The oval office
hah! Salsa Dancing Dog
This quote from MarketWatch is exactly what is wrong with M&A:
But perhaps what investors should be most encouraged about is that Intel didn’t just pick a company that had a good product in what it believes is a growing business. Intel bought a company that has something the chip maker doesn’t have — a stock that’s been trending sharply higher for the last 10 years.
If investors are so excited by MFE, they can just buy some of it. They don’t need Intel to buy it, creating a big unfocused company, for them. This is a merger for management, not for investors.
Repeated Injuries and Usurpations
Let’s have a little fun with the Declaration of Independence. How similar is Obama to King George? Here are the charges against the latter and my fun comments:
- He has refused his Assent to Laws, the most wholesome and necessary for the public good. GM/Chrysler Bankruptcy Chaos
- He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them. Arizona Immigration
- He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only. Nothing yet! Go Obama!
- He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public Records, for the sole purpose of fatiguing them into compliance with his measures. His States of the Union couldn’t be more painful… but no tyranny here.
- He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people. N/A
- He has refused for a long time, after such disolutions, to cause others to be elected; whereby the Legislative powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within. N/A
- He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands. Let’s only allow immigration to the illiterate.
- He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers. Black Panthers voter intimidation
- He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries. N/A
- He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance. This is Obama’s daily mission.
- He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures. War in Afghanistan and Iraq (Bush too).
- He has affected to render the Military independent of and superior to the Civil power. N/A
- He has combined with others to subject us to a jurisdiction foreign to our constitution Obama: Citizen of the World, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:
- For Quartering large bodies of armed troops among us: N/A
- For protecting them, by a mock Trial, from punishment for any Murders which they should commit on the Inhabitants of these States:N/A
- For cutting off our Trade with all parts of the world:Chinese tariffs
- For imposing Taxes on us without our Consent: Daily M.O.
- For depriving us in many cases, of the benefits of Trial by Jury: N/A
- For transporting us beyond Seas to be tried for pretended offences N/A
- For abolishing the free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies: Boy, would he love to do this, but N/A
- For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments: Daily M.O.: what happened to the republic?
- For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever. States have no rights now.
- He has abdicated Government here, by declaring us out of his Protection and waging War against us. Feels about right, but N/A
- He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people. BP Oil Spill
- He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation and tyranny, already begun with circumstances of Cruelty & perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation. N/A
- He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands. N/A
- He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers,
the merciless Indian Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.Daily M.O. (the first part). The country has never been this divided except the first Civil War (the second one is right around the corner) - In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. (Daily M.O.) A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people. Sounds about right to me!
The Polidore Rule for the Federal Funds Rate
Using the Taylor Rule estimator in Bloomberg with the following inputs:
- Inflation alpha: 1
- Target inflation rate: 0%
- GDP alpha: 0
I’m trying to find the “natural” price of objective money and compare that to the Fed’s meddling over time. This is based on my opinion that no benevolent ruler should be setting the price of money for a society as large as the United States.
Here are the results:
Shower Thoughts: New Tax Regime
As I was rinsing off that extra glass of wine from last night, I was thinking about, obviously, efficient taxation. Let’s consider replacing the current income tax system with one on gross income (corporate and personal) with zero deductions— even for cost of goods and services.
That is, at a 15% rate, if you make $100,000 per year, you pay $15,000 in taxes— even if you have 6 kids and a mortgage. If your company has $1mm per year in revenue, it pays $150,000 in taxes— even if it only makes a profit of $1 on that $1mm in revenue prior to taxes. Under this system, some profitable (barely) companies will become unprofitable.
Advantages:
- Economic- A business should create more of its product until the marginal cost of the next unit of production exceeds the marginal increase in revenue. The problem with this equilibrium is that it does not include externalities. It occurs to me that the simplest way to price in externalities is to tax revenue. It is a rough fit, but generally speaking a firm that has more revenue demands more of the government and the environment than one with less revenue— regardless of profitability. There are too many firms out there that aren’t profitable enough to justify their externalities and if externalities were priced in would either dramatically change ($WMT) or cease to exist ($GM). Why should $AAPL pay more in taxes than $GM— it is clear who has the greater externalities, isn’t it? Under this regime, less capital would be wasted.
- Practical- Firms spend billions each year “managing” their income to reduce their tax burden. For the same reason many fundamental analysts like sales-based ratios instead of income-based ratios, I think taxation would be more equitable if based on revenue instead of profit. It’s very difficult to hide revenue, so most people won’t even try. This has the nice side-effect of fewer smart people using their intellectual capital to reduce taxation— maybe they’ll invent a cure for cancer instead.
- Fairness- Those with greater resources have greater ability to avoid taxes by maximizing deductions and generally working the system in our current regime. I think a system like this would be very progressive without being explicitly progressive. Also, our current system is a treasure trove of social engineering experiments (child tax credit, mortgage interest deduction) and implicit subsidies of high tax localities (you can write off your local taxes today). No more under revenue based taxation.
Disadvantages:
- Both- We certainly don’t want this tax and the traditional income tax. It has to be a replacement.
- Black market- Unlike a property or sales tax, those who earn income in the black market are not affected by this tax, which is a shame. That said, if you legalize drugs, the black market becomes much smaller. The issue with a consumption tax (which I’m in favor of in principle) is how to migrate to it— it’s not really fair to move to a different tax regime while millions of people are living off their savings that was once heavily taxed as income.
Of course, any tax system is probably ok— even a tax on smiles— if fewer dollars are collected. This system will not balance the budget until we stop spending like drunken sailors.
It could make things a bit more efficient and fair, though.
