This Week in Barrons – 1-6-2013
The
Devil’s in the Details:
Congratulations
to my son Morgan for being admitted to Carnegie Mellon University! They’re getting a terrific student.
Often
the market is viewed as a "random walk" that moves up and down on the
whims of the collective wisdom of millions of investors. That may have been the case years ago: (a) before
high frequency trading, (b) before major banks set Libor rates, and (c) before banks
were fined for money laundering for drug cartels. And just as Wall Street has many underlying
threads and currents, so does that ‘fiscal cliff’ deal. All we have heard for two days was that the
President got his victory by raising taxes on the evil rich, and the middle
class was spared any tax hikes. Ah, the
Devil’s in the Details. Inside the
fiscal cliff bill, there are not only additional payroll taxes and health care
taxes for ALL, but approximately $76 Billion in tax credits to special interest
groups – some are listed below:
- Former
Senators John Breaux (D-La.) and Trent Lott (R-Miss.) – a pair of rainmaker
lobbyists, succeeded in getting the Senate to extend a tax provision that
allows multinational corporations to defer U.S. taxes by moving profits into
offshore financial subsidiaries. This "active
financing exception" is the main tool GE uses to avoid nearly all U.S.
corporate income tax.
-
Diageo (a liquor giant) also
retained Breaux and Lott to win extensions on two provisions benefitting rum
making in Puerto Rico.
-
CTP represented green energy
companies like GE and the American Wind Energy Association, winning extensions
and expansion of the production tax credit for wind energy.
-
CTP also won for The Motion
Picture Association of America, an extension on tax credits for film
production.
If
all that doesn’t raise your blood pressure, how about GE (who’s CEO – Jeff
Immelt is on Obama’s Economic Advisory Board) reported U.S. profits of $5.1
Billion in 2010 ($14.2 Billion worldwide) – and paid $0 in U.S. taxes. In fact, they claimed a $3.2 Billion tax
credit due to “an aggressive strategy that mixed fierce lobbying for tax breaks
and innovative accounting – enabling GE to concentrate its profits offshore”
(as quoted to a New York Times reporter).
So,
Obama has NO PROBLEM letting a huge corporation (that takes in tens of billions
of dollars) go virtually tax free, but shame on the small business guy that
after 20 years finally makes his $400,000.
Let’s fine him, tax him, and take away his incentive to create
jobs. Let’s convince the masses that
HE’S the problem. He’s that wicked small
business guy that just isn’t paying enough.
When
I looked at the details in the Hurricane Sandy Relief Legislation, I found that
Harry Reid’s senate committee also loaded it up with pork. The ‘pork fest’ includes many items – a few
of which are below:
-
$150 million for the National Oceanic and Atmospheric
Administration to spend on fisheries in Alaska,
-
$207 million for the VA Manhattan Medical Center, and
-
$10.78 Billion for future public transportation improvements
– not effected by Hurricane Sandy.
Honestly,
we have desperate people in the Northeast that NEED help and our politicians
load the bill with pork for their constituent friends. The Devil’s in the Details of what our
government is doing – and it’s approaching lunacy.
The Market...
So
far, so good. For weeks I was convinced
that if we would get the fiscal cliff out of the daily news, the market would love
it and probably set us up for a shot at the "all time" highs. This week we saw a stunning 300+ point move as
the DOW posted the single biggest New Year’s trading day ever!
200
points is all that it’s going to take to see if this market really can
challenge the all time highs. There is a
pretty stern triple top at the 13,600 level.
If we can get over that, we will see a challenge of the old all-time high
shortly thereafter. It’s amazing that in
a market where our Fed is printing $85 Billion a month for bank ‘life support’
– we are challenging the stock market all time highs.
So,
what happens now? I think we challenge
the all time highs. I even think we get
THROUGH them, and that opens a new can of worms. Why, because the market doesn't deserve to
make all new highs here. This year’s
earnings are going to stink. The only
thing going for us is The Ben Bernanke's billions, which we almost lost the other
day when some of the Fed members hinted that maybe they should back off QE in
2013. Well that's strong talk (but insanity)
as our banks can’t afford the Fed to stop QE any time soon. All that remark did was to create a buying
opportunity for gold and silver.
I
tend to think we challenge DOW 13,600 fairly quickly. I also think we will (in some time) challenge
the all time ‘down’ high of 14,164. If
we get past that, we could see an enormous first half market move to 15,400. I also think that in 2013 we will also see
the beginning acts of a very long, drawn out bear market. So I'm looking at 2013 as the "blow-off-top",
and afterwards we go back and visit a much lower market.
For
now, we lean long and (knock on wood) things are going about how I thought they
might. Let us keep our fingers crossed
and hope.
Tips:
My current short-term holds are:
-
HD – in at 61.53 (currently 63.20) – stop at
61.60
-
FWLT – in at 24.77 (currently 24.82) – stop
at 24.30
-
VALE – in at 18.52 (currently 21.26) – stop
at 19.45
-
ALTR – in at 34.40 (currently 35.23) – stop
at 34.70
-
MS in at 18.50 (currently 20.19) – stop at
18.00
-
RGR in at 42.00 (currently 47.34) – stop at
45.50
-
SWHC in at 8.00 (currently 8.81) – stop at 8.40
-
SIL – in at 24.51 (currently 22.52) – no stop
yet
-
GLD (ETF for Gold) – in at 158.28, (currently
160.44) – no stop ($1,648.10 per physical ounce), AND
-
SLV (ETF for Silver) – in at 28.3 (currently 29.19)
– no stop ($29.90 per physical ounce).
To follow me on Twitter and get my daily thoughts and trades
– my handle is: taylorpamm.
Please be safe out there!
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