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2010-01-27 09:20

HIGH NOON (FINAL EDITION)

The question is whether tonight's State of the Union address will be a decisive call to arms as promoted by The Economist magazine and liberal media pundits, or will the President remember that many of the people that propelled him into office did so because they felt he wasn't business as usual. Will it be about fighting everyone alone or trying to bring the nation together. For the country's sake and the stock market let's hope it's the latter. But, I don't think that it will be. In fact, many of the positive offerings will be things that nice people would frown upon like the idea of limiting repayments of student loans to 10% of income above living expenses from the current 15%. From the way I read it that means a person owing $20,000 and making $30,000 a year would only have to pay $115 a month rather than $228 a month. Here's the kicker, if you are a public servant you only have to pay back the loan for ten years and then the rest is forgiven. That means you take the loan and go to work in the government and only have to pay (under the scenario outlined above) $13,800 on $20,000 in student loans. Oh, those choosing to work in the private sector can also have their student loans forgiven... after 20 years. That's right, once again government workers get remarkably more favorable terms than other Americans. So much for shared sacrifice! By the way, all the focus on the lower end of the economic spectrum has backfired. Maybe that person with the extra $113 a month spends it, but there are fellow Americans out there with much more money and they would like incentives, too In the meantime, I'm not sure how to connect the dots to job creation from the latest offers for the so-called middle class Americans. I get the idea of helping, but what I don't get is the idea it's fair, or even smart, to freeze people from programs supposedly designed to help the entire nation. Case in point is the first-time homebuyer tax credit where full credit was limited to couples making $150,000 and individuals $75,000. This is a long way from those greedy Americans making $250,000 a year. The program has been adjusted, so after November 1 the numbers became $225,000 and $125,000, respectively, which is still discriminatory toward people doing well but not rich by any stretch of the imagination. The same is true with the child care and dependent care tax credit that will be doubled for families making less than $85,000 a year (tax credits increase for families up to $115,000). It's a nice gesture and who could argue, but gosh darn it, families making more than $85,000 a year in most metropolitan cities are struggling. They are fellow Americans that could use a break. I bet that many of these people cast their votes in November 2008 thinking they would get a break as they weren't in that evil class of folks at $250,000 plus. According to the presidential panel that helped to put together the middle class actions to be outlined tonight, care for a single child can run as high as $10,000 a year. So consider if you are a family with household income in New York making $125,000 a year with two children. Over 40% of your income will go to taxes (New York's taxes are second only to my home state of New Jersey), then there is rent, the cheapest in Manhattan is up in Harlem where a non-doorman two bedroom goes for an average of $2,023 a month. Then there are travel costs and all the other costs that it takes to live. Would anyone consider this couple fat cats that don't deserve the same considerations as others? As for the rest of the speech, I hear that there will be a continuation of the attack on banks because the scarier the villains the more endearing the people to the sheriff. He will try to appease the tea party crowd with a freeze on spending that on the face of it is a joke, but at this point I will take the baby step. However, just don't try to act like there is a sincere concern about debts and deficits. There is nothing that's going to stop the growth of the government and its central planning agenda. I don't think that the President is ever going to come around to the supply side way of thinking but at some point he may figure out if we are all in this together then...well, we are all in this together. In the 1952 classic "High Noon" Sheriff Will Kane, played by Gary Cooper, waited on the edge of town to face a gang of ruthless killers on his own as the rest of townspeople cowered in fear. These days the townspeople are cowering in fear as the sheriff strolls through town picking winners and losers as he uproots the evil influence of capitalism and success otherwise known as the ruthless gang that kills mediocrity and sloth. War on Big Business from the Carter Files The last time a President declared war on a specific industry Jimmy Carter pounced on U.S. oil companies. In fact, in one of his last acts as President he pushed through the Crude Oil Windfall Profit Tax Act. Ostensibly, it was considered a tax on profits but turned out it was an excise tax that punished oil companies on the difference between market prices for oil versus the 1979 price and factored in inflation and state taxes. Just as President Obama is suggesting now, President Carter suggested then, too, the tax would help pay off the deficit. Of course in both cases that is disingenuous at best. Instead, the plan made American oil companies retrench and refocus their businesses. Since the tax was on domestic production there was a shift from exploration into refining. The result is American dependence on foreign oil surged and hasn't stopped since. U.S. oil companies are still seen as public enemy number one when crude oil prices surge, even when those prices surge from emerging market demand and dumb monetary policy. The Carter team said that the tax on oil companies would raise $393.0 billion between 1980 and 1990. As it turns out, the government raised $80.0 billion (surprisingly their numbers were too ambitious). The estimates vary, but virtually all economists agree that domestic production was artificially reduced. The low end reduction estimate is 320,000 barrels a day and on the high end some believe 1,268,000 b/d were lost. The multi-decade trend of higher domestic oil production was brought to an abrupt halt, and has been in retreat ever since. By 1990, America was getting more oil from imported sources than domestic. Today' Session Once again the market closed on a sloppy note even after a midday push seemed to signal some enthusiasm on earnings and economic data. Earnings have failed to inspire as even Apple (AAPL) saw the majority of midday gains fade into the close. Maybe earnings will lift the market today. SANM: posted earnings of $0.23 per share on $1.48 billion in revenue; the Street was looking for $0.13 per share and $1.40 billion. In addition to the big top and bottom line beats the company offered guidance that was on the high end of expectations and says earnings for the current quarter will be $0.27 per share and revenue $1.55 billion; the Street was at $0.09 per share and $1.36 billion. The company makes end to end solutions for a myriad of industries, including communications equipment and enterprise data storage, and is also billing itself as a renewable energy play. The stock soared after the results were posted. This is sure to put the company back into the takeover rumor mill. GILD: earned $0.93 per share on $2.03 billion versus consensus of $0.85 per share and $1.93 billion. Overall revenue climbed 42%, led by Atripla, whose sales were up 50% as it became the company's top-selling drug. The company makes drugs for HIV, hepatitis B, and high blood pressure. YHOO: earned $0.11 per share versus a loss of $0.22 per share a year earlier. The bottom line was in line, but revenue of $1.7 billion was well above the $1.23 billion modeled by Wall Street. Yesterday the stock traded 43.7 million shares versus the daily average of 19.0 million, but closed lower. Initially, the shares dipped on the news but edged higher on higher sequential revenue in display and search. I was also impressed that the company hired 700 new employees during the quarter. It's still an uphill battle, but the stock isn't dead yet. Today Timothy Geithner and Henry Paulson will testify on their roles as treasury secretaries 74 and 75 with respect to all the emergency measures that have been taken.

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