TaxProf Blog: President Obama and Tax Fairness

Presented as public service message.

from TaxProf Blog:
TaxProf Blog: President Obama and Tax Fairness:

President Obama and Tax Fairness

Wall Street Journal op-ed:  The Latest News on Tax Fairness, by Ari Fleischer:

A new CBO report shows the share of taxes paid by the top 20% has gone up over the last 30 years, while the share of taxes paid by everyone else has gone down.

If fairness in paying taxes means the amount you pay is based on the amount you make, then the only group in America paying at least a "fair share" is the top 20% -- people who make more than $74,000. For everyone else, the tax code is a bargain."

You wouldn't know this from President Obama's rhetoric, but our tax system, according to a recent report by the CBO, is incredibly progressive. Consider: The top 1% of income earners pay an average federal tax rate of 28.9%. (See the nearby table.) The average federal tax rate on the top 20% is 23.2%. The 20% of taxpayers earning between $50,100 and $73,999 pay an average 15.1%, and so on down the line. The CBO report includes payroll as well as income taxes paid.

There's also another way of looking at fairness, and that's the tax burden. Here, consider the top 20% of income earners (over $74,000). They make 50% of the nation's income but pay nearly 70% of all federal taxes.

The remaining 30% of the tax burden is borne by 80% of the taxpayers, those who make less than $74,000. In short, this group's share of taxes paid, 30%, is lower than the share of income they earn, 50%.

One reason our country is so divided is because the president keeps dividing us. If taxes need to be raised to fight a war or fund a cause, the president should ask everyone to pitch in. If the need is national, the solution should be national—and that includes all of us.

But that's not how Mr. Obama governs. We learned during the 2008 campaign that he believes in spreading the wealth around. And recently we learned he doesn't believe that successful people made it on their own. Without the government, the president tells us, job creators and entrepreneurs would not be able to make it in America.

It's really the other way around. Without job creators and the successful, the government wouldn't have any money. So next time Mr. Obama meets someone in the top 1% or even the top 20%, instead of saying they're not paying their fair share, he should simply say thank you.

'via Blog this'


from the Tax Policy Center:
http://www.taxpolicycenter.org/taxtopics/2012-candidates-tax-plans.cfm

Major Tax Proposals by President Obama and Governor Romney

View this page as a PDF                                                                                 Return to previous page

Major Federal     Tax Issues

President Barack Obama

Governor Mitt Romney

Individual Income and Payroll Tax Provisions
Expiring Tax Cuts
2001-2008 Cuts1	Extend except for high-income    households2	Extend all
2009-2010 Cuts3	Make remaining 2009 income tax cuts permanent3	Allow to expire
Tax Rates and Brackets	Allow top two tax rates to revert to pre-2001 levels: 10%   15%   25%   28% 33%4   36%   39.6%	Make 2001 rate cuts permanent and reduce all rates by 20%: 8%   12%   20%  22.4%   26.4%   28%
Tax Rates on Capital Gains and Dividends	Up to 20% tax on long-term capital gains; up to 39.6% tax on dividends	Exempt capital gains, dividends, and interest for households with AGI below $200,0005; 15% maxiumum rate for others
Taxes on Investment Income Under the Afforable Care Act 2010	Additional 3.8% tax on capital gains and dividends for high-income households6,7	Repeal8
Exemptions, Deductions, Credits, and Other Tax Preferences	Limit the value of income exclusions and itemized deductions to 28%9	Reduce or eliminate unspecified tax preferences to replace revenue lost due to rate cuts while also maintaining current progressivity of federal taxes. Romney has suggested capping itemized deductions and other tax preferences and possibly denying them entirely for high-income taxpayers.
Alternative Minimum Tax	Index all parameters	Repeal
Refundable Credits	Maintain current refundable tax credits	Allow Obama expansion of refundable credits to expire3 and consider further reductions as part of base-broadening
Other	Impose a “Buffett Rule” tax to ensure that “No household making more than $1 million [pays] a smaller share of their income in   taxes than middle-class families pay.”
Payroll Tax
Temporary Cut in FICA Tax Rate	Allow temporary cut to expire after 2012	Allow temporary cut to expire after 2012
Medicare Tax Under the Affordable Care Act of 2010	0.9% tax on earnings for high-income households6	Repeal8
Business Tax Provisions
Top Corporate Tax Rate	35%   28%10	25%
Tax Preferences	1) Increase tax incentives for domestic manufacturing 2) Reduce fossil fuel preferences 3) Impose additional fees on financial and insurance industries	1) Extend for one year of the expensing of capital expenditures and enact a temporary investment tax credit 2) Expand the R&E credit
International Taxation	Reform international tax rules to limit benefit of deferral and discourage income shifting	1) Territorial tax system 2) Immediate Repatriation holiday
Other	Revenue neutral reduction in corporate rate to 28%; unspecified base broadening10	Broaden the base (unspecified provisions) in exchange for further corporate rate reductions
Estate Tax Provisions
Estate tax	Index starting from 2009 law11	Repeal

http://www.taxpolicycenter.org/taxtopics/upload/tax-plan-comparison-v7.pdf


From the Tax Foundation:
http://taxfoundation.org/article/quick-guide-obama-and-romney-tax-plans

CARPE DIEM: Tax Tip for Warren Buffett, and Wouldn't His 2010 Taxable Income Be only $100k To Pay 17.4% Rate?

from Tax Policy Center Blog:
http://taxvox.taxpolicycenter.org/2011/08/23/was-buffett-right-do-workers-pay-more-tax-than-their-bosses/

Was Buffett Right? Do Workers Pay More Tax than Their Bosses?

Roberton Williams | Posted on August 23, 2011, 12:47 pm

Overall, Buffett’s story is correct, but he did get a couple of things wrong.

First, the 41 percent top tax rate he ascribed to his fellow workers appears to be a marginal rather than an average rate. That is, it’s the tax on an additional dollar of income rather than total tax measured as a percentage of total income. A single worker’s earnings must approach $500,000 before his combined income and payroll tax hits even 35 percent and the effective tax rate never tops 38 percent. For a married couple, total earnings have to near $1 million to hit those levels. Those are still very high rates, well above Buffett’s 17.4 percent, but they’re not as high as he asserted.

More importantly, because of progressive tax brackets and the many exclusions, exemptions, deductions, and tax credits, typical taxpayers actually pay effective tax rates well below the levels Buffett cites. And high-income taxpayers usually pay a higher effective rate than he does. The average household in the middle 20 percent of the income distribution (income between about $34,000 and $65,000) will pay combined income and payroll taxes equal to 12.0 percent of total income this year, compared with 19.6 percent for those in the top 20 percent (income over about $104,000) and 20.2 percent for those in the top 1 percent (income over roughly $533,000).

Warren Buffett may be right when he says that high-income taxpayers could pay more, especially given the extremely rapid rate of income growth at the top of the distribution. And he’s certainly correct when he says that the low tax rate on investment income cuts his tax bill well below that of many Americans. But he’s off base when he suggests that all high-income taxpayers pay a smaller share of their income in taxes than their middle-income coworkers.

---

from Carpe Diem blog:
CARPE DIEM: Tax Tip for Warren Buffett, and Wouldn't His 2010 Taxable Income Be only $100k To Pay 17.4% Rate?:

"Just a thought: If Warren Buffett is really serious about paying higher taxes, couldn't he simply take the standard deduction voluntarily ($11,400 for married taxpayers filing jointly in 2010) instead of itemizing his deductions?  That wouldn't require any change in tax policy, so he doesn't have to wait.  

After all, it must be all of his itemized deductions (e.g. charitable, etc.)  that reduce Buffett's income tax rate to only 17.4% on about $40 million income last year.  Except for about the first 1% of his income ($373,650) that would be taxed at lower rates, he should be paying a marginal tax rate of 35% on the other 99%.  Using the tax brackets below for 2010, how could Buffett claim that he paid an effective tax rate of only 17.4% unless his taxable income was only about $100,000?"

Married Filing Jointly 2010 Tax Brackets

Taxable Income Marginal Tax Rates
$0-$16,750..............................10%
$16,751-$68,000.........................15%
$68,001-$137,300........................25%
$137,301-$209,250.......................28%
$209,251-$373,650.......................33%
$373,651+...............................35%

---

MORE ON BUFFET AND TAXES

Last year, according to his own accounting, Mr. Buffett earned a “taxable income” of almost $40 million. It goes without saying that most of us will never see that kind of money in our lifetimes. Not by a long shot. You’d think, therefore, all would be “good in the hood” for one of America’s richest men.

But Buffett has a big problem: Taxes. He is unhappy with the amount he pays. It’s not enough, he says. Nor is the amount paid by his super wealthy friends. Earlier this week, Buffett’s odd desire to keep less of what he earns led him to pen an op-ed piece in The New York Times in which he decried Washington for “coddling the super- rich.” Perhaps you saw it.

“Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as ‘carried interest,’” he confessed, “thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long- term investors.”

In 2010, Buffett paid almost $7 million in taxes to the federal government, about 17.4 percent of that whopping “taxable income.” Despite his immense earnings, that percentage came in considerably less than the 20 other folks working in his office. “Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent,” he wrote.

----

The diagram below shows why Buffett pays a lower "total" tax rate and why this is an apples to oranges comparison.

http://www.moneychimp.com/features/tax_calculator.htm

Tax Calculator

Obviously, this very simple calculator can only give you an unofficial estimate - please don't try to file your taxes by mailing the IRS a screen shot of this thing stapled to a check. (Although it makes you think that Congress could probably simplify the heck out of the tax code if they really felt like it. They probably just don't feel like it, is all.)

(Adjusted gross income determines whether you are eligible to contribute to a Roth IRA. And don't forget to pay Social Security.)

How to Pay Less Taxes

As complicated as the tax code is, it's built around a philosophy that actually makes sense: the government will reward intelligent behavior with a tax break. A few obvious suggestions:

(1) Don't Churn Your Portfolio
You want to pay the long term capital gains rate, and pay that as infrequently as possible. (Many index funds are low-churn and tax efficient.)

(2) Open a Retirement Account
A deductible IRA gives you a negative adjustment, lowering your taxable income. (A Roth version gives you a tax break later.)

(3) Have "Good" Debt
Credit card debt is bad debt, but a long-term mortgage is very good debt - a fixed, low interest rate, plus a tax break that shows up as an itemized deduction.

(3a) Give to Charity
Another deduction, plus you'll make people think you're nice.

Tax Diagram: Which Rates Apply, and Where?

---

WARREN BUFFET RIDES TO BAC'S RESCUE: QUID PRO QUO CLARISSE?

The Silence of the Lambs (1991)

Hannibal Lecter: "Plum Island Animal Disease Research Center." Sounds charming.
Clarice Starling: That's only a part of the island. There's a very, very nice beach. Terns nest there. There's beautiful...
Hannibal Lecter: [cuts her off] Terns? Mmh. If I help you, Clarice, it will be "turns" with us too. Quid pro quo. I tell you things, you tell me things. Not about this case, though. About yourself. Quid pro quo. Yes or no?
[pause]
Hannibal Lecter: Yes or no, Clarice? Poor little Catherine is waiting.
Clarice Starling: Go, doctor.


Hannibal Lecter: First principles, Clarice. Simplicity. Read Marcus Aurelius. Of each particular thing ask: what is it in itself? What is its nature? What does he do, this man you seek?
Clarice Starling: He kills women...
Hannibal Lecter: No. That is incidental. What is the first and principal thing he does? What needs does he serve by killing?
Clarice Starling: Anger, um, social acceptance, and, huh, sexual frustrations, sir...
Hannibal Lecter: No! He covets. That is his nature. And how do we begin to covet, Clarice? Do we seek out things to covet? Make an effort to answer now.
Clarice Starling: No. We just...
Hannibal Lecter: No. We begin by coveting what we see every day. Don't you feel eyes moving over your body, Clarice? And don't your eyes seek out the things you want?

"I've taken a look at recommending a BAC short several times over the past year," says our short specialist Dan Amoss, "with the idea that ‘fraudclosuregate' might transform it into a juicy target for class action lawyer piranhas.

"But I kept coming back to the bull thesis... that with good enough lawyers, BAC can string along this legal settlement process and mortgage-related losses forever. With Tim Geithner at Treasury, BAC also essentially has a lobbyist on its behalf.

"The suspension of mark-to-market accounting, an army of lawyers and lobbyists to fight mortgage put backs, and a very friendly Treasury Department will probably keep the stock muddling along for the next few years. I wouldn't buy it or sell it short. The Fed's ‘zero rates through 2013' policy is a guaranteed carry trade gift to BAC shareholders -- or a tax, if you're a depositor -- that will be measured in the billions."

In other words, in a fair and just world, BAC would have gone down in flames long ago. But it's not a fair and just world... and you can't invest on that assumption.

----

MORE ON DEBT AND DEFICITS:


Erskine Bowles on the proposed Obama Budget compromise:

"It is $4 trillion, however, over 12 years. It is heavily back-end loaded, so when you compare it to the Ryan plan and to the Commission’s plan, which also has $4 trillion in savings, it is probably more like $2.5 trillion. And in fairness, the way it is setup, according to our analysis, it really doesn’t stabilize the debt, and the debt as a percentage of GDP gets up to around 77 percent and it never gets to primary balance, which is about a deficit-to-GDP ratio of around 3 percent." -- Erskine Bowles re: Obama's $4T Budget "Savings"

On the other hand, he WAS against this type of behavior before he was FOR it. I guess this is just another example of the huge divide between candidate Obama and President Obama.

On the day before Independence Day 2008, Senator Barack Obama pronounced deficit spending "unpatriotic" at a campaign event. He would go on to rack up more debt in three years than his predecessor did in eight. Does he still think deficits are "unpatriotic," or is that the wrong word?

Sustained deficit spending is certainly irresponsible. Trillion-dollar deficits are an accepted fact of life in Washington, even after a big "deficit reduction deal." This means the government is willing to spend more money than it collects, in perpetuity.

Deficit spending is tyrannical. It's the ultimate form of taxation without representation, presenting children not yet born with bills they never had a chance to vote against. It establishes programs that become permanent financial obligations for future Congresses. It's a lie, because it offers the people subsidies and benefits, paid for with money that doesn't exist. When politicians speak of trillion-dollar "stimulus" programs, they're distorting the free market with false information, and wielding economic influence they don't really have.

Our massive national debt, built through decades of deficit spending, makes America weak. Increasing individual and corporate dependency on a rapidly growing government drains the vitality of the free market. Unfriendly creditor nations like China gain unhealthy amounts of economic leverage over us. Credit agencies like Standard & Poor's become major players in public policy debates. In the end, social chaos caused by the collapse of unsustainable entitlements will destroy civic order.

Does all of that add up to make deficit spending "unpatriotic?" Barack Obama claimed to think so, four trillion dollars ago. — John Hayward

Report: Buffett's Berkshire Owes $1 Billion In Back Taxes

Clearly, this guy should get a medal for hypocrisy and shilling for the man. Do as I say, not as I do, right Warren?

Report: Buffett's Berkshire Owes $1 Billion In Back Taxes:

"Yes, that’s right: while Warren Buffett complains that the rich aren’t paying their fair share his own company has been fighting tooth and nail to avoid paying a larger share.

The story of Berkshire's years-long tax battle, which is generally known in business circles, took on new life this week when a group called Americans for Limited Government (ALG) reported that, according to Berkshire Hathaway’s own annual report, the company is embroiled in an ongoing standoff over its tax bills.

That report, in turn, was cited in an editorial in The New York Post.

“Obvious question: If Buffett really thinks he and his 'mega-rich friends' should pay higher taxes, why doesn’t his firm fork over what it already owes under current rates?” the Post opined.

“Likely answer: He cares more about shilling for President Obama -- who’s practically made socking “millionaires and billionaires” his re-election theme song -- than about kicking in more himself.”

THIS GUY SHOULD GET A MEDAL FOR BEING SUCH A GOOD SOCK-PUPPET

Using only publicly-available documents, a certified public accountant (CPA) detailed Berkshire Hathaway’s tax problems to ALG. AlG President Bill Wilson cites the company’s own 2010 annual report, which states at one point that “At December 31, 2010… net unrecognized tax benefits were $1,005 million”, or about $1 billion.”

“Unrecognized tax benefits represent the company’s potential future obligation to the IRS and other taxing authorities,” ALG explained in its report. “They have to be recorded in the company’s financial statements.”

“The notation means that Berkshire Hathaway’s own auditors have probably said that $1 billion is more likely than not owed to the government,” the ALG report explained.


That $1 billion represents about 0.2 percent of the company’s $372 billion in total assets, according to ALG.

As Wilson points out, “On one hand Buffett advocates for paying more taxes, but when it comes to his own company’s taxes, he has gone through great lengths to pay less. That’s rich.”

Here's the key section from Berkshire's report:

“We anticipate that we will resolve all adjustments proposed by the U.S. Internal Revenue Service (‘IRS’) for the 2002 through 2004 tax years at the IRS Appeals Division within the next 12 months," the report states. "The IRS has completed its examination of our consolidated U.S. federal income tax returns for the 2005 and 2006 tax years and the proposed adjustments are currently being reviewed by the IRS Appeals Division process. The IRS is currently auditing our consolidated U.S. federal income tax returns for the 2007 through 2009 tax years.”

Wilson also points to a prior tax fight the company fought. “Apparently, this is not the first time that Berkshire Hathaway has tangled with the IRS. They fought a 14-year battle over the dividends received deduction. That case was just resolved in 2005,” Wilson reports..

“Although the prior case was settled in Buffett’s favor, it demonstrates a decades-long pattern of behavior by Buffett to minimize his taxes. That’s the important part of the story,” Wilson writes.

And Buffett this week is at the center of another tax controversy, according to The Wall Street Journal. His recent decision to invest in Bank of America "represents another tax-avoidance triumph for the Berkshire chief executive," the Journal wrote in an editorial Wednesdy.

It turns out that U.S. corporations are subject to a top federal income tax rate of 35 percent, the second highest in the world. But Berkshire won't pay anything close to that on their investment in BofA preferred shares.

"Berkshire will hold the investment in a property-casualty insurance subsidiary. Such corporations can exclude from taxation 59.5% of the dividends they receive from an investment in another corporation," the Journal reported. "This exclusion is intended to prevent double- or even triple-taxation as money is earned by one company, paid to another company and then ultimately paid out to shareholders. The policy makes sense; we only wonder why the exclusion isn't 100%.

"With the exclusion for Mr. Buffett and his fellow shareholders, Berkshire will enjoy an effective tax rate of 14.175% on the $300 million in dividends it will receive each year from Bank of America," the Journal reported.

These new revelations about Buffett's tax practices have only furthered enraged conservatives at the hypocrisy being shown by the famed "Oracle of Omaha."

Writing in the conservative website Human Events, John Hayward added that analysts should look at the "value of the time IRS agents have invested trying to collect it – they don’t work cheap, and we pay their salaries – and the resources Buffett’s people have invested fighting back. All of which would have been saved if Buffett simply practiced what he preached, and willingly handed over his fortune to the brilliant and compassionate 'leaders' he commands the rest of us to support without resistance.

"Warren Buffett is no different from the other liars and frauds orbiting Barack Obama​. His hypocrisy just runs billions of dollars deeper. When it comes to 'shared sacrifice,' you do the sacrificing, and they do the sharing," Hayward writes.

Maybe it is time for corporations to step up. More likely it's going to take serious tax reform across the board to un-do the decades of chicanery and favoritism that has allowed these glaring disparities in fairness to exist and grow to such obscene levels.

THINK MENTAL MODELS

I remember when I was a bigger fan of Warren Buffett and Charlie Munger and read the graduation speech Munger made outlining how students should have a "latticework of mental models" I was so smitten by the brilliance and simplicity of the concept that I kept repeating the words in my head over and over.

You get an PhD. in the game of life if you can learn the concepts and models outlined in this site.

A neat illustrative story at the end demonstrates how these models blend together in how you are talking about playing bridge or playing baseball. Interesting parallels in terms of mind-set.


Think Mental Models website:
http://www.thinkmentalmodels.com/

“The better decision maker has at his/her disposal repertoires of possible actions; checklists of things to think about before he acts; and he has mechanisms in his mind to evoke these, and bring these to his conscious attention when the situations for decision arise.”
(Herbert Simon, Nobel Laureate)

How the exceptional mind works

According to Warren Buffett, his business partner, Charlie Munger has ‘the best 30-second mind in the world. He goes from A to Z in one move. He sees the essence of everything before you even finish the sentence’ (Forbes, January 22, 1996).

How does he do it?

Well, fortunately, Mr. Munger has explained his approach in lectures and books. Essentially, he thinks by using the BIG IDEAS from disciplines as diverse as physics and psychology. He has a list of these ideas (mental models) in his mind and quickly picks the one(s) applicable to the given situation, much as a pilot automatically goes through a checklist prior to take-off.

This website, inspired by the work of Charles Munger, provides over 100 models that can be brought consciously to mind to aid the thinking process.

Each model is described by at least one distinguished user. Examples include Warren Buffett, Richard Feynman, Robert Rubin and Peter Drucker, among others.

Wikipedia defines it as follows:
http://en.wikipedia.org/wiki/Mental_model

A mental model is an explanation of someone's thought process about how something works in the real world. It is a representation of the surrounding world, the relationships between its various parts and a person's intuitive perception about their own acts and their consequences. Our mental models help shape our behaviour and define our approach to solving problems (akin to a personal algorithm) and carrying out tasks.

A mental model is a kind of internal symbol or representation of external reality, hypothesized to play a major role in cognition, reasoning and decision-making. Kenneth Craik suggested in 1943 that the mind constructs "small-scale models" of reality that it uses to anticipate events.

FROM CAPITALISMMAGAZINE.COM:
http://www.capitalismmagazine.com/culture/books-non-fiction/4669-Latticework-Mental-Models.html

Excerpt from Chapter I of "Investing: The Last Liberal Art" by Robert G. Hagstrom

A Latticework of Mental Models

How does one achieve worldly wisdom? To state the matter concisely, it is an
ongoing process of, first, acquiring the significant concepts--the models--from
many areas of knowledge and then, second, learning to recognize patterns of
similarity among them. The first is a matter of educating yourself; the second
is a matter of learning to think and see differently.

He challenged the students to broaden their vision of the market, of finance, and of economics in general; to see them not as separate disciplines but as part of a larger body of knowledge, one that also incorporates psychology, engineering, mathematics, physics, and the humanities.
In this broader view, he suggested, each discipline entwines with, and in the process strengthens, every other. From each discipline the thoughtful person draws significant mental models, the key ideas that combine to produce a cohesive understanding. Those who cultivate this broad view are well on their way to achieving worldly wisdom, that solid mental foundation without which success in the market--or anywhere else--is merely a short-lived fluke.

To drive his point home, Charlie used a memorable metaphor to describe this interlocking structure of ideas: a latticework of models. "You've got to have models in your head," he explained, "and you've got to array your experience-both vicarious and direct-on this latticework of models." So immediate is this visual image that latticework has become something of a shorthand term in the investment world, a quick and easily recognized reference to Munger's approach.

from the book: Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger
http://www.poorcharliesalmanack.com/intro3.html

The quotes, talks, and speeches presented here are rooted in the old-fashioned Midwestern values for which Charlie has become known: lifelong learning, intellectual curiosity, sobriety, avoidance of envy and resentment, reliability, learning from the mistakes of others, perseverance, objectivity, willingness to test one’s own beliefs, and many more. But his advice comes not in the form of stentorian admonishments; instead, Charlie uses humor, inversions (following the directive of the great algebraist, Jacobi, to “Invert, always invert”), and paradox, to provide sage counsel about life’s toughest challenges.

Charlie also employs historical and business case studies to great effect. In these presentations, he makes his points with subtlety and texture, often using a story-like context instead of abstract statements of theory. He regales his audience with humorous anecdotes and poignant tales, rather than with a blizzard of facts and figures. He well knows, and wisely exploits, the traditional role of the storyteller as purveyor of complex and detailed information. As a result, his lessons hang together in a coherent “latticework” of knowledge, available for recall and use when needed.

It is clear throughout these talks and speeches that Charlie places a premium on life decisions over investment decisions. His mental models, drawn from every discipline imaginable, recur repeatedly and, in no way, focus on “business portfolio strategy” or “beta” or “Cap M.” Rather, they center on fundamental truth, human accomplishment, human foibles, and the arduous path to wisdom. Charlie once said, “I wanted to get rich so I could be independent, like Lord John Maynard Keynes.” Independence is the end that wealth serves for Charlie, not the other way around.

HANDLING LOSSES IN AN ENVIRONMENT WHERE WINNING IS IMPORTANT:

"After all is said and done, learning to handle losses will be your greatest triumph." -- Robert Prechter.

More from Prechter:

There are many denials of reality which automatically disqualify millions of people from joining the ranks of successful speculators. For instance, to moan that "pools," "manipulators," "insiders," "they," "the big boys" or "program trading" (known today as "high-frequency trading" -- Ed.) are to blame for one's losses is a common fault.

Anyone who utters such a conviction is doomed before he starts. [My] observation, after eleven years "in the business," is that the biggest obstacle to successful speculation is the failure merely even to recognize and accept the simple fact that losses are part of the game, and that they must be accommodated.

The perfect trading system does not exist. Expecting, or even hoping for, perfection is a guarantee of failure. Speculation is akin to batting in baseball. A player hitting .300 is good. A player hitting .400 is great. But even the great player fails to hit 60% of the time! He even strikes out often. But he still earns six figures a year, because although not perfect, he has approached the best that can be achieved. You don't have to be perfect to win in the markets, either; you "merely" have to be better than almost everybody else, and that's hard enough.

---

I read an investment article recently from the Hussman Funds titled "Why Warren Buffet Plays Bridge" and it is especially appropriate to the craft of hitting in baseball in addition to long-term success in investing.

FROM HUSSMAN.NET:
http://www.hussman.net/wmc/wmc061127.htm

The reason relates to the story Buffet's mentor the legendary investor Benjamin Graham tells about the game of bridge. Focus on the process not the results.

"I recall to those of you who are bridge players the emphasis that bridge experts place on playing a hand right rather than on playing it successfully, Because as you know, if you play it right you are going to make money an d if you play it wrong you lose money - in the long run.

There is a beautiful little story about the man who was the weaker bridge player of the husband-and-wife team. It seems he bid a grand slam, and at the end he said very triumphantly to his wife 'I saw you making faces at me all the time, but you notice I not only bid this grand slam but I made it. What can you say about that?' And his wife replied very dourly, 'If you had played it right you would have lost it."

The author rightly observes that it takes restraint to play the game " the right way", with an established "discipline" or approach and let the law of averages work out in your favor. You don't try to win every hand. He describes having the right "temperament" to execute the "approach" and not deviate from it.

The same temperament and approach leads to success in baseball.

----

"Anytime you and I question the schemes of the do-gooders, we're denounced as being against their humanitarian goals. They say we're always "against" things — we're never "for" anything. Well, the trouble with our liberal friends is not that they're ignorant; it's just that they know so much that isn't so." - Ronald Reagan

Trader Dan's Market Views: FOMC gives Precious Metals Bulls reasons for cheer

Even when things go entirely your way on a day like today (Thanks Uncle Ben), it does have all the makings of a Pyrrhic victory. If being on the right side means that -- as that old scag-bag Charlie Munger says, "Even if it works, you're a jerk" -- then I guess I'm a jerk. So be it.

Given what seems to be going on at the House of Buffett lately maybe it takes one to know one. Sliding Sokol out the door on the day of Bernank's presser is a work of PR genius. You guys are really slick over there.

http://www.zerohedge.com/article/and-so-billionaires-turn-each-other-sokols-lawyer-accuses-buffett-lying

From Trader Dan Norcini's blog in words much more eloquent than I can manage to muster at the moment, but whose sentiment I echo 100%.



Trader Dan's Market Views: FOMC gives Precious Metals Bulls reasons for cheer:

"Thanks Ben and thanks to all the Fed governors whose foolish, inept, and short-sighted idiocy has set this nation on a path that will make the IMF prediction of its sliding into second place behind China, indeed come to pass. No nation ever kept its place of economic ascendancy by deliberately killing its own currency. An economically strong nation, with a solid manufacturing sector, the rule of law, an ethic of thrift, low taxes, reasonable regulation, etc, will by default have a strong currency.

The plight of the Dollar is now a commentary on the decline of our beloved nation. It speaks with a more pure voice than any analyst could ever aspire to and what it is crying is disheartening to an extreme for those with ears to hear it.

History has the advantage of being relatively objective in its analysis as it is removed from the passions of the era. It is with that in mind that I can confidently say it will render a harsh and severe criticism of those who led our nation and its monetary policy during this period as they presided over its decline."

YOU GO UNCLE BEN, YOU GO.... Your plan has been working so well.

OBAMANOMICS - From the Sophist in Chief

If the shoe fits, WEAR IT!!!

---

soph·ist
noun /ˈsäfist/
sophists, plural

A paid teacher of philosophy and rhetoric in ancient Greece, associated in popular thought with moral skepticism and specious reasoning

A person who reasons with clever but fallacious arguments

sophism - A flawed argument superficially correct in its reasoning, usually designed to deceive. An intentional fallacy
en.wiktionary.org/wiki/sophism

sophism - a deliberately invalid argument displaying ingenuity in reasoning in the hope of deceiving someone
wordnetweb.princeton.edu/perl/webwn

sophism - A plausible argument that is actually fallacious, especially when someone dishonestly presents it as if it were legitimate reasoning.
www.philosophypages.com/dy/s7.htm

sophists - traveling teachers that taught how to win an argument; didn't believe in gods; refused the idea of an absolute right or wrong
quizlet.com/print/1496703/

----

In 2006, Senator Obama argued and voted against raising the debt ceiling. In 2007 and 2008, he didn't even bother to vote.

In 2006...

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”

Obama and Warren Buffet don't need tax breaks. 

They both would be willing to "give" more in taxes, but they've never been asked. 

In what Bizarre-o world are taxes paid equated to "voluntary charitable giving" and taxes charged by the government are equated to a "voluntary request" for payment.

Am I missing the part of the tax code that outlines the penalties for non-compliance. 

This is the same mind-set that believes the federal government provides "subsidies" to churches because it does not tax them. It's all the governments property, they just decide to let you keep some of it. 

UNBELIEVABLE.

-----

Obama will cut deficit in half FEB 2009

http://youtu.be/SaQUU2ZL6D8

"Obama talks about how he will cut the deficit in half during his first term - and why it's so important. Really? The 2008 budget deficit was 458 billion. Obama's proposed new budget for this year has a deficit of 1.1 TRILLION. For God's sake - WTF???"

-----

Let me see if I get this straight Chief. "You were going to cut the deficit in half, before you decided to double it as far as the eye can see." Is that about right? Or am I not hearing the words that are coming out of your Teleprompter correctly?

PLAN A - fail miserably

PLAN B - hope electorate forgot about PLAN B and proceed to PLAN B

PLAN B - lather, rinse, repeat.

Obamanomics = Bullshit²

What happened in Wisconsin showed that the mind-set of these government idiots and their lackeys is "what's mine is mine and what's yours is mine to if I want to take it." 

Our standard of living has been a bit of a charade for decades and now the bill is coming due. GDP has been highly subsidized by government spending for many years, growth has been an illusion.

INSIDE JOB - Get out the handcuffs, let the perp walks begin

The answer is handcuffs for some of these thieves. Handcuffs and perp walks IMO, and lots of them.  We're still going after Bonds and Clemens for perjury, yet scumbags like this are allowed to conduct their "business" with impunity.

Remember Congress chose to engage in these dog and pony show hearings on PED's in baseball while the financial system was crumbling. And all we heard was how these guys were capable of multi-tasking. In hindsight, apparently not.

Why wasn't Angelo Mozillo prosecuted by the SEC or the Justice Department? Martha Stewart goes to jail for a somewhat flimsy insider trading deal, yet an administration insider favorite like Warren Buffet and his cronies (like Sokol and Munger) can engage in more brazen acts and still walk free? 

Did these guys not lie, cheat and steal?

A culture of lies and chicanery at Berkshire Hathaway? No, couldn't be. He supported and advised the administration during the crisis, right? And profited enormously from the resulting policies.

From Market-ticker.org
http://market-ticker.org/akcs-www?post=183563

These guys act were born on third base and act like they hit a triple. Sort of takes some of the bloom off the investment genius rose when you have such insider access.

Crony capitalism, crony justice system......not a good formula for the future of this country that's for sure. 

Wachovia dealt with Mexican drug cartels to launder money:

http://www.guardian.co.uk/world/2011/apr/03/us-bank-mexico-drug-gangs

"The conclusion to the case was only the tip of an iceberg, demonstrating the role of the "legal" banking sector in swilling hundreds of billions of dollars – the blood money from the murderous drug trade in Mexico and other places in the world – around their global operations, now bailed out by the taxpayer.

At the height of the 2008 banking crisis, Antonio Maria Costa, then head of the United Nations office on drugs and crime, said he had evidence to suggest the proceeds from drugs and crime were "the only liquid investment capital" available to banks on the brink of collapse. "Inter-bank loans were funded by money that originated from the drugs trade," he said. "There were signs that some banks were rescued that way.""

Maybe this movie should be required viewing for government regulators. Or the torch and pitchfork crowd.

From imdb.com

-----

http://www.imdb.com/title/tt1645089/

'Inside Job' provides a comprehensive analysis of the global financial crisis of 2008, which at a cost over $20 trillion, caused millions of people to lose their jobs and homes in the worst recession since the Great Depression, and nearly resulted in a global financial collapse. Through exhaustive research and extensive interviews with key financial insiders, politicians, journalists, and academics, the film traces the rise of a rogue industry which has corrupted politics, regulation, and academia. It was made on location in the United States, Iceland, England, France, Singapore, and China.

"Inside Job" won the 2011 Academy Award for best documentary on Sunday night. The film's director used his acceptance speech to deliver pointed criticism of Wall Street and the financial industry.

"Inside Job" director Charles Ferguson subjected Wall Street players, economists and bureaucrats to a fierce cross-examination to depict the economic crisis as a colossal crime perpetrated on the working-class masses by a greedy few.

His film examined the financial crisis of 2008. His speech lamented the lack of accountability three years later.

"Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that's wrong," Ferguson said.

---

Open Letter to Warren Buffett - Drop Dead!! and take Congress with you

As if the recent comments of Buffet's little sock-puppet Charlie Munger to "let them eat cake" comments were not bad enough, we have to put up with this self-serving drivel from "The Oracle" himself.

First Buffet's letter to Uncle Sugar in Washington, who bailed out these self-described geniuses.

They will get the free government handouts and you will get the bill.

And then to top it off, the guy complains that he may have had to endure Thanksgiving at McDonald's? Oh, the indignity!! Mr. Buffett has to go to McDonald's to eat!!!

What happened to the populist "Everyman" image you and CNBC worked so hard to craft while you slimeballs were feeding at the public trough? Are you too good for McDonald's now?

All this while people across the country are still suffering and NOT receiving bailouts from Uncle Sugar Daddy in DC.

Are you serious?

FROM THE NEW YORK TIMES:
http://www.nytimes.com/2010/11/17/opinion/17buffett.html?_r=2&hp

DEAR Uncle Sam,

My mother told me to send thank-you notes promptly. I’ve been remiss.

Let me remind you why I’m writing. Just over two years ago, in September 2008, our country faced an economic meltdown. Fannie Mae and Freddie Mac, the pillars that supported our mortgage system, had been forced into conservatorship. Several of our largest commercial banks were teetering. One of Wall Street’s giant investment banks had gone bankrupt, and the remaining three were poised to follow. A.I.G., the world’s most famous insurer, was at death’s door.

Many of our largest industrial companies, dependent on commercial paper financing that had disappeared, were weeks away from exhausting their cash resources. Indeed, all of corporate America’s dominoes were lined up, ready to topple at lightning speed. My own company, Berkshire Hathaway, might have been the last to fall, but that distinction provided little solace.

Nor was it just business that was in peril: 300 million Americans were in the domino line as well. Just days before, the jobs, income, 401(k)’s and money-market funds of these citizens had seemed secure. Then, virtually overnight, everything began to turn into pumpkins and mice. There was no hiding place. A destructive economic force unlike any seen for generations had been unleashed.

Only one counterforce was available, and that was you, Uncle Sam. Yes, you are often clumsy, even inept. But when businesses and people worldwide race to get liquid, you are the only party with the resources to take the other side of the transaction. And when our citizens are losing trust by the hour in institutions they once revered, only you can restore calm.

When the crisis struck, I felt you would understand the role you had to play. But you’ve never been known for speed, and in a meltdown minutes matter. I worried whether the barrage of shattering surprises would disorient you. You would have to improvise solutions on the run, stretch legal boundaries and avoid slowdowns, like Congressional hearings and studies. You would also need to get turf-conscious departments to work together in mounting your counterattack. The challenge was huge, and many people thought you were not up to it.

Well, Uncle Sam, you delivered. People will second-guess your specific decisions; you can always count on that. But just as there is a fog of war, there is a fog of panic — and, overall, your actions were remarkably effective.

I don’t know precisely how you orchestrated these. But I did have a pretty good seat as events unfolded, and I would like to commend a few of your troops. In the darkest of days, Ben Bernanke, Hank Paulson, Tim Geithner and Sheila Bair grasped the gravity of the situation and acted with courage and dispatch. And though I never voted for George W. Bush, I give him great credit for leading, even as Congress postured and squabbled.

You have been criticized, Uncle Sam, for some of the earlier decisions that got us in this mess — most prominently, for not battling the rot building up in the housing market. But then few of your critics saw matters clearly either. In truth, almost all of the country became possessed by the idea that home prices could never fall significantly.

That was a mass delusion, reinforced by rapidly rising prices that discredited the few skeptics who warned of trouble. Delusions, whether about tulips or Internet stocks, produce bubbles. And when bubbles pop, they can generate waves of trouble that hit shores far from their origin. This bubble was a doozy and its pop was felt around the world.

So, again, Uncle Sam, thanks to you and your aides. Often you are wasteful, and sometimes you are bullying. On occasion, you are downright maddening. But in this extraordinary emergency, you came through — and the world would look far different now if you had not.

Your grateful nephew,

Warren

FROM BUSINESSINSIDER.COM
http://www.businessinsider.com/warren-buffett-if-the-bailout-didnt-happen-i-would-be-eating-dinner-at-mcdonalds-2010-11#ixzz15Y6xIq00

Then he dropped this line, which sounds like an exaggeration:
"If the government hadn't acted, I would be eating Thanksgiving dinner at McDonald's."

A lot of these guys should be more concerned about swinging from a lamp post than where their next Thanksgiving meal is coming from.

Nothing but a bunch of thieves and liars masquerading as geniuses.

Dear Mr. Buffett:

DROP DEAD YOU RAT BASTARD!!!

1) Don't thank the government, when it is we, the taxpayers, who will ultimately pay the bill to save your sorry ass.

2) We remember what you fail to mention in your letter -- that the financial bailouts predominantly benefited the elite, the ruling class and their cronies -- who were responsible for getting us into the mess in the first place.

3) We do know that we -- "the McDonlad's eaters" were not aided in any way. In fact, quite the opposite. Millions unemployed, tens of thousands losing their houses and / or life savings. And you complain about having to eat at McDonald's?

You and your fellow thieves, like Charlie Munger and Lloyd "Doing God's Work" Blankfein, had better pray that if as expected, QEII is as big a failure as QEI was, the "Torch and Pitchfork 2.0" crowd doesn't make a detour to Omaha on its march to Washington DC.

You act like "Thanksgiving at McDonald's" would be the worst inconvenience you could suffer. When people across the country are truly suffering, every day of the year?

Happy Thanksgiving, you arrogant, self-absorbed POS. Don't choke on a wishbone or anything.

The Slav

BERNANKE TESTIMONY JUNE, 2009:
http://www.federalreserve.gov/newsevents/testimony/bernanke20090603a.htm

Instead of addressing the twin towers of fiscal irresponsibility that the Federal Reserve Chairman Bernanke outlined in his testimony to Congress in June 2009 -- the annual budget deficit and the total national debt load -- Congress and the administration did what it does best, NOTHING.

To paraphrase von Mises, they took the cowards way out.

Nearly a century ago, the great economist Ludwig von Mises observed that massive central bank easing is invariably a form of cowardice that attempts to avoid the need to restructure debt or correct fiscal deficits, avoiding wiser but more difficult choices by instead destroying the value of the currency.

Like rats deserting the Titanic, they ignored saving the least fortunate among us, instead filling the lifeboats with those in America who were the most blessed.

COWARDS, LIARS, THIEVES!!! THE WHOLE BUNCH OF YOU.

They were however getting richer while most Americans were getting poorer. Incomes increasing, wealth exploding higher. Is that the reality for most households across the country since 2008?
It is in D.C.

Just like Buffet, these guys benefited and prospered while the rest of the country suffered.

FROM THE ECONOMIC COLLAPSE BLOG:
http://theeconomiccollapseblog.com/archives/12-facts-that-will-blow-your-mind-federal-employees-and-members-of-congress-are-getting-rich-while-those-of-us-who-pay-their-salaries-suffer

Median household income in the United States fell from $51,726 in 2008 to $50,221 in 2009, and yet the personal wealth of members of Congress and the salaries of federal workers (especially at the higher levels) continue to explode. A lot of corrupt politicians and federal fat cats are raking in stunning amounts of cash, and we are the ones paying the bill. There is certainly nothing wrong with making a lot of money, but does it seem right that so many of our "public servants" are getting filthy rich while so many of the rest of us are barely getting by?

#1 According to an article in the Hill, House Speaker Nancy Pelosi's net worth soared from $13.7 million in 2008 to $21.7 million in 2009.

#2 In 2005, 7420 federal workers were making $150,000 or more per year. In 2010, a whopping 82,034 federal workers are making $150,000 or more per year. That is more than a tenfold increase in just five years.

#3 More than half of the members of the U.S. Congress are millionaires.

#4 The total compensation that the U.S. government workforce is going to take in this year is approximately 447 billion dollars.

#5 Today, all members of Congress earn at least $175,000. This is far, far more than the average American makes.

#6 60 percent of the federal government workforce is represented by labor unions.

#7 The median wealth of a U.S. Senator in 2009 was 2.38 million dollars.

#8 In 2005, the U.S. Department of Defense had just nine civilians earning $170,000 or more. When Barack Obama took office, the U.S. Department of Defense had 214 civilians earning $170,000 or more. In June 2010, the U.S. Department of Defense had 994 civilians earning $170,000 or more.

#9 Insider trading is perfectly legal for members of the U.S. Congress - and they refuse to pass a law that would change that.

#10 According to a recent study conducted by the Heritage Foundation, federal workers earn 30 to 40 percent more money on average than their counterparts in the private sector.

#11 When you factor in such things as retirement and health care benefits, the compensation gap between federal workers and private sector employees gets even larger. Just consider the following quote from the Heritage Foundation study mentioned above....

"Including non-cash benefits adds to this disparity. The average private-sector employer pays $9,882 per employee in annual benefits, while the federal government pays an average of $32,115 per employee."

#12 The personal wealth of members of the U.S. Congress collectively increased by more than 16 percent from 2008 to 2009.

And so while Mr. Buffett exhales in relief and pays homage to the gods he worships that he doesn't have to lower himself to dine at a McDonald's on Thanksgiving, let's take a look at how the "other half" lives in Amerika today on the week before Thanksgiving.

FROM THE ST. PETE TIMES:
Gulfport man tries to kill himself as bank forecloses on his home
http://www.tampabay.com/news/humaninterest/article1134965.ece

The bank sent someone to drill through the lock. It was 9:02 a.m. when the drilling stopped. The busted lock hit the floor inside.

That's when they heard the gunshot.

The man not only tried to kill himself, he succeeded. But to listen to ass-wipes like Warren Buffett, perhaps we should be thankful that the criminal banskters, the stocks of many of whom Buffett owns in his Berkshire Hathaway portfolio, are made whole and protected.

God Bless America this Thanksgiving.

But just in case, be prepared for "TORCH AND PITCHFORK 2.0". In this case I trust, the sequel will be so much better than the original.

HAPPY THANKSGIVING MR. BUFFETT. YOU ARROGANT, SELF-ABSORBED PIECE OF SHIT!!

-------
FROM THE DAILY BELL:
http://www.thedailybell.com/1535/What-Kind-of-Freedom.html

Start with Buffet. Here is a man who constantly campaigns for increased taxes to be placed on US citizens, identifies himself as a Democrat and is worth something like US$50 billion. He poses as an investor, but really he makes "investments" in businesses that have hidden economic advantages, usually via regulatory loopholes. Of course Buffet may seem free-market oriented in the sense that he has made a fabulous fortune in the "investment game" – but when one examines his criteria for picking companies, it becomes obvious that one of them is mercantilism.

This means that Buffet values companies that in some way have developed access to the US government at state or federal levels and can pull levers of power available to no one else. Buffet is thus not investing in companies that necessarily have a better widget. He is putting his money into companies that are interacting most efficiently with government. He is not in his investing making a principled stand for entrepreneurialism or free markets but seeks out firms that have best exploited the current socialist and leveling environment of the US. It is difficult to reconcile this investment philosophy with freedom.