What Was THAT?

The bottom dropped out of the market today. The Financials fell apart, GM hit a 53 year low, the Dow crash through its year-to-date lows. The broader indices posted their worst June since the Depression.

What was this — the beginning of the end, or the end of the beginning? How bad is it — are we going to 10,600, like Louis Yamada said?

Or is this a bottom, a great buying opportunity? Barton BIggs said the worst was over for both the economy, stocks (unfortunately, he said it a month ago in the WSJ).

~~~

What say ye?

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  1. Espumoso commented on Jun 26

    Is Reality™ starting to sink in?

    I couldn’t check in with the alternate universe today as my CNBC feed, and thus Kudlow, was garbled.

  2. Larry commented on Jun 26

    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.

  3. dss commented on Jun 26

    I see some blood running in the streets, but no capitulation. We need a few weeks to really find a bottom, but will it be “the” bottom?

    I am scanning now looking for good candidates…

  4. jhunt commented on Jun 26

    the end of the beginning. with the nikkei down 300 points in the first couple minutes of trading, it certainly doesnt look good. the fundamentals for the economy are crap, but every perma bull will still be screaming ‘buy buy buy!’

    any word on the VIX spiking barry?

  5. Mind commented on Jun 26

    We’re going lower – much lower.

  6. problembear commented on Jun 26

    the train just came uncoupled according to my barometers. the dow will drop to 7500 before christmas. smart money and big money are fleeing quietly.

  7. Robert commented on Jun 26

    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.

  8. Maj Tom commented on Jun 26

    Two things – with Dow trailing PE at 80, market will either drop in half or churn for the next couple years. Don’t believe we will immediately drop in half, but possibly over the next few years… Gee – remember coming out of the last one? Took several years and a 42% drop.

    Second, Typical recession is 27% drop on S&P – we aren’t even close to that yet. That gives us around 1150 on the S&P – and yeah, that would be for a normal recession. I seriously doubt this as a “normal” recession.

    Why not? – simple, negative savings rate, credit tightening, no manufacturing, housing in the squatter.

    Spoke to a many financial advisor and asked a simple question – what will bring our economy out of a recession? Not a peep…

    The entire financial economy that brought us out of the last recession by securitizing products, mortgages, CDO’s, CLO’s, etc… and moved financials to 30+% of S&P is gone… finished… ne’er to be heard from again. Most of the financials contained years of fake earnings from those securitizations and are now paying the price for it.

    The only thing the US has now is food commodities – beans, corn, wheat… Jim Rogers, Barry Ritholz, and Jeffrey Saut seem prescient concerning the “stuff” stocks.

    Also Barry – predict it here and now, Greenspan and Bernanke will go down in history as the “#1 and #2 worst Fed’s” in history. Bernanke lowered rates to help out his Wall St buddies and where has it gotten him… American’s have a lower dollar, inflation everywhere, and the market’s tanked anyway.

    The Fed rate should be a constant 4.5% and the Fed should be abolished – sorry for the rant – I should be happy since I am making $$ being short…

    Thanks for the hard work BR…

  9. Mind commented on Jun 26

    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.

  10. austincompany commented on Jun 26

    One should only look at a 5 year chart of the DJIA to see how much farther it should drop.

    It’s kinda like how short of memories do folks have? Folks in California may have bought a house in 2000 for $250K that went to $900K in ’06, but today is “only” worth $600K – sob. Same for stocks. Look at the 5 year chart. Get real people, houses, metals, oil and the stock market are all historically overvalued. They just are not all falling/rising at the same time.

  11. catman commented on Jun 26

    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.

  12. bob commented on Jun 26

    The same financial conditions still exists as it did 9 months ago. Except less jobs, more foreclosures, the continuation of the fed lending bonanza, inflation, energy, etc. The market is just getting back to reality and blowing off the cheerleading (CNBC) and bottom calling. It’s bad out there.

  13. wabrew commented on Jun 26

    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 ???

  14. mark mchugh commented on Jun 26

    Don’t look now, but it’s almost report card day. The folks who actually finance this whole venture are gonna get a clue as to what’s going on. Keep in mind, the reality that home values ain’t what they used to, is really starting to sink in. They’re in no mood…

    Like my sister used to say, “Dad’s gonna kill you!”

  15. Michael F. Martin commented on Jun 26

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

  16. tradeking13 commented on Jun 26

    A bottom is a process, not an event.

  17. Paul Jones commented on Jun 26

    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.

  18. MitchN commented on Jun 26

    Seriously, folks. I bailed on this bubble market in early 2006 when the price of a small, unaffordable two-bedroom condo in Manhattan started to climb from $650,000 to…well, $1 million or more by mid-2007. Ridiculous. I used to walk around my neighborhood wondering, Who can afford these prices? The answer, of course, is no one. (Not even flush Europeans.)

    We overshot, big time, on the upside and, as markets do, we will overshoot on the downside. I used to think 10,400 on the Dow would get us back to where we should be be, but I now think we’ll go below 10,000 — and sooner than we think.

  19. techy commented on Jun 26

    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.

  20. Colin commented on Jun 26

    I’ve gotta say, I have been short for the past 6 months, and I still think we have a ways to go, but the fact that every single post on this thread has a bottom 20% below here screams contrarian indicator…

    No drop is a smooth one, and this one won’t be either.

  21. Nihilism commented on Jun 26

    – 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.

  22. catman commented on Jun 26

    Stop the presses! Over on Bloomberg Laszlo Birinyi says buy and hold isnt working!

  23. Bob A commented on Jun 26

    Buy and Hold investors are Wall Street’s cash crop… plant the seeds, let them grow, fertilize and water, then whack ’em off at the ankles and turn ’em into pig feed.

  24. En&En commented on Jun 26

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

  25. En&En commented on Jun 26

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

  26. En&En commented on Jun 26

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

  27. En&En commented on Jun 26

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

  28. En&En commented on Jun 26

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

  29. En&En commented on Jun 26

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

  30. En&En commented on Jun 26

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

  31. En&En commented on Jun 26

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

  32. En&En commented on Jun 26

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

  33. En&En commented on Jun 26

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

  34. En&En commented on Jun 26

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

  35. En&En commented on Jun 26

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

  36. En&En commented on Jun 26

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

  37. En&En commented on Jun 26

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

  38. En&En commented on Jun 26

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

  39. En&En commented on Jun 26

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

  40. Dude commented on Jun 26

    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…

  41. ddt commented on Jun 26

    I dunno what happened..
    I was short regional banks, homebuilders, brokers, monolines – the usual suspects, but I covered all my positions when the dow was around -250 on the day. I was expecting to see a bounce in the afternoon, and another opportunity to short, but it just kept trailing downward! I still made about 8% on the day and I’m pretty happy with that. now I’m just waiting for another opportunity to reestablish short positions. I hope it doesn’t crash again tomorrow morning before I get short.
    Re: oil… I’m thinking of buying some DUG to hold. I don’t think these prices are sustainable

  42. mhm commented on Jun 26

    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.

  43. Brian Belski commented on Jun 26

    “I’m quite frankly a little tired after this week.”

  44. bobd commented on Jun 26

    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.

  45. Risk Averse Alert commented on Jun 26

    The first six months of 1929 were kind of rough, too. Then came a 20% burst carrying the Dow to its peak in September.

    There’s still a ton of liquidity out there … and there’s still an election to rig. And then what does one make of today’s dog eat dog downgrade show?

    The generals led the way lower in 2000, too. The Dow was the first to break in January, then came the Pump and Dump in March and April.

    It sure seems there’s lower to go here — the VIX, for one suggests so, as does the CBOE Put/Call Ratio — yet, the Volatility Spread is as narrow as it was at the March bottom (that said, however, the S&P Oscillator has been deeply “oversold” for a couple weeks now, and still no bottom appears in sight).

    I suspect things will not get too terribly out of hand, that is after the next couple days possibly go some way to put the fear of God in Kudlow and his Tory minion.

    I think we’re looking at the gnashing of teeth kind of capitulation. Everything so far over the past year has been fairly well-contained. It appears even more so now with NYA and COMP performing far better than the Dow.

    Still, it seems likely that weakness across various sectors and indexes will come into greater balance. Hence a “gnashing of teeth” capitulation — “when will this market bottom?” becoming a resounding sentiment; Maria Bartoromo no longer chastising bearish money managers for not “putting their cash to work” — and this rather than a “weeping” capitulation characterized by a stunning crash event — no matter what might unfold the next couple days.

    The area of 2004’s lows in major indexes seems a reasonable objective over the weeks (and possibly months) ahead.

    Subsequently, however, I strongly suspect the market will melt up … despite a seemingly awful underlying financial and economic environment.

  46. dave commented on Jun 26

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

  47. Rick commented on Jun 26

    Haven’t checked the DOW, but if the S&P pulls back as far as it did in the last Bear Market the bottom should be somewhere around 1090. How long will it take to get there? I say months not weeks.

  48. michange commented on Jun 26

    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!

  49. Tom Vanderwell commented on Jun 26

    It’s the bottom of the 4th inning. The home team is down 5 to 2, with 2 outs and the star slugger on the team just pulled his hamstring.

    It’s going to be a long difficult challenge to pull this one out.

    Tom

  50. larster commented on Jun 26

    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.

  51. floating stinging butterfly commented on Jun 26

    re: Nobody knows .. who to trust.

    what if people were encouraged by the ‘reality-based finance blogosphere’ to reduce their 401k contributions to 0 until true accountability / transparency by all parties was writ into law or otherwise enforced by market behavior??

    the political blogosphere has been successful in affecting change — hmmm….

    would .1 or .25 percent decline of total contributions to fidelity/vanguard/etc. rock the boat a little?

    boston tea party on wall street?

  52. Dennis Kneale commented on Jun 26

    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.

  53. Simon commented on Jun 26

    All I have to add is the astute observation that June is not over yet. Monday is still to come…..

  54. Bob A commented on Jun 26

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

  55. dss commented on Jun 26

    mhm:

    The way we got here was 28 years of the GOP’s disastrous deregulation of the capital markets. First we had the S&L crisis, then Long Term Capital, and now the entire financial system is melting down and taking everyone with it. Let’s thank the GOP, Reagan, Bush for the fiscal insanity.

    We also need to roll back the tax holiday that was given to the wealthiest among us, which like in the Reagan years has caused extreme deficits and huge national debts. We have never fought a war where tax cuts were given to the wealthy while the poor were doing the fighting.

    Indeed, we need to think very carefully if we want more of the same utterly failed economic policies.

    We need a real fiscal conservative in the WH who will put us on the path to fiscal sanity. Only the Democrat has done this in the past 28 years, and I expect the next Democrat will spend his 8 years fixing the mess that Bush and corporate America has brought upon America.

    Funny how all the “free market Republicans” I know are whining about high energy and food costs; I guess they only like the free market when it doesn’t cost them anything.
    —————————————-
    Gloom and doom all over the place here, must be time for a bounce.

  56. Jose L Campos commented on Jun 26

    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.

  57. rj commented on Jun 26

    “I couldn’t check in with the alternate universe today as my CNBC feed, and thus Kudlow, was garbled.”

    I watched the first half of the show and these were my comments in another thread:

    “Larry Kudlow is about to have a heart attack.

    And he’s actually chastising the Fed for not having tough money policies. Can someone put up a link to him stating eight months ago on how great it was that the Fed cut rates?

    And Larry Kudlow just used the term “inflation tax”.

    Somewhere, Ron Paul is smiling.”

  58. ct commented on Jun 26

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

  59. John F. commented on Jun 26

    From the obvious to the speculative:

    – Over the longer term (5-10 years), plenty of mean reversion left in market multiple and profit margins as % of GDP (down and down, respectively). Memories are short and hope springs eternal. Not priced in.

    – Massive deflationary forces at work, high commodity prices creating a diversion. Not priced in.

    Oh, I dunno. Maybe I’ll flip a coin.

    – Moderate volume, VIX. No capitulation yet.

    – Things which haven’t happened yet (e.g., Alt-A, HELOC, credit card losses, market revolt at bank recapitalization). Not priced in.

    – Things which might happen (ECB rate hike, protectionism, war). Not priced in.

  60. Ironman commented on Jun 26

    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.

  61. bsneath commented on Jun 26

    ye say Oh Crap.

  62. Risk Averse Alert commented on Jun 26

    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.

  63. Solodoc commented on Jun 26

    Yamada rules

  64. mhm commented on Jun 26

    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.

  65. quonk commented on Jun 26

    The only way to staunch the bleeding is for Bernanke to ground the helicopters and perform a surprise rate hike to show the world that we are serious about defending the dollar. The problems plaguing the mortgage, banking and real estate industries will not be cured by throwing open the liquidity spigots, but by booking losses, retrenching, and returning to the good old days of lending money to qualified buyers seeking ownership of reasonably priced properties. The Fed spigot is simply gushing higher oil prices, stimulating speculation in the commodities pits, and undermining the consumer’s ability to make ends meet via obvious, though underreported, inflation.

    A hike tomorrow or next week might take us below Dow10K in a New York minute, but we are headed there anyways if we continue the charade that recessions are a thing of the past and that all problems can be cured by socializing losses through the impairment of the Fed’s credibility and balance sheet. Mr. Bernanke, it is time to show some backbone and stop relying on the wishbone.

    Of course…we could just pass a law moving the decimal point to the left on all our debts and to the right on all of our savings accounts…that might renew confidence in the dollar.

    BTW – caught Dennis Kneale crowing on Kudlow this evening…that dude must be making minimum payments on his revolving clue deficit.

  66. Troy commented on Jun 26

    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.

  67. Sing Expat commented on Jun 26

    Why does everyone persist in picking bottoms? Everyone has been wrong, wrong, wrong.

    Let’s examine the economy. Unemployment at high levels and rising. Price inflation screaming. Housing plunging another twenty percent. Many more bank failures (and bail-outs) on the way. Thousands of hedge funds about to go bust. Massive deficits. No savings. Global climate change. And neocon fascists goading us into Armageddon.

    10600? Why not 40000? Where do these numbers come from? PE ratio estimates? Hanging Doji charts? Pulled out of you know where?

    The Dow will go down, down, down until the economy starts going back up. And even then, the Dow will be made up of different companies anyway. Personally, I see 9000 before this is over, and consider that a favor.

  68. Risk Averse Alert commented on Jun 26

    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…

  69. ben commented on Jun 26

    I love reading all the bearish posts on this website. This is def. the doom and gloom crowd. You all live here and feed off each other’s comments and yes each other to death about how bad things are.

    The problem is the market is up I think, 42 of the last 57 years. That’s 74% of the time up and … yeah 26% of the time bears are correct. You wouldn’t know it if you read these posts, or listened to the moron A. Gary Schilling and his kind. If you are bearish every year you are eventually right.

    Sure, we could, and probably will go down from here, 10,600, 10,400, 10,200 so what?. 1,100 s&P 1,200? who cares. What good is trying to predict it or trying to prove as hard as you can why the system is broke, that GDP shouldn’t have been 1% and that we are in a recession, and housing and Bush, blah blah blah blah. The moronic calls I see on here that some of you post for 7,000 DOW or some other absurd number, I think not. I’m going to say we won’t get there.

    the people running the banks can’t understand the balance sheets but you put a post on the big pic. so you must know what is going on at the banks.

    Every time something like this goes on everyone likes to talk about why this time is different and how it’s over now and we are all going to be living in boxes, but it’s not different. This is what the market does. It goes down sometimes, sometimes it goes down more than other times. The market is a combination of what everyone know’s and what everyone know’s is more than what any one person on this bear site knows.

    Keep this post and read it after the market begins to pick itself up again and remember it’s never really different, just a different spin.

    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.

    I also must laugh at everyone on here that gets so pissed at the CNBC people for the calls they make. Why the hell are you listening to them anyway. Most of them are journalists, what the hell do they know about when to buy a stock, do your own homework and maybe you won’t be so pissed off about how much you lost because you bought what they said to buy. Quit looking for someone to blame for the bad trades you made.

    The american economy is the shit, not a piece of shit. Call me an optimist.

    ~~~

    BR: Wow. Classic academic nonsense.

    Have you ever really managed large assets? You would be far less blithe about 20% losses. . .

  70. Chief Tomahawk commented on Jun 26

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

  71. christofay commented on Jun 26

    I remember reading in Forbes that Mr Biggs was taking his money out of the market early in the Clinstones’ rule. Gee, Forbes used to be the capitalist tool but it is now the Republican shill. So that is the first call of Biggs that I remember. Plus keep in mind that Biggs’ job partially is to be a shill for the market, now is always a good time to buy.

    I’d rather see what Biggs’ record is in the fund that he runs which he wrote about in the hedge hogg book. Did it beat an index fund after fees extraction?

  72. rj commented on Jun 26

    “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.

  73. Andy Tabbo commented on Jun 26

    Hate to agree with the ‘crowd’ (at least on this blog), but taking out 1296, the 78.62% retrace was not good. We are still in the middle of an unfolding five wave move down. We may see some little bounces here and there, but we have further to go on this wave down.

    Finishing at the absolute lows is never good and the VIX as not yet begun to spike. This is a boiling kettle that’s just building up pressure right now.

    Energy is a mania bubble, of course. But it still has legs higher (Think Nasdaq 4000 before surging to 5000). Not sure what’s coming, but it’s going to take oil a lot higher and is going to crush the equities.

    Today was a NO CONFIDENCE vote on Bernanke & Co. They were laid bare yesterday and have revealed themselves to be utterly powerless. The realization that there is no financial diety to save us all has sent a chill down the Street.

    Good luck all.

    – AT

  74. rj commented on Jun 26

    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?

  75. Bob A commented on Jun 26

    Blame Bernanke?

    Or blame the defense and oil industry mafia that are eating your lunch and raping your retirement account?

  76. rj commented on Jun 26

    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.

  77. al commented on Jun 26

    per rule “Put the money where your mouth is”
    are you really so short or you are just getting orgasms for VIX?

  78. Hal commented on Jun 26

    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)

  79. ben commented on Jun 26

    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.

  80. ben commented on Jun 27

    Steve Barry,

    You know your chart comes from the idea of planetary influence on the market right?

    Astrology? Seriously?

    Maybe since we sent that rover to mars it will skew this work and make the chart invalid.

    ~~~

    BR: I don’t know what the source of that chart is, but it depicts a long term trend channel of the Dow in logarithmic format.

    Perhaps a better criticism might be that its 2003, and the SPX Dow went up for the next 5 years — and not to 2,400 . . .

  81. TheGuru commented on Jun 27

    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.

  82. rj commented on Jun 27

    I don’t sound bitter Ben. I’m just realistic. GM will declare bankruptcy within the year and all those workers they promised healthcare and pensions to our going to drop a class.

    Heck, I’m 25 years old and I know this country will renege on Social Security before I ever get a dime. The generation that preceded me has screwed this country over so horribly. Guess who has to pick up the pieces, get a third of the benefits, while having their taxes tripled because the older generation voted themselves every perk in the world while leaving their children the bill that will make the country default and we have to live with it!

    Even Wall Street’s full of crap. Take this $600 rebate bill getting passed to everyone. That is $150 billion total being added to the deficit, no spending is being cut to account for the costs. I’m waiting for my generation to wake up one day and realize we’re being screwed over so that when the pain and suffering comes, the people all responsible for it will be mostly dead.

    Why should I think this country is not “I’m in it for myself and screw everyone else along the way” when the people and generation that run this country have that as their lifestyle? We decreased taxes while having an overseas occupation and war, increasing Medicaid, and having serious increases to entitlement spending, and Wall Street wrote themselves a tax reduction and also a federal bailout of their bad loans. How does that make sense?

    It’s hard to not be bitter.

  83. RP commented on Jun 27

    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.

  84. HT commented on Jun 27

    We goin’ down…

    Nobody was buying any put protection in recently, even with vol going quite cheap, with the expectation of a squeeze going into the end of the half next Monday (… could yet happen, but…?) which almost guaranteed that markets would tank.

    What’s a bit more disturbing is how volumes in down markets are still relatively subdued, and NOT accelerating into the slides – particularly compared with the periods prior to the mid January and mid-March rallies.

    Not capitulation (yet) if you ask me.

  85. Mike Wilmot commented on Jun 27

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

  86. VJ commented on Jun 27

    mhm,

    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.

    But the two periods of greatest prosperity during the 20th Century were when tax rates for corporate America and the wealthy were their highest, while four recent rounds of tax cuts for the Rich & Corporate and de facto deregulation of the “capital markets” has yet to produce a “recovery”, fast, slow, or otherwise.

    The reality is, tax cuts for the wealthy will be reversed, as whoever the next president, the Democratic Majority Congress will send them a tax bill that extends the lower end tax cuts, and allows the tax cuts for the wealthy to sunset. If the next president signs it, the tax cuts for the wealthy will sunset, if the next president vetoes it, all the tax cuts will sunset, and it will be on them.
    .

  87. ben commented on Jun 27

    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.

  88. Rock commented on Jun 27

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

  89. Unsympathetic commented on Jun 27

    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?

  90. TomD commented on Jun 27

    Remember rj’s most recent post. We’re gonna hear that theme a great deal over the next years. And we deserve it. We and our “leaders” have so screwed the coming generations. Immoral.

    TomD

  91. CDizzle commented on Jun 27

    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. :)

  92. ben commented on Jun 27

    last post to correct from what I said before,

    I do disagree with higher cap gains taxes. non-qualified investment accounts are already double taxed, raising long term rates from 15 to 27% is a terrible idea. if marginal rates went up on those above 250k there would most likely be a benefit there.

  93. Brian Benner commented on Jun 27

    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.

  94. rockitz commented on Jun 27

    What’s everybody crying about? My gold and gold stocks did great.

  95. Francois commented on Jun 27

    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.

  96. philip commented on Jun 27

    What happens to the world if China breaks? I think they are doomed. There is a reason half-assed communist-capitalist, zero-margin, goverment-bank corruption fests aren’t known for thriving long term. If this downturn causes Americans to spend less on Chinese goods, the Chinese are cooked. And if they are cooked we are all cooked since if they stop buying our debt we are going to have to stop making so much of it. Until this is resolved bottom calling seems a bit silly. I am also a long term optimist. But I short term pain and lots of it.

  97. Sinomania! commented on Jun 27

    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…

  98. Mike in Nola commented on Jun 27

    Any room down here at the bottom of the page for a comment?

    phillip: Great description of Chinese economy. Or, were you describing the US?

    I think were going below 10,000. Of course, it’s never straight down. A bit further to go on this leg yet. Remember the great sawtooth of 29-32:

    Crash Chart

    Plenty of opportunity for trading on the way down if you can catch the bounces. Then sell when Cramer says “buy.”

  99. Andy Tabbo commented on Jun 27

    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

  100. lunatic_fringe commented on Jun 27

    RUT, NDX and SPY not even at the March lows. I think there’s plenty of room still to head lower; much, much lower. 1 step up, 2 steps down, bottom of this wave is SPX 1050.

  101. michael commented on Jun 27

    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.

  102. Jack Walsh commented on Jun 27

    You fellas that are worried about who to vote for on reasons of taxation and regulation should wake up. The lack of regulation, just a small amount to keep the markets transparent during this last Bull phase would probably have prevented the situation from becoming what it is today. Another republican presidency will in no way speed up any kind of economic recovery. If it’s economic voodoo you’re looking for, head to Jamaica after you’ve lost you job.

  103. Troy commented on Jun 27

    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.

  104. We’llbeallright commented on Jun 27

    It is just too bearish here, afterall, we are seeing a correction, not the end of the world! Be bullish, think long-term.

  105. Mr. Bubbles commented on Jun 27

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

  106. KnotRP commented on Jun 27

    The leveraged asset chasing feedback loop has burned the fuse.

    The greater fools have all been schooled, and all their
    money has parted (and concentrated in the strongest
    of hands).

    So get used to regular stimulus checks, everyone.

    And get used to competing with 2 billion more
    people for that last box of hot pockets on the shelf
    with declining purchasing power.

    The Me generation of leadership has lived up to it’s name, rj.

  107. VJ commented on Jun 27

    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.
    .

  108. VJ commented on Jun 27

    ben,

    I do disagree with higher cap gains taxes. non-qualified investment accounts are already double taxed, raising long term rates from 15 to 27% is a terrible idea.

    Why should one form of income be taxed differently than another ? Not to mention that the vast overwhelming majority of cap gains are reported by the wealthy, there is no evidence that a lowered cap gains tax rate has ever increased GDP, ever increased business startups, or produced more tax revenue (other than short term).
    .

  109. Ben commented on Jun 27

    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.

  110. Troy commented on Jun 27

    Why should one form of income be taxed differently than another ?

    When I was a wee lad I thought the same thing. But there is a case to be made for treating interest income more favorably than wage income, to encourage savings and investment.

    Also, wage earners can theoretically demand higher after-tax wages.

    However, as a Georgist I believe income from rents — ground rents and resource rents — should be taxed away completely, since these economic rents are a form of theft and not productivity.

  111. michange commented on Jun 27

    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!

  112. ECONOMISTA NON GRATA commented on Jun 27

    Barry:

    First, I think that it would be a grave mistake to view this decline as a standard, business as usual, cyclical decline. NO….! We have been discussing this for a long time. We are in the early stages of a transformative secular decline in asset values. I can’t think of any asset class that is not currently overvalued and over leveraged. We need to remember that much of this leveraging occurred at peak values and rates. Collectively we borrowed higher and higher to buy higher and higher. I believe that, DOW 10,600 will prove to be a very optimistic number a year from now.

    “Equities are still priced like Miami Condos….”

    Best regards,

    Econolicious

  113. cinefoz commented on Jun 27

    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.

  114. leftback commented on Jun 27

    Remember the line about obscenity? “I know it when I see it”.. You will definitely know the bottom when you see it.

    We are not there yet, there will be all kinds of interference and manipulation along the way as we bounce down the hill.

    This is nothing, young people like rj have never seen a 10-20% down day….. but they will before this is done.

    No blood yet, just a flesh wound. VIX isn’t very high, there is still a lot of complacency, Dennis Kneale still has a job at CNBC.

    Some of the selling yesterday was end of quarter portfolio cleaning, we may well see a bounce today.

    The details of cinefoz’s portfolio and strategy are fascinating…..

  115. Owner Earnings commented on Jun 27

    101 comments? I smell a bear market rally.

  116. Arthur commented on Jun 27

    Can’t remember seeing this many comments which may well point to a temp bottoming (‘course one should keep in mind that the BP stock is soaring).
    For Larry K’s sake I hope his staff has the on-site defibrillator figured out; shocking performance Thursday evening by the Great Denier, another temp bottoming indicator, perhaps.
    But in the Bigger Picture (apologies, B) OPEC members are sensing, and enjoying, I suspect, their re-discovered power, when a single comment by a second tier producer can
    rock that market, even if exercising that power kills the client. I don’t think OPEC producers will want to settle even for $100 a barrel any time soon. To get back to that price it seems a very great deal of demand will have to be destroyed; and if oil doesn’t go down we’re doubly screwed.

    So no bottom here.

    A

  117. rj commented on Jun 27

    “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.

  118. cinefoz commented on Jun 27

    leftback,

    a) I went from 100% cash to 75% cash.

    b) I bought the dip. I try to buy bottoms and sell tops. I don’t worry about hitting THE top or THE bottom. I’m happy to be close. The bottom rallies are amazing and I love to be included in them.

    c) I buy sectors and groupings as opposed to individual stocks. Stocks are for losers and gamblers and people much smarter than me.

    d) I went with emerging markets, latin america, mid/large cap international, consumer staples, and chemicals.

    e) Consumer staples is impacted by high costs, but has a captive market that will probably grow as buying habits adjust. They have pricing power in many cases. This is a trade.

    f) Chemicals use the same logic as consumer staples. Their markets will grow as the world grows. This may be a buy and hold for a moderate term.

    g) The foreign groups, on balance, use less oil than the US, and are less impacted over higher costs. Their decline looks nearly spent, if historical levels are a good guide. They generally rise at 2x or 3x the US market rate. Latin America will be a buy and hold. The other groups are moderate term trades.

    h) US markets, at this time, appear to suck royal dog dick. However, one thing I have noticed is that people adjust to almost everything once the shock wears off. Today, shrill memos from GS are the rage. In a few weeks, people will be wise to their shill tricks and become less reactive. However, at this time, people appear to fall for their games every time they pull them.

    i) I plan to change my strategy from in and out, to in and mostly out, with some holds unless a big dip appears to be on the horizon.

  119. Douglas Watts commented on Jun 27

    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.

  120. ben commented on Jun 27

    D Watts.

    SO? are you serious? go plant some more flowers pal.

    I live in Delaware so I don’t pay tax on my meals or any other sales tax.

    Tips aren’t a tax, they are a choice that I get to make or not make. Tax, is clearly different. No one ever said anything about an oppression, nice try, it is an argument that lower capital gains tax are beneficial for all who take advantage, not just the ultra wealthy. Cap gains tax should be 000, I already paid tax when i put money in and understand I will pay on the divs. I should not be penalized based on how I chose to put capital to work. The argument wasn’t about having them or not having them it was about the percentage, read a little more before you post.

  121. Patrick commented on Jun 27

    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.

  122. Patrick commented on Jun 27

    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.

  123. Steve Kay commented on Jun 27

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

  124. bluestatedon commented on Jun 27

    I’m not a savvy investor like all you people, so my take on things is naive and simplistic: no nation can prosper in the long run when it buys substantially more from other countries than it sells to them. Credit and speculation can sustain the illusion that things are fine for only so long, and eventually even those twin Potempkin towers of our current economy will collapse because the foundation under them has disappeared. We used to make vast quantities of durable manufactured goods that we sold to the world, and now it’s almost an impossible task to buy something made in the US in your neighborhood hardware store or Home Depot. This is primarily due to the globalization of labor markets, and this is what makes the current situation fundamentally different from those of past downturns. Those who cheerily assert that everything will be fine because it’s always turned out that way in the past are in for a painful surprise — we’re in uncharted waters here. When you can realistically contemplate the bankruptcy of General Motors or Ford, you know we’re not in Kansas anymore. Eventually, the equity and credit markets will reflect this situation.

    We can either accept an inexorable, steep decline in living standards for everybody save a tiny elite at the top, our economy exporting mainly raw materials and agricultural products with everyone else taking in each other’s laundry. Or we can figure out what it is that the world needs that we can make and sell at a profit. This means we need to produce many, many more engineers and scientists and true entrepreneurs — people who actually create real things — and vanishingly small numbers of MBAs, salesmen, marketers, and hedge fund managers.

  125. Chris D. commented on Jun 27

    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!

  126. patrick commented on Jun 27

    Ben, I think rather than a contrary indicator, its a capitulation to reality on Cramer’s part.

    Look at housing prices. If you believe that there’s even just another 10% slide down to come, its impossible to see how this won’t translate into equities. “The” bottom for stocks won’t be discovered until the bottom for housing is. The decline continues.

  127. zackattack commented on Jun 27

    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.

  128. Mike in Nola commented on Jun 27

    rj:

    Don’t worry about borrowing down the road, though it might take 20 years. The human race has a very short memory and will keep stepping into the same hole.

  129. espitzer commented on Jun 27

    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.

  130. Mysticdog commented on Jun 27

    “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.”

    Did someone say commodities? Crap. I think someone just said commodities…

    Might be time to invest in canned goods.

    If the market ever returns to something where people are actually investing in companies, rather than investing in stocks for some other schmuck to buy in a week, it might have a chance. I don’t think it will – our economy has removed most of the money pumps that returned some wealth back to the “real” part of the economy, and there is nothing to prop up the absurd speculative prices in the rarified world of high finance anymore.

  131. Northern Observer commented on Jun 27

    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.

  132. DL commented on Jun 27

    The low in the market for 2008 will probably happen in August or September. Then a rally after the election. But sell in February 2009, because 2009 isn’t going to be great for the market. I think Louise Yamada will prove to be right sometime in the next 12 months.

  133. Hal commented on Jun 27

    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.

  134. VJ commented on Jun 27

    Troy,

    When I was a wee lad I thought the same thing. But there is a case to be made for treating interest income more favorably than wage income, to encourage savings and investment.

    Oh, I see, you want to ENCOURAGE savings and investment, but DISCOURAGE labor.

    Gee, that sounds productive.

    Also, wage earners can theoretically demand higher after-tax wages.

    HAH !

    Tell that to the vast majority of American workers whose inflation-adjusted wages have DECLINED since 2000.
    .

  135. VJ commented on Jun 27

    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.
    .

  136. Chester White commented on Jun 27

    Northern Observer:

    So you say taxes have to rise on the wealthy; we have no choice.

    Can you please tell me exactly how high is the max you are going to bleed from me?

    Obama already says 39.6%, plus state, plus others, plus both ends of FICA, plus sales tax when you actually want to use the pitiful remnant to buy something.

    Gee, look at that, I’m getting up way over 60% already.

    How high is enough, dude? 70% 80%?

    And if you own a business you constantly run the risk of losing everything, or getting sued into oblivion by some goddam fucking SOB like John Edwards, and working 60 hours a week on top of it and dying of a heart attack from the stress. And in a couple years, there will be a nice estate tax ready to take 55% of anything left.

    You know, guys like me have options. No way I’m generating a dollar of taxable income only to give 75% of it to Obama to give to people who are trying to cut my economic throat.

    NO FUCKING WAY.

  137. Arthur commented on Jun 27

    So Chester, I gather we put you in the “this is not a bottom” column?
    A

  138. OhNoNotAgain commented on Jun 27

    “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.”

    Yeah, McCain is going to be a real treat for us, just like Bush has been. I just love these types of predictions – people like you just pull them right out of their asses. Republicans made the same predictions about Clinton, and what happened there ?

    And Chester, ever heard of a marginal rate ? You don’t pay 39% on the entire amount, only the amounts that are way past what most Americans make. And state taxes are deductible from your Federal tax liabilities. IOW, you aren’t going into the poor house, you angry, ignorant whiner.

    I’m a business owner, and I welcome a President that wants to restore some fiscal sanity to our government and get the dollar and our budget back on track. And guess what ? Tax cuts ain’t going to do it. You, on the other hand, apparently think that things are going peachy right now. As long as you got yours, everyone else can go live on the streets, eh ?

  139. Chester White commented on Jun 27

    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.

  140. Chester White commented on Jun 27

    OhNoNotAgain:

    Yes, I know what a marginal tax rate is. I’ve known since the early 1970s. It’s the number that determines how much HARDER I want to work than I am working now and how much more risk I want to take to do so.

    It’s already a dicey deal, but it becomes a no-brainer if Obama raises my rates the way he wants to.

    Highly productive people are not stupid. I can go sit on a beach now for the rest of my life, and I may just decide to do so.

    I lived through the godawful hell that was Jimmy Carter and I don’t want to reprise that. Get a mortgage amortization program and see what 21% interest rates do to you.

    And I know that certain taxes are deductible from taxable income. A couple per cent net difference in the marginal rate. BFD.

    I don’t think things are “peachy.” I think they are shaky as hell, and when rates go up, they will be worse, potentially a lot worse.

    Get up to my level and we’ll talk.

  141. ben commented on Jun 27

    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.

  142. VJ commented on Jun 27

    Chester,

    Obama already says 39.6%, plus state, plus others, plus both ends of FICA, plus sales tax when you actually want to use the pitiful remnant to buy something. Gee, look at that, I’m getting up way over 60% already.

    Nope.

    You’re adding up tax BRACKETS, not percentages of income.
    .

  143. VJ commented on Jun 27

    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.
    .

  144. OhNoNotAgain commented on Jun 27

    VJ,

    I think what is happening here is basically too much kool-aid. Certain people won’t go for an Obama presidency no matter how much better it would be, because their ideology won’t let them. It really doesn’t matter that he’s only talked about sunsetting the tax cuts on the very wealthy, and leaving in place, and possibly enacting further, tax cuts for the middle class. They’re only going to hear what their ideology allows them to hear.

    Ben, coming from someone that had to pay $32,000 one year in self-employment taxes, get yourself a lawyer and incorporate, form a partnership, whatever. There are ways to reduce your tax liabilities as a self-employed person, often with benefits that help shield your personal assets from risk if the business fails.

    And Chester, if you’re going to bitch about tax rates, then you should probably at least get the basics right. And it is certainly your right to go sit on the beach, etc. if you don’t want to work any more if it means higher taxes. It’s also possible that you donate your free time and expertise to helping teach others what you have to offer. After all, if you’ve got enough money that you can decide to just stop working to avoid paying any more taxes, then you’re doing pretty well for yourself.

  145. VJ commented on Jun 27

    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.
    .

  146. ben commented on Jun 28

    Getting back to our earlier discussion about whether or not long term rates impact rev’s, both of us are correct.

    What I mean by this is many economists disagree about whether cap gains realizations would rise by enough to permanently counter the effects of a lower tax rate.A key magnitude is what economists call the “elasticity” of capital gains realizations, or the percentage change in annul realizations of capital gains that results from a given percentage change in the tax rate. Roughly speaking realizations will change by enough or more than enough to offset the effects of changing the tax rate when this elasticity has an absolute value of 1 or more. For example, a cut in the tax rate of 10 percent leaves tax collections unchanged if realizations of taxable capital gains rise by 10 percent. If the elasticity is 0.5, realizations will rise only 5 percent in response to a 10 percent rate cut.

    I’ve read studies that have tried to pin down the size of this elasticity, with conflicting results. Studies of the correlation between realizations and tax rates over time generally find an elasticity well below 1. An elasticity below 1 implies that a cut in tax rates on capital gains would reduce tax revenue. Clearly I think these are flawed and I still don’t believe the government is entitled to it anyway. But studies of the correlation between realizations and tax rates of different taxpayers at the same point in time generally find values above 1. This implies that a cut in tax rates on capital gains would increase tax revenue.

    I’m going to have some more kool-aid.

Read this next.

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