Stock to get crushed in 2013

[The Rabbi]

Op ed in the WSJ on saturday. He makes an excellent case. Don't look for Obama to do anything about this as he is the one who wants to raise taxes "for the sake of fairness."
Donald Luskin: The 2013 Fiscal Cliff Could Crush Stocks - WSJ.com

Why doesn't the stock market, that most sensitive of economic barometers, seem to care that the U.S. economy faces a "fiscal cliff" at year-end? On Dec. 31, trillions of dollars in tax cuts will expire, trillions more in new tax hikes under ObamaCare will kick in, and a trillion in automatic spending cuts will begin. Yet stock prices are the highest in four years.

Maybe with the date still far away, the fiscal cliff just doesn't seem real. It's certainly being treated that way on both sides of the political divide. On the left, economists claim with a straight face that even huge tax hikes don't matter—a top tax rate as high as 70%, they claim, would have no chilling effects on top earners' incentives. On the right, they just as solemnly claim even a small rise in the top rate for high earners from today's 35% to the 39.6% scheduled for after year-end will bring about economic ruin.

So perhaps the stock market has been lulled into thinking these issues are merely abstract matters of theory to be hashed out by economists on both sides. What's the big deal, so long as Apple beats consensus earnings expectations again next quarter?

The big deal is that one key element at stake here is not a matter of theory at all—it's simple arithmetic. And it leads to the simple yet alarming conclusion that unless current law is amended before year-end, the stock market has to fall by at least 30%.


It's all about how dividends are taxed—and the reality that we are facing the biggest single hike in dividend tax rates in history.

The market sets the price of a dividend-paying stock so that it will pay the after-tax yield required to attract capital. When the tax rate on dividends goes up, the after-tax yield necessarily goes down—to restore the after-tax yield to its required level, the stock price has to fall.

Please bear with us through an explanation that involves a little arithmetic. If you are an investor, this is important.

More at the source.

 

[rightwinger]

Maybe Republicans need to accept the middle class tax cut for the good of the country

 

[The Rabbi]

Maybe Republicans need to accept the middle class tax cut for the good of the country

The Bush/Obama tax cuts are middle class tax cuts. So why does Obama want to raise taxes, especially as we go into another recession?

 

[Avorysuds]

Now that Dems have adopted the "tax cuts" position I wonder what Republican have left... Gays and abortion, lol.

Don’t tax but spend, Reps did it for years and we have the deficit to show for it, why get all pissy now that Dems found out how to scam the voters. You can just print the cash. This is a great reason the Republican party needs to die off, they are just liberals.

 

[rightwinger]

Maybe Republicans need to accept the middle class tax cut for the good of the country

The Bush/Obama tax cuts are middle class tax cuts. So why does Obama want to raise taxes, especially as we go into another recession?

He wants to shift the burden back to where it was before the ill advised Bush tax cuts

Borrowing money to fund tax cuts for the wealthy?

Insanity. What's more insane is to keep doing it even though we never got the jobs we were promised

 

[The Rabbi]

Maybe Republicans need to accept the middle class tax cut for the good of the country

The Bush/Obama tax cuts are middle class tax cuts. So why does Obama want to raise taxes, especially as we go into another recession?

He wants to shift the burden back to where it was before the ill advised Bush tax cuts

Borrowing money to fund tax cuts for the wealthy?

Insanity. What's more insane is to keep doing it even though we never got the jobs we were promised

Where do you get this shit?
And how many jobs exactly has Papa Obama actually "created"? His porkulus was a gross failure. His pitiful attempt to pass another porkulus got rejected by his own party.
Obama's best UE reading was the day he took office. It's been downhill ever since.

 

[Toro]

Mr Luskin doesn't have a very good track record calling the market.

He thesis may be correct though.

 

[Truthseeker420]

I'm not surprised Fox News would say the sky will crash if Obama is elected.

 

[The Rabbi]

Mr Luskin doesn't have a very good track record calling the market.

He thesis may be correct though.

Which part do you think is wrong?

 

[Toro]

Mr Luskin doesn't have a very good track record calling the market.

He thesis may be correct though.

Which part do you think is wrong?

I didn't say he was going to be wrong. I just said he has a poor track record.

My guess is that he could be right. However, the market is likely to discount the news before 2013. So he could be right about what happens but wrong about when it happens.

 

[Staidhup]

So it's now a flight from bonds to equities and now gold? In short kiss the dollar goodbye and expect increased interest rates to fund the bubble?

 

[Paulie]

Op ed in the WSJ on saturday. He makes an excellent case. Don't look for Obama to do anything about this as he is the one who wants to raise taxes "for the sake of fairness."
Donald Luskin: The 2013 Fiscal Cliff Could Crush Stocks - WSJ.com

Why doesn't the stock market, that most sensitive of economic barometers, seem to care that the U.S. economy faces a "fiscal cliff" at year-end? On Dec. 31, trillions of dollars in tax cuts will expire, trillions more in new tax hikes under ObamaCare will kick in, and a trillion in automatic spending cuts will begin. Yet stock prices are the highest in four years.

Maybe with the date still far away, the fiscal cliff just doesn't seem real. It's certainly being treated that way on both sides of the political divide. On the left, economists claim with a straight face that even huge tax hikes don't matter—a top tax rate as high as 70%, they claim, would have no chilling effects on top earners' incentives. On the right, they just as solemnly claim even a small rise in the top rate for high earners from today's 35% to the 39.6% scheduled for after year-end will bring about economic ruin.

So perhaps the stock market has been lulled into thinking these issues are merely abstract matters of theory to be hashed out by economists on both sides. What's the big deal, so long as Apple beats consensus earnings expectations again next quarter?

The big deal is that one key element at stake here is not a matter of theory at all—it's simple arithmetic. And it leads to the simple yet alarming conclusion that unless current law is amended before year-end, the stock market has to fall by at least 30%.


It's all about how dividends are taxed—and the reality that we are facing the biggest single hike in dividend tax rates in history.

The market sets the price of a dividend-paying stock so that it will pay the after-tax yield required to attract capital. When the tax rate on dividends goes up, the after-tax yield necessarily goes down—to restore the after-tax yield to its required level, the stock price has to fall.

Please bear with us through an explanation that involves a little arithmetic. If you are an investor, this is important.

More at the source.

Oh you like Luskin huh? He advised Ron Paul's campaign.

Do you still like him?

 

[rightwinger]

This is getting scary

If we vote for Obama, Rabbi is claiming that if Obama is elected again we will all face economic armagedden

We better listen to Rabbi or else!

 

[The Rabbi]

This is getting scary

If we vote for Obama, Rabbi is claiming that if Obama is elected again we will all face economic armagedden

We better listen to Rabbi or else!

I'm not claiming anything. I merely reproduced the article. Go argue with Luskin.
Which part of his argument do you not agree with?

 

[rightwinger]

This is getting scary

If we vote for Obama, Rabbi is claiming that if Obama is elected again we will all face economic armagedden

We better listen to Rabbi or else!

I'm not claiming anything. I merely reproduced the article. Go argue with Luskin.
Which part of his argument do you not agree with?

The "crushed" part

There may be a correction as the market reacts to a new tax structure. "crushed" is what happened under Bush. We had the same tax structure under Clinton and the market made record gains. There is no reason our economy would be "crushed" by a four percent tax rate change

 

[Paulie]

This is getting scary

If we vote for Obama, Rabbi is claiming that if Obama is elected again we will all face economic armagedden

We better listen to Rabbi or else!

I'm not claiming anything. I merely reproduced the article. Go argue with Luskin.
Which part of his argument do you not agree with?

You realize Luskin is a proponent of laissez faire, and probably the closest thing to an economic libertarian that the gaggle of MSM economists has?

Do you think he has a wookie suit in his closet?

http://en.wikipedia.org/wiki/Donald_Luskin

Luskin is a self-avowed libertarian

 

[The Rabbi]

This is getting scary

If we vote for Obama, Rabbi is claiming that if Obama is elected again we will all face economic armagedden

We better listen to Rabbi or else!

I'm not claiming anything. I merely reproduced the article. Go argue with Luskin.
Which part of his argument do you not agree with?

You realize Luskin is a proponent of laissez faire, and probably the closest thing to an economic libertarian that the gaggle of MSM economists has?

Do you think he has a wookie suit in his closet?

Donald Luskin - Wikipedia, the free encyclopedia

Luskin is a self-avowed libertarian

That's probably why Toro says his record is terrible.
I'll bet you didnt read the article either.

 

[Paulie]

I'm only interested in the fact that you're valuing the opinion of arguably the most libertarian mainstream economist. One who endorsed Ron Paul and even advised his campaign on economics.

That's interesting to me.

 

[Toro]

I'm not claiming anything. I merely reproduced the article. Go argue with Luskin.
Which part of his argument do you not agree with?

You realize Luskin is a proponent of laissez faire, and probably the closest thing to an economic libertarian that the gaggle of MSM economists has?

Do you think he has a wookie suit in his closet?

Donald Luskin - Wikipedia, the free encyclopedia

Luskin is a self-avowed libertarian

That's probably why Toro says his record is terrible.
I'll bet you didnt read the article either.

People track the records of pundits. The last I saw was a few years ago and he was at the bottom of the list. And that was for the prior 10 years. The Elliott Wave guy Zander likes was dead last.

Ideologues are generally poor traders and investors. Luskin, if I recall correctly, was banging the table bullish in both 1999 and 2006.

 

[Toro]

I just finished a Ned Davis overview of the 2013 fiscal cliff. Tax increases and spending cuts will detract ~2.4% of GDP next year. So it is likely something will get done.