WASHINGTON, December 17, 2012 – Our manic-depressive market seems relatively happy this morning as it seems Speaker Boehner might be amenable to “taxing the rich” as indeed, on some level, he always has been. It’s been occurring to us lately that going along with the Democrats on this issue might actually be a productive strategy for the Stupid Party. Why? Because it give the Repubs a chance to be stupid like a fox. If you think about it, why should Republicans stand up for these billionaire swine anyway? Look at the numbers, available from any number of online sources. The mega-rich bet their big bucks on Democrat candidates, nearly all the time.
And why shouldn’t they? Monster companies like G.E. have been helping themselves to taxpayer-funded government welfare since the time of FDR. Why stop now? Dems essentially run the government; and by our estimates, outside of DoD, Federal government employees are roughly 90% lifetime Democrats who know which politicians and businesses they can rely on for lifetime employment. Why ruin a good thing? Backing Republicans too obviously might cut off the Federal feedbag, damage the bottom line, and wreck those swell bonus structures. Ask Jeff Immelt.
Don’t rock the boat. Go along to get along. What a bunch of cynics. No wonder everybody hates them.
So let us indeed tax the rich. It’s a win-win for everybody. The Dems get to crow about how the Republicans “caved.” The Repubs get to posture humbly before their conservative base and correctly say, “we did our best.” And real Republicans get to snicker in the cloakroom about the switcheroo they managed to pull by looking like they lost. Because if we start taking more money away from the mega-rich, mirabile dictu, that’s less money for the Democrats in the next election.
Oh, sure, the Stupid Party would need to be careful to avoid Obama’s slick ploy of simply upping the percentages of income taxed on rich dudes, the time-honored, time-worn hocus-pocus the Dems have used from time immemorial because it looks good in public while not screwing the wrong sugar daddies. Benevolent, kindhearted, totally-in-favor-of-the-middle-class rich guys like Uncle Warren Buffett will respond, as always, by simply stashing more of their virtual paychecks inside their C-Corp structures, allowing their gains to compound away tax free while the virtual income goes unreported on the good ol’ 1040. Thus avoiding those percentage income tax bracket hikes, BTW.
This is why Warren and his buds love a Marxist like Obama. They bristle at his attacks in public, but know he won’t cut off one of his party’s big feedbags behind the scenes. Any economist who’s not hooked on the Kool-Aid will tell you that the biggest source of Federal taxes is still the hapless middle class, which, contrary to public verbiage, will be bled dry by this administration while Uncle Warren gets richer.
So the Stupid Party needs to do the best it can do to cut away deductions from the mega-rich rather than letting them play that phony percentage-of-income tax bracket game. Of course, the high-paid lobbyists of the rich will fight any hint of this approach tooth and nail. But they’ll do it behind the scenes and away from the prying eyes of the press which, of course, will actually be disinclined to pry into this particular bit of tax arcana anyway.
So yeah, Mr. Speaker, cave away and rob the Dems of their current main talking—er, trashing point against your party. Just make sure you stick to your guns in the way you actually make the rich dudes pay. Otherwise, they won’t. After all, that’s their real intent. Like all the rest of the Democrats, the mega-rich are adept at maintaining the appearance of virtue. As for the actual practice of virtue, they could give a tinker’s damn.
Meanwhile, at least as of 10:30 a.m. or so EST, the market is levitating on the usual overdose of Hopium. As so often is the case, we’d be aware that the bearish worm might turn again this afternoon, though, sending the market rushing in a Southward direction.
We continue to raise cash. Nothing really works for long in this environment. Trading is thin and run by headline-driven machines. Back in the day, you used to be able to invest pretty freely in almost any stock once you’d done your homework, verified the reality of the PE, and checked the charts. Only with stocks like the tobacco giant now called Altria (MO) would you have to fear “headline risks” that might irrationally jeopardize your investment.
Now, thanks to HFTs-Gone-Wild, the entire market—every single stock and ETF—is now driven by headline risk. And you either have it or you don’t. It’s tedious. But the SEC won’t be doing anything about it. Too risky for them when it comes time to getting a lucrative position in the private sector after they take their early, rich, taxpayer-funded early retirement. Double-Dipping-Is-Us.
Today you have the market thrashing to the whims of HFTs and algos 24/7 with both the never-ending fiscal cliff nonsense here and with the never-ending can kicking across the pond in the Eurozone. One of these days, like an old guy with lazy colon issues, we’re likely to get a nice purging in the market almost without warning. It will feel pretty good if we’re mostly in cash, and we’ll probably feel like dining out then. Until that happy day, let’s not trust much of anything. If we do, we risk terminal nausea in this market as 2012 draws to its unpleasant close.
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