Center for American Progress: "Ending Special Tax Treatment for the Very Wealthy"

Kim Zussman writes: 

(Cue Sonny and Cher "The Beat Goes On")

In the US the top 10pc pay most of the taxes, and a large portion of low income pay no income tax. Maybe we need leveraged taxes, like SPU: the top must pay 300pc and the bottom pays -200pc. This will not only be fair to the poor, but will also importantly maintain governing apparatchik's vig and fiefdoms.

Stefan Jovanovich writes: 

The analysis has the usual academic corruption; it only examines the facts that support its conclusions. There is no mention of the other direct and indirect taxes that are levied in the U.S. against people, property, spending and incomes. The people with "low" incomes pay almost all the employment taxes collected. If the authors were serious about taxing the rich, they would have spared us the elaborate discussion and simply advocated removing the income ceiling on Social Security and other employment taxes. That alone would make Social Security's pay-go financing secure for this century. Those of us who have fond memories of our anarchist grandfather would be happy to add a further adjustment in the name of having one big tax. (The Wobblies platform was "one big union"). Abolish all confiscations of income from savings (interest, dividends, pass-through distributions, capital gains, "excess" Social Security) and tax those incomes as further employment income. That alone solves the inequality of the Federal tax system and the unfunded liabilities for Medicare as well as Social Security.

So, why don't Lefties offer this alternative - which would be simple and avoid all further adjustment of the income tax? Because "fairness" is about assuring that the rich use the Buffett Dodge to subsidize the non-profitistas. Keeping high marginal rates at the top guarantees a continuing flow to foundations.

That motivation explains the authors' other glaring omission. They do not discuss the Federal estate tax. All the subsidies for income on securities (the special rates for interest, dividends, long-term capital gains) are more than successfully recaptured by the estate tax. If, instead of the current system, estates had a single flat rate equal to the employee share for Social Security, net collections from the estate tax would go up ten-fold. But, that would crush the rake-off by recipients of the deductible bequests. Can't have that either.



Wild elephants migrate back every year to partake in an annual mango feast, retracing their steps right through the lobby of a hotel. It seems to be snopes certified.

Here is a great short video about it: "The Elephants that Came to Dinner"



 This is an amazing clip of a magician performing the card trick "Sam the Bellhop", which is "without a doubt one of the best card tricks you’ll ever see." (from Big Geek Daddy).

The other week I was at a social event where they brought in a "corporate" magician. I've always wanted to see someone cut aces from a deck in person — and sure enough, the guy said it was easy.

So we went off to the side — I inspected the deck and shuffled it myself. He cut the 4 aces in 10 seconds…unreal!

Jeff Watson writes: 

Notice the very subtle technique he used to get the guy cut the cards exactly where he wanted it cut. Notice the crimp? Notice the Mechanic's Deal? The rest was false cuts, false riffles, false shuffles and very nice subtle pass throughs. He had the deck set up beforehand, and not a single card was moved despite all outward appearances. This guy is pretty good, but you can't listen to him, just watch the hands, and only the hands. His patter reminds me of the noise that the mistress uses to deceive us and relieve us of our cash. One could probably improve their speculation game if they just concentrate on the movement of the hands and ignore the noise. 



One of hardest things to do is nothing. To rest. It goes against everything. The urge to do something can result in disaster. Especially the urge to catch up say when price passes you by or you miss a fill.

Victor Niederhoffer writes:

In reading Deep Survival ( which one has eschewed for many reasons), one comes across the chapter on panics. The conflict between trying to achieve a goal, of food shelter and a mate, (always there) , and being lost causes great discombobulation. Great foolish activities leads to people refusing to survive when it was so close. One finds the same conflict between lost and goal in markets. For example, one has a target. You put your limit in. The algorithm boys move in front of you. The price moves away. You are lost. You have a goal. There is a tendency to panic, to die when it would have been so easy to go down the previous path, or use your tools. A terribly poignant and applicable sensation.

Chris Cooper responds:

Those lessons about paying attention are reiterated in depth in a book I recently finished, "Traffic: Why We Drive the Way We Do" . It is full of counter-intuitive evidence regarding driving and safety. Especially noted is that seemingly unsafe situations can be safe simply because people pay attention.

Dan Grossman replies:

I agree with Chris, Traffic is a great book. Both for understanding driving/road safety and for other aspects of life.

Book was the only advice in my life that changed the way I drive. For example, now realizing statistically how dangerous changing lanes is (what a high percentage of accidents are caused by it), I change lanes far less frequently.

Also makes one appreciate how less safe red light cameras (now common in NYC) are: More accidents caused by stopping short at red lights to avoid camera tickets, than by finishing scooting through.

Alan Millhone writes:

Hello Mr. Sogi. I had an old friend that told me , " if you miss one deal there is usually another around the corner somewhere ". Regards, Alan

Legacy Daily comments:

So true… I don't know which is a bigger regret: the buyer's/seller's remorse or the regret of chasing a price to get a fill then seeing the market go back to the original order level. The price frequency distribution helps (not always) against my wrong instincts so the new routine is to remember the eye exercise program in those moments. :)

1. Blink ten times by closing the eyes as if falling asleep (very slowly). This help re-wet the eyes.

2. Look away from the computer and gaze at a distant object outside or down the hallway. Looking far away relaxes the focusing muscles inside the eye to reduce fatigue.

3. Look far away at an object for 10-15 seconds, then gaze at something up close for 10-15 seconds. Then look back at the distant object repeating the cycle 10 times.

4. Take a break, stand up, move about and stretch the arms, legs, back, neck and shoulders.

Kevin Eilian writes:

Wisewellian - that which effects your move the least effects your opponents the most (courtesy of chair).



 On Misdirected Workplace Worry, by Rick Carew, from WSJ.com

Worried about your job being sent to China? If so, then you'll never see the bigger threats lurking on the other side of the cubicle wall. Advances in technology and budget cuts by management are much more of a menace to your future employment than some two-bucks-an-hour worker in a southern China boomtown. At least that's the message of Columbia Business School professor Bruce Greenwald and historian Judd Kahn in "Globalization," their bracing response to the "irrational fear" of outsourcing and other bogeymen of the antiglobalization brigades.

Messrs. Greenwald and Kahn argue that the key forces shaping our lives are local; it's not that international trade is unimportant, it's just that other factors are more important. Consider the significance of technology in the workplace, something often overlooked by globalization worrywarts. Examining data on changes in the U.S. work force, the authors show that job losses due to higher productivity — often the result of improving technology — greatly outnumber those lost to globalization. The authors cite Commerce Department figures estimating that 65% of job losses in manufacturing between 2000 and 2006 were due to productivity increases; just 35% of job losses owed to overseas outsourcing. "The data actually reveal that fears about the havoc from globalization on workers in high-wage economies have been wildly overblown," Messrs. Greenwald and Kahn report. Think of the legions of secretaries and office workers eliminated by the desktop computer or the increasing use of technology in the auto industry.

So if globalization hasn't sent your job to another country, it must at least be the reason for the economic rise of China and India, right? Wrong. If globalization were the cause rather than a condition, Latin America and Africa would have arrived at the party a long time ago. Instead, globalization and trade help countries that have made the tough local decisions to liberalize markets, tamp down corruption and unleash the powerful incentives of capitalism. Hence the influential role of local decision-making in everyone's future.

If this sounds counterintuitive, given the conventional wisdom about world economics, it helps to remember that "globalization" is just another word for a phenomenon that we've seen before. Messrs. Greenwald and Kahn find similarities between our era of expanding global trade and international markets a century ago. Trade as a share of global output rose until 1920, thanks to improvements in shipping, which helped build foreign markets for commodities such as grain and coal. But this trade expansion proved limited and cyclical. Commodities became cheaper and thus commanded a smaller share of household budgets. Consumers were able to spend more money on manufactured goods, such as washing machines and automobiles, that were harder to globalize because they depended on local sales networks and consumer preferences. That caused global trade's importance to shrink — until midcentury, when overseas markets heated up again.

Globalization: The Irrational Fear That Someone in China Will Take Your Job By Bruce C. Greenwald and Judd Kahn (Wiley, 186 pages, $29.95) Fast-forward to today. Will trade continue its post-World War II boom? The authors argue that global trade has peaked again — independent of the world-wide recession that has so constricted consumption. The demand for computers, cars and appliances fueled the increase in global trade because companies learned how to produce cheaply manufactured products that could be tailored to meet local market demands. In other words, manufacturers finally figured out how to commoditize the modern equivalents of yesterday's washing machines. Computers, iPhones and automobiles are now all global goods, easily tailored and distributed to meet local market needs.

But Messrs. Greenwald and Kahn believe that we will again shift more of our spending to things that are hard to globalize. "Services are likely to be the greatest area of growth, and the majority of these items will be locally produced and locally consumed: housing, medical care, education, legal and social services, recreation, utilities, telecommunications, and others."

The authors' contrarian view of globalization leads to several provocative arguments. Among the more startling is the contention that liberalizing global financial markets isn't necessarily a positive development. Local investors will always have better information than investors who are widely dispersed geographically, Messrs. Greenwald and Kahn argue. The authors offer a vivid example of how information gets lost as the distance grows between investors and the assets they're buying: the repackaging and sale of toxic subprime mortgages across the world.

While local knowledge is certainly important, Messrs. Greenwald and Kahn might have at least spared a word of praise for the way that deploying capital globally can produce worthwhile investments. Disciplined foreign investors made out very well in the aftermath of the Asian financial meltdown of 1997 and in crises where fund managers were able to move money quickly from capital-rich investors in one part of the world to capital-starved countries elsewhere.

Messrs. Greenwald and Kahn also might have spent a little more time on the subject of wages around the world. They dismiss concerns about the income stagnation caused by global trade, noting that wages have done slightly better as global trade has expanded. But a more rigorous analysis of the forces influencing anemic income growth in the U.S. would have been welcome; they may well include migration, the quality of new service jobs or other matters related to globalization. Still, in its crisp, stimulating way, "Globalization" presents a rational element in a debate too often characterized by hysteria.

Mr. Carew covers Asian mergers and acquisitions for The Wall Street Journal in Hong Kong.



 Original Study

Diets that are high in protein and cereal grains produce an excess of acid in the body which may increase calcium excretion and weaken bones, according to a new study accepted for publication in The Endocrine Society's Journal of Clinical Endocrinology & Metabolism (JCEM). The study found that increasing the alkali content of the diet, with a pill or through a diet rich in fruits and vegetables has the opposite effect and strengthens skeletal health. "Heredity, diet, and other lifestyle factors contribute to the problem of bone loss and fractures," said Bess Dawson-Hughes, M.D., of Tufts University in Boston, Mass. and lead author of the study. "When it comes to dietary concerns regarding bone health, calcium and vitamin D have received the most attention, but there is increasing evidence that the acid/base balance of the diet is also important." Average older adults consume diets that, when metabolized, add acid to the body, said Dr. Dawson-Hughes. With aging, we become less able to excrete the acid. One way the body may counteract the acid from our diets is through bone resorption, a process by which bones are broken down to release minerals such as calcium, phosphates, and alkaline (basic) salts into the blood. Unfortunately, increased bone resorption leads to declines in bone mass and increases in fracture risk. "When fruits and vegetables are metabolized they add bicarbonate, an alkaline compound, to the body," said Dr. Dawson Hughes. "Our study found that bicarbonate had a favorable effect on bone resorption and calcium excretion. This suggests that increasing the alkali content of the diet may attenuate bone loss in healthy older adults." In this study, 171 men and women aged 50 and older were randomized to receive placebo or doses of either: potassium bicarbonate, sodium bicarbonate, or potassium chloride for three months. Researchers found that subjects taking bicarbonate had significant reductions in calcium excretion, signaling a decrease in bone resorption. "In this study, we demonstrated that adding alkali in pill form reduced bone resorption and reduced the losses of calcium in the urine over a three month period," said Dr. Dawson-Hughes. "This intervention warrants further investigation as a safe and well tolerated supplement to reduce bone loss and fracture risk in older men and women."

Article adapted by Medical News Today from original press release.

Other researchers working on the study include Susan Harris, Nancy Palermo, Helen Rasmussen, and Gerard Dallal of Tufts University in Boston, Mass., and Carmen Castaneda-Sceppa of Northeastern University in Boston, Mass. The article "Treatment with Potassium Bicarbonate Lowers Calcium Excretion and Bone Resorption in Older Men and Women," will appear in the January issue of JCEM. Founded in 1916, The Endocrine Society is the world's oldest, largest, and most active organization devoted to research on hormones, and the clinical practice of endocrinology. Today, The Endocrine Society's membership consists of over 14,000 scientists, physicians, educators, nurses and students in more than 80 countries. Together, these members represent all basic, applied, and clinical interests in endocrinology. The Endocrine Society is based in Chevy Chase, Maryland. To learn more about the Society, and the field of endocrinology, visit our web site.



F & SOver and over again, we see the market moving in trepidatious concert with the father figure of the moment. It used to be the fake doc and then it was the scholarly economist chair, and now it's the former chair of the white shoe firm that maintains the Chinese wall with its former colleagues. On past occasions it's the Sage, and every now and then, a big executive like the head at Intel or the basketball player from Conn.

What's particularly damaging to the market is when these people bow. The spectacle of the Intel chief bowing and begging forgiveness I believe forever tarnished the aura of high p/e deservingness that his company with 59% profit margins might have deserved. The news that the former white shoe chair knelt in front of the chair of the Democratic party and begged her to pass the bail out bill was the death warrant for the market for a time. And now that he changed horses in midstream and gave up on buying mortgages directly, a position he had previously begged for, "based on a different set of circumstances" was the death knell for the market.

The trader has the Dostoiyefskian tendency to feel guilty about their activities from the time they were small. And they wish their father figure to be strong and not to kneel. When these figures regain the respect of their kids by being strong, maintaining the stiff upper lip, etc., we can expect a much better market. How would you quantify this and what other instances of kneeling as a bearish indicator have you seen?

Anatoly Veltman writes:

You mean like when Chancellor of the Exchequer raised discount rate 9/16/92 three times (from 3% to 7%), before rolling it back to 3% by the end of the same day… and recognized that ERM snake was in fact beheaded?

James Lackey replies:

The return of the dipsy doodle is a good start. The most damaging current meme is that the markets are at fault…  and market prices do not forecast. "Free markets need help and regulation from governments," The dog is chasing its tail. Government regulations are what cause markets to come up with crazy schemes to avoid the previous market patches, in Microsoft terms, a "hot fix."

A more direct answer is price discovery. Once we all figured out too many prices were rigged they panicked and traders bought as usual. Then when the father figures changed the rules to bailout their kin, we went on strike. No traders, no liquidity for the markets. Now the prices are caught in the crossfire of the Hatfield-McCoy feud. Do not blame the hired guns.

Art Cooper adds:

Obviously the market and economy respond positively to strong leadership, as this relates directly to human emotions (animal spirits) which are so essential a part of Main Street economics, finance and the financial markets. Hence, the Great Depression market responded positively to a strong leader who declared that "The only thing we have to fear is…fear itself," even though his economic policies were in fact counter-productive to recovery (see Jim Powell's "FDR's Folly").

Kim Zussman interjects:

The child is racked with disorienting insecurity when they first witness their parents own uncertainty, indecisiveness, and fear. Now the children are being dragged by their mother to a new daddy with undetermined rules of discipline, while being told that the last daddy was really an immoral fraud.

It's hard growing up, especially with a fickle mother.

James Lackey writes:

I listened to Santana's show tour warm-up in 2002 or so. Later that evening he was on an interview, local radio, and was describing his so called comeback. His rebirth was through collaboration with new young artists. His quote went something like, "I wanted my teenage kids to know dad can jam, and how the system works, sure they saw my old awards and shows from back in the day… but to a teenager..it's now that counts." The gist was, the only reason he did the work was to prove a point to his children… boom… the return of a father figure.

J.T Holley writes:

Highly apropos, like all great literature, call me crazy if ya'll don't see it that way, this has been written in William Golding's Lord of the Flies.

Kids abandoned due to crash from adults.

Ralph pleads with Piggy about Simon's death: "You were outside, Outside the circle, Didn't you see what they did" (paraphrased).

Piggy before his murder: "Which is better? Law and rescue or hunting and breaking things?" (paraphrased). Then the rock falls.

Kids rescued from abandonment and panic/chaos when Ralph looks up at Naval Officer (adult).

I guess the big question right now and maybe one that Golding proposed is who is going to rescue the naval officer and his boat? In other words who saves the adults themselves?

Now substitute War, Atomic Bomb, Ralph, Jack, Simon, Piggy, Naval Officer, Naval Ship with traders, investors, banks, citizens, government, and politicians.

Kevin Eilian writes:

Before it became a quote dejour by Mac and others, R*bin's upper lip, bone straight poker face, "the economic fundamentals are strong,"– you believed it. He made sure he did, too, as his net worth was tied to white shoe IPO.

James Sogi says:

Demographics is the counting of the "father figure" issue. We saw the effect in the aging of Japan. Now we are seeing the aging of America. The rest of the world is quite young, averaging something like 15 years old… Many of our parents are sick, old or dying or died. There is a changing of the guard. The boomers are retiring. America is aging and gaining weight. Though America "the great white father" is kneeling or brought to its knees, the emerging world will rise in its place over time. I would watch this trend over the long term. The world is becoming multicultural. Witness, O witness, the non white majority in California.

Russ Sears adds:

I have been thinking for the last few weeks that all of this could have been avoided if the investment bankers had learned a few lessons on risk management from a mother of a smart, curious two year old or a teenage boy. You can't just tell them no and then ignore them once they've moved on and not still expect some experimention to happen. The alerrt mom always seems to have an instinct, before the father, when silence is a clue they are into something or when the truth has been stretched. How the mother always is prepared to contain while still delighting in their first taste of chocolate cake or discovery of girls and love. The good mom has the sense to help them limit these new found divine obsessions, before they ruin their mental and physical health.



If there really were a Plunge Protection team why didn't they come save the world this week? Could it be there isn't one, as certainly this week they were needed?

Charles Pennington comments:

Government likes plunges because they provide an excuse to seize new powers and enlarge the government footprint. It certainly worked out that way during the plunge of the 1930s.

If there were a government Plunge Protection Team, the government would heavily publicize it and its heroic role in stopping plunges. The Hong Kong government openly stepped in to buy stocks in the midst of the 1998 Asian market collapse — the intervention was announced in August 1998 — and to my surprise, the announcement just about coincided with the market low.

My theory, then, is that governments relish plunges and would only intervene if done with great fanfare to take credit. 

Kevin Eilian writes: 

Sometimes "plunge protection" can take the form of a wink and a nod, like the 1998 Russian meltdown/LTC deal. The knight gathered together the biggies from all participating banks (so I understand) and "asked" them to "coordinate" a de facto bailout. Now with huge consolidation among world financials, this type of pp (reminds of me of JP's role in the 1900s) should be easier.

The government will use plunges to assume new power - if it lasts (i.e., the 30s or the late 60s/70s for example). Since most of the world's politicians do not really understand economics (growth causes inflation, static budget analysis, cap gains balance the budget, etc.) the attempt to gather more power in light of a prolonged plunge is worrisome ("double whammy" potential).

I think most politicians dislike the uncertainty and potential shorter term election implications of a typical plunge and/or dislocation, so they'll do what they can to bring in a plunger. To me, whether it’s explicit (like r*bin), informal (like the knight in 98) or just day to day (central bank coordination) they are around. We just need to be careful what we wish for! 

David Wren-Hardin writes:

We're in just the first episode of a multi-episode drama. It's like in the comic books or cartoons where the evil overlord rises up, and a second tier superhero team from another country like Alpha-Flight or Justice League Europe tries to take him on, only to be crushed. Then the real superheroes come in.

We saw Plunge-Protection Team Europe take a swing. Bernanke is still ensconced in his Fortress of Solitude, waiting to call on the rest of PPT-USA. 



 As usual for the beginning of the year, the weak and rigid made a contribution to the strong and flexible. In markets the best of recent years performed the worst, and the worst performed the best. The NASDAQ was up a mere 7% last year, versus the S&P 500 's 15%, but now is up 4 % this year already, whilst the S&P is struggling along unchanged. Oil, the best performing market over the previous two years, is down 10%, and the dollar which was, at the worst of last year relative to its normal variability, down 10%, is now up 3%.

It is a similar story for the ten best individual stocks in the S&P 500 last year — ati, nvda, cmx, cbs.v, big, merq, bls, pd, hpc, nue — they are down 2% so far this year. The ten worst stocks last year — donaq, apol, adct, amd, jbl, ebay, bsx, novl, kbh, stj — are now up about 2%. Good old blue.

In Japan when a big stock sets a milestone there is singing on the exchange. There should have been an opera for IBM yesterday as it broke through 100 for the first time since April 2002. What a show of resilience — a milestone for the market, similar to the Dow breaking 12,000. This show of strength had a gravitational pull enough to outweigh the pseudo event of Gov. Moskow in Iowa stating that the Fed. would have to remain vigilant on inflation and raise rates again if economic growth quickens in 2007. When will someone explain to Fed. Governors that the stronger the economy, the less likelihood there is of inflation, as there is expansion to absorb the money supply.

pt (price times trade) = a constant to a first approx., and if t is up then p is down.

But of course the Iowa speech was a staged classic pseudo event of the kind that Boorstin would have used as a cardinal example, if his interests were not so aligned with the collective and it would not have offended his sponsors. Nevertheless, it was picture perfect. At precisely 12:30 e.s.t., the market swooned to 1415, down a nice 1% on the year, when the word "vigilant " came across the tape, and within 4 hours, the market had recovered the full 1% so it could play footsie with unchanged levels again, and get the boys who anticipated the pseudo Jan. barometer to reverse.

The major mistake that they make in fundamental statistical research, in my opinion, even above and beyond the use of retrospective files and out of date data, is to assume that the number of independent observations is somehow related to the company years in the study. If you are considering 1000 stocks say, value versus growth, over ten years, then you have ten independent observations, not 10,000. That is because in any given year, a certain style does well or badly, and the rising tide lifts all boats designed in such a way, and therefore the results in that year are completely predictable from five of six of the company years, and the rest of the 995 are redundant and non-informative.

I always get a kick from the key level boys who say "1398 is the key level." They do not tell you whether it's bullish or bearish, when you should act on it, or which index they're talking about. But if five days later the index or the futures is well above 1398, why then they say "we were on record with that 1398 was the key level to buy." If 5 days later it's 1350 then they tell you that the big boys got you again.

Now someone is going to tell me that 1398 was not a key level but the problem is that the key levels that I have heard talk of never got near for the futures, and were broken below for the index by three, so my goodness, what fools they must think we mortals are. What a terrible Upas tree of self destruction is wrought by such key level analysis.

Kevin Eilian comments: 

When will someone explain to Fed Governors that the stronger the economy, the less likely there is for inflation as there's expansion to absorb the money supply pt( price times trade) = a constant to a first approx and if t is up then p is down.

This concept that real economic growth reduces the likelihood of inflation is something that is rarely explicitly mentioned. In fact, even on this list, this is the first I've heard it put this way, and it makes sense. The only other place I've seen it is in Wanniski's works and essays.

Growth is a result of "demand for liquidity," which is defined as demand for liquid funds (money) to be invested directly into the economy. Lower taxes increase demand for liquidity, since it lowers the cost of capital (and rewards to capital).

The result is an "expansion to absorb the money supply." Now, if the money supply increases, but the desire to invest decreases or goes away (say, because of new regulations or suddenly sharp, higher marginal tax rates), there is a) less expansion (investment) and b) higher inflation (less supply of goods and services).

In the case of this higher inflation, the money bids up the prices of goods and services, and/or is stashed away in "inflation hedges" (or perceived inflation hedges), as people observe increases in nominal prices.




SEC Plans to Raise Hedge-Fund Investing Requirements

Nov. 10 (Bloomberg) — U.S. Securities and Exchange Commission Chairman Christopher Cox said the agency will propose rules next month making it harder to invest in hedge funds. “We’re going to make it very clear that hedge funds are risky investments that are not for mom and pop by fencing it off with higher standards to accrediting investors,” Cox said in an interview today.

Nice meme imagery, “We’re going to make it very clear that hedge funds are risky investments…”

What does that mean? Leverage? Commodities? Long/short? Short only? Unlevered equity? Fixed income subordinated leverage? Not important. They’re all the same!


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