Life with Trannies is Always Exciting

Written By: DragonFly Capital

Many people in my circles could not imagine life without Trannies. It is part of their upbringing and just normal. But I understand that Trannies can be an after thought in today’s world. What with the large number of other Indexes around now, the S&P 500, NASDAQ, Russell 2000, the Transportation Index can get lost in the mix. You are still with me right? You knew I meant the Dow Jones Transportation Average ($ DJT, $ IYT) of course. This Index has been a cornerstone of Technical Analysis in the US Markets forever. As part of Dow Theory, the Transports need to confirm a new high in the Industrials ($ DJIA, $ DIA) for a new trend to be bought. This has been a sticking point keeping many Technical Analysts out of the market as the $ DJIA has been making new highs, without confirmation. But the monthly chart for the Transports below does not show any sign that you should be panicked. It is moving higher along the Median Line of the Andrews Pitchfork and consolidating some gains at a previous high. If it were to drop back below 5000

then some alarms should trigger but no one ever said that the confirmation from the Transports had to happen the day the Industrials made a new high. In fact the Dow Theory as practiced by Charles Dow and codified by Robert Rhea missed the first 10-20 % of the move ON PURPOSE in order to be certain that the trend had changed. In an era when you got one price per day and your news from a newspaper that was a good plan. If Iran was going to block the Strait of Hormuz, for example, you did not know it for a week. This is not to say that the confirmation is no longer important. A totally separate debate, but just because the Trannies have not confirmed the Industrials new highs, does not mean the uptrend is not happening. Look at the price action. Trade that, and if you want, save some powder for the the rise of the Trannies.

Dragonfly Capital

The Supreme Court’s corporate monsters–if money buys them “free speech” rights, can it help them avoid giving others human rights?

by Linda Beale

The Supreme Court’s corporate monsters–if money buys them “free speech” rights, can it help them avoid giving others human rights?

The Supreme Court decided in Citizens United that corporations could intevene to influence elections–giving money and aide to their selected candidates. This was an inordinate broadening of corporate “personhood”, claimed to be necessary under the warped First Amendment precedents of the Supreme Court that count “money” as speech and thus consider that limitations on money spent to influence elections as a limitation on speech.

Yet most economists and tax professors argue against the corporate tax–which has been in place longer than the individual income tax–on the grounds that taxes distort and that the claimed “double taxation” of corporate income distorts the allocation of capital. See, e.g., Tax Foundation, 2004 paper on integrating corporate and personal income taxes; seminal 1985 integration piece from NBER. Much of the argument boils down to an a prior assumption that “only people can pay taxes.”
(Of course, we used to think that only people could engage in campaign speech or bribe politicians for quid pro quo policies or otherwise influence the course of society. We were naive.)

As a result of this “received wisdom” about economics and corporate taxes–mostly based on the mathematically correct but practically challenged Chicago School approach to understanding economic systems (by assuming away most of the real world, including life, death, and everything in between)– corporate lobbyists and their allies in Congress have been pushing for decades to eliminate corporate taxation through integration of the corporate and individual tax schemes or at a minimum to drastically reduce the liability of corporations for federal income taxes.
Every presidential candidate has one scheme or another to reduce corporate taxes, with even Obama falling prey to the continuing influence of the Wall Street facilitators like Timothy Geithner in the Treasury and Larry Summers. See Citizens for Tax Justice, President’s Framework Fails to Raise Revenue (pointing out that there is no reason not to fix the loopholes in corporate tax to help address the deficit without having to lower corporate rates, and noting that although Obama at least called for making his rate reduction framework for so-called corporate tax reform revenue neutral, his plan fails to raise about a trillion dollars to make up for the corporate taxes that it gives up). As CTJ notes, many organizations have called for the opposite–to raise revenues from corporations that have been paying very little in taxes, especially since the 2003 Bush “reforms” that granted most of the items on corporations’ wish list for tax cuts.

Last year, 250 organizations, including organizations from every state in the U.S., joined us in urging Congress to enact a corporate tax reform that raises revenue. These organizations believe that it’s outrageous that Congress is debating cuts in public services like Medicare and Medicaid to address an alleged budget crisis and yet no attempt will be made to raise more revenue from profitable corporations. Id.

Nonetheless, most candidates call for making the corporate income tax territorial and thus making it even more lucrative for US multinationals to move more of their corporate businesses (and jobs) abroad. Most call for reducing the rates on corporations to a historically unprecedentedly low level–making it even more likely that the US trade deficit and corresponding budget deficit will continue to grow, even at a time when these self-nominated fiscal “conservatives” are claiming that the current deficit requires monumental sacrifices from ordinary people in the way of reduced medical care and old age security (the effort to cut back drastically on the benefits payable under Medicare and Social Security).

Most treat the owners of corporate equity as though they were some kind of revered engine of growth, when in fact they are usually merely rich people who are interested in reaping as high a profit as possible from sales of corporate shares but very little interested in entrepreneurship, and as likely to engage in quick trades (the profits of which go into their pockets and not into the working capital of the corproations) as to hold long-term based on analysis of corporate business fundamentals. Most don’t accompany their form of integration with eliminating the category distinction between capital gains and ordinary income.

Most “corporate reform” plans call for continuing most of the absurd provisions that have larded the pockets of corporate management over the last few decades, such as

  • accelerated depreciation and expensing (including all the depletion allowances for the heavily subsidized oil and gas extractive industry, even while it complains about the petty little incentives put in place in recent years for environmentally sound energy generation–accelerated expensing creates “phantom” deductions that reduce taxable income well below economic profits), and
  • the “research & development” credit, which was first enacted as a stimulus that was to be in place for a very short period of time but has been extended in fits–even retroactively for several years–as corporations demand making every single “stimulus” tax break they get permanent.

(As readers of this blog know, I see little merit in the R&D credit. Corporations can already deduct way too much “phantom” expenses–excess interest expense that allows them to operate with too much leverage, facilitating equity firm buyouts by leveraging up the purchased entity to pay off the equity strippers. Further, as with so many of the GOP’s favorite programs of tax subsidies for multinationals and the upper crust, it hasn’t bothered to conduct studies to see if the R&D credit indeed results in more research done in this country. Clearly, a retroactively enacted credit does NOT incentivize research.

Probably the times it’s been enacted without being retroactive haven’t either–it takes extensive labs and equipment to do research, and such labs and equipment have to be purchased far ahead of when they pay off. Most of the R&D that the credit supports is likely to be of the “tweak-a-patent” variety that seeks merely to find a way to extend a monopoly profit from a particular profit–something the patent law should frown upon.)
So the drumbeat for lower corporate taxes–at a time when corporations are paying less as a proportion of GDP than they did in the time of our most sustained economic growth–continues unabated from the right joined by only slightly less enthousiastic accompaniment at the White House and think tanks like the Tax Policy Institute.

Meanwhile, the Supreme Court, having anointed corporations with a kind of personhood that lets them intervene in elections even though they have no vote, has taken for consideration a case that challenges the rights of individuals to hold corporations accountable as people are held accountable for human rights violations. The case is Kiobel v Royal Dutch Petroleum (2d Cir. 2010), in which Nigerian plaintiffs seek to hold Royal Dutch/Shell liable for violating the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350, which upholds international norms of human rights.

The Second Circuit held that US courts cannot entertain such suits, holding that jurisdiction under the Alien Tort Statute against corporations requires an international norm approving sanctioning corporations for torts and that requires more than the mere fact that most countries treat corporations under their domestic law as capable of committing torts. The court in the Second Circuit opinion makes a point much like economists tend to make about taxes–essentially implying that “only people commit heinous acts”.

From the beginning, however, the principle of individual liability for violations of international law has been limited to natural persons—not “juridical” persons such as corporations—because the moral responsibility for a crime so heinous and unbounded as to rise to the level of an “international crime” has rested solely with the individual men and women who have perpetrated it. Second Circuit in Riobel.

While people are the “deciders” of corporate decisions, nonetheless the corporate form permits corporations to engage in conduct that individuals alone cannot engage in–from amassing huge resources to carrying out massive enterprises that pollute and steal human dignity. To ignore that reality of corporate wrongdoing, especially in an age that has anointed corporate personhood with rights that seem furthest from ones that corporate entities should be permitted to enjoy, would be folly.

For further discussion of the implications of the case, see Peter Weiss, Should corporations have more leeway to kill than people do?, New York Times (Feb. 24, 2012).
Suffice it to say that this case raises the specter of full-blown corporatism overtaking the entire U.S. economic and social system. If the Supreme Court accompanies its “personhood for free speech/election intervention rights” with “not people so can’t be touched for human rights violations”, there will be even fewer ways to hold multinationals accountable, and they will forge even stronger relationships with autocratic dictators who treat their citizens like slaves and their environments like garbage pits. Meanwhile corporations will continue to intervene in our elections at will (usually the will of their ultra-wealthy managerial class), using the extraordinary power of the resources at their command.

We will all be the worse for any decision that would allow multinationals to expand their quasi-sovereign rights without saddling them with a strong obligation to comply with international norms respecting human rights. Rights without obligations are invitations to corruption.

crossposted with ataxingmatter

Angry Bear

Technical Picture – Ambush

As depicted on the daily ES emini futures chart above, the bears ambushed the bulls at the cusp of the ambush zone ( 50-61.8% Fib. retracement) and carved out a reversal bar.

On the 15 minute chart below, we see that in pre-market, price printed new highs, but failed to hold, leading to failed BO and swoon back to former resistance just as the US markets opened. The first test of support was a buy and we traded half way back to the 15 min. ambush zone. This is where the algos a programmed to short once a trend is broken. This level was tested twice and the algos defended both times.

Basically, we carved out a symmetrical continuation triangle and support gave way into the close.

The short squeeze off of the Oct. 4th lows was getting long in the tooth. We were overbought and needed to correct. If the bears can push prices below last week’s congestion area, we will likely trade half way back to the October lows.

Wall St. Warrior

Trade, control your risk, breathe (VVUS)

Sifting thru the daily trading reviews from yesterday it was clear that many traded VVUS. Here in Capetown training former elite athletes and now traders I work to make one point. See your trades as patterns. Trade the set up and then accept the result. Trading is not about being right. It is about controlling your risk. And finding patterns where your risk/reward for you is exceptional.

Match Play winner Hunter Mahan teaches us the importance of this mindset for elite performers (traders):

“If I wanted to be the player that I felt like I could be, I was going to have to change,” Mahan said after capturing the WGC-Accenture Match Play in a 2 and 1 win over Rory McIlroy. “I had to take it easy on myself, not try basically not try so hard.
“I didn’t want to have my identity stuck with my golf score. They needed to be separated, and I needed to play golf because I enjoyed it and accept the result and move on and not get attached to it.”

One of our SMB Traders sent a “proper” (as we say in South Africa) review of his VVUS trading. He summarized his trading precisely with this thinking……….

I traded 22 tickets on VVUS and there were about 7 distinct trades I made
1) pre-market scalp
2) open drive at 23
3) fade the ticks to buy a pullback during an open drive, move from 23.80 down to 23.30
4) buying into a pullback after 10am, after it puts a top at 24.83
5) intraday resistance breakout at 23.50
6) one last try for the big move to the long side: taking a feeler and scalping the range from 24.40-24.80
7) getting short when the range fails and confirms a lower high for the afternoon sell-off

Perhaps thinking of your trading like this will help your trading.

One Good Trade

no relevant trading positions

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SMB Capital – Day Trading Blog

Diamonds are Sparkling

Written By: DragonFly Capital

Today marks the end of the end of February and time to step back and look at the longer term charts to gain perspective. Despite one day left in the Month, the monthly chart for the SPDR DJ Industrial Average ETF, $ DIA, is not going to change character unless Monday closes under 125. Not only does this chart show the long bullish run off of the Triple Bottom near 60 since march 2009, but it screams that we are going to continue higher.

SPDR DJ Industrial Average ETF, $ DIA

in January it broke above the Double Top and February is confirming higher. The first target on a Measured Move takes it to 138. It has support of the Relative Strength Index (RSI) bullish and rising and the Moving Average Convergence Divergence (MACD) indicator positive and rising. The second Measured Move takes it to 170. You could also create targets from the Fibonacci extensions of the retracement of the move lower from 2007 to 2009. These come at 151 (138.2%), 159 (150%) and 167 (161.8%). Need more ammunition? Well the Point and Figure chat measures a price objective of 154 from the Double Top break. Notice how none of these mention any kind of pause at the current 130 level? Still think that 150 on the $ DIA or 15,000 on the Dow Jones Industrial Average, $ DJIA, is pie in the sky?

Dragonfly Capital

Rick Santorum’s tax policies and more–imposing his moralizing choices on all

by Linda Beale

Rick Santorum’s tax policies and more–imposing his moralizing choices on all

Rick Santorum is a man who seems to hold sincerely held religious beliefs. The problem is that he thinks everybody that matters holds (or should hold) the same beliefs that he does, or at least should be forced to live in a country that operates by the principles that follow from those beliefs.
Santorum has accused Obama of operating from a “phony theology” (one not based on the Bible). That suggests that Santorum thinks a president is supposed to impose a biblical theology on all presidential work–and that Santorum intends to impose his own “correct” theology if he were to be elected president. See Santorum Questions Education System and Criticizes Obama, New York Times (Feb. 18, 2012). That approach fits with Santorum’s idiosyncratic views on how religion is supposed to influence public life: Santorum has made a point of claiming that he does not hold with the founding principle of separation of church and state–a principle enunciated by Thomas Jefferson, ascribed to by Abraham Lincoln, and articulated splendidly by John F. Kennedy. See Joan Walsh, Santorum’s JFK Story Makes Me Want to Throw Up, (Feb. 26, 2012).

This issue is worth pointing out clearly. Here’s what Santorum said

I don’t believe in an America where the separation of church and state is absolute. The idea that the church can have no influence or no involvement in the operation of the state is absolutely antithetical to the objectives and vision of our country. (emphasis added)

And here’s what the statesman Kennedy said when confronting the concerns of the Southern Baptist Convention that a Catholic in office would implement the laws under the dictate of the Pontiff in Rome rather than the U.S. Constitution.

I believe in an America that is officially neither Catholic, Protestant nor Jewish; where no public official either requests or accepts instructions on public policy from the Pope, the National Council of Churches or any other ecclesiastical source; where no religious body seeks to impose its will directly or indirectly upon the general populace or the public acts of its officials; and where religious liberty is so indivisible that an act against one church is treated as an act against all.

What does Santorum’s theology look like and how will it influence public policy under a Santorum presidency? Santorum apparently thinks public schools are a bad idea (he’s likened them to “factories”) and that all children should be able to be home schooled (and indoctrinated in a parent’s religious preferences) at taxpayer cost. See Santorum Questions Education System and Criticizes Obama, New York Times (Feb. 18, 2012); Santorum Exposed: why is Santorum spending your tax dollars on his family (noting that Santorum took $ 100,000 from Pennsylvania for an online program for his home-schooled kids, even though he resided in Virginia at the time). He thinks kids get “weird socialization” in public schools. Rick Santorum, Kids Get Weird Socialization in Schools, Huffington Post (Feb. 22, 2012).

We already have weakened public schools by permitting taxpayer funds to pay for “nonreligious” items at religious private schools, such as text books and transportation. Since money is fungible, that payment merely subsidizes more religious expenditure on religious education and deprives children in public schools of much needed resources to deal with the huge lingering infrastructure problems of our public school systems. We don’t need to go even further in that direction by moving religion into public schools wholesale, or moving even more children into ideological indoctrination through taxpayer-funded schooling.

Santorum’s theology is backward on women as well, seeming to think more women should be anchored in the kitchen with numerous progeny pulling on apron strings that signify the most satisfying role for women (in his book). One worries how that would play out in a Santorum presidency that could cut off funding for disfavored activities through executive orders, and his public statements bode ill for how it would pan out. Santorum apparently thinks the feminist revolution is bad, because it has made it harder for women to choose to stay at home. See Santorum faces questions on women in the work force, New York Times (Feb. 12, 2012).

 In contradistinction to the importance of individuals’ rights under the First Amendment, he seems to think that every religious institution should be able to impose its beliefs on its workers (no matter what their beliefs are): under Santorum, a woman working in any capacity for the Catholic Church could not be covered in her health care plan provided by her employer for contraception. See Social Issues Rule Day in Candidates Race, AP (Febl 12, 2012) (noting Santorum’s comment that the contraception rule forces churches to do something against their basic (institutional) tenets). He thinks voters should be aware of his religious faith and should consider that in determining whether to vote for him. And his religious faith doesn’t believe in birth control, so he wants to be sure that the tax code provides a huge tax exemption for each child in multi-child families–but not a refundable tax credit that would be of real use to a poor working mother with one child to care for. See Santorum letter, Raise the exemption for children, not the child tax credit, Wall St. J (Feb. 25, 2012) (claiming that he wants an $ 11,100 personal exemption per child for working families but is against a child tax credit that would be refundable, so is “innocent” of “expanding welfare”).

Santorum’s theology doesn’t seem to find it problematic when a government system systematically redistributes resources upwards to the benefit of the wealthy. His tax plan would result in zero taxation on unearned income, the primary type of income of the wealthy. Welfare for the rich is apparently fine and dandy under Rick Santorum’s version of morality.

crossposted with ataxingmatter

Angry Bear

Banana’s, Tweezers and a Long Nap

Written By: DragonFly Capital

While running through charts this weekend I came across 2 in particular that were interesting not because they were ready to break a pattern or trendline or through some resistance or support level. Chiquita Brands, $ CQB and Tempur-Pedic, $ TPX, had both been moving higher but printed Tweezers Tops on their charts. This pattern, two candles with upper shadows that end at the same point, often signals a reversal, but needs to be confirmed. Lets see what happened Monday.

Chiquita Brands, $ CQB

Chiquita Brands, $ CQB, shows the Tweezers followed by a Hollow Red candle Monday. This bullish intra-day action is usually a good sign, but following the Tweezers Top, closing below the previous day, it actually confirms the reversal. How low will it go? There is support at the 9.74 area and then 9.05-9.10. Either could give a healthy return on a short.

Tempur-Pedic, $ TPX

Tempur-Pedic, $ TPX, has the second half of the Tweezers engulfed Monday with a bullish candle moving higher. But note that it did not close above the Tweezers Top. This could still be confirmed lower on Tuesday. The Relative Strength Index (RSI) on this chart is getting overbought as well adding to the required caution in this stock. A close below 76.50 Tuesday cold trigger downside with support at 74 and then 70. If it does close above the previous top at 78.51 then the Tweezers Top will be negated, but the RSI will likely be over 80 at that point. I would suggest you go take a nap instead of buying it there.

Dragonfly Capital

… And Whom Would President Romney Pay Off? Do Tell!

sales “are growing so fast that Detroit can barely keep up,”
according to an AP report published this evening bearing a Detroit
dateline.  “Three years after the U.S. auto industry nearly
collapsed, sales of cars and trucks are surging. Sales could exceed 14 million
this year, above last year’s 12.8 million.”
report says that as a result, carmakers and their suppliers are adding shifts
and hiring thousands of workers around the country.  Most
of the added jobs in the upper Midwest are for the Big Three carmakers and
their suppliers. 
the good news.   But two of these carmakers, and many of the
suppliers in the Midwest and elsewhere in the country, would have collapsed in
2009 but for the government bailout of those two carmakers.
the good news is really bad news, Romney told Fox News today, in sticking to
his anti-bailout stance.  “The president ‘was paying off the people
that supported him and that, by the way, are trying to get him re-elected,’
Romney said,” according to the AP report.
What?  No
longer a Detroit-would-have-been-better-off-without-the-bailout claim?  Just
I dunno.  This
doesn’t sound to me like a winning complaint for the general
election.  Especially since the obvious question is: And whom will you be
paying off as president, Mr. Romney?

Angry Bear

My Thought Process: VVUS

I tweeted early this afternoon that it looked like VVUS had put in an intra-day bottom. Here is the tweet.

i think bottom is in for $ VVUS today. a hold above 20.25 should get it trending nicely

Here is a pic annotated that sums up what I was thinking. The long trade didn’t work out as VVUS failed to get above 20.25 and eventually made a new intraday low knocking out the 19.50 support area. This is a stock that will offer a lot more short term trading opportunities in the days and weeks to come. I will continue to monitor it closely.

Steven Spencer is the co-founder of SMB Capital and SMB Training and has traded professionally for over 15 years. His email is

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SMB Capital – Day Trading Blog

Cleveland’s Best Linkfest!

Written By: DragonFly Capital

Charts/Markets/Business/Economy You Might Not See Otherwise

Despite that…S&P 500 posts highest close in nearly four years Reuters

Will this take the lid off the market? Greece launches long-awaited debt swap offer Reuters

Stocks: How Tweet It Is WSJ Try it with Level 3 Communications, $ LLL, the chart looks ready for a breakout

You did it you or you did not: ‘Neither Admit Nor Deny’ Settlements Draw Judges’ Scrutiny NYT

1st try- Admit: Don Fair, former Fair Finance owner, sued for $ 150 million

Good News, unless You owned the stock: Regulators reject AEP rate plan Columbus Dispatch

Missing a W-2 or 1099? Here’s help

Cleveland Flair

The 2012 Auto Show starts today at the I-X center and runs through March 4th.

For a bit of great sensations of a different kind Arrabella Steinbacher joins the Cleveland Orchestra to play Mendelssohn’s Violin Concerto and Schubert’s Ninth on Saturday.

Or a little more relaxed tone at the 40th Lakeland Civic Jazz Festival with the Yellowjackets Saturday.

Pick up Two Tickets to Paradise at the House of Blues for Thursday when Eddie Money

Down the street from me the Shaker Nature Center is having a Pancake Breakfast with the Birds Saturday til noon. I guess birds like snow. Wonder if they will have blueberry?

And for some hometown pride: Irving steals Rising Stars Challenge as Lin goes silent – USAToday

Dragonfly Facts

Dragonfly eyes consist of approximately 28,000 individual telescoping lenses called ommatidia. The large eyes appear out of proportion to the rest of the head and body. They cover most of the head and come together at the top. The many lenses of the eye provide the dragonfly with almost 360-degree vision. Dragonflies can detect colors and moving objects.

Dragonfly Capital

Romney’s association with corporate tax shelter schemes

By Linda Beale

Romney’s association with corporate tax shelter schemes

Bloomberg’s Jesse Drucker has been doing some research into presidential candidate Mitt Romney and come up with some interesting information–at least for those of us who find corporate involvement in aggressive tax shelter phantom loss generating schemes a worrisome problem. See Drucker, Romney as Audit Chair Saw Marriott Son of Boss Shelter Defy IRS, (Feb. 22, 2012).

Mitt Romney has been on the board of Marriott INternational Inc. on and off since 1993, and has served as chair of the audit committee for 6 years. During that period, the company has used aggressive tax avoidance deals, including (i) the “Son of BOSS” tax shelter structure for generating artificial losses that could be used to offset gains from other sources, thus reducing taxable income and tax liabilities and (ii) shifting profits to a Luxembourg shell company. Marriott’s effective tax rate has been as low as 6.8%, even though the federal statutory rate for corporations is 35%.
These factoids demonstrate two things.

First, as the article points out, Romney claims that his business experience is the primary reason that Americans should want to see him in the White House. Contrary to his claim, it seems to me that the more we hear about his business experience the less I think he is suited to the White House.

At Bain Capital, as at most private equity firms, Romney was willing to reap millions from taking a stable, operating company and turning it into a bankrupt by leveraging it up, firing employees, and otherwise destroying the stable business. Yeah, sometimes the “creative destruction” worked and the company exited making profits. But often it didn’t, and the company wasn’t a loser until Bain Capital got hold of it. Further, Romney doesn’t appear to have developed much of a sense of corporate social responsibility through his “earning” of multi-millions taxed at low rate through Bain Capital. So he didn’t see anything amiss in the very aggressive tax planning engaged in by Marriott when he served as a Marriott director with oversight responsibility–of which he certainly knew, as head of the audit committee. Even John McCain was aghast at Marriott’s wanton use of tax shelters, when he complained about the federal tax credits Marriott claimed in an accidental loophole in the law on synthetic fuels. As the piece notes, McCain called Marriott’s use of this loophole to claim the credits an “expensive hoax” or “scam.”

Do we want as president a man who thinks it is okay for taxpayers to gin up artificial losses to reduce their tax liability or use provisions of the Code in ways that clearly go against their underlying purpose to get an unintended subsidy from the Federal government? I don’t think so. Such a person would likely be quite willing to see further cuts to the corporate taxes and taxes on the wealthy, no matter what that does to the federal fisc. And Romney has certainly demonstrated his willingness to cut taxes even in the face of deficit claims that are being used to demand privatization of Social Security and cuts to Medicare. (See his plan for a 25% corporate rate, a zero percent estate tax, a lower top rate on earned income for the wealthy, and other items.)

I want a president who considers that every taxpayer has an obligation to the integrity of the system, and who would not look kindly on businesses that engage in aggressive tax minimization transactions that don’t hold up to the laugh test.

Second, major corporations aren’t paying enough–much less too much –in taxes these days. We have a statutory rate of 35%, but most very profitable corporations end up paying very little in taxes, through a combination of excessive loopholes built into the Code by their accommodating buddies in Congress (quid pro quo for campaign contributions or, after Citizens United, “independent” super-PAC donations?) and outright tax sheltering through aggressive customized transactions intended to generate tax benefits.

Why in the world would anybody in his/her right mind propose cutting the corporate tax rate in this context of minimal tax payments by corporations? Makes no sense at all. Get rid of the loopholes. Bear down with enforcement clout on the phony tax-loss shelters. But don’t cut the corporate tax rate. There’s absolutely no substance to the constant whine we hear from corporate lobbyists that the corporate tax code is “too complex” (my JD students in corporate tax are quite capable of understanding it, so I am sure Corporate Tax Counsel are, too); or that the corporate tax code is “anticompetitive” (Marriott is making a fine rate of return); or that the corporate tax code is “preventing investments” (corporations have lots of cash floating around–if they want to make expansion investments, they can do so already).

Tax policy should be based on reasonable considerations of efficiency and simplicity, not exorbitant and unfounded claims of how the tax code is wrecking business. But even more importantly, tax policy should be based on fairness considerations. And Romney hasn’t shown much understanding of what fairness is, or how to make the tax code fairer rather than even more of a government program for redistribution upwards.

crossposted with ataxingmatter

Angry Bear

Technical Picture – Ambush Fails, Bulls Own It

News of the EU debt resolution sparked a huge rally as depicted on the ES emini chart above. The ambush zone was broken and we expect this rally to continue to through to the end of the year.

On the SPY weekly chart below we are targeting the $ 148-149 level which represents an extension of 23.6%. All future fib pullbacks will be measured from highs to highs where August high is the base, until the pattern fails.

We saw some profit taking into the close on Thursday. Buyers stepped in half way back of the US trading hours price levels. Then we traded all the way half way back short, and held within that range overnight Thursday and all day Friday. Short-term, we don’t expect wide price expansion ahead of Friday’s jobs data, notwithstanding a catalyst. In the meantime our trading is guided by the 15 min. Fib. levels.

Friday’s daily bar is narrow, in the upper range of Thursday’s WRB which is bullish. A few more upper inside bars would lead to a coil.

Wall St. Warrior

Macro Week in Review Preview February 25, 2012

Written By: DragonFly Capital

Last week’s review of the macro market indicators looked heading into the week that Gold might continue to be an enigma, consolidating in a intermediate term downtrend in a long term uptrend, while Crude Oil was breaking higher and looked to continue. The US Dollar Index and Treasuries were in consolidation zones but both were biased lower. The Shanghai Composite and Emerging Markets looked ready to continue higher with Emerging Markets perhaps consolidating. The Volatility Index looked to remain low and perhaps test the low support. These influencers created an atmosphere for the Equity Index ETF’s, SPY, IWM and QQQ to continue higher and their charts generally agreed, with the exception of the IWM that might consolidate or pullback.

The major move of the week goes to Gold breaking the consolidation higher and following the trend continued by Crude Oil, both ending near the highs. The US Dollar drifted lower while Treasuries turned into the new enigma continuing to hold their support levels and drifting higher. The Shanghai Composite drifted higher before busting a move Friday while Emerging Markets consolidated. Volatility moved back lower towards support. The Equity Index ETF’s held higher with the SPY establishing a new higher range for the week and the QQQ joining higher on Friday. The IWM recovered from an early week selloff to bounce back to the top of its range. All in all pretty true to the read presented from the price action. What does this mean for the coming week? Lets look at some charts.

If you like what you see sign up for more ideas and deeper analysis using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

Dragonfly Capital

Length of Unemployment is Worst Since World War II

Middle Class Political Economist: Basics: Length of Unemployment is Worst Since World War II.. (HT Brad DeLong.)

The key graph:

Assuming the economy is “trying” to reach equilibrium, this suggests that it “wants” less workers.

If that is a secular trend, as suggested by the steadily lengthening jobless recessions since the 80s,

…we’re faced with the need for a new structure wherein people’s claims to a decent share of the pie are not linked to their ability (luck) in finding well-compensated employment. Alternative means are necessary to provide widespread prosperity and the widespread demand that gives producers the incentive to expand and innovate.

Have I mentioned expanding the EITC lately, and indexing it to unemployment?

Cross-posted at Asymptosis.

Angry Bear

Waiting for Godot (by BBFinance)


First I would like to express my apologies for not being able to respond to some of the questions or comments from the readers. For some silly reason, Blogger is not allowing me to post response to the comments. I hope they sort it out soon.

Like the famous absurdist play by Samuel Beckett, we are all waiting for Godot, the market correction.  It just doesn’t want to listen to anyone. It simply refuses to show up and hiding behind the coat tails of the Fed.  In a liquidity induced rally, what will happen when all of a sudden a whole chunk of liquidity is removed from the market? As per Lee Adler of “The Wall St. Examiner” a total of $ 87 billion (yes, billion with a B) will be settling next Wednesday and Thursday. Won’t that be interesting! And cycles are calling for an end of this rally as well. We will see what next week brings.

Did SPX break its previous high? Yes and No.

It did a kind of peek-a-boo but there was no conviction. I suppose we will have to wait for another day to get a confirmation in either way.

While the trend is still not broken and SPX made a new high, not everything is well in the market place. Both Dow and DJ-Tran were in red. So was Russell 2000, gold, silver and copper. There are some funny disconnect in the market place and it is acting in the most irrational and suicidal manner. Euro is at a new high while Germany is saying that Greece bailout is not guaranteed. The Telegraph, UK has an interesting article on this:

While Greece has opened the bond swap under PSI, the threshold level is 75%. I am not sure if the Greek FinMin is ignorant or just bluffing but he says that nobody cares about a CDS event.  What happens if 25.1% of the bond holders do not agree and the PSI does not go through? I am sure lots of European Countries will say “Halleluiah”. The following is a chart of Greek PSI from BNP Paribus. Just replace 67% with 76%. Germany and other Northern European countries are waiting for such an opportunity when they can blame the greedy hedge funds for kicking out Greece.

Greek PSI

So the risks are high in the market place and never for a moment believe in the US growth story or fall in unemployment numbers. The following chart is from which is self explanatory.

SPX 500 60 dma 3 sd

As the Trend following table is saying, the trend is up but barely so. It is advisable not to front run unless you are sure of what you are doing. I lost on the gamble which I should not have taken in the 1st place. Trading should not be a gamble and I am guilty of breaching my own discipline.

Trend Following
We know that a trend change is about to take place but it has not happened yet. So trade safe.

Thank you for reading . Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions. Have a wonderful weekend folks.

Slope Of Hope with Tim Knight