Thursday, January 6, 2011

Bend Over: Here it Comes!

So much for those tax cuts if you live in Illinois:

"SPRINGFIELD — Gov. Quinn and the Democratic legislative leaders have struck an agreement to raise the income tax on individuals from 3 percent to 5 ¼-percent and raise the state tax on cigarettes by $1 a pack, sources said.
The moves, if they pass the House and Senate before next Wednesday, could erase the state’s expected $15 billion deficit, generate a $700-million-plus windfall for schools and grant property tax relief, sources said.

The tax increase, which would represent the first time the income tax had been raised in roughly two decades, would be temporary and need to be renewed by lawmakers and the governor, though the duration for that temporary period remained fluid, sources said."

My Take:

Let the raping and pillaging of the US taxpayer begin!  This is the first step that America has taken on the austerity path and it's only the beginning folks.      

Good luck with that whole economic "recovery" thingy as both taxes and prices rise at the same time income falls.  The sheeple can barely afford their mortgages as it is.

It's not going to take much to knock this economy right back into recession.  Watch for margin compression in the next round of corporate earnings as input prices rise thanks to the Fed's bubble blowing antics. 

Alcoa is already feeling it:

"Citigroup analyst Brian Yu cut Alcoa to "hold" from a "buy," explaining that the aluminum maker was approaching his stock-price target of $17. Yu also trimmed his fourth quarter profit estimate for Alcoa to 17 cents a share from 19 cents due to the weak U.S. dollar and rising input costs."

The Bottom Line

There is no free lunch folks.  You cannot bailout the world without consequences.

Our recent strengthening of the dollar won't help us that much on the rising prices front because the inflation genie is already out of the bottle in China.

As a result, wages are rising in China which means prices will rise on everything we import from there.  The same thing goes with many of our other countries we import from.   Get used to rising prices as long as the Fed keeps rates this low.

I will be curious to see how the markets trade the jobs number tomorrow.  ADP really heightened expectations around tomorrow's jobs report after they reporting a blowout number.

If the government's numbers fails to deliver then we could see a negative reaction after the news.  In fact, I wouldn't be surprised to see the market sell off on a great number because the market have already  "priced in" something big.

I like the percentages for a quick short trade here on the announcement.

Quiet day marketwise.  The pump has lost it's momo the last few days.  Let's see if they can regain it after the jobs report.


Please take a look at this chilling video from Peter Stansberry. 

No comments: