I want to tip my hat to Prophet again,

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crondanet5
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I want to tip my hat to Prophet again,

Post by crondanet5 »

and to the other savvy investors who appear to have foreseen this parade of events that have pummeled the markets of late. I may be out of the market like them but it does not mean I do not search for reasons behind these significant drops and try to ascertain how they were aware of them. First, let me say I follow IXIC and last week it was right up there where it was the last time the market dropped. And then there was the question of the banks of China and Japan raising rates to manage inflation. Monday saw the concerns about Italy defaulting. And then Bernanke sang before congress and the markets swooned. (I believe he is batting a thousand on his ability to cause major market drops everytime he talks). But there is another event occurring in the markets and I haven't heard much of any talk about it: option expiration. Normally there is one day of gains before the expiration occurs and the rest of the days are downers. These are all good reasons on their own merit to be on the sideline. But the question is how do the top dawgs know it? Any ideas on this would be appreciated.

tspnoob
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Re: I want to tip my hat to Prophet again,

Post by tspnoob »

Yoda man Prophet!!!!!!

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Tomanyiron
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Re: I want to tip my hat to Prophet again,

Post by Tomanyiron »

One thing for sure, the Prophet doesn’t care much for reading our scribbling. He hasn’t logged-in in two weeks, which also makes me think his system does not include the watch list, to make his IFTs. That last part isn’t real surprising to anyone, I bet.

crondanet5
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Re: I want to tip my hat to Prophet again,

Post by crondanet5 »

The next question is what happens with Obama's press announcement this morning?

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Jahbulon
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Re: I want to tip my hat to Prophet again,

Post by Jahbulon »

I don't know, but I wish we could muffle both sides, lock them in a room with no food, air or water, turn up the heat to about 200 degrees, and tell them they cannot come out until a deal is done. :)

crondanet5
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Re: I want to tip my hat to Prophet again,

Post by crondanet5 »

Some say the deal was done long ago but the press opportunitites are so great they don't want to announce a deal has been made. If a deal has not been made then Obama is the only one pressing for a solution instead of walking around thinking they will get re-elected if they hold out. Could be a voter backlash on that approach. Also, in this deal, word is Medicare takes more cuts and Social Security gets reduced. I think a medical coverage program that only permits a colonoscopy once every ten years, and no increase in Social Security 2 years running when we know all the categories the federal economists removed from their charts have increased in cost to S/S recipients means those programs have undergone too many cuts already. Let's cut staff and staff salaries of Congress before we resort to cutting the 2 most important federal programs this country has that give a large percentage of Americans the hope they can have some kind of retirement and not work until they drop. Elected officials should take the first hit in their offices before looking at long standing programs so many
Americans call their primary old age support. Why should Europeans have better retirements than us? Something wrong here. Cut staff, cut salary cost first.

Reese99
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Re: I want to tip my hat to Prophet again,

Post by Reese99 »

This cannot be said often enough: In FY2010, federal revenues (taxes, etc.) totaled $2.162T, and the total federal budget was $3.456T. Of that $3.456T, $2.107T came from expenses related to Social Security, Medicare, Medicaid, Interest on the Debt and "Other Mandatory" spending.

To put this in perspective, if during the fiscal year of 2010, the US fired the entire federal government and spent NO money on defense, fired the entire military and ONLY paid mandatory expenses, the remaining budget from tax revenues would have been $55 billion dollars.

This will only get worse as more baby boomers retire and our workforce to social security claimants ratio decreases.

You cannot solve the budget crisis with cuts to discretionary spending.

Again:

You cannot solve the budget crisis with cuts to discretionary spending.

Period.

We need to suck it up, accept the fact that our entitlements are monetarily broken, and redesign them. This needn't impact people already relying on these programs to survive, nor the people who won't be in the workforce long enough to acclimate to new entitlement rules. The rest of us, though, need to accept the fact that without changes to the way the entitlement programs work, these programs, and the U.S. economy, will not exist in any form by the time we're old enough to make claims on them.

BuffaloNY
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Re: I want to tip my hat to Prophet again,

Post by BuffaloNY »

[quote="Reese99"]You cannot solve the budget crisis with cuts to discretionary spending.

Again:

You cannot solve the budget crisis with cuts to discretionary spending.

Period.

Reese, you are absolutely correct...and I am sure everyone in the room debating how to solve the debt ceiling crisis knows that. Question is, will they solve the problem now or punt it down the road?

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flight23
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Re: I want to tip my hat to Prophet again,

Post by flight23 »

The flaw in your logic though is assuming tax revenues are steady, when they are increasing. The only solution is a combination of budgetary cuts and increased taxes. Also, no spending is really mandatory, in that the programs can be changed and the white house has said they are on board with cuts to entitlements but leaders of congress still refuse to budge on cutting ridiculous tax loopholes. There is no legitimate reason hedge fund managers should be taxed at a dividend rate for their income. There is no legitimate reason oil companies making billions upon billions in profit should be taxed at 2% less than all other corporations. There is no legitimate reason someone making 372k per year should be taxed at the same rate as someone making 50 million. In my opinion there is also no reason anyone should be paid a 'salary' or compensation of 50 million, and the tax rate should increase systematically (like 2% for every 2M increase in income) as incomes rise beyond some high limit, such as 20M per year.

*THE* major issue with the country right now is there is a continuous, major shift of wealth from the bottom 60% to the top .01%. The 400 wealthiest people in this country have an equivalent net worth to the bottom 60%. We need a high estate tax bring back some of that wealth to the vast majority of the workforce and populous. Those 400 people do not spend even a small fraction of that money. Of the tiny amount they do spend, the majority is for exotic foreign purchases, reducing the tax revenue in this country. If even just 30% of that wealth was in the hands of the bottom 60% that money would almost all be spent domestically and our tax base would be significantly higher.

The problem is people like that wealth 400 control our politicians. Nobody cares about the good of the country they just care about who is funding their next campaign.
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flight23
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Re: I want to tip my hat to Prophet again,

Post by flight23 »

To illustrate the problem here are some numbers:
The wealthiest 400 people (yes, 400, as in .000015% of the population) own 60% of the nations wealth, or approximately 1.3 trillion dollars in 2009.

Lets say 500 billion of that was in possession of the bottom 60% instead. Income tax revenue on that money, plus sales tax on the say >85% of it they would spend, plus taxes on the increased corporate income from that spending would likely total upwards of 50-100 billion in federal and state taxes per year, not counting the tax revenue generated from the new jobs created.
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Reese99
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Re: I want to tip my hat to Prophet again,

Post by Reese99 »

BuffaloNY: My money is on punting.

flight23: While I can agree to some of what you said in principle, the primary issue I take with redistribution of wealth, aside from the fact that it's theft, is that expecting the federal government to be the vehicle that moves that wealth in a supposedly equitable way is just inherently ridiculous.

Let's pretend that the government was good-willed and 100% Robin Hood-esque, and really wanted to redistribute wealth from the most wealthy to the most needy and had no selfish motives for collecting that money... (sorry, need a few minutes here to stop laughing)... (okay, I'm back)... there would still be that obligatory layer of bureaucracy that sucked out some absurd percent of the total funds into the government wasteland.

By way of example, take cash for clunkers. In issuing an average government-sponsored rebate of $1,667 per vehicle sold, the program incurred a total cost of $24,000 per vehicle sold. (source: http://www.edmunds.com/about/press/cash-for-clunkers-results-finally-in-taxpayers-paid-24000-per-vehicle-sold-reports-edmundscom.html?articleid=159446&)

I agree with the premise that raising taxes is one tool we need to use to fix the debt crisis. I even agree that it's absurd that there are salaries for executives which are several hundred times greater than their employees' salaries.

However, those richest 400 Americans you mentioned already keep the majority of their wealth overseas, so raising their tax rate won't actually significantly increase tax revenues. In fact, in most cases, they'll just move more of their money overseas as a reaction to the tax increase.

The real victims of raising the top tax rates are the near-rich, who can't yet afford to play three-card monte with their money at an international level. And oddly enough, these are the primary job-producers in America.

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UwshUwerME
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Re: I want to tip my hat to Prophet again,

Post by UwshUwerME »

"We need to suck it up, accept the fact that our entitlements are monetarily broken, and redesign them. " Agree!

TSPNerd
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Re: I want to tip my hat to Prophet again,

Post by TSPNerd »

The biggest problem is that very, very few people actually understand how the United States monetary system works. No politicians understand, and I'd venture to guess that nobody in here does either.

The US does NOT run like your household does (unless your house hold can print money). The US does NOT have to run a balanced budget...and DEFINITELY should not run not a budget surplus.

This is the equation for the United States monetary system (And Australia, Japan and some other countries too):
(G-T)=(S-I)-NX. This equation MUST balance to zero.

G = Govt Spending
T = Taxes
S = Private sector savings
I = Private sector investment
NX = Net Exports

Since the 2 sides must remain in balance, tell me how you're going to run a balanced budget without effecting the private sector's ability to save? Especially since NX is a negative number (which turns the sign to a +)

Data for Q3 2010:
S-I = 961 Billion
NX = -520 Billion

So plugging those numbers into the equation we get:
G-T = 961+520
G-T = 1,481

So in order to keep the equation in balance, the government must run a deficit of 1.481 trillion dollars (after tax collection).

We are a net import nation. That means it's next to impossible to have a balanced budget, especially if the private sector wants to save (private sector is currently saving roughly 7% annually).

Here's a good article on exactly what I wrote above. http://pragcap.com/what-happens-when-th ... elt-part-2

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flight23
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Re: I want to tip my hat to Prophet again,

Post by flight23 »

Reese99 wrote:flight23: While I can agree to some of what you said in principle, the primary issue I take with redistribution of wealth, aside from the fact that it's theft, is that expecting the federal government to be the vehicle that moves that wealth in a supposedly equitable way is just inherently ridiculous.

I agree with the premise that raising taxes is one tool we need to use to fix the debt crisis. I even agree that it's absurd that there are salaries for executives which are several hundred times greater than their employees' salaries.

However, those richest 400 Americans you mentioned already keep the majority of their wealth overseas, so raising their tax rate won't actually significantly increase tax revenues. In fact, in most cases, they'll just move more of their money overseas as a reaction to the tax increase.

The real victims of raising the top tax rates are the near-rich, who can't yet afford to play three-card monte with their money at an international level. And oddly enough, these are the primary job-producers in America.


Two things.. any form of taxation is a 'redistribution of wealth'... that term gets thrown around too much IMO. The bailout itself was a redistribution of wealth, the problem is it was in the wrong direction... hundreds of millions of dollars transferred to banks that are already back to making billions each month.

The main point I am making though is the current system *allows* this to happen... it allows the rich to get richer without limitation and without consideration of what is best for the country as a whole. Im not saying we should take the 500M from them (that would be theft), Im saying we need to make sure it cant continue to move in that direction. The Bush tax cuts made the situation worse. The fact that we allow executives to make an average of 400x or more the average worker is the issue. If we force corporations to pay more to their workforce and remove ridiculous tax breaks, and at the same time increase taxes or employ a luxury tax on exorbitant salaries then our tax base will be rebuilt. Then the rich can find another way to steal it from everyone else again and the cycle will continue.

The rich cant really move their money overseas and avoid taxes by the way. Unless they completely forgoe their US citizenship (for something like 5+ years) among other very restrictive rules, they cant get away from paying US taxes. The problem is they just dont spend any of their money. They invest it and make more money and pay a 15-20% tax on the money they make. All of that wealth is essentially just removed from the economy, or is spent on foreign goods/services. In the hands of the lower 50% the vast majority of wealth gets spent domestically.

We can make all the changes we want to entitlements and keep increasing taxes in minute amounts but eventually if the government doesnt realize that this degree of wealth inequality exists and is unsustainable then there will either be a revolution or the country will plain and simply fail and fall into a huge depression. It may take 20 or 30 years, or more, but the trend continues and eventually we'll hit the breaking point, if we arent at it already.
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flight23
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Re: I want to tip my hat to Prophet again,

Post by flight23 »

TSPNerd... what you wrote makes sense, logically, but then how would the government *ever* reduce the deficit? Based on what you wrote the deficit should increase every year, without question. Just the interest on the national debt is already a high proportion of government spending. If our credit rating drops and interest rates rise then we will be paying more and more to China (as our largest investor) every year just to pay for the amount of money we are borrowing, effectively sending even more money out of the country.
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