GOLD SITTING ON SUPPORT

The ETF for Gold is GLD which is sitting right on a support line. If it does not go up from here, next support level for GLD would be 100.

Stock Tax May Reduce Volume 90%

Stock Tax May Reduce Volume 90%
By Nina Mehta and Whitney Kisling
Jan. 29 (Bloomberg) — Taxing equity trades may reduce U.S. stock market volume by 90 percent, Interactive Brokers Group Inc. Chief Executive Officer Thomas Peterffy said.
A transaction tax was first discussed in February and revived in December, when Iowa Senator Tom Harkin and Oregon Representative Peter DeFazio said it is the “most painless way” to fund the government’s deficit and curb speculation. French President Nicolas Sarkozy said Jan. 27 that a European debate on the subject is unavoidable.
“The mother of all creators of havoc on Wall Street is this looming transaction tax,” said Peterffy, who is also president of the brokerage and automated market-making company, in an interview yesterday. Interactive Brokers is based in Greenwich, Connecticut. “Trading volumes would plunge by about 90 percent, markets would become illiquid and tens of thousands of people would lose their jobs.”
Sending a fee to the government for every transaction would hurt asset managers, brokerages and so-called high-frequency traders, a group that accounts for 61 percent of volume, according to New York-based research firm Tabb Group LLC. Interactive Brokers handles about one-seventh of U.S. options that change hands.
An average of 10 billion shares has traded each day on U.S. exchanges since the beginning of 2009, according to data compiled by Bloomberg.
$5.93 Trillion
The debate follows the biggest U.S. stock market rally since the Great Depression. The Standard & Poor’s 500 Index jumped 70 percent between March 9 and Jan. 19, restoring $5.93 trillion to American equity markets. It has fallen 5.7 percent in the past two weeks as President Barack Obama proposed limiting the size of financial institutions and their proprietary trading.
The proposals from Harkin and DeFazio, both Democrats, would impose a fee on transactions of stocks and derivatives, aiming to raise money for economic stimulus plans. The U.S. government’s budget deficit in the fiscal year that ended Sept. 30 was a record $1.42 trillion.
Sarkozy joined U.K. Prime Minister Gordon Brown and German Chancellor Angela Merkel in supporting a tax on trades. In Europe, the money raised could be used to fund climate measures or aid for poor nations, Sarkozy said. He leads the world’s fifth-largest economy.
‘Wacky Idea’
“As leaders and intellectuals throughout the world endorse a tax, that makes it seem more reasonable and less like the wacky idea it is,” said Dan Mathisson, head of the Advanced Execution Services unit at Credit Suisse Group AG in New York. “And if other countries are willing to consider a tax, it becomes more realistic that it could pass in the U.S.”
DeFazio’s proposal would put a tax of 0.25 percent on stock transactions and 0.02 percent on derivatives including futures, options, swaps and credit-default swaps. A transaction of 200 shares at $40 each would result in a $20 tax, compared with a commission of $1 for active traders at Interactive Brokers, Peterffy said.
The bill’s sponsors have “no understanding whatsoever” about its likely effect, Peterffy said.

Mean Street: Obama is Killing America by Killing Wall Street

By Evan Newmark

What has become of America?

Today, Goldman Sachs CEO Lloyd Blankfein announced record annual profits of $13.4 billion for his bank.

He has repaid the U.S. taxpayer $11.42 billion for taking TARP money he didn’t want.

meanstreet

He will contribute another $6.4 billion in taxes to the general public.

And within weeks, if President Obama gets his way, Blankfein has a good shot at becoming the most hated man in our nation.

Apparently, this is now how we treat success in America. We damn it, and then we punish it by enacting loopy, politically expedient measures such as caps on Wall Street trading and principal investments.

Why is our country so self-destructive?

We need people to come together, but we engage in populist divisiveness. We need millions of jobs, but we kill the incentives and destroy the capital that will create them.

Please don’t accuse me of not “getting it.” I do “get it.” I “get” that Main Street is suffering. I “get” that Wall Street is full of selfish, greedy people. I “ get” that Wall Street engages in reckless trading. I “get” that no bank should be too big to fail.

But does anyone actually believe the new White House war on Wall Street will remedy any of that? I know I don’t.

This war is about politics. It’s about a big election loss in Massachusetts. It’s about pushing the blame for the nation’s misery from Washington onto Wall Street.

Is President Obama talking to Tora Bora terrorists or Park Avenue bankers when he says: “So if these folks want a fight, it’s a fight I’m ready to have.”

Unfortunately, it’s a fight — that at least on the PR front — Washington is already winning. Just read today’s subdued Goldman Sachs earnings release.

Total profits were a “record” at the bank, even if earnings per share weren’t. But you wouldn’t know that from the Goldman press release. Instead, the big PR highlight is “Compensation and Benefits Down By $4 billion or 20% From 2007. Lowest Annual Compensation.”

How perverse. Job creation in our economy comes from profits and growing incomes. But here is America’s best-run company almost ashamed of its profits and bragging about how much less it’s paying its people.

Make no mistake — this war will damage the nation’s psyche. Just look at today’s stock market. In fact, the war’s unforeseen consequences are just now beginning to appear .

It’s bound to get very, very messy because in fact, contrary to the President’s assertion, the 2008 collapse had little to do with the dissolution of Glass-Steagall or proprietary trading by banks.

Sure, Wall Street was way too vulnerable because it was way too leveraged.

But AIG wasn’t a bank. Neither Lehman Brothers nor Bear Stearns took consumer deposits. And the hundreds of billions in losses at Fannie Mae and Freddie Mac — as well as the destruction of Wachovia, Washington Mutual and Countrywide had nothing to do with prop trading.

That was caused by banks lending money to millions of Americans to buy houses they couldn’t afford. You won’t hear much of that coming from Washington. After all, “It’s Actually Your Fault, America” is not a good slogan for a re-election campaign.

PROFIT FROM GOLD AND KEEP YOUR DAY JOB

THE BANK TAX

By Peter Morici

President Obama is at it again – pandering to rich and powerful political supporters, while portraying himself as the guardian of the exchequer and champion of the little guy.

The president says his proposed tax on the capital of the largest banks and financial institutions is intended to recoup the TARP money that has not or will not be repaid.

That is a flagrant attempt to confuse the public on two fronts.

First, the banks the president would tax are repaying their TARP money with interest to the Treasury. Though not all of the TARP money given to the banks has yet to come back, the government will get it all back with a significant profit because the government was paid such generous interest under the terms of the TARP.

Second, the president misused the TARP money by investing in GM and Chrysler, and GMAC, and that is where the government will lose money.

If President Obama were to tax anything to recoup lost TARP funds, it should be cars. However, that would anger the UAW, staunch supporters of the president and Democrats running for Congress.

The bank tax is in response to public outrage over the $150 billion in bonuses paid in 2010 on 2009 bank earnings. The tax would only raise $9 billion in 2010-a pittance compared to the bonuses.

Those bonuses were “earned” trading the $1.5 trillion the biggest banks were loaned by the Federal Reserve at near zero interest rates.

The bankers are screaming about a death wound when the tax is merely a paper cut.

The tax is a bad idea. It won’t fix the banks, who continue trading complex derivatives, energy futures and repackaging old mortgage-backed securities instead of making new loans to worthy homeowners and businesses.

The president’s tax would let the bankers, who contribute mightily to campaigns of congressional Democrats and President Obama, keep their bonuses after they nearly wrecked the global economy with irresponsible risk taking on the public’s tab.

This is horrible public policy and demagoguery.

The proposed bank tax is meaninglessly small, serves no purpose toward reforming the banks, and is merely an attempt by the president to appear on the side of the auto industry and against the banks, when he is really on the side of union organizers and the bankers.

As with the union exemption from the Cadillac tax in the proposed health care reform compromise, the president is putting his political debts ahead of public purpose.

He could propose a 50 percent tax directly on bonuses over $250,000 as the British prime minister plans.

Instead, the president lets the bankers keep their money, and sends Democrats calling for contributions. It’s all very insidious.

A CLEAR EXPLANATION OF DEBT MONETIZATION

Debt monetization is one of the two main ways that national governments pay for their budget deficits.

When the US national government, for example, wants to spend more money in a given year than it has received in taxes, it must borrow the extra money. One way is to go into private capital markets to borrow the money. However, this means that the government is competing with private-sector businesses for a scarce pool of available loan funds. This can result in a “crowding out” effect, as government draws investment capital away from productive private-sector borrowers to pay for its own largely worthless programs.

As an alternative, the government can “monetize its debt” by borrowing from the US Federal Reserve system, which is nominally under private control but is really just another part of the government. In this case, the government sells its bonds to the Federal Reserve, which creates new bank deposits out of thin air and uses them to pay for the bonds. This process creates new money and expands the money supply: hence it is called “monetizing” the government’s debt.

Debt monetization is essentially no different from the historic practice of “coin clipping,” whereby kings would reduce the amount of gold or silver in a country’s coins and keep the extra gold or silver for themselves. When that happened, the coins were worth less, so the people lost purchasing power and it was transferred to the king.

Likewise, when a modern national government monetizes its debt, it reduces the value of the country’s money, thereby — in a sneaky way — taking money out of the pockets of working people and giving it to government officials in a kind of “hidden tax.” Hence, the reason for the current weak dollar and the rally in the stock market.

AMERICA SLIDES DEEPER INTO DEPRESSION AS WALL STREET REVELS

By Ambrose Evans-Pritchard
Published: 6:35PM GMT 10 Jan 2010

December was the worst month for US unemployment since the Great Recession began.

The labour force contracted by 661,000. This did not show up in the headline jobless rate because so many Americans dropped out of the system. The broad U6 category of unemployment rose to 17.3pc. That is the one that matters.

Wall Street rallied. Bulls hope that weak jobs data will postpone monetary tightening: a silver lining in every catastrophe, or perhaps a further exhibit of market infantilism.

The home foreclosure guillotine usually drops a year or so after people lose their job, and exhaust their savings. The local sheriff will escort them out of the door, often with some sympathy –– just like the police in 1932, mostly Irish Catholics who tithed 1pc of their pay for soup kitchens.

Realtytrac says defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody’s Economy.com expects another 2.4m homes to go this year. Taken together, this looks awfully like Steinbeck’s Grapes of Wrath.

Judges are finding ways to block evictions. One magistrate in Minnesota halted a case calling the creditor “harsh, repugnant, shocking and repulsive”. We are not far from a de facto moratorium in some areas.

This is how it ended between 1932 and 1934, when half the US states declared moratoria or “Farm Holidays”. Such flexibility innoculated America’s democracy against the appeal of Red Unions and Coughlin Fascists. The home siezures are occurring despite frantic efforts by the Obama administration to delay the process.

This policy is entirely justified given the scale of the social crisis. But it also masks the continued rot in the housing market, allows lenders to hide losses, and stores up an ever larger overhang of unsold properties. It takes heroic naivety to think the US housing market has turned the corner (apologies to Goldman Sachs, as always). The fuse has yet to detonate on the next mortgage bomb, $134bn (£83bn) of “option ARM” contracts due to reset violently upwards this year and next.

US house prices have eked out five months of gains on the Case-Shiller index, but momentum stalled in October in half the cities even before the latest surge of 40 basis points in mortgage rates. Karl Case (of the index) says prices may sink another 15pc. “If the 2008 and 2009 loans go bad, then we’re back where we were before – in a nightmare.”

David Rosenberg from Gluskin Sheff said it is remarkable how little traction has been achieved by zero rates and the greatest fiscal blitz of all time. The US economy grew at a 2.2pc rate in the third quarter (entirely due to Obama stimulus). This compares to an average of 7.3pc in the first quarter of every recovery since the Second World War.

Fed hawks are playing with fire by talking up about exit strategies, not for the first time. This is what they did in June 2008. We know what happened three months later. For the record, manufacturing capacity use at 67.2pc, and “auto-buying intentions” are the lowest ever.

The Fed’s own Monetary Multiplier crashed to an all-time low of 0.809 in mid-December. Commercial paper has shrunk by $280bn ($175bn) in since October. Bank credit has been racing down a hair-raising black run since June. It has dropped from $10.844 trillion to $9.013 trillion since November 25. The MZM money supply is contracting at a 3pc annual rate. Broad M3 money is contracting at over 5pc.

Professor Tim Congdon from International Monetary Research said the Fed is baking deflation into the pie later this year, and perhaps a double-dip recession. Europe is even worse.

This has not stopped an army of commentators is trying to bounce the Fed into early rate rises. They accuse Ben Bernanke of repeating the error of 2004 when the Fed waited too long. Sometimes you just want to scream. In 2004 there was no housing collapse, unemployment was 5.5pc, banks were in rude good health, and the Fed Multiplier was 1.73.

How anybody can see imminent inflation in the dying embers of core PCE, just 0.1pc in November, is beyond me.

Mr Rosenberg is asked by clients why Wall Street does not seem to agree with his grim analysis.

His answer is that this is the same Mr Market that bought stocks in October 1987 when they were 25pc overvalued on Shiller “10-year normalized earnings basis” – exactly as they are today – and bought them at even more overvalued prices in 2007, long after the property crash had begun, Bear Stearns funds had imploded, and credit had its August heart attack. The stock market has become a lagging indicator. Tear up the textbooks.

WEAK YEN MEANS LOWER GOLD

“There are a lot of voices in the business world saying that the dollar around Y95 is appropriate in terms of trade…in cooperation with the Bank of Japan, I will make efforts to…bring the exchange rate to appropriate levels.”

- New Japanese Finance Minister, January 7th 2010
Below is chart of FXY which is an ETF of the Japanese Yen. The Yen and Gold, move in the same direction.