. McCain says he wants judges that are not activists, yet both these decisions are activists. Dems are parsing their wors so as not to offend those bozos that still consider Scalia something other than an idiot. Who’s running this place? We have an economic crisis and we are trying to protect corp misconduct and every yahoo that wants to be a big man by walking around with a gun on hi9s belt.

MAyor Daley in Chicago had his usual good sputtering angry response today. He said and I paraphrasE, ” why don’t we get rid of the courts , everyone gets armed up, and let’s settle it on the street”. Good advice for a screwed up, dumbed down society.

You silly bears, thinks are not so bad, the U.S. economy is great. Look at the bright side, do you remember when I was telling you to buy stocks at dow 14k, then 13k, then 12k…just think now you can buy at 11.5k. I am so lucky today that the GE shares I was buying for $38 a few months back I am now only paying $26. Cheer up guys!!! I am so excited I am going to take my boyfriend out for a nice dinner tonight.

Why should an 80’s style 50% pullback be such stretch to imagine?

My considered guess is that the Dow will go down to around 6000 that is wiping out all the fictitious “growth” that Greenspan manipulations created. At the end of the process banks will have disappeared and the government will dispense funds directly to citizens as it has just done. Formerly the government distributed funds under the form of tax cuts that were never accompanied by a cut in government activity so the tax cut amounted to a gratis distribution of funds. Recently the goverment has just done that with the ‘stimulus package”. It has just given money away, not to me, I am old and unemployed, and in that manner it has, the government, preserved the fiction of rewarding those that work. Gainful employment is a must but since consumption is the fundamental economic activity of the American citizen the government cannot ignore all of us for ever. Eventually it will reward us for merely existing. Capitalism is a system in which everything becomes uniform, dress, sex, age, marriages and in consequence stocks and bonds will come to meet together and any difference in them nullified. This process will be very long but at the end the notion of “growth” will have been eliminated. Rent may still exist and so will be interest but dividends will have disappeared. Without growth and without dividends the stock market is superfluous and its valuations fictional, that is why I say that quotations will go down and down until they reach 5000 or 6000 during my lifetime. Afterwards Heaven knows.

We’ll rebound from this. It’s just a practice run for Sept/Oct.

I’m going to have more on this next week, but essentially we’re about to see the other shoe drop with the Financials.

The first shoe dropped in January when a number of banks and financial issues cut their dividends. I think the action today is the largely the result of the now increased and almost certain likelihood that another round of dividend cuts is about to drop, only now with a wider impact (affecting more company’s within the sector.)

As dividends represent the stable component of corporate earnings, these pending cuts are forcing investors to reconsider the valuations of the various companies’ stocks. Since the Financials grew to represent a pretty large share of market cap and price-based stock indices over the past several years, those indices were hammered today.

The good news is that the damage thus far is largely contained to the financial sector. Other companies with looming dividend cuts (such as Circuit City) have actually been distressed for some time – their problems are long-standing and not necessarily tied to market or general economic conditions. The really good news is that most companies in other sectors are in fairly decent health and will weather the storm.

GM has a different problem – the company made huge capital bets that backfired. GMAC’s foray into the mortgage business started the bleeding when housing dived. Meanwhile, the company’s choice to focus upon producing SUVs at the expense of smaller vehicles will handicap the auto production side of the company as it cannot diversify its production fast enough to accommodate consumer demand for more fuel efficient vehicles. One wonders if the company’s leaders and employees knew they were betting the company in making the decisions they did.

I’m particularly concerned with the airline sector. We’re going to see more bankruptcies here, including at least one large carrier. This is the one industry that’s being squeezed from all sides – banks getting tight, fuel going up, passengers cutting back travel (not to mention the increased hassles they have to go through when they do.) If anyone is wondering why Boeing’s stock is taking such a hit, that’s the reason why – it’s a proxy (in the Dow in particular) for the much less healthy airlines that make up its customer base.

TO THOSE LOOKING AT LARGELY BEARISH COMMENTS HERE AS A POSITIVE CONTRARY INDICATOR:

When the bank for the British royal family (RBS) is “forecasting” continued credit market troubles … when the European Monetary Union is essentially declaring war on the Fed with threats to drive the exchange rate value of the dollar into the depths of hell … you must appreciate how these are, indeed, extraordinary times in which we are living. Therefore, resort to analytical points of reference which in the past have proven statistically meaningful may now prove an exercise in futility.

Jose’s “Capitalism is a system in which everything becomes uniform, dress, sex, age, marriages …”

Tell that to the millions of Chinese that left the socialistic rural dark age and now have brokerage accounts. That only because a whiff of capitalism was allowed to break the state imposed uniformity.

dss, the capital markets have a few broken ribs only because it was allowed to run. Casting it in plaster is not the solution.

To all: capital markets is only a _part_ of Capitalism.

Whither earnings?

No P/E, no price.

IMO the 2004-2007 corporate profit bonanza was due to debt-driven consumer and corporate expenditures. THAT party is over.

The S&P 500 bounced off of 800 in 2003-2004. I see it bouncing off of 1000, with resistance at 1200, over the next 2 years.

The other day you mentioned some correlation between site visitors and sentiment. Diminishing site visitors = poor sentiment = bottom.

Well, judging by all the comments on posts here today, tomorrow looks like it will be a very bad day…

I don’t know what “that” was, but I’m hoping ye old FusionIQ will guide me to The Promised Land… (no pressure…)

“I’m like Larry, I’m for “keeping America great” you’ll have a great buying opporunity at some pt. in the next 6-12 months. Everyone here will still be writing about Dow 7k though.”

So you’re buying Goldman or Merrill tomorrow? And if not, at what point?

I’m for keeping myself and my family great. Everyone else can take care of themselves. That’s the essence of capitalism and this country after all: individualism, take care of yourself, screw everyone else along the way.

Per Andy’s comments on today being a no confidence vote on the Fed, I agree.

Does anyone think will have a between meeting emergency rate hike?

From Bill Fleckenstein’s Daily Rap:

“[About midday] I received a phone call from the Lord of the Dark Matter, who began the conversation: “It’s about to blow!” He then repeated himself.

He went on to say that behind the scenes, many parts of the credit/mortgage market were “offered only.” He said it had nothing to do with month-end or quarter-end. Instead, he believed it had to do with the enormous amount of inventory that would be looking for a home in the next quarter. He believed that the equity market was “miles behind what was occurring in the mortgage-backed/credit markets.” Though he noted that he’d said it before, he repeated: “It’s never been this bad.” ”

Also, Senator Schumer made public a letter he wrote to regulators where he openly questioned IndyMac’s solvency and asked for greater scrutiny.

several quick comments:

Barton Biggs has made a number of right calls: a) going to a hedge fund, b) writing books, etc.

Gun issues: I do not know that we have the ability to pick and choose which parts of the constitution we accept or ignore. IE the fiat money issue vs guns and the right to bear arms. We know what has been happening–so the issue needs to be resolved, somehow. As I do not have the capacity to do it, someone else smarter than me will have to do it.

The bottom? Who the heck knows? Certainly not most of te talking heads on TV (the buy on dip crowd)

rj

who said anything about buying brokers tom. why the hell would I do that? besides, you could have bought gs at close to 150 in mid march and it closed at 176 today, where I come from they call that a gain.

if not now then when?, if and when it goes down more of course. buy some at 160, buy some more at 150, and buy the most at 140. something tells me in 5 years gs is still going to be around and the price, it will be higher on the stock.

merrill is not gs so I just won’t even answer that one.

financials aren’t my fav. but you asked. the value’s will come in all the other sectors that haven’t been taken out just yet, lots of sectors aren’t expensive but certainly not cheap either because I think estimates are still too high for earnings. I’m not saying i’m not bearish either, from time to time though, but the reality is longer term, I’m a bull, an optimist, whatever you want to call it. people on here act as if the world is about to end and it is funny.

i’m also not trying to get to the real meaning of capitalism, at the end of the day this country isn’t about help yourself and screw everyone else as you say, that’s part of what makes it great. you just sound bitter when you say stuff like that. take it easy.

On another note, like doug kass, I’m long DUG.

I watched Kudlow tonight and was amazed at his imploring of the Fed to raise the Fed Funds rate to strengthen the dollar. Just 6-12 months ago, he foolishly argued that rate cuts would strengthen the dollar. He is in sheer panic, as Bernanke must be — as we all should be.

Ain’t no easy way out of this mess. It’s all rock and hard place.

We are gonna CRASH…YIPEEEEEE. MY name is Bobby Prechter and Ive been screaming CRASH for 21 years now and I think we might just get it.

I think the worst is over… sold some put options today… market breathes in, market breathes out… don’t follow the herd.

RJ,

You know, you have some good points. I don’t like seeing people at GM get screwed, if they declare bankruptcy it is because they made some major mistakes, it is a poorly run shop. Made promises they couldn’t keep, this is all part of the free markets. Blame the board, blame the leadership of the company, blame the ceo’s who run companies into the ground and take a fat check home, don’t blame the market. Go talk to someone that worked at Bear a few months ago, it wasn’t the market that told them to lever up 33 to 1.

the whole point of my first post was to say that the worst run companies look even worse in a bear market. they go away and leadership emerges.

some of your other poins, a little less compelling. social security could go any way. if it get’s privatized, as it should, you would benefit given your age and your new ability to control your money instead of having it sit in some bs trust that makes no money. the market is here along with a million other vehicles so you don’t need to depend on social security anyway. besides this is just another bad government creation, not a market creation.

the point is there are other ways to fix ss besides taxing the shit out of people. that’s just obama’s fix so he can redistribute wealth and still have all the govt spending he wants. I agree spending is out of control and it goes for both sides. I don’t disagree with tax cuts though, especially of the capital gains variety, and say what you will about kudlow but inflation tax is real.

I’d suggest reading this when thinking about the def. and taxes

http://www.ftportfolios.com/Commentary/EconomicResearch/2008/5/12/Deficit_Rising,_But_Tax_Hikes_Not_Warranted

It’s not the street that is full of crap as you say, it’s your career politicians like Chris dodd who get sweet deals and then screw the taxpayers to bail out a bank. make your vote count, not as if we have anything to choose from though.

I’m 27 so I’ll have to deal with the same crap you deal with, I just have a different outlook. If worse comes to worse I’ll stick all my money in gold and move to canada and grow my own food. thanks to monsanto by the time I need to do so i probably won’t have to do anything but throw some seeds on the ground and a few days later i’ll have a meal.

BR, surely you have a few contacts in the fun and murky world of credit origination. How, exactly, can you even post this thread as a question?

Isn’t Wile E Coyote’s moment cute?

once the dow broke 12800, i thought it would go to 11 flat. seems that it will go lower now. nas/qqqq took a hit today with the rimm selloff but still looks decent. spy is in a lot of trouble.

probably a good time to look at 5-10 year p/e chart on the dow and s&p. the bottom historically (i.e. 1900-1980, i admit 2000-2002 didn’t…but maybe that wasn’t the bottom) has come when p/e has hit single digits…something most fundy traders haven’t thought possible since probably 1995.

we’ll see…if it’s different this time.

i’ve officially quasi-subscribed to the “if china wants it and didn’t want it 10 years ago, it’s more likely to go up” theory. but on days like this there’s not much shelter long.

lots of opinions 180 if we pipe back to wednesday’s close tomorrow. that would be quite interesting to see, especially on heavier volume. :)

I haven’t taken the time to read all the comments so I should apologize if i repeat other opinions. Unless you are over the age of 60, this market and the outcome will be different than you’ve ever observed. We’ve had a generation of people (including my self) that has been able to live far beyond our own means due the easy credit access. That is now over. Asset prices will reflect their true intrinsic value vs the value someone might be able to afford due to the bogus loan they could receive from a lender like CFC. Be careful with your expectations based on recent history as that may lose you a lot of money. We have serious issues not seen since the 1930’s. The outcome doesn’t need to be as dire, but you should consider protecting your assets.

We are going much lower; maybe not very fast, but we will.

In the last 2 decades, too much time have been spent trying to prop up and alternate universe:

where if the wealthier get even more, everybody wins
where the government can ONLY be a problem, never a part of the solution
where America was supposed to be able to operate in a energy vacuum, oblivious to the reality on (and below) the ground, driving biiig cars and expand ever more the exurbanization
where fundamental problems that threaten our very survival were systematically denied, distorted and haughtily called “part of the librul agenda”, irrespective of the facts
where 2 simultaneous wars are draining the treasury, sapping the moral of the nation AND the military.
where the civil liberties are brushed aside and trampled upon in the name of more security.
where our political leaders have been doing everything but lead.
where our regulators were either anti-regulations to begin with, or obstructed and fired if they dared to do the job they were hired to do in the first place.
where the middle class has been systematically robbed, taxed, lied to and put on notice that they really do not matter anymore.

It takes time to damage the very fabric of such a complex society like the USA. Doesn’t mean it could never happen; and I say it is happening right now.

Repairing the economy AND the social canvas will be a arduous and painful job that will take TIME.

Anyone expect a bottom pronto with such a political, economical and social backdrop?

There will be more pain, blood sweat and tears.

Barton Biggs! How much sway do his words have these days?

Re: philip’s comments about China, it’s not all just sweatshops making plastic goodies for Americans, you know. The EU is the #1 market for Chinese goods now and don’t forget the dominance of Chinese exports to the rest of Asia and China as the chief export market for Japan, Australia, etc. “government-bank corruption fest” — we talking about the United States here??

I think the bottom is a ways off and agree with other posters it will be a slow process. Seems we turning Japanese. It’s 1995 in America…

I’ve said this before on this blog, and I’ll mention it again. There have been very long periods of time when the stock market has done NOTHING–decades of consolidation.

When we look back on the decade that was 2000-2010, we may see a decade that was a very large period of congestion between 800-1500 on the S&P 500. We could head back to 800 on this latest move down and still be in a consolidative channel on longer term charts.

Don’t get depressed. Don’t be in 15% cash as some of the BEARS on cnbc suggest. There’s no shame in being in 100% cash.

It’s no coincidence that the greatest bull market in assets began when U.S. baby boomers were at the height of their earnings power. It will be no coincidence that assets will deflate when they “try” to retire.

– AT

most if not all homes in Europe are heated by circulating hot water… this system is tremendously more efficient than forced air heating… curiously enough, this system was common in the U S in the 20’s and 30’s.

I do not know that we have the ability to pick and choose which parts of the constitution we accept or ignore. IE the fiat money issue vs guns and the right to bear arms

This is horribly off-topic but IMV the 2nd amendment simply defines a fundamental right to become competent with and have access to militia-grade firearms. Not muskets, but AR-15s, etc. This could be adequately covered by private or even semi-public gun clubs.

This does not necessarily extend to concealable firearms, but I also believe we have a common-law right to protect ourselves and the Federal government needs to butt out of this (outside of interstate commerce issues). cf. the Lopez decision.

This ain’t no bottom. Look at the $CPCE, $TRIN, and $VIX. See you at DOW 10,000

RJ,

“Heck, I’m 25 years old and I know this country will renege on Social Security before I ever get a dime.”

No it won’t, unless it’s scrapped and given to Wall Street to skim.

Once again, Social Security is more financially sound today than it has been throughout most of its 72-year history, and even forty-four years from now, Social Security will be in much better financial shape than the rest of the U.S. government is today.
.

Let’s blame the Chinese.

Let’s blame the speculator.

Let’s blame GS “dog eat dog” downgrades.

Let’s blame Jim, Dennis and Larry.

Let’s blame the FED of course.

well blamed, Ben!

Let us blame Jimmy Nodownpayment!

Let us blame Johnny Securitize!

Let us blame Fred Fakedfigures!

Let us blame Ted Tabloidpress!

Let us blame Harry Donteducate!

I’m taking the optimistic view. It may get a little worse before it gets better, or maybe not. As I said earlier, I bought in a couple of days ago and I’m only down a little over 2% on the amount invested, or about 1/2% on the total portfolio. At this time, I think it was a good choice. Maybe in a month or two I will think differently. We’ll see.

I’m still betting Congress will fix the oil loopholes. If they don’t, then this is only the beginning of the end of the world. The price of oil is limited only by the imagination of the memo writers and the uselessness of Congress and law enforcement (remember, the Feds are supposed to be investigating the oil thieves and have been doing it since December.) I hope those useless puds in Congress put something together fast, and don’t put it off until after the August break.

101 comments? I smell a bear market rally.

“rj, enjoy yourself now, you’ve got another twenty years before YOU become the generation that caused all the problems for the younger generation.”

No we won’t. Cause no one will lend us the money by that point in time.

By far the smartest man in Washington on this retired a couple months ago. David Walker, who was Comptroller General for ten years. He exasperatedly was going around pounding tables for years on this issue and no one listened to him.

I pay tax before I buy stock, I pay tax when my stock pays dividends, and I pay tax when I have a gain on the stock.

So ?

And if you buy a meal with your profit you have to pay a meals tax and leave a tip.

Not seeing the oppression.

Quite a good discussion going, I always feel I learn a lot from the opinions expressed here, even if its just how better to judge opinions.

Did anyone notice that Libya, the world’s #15 crude oil producer, at around 1.6 Mbpd is considering cutting production because, as their minister says, the market is “oversupplied.” This is stunning and painfully illustrates where we are at. That a relatively small player can cause such a move in the global market shows that the spare cushion of oil capacity is gone. The developed world has been grovelling to Saudi Arabia for a paltry increase, and here their cartel partner is suggesting a decrease in output. The “oil weapon” can be wielded by any exporter at this point, and Libya realizes this. A mere threat to cut was enough to send a signal to the US.

Given this, who knows the fallout from Israel possibly attacking Iran? Its really unthinkable, and we should be doing everything possible to deter them from that, otherwise we’ll be at permanent war and the reason will be oil.

It doesn’t matter how sophisticated and robust our financial systems and technology are so long as the transfer of wealth on the order of hundreds of billions of dollars per year is happening as we depend on foreign supplies of oil to operate our capital markets and fuel growth.

And we can’t drill our way out of this. As RJ suggested, the generation that could have come away with a lasting lesson didn’t, and we never solved the fundamental problem that threatens to undermine the nation’s stability. Now the possible solutions are all painful and stand less of a chance of working than they did 30 years ago. But we have no choice.

I do not like to have this view. I’m naturally inclined toward optimism, and I enjoy investing for future prosperity. But the facts aren’t debatable in this matter.

Energy drives growth, energy affords prosperity. Energy provides a surplus that can’t be overstated.

Sam Zell: Overall positive comments by him this morning on CNBC.

rj,

Chill. I used to be like you 10 years ago. SS is not going broke–all they’ll do is lift the cap on payroll taxes and it’ll be fixed. Unfortunate though. Payroll taxes are horribly regressive and no progressive–including me–can morally support them.

Otherwise, don’t fret about the Boomers, take their f’ing money. They will not go quietly into that dark night…but I guarantee you they will go broke trying to fend it off. Pharmaceuticals. Assisted living facilities. Home health care. Home renovations for the elderly (with special tax incentives). And, don’t forget reverse mortgages. These will be the next big cash source for them. Forget alt energy, just clean-burning coal plants. King coal can make big oil its b!tch in America.

It’s gonna be like shooting fish in a barrel!

No matter what I may *think*, what I’m actually doing is covering – more slowly than I’d like – selling some energy and hedging what I don’t want to sell.

Tough for me to imagine a crash coming from this deeply oversold. Everything I look at was screaming “cover!” last week. Discipline over conviction.

OIL. As long as crude runs higher, don’t expect much out of anything else. Except maybe gold. Even there, the costs are getting wacky.

I caught Zell’s comments also. I especially liked the comments he made on TAXES. Felt good, we’ll see if he’s correct.
Posted by: ben | Jun 27, 2008 9:17:35 AM

I saw Zell too. We’ve seen similar things out of Jack Welsh and Mr Forbes. While I agree that the American economy is an amazing thing, I think these guys are deluded when it comes to taxation and are basically “talking their book”; advocating for the taxation policies that will make their lives easier. They simply use the free market religion fell good rationalizations to sell it, they don’t really care if it’s true or not.

Taxes are going up going forward not because politicians are crypto communists but because over the last 8 years the USA has run at taxation levels below the minimum necessary to run the country. Let me hammer that one in again, the USA can not sustain this level of taxation and remain solvent. And a third time, the debt generation and all the problems that flow from it are directly related to the American Government, not collecting enough to pay the bills for necessities

That is the big picture, and Zell knows it, and he’s terrified because he knows that when the American government goes to correct this permanent imbalance they will have to go where the money is; the top of the pyramid.

So we can live in this fantasy land where taxation never needs to rise because we just know that taxation is like a totally evil thing, like the devil. Or we can grow up and have debates about how to tax in a way that is most efficient for the economy.

So far the signs are poor. The no tax ever religion is too embeded in America. And so it will be the international bondholders who will force the federal governments hand. Americans will learn the hard way. There is no free lunch. This applies to taxation as much as anything else and the American people and corporations have been living in a low tax fantasyland purchased through debt. It will end because it can’t go on.

agree on Zell talking his book–

smart guy though

he said the govt should let the free market resolve the housing crisis said the fed had done a good job-said nothing about the fed bailing out JPM Bear as being intervention

also said commercial RE in fine shape???

but hes the multi billionaire, not me.

ben,

“First, it is not just another form of income. For a young person like me I just get f-ed on this. I pax before I buy stock, I pay tax when my stock pays dividends, and I pay tax when I have a gain on the stock.”

And ?

Those are three DIFFERENT forms of taxation.

“Second, I believe the cap gains tax rev. has quadrupled since the long term rate went from 20 to 15.”

Every time the cap gains rate is lowered, there is always a short-term spike in revenue, but it is very quickly surpassed by the longer-term losses.

“It encourages investment by the less wealthy for the simple fact that they keep more of the money that does not belong to the government in the first place.”

There’s simply no evidence of that assertion.

“Third, to say that only wealthy people have these accounts is completely false. Do some homework, it just isn’t the case.”

I never claimed that “only wealthy people have these accounts”.

The last time I checked, the IRS reported that upwards of 85% of cap gains is reported via the 1040 from the already wealthy. It should not be a surprise, as something like the top 10% of the taxpayers own the vast majority of securities. The average American family has more value in the vehicles parked in their driveway than they do in securities.

“Also, if you kept the rate lower, for longer I’d argue that the simple folks out there with little money would do more investment in these assets.”

You can argue it all you like, it has never happened.

“Fourth, repeat number two. Don’t tax my money three times, at a higher rate!”

That isn’t how taxation works.
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So Chester, I gather we put you in the “this is not a bottom” column?
A

Arthur:

I don’t time the market, so I don’t take the effort to generate an opinion on its level. I put X dollars in a month (X goes up over time) into something like Vanguard’s Total Market Index and get a very attractive average cost over the decades.

Less stress, and I get better results than most people after tax and expenses.

Go back sometime and read the commentary the stock market “experts” were putting out in 1974. Hilarious. No reason that the advice should be superior now.

Nobody knows nothing. That includes everybody here.

VJ,

From your first response to my post:

Not to mention that the vast overwhelming majority of cap gains are reported by the wealthy.

So, I think you did indeed say or at the very least imply only wealthy people have these accounts. You can spin it any way you like but every single person who has one of these accounts or wants to set one up gets burned by higher cap gains taxes.

Next, from your second post:

Those are three DIFFERENT forms of taxation.

I’m quite clear they are different forms of taxation, however it’s all on the same money is the point. Do you really say out loud it’s o.k. to tax the same money three different ways because it’s a different form of tax.

Next:

Every time the cap gains rate is lowered, there is always a short-term spike in revenue, but it is very quickly surpassed by the longer-term losses.

The capital gains rate during the Clinton administration fell from 28 percent at the beginning to 20 percent with the signing of the Taxpayer Relief Act of 1997 in August of that year. Interestingly, the economy managed only two years of growth of 4 percent or more in the decade previous to the 1997 cap gains cut—but notched three straight years of such growth in 1997, 1998, and 1999.

then you said:

The last time I checked, the IRS reported that upwards of 85% of cap gains is reported via the 1040 from the already wealthy. It should not be a surprise, as something like the top 10% of the taxpayers own the vast majority of securities. The average American family has more value in the vehicles parked in their driveway than they do in securities.

What is your point here? The top 10% of taxpayers pay something like 80% of the total tax in this country. How much is enough? Maybe people with less money need to live within their means a little better instead buying things they can’t afford, that might leave them with more to invest. Don’t pin it on those who earn the most to help everyone else, they usually work themselves to death for that. I suppose your support this new bs house bill too? Why the hell should I bail out some moron who took out a loan they couldn’t afford or took an adjustable rate, adjustable means it can go up, if you are old enough to buy a home you know what adjustable means.

“Also, if you kept the rate lower, for longer I’d argue that the simple folks out there with little money would do more investment in these assets.”

You can argue it all you like, it has never happened.

I think it did happen and I’ll find a study that shows that more people invested when there was a cap gains tax cut in the 90’s and that after 10 years of lower cap gains taxes more average income households have taxable accounts.

I also said:
“Fourth, repeat number two. Don’t tax my money three times, at a higher rate!”

That isn’t how taxation works.

It does work this way, I pay the taxes every year, three times on the same money. If you know of another way please enlighten me, and give my CPA a call too. And while you are at it ask him how I can avoid the self employment tax that I pay.

anyway man, we’ve had a good back and forth, I hope you aren’t taking what I’m saying personal. I just get extremely pissed off when I hear any politician talking about taking more of the money I earned. Don’t tell me it’s to pay for what is necessay, the govt wastes so much money every single year that if they had any sense of control on spending higher taxes would not be needed.

Have a good weekend VJ.

ben,

“So, I think you did indeed say or at the very least imply only wealthy people have these accounts.”

You “think” wrong. Check the post.

“I’m quite clear they are different forms of taxation, however it’s all on the same money is the point. Do you really say out loud it’s o.k. to tax the same money three different ways because it’s a different form of tax.”

Uh, it happens ALL THE TIME in our economy.

An employer is taxed on profits, and pays the employee who is taxed, the employee buys merchandise and is taxed, etc.

Where’s the mystery ?

“Interestingly, the economy managed only two years of growth of 4 percent or more in the decade previous to the 1997 cap gains cut-but notched three straight years of such growth in 1997, 1998, and 1999.”

And ?

What’s that have to do with the price of eggs in Singapore ?

How do we know it wasn’t as a result of President Clinton signing an increase in the Federal Minimum Wage in late August of 1996 ? (just as an example)

“What is your point here?”

Ah, I assumed it was pretty clear, that the vast majority of cap gains are realized by the already wealthy.

“The top 10% of taxpayers pay something like 80% of the total tax in this country.”

They do not.

“I think it did happen…”

There you go again.

“…and I’ll find a study that shows that more people invested when there was a cap gains tax cut in the 90’s and that after 10 years of lower cap gains taxes more average income households have taxable accounts.”

Good luck with that.

“It does work this way…”

Only in Bizarro World.

“…I pay the taxes every year, three times on the same money. If you know of another way please enlighten me, and give my CPA a call too. And while you are at it ask him how I can avoid the self employment tax that I pay.”

Obviously, you are the one who needs a discussion with your CPA, and there is indeed a manner to “avoid the self-employment tax”, perhaps you need a different tax advisor.

“I just get extremely pissed off when I hear any politician talking about taking more of the money I earned.”

I’d guess your anger is misplaced, as I’ve only seen proposals to sunset the tax cuts for those with an AGI over $250K.
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To be clear, my responses were not in defense of a specific candidate, but merely a statement of the prevailing facts. I was not advocating for any particular candidate.
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Barry, I commented right here back on March 10th that we would see sub-10,000 by October.

[See comment at 1:38 PM]
http://bigpicture.typepad.com/comments/2008/03/golddollar-corr.html

I have every reason to continue sticking with that.

PYMWYMI boys (Put Your Money Where Your Mouth Is).

Regards,
George