Plan B, Plan S
by Sinclair Noe
DOW + 59 = 13,311
SPX + 7 = 1443
NAS + 6 = 3050
10 YR YLD un = 1.80%
OIL -.03 = 89.95
GOLD – 18.70 = 1648.20
SILV – 1.06 = 30.02
I’m thinking we just go over the cliff. Why not? It looks more and more that they aren’t going to get anything done. They say they are close, they say it is possible, but really, I don’t have confidence.
President Obama held a press conference. And he said he had gone at least halfway in meeting some of the Republican concerns. At least halfway? So he’s admitted that he’s already met them in the middle, and likely gone past the middle into Republican territory. And we’re still two weeks out from the fiscal cliff deadline, with Republicans sitting around waiting for the inevitable further concessions Obama will make. Why didn’t Obama say something like, “I made a more than fair deal. The GOP rejected it. So now I’m pulling the offer off the table and waiting to see what the GOP has to offer. Clock’s ticking!” Instead, the GOP will bank the concessions he’s already made, then demand more. Rinse. Lather. Repeat.
Meanwhile, Speaker John Boehner is just playing with himself. He’s offered up a Plan B for a vote in the House. One of the touted benefits of “Plan B” is that it only raises taxes for those making $1 million or more. Eric Cantorsaid this morning, the plan would raise revenue “without hurting many small businesses” or taxpayers. Not exactly.
But a closer look at the tax impacts of Plan B shows that while it raises taxes on most million-plus earners, it also raises taxes for many low-income earners. The non-partisan Tax Policy Center found that the average taxpayer earning $1 million or more in cash income would see their taxes go up by an average of $72,000. A small number of those million-plus earners will see a tax cut, due to an anomaly in the Alternative Minimum Tax.
But lower income earners will also see a tax hike. People making between $10,000 to $20,000 will see their taxes go up by an average of $262. People making $20,000 to $30,000 will see their taxes go up by $219. Some of those low-income earners could see a sizable increase. One in five of Americans who earn less than $20,000 a year will see an increase of $1,070 — a sizeable amount for low-income earners.
In fact, the only taxpayers who will get an overall tax cut under Plan B are those who earn between $200,000 and $1 million. People making between $200,000 and $500,000 will see an average tax cut of $301. Those making between $500,000 and $1 million will see their taxes go down by $164.
The reason is that Plan B has two parts; raising taxes on high earners and eliminating deductions for low earners. The plan raises the tax rate for those making $1 million or more to 39.6 percent from its current rate of 35 percent. It would also raise the capital gains and dividend tax rates for those earners to 20 percent from 15 percent. Plan B also eliminates many of the Obama-led tax credits that largely benefit low-income earners, including the 2009 enhancements to the child tax credit, the earned income tax credit and others.
Which is just another way of saying that Boehner is playing games because he knows that Plan B will never get through the Senate and never get signed into law. Apparently, it is nothing more than an effort to show some Republicans are willing to stand up to Grover Norquist and vote for a tax increase, for everybody not earning between $200,000 and $1 million; which is something that is so far out of the mainstream conversation that it is absurd. The Democratic leader in the Senate, Harry Reid, at an earlier press conference, said the bill was an empty gesture: “We are not taking up any of the things that they’re working on over there now. It’s very, very, very unfortunate the Republicans have wasted an entire week on a number of pointless political stunts. The bill has no future, if they don’t know it now, tell them what I said.”
The impasse comes at a time when the differences between Obama and Boehner appear to be minimal, with agreement reached on principle and divided only over the final figures. Obama wants the tax increases to kick in at $250,000 rather than $1 million. He is proposing $800 billion in spending cuts whereas Boehner is looking for $1.2 trillion.
Claiming it was not about the figures,Democrats identified the problem as Boehner being unable to deliver Republicans behind a tax-raising measure, and that is probably the reason for the crazy Plan B vote. It might just be a way to measure how everybody might be expected to vote, you know, in a real vote.
Hong Kong financial authorities are investigating Swiss bank, UBS over possible misconduct related to the Hibor, the Hong Kong benchmark interest rate.
Th Hong Kong Monetary Authoritym the city’s de facto central bank said on its website that it has launched a probe to determine whether there was any wrongdoing by UBS when it submitted information used to set the Hong Kong Interbank Offered Rate. It will also try to find out if the misconduct had any “material impact” on setting the Hibor rate.
Everyone who has ever claimed that the financial industry is overregulated should be forced to read the United Kingdom’s Financial Services Authority final notice on UBS’s manipulation of the London interbank offered rate.
UBS disclosed cooperation with antitrust authorities more than a year ago, so it’s no surprise that the bank was penalized, though the $1.5 billion penalty was nothing more than the cost of doing business, particularly because UBS had been granted leniency or some parts of the Libor probe. What’s most striking about the FSA’s filing on UBS is the brazenness of the reported misconduct. According to the FSA, 17 different people at UBS, including four managers, were involved in almost 2,000 requests to manipulate the reporting of interbank borrowing rates for Japanese yen. More than 1,000 of those requests were made to brokers in an attempt to manipulate the rates reported by other banks on the Libor panel.
According to the FSA, the bank’s rate manipulation, whether to improve UBS’s trading positions or to protect the bank’s image, was so endemic that one employee who was supposed to submit rates complained in 2007 of being caught between demands by two different traders who wanted two different fake submissions. “I got to say this is majorly frustrating that those guys can give us s*** as mu c h as they like…. One guy wants us to do one thing and (the other) wants us to do another,” he told a UBS manager, according to the FSA. Even after The Wall Street Journal first broke news of suspected Libor manipulation in 2008, UBS managers discussed continuing their rate-rigging, this time with the goal of staying in the middle of the pack of rate reports so it would look as though they weren’t engaged in rigging.
The New York Stock Exchange has agreed to an $8.2bn takeover that will hand control of the icon of American capitalism to an Atlanta-based energy trader.
The stock exchange’s holding company, NYSE Euronext, has agreed to an offer of $33.12 a share in cash and stock from IntercontinentalExchange (ICE). ICE was founded in 2000, NYSE in 1817. The combined company would have headquarters in both ICE’s home of Atlanta and in New York.
The National Association of Realtors reportes sales of existing homes rose 5.9% in November to a seasonally adjusted annual rate of 5.04 million, reaching the highest rate since November 2009, when a tax credit was expected to expire.
First-time claims for unemployment benefits climbed 17,000 in the latest week, that’s a level that suggests the labor market is continuing its steady but painfully slow improvement.
The US economy grew more quickly than previously stated in the July-to-September quarter due to stronger trade, faster health-care spending and increased local government construction. The Commerce Department said third-quarter gross domestic product grew at a seasonally adjusted annual rate of 3.1% in the third quarter, which is the fastest rate of growth since the 4.1% pickup in the final quarter of 2011.
Personal consumption is now pegged to have grown at a 1.6% rate, up from a previously estimated 1.4% rate and faster than the 1.5% advance in the second quarter. The change from the previous estimate was due to an upward revision to health-care services, and the growth during the quarter came from durable-goods spending on vehicles.
Other differences between the third-quarter reports: Trade was a bigger help, with exports 0.8 percentage point higher due to revised export prices as well as more goods, and imports 0.7 percentage point lower due to downward revisions to travel and to royalties and license fees.
Government spending also was stronger than previously estimated, showing 3.9% instead of 3.5% growth, due to local and state government construction. The big increase in government spending during the third quarter is expected to be a one-time affair, driven by a temporary surge in defense maintenance costs. Business investment was a drag in the third quarter, dropping by 1.8%. So, now we know what the economy did five months ago.
The Treasury has announced plans to get out of General Motors.”GM will purchase 200 million shares of GM common shares from Treasury for $27.50 per share” translates into news reports as “Treasury will lose a gazillion dollars on GM Deal” since after all Treasury paid rather more than $27.50 per share originally, but there are other ways to look at it. One is that Treasury seems to have agreed a deal with GM after the 12/18 close at $27.50 for a stock that had closed at $25.49 and hasn’t touched $27 in ten months; in other words, GM overpaid for stock by $400 million.
Here’s the official explanation: GM’s repurchase will be accretive to earnings per share, reducing the auto maker’s total shares outstanding by about 11%. GM expects to take a charge of approximately $400 million in the fourth quarter, which will be treated as a special item.
Getting rid of shares reduces shares outstanding and is accretive to EPS. It’s somewhat less accretive when you overpay for the shares by $400 million and that $400 million is a charge to income. But at least you can call it a special item. Isn’t that how all of us do our tax returns?