Tuesday, April 17, 2012

Tuesday, April 17, 2012

DOW + 194 = 13,115
SPX +21 = 1390
NAS + 54 = 3042
10 YR YLD +.04 = 2.01%
OIL +.07 = 104.27
GOLD – 2.90 = 1651.00
SILV +.18 = 31.81
PLAT + 8.00 = 1589.00

Tax Day, and you still have a few hours to get the forms filed. We talk a lot about taxes on MoneyRadio; how to legally minimize the tax bill, how to defer the tax bill. We talk about annuities, life insurance, harvesting losses, IRA's, 401K's, corporate entities and more. And that's all good, but if you really want to cut your tax bill, there is a sure fire way to do it. If you are looking to stick it to the IRS, I'll tell you the secret. You don't need accountants, you don't need financial planners, you don't need tax software, you don't even need a mailbox in the Grand Caymans.

You need a lobbyist. The top eight companies that spent the most on federal lobbying from 2007 to 2009 all saw their reported tax rates decrease from 2007 to 2010; these top eight firms spent $540 million on lobbying from 2007 to 2009. They filed 332 lobbying reports that mentioned taxes and named 491 different tax bills in those reports.

The top eight companies that spent the most on lobbying were Exxon Mobil, Verizon Communications, General Electric, AT&T, Altria, Amgen, Northrop Grumman and Boeing. Exxon Mobil spent the most, some $81.92 million from 2007 to 2009.
AT&T recorded the largest tax reduction, with its tax rate falling from 34.0 percent to negative 6.4 percent from 2007 to 2010, or an estimated reduction of more than $7.3 billion. Altria, the parent company of Philip Morris, had the smallest decline from 2007 to 2010, with its rate declining from 28.9 percent to 27.4 percent. Six of the top eight companies saw declines of at least 7 percentage points. The likelihood of six of the top eight companies lowering their rates "by at least seven percentage points purely by random chance is less than 1 in 100,000." The lobbyists earn their money.
President Obama has proposed lowering the corporate tax rate from 35% to 28% and eliminating loopholes and deductions. Romney has proposed lowering the corporate tax rate to 25% and repealing the alternative minimum tax. And if you believe that – you are a dolt. Those proposals wouldn't lower taxes they would raise taxes. Nobody pays the full tax rate.
While you've probably heard that the United States has the highest corporate tax rate in the developed world, you know that only schmucks pay the full amount; U.S. corporate taxes that were actually paid (the effective rate) fell to a 40 year low of 12.1% in fiscal year 2011. The U.S. both taxes its corporations less and raises less in revenue from corporate taxes than its foreign competitors: the U.S. Is about 25% below the OECD average.
We hear about the effective tax rate for wealthy individuals; Warren Buffet pays a lower effective tax rate than his secretary; President Obama pays a lower effective tax rate than his secretary. The Buffet Rule died this week.
This year, federal taxation will take up less than 15 percent of total national economic activity. That’s the lowest level in 60 years. In fact, total revenue as a share of gross domestic product has now been under 15 percent for three straight years—the first time that has happened since before World War II.
What is this really telling us? We're missing a great opportunity, folks. Clearly, there is an one area of the economy where Americans excel, where we generate enormous Return on Investment; I'm talking about the Lobbyist Industry. Embrace it; export it to other countries; share the prosperity. This is obviously the path to big time profits. Are they teaching this in business schools? Forget about innovation, forget about best practices, forget about technology, forget about production, forget about making something that people need. The best ROI anywhere is to lobby. If we really focus out attention on this industry, we can push the effective tax rate even lower. Refunds for everybody. We'll change Tax Day into Refund Day. Yea, that's it.
Speaking of not doing anything productive; Goldman Sachs reported 1st quarter profit fell 23% as sluggish demand for deal-making put a damper on results.Goldman posted a profit of $2.11 billion, compared with a year-earlier profit of $2.74 billion. Lighter client demand for trading and investment banking has been a sore spot for Goldman in recent quarters, putting pressure on two of the firm's prized sources of revenue. Maybe demand fell because nobody wants to be a Muppet.
After the close, Yahoo said first-quarter earnings rose 28%, beating expectations despite relatively flat revenue for the period. Yahoo reported net income of $286 million, or 23 cents a share, compared with net income of $223 million or 17 cents a share same quarter last year.
Intel reported a profit of $2.74 billion, or 53 cents a share, compared with $3.16 billion, or 56 cents a share, in the year-earlier period. Revenue was $12.91 billion, up from $12.85 billion. Adjusted profit was 56 cents a share. I don't know what adjusted profit means. Intel has been really good at beating estimates, so good that the game is catching up with them. It's not good enough that Intel beats estimates, they have to beat big.
IBM said it earned $3.07 billion, or $2.61 a share, on revenue of $24.7 billion, compared with earnings of $2.86 billion, or $2.31 a share, on $24.6 billion in sales in the same period a year ago. Excluding one-time items, IBM would have earned $3.3 billion, or $2.78 a share. One-time items are also known as the cost of doing business.
The International Monetary Fund warned today that the European debt crisis could flare up again at any time and send the global economy back into deep recession. The Fund's chief economist said there was currently "an uneasy calm" following the tensions in financial markets at the end of 2011, with hopes of a gradual recovery dependent on keeping the single currency in one piece. The Fund said that there was a risk of a 1930's style slump. "In the current environment of limited policy room, there is also the possibility that several adverse shocks could interact to produce a major slump reminiscent of the 1930s." In the absence of a euro meltdown, the IMF predicted that weak recovery was likely to resume in developed countries. The best we can hope for is lousy and the worst is truly dreadful. So thanks and have a nice day. Spain managed to sell a few billion dollars worth of bonds, which is a remarkable accomplishment considering nobody expects Spain to survive. Remarkable until you consider the ECB and the IMF are buying the bonds.
John Paulson, is a billionaire hedge-fund manager; he made a fortune betting US mortgages would turn sour; they did. Last year he almost lost his shirt, now he's seeking to reverse record losses in 2011, by shorting European sovereign bonds. Paulson said he is buying credit-default swaps on European debt, or protection against the chance of default. Spanish banks are of particular concern as their holdings of the country’s debt and client withdrawals make them overly dependent on European Central Bank financing.
Sometimes economics just seems bizzaro; case in point from the Murdoch Street Journal:
Thirty-six of the 51 economists surveyed, not all of whom answer every question, say the central bank will refrain from another round of large-scale bond buying in 2012. The number who expect no action is up from 30 in the January survey. An entrenched upturn in growth, albeit anemic relative to history, is entering a sweet spot,” said Allen Sinai of Decision Economics. He noted that with the economy expanding at an adequate pace, the Fed should remain on the sidelines.
OK, we are in the sweet spot of an “anemic recovery”; I never knew you could have an anemic sweet spot. But we don’t need monetary stimulus. And why not? Because we have an “adequate recovery.” That seems to pretty much sum up macroeconomics circa 2012.

Wells Fargo has been busy expanding its stake in the GEO Group; Wells Fargo is the company's second-largest investor, holding 4.4 million shares valued at about $86 million. Unfortunately it's a safe investment. GEO is the second larges private jailer in America. The private prison industry grew by more than 350 percent over the last decade and a half. Overall, more than 2.3 million people are currently behind bars, up 50 percent in the last 15 years, the land of the free now accounting for a full quarter of the world’s prisoners.

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