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Has anyone caught a glimpse of the economics book Barack Obama's reading? I'd love to get a look at the section that says when you're on the verge of an economic collapse it's a good idea to raise taxes. Or the part about, hey when the equity markets are literally cratering, people's retirements are getting wiped out, and the bid side of every Level 2 quote looks like a god damn deserted ghost town, it's an absolute genius idea to raise capital gains taxes so people just keel over and puke every time they even think of buying stocks! I hear in section 3 it proposes a tax on finding a job.
Let me tell you something you can kiss recession good bye, we're going into a full blown depression, and you can thank President Obama for that. The only thing he's done since getting into office is wave and smile everyday like he's god damn Miss America, raise the debt load on the American tax payer, and implement an ass backwards anti-growth economic policy. Best thing to do now, get yourself a .357, 5 cans of tuna, and take cover because as time goes on and people continue to lose their jobs along with their life savings, people will get desperate. You don't think people are already preparing for outright anarchy? Do yourself a favor and google "gun sales." Guns are flying off the shelves. And don't gimme this crap about, oh its because Obama is anti-gun and everyone is fearful that he's gonna outlaw certain high powered firearms. No way, its because its a well known fact that when GDP declines, crime goes up...and in this case GDP has gone right down the damn toilet and its not even done yet....in fact it's threatening to come back up and flood the entire living room with the remnants of a late night cockroach and fungus infested bean burrito. Ya i'll say it, we're in a damn shitstorm and this moron won't even give us an umbrella! We're in a damn sinking Titanic, and this dipshit just popped a hole in the getaway dinghy!! Can we get some trash bags at least you idiot! We're dyin here!!
And for those who refuse to get angry now, at a time when our country is literally going down the toilet, then I ask you, when will you get angry?? People are losing everything, their homes, their jobs, their life savings, everything! We have a right to be angry now, especially when the invisible hand which is being financed by our hard-earned money and is supposed to be there to foster economic growth and maintain order is off in the back room jerking off till no tomorrow!! I ask you, if not now then when??
You want the market to bottom, eliminate capital gains taxes for 1 year, and watch the market fly. Right now there is absolutely ZERO incentive to take on the risk of owning stocks! Valuations, fundamentals, no one cares! The demand side of the supply/demand equation with respect to equities has been hacked 75% which means we can not see equities rally more than 10-20% or for more than a few days. There is simply not enough money out there to produce any sustainable long term rallies! Notice how we've rallied for a couple days multiple times, only to wipe out all those gains and more in one single day! That is the problem, there is no money on the demand side willing to truly take a long term commitment to owning stocks. Is there money out there, yes, but right now it feels much safer in a risk free environment. Give that money some sort of incentive to take risk again, and you will see money flood this market!
Moreover, for those that think the government simply can not afford to slash capital gains taxes at this time, think again. The effect of slashing capital gains on government revenue would be minimal in my opinion, as no one is making any money right now in stocks as it is, taking 20% of 0 = 0!! However, if you slash capital gains, sure the government collects no revenue on the gains but equity prices will rise, Funds, Hedgies, Banks and most importantly AMERICANS will make money and get to keep it for one year. This money will trickle throughout the economy and produce increased sales whereby the government can collect tax revenue! GDP will increase, Americans will feel wealthier, retirement accounts will rise, and Banks may even make enough money to start loaning again! Second of all, as equity prices rise, companies with "high" debt loads will have the opportunity to do secondaries again at reasonable prices! Sure the credit markets are frozen and currently irrepairable, but the equity markets can be repaired and are a major source of capital to every company out there. However, again there is simply no one willing to take on the huge # of shares companies need to sell to raise sufficient capital at this time, and that is because of deflated stock prices! Raise those stock prices, and the amount of shares needed to be offered to raise the same amount of capital decreases!
Is this the ultimate solution to fix all our problems? Probably not, but its as good as any other solution being presented right now!!
Don't forget guys, the commercial real estate market has yet to fully implode....businesses across the country are now on their last legs after trying to fight for dear life and weather the slowdown in consumer spending...the next downleg in the economy will be attributed to large and small businesses across the country (and likely the world) beginning to throw in the towel and close up shop. I'd reckon to say that 50-60% of small businesses across the country will be closing down in the next 12 months, large businesses will begin closing up maybe 30% of their slow growth stores, and many chains will close down all together (as we've already seen). The significance of a commercial real estate crash outside of enormous supply of retail space hitting the market and putting severe pressure on commercial real estate prices, is that more people will be out of jobs as large businesses close up shop and lay off employees, and self-employed small business owners will lose their income streams, resulting in additional pressure on consumer spending. Unemployment has yet to top out by any means in my opinion...I believe we are likely to see unemployment reach 12-15% by the end of 2009 resulting in US GDP declines in the 5-7% range. Im telling you guys its all about jobs, there will be no bottom in the market until the trajectory and velocity of unemployment begins to show signs of slowing down which I don't believe is here yet. Financial markets are still in the process of eliminating high risk taking leveraged entities, and those who are not highly leveraged are still in the process of adjusting to low and still declining consumer demand. This is not a process that happens overnight especially after many many years of easy credit where almost all market participants were under the impression that they could easily service high debt loads. This is clearly the dawn of a new era where an entire country is now learning and adjusting to the consequences of mass-scale leverage. We are in the midst of a painful detoxification process where those addicted to the act of unbiased consumption are now forced to learn the significance of living within the scope of their means. It will without doubt be a painful and lengthy process....
Bank of America and Citigroup stock prices are clearly saying that the private sector refuses to support these 2 institutions which means that the public sector must support them all on their own if they want these 2 institutions to survive...which means both will likely be forced into some sort of nationalization once the Treasury wakes up to the reality that there are no other options. However, the fact that the Treasury continues to take some delayed route by throwing additional money to plug up holes that will likely still blow up in the future, will make the Treasury look incompetent and narrow-minded as they were unable or simply refused to accept the current reality, thereby costing taxpayers more money for absolutely no reason. This is where the lack of confidence in markets is coming, the Treasurys absolute inability to accept reality...like a pathetic loser unwilling to accept a loss and move on. Believe me the consequences of this type of action are far greater than simply accepting a "smaller" loss....they're simply trying to move toward some solution that probably has a 5% chance of creating a 50% loss rather than accepting a 75% loss now...the only problem is that the cost of moving toward that 5% chance of creating that "smaller" loss is so great that it makes absolutely no sense to even venture towards it. The only person who attempts to quantify such a venture is a man who refuses to accept that he has the capacity to make mistakes.
Rather than continue to throw money at banks in an effort to delay the inevitable, the government needs to nationalize both Bank of America and Citigroup as soon as possible. The government needs to wake up to the reality that the private sector refuses or is simply unable to support these 2 institutions. Notice how even with continuous insider buying of bank stocks (which are in my opinion being fully financed by the US government as an attempt to create an image of confidence), the stock prices continue to languish. This is because the market has already somewhat accepted the possibility of nationalization of these 2 banks (based on depressed stock prices). In fact I'll go out on a limb here and say that when Bank of America and Citigroup do in fact become nationalized, the market will actually rally creating a SHORT TERM bottom in markets equal to a 1000-1500 point short covering rally.
