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Saturday, July 3, 2010
Government for Sale: How Lobbyists Shaped the Financial Reform Bill
Two weeks ago, along a marble corridor in the Rayburn House Office Building in Washington, I watched about 40 well-dressed men (and two women) delivering huge value for their employers. Except that we, the taxpayers, weren't employing them. The nation's banks, mortgage lenders, stockbrokers, private-equity funds and derivatives traders were. They were lobbyists — the best bargain in Washington. Capitol Tax Partners, for example, is one of 1,900 firms that house more than 11,000 lobbyists registered to operate in Washington. Last year, according to the Center for Responsive Politics (CRP), firms like Capitol Tax were paid a total of $3.49 billion for unraveling the mysteries of the tax code for a variety of businesses. According to Capitol Tax co-founder Lindsay Hooper, his firm provided "input and technical advice on various tax matters" to such clients as Morgan Stanley, 3M, Goldman Sachs, Chanel, Ford and the Private Equity Council, which is a trade group trying to head off a plan to increase taxes on what's called carried interest, a form of income enjoyed by the heavy hitters who run venture-capital and other types of private-equity funds. (Time Warner, the parent company of TIME magazine, is also a client of Capitol Tax Partners.) (more)
We’re Going Broke
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.Let's see...what's in the news today?
Stocks went down again yesterday. The Dow got trimmed by 96 points.
Gold, on the other hand, went up $3 to $1,245.
The first half of the year came to a close with the S&P 500 down 6%, global stocks down 10%, oil down 5%, Chinese stocks down 27%, the euro down 14%.
What was up? Gold. Plus 13%.
There are two major pieces of unfinished business in the markets. Stocks have still not completed their bear market drop. Gold has not fully realized its bull market either. (more)
3 Beaten-Down Stocks With Huge Reserves
S&P 500 companies have never held more cash than they do today. Microsoft (MSFT: 23.27, +0.11, +0.47%), Cisco Systems (CSCO: 21.13, -0.13, -0.61%), Google (GOOG: 436.55, -2.94, -0.66%) and Apple (AAPL: 246.94, -1.54, -0.61%) together sit on more than $128 billion in cash and short-term investments. More than two-thirds of countries don't make that much in a year, counting wages and profits for all of their citizens and companies.Such hoarding generally serves stock investors poorly. They should receive larger dividends, but instead they are left to hope that before the money is wasted it's spent on something that results in a higher share price. However, at the moment, mountains of cash might give confidence to investors who fear another sharp market decline. In a downturn, companies can use cash reserves to snap up struggling competitors on the cheap, or to repurchase their own shares.
The three companies below aren't nearly as dominant as the aforementioned ones, and two are struggling to compete with them. What they have going for them is that their cash reserves are huge when calculated as a percentage of their stock market values, and that they're adding to them by generating abundant free cash from operations. Whether all that financial firepower will be put to good use is unknown, but turnarounds are surely easier when companies can fund them properly without taking on excessive debt. (more)
Bears Should Beware
I'm going to go through some signs that rabid bears might do well to pay attention to because I think the market is very close to a major bottom. (That doesn't mean we are guaranteed to make new highs, although we might. Just that we can probably expect an explosive rally soon, even if it ultimately turns out to be a counter trend rally in an ongoing bear market).First off, way too many people are counting on the head and shoulders pattern taking the market directly down to 850. Folks, historically these head and shoulder patterns have a success rate of about 50%. A coin toss, in other words. Didn't we learn that lesson last July?
Let’s go now to the charts. We have a large momentum divergence that has developed on the daily charts. (more)
Bond rally reflects gloom - but don't bet on it lasting
NEW YORK (MarketWatch) -- The recent steep rally in U.S. Treasury bonds, helped by investor jitters over European debt and weakening U.S. economic data, isn't likely to last, say some bond investors and strategists.
They expect longer-term rates to rise in coming months as investors pull back from bonds -- whose prices rise when their yields fall -- because growth turns out to be better than markets anticipate. This shift should support the stock market.
Short-term Treasury yields dropped to a new record low in recent sessions as bad news piled up about consumer confidence, manufacturing and the job market. In the six months ended Wednesday, an index of Treasury debt had the biggest half-year gains since 1995.
And with investors leaning toward longer-duration Treasurys, the yield curve flattened; in severe cases, the shrinking between short and long-term yields has been a harbinger of recession. (more)
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