BG11052009
OUT THERE
Ever ask yourself “what were they thinking?” after something big happens that seems so obvious after the fact - but evidently didn’t then?
By Neil George
It doesn’t matter whether we’re talking about the markets, politics or life. Common sense isn’t always onboard when too many folks are making choices that can end up costing them and others dearly.
The infamous Darwin Awards some immediately to mind. In case you aren’t familiar with this award – it has nothing to do with the political debate over evolution – but rather it takes a very dark humor and macabre look at how some folks that are really out there end up bring their own demise by making some of the dumbest decisions.
And in bringing their own demise – it makes the argument that it might well be better off for the continuing development of the human species if these guys are eliminated from procreating population.
In each of the stories of the winners and runner-ups for the annual awards – from the beginning to the end – everyone hearing or reading about how the nominees meet their end will always exclaim “what was that guy thinking”?
While not involving life and death – there is one group of folks that are going down the darker path that most of us will eventually be exclaiming – what indeed were they thinking?
Ok, contrary to the cheerleaders from the West Wing and Wall Street doing their shticks that the economy and the markets are just ducky – they aren’t.
Last Friday we all saw the employment data. 539,000 jobs lost give or take under the Labor Department’s best guess survey. Yet, the deal is that the number of applications for new jobless benefits was down a smidge so that was enough to grab on to and say that the turn is coming.
8.9 percent unemployment. But instead, let’s look at 91.1 percent that do have jobs.
The turn is coming – right?
Well, let’s forget that a good chunk of the net job number came from Uncle Sam Incorporated. And in particular those jobs had no a shred to do with any stimulus spending project – but rather a perpetual budget item that comes around every 10 years.
Yep, the Census. And those jobs have little long-haul life to them.
But let’s leave that aside.
And then we had the whole Stress Test results published last week. I know that I discussed that the test wasn’t all that that stressful to begin with – but it was enough for some traders to step in and send stocks of several larger banks soaring.
But that’s before more and more folks began to learn that not only were the tests not exactly that strenuous – but even with the easy, breezy criteria – several of the 19 banks studied by the Federal Reserve Bank weren’t too pleased with the results. So, as I prognosticated days before – the bank CEOs went in and negotiated the results of the test including the capital deficiency amounts.
So, no wonder that the market has been dumping off some of the same stocks and others and those better perhaps better grounded in their appraisals weren’t willing to just go along with the pitches.
But whether we are turning around, parked, or still careening further down the path of economic recession and bear markets – what might be the worst possible idea to roll out – let alone actually put into motion?
Let’s look at really hammering those that actually employ folks – both current and prospective?
Yes, what a great idea.
We start with the movement to tax corporations on their worldwide income. Now, I know that its unfair to tax individuals and corporations on two different levels doesn’t meet the usual fairness tests.
And it does make for great political fodder to want to stick it to the corporations that are supposedly able to shield hundreds of billions of dollars worth of taxable income just by keeping the revenues earned outside the US – outside the US.
You and I can’t. For if we own stocks that pay us well that happen to be outside the US – we have to declare the income and pay out taxes on the income simple as that.
The deal then is to make the rules the same for corporations.
But the big difference is that you and I can’t just change our citizenship on a dime. And even if we did – we couldn’t still live in the US after doing so.
Corporations can shift legal incorporation in a New York Minute. And still continue to run their operations in the US – paying taxes on what is indeed earned within the US borders.
And countries around the globe are ever more eager to welcome more corporations – with lower or non-existent taxes or other schemes that make them more attractive legal venues.
Ok, that’s one. Now we the next new big idea coming out of the West Wing – reversing anti-trust enforcement on corporations.
Now, fairness comes back into the picture – just like with the on-shore/off-shore tax issue. But again – is this really the right time to want to make it that much less appealing to operate and more importantly expand business investment in the US?
It might play well now with the politicos. And the advisors and lobbyists might be doing their little jigs back in their offices on K Street. But really, it shouldn’t be that much longer if indeed these and some other prospective legislative and executive ideas out there become reality before too many of us will say – what were they thinking?
Lastly, a lady that had a big idea for something that was about as out there as possible died at 90 years.
Venetia Phair was a very well educated and precocious young lady that came down for breakfast with her grandfather back in March of 1930. At this one particular breakfast her grandfather an official at Oxford University was all about discussing the discovery of the then so-called Planet X at the outmost part of our solar system.
Venetia had the idea of proposing naming the new planet – Pluto. Now sure, you like me are immediately thinking of the beloved Disney character – Pluto – the dog and sidekick of Mickey Mouse. But for Venetia – she was thinking of the Roman god of the underworld.
Her grandfather took her naming idea and ran with it and after some serendipitous events – her idea came to be.
Neil George is editor By George and Stocks That Pay You.
The above is only opinion and does not represent and/or offer to buy or sell any security and/or any financial advice. The opinions contained may not be suitable for all investors who should consult their own financial adviser before making any investment or other decisions. I may own some of these same securities noted in accounts under my control or for my benefit.
Errors/Omissions: I always welcome being called on facts, figures and commentary from readers and look forward to your feedback. I can be reached by email at njgeorge@att.net or njgeorgejr@gmail.com or at 01-314-616-3325.
