Was it a stroke of genius… or was it just an accident that President Obama’s threat of sharply higher taxes next year will bring in a bumper crop of tax revenue this year, 2013? This is good news that the American news media has not picked up on yet.

All the tax dodgers took profits in 2012 and asked that their dividends be pushed forward into 2012 thinking they would have to pay much more in 2014 if they didn’t pay the taxes in 2013.   And some corporations gave their dividends for the first time in December rather than January just to help their shareholders avoid USA taxes due in 2014.   

Let us examine their logic for a lower tax on dividends for one moment.  It goes like this.  They say a dividend tax is double taxation because the corporation already paid taxes on dividends which are usually from earnings.  That however is not always true.  There are companies that borrowed money to pay the dividends and even pay the CEO and other bigger bonuses.  Those are companies that clearly are not run by entrepreneurs and they are bleeding those companies to death. 

The dividend is a financial product of the corporation for the expressed purpose enticing people to buy the corporation stock with the incentive that they avoid a higher tax rate and the volatility (risk) of the stock market.  The wealthiest families use dividends as a low risk, high return way to avoid taxes and investment in municipal bonds.  Dividend taxes are not good for cities and states to impose them because wealth moves out.  Only the Federal government can do dividend taxes wisely.  We need things like dividends because they improve the stability of the economy especially for the elderly who cannot tolerate volatility well.

But  isn’t a sales tax also a form of double taxation?  It is… but it is but it applies to all competitive corporations products equally and to foreign products as well, so it does not hurt American inter-competition!  That is why Europe uses the sales tax successfully.   

But Americans pay a 20+% tax in Europe when they shop and can file and get the tax money back when they return to the USA.  That creates unfair competition.  The USA needs to tax that EU kickback because it damages America’s ability to compete and as long as America does not do it Europe will continue to do it.  It was so bad 50 years ago that Americans would start their vacation by buying a new car on arrival in Europe at a low cost, tour Europe in it and have it shipped to the USA as a used car.  The USA caught on to that.  Another option is to negotiate with Europe to eliminate that game or put a 100% tax on that “sales tax EU kickback” and collect the EU sales tax for ourselves.  That is not simple.  The sales tax hurts balance of trade to some degree which is worse than vanilia double taxation.

Municipal bonds compete with dividends because both offer investment stability and a lower Federal tax.   Dividends are a direct competitor with the needs of states and cities to raise capital.  If dividend taxes were higher municipalities could pay a lower interest rate on their bonds because wealth would invest more in cities because dividends would be taxed higher.   Only the Federal government can do a dividend tax with minimum effect on cities and states but must realize that at some point when taxes go up the wealthy will move out of the country.   Today they already move out of municipalities and states that have dividend taxes.

Was that threat of a higher dividend tax a brilliant maneuver on the part of President Obama or just an unanticipated consequence?  Now the tax dodgers raised their own taxes this year by moving some of their dividend income forward and President Obama will get a revenue boost.  Warren Buffett must be happy.

The shame of socialism is the harassment of people who think and express themselves.  They lose their jobs and they end up with nothing, living in poverty on the charity of family and friends.  Great Americans such as Abraham Lincoln put up with a lot of criticism but he was a great American who knew it was wrong to misuse government power to harass critics because harassment is the method and mode of governments of socialist tyranny. 

Winston Churchill said,  “Some people (International socialists) regard private enterprise as a predatory tiger to be shot. “Others (nationalist socialists) look on it as a cow they can milk.”  But either kind of socialist tyranny spies on and harasses their citizens and ultimately does far, far worse things.  That is when you know a tyranny is actually growing.  Lincoln was a Republican reviled and hated by many and tolerated the free speech that truly was despicable towards both himself and his family but never lost sight of his ideals to end slavery.  Had he employed harassment and been vindictive and arrogant he would have failed because America has and will never tolerate a tyrant.  The second ammendment is there not there for hunters and sportsmen.  The founding fathers made it clear that the second ammendment is there because it was necessary for Americans to overthrow their tyranic government in 1776 and the second ammendment gives Americans the right to do it again if necessary.  The USSR lasted four decades only because they could not bear arms.  It clearly puts any potential American tyrant on notice that tyranny will not be tolerated in America.  The shame and damage from the exposure of USSR government harassment finally won Aleksandr Solzhenitsyn his freedom. 

Nuclear physicist and writer Aleksandr Solzhenitsyn said the following about the USSR. 

• For us in Russia, communism is a dead dog, while, for many people in the West, it is still a living lion. 
• Everything you add to the truth subtracts from the truth.
• I have spent all my life under a Communist regime, and I will tell you that a society without any objective legal scale is a terrible one indeed. But a society with no other scale but the legal one is not quite worthy of man either.
• In our country the lie has become not just a moral category but a pillar of the State.
• It would have been difficult to design a path out of communism worse than the one that has been followed.
• Our government declared that it is conducting some kind of great reforms. In reality, no real reforms were begun and no one at any point has declared a coherent program.
• The name of "reform" simply covers what is latently a process of the theft of the national heritage.
• Violence can only be concealed by a lie, and the lie can only be maintained by violence.
• Woe to that nation whose literature is cut short by the intrusion of force. This is not merely interference with freedom of the press but the sealing up of a nation's heart, the excision of its memory.
• We have arrived at an intellectual chaos.

When exposed to the public in all its self-evident leadership tyranny, harassment of citizens who think and express themselves is the beginning of the end for all demigods. Compassionate people eventually know the State has arrived at intellectual chaos when good people are harassed by government.

The Founding Fathers feared "The Dictatorship of the Majority."  That is what both National Socialism and International Socialism are.  Hitler and Stalin and all the rest came to power by "democratic vote."  It might have been voter fraud but for all appearances it was democratic.
 

Thousands of New England roofs are now in danger of decay due to environmental agency restrictions on the materials in asphalt shingles that went into effect about ten years ago.  Moss, mold, and fungus now attack them and weaken them.  Homeowners have to hire people to power wash and treat the roofs and possibly far more damage is done to the environment.  The agency should have done some homework before they passed their regulations.  Scrap pieces of zinc metal is being put on many roofs as a temporary solution.    The effects of the regulations in Eastern Europe were that they didn’t even paint their homes for the 50+ years they were under socialism (a dictatorship of the majority).  

It was a shameful time when elected and employed state officials no longer helped citizens who were mistreated or harassed but instead become the harassers themselves. 

 Obama so far refuses to propose spending cuts to balance the out-of-control budget.  The specter of a severe setback to the U.S. economy will exist until the President and Congress do something meaningful to get the spending binge under control. 

President Obama must get serious about overdue spending cuts and the debt limit is the perfect time for it, Senate Republican leader Mitch McConnell pleaded.  Republican John Boehner, the House of Representatives speaker, said: "The American people do not support raising the debt ceiling without reducing government spending at the same time."

It took 10 years and $1Trillion to place an American on the moon when America believed in exceptionalism.  Today America is already running a deficit alone of over $1Trillion each year.   Our children will be impoverished and our grandchildren will be starving like they did in Easter Europe, the USSR, N. Korea, and every country that destroys the incentive to work.  China’s entire recent prosperity is the result of their experiment with American free enterprise and only a socialist is not capable of understanding that.

American industry has begun a surge in manufacturing thanks to American robotics development.  The total cost of robot labor is now down to the cost of a Chinese factory worker.  Soon American robots will bring US and foreign manufacturing back to the USA.  Then in a few years China and Japan will have stolen patents and copied everything unless we make a chip breakthrough in small size and high complexity it cannot be copied.  That is how the USA won the Cold War.  In one example the USA produced cooled gas turbine blades that none of the Socialists could duplicate.  Therefore when US fighters established speed records they were done under normal military limits that ensured at least 6000 flight cycles before overhaul.  When the USSR (Union of Soviet Socialist Republics) established their records it was that one single flight and then the engine was on the scrap heap for spare parts.

The Federal Reserve Bank of Philadelphia’s economic index dropped to minus -5.8 from 4.6 in December. Readings lower than zero mean contraction in the area of eastern Pennsylvania, southern New Jersey and Delaware.  The reinforce the significance of the  New York Fed data released this week that showed factory activity shrank for a sixth month indicating that manufacturing, the pillar of the recovery has had its day in the light.  The business news reported this week that deficits and refusal to reign in spending, expanding government, thousands of pages of change to business regulations, and stagnant prices give companies little hope for any positive change worth investing in at the present moment.

World Economies

http://www.bloomberg.com/news/
http://www.foxbusiness.com/index.html

Gross domestic product in the 17-nation currency region will stay unchanged in the three months through March, before rising 0.1 percent and 0.2 percent in the second and third quarters, the median forecast in a Bloomberg News monthly survey showed. GDP probably fell 0.4 percent last year and will decline 0.1 percent in 2013, economists said.

 The World Bank on Jan. 15 cut its global growth estimate to 2.4 percent from 3 percent.

Brazil had 1% growth and 5.84 percent inflation in 2012.  The BRICK is now RICK

China has been making noises and has been claiming they are stimulating and growing their economy for over a year now but investors who first believed the news still have not broken even and presently their stocks are looking pricy with many of China’s companies essentially bankrupt shells at this point with little chance of a turn around.  They no need to deal with infrastructure and high pollution if they are going to resume real national economic growth in value.

http://in.finance.yahoo.com/q/bc?s=000001.SS&t=5y&l=on&z=l&q=l&c=

See what QE 1985 to 1990 did to Japan.  Japan’s market indicates stagnation since 1990 when they ended their QE experiment. 

http://in.finance.yahoo.com/q/bc?s=%5EN225&t=my&l=on&z=l&q=l&c=

The French market indicates stagnation since 2000.

http://in.finance.yahoo.com/q/bc?s=%5EFCHI&t=my

German stocks in 2013 are now at the same highs as when the German markets collapsed of 2000 and 2007.  See:

http://in.finance.yahoo.com/echarts?s=%5EGDAXI#symbol=^gdaxi;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

 The British market indicates peaking in 2000 and stagnation since 2007.

http://in.finance.yahoo.com/q/bc?s=%5EFTSE&t=my

The Swiss market indicates stagnation since 2007.

http://in.finance.yahoo.com/q/bc?s=%5ESSMI&t=my

 The NYSE is similar to the British and Swiss and indicates stagnation since 2007.

http://finance.yahoo.com/q/ta?s=%5ENYA&t=my&l=on&z=m&q=l&p=m20%2Ce50&a=m26-12-9&c=

The DOW is highly manipulated and the NASDAC tends to bubble up and burst.

 American Economy

The stock market continues disengaged from the economy and is becoming increasingly unstable because the FED has created a bloated balance sheet.  Volume is extremely low meaning very little cash can and is controlling the market. 

The DJA is 2013 is also now at the highs before the market collapses of 2000 and 2007.

http://finance.yahoo.com/q/ta?s=%5EDJA+Basic+Tech.+market Analysis&t=my

http://biz.yahoo.com/c/e.html

This week

Jan 15

Retail Sales Dec 0.5% improved slightly from 0.4%

Retail Sales ex-auto Dec 0.3% improved from 0.0%

Producer Prices I Dec -0.2% continued lower energy costs -0.8%

Core PPI Dec 0.1% no change 0.1%

Empire Manufacturing Jan -7.8 once more very bad -8.1

MBA Mortgage Index 01/12 15.2% NA NA 11.7% -

Jan 16

 CPI Dec 0.0% stable -0.3% 

Core CPI Dec 0.1%  still low 0.1%

Net Long-Term TIC Flows Nov $52.3B back to normal from $1.3B

Industrial Production Dec 0.3% down sharply from 1.1%

Capacity Utilization Dec 78.8% improved from 78.4%

NAHB Housing Market Index Jan 47 flat at 47

Crude Inventories 01/12 -0.941M worsened from 1.314M

Jan 17

Initial Claims 01/12 335K down from 371K  looks suspicious

Continuing Claims 01/05 3214K up sharply 3109K

Housing Starts Dec 954K up from 861K

Building Permits Dec 903K up from 899K

Philadelphia Fed Jan -5.8 much worse 8.1

Natural Gas Inventories 01/12 -148 bcf still getting worse -189 bcf

Jan 18

Mich Sentiment Jan 71.3 down again from 72.9

http://www.martincapital.com/index.php?page=graph&view=consumer_sentiment

Markets  January 18, 2012

We need to look at Japan to see what will likely happen in America after the QE experiment because we are copying Japan’s Quantitative Easing they used from 1985 to 1990.  Japan’s stock market is down about 70% from 1990.  In Japan the bond holders have not lost much but if they want to make money the Japanese invest in emerging markets not Europe or over valued markets like the USA’s stocks.

It is intuitively obvious is that if US treasury interest rates rise bond prices must fall.  But the US has QE and as long as we continue we will be more addicted to QE.  And if we never stop QE we get like Japan and bonds will be flat but stocks will plummet.

The DJ Rails are within 1% of confirming a DOW buy signal. The DJI and DJR confirmed a sell signal together in August 2011and the DJR was recently rising faster than the DOW.  The two are now converging toward a confirmation of a DOW buy signal possibly by mid year.

http://finance.yahoo.com/echarts?s=%5EDJT+Interactive#symbol=^djt;range=3m;compare=^dji;indicator=;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined;

The Dow Theory Industrials and Rails sell signal of August 2, 2011 still holds. The Rails beat the last 3-month shoulder. http://finance.yahoo.com/echarts?s=%5EDJT+Interactive#symbol=^djt;range=1y;compare=^dji;indicator=;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined;

 The USA VIX collapsed again.  It seldom has stayed low this long.  A low VIX normally precedes a sell-off. Once that starts the VIX needs to go up above 30 until bear markets normally end.  Volume indicated churning in December most probably profit taking before tax rates rise.

http://finance.yahoo.com/q/bc?s=%5EVIX&t=5y&l=on&z=l&q=l&c=

Is the Baltic Dry Index is near a new low.  China probably hit bottom.  

http://www.bloomberg.com/quote/BDIY:IND/chart

 

World stock market updates:

http://in.finance.yahoo.com/intlindices?e=asia

http://in.finance.yahoo.com/intlindices?e=europe