One of the stocks I have mentioned previously on this blog is Pier 1 Imports (symbol PIR). The company is doing quite well with a good report last week. Even after that report, however, there is a high time value in the options which is there for the taking. My suggested trade is to put on a June 9 - 11 bull spread. that means buying the June 9 calls and selling the same number of June 11 calls. As of Friday's close, that spread was available for a cost of $1.50 with the stock price at $11.82 per share. What this means is that so long as the stock stays above $11.00 on the June expiration date (June 18th), one would get $2.00 back for the investment of $1.50. The annualized return on such an investment is 200%.
I like the bull spread on PIR because I do not think that the stock is likely to go up dramatically in the next two months. Indeed, it may even meander back down to $11.00 or so. In either case, however, the 200% return is plenty high enough. There is also the fact that the stock can go down by $0.82 or over 8% with no reduction in the return. Those are odds that I like. Of course, there is an increased risk if the stock really tanks. If you buy the stock itself at 11.82 and it goes down to $9.00, you still have three quarters of your money and the chance to get it all back if the price increases. With a bull spread, were the stock to go down to $9.00 on June 18th, you would lose your entire investment.
Disclosure: I am long the PIR stock and have option positions not including the spread recommended here.
Sunday, April 17, 2011
Taxes -- the AP is Cheerleading Again!
In a bizarre story this morning, the AP is announcing that "Super Rich see Federal Taxes Drop Dramatically"! The article then points out that the rate of taxes paid on the 400 highest tax returns has fallen from 26 percent in 1992 to 17 percent in 2007. This is, however, totally misleading. The average amount of income on these 400 returns was $345 million. That's right, we are talking about people who had taxable income of more than a third of a billion dollars. That means that the income in question came from one of two sources: capital gains or dividends. Both of these sources were taxed in 2007 at a rate of 15%. In 1992, the rate was 28% for capital gains and even higher for dividends. (I am assumeing that all capital gains are long term.) This change in the rate was not a tax break for the rich, rather it was a strategy to increase investment, economic growth and new jobs by lowering taxes on investment income so as to make investment more attractive. It is a strategy succesfully employed by economies around the world. In fact, it was not long after 1993 that president Bill Clinton, a Democrat, signed into law a major reduction in the capital gains tax rate just for the purpose of promoting economic growth. So, contrary to what the AP is implying, the drop in that tax rate was not meant to benefit the rich, but rather to help the entire country.
It is also interesting that the AP does not bother to set forth the total amount of taxes paid by the highest 400 returns in each of the years. The amount of tax paid is much higher in 2007 than it was in 1992. And, the AP also buries the fact that the percentage of taxpayers who owe no tax whatsoever is also much higher in 2007 than it was in 1992. Indeed, the tax reductions for the middle class results in lower taxes of well over three trillion dollars during the next decade while the lower taxes on those who Obama calls wealthy only reduces taxes by about 700 billion dollars during the same time. In other words, just about 80% of the tax reduction goes to the middle class. It is not a tax break for the rich unless you are a Democrat trying to foster class warfare.
There should be a national debate about simplifying the tax code; there is no question about this. On the other hand, it does a disservice to the country for an organization like the AP to publish articles that set forth bogus and misleading statistics.
It is also interesting that the AP does not bother to set forth the total amount of taxes paid by the highest 400 returns in each of the years. The amount of tax paid is much higher in 2007 than it was in 1992. And, the AP also buries the fact that the percentage of taxpayers who owe no tax whatsoever is also much higher in 2007 than it was in 1992. Indeed, the tax reductions for the middle class results in lower taxes of well over three trillion dollars during the next decade while the lower taxes on those who Obama calls wealthy only reduces taxes by about 700 billion dollars during the same time. In other words, just about 80% of the tax reduction goes to the middle class. It is not a tax break for the rich unless you are a Democrat trying to foster class warfare.
There should be a national debate about simplifying the tax code; there is no question about this. On the other hand, it does a disservice to the country for an organization like the AP to publish articles that set forth bogus and misleading statistics.
Romney -- no
I happened to hear a short part of the Larry Kudlow radio show yesterday during which he replayed his interview with Mitt Romney. romney is once again "exploring" a run for president. Kudlow asked him about romneycare, the Massachusetts health plan on which big parts of Obamacare are based. In the interview romney said that he was strongly against Obamacare, but he was still in favor of romneycare. That's like being in favor of partly sunny but against partly cloudy. It is also a killer for me with regard to Romney. He always has seemed way to slick and willing to change his supposed "principles" in the past. this latest performance with Kudlow just re-emphasizes all the negatives as far as I am concerned. we have just gone through two and a quarter years with a president who was prepared to lie about his true beliefs for political purposes. I do not htink the country could stand four more yeears of that whether from Obama or a Republican.
I suggest that once Romney considers running, he decides not to do so.
I suggest that once Romney considers running, he decides not to do so.
Saturday, April 16, 2011
A different way to look at the problem with entitlements
At the moment, the impending bankruptcy of Medicare, Social Security and the other entitlement programs is front and center in the national debate. Some say we are spending too much; others claim the cause is that taxes are too low. Here is another way to look at the issue.
The main reason that programs for the elderly like Social Security and Medicare are going under is that there are simply too few workers paying into the system to be able to afford the cost of the increasing numbers of those over 65. In the 1930's when Social Security began, there were over 40 workers for each retiree drawing benefits. soon, those numbers will be two workers for each retiree. What caused this shift?
The simple answer is that the avalanche of abortions that occured after the Roe V. Wade decision in 1973 legalizing abortion has changed the age distribution of the American population. According to government statistics, there have been about 50 million abortions in the USA since 1973. That means at least 50 million fewer people at least. The children of those who were aborted would probably lift that number to something in the area of 75 million or more. There would also be about another 25 million folks in the workforce, each of whom would be paying taxes for both Social Security and Medicare. In short, there would be enough additional workers paying into the system, that the current crisis could have been avoided.
Now, obviously, if abortion were not legal, there would still have been a fair number of illegal abortions. Indeed, prior to the Roe decision, some states like New York had relaxed the requirements for abortion, so there would still have been a growing number of legal abortions. The enormous onslaught of abortions following the 1973 decision would have been avoided, however. There is no way to know the precise number of additional workers who would be in the workforce today but for the Roe decision. It is, however, undeniable that the number would necessarily be over ten million and maybe as high as twenty million. With either number, the tax payments into Social Security and Medicare would be substantially higher, and the prospects for future payments would also point towards a much greater increase than the current number.
Strangely, the big "victory" by the liberals on their cherished "right" of abortion laid the groundwork for the demise of the big government social programs that depended on a growing populaiton for solvency.
The main reason that programs for the elderly like Social Security and Medicare are going under is that there are simply too few workers paying into the system to be able to afford the cost of the increasing numbers of those over 65. In the 1930's when Social Security began, there were over 40 workers for each retiree drawing benefits. soon, those numbers will be two workers for each retiree. What caused this shift?
The simple answer is that the avalanche of abortions that occured after the Roe V. Wade decision in 1973 legalizing abortion has changed the age distribution of the American population. According to government statistics, there have been about 50 million abortions in the USA since 1973. That means at least 50 million fewer people at least. The children of those who were aborted would probably lift that number to something in the area of 75 million or more. There would also be about another 25 million folks in the workforce, each of whom would be paying taxes for both Social Security and Medicare. In short, there would be enough additional workers paying into the system, that the current crisis could have been avoided.
Now, obviously, if abortion were not legal, there would still have been a fair number of illegal abortions. Indeed, prior to the Roe decision, some states like New York had relaxed the requirements for abortion, so there would still have been a growing number of legal abortions. The enormous onslaught of abortions following the 1973 decision would have been avoided, however. There is no way to know the precise number of additional workers who would be in the workforce today but for the Roe decision. It is, however, undeniable that the number would necessarily be over ten million and maybe as high as twenty million. With either number, the tax payments into Social Security and Medicare would be substantially higher, and the prospects for future payments would also point towards a much greater increase than the current number.
Strangely, the big "victory" by the liberals on their cherished "right" of abortion laid the groundwork for the demise of the big government social programs that depended on a growing populaiton for solvency.
The Syrian Enigma
The last few days saw the issuance of a joint op-ed column by the presidents of France, the UK and the USA calling for the end of the Gaddafi regime in Libya. NATO is still bombing the Gaddafi forces. Sanctions are crippling the Libyan regime. Although Gaddafi is holding on, he and his government are certainly under siege.
At the same time, nothing is being done with regard to Syria. We hear today that the Druse communities have joined in the demonstrations against Bashir Assad and the Baath regime. Despite claims by the regime that it would release demonstrators who had been taken into custody, there have been only 9 people released out of the thousands arrested. Now we are hearing that Asad has moved Alawaite units into the front lines against the demonstrators. the Alawaites are Assads own ethnic group, a group that has received many special privileges in Syria during the decades of rule by the Assad family. There are undercover Alawaite soldiers who are claimed to be infiltrating the crowds of demonstrators and killing people at random in order to terrorize the crowds and disperse the demonstrations. Hundreds are said to have dies, although no one knows for sure due to the news blackout from Syria.
Syria is the closest ally that Iran has among the predominantly Sunni Arab countries of the Middle East. It is Syria that has enabled the arming of Hezbollah in Lebanon, thereby giving Iran a Shiite proxy army on the border with Israel. Syria is also the country whose secret nuclear bomb facilities were taken out by the Israelis less than two years ago. Syria was also the source for most of the infiltration of fighters into Iraq to fight US soldiers during that war. Simply put, Syria is no friend either of the USA or of peace.
The reaction from Obama to all of this has been puzzling. The USA has called Assad a reformer and said nothing about his leaving. Obama and Clinton seem to want to prop up this despot and enemy. Gaddafi was condemned because he was killing his own people. Now, Assad is doing the same thing, but Obama is silent.
As the various countries in the middle east move through this cycle of uprisings, there are points where a well placed push from the USA might actually topple the dictators. There was just such a point in Libya when the first wave of protests came close to throwing out Gaddafi. At that point, the US sat by silently and let Gaddafi regain his balance. By the time Obama finally got off his rear end and did something, the task was a much harder one. Indeed, Obama's failure to act has left the USA in a position where it may be thwarted in its effort to remove Gaddafi. Right now,however, Syria is at the point where Assad's power could crumble. there are ripples of discontent in the army. All of the communities in the country aside from Assad's favored group of Alawaites are protesting his rule. A push to encourage the rest of the army to rebel might well end the murderous rule of the Assads. But there is only silence from Washington.
At some time, Obama has to learn that the goal of American foreign policy ought to be doing what will further the national interests of the USA. Were Assad to fall, look at the consequences: 1)Hezzbollah would be cut off from its Iranian arms supplier. That would leave the Lebanese free to move forward with their own future rather than the one that Iran dictates to them. It would also lessen the likelihood that Hezbollah would start another war or even carry out terrorist attacks. 2)Syria would be removed from the ranks of allies of Iran. that means that chances of Iranian hegemony in the Middle East would be reduced dramatically. The historic emnity between the Sunnis who are the majority in Syria and the Shia who rule in Iran would come to the fore again. 3) The chance for peace between Syria and Israel would increase dramatically. Obviously, there is no guarantee that there would be peace achieved. There is, however, a guarantee that there will be no peace while Assad is in office.
It is important to remember that the Assad regime in Syria is the one government in the world that has used chemical weapons against its own people. About 20 years ago, there was an uprising in the city of Homa and the Assad regime (the headed by Bashir Assad's father) order the gassing of the entire city. Tens of thousands died. Yet, this is the regime that Obama does not find sufficiently objectinoable to oppose.
At the same time, nothing is being done with regard to Syria. We hear today that the Druse communities have joined in the demonstrations against Bashir Assad and the Baath regime. Despite claims by the regime that it would release demonstrators who had been taken into custody, there have been only 9 people released out of the thousands arrested. Now we are hearing that Asad has moved Alawaite units into the front lines against the demonstrators. the Alawaites are Assads own ethnic group, a group that has received many special privileges in Syria during the decades of rule by the Assad family. There are undercover Alawaite soldiers who are claimed to be infiltrating the crowds of demonstrators and killing people at random in order to terrorize the crowds and disperse the demonstrations. Hundreds are said to have dies, although no one knows for sure due to the news blackout from Syria.
Syria is the closest ally that Iran has among the predominantly Sunni Arab countries of the Middle East. It is Syria that has enabled the arming of Hezbollah in Lebanon, thereby giving Iran a Shiite proxy army on the border with Israel. Syria is also the country whose secret nuclear bomb facilities were taken out by the Israelis less than two years ago. Syria was also the source for most of the infiltration of fighters into Iraq to fight US soldiers during that war. Simply put, Syria is no friend either of the USA or of peace.
The reaction from Obama to all of this has been puzzling. The USA has called Assad a reformer and said nothing about his leaving. Obama and Clinton seem to want to prop up this despot and enemy. Gaddafi was condemned because he was killing his own people. Now, Assad is doing the same thing, but Obama is silent.
As the various countries in the middle east move through this cycle of uprisings, there are points where a well placed push from the USA might actually topple the dictators. There was just such a point in Libya when the first wave of protests came close to throwing out Gaddafi. At that point, the US sat by silently and let Gaddafi regain his balance. By the time Obama finally got off his rear end and did something, the task was a much harder one. Indeed, Obama's failure to act has left the USA in a position where it may be thwarted in its effort to remove Gaddafi. Right now,however, Syria is at the point where Assad's power could crumble. there are ripples of discontent in the army. All of the communities in the country aside from Assad's favored group of Alawaites are protesting his rule. A push to encourage the rest of the army to rebel might well end the murderous rule of the Assads. But there is only silence from Washington.
At some time, Obama has to learn that the goal of American foreign policy ought to be doing what will further the national interests of the USA. Were Assad to fall, look at the consequences: 1)Hezzbollah would be cut off from its Iranian arms supplier. That would leave the Lebanese free to move forward with their own future rather than the one that Iran dictates to them. It would also lessen the likelihood that Hezbollah would start another war or even carry out terrorist attacks. 2)Syria would be removed from the ranks of allies of Iran. that means that chances of Iranian hegemony in the Middle East would be reduced dramatically. The historic emnity between the Sunnis who are the majority in Syria and the Shia who rule in Iran would come to the fore again. 3) The chance for peace between Syria and Israel would increase dramatically. Obviously, there is no guarantee that there would be peace achieved. There is, however, a guarantee that there will be no peace while Assad is in office.
It is important to remember that the Assad regime in Syria is the one government in the world that has used chemical weapons against its own people. About 20 years ago, there was an uprising in the city of Homa and the Assad regime (the headed by Bashir Assad's father) order the gassing of the entire city. Tens of thousands died. Yet, this is the regime that Obama does not find sufficiently objectinoable to oppose.
China is not a great inestment
For the last decade, China has been the world's economic powerhouse. The Chinese economy has grown at rates that make the rest of the world envious. Last year, China overtook Japan to become the second largest economy in the world. Many of the Chinese companies are now trading on American excahnges, making it easy to buy stock in them. So is China a good place to park one's money? My answer is No!
I chose not to invest in China because I do not trust the government there. It is not a question of ideology. Rather, there is no way to guarantee that the Chinese government will keep its present policies. We could allwake up tomorrow to a major expropriation of foreign asets or just a major shift in the way that corporations are treated. I simply will not invest in places where the risk of loss due to governement action is real. for example, I will also not invest in Russian companies; Putin and the Russian government make the Chinese look positively steadfast in their policies. I also rule out companies with heavy investment in other countries with iffy governments.
Over the last few years, many folks have made nice profits investing in chinese companies. that does not change my view. After all, many folks have also made nice profits by gambling in Vegas or Atlantic City during the same time. Not me.
Now, however, we may be approaching a new problem for the Chinese. I read a very interesting analysis this morning about the direction of the Chinese economy. The prognosis is not for an end to growth, but rather for a marked slowing in the rate of growth. You can read this piece by clicking on the title to this post. I strongly recommend that you take the time to do so.
I chose not to invest in China because I do not trust the government there. It is not a question of ideology. Rather, there is no way to guarantee that the Chinese government will keep its present policies. We could allwake up tomorrow to a major expropriation of foreign asets or just a major shift in the way that corporations are treated. I simply will not invest in places where the risk of loss due to governement action is real. for example, I will also not invest in Russian companies; Putin and the Russian government make the Chinese look positively steadfast in their policies. I also rule out companies with heavy investment in other countries with iffy governments.
Over the last few years, many folks have made nice profits investing in chinese companies. that does not change my view. After all, many folks have also made nice profits by gambling in Vegas or Atlantic City during the same time. Not me.
Now, however, we may be approaching a new problem for the Chinese. I read a very interesting analysis this morning about the direction of the Chinese economy. The prognosis is not for an end to growth, but rather for a marked slowing in the rate of growth. You can read this piece by clicking on the title to this post. I strongly recommend that you take the time to do so.
Clearly, Obama never lived iin New York city
In another of his positive and up-lifting speeches, president Obama charged on Friday that Republicans want to turn the USA into a third world country. Here's part of the description from AFP:
"US President Barack Obama accused Republicans of wanting to turn the United States into a "Third World" country as he rallied support for his reelection campaign. The attack came a day after Obama savaged Republican budget plans and unveiled his $4-trillion deficit reduction drive that aims to raise taxes on the wealthiest Americans in order to preserve key social services.
"Under their vision, we can't invest in roads and bridges and broadband and high-speed rail," Obama told a select group of the Democratic faithful at the second of three fundraising events in his hometown of Chicago.
"I mean, we would be a nation of potholes, and our airports would be worse than places that we thought -- that we used to call the Third World, but who are now investing in infrastructure."
The attack is obviously not in keeping with Obama's previous call for civility in debating issues in Washington. Indeed, Obama himself said just about two months ago that the problems with the deficit could never be solved if politicians use the debate to describe the other party in negative terms. Apparently, Obama just meant that no one should point out Obama's own obvious failures when it comes to the deficit and spending; he can call the GOP evil, however, without a second thought.
So let's look at the nonsense that Obama is spouting to the faithful in Chicago. Supposedly, if the GOP gets its way, we will be "a nation of potholes" and bad airpots. Hey, Mr. President, try riding around New York City. It wasn't that long ago that a pothole on the FDR Drive in Manhattan got so large that a car fell through it and into the East River below. There are so many potholes in New York that it was suggested that the state put a picture of one on its license plates. And how about those airports? LaGuardia looks like it was built in the 1950's: wait, most of it was. It is an uncomfortable melange of Old and a few new buildings. Indeed, it is not as nice as the average airport in China.
Beyond the obviously silly nature of Obama's claims, there is this truly important critique: Potholes are not the concern of the federal government. State and local governments are responsible to keep the streets in good repair, so Republican proposals to cut federal spending should have no impact on street conditions. Airports too are supposed to be local concerns. That self same Laguardia airport is owned by the Port Authority of New York and New Jersey, an entity that has had sufficient revenues to spend billions on projects like the World Trade Center while leaving the airports to rot.
Fianlly, to me, the defining aspect of a third world country is not the state of the roads and airports. No, it is the poverty of the mass of people, the total control by the government and the wealth of a privileged few. That is exactly where the Obama spending spree of the last few years is pushing the USA. How many jobs did Obama drive out of the USA by stopping oil drilling, by driving up healthcare costs for business and by threatening all business with a host of other regulations and restrictions? How much investment did Obama discourage with these moves? And who got the benefits? Well the governement is now much bigger and stronger than it used to be. And Obama's cronies like GE got enormous bailouts from the governement with the people's money and then paid no taxes on the billions of dollars in profits. Obama, can you say banana republic?
Obama has got to go!
"US President Barack Obama accused Republicans of wanting to turn the United States into a "Third World" country as he rallied support for his reelection campaign. The attack came a day after Obama savaged Republican budget plans and unveiled his $4-trillion deficit reduction drive that aims to raise taxes on the wealthiest Americans in order to preserve key social services.
"Under their vision, we can't invest in roads and bridges and broadband and high-speed rail," Obama told a select group of the Democratic faithful at the second of three fundraising events in his hometown of Chicago.
"I mean, we would be a nation of potholes, and our airports would be worse than places that we thought -- that we used to call the Third World, but who are now investing in infrastructure."
The attack is obviously not in keeping with Obama's previous call for civility in debating issues in Washington. Indeed, Obama himself said just about two months ago that the problems with the deficit could never be solved if politicians use the debate to describe the other party in negative terms. Apparently, Obama just meant that no one should point out Obama's own obvious failures when it comes to the deficit and spending; he can call the GOP evil, however, without a second thought.
So let's look at the nonsense that Obama is spouting to the faithful in Chicago. Supposedly, if the GOP gets its way, we will be "a nation of potholes" and bad airpots. Hey, Mr. President, try riding around New York City. It wasn't that long ago that a pothole on the FDR Drive in Manhattan got so large that a car fell through it and into the East River below. There are so many potholes in New York that it was suggested that the state put a picture of one on its license plates. And how about those airports? LaGuardia looks like it was built in the 1950's: wait, most of it was. It is an uncomfortable melange of Old and a few new buildings. Indeed, it is not as nice as the average airport in China.
Beyond the obviously silly nature of Obama's claims, there is this truly important critique: Potholes are not the concern of the federal government. State and local governments are responsible to keep the streets in good repair, so Republican proposals to cut federal spending should have no impact on street conditions. Airports too are supposed to be local concerns. That self same Laguardia airport is owned by the Port Authority of New York and New Jersey, an entity that has had sufficient revenues to spend billions on projects like the World Trade Center while leaving the airports to rot.
Fianlly, to me, the defining aspect of a third world country is not the state of the roads and airports. No, it is the poverty of the mass of people, the total control by the government and the wealth of a privileged few. That is exactly where the Obama spending spree of the last few years is pushing the USA. How many jobs did Obama drive out of the USA by stopping oil drilling, by driving up healthcare costs for business and by threatening all business with a host of other regulations and restrictions? How much investment did Obama discourage with these moves? And who got the benefits? Well the governement is now much bigger and stronger than it used to be. And Obama's cronies like GE got enormous bailouts from the governement with the people's money and then paid no taxes on the billions of dollars in profits. Obama, can you say banana republic?
Obama has got to go!
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