Our Horrible Hopeless Tax Code
I agree with what Richard Suttmeier writes in valuengine.com today:
“New home sales slipped 2.2% in Dec. to an annual rate of 307,000. The price of a new home fell 12.8% year over year to $210,300, and 2011 was the worst sales year on record. The inventory of new homes fell to a record low of 157,000. The Federal Reserve needs to channel money to the housing market on Main Street at 100 basis points over the yield on the 10-yr note as long as they keep the funds rate at zero to 0.25% for Wall Street speculators.
“A Main Street refinancing plan for all homeowners will create jobs and help stimulate the economy.”
Trading Alert
Today I sold some shares. More details for paid subscribers. Before going into that I wanted to explain that the remark made in today's blog about Mormons not being in the Judeo-Christian theology system is based on their interpretation of the New Testament. Mormons view The Father, The Son, and the Holy Spirit as separate gods, meaning they are not strictly speaking monotheists.
But I love hanging around with Mormons to be counted as a Gentile. Mormons call non-Mormons Gentiles just as we Jews call non-Jews Gentiles. The difference is that you can ski in Utah most winters but only occasionally in what may not even be Israel at all (the Golan).
I haven't yet been to see the Bway show called the Book of Mormon. The fact that it's out there is probably better for the religion of Messrs. Romney and Huntsman and others than the earlier link in Angels in America.
Moreover I think Mitt Romney would be less of a disaster for the USA than the other Republicans although more of one for a second Obama term.
Filthy Lucre
Is money earned on money saved or invested supposed to be taxed or is this double-taxation? That is an old philosophical question. Most religions do not approve of money making money which is considered usury.
The monotheistic religions all consider the return from investment as less wholesome than the return from work.
Islam prohibits ''riba'', defined as interest, based on a revelation to Mohamed written in the Koran.
St. Thomas Aquinas, the medieval saint and thinker, famously called interest ''filthy lucre''.
Judaism prohibits charging interest on loans to other Jews. But in the Middle Ages the sages allowed Jews to charge interest on loans to non-Jews, mainly because it was hard for Jews to survive otherwise.
So Pres. Obama's proposal to tax unearned income topping $1 mn per taxpayer per year is firmly within the Judeo-Christian canon. And if it was sheltered by being retained at the firm to cut taxes on its execs as was done by Bain Capital (not alone in that form of perq for execs, who can then pay at the capital gains rate) it is even more vulnerable.
Of course the Church of Jesus Christ of the Latter-Day Saints is not wholly Judeo-Christian and I have a suspicion that its tenets do not condemn usury or money making money.
However, I think it will be tough for Mitt Romney to defend a tax proposal from which he will be a victim with a 30% bite vs a current 14%.
More for paid subscribers follows from Israel, Finland, and Singapore and a few other places where we have ill-got gains from filthy lucre like Israel, India, Germany, South Africa, and Brazil Read more »
Kung Hei Fat Choy
Kung Hai Fat Choy. And happy Robbie Burns Day. And watch out for solar flares.
My Dragon Power breakfast yesterday (focused on commodities) was sponsored by HSBC and moderated by the Economist Intelligence Unit which benefits from over 150 years of commodity price data. Two questions caught everyone's attention: 1) when will China overtake the USA in per capita production, if it hasn't already done so; and 2) the degree to which a fatal commodity shortage can be offset by alternatives, substitution, new technology, or more intelligent consumption—all of which of course operate on the demand side. But I struggled to find new stock ideas.
Maestro Placido Domingo conducted a 'Harmony' concert for two elementary school orchestras, inspired by the Venezuelan program to teach children to cooperate and focus. Hugo Chavez isn't my favorites presidente, but give him credit for this program. One of the orchestras was from P.S. 152 Manhattan from which I graduated. Inwood (north Manhattan) was then a center of the German-Jewish emigre 4th Reich; today it's mostly Dominican.
The head of British Man Group, a leading hedge fund manager, backs the reintroduction of the 'uptick rule' to reduce the risk of a market crash prompted by high-frequency computerized trading. Peter Clarke Monday at a London School of Economics Alternative Investment Conference called for bringing back the old U.S. rule, which only allow short-selling (bets that a stock price would fall) if the last trade price was higher than the previous one. He said this could help stop rapid-fire computerized hedge fund trading causing sharp, irrational market drops.
Quantitative hedge funds twice caused market sell-offs during the financial crisis. In mid-2007 quantitative hedge funds suffered heavy losses after being caught in a vicious circle of selling. Our Securities and Exchange Commission also partly blamed the March 2010 "flash crash," when the DJIA fell nearly 1,000 points in a matter of minutes, on high-frequency trading firms, which can make tens of thousands of ultra-fast trades daily. Clarke argued that high-frequency traders, whose strategies include making markets for other investors, do not contribute to overall market liquidity despite their claims that they do.
Clarke said the uptick rule could halt some "quant strategies from becoming systemic in certain markets over the short term".High frequency trading accounted for 56% U.S. equity volume and 36% of European in 2010, according to TABB Group (quoted by Reuters).
While I was otherwise engaged, the Bank of Israel boosted the Shekel-$ exchange rate by 0.32% yesterday to NIS 3.787/$. For euros the new rate is NIS4.925. It also cut the interest rate charged starting in Feb to 2.5%, down a half a percent.
The Reserve Bank of India, their CB, also cut the Cash Reserve Ratio it requires banks to hold with RBI by a half a percent, in this case to 5.5% while keeping its repo rate at 8.5%. The RBI seems to think the Indian inflation threat is moderating. While we do not have any way to play Israeli we do gain from CB easing in India.
More for paid subscribers from our companies,.with news from India, Finland, Britain, Greece, Israel, Canada, France, Belgium, Spain, the Netherlands, Ireland, Greece, South Africa, and Brazil. Because it is two day's worth, this is a (Kung Hei) fat (Choy) issue.
Trading Alerts
Today while attending the 2012 outlook conference at The Economist Intelligence Unit and HSBC Bank, I naturally celebrated Chinese New Year. Kung Hai Fat Choy. The hotel was designed by my neighbor, I.M. Pei.
I also did a stock trade based on a limit order, but of course I was not aware of it at the conference where cellphones and their latest clones were compulsorily turned off. I used a limit order because I thought the stock was rather toppy. The writer, Frida Ghitis sort of admitted it too, as did at least one Texas reader, RH. No, I do not tell people in advance about my limit orders lest they gazumph me by offering a mere penny more.
Trading alerts are only for paid subscribers.
Dragon Breakfast
As I am having a dragon~year-launching breakfast with The Economist tomorrow morning, Tuesday´s blog is coming a few hours early. It will be at the I.M. Pei desgined Four Seasons Hotel.
More for paid subscribers from India, South Africa, Britain, and Colombia.
Some Family History
Today I am indulging in some family history. You can skip it if you wish. Nick Clegg, the deputy British Prime Minister, told a business audience in January: Read more »
Tables Posted
The rocket keeps on rising. The year-to-date performance of our stocks has echoed that of US indexes, which are up the most in January since 1987. And if you are an old investor like I am, that will remind you what happened in the autumn of 1987, when the stock markets suddenly got the vapors and sank sharply.
The recollection along with the pretty rotten market performance of 2011 makes many investors trigger-happy now. So we are taking some profits in the coming week. Details for paid subscribers only who should please view the tables by logging in to www.global-investing.com
To view the tables with all columns, click the printer-friendly button to view the whole nine yards.
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We do this to prevent denial of service attacks from people who dislike what we are writing, which occured most recently from China.
A Hedge Idea
The nice thing about India, despite the corruption and backtracking is that it inherited from the British a respect for the rule of law. Yesterday the Indian High Court threw out an attempt by tax authorities there to charge Vodafone of Britain $4.4bn in capital gains taxes for buying out Indian interests of Hutchison Telecommunications in 2007. The $11 bn in assets were bought by the UK firm from a Cayman Islands one. After much legal hassle, the Indian court threw out the tax claim.
This will help other companies which made or are thinking of making investments in India.
However, the more I think about it, the more convinced I am that India is not the right emerging market to invest in short term. Analysts of a fund we own argue that the new I in ''BRIC'' countries should be Indonesia because of its fast growth. I am not sure.
We also have a new reporter who pitches many South African stock ideas at us, including a new contrarian one today. I am not sure about that either. But I do agree with his pick today.
I think the hot emerging market for 2012 can be spotted. In my view it is Mexico. It is achieving both growth of valuations of its stock and higher currency rates. That is a win-win.
More from South Africa, Spain, Britain, Indonesia, the Netherlands, France, Colombia, and lots from Canada today.
The Unflat World
It was impossible to buy the well-priced euro-denominated bonds of London airport operator BAA in the USA as a retail investor, because they are not registered with the SEC. We have to wait until they have been trading at least 90 days. (I also misstated the net yield yesterday because of a typo. It is 4.495%.) The supposed flat world is full of regulatory barriers. My US bank, HSBC, was one of the underwriters, but I was still not allowed to buy.