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Monthly Archives: September 2011

Top 50p Tax Rate Damages UK, say Economists

Twenty high-profile economists have urged the government to drop the top 50p tax rate, which they say is doing “lasting damage” to the UK economy.

In a letter to the Financial Times, they say it should be axed “at the earliest opportunity” to boost growth.

The tax is paid at 50p for each pound earned over £150,000 and affects around 310,000 people.

Critics say cutting the top rate at a time of cuts would be “monstrously unfair” and “phenomenally immoral”.

Ministers say although the 50p rate is temporary, their policy is to first increase the income tax threshold to £10,000.

The chancellor has asked HM Revenue and Customs to look at how much has been raised by the 50p rate, but it will not be able to count this until this year’s self-assessment tax returns are in after January next year.

The 20 signatories to the FT letter include two former members of the Bank of England’s Monetary Policy Committee, DeAnne Julius and Sushil Wadhwani.

It is part of a campaign being promoted through PR firm Westbourne, which they say is funded by businesses concerned about the impact of the 50p rate.

‘Mobile people’

The economists argue that the tax rate makes is making the UK “less competitive internationally, and making us less attractive as a destination for both foreign investment and talented workers”.

They call on the coalition, “to drop the 50p tax at the earliest opportunity as part of a package of measures to stimulate growth”.

Read the rest here.

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Late Night Fun: Fact or Fiction

What will it be ? People are protesting against austerity and bailouts globally. Will it come here to the extent we have seen around the world ?

More importantly, do those objecting really understand a fiat currency system ?

Not a bed time  story for glass half full type personalities.

An op-ed on social unrest, bailouts,  and the overall burning of Rome 2.0  

Not interested in the above….Nikkei Just bounced out of negative territory

 

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One Reason Why Keynesian Stimuli Aren’t Working: They Aren’t Keynesian

Nick Gillespie, September 7, 2011

In The Washington Times, businessman Mike Whalen (who’s associated the free-market think tank NCPA) writes up an interesting take on why various federal stimulus program have tanked like the Titanic(while causing few ripples on the way down).

His points are worth thinking about.

According to the Keynesians, the remedy for today’s economic problem is for the federal government, as the single biggest actor, to “prime the pump.” As government money starts to ripple through the economy, consumers and businesses will be encouraged and cautiously respond with limited increases of their own. Vroom! The economic engine steadily revs up in billions of responsive steps until happy days are here again. This pump-priming reaction is termed the “multiplier effect.”

There are many reasons to doubt that the multiplier exists at all and if it does, it certainly isn’t at the levels the Obama administration has claimed. As Reason’s economics columnist Veronique de Rugy has pointed out, the administration claimed that one dollar of government spending would create as much as four dollars in economic activity while other economists were coming in with multipliers of between 0.8 and 1.2, meaning that each dollar of government spending might yield just 80 cents to $1.20 in activity. Even if accurate, that buck-twenty is nothing to write home about, especially given the fact that government spending has to be pulled out of some other part of the economy via current or future taxes or borrowing. Which casts huge doubt on the possibility of any stimulus to work.

But Whalen isn’t simply dumping on Keynesianism, he’s bent on pointing out that even its latter-day adherents are straying far from their master’s theory. And in this, he’s surely correct. As Allen Meltzer has argued, Keynes was against the very sort of large structural deficits that characterize contemporary federal budgets and policy, believing instead that deficits should be “temporary and self-liquidating.” And Keynes believed that any sort of counter-cyclical spending by government should be directed toward increasing private investment, not simply spending current and future tax dollars on public works projects.

Or, to put it another way: If the federal government had a strong track record of responsible spending, it would mean one thing if it went into hock for a short period of time to goose the economy (again, whether this would work is open to question). It means something totally different when a government that spent all of the 21st century piling on debt and new, long-term entitlement programs responds to an economic downturn first by creating yet another gargantuan entitlement (Obamacare) and taking on even more debt in the here-and-now. This cuts in a Milton Friedmanesque, monetarist direction too. If the Federal Reserve had not been keeping money artificially cheap for the past couple of decades and it worked to lower interest rates and increase the availability of money in a given moment, that would mean one thing. Promising to keep rates low for the next couple of years – after years of loose money and statements that all those bubbles weren’t bubbles at all  – doesn’t mean the same thing.

Read the rest here.

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Word Up Kid: Stop the Taiji Slaughter!

If you don’t know about it then sadly you must be shook from your coma induced life.

Join the club 

[youtube:http://www.youtube.com/watch?v=hAwr-LUwh_I&feature=related 450 300]

 

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Mainstream Media Is Already Expecting and Titling a Fed Move at the End of the Month

The key to this article is ”

Though officials aren’t certain to take new steps this month, they are looking at alternatives to that controversial bond-buying, known as “quantitative easing.” One step getting considerable attention inside and outside the Fed would shift the central bank’s portfolio of government bonds so that it holds more long-term securities and fewer short-term securities.

The move—known to some in markets as “Operation Twist” and to some inside the Fed as “maturity extension”—is meant to further push down long-term interest rates and thus encourage economic activity. The program draws its name from a similar 1960s effort by the U.S. Treasury and the Fed, in which they tried to “twist” interest rates so that long-term rates were lower relative to short-term rates.

Anticipation of the move—along with grim economic news and the Fed’s public plan to keep short-term interest rates near zero through 2013—has helped push yields on 10-year Treasury notes, above 3% in late July, to around 2%.

Although some consumers and businesses are unable or unwilling to borrow more at any interest rate, several Fed officials believe pushing rates still lower can help on the margin.

“There are still some businesses that at a lower cost of funds are going to make investment decisions and hiring decisions based on an ability to lock in those funds at a lower rate,” Eric Rosengren, president of the Federal Reserve Bank of Boston, said in an interview.”

Full article

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Today’s Best Performing ETF’s

No. Ticker % Change
1 SOXL 12.92
2 TNA 12.03
3 FAS 11.87
4 DRN 11.50
5 ERX 9.95
6 COWL 9.67
7 UYG 9.10
8 MWJ 8.98
9 UVT 8.34
10 SAA 8.01
11 UPRO 7.70
12 MATL 7.66
13 EIPL 7.46
14 TYH 7.46
15 BGU 7.38
16 URE 7.34
17 DIG 7.33
18 RETL 7.32
19 MVV 7.18
20 UWM 7.12
21 BXUB 7.04
22 USD 6.96
23 EDC 6.91
24 DZZ 6.86
25 UKK 6.72

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Documents Reveal General Dynamics Played Role in Libya Uprising

SOURCE: REUTERS  

A major Western defense firm was upgrading military equipment for an elite Libyan security brigade just before an uprising against Muammar Gaddafi, documents show, showing how the West tried to foster ties with him during his final years in power.

Less than a month before the start of the revolt, the British arm of U.S.-based General Dynamics was making arrangements to improve communications systems for tanks, artillery and armored troop carriers for the Khamis Brigade, which played a lead role in cracking down on the revolt, according to documents found by Reuters at a brigade base.

General Dynamics said the upgrade was never completed. But the documents illustrate in detail for the first time what weapons were involved in the deal and that the firm was doing business with Gaddafi’s forces on the eve of the uprising.

It said the equipment might have been included in the British subsidiary’s May 2008 contract with Libya — an 85 million pound ($136 million) deal to provide a tactical communications and data system as part of what it termed at the time “the United Kingdom’s initiatives to improve economic, educational and defense links with Libya.”

This was after Gaddafi, widely ostracized abroad for much of his 42-year rule because the West accused him of supporting terrorism, abandoned his program of mass-destruction weapons in 2003, returning Libya to mainstream international politics.

The Khamis Brigade, led by and named after one of Gaddafi’s sons, was the best equipped of Libya’s security forces and was directly involved in putting down the uprising in cities such as Misrata and Tripoli, where thousands of people were killed.

Peter Bouckaert, emergencies director with Human Rights Watch, said the brigades commanded by Khamis, and another Gaddafi son, Mutassim, were able to become so strong thanks in part to procurement from Western countries.

“These elite brigades … had access to the most modern weapons,” he said. “We’ve documented arms sales from not just the usual suspects but also Western companies.

“I think the lesson is that if you’re going to sell weapons to dictators, at some point down the line you’re going to be deeply embarrassed.”

COMMUNICATION UPGRADES

A letter from a General Dynamics UK project manager, Simon Kirkham, to Libya’s defense ministry dated January 25 was found this week in the Khamis Brigade’s bullet-scarred compound near Tripoli.

That date marked the start of anti-government protests in Egypt, to Libya’s east. Libya’s neighbor to the west, Tunisia, had already toppled its president and political analysts were predicting similar protests could erupt against Gaddafi.

The note, and an Arabic document accompanying it, listed 40 T-72 tanks, eight Palmaria artillery pieces, four BTR-60 armored personnel carriers, 10 Shilka anti-aircraft systems and two M-113 armored personnel carriers to be upgraded.

“These platforms are required to meet the proposed 1 April conversion deadline,” said the letter, which listed offices in England and Wales.

A spokesman for General Dynamics, Rob Doolittle, said he could not comment specifically on the documents without seeing them, but said the equipment might have been included in the British subsidiary’s May 2008 contract with Libya.

That deal came as “part of the United Kingdom’s initiatives to improve economic, educational and defense links with Libya,” a statement released at the time said.

“It will provide communications and data handling capabilities, together with technical and training support, to the Elite Brigade of Libya’s armed forces,” the release said.

Doolittle said the firm did not finish deploying the system, involving a process sometimes referred to as “conversion” — switching from one communications system to another — and did not train Libyan forces in its use.

A small group of General Dynamics UK employees working on the system were withdrawn from Libya in early February, he added.

DREADED BRIGADE

Inside the Khamis Brigade compound, a narrow road cuts through rows of planted cypress trees which shield the central area from view. The burned-out husks of tanks and ammunition crates lay tucked between the trees.

Human rights activists and analysts say the Khamis unit played a major role in the civil war, spearheading the fight against NATO-backed rebels who took up arms after a crackdown on anti-government protesters in February.

A leaked 2009 U.S. diplomatic cable said the brigade “effectively serves as a regime protection unit.” Libyans knew the brigade for its discipline and fierce loyalty to Gaddafi.

“This was a place of torture, a place of imprisonment, a place of mercenaries and a place of terrorism,” Abdel Hafidth Iswad, a former rebel now helping guard the compound, said.

The General Dynamics UK deal to provide communications technology to the unit came the year after former Prime Minister Tony Blair’s 2007 visit to Libya, a seminal moment in the push to warmer relations between Gaddafi and the West.

For years, Gaddafi had been shunned for his government’s alleged role in bombings and other attacks in Britain and elsewhere, and was accused by human rights activists of brutal repression of dissent at home.

The documents obtained by Reuters showed the General Dynamics UK work was scheduled up to and through the date the revolt broke out, with start dates between February 10 and February 24, and end dates between February 24 and March 17.

Separate documents found by Human Rights Watch in the unit’s compound, overrun by anti-Gaddafi fighters last month and now open to journalists, showed the brigade was receiving arms from a variety of countries and companies.

One 2004 order marked the delivery of Russian-made Kalashnikov rifles, and one from 2009 showed an unspecified delivery was made from South Africa. Another 2009 order showed rifles came from Belgium’s FN Herstal.

Boxes of those FN rifles now litter the compound, including the archives room where many of the documents related to the daily functioning, tactical planning and weapons procurement of the base were found.

“Is anyone surprised these weapons were used against his (Gaddafi’s) own people?” Bouckaert said.

 

 

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ZUCKERBERG WINS AGAIN: FACEBOOK DOUBLES FIRST-HALF REVENUE

SOURCE: REUTERS EXCLUSIVE 

Facebook’s revenue doubled to $1.6 billion in 2011’s first half, a source with knowledge of its financials told Reuters, underscoring its appeal to advertisers while it grapples with intensifying competition from the likes of Google Inc.

Net income in the first half of 2011 came to almost $500 million, according to the source, who wished to remain anonymous because privately-held Facebook does not disclose its results.

Facebook’s stronger results come as investors have pushed its valuation to roughly $80 billion in private markets, with many industry observers expecting the world’s No. 1 Internet social network to go public in 2012.

Its growing popularity among its advertisers and 750 million users has pressured entrenched Web companies such as Yahoo Inc, which ousted its chief executive Carol Bartz on Tuesday.

Search leader Google Inc launched Google+, a rival social network in June that attracted more than 10 million users in its first two weeks. Google is trying to increase the appeal of its social network by offering games such as Zynga Poker and Rovio’s Angry Birds.

Some venture capitalists and industry experts see early signs that Google+ is headed down the right path in taking a bite out of Facebook.

FROM DORM ROOM TO MARKETS

Facebook earned $355 million in net income in the first nine months of 2010 on revenue of $1.2 billion, according to documents that Goldman Sachs provided to clients during a share offering this year.

The source did not provide figures for a direct comparison for the first half 2011 figures.

Created by CEO Mark Zuckerberg in a Harvard dorm room in 2004, the company is expected to introduce new features this month such as music services from Spotify and Rhapsody, according to people familiar with the plans.

Facebook has become one of the Web’s most visited destinations by people who spend hours on the site every month sharing photos and videos, and conversing with friends.

Facebook accounted for nearly one third of all Internet display advertisement impressions in the United States in June, more than the combined total of Yahoo, Microsoft Corp, Google and AOL Inc, according to analytics firm comScore.

It was not clear what portion of Facebook’s $1.6 billion in revenue in the first half of the year came from advertising sales. Facebook also gets a 30 percent cut of sales of virtual goods, such as digital cars or animals, that enhance the experience in social games such as Zynga’s FarmVille.

In January, Facebook said it had raised $1.5 billion from investors including Goldman Sachs and Digital Sky Technologies, as well as through a private offering to overseas investors conducted by Goldman Sachs, at a valuation of roughly $50 billion.

Facebook declined to comment on its financial results.

 

 

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Technical Chart Question

With the news from the German high court, expectations China is done raising rates, and some better comments out of Trichet world markets rallied with gusto from a technically oversold point, good evaluation, and total exhaustion from sellers.

Albeit volume in the U.S. was extremely light, but we probably can ignore this given the volume overall for this bull cyclical rally that started in 2009.

A recent failure occurred at the 30 day moving average on the S&P last Thursday. Last Thursday the 30 day was 1220 S&P. Today’s rally took us right to the 30 day now at 1198-1200.

So the question is will we fail here at the 30 day moving average ?

Looking at the chart above some technical indicators suggest we still have room to rally. It seems we have some room up to the 50 day MA of 1248, but we will find resistance at 1206 & 1220 which were previous supports turning into resistance.

Also take note how one days rally has put us near overbot conditions.

Hopefully, tomorrow’s continuing claims will be a good number to give us follow through.

For some reason i had trouble loading  a P&F chart. Hopefully, this link will work. The count on the P&F chart gives us 7 counts and today we made 4. Depending on what theory you follow 3 more counts takes us between 1206 and 1220 S&P.

All in all, a strong argument can be made for a triple bottom and the transports may have four to five bottoms.

Essentially, a total risk on is only in place with a strong rally through the 1248 for at least three closing prices. Until then expect a lot of flip flopping on the movng averages as we do not know three key elements.

1) Although the German court ruled in favor of Merkel continuing to support EU bailouts with  Parliament approvals; there is one more vote coming up on the 29th of September.

2) We are not sure wether the clam will announce the “twist and turn” or buying of long term treasuries and other paper.

3) Will the EU have the collective power to halt the current crisis. With comments like this  and this; it is hard to determine what the fate of the Euro and the union really is.

It is wise to consider putting some hedges on if we get some more upside over the next few days of trade. Technically, we are broken and the banking sector remains a huge question mark both at home and abroad.

Also keep in mind that most analysts have not ratcheted down earnings for the S&P. A lot of analysts are still in the $100-$105 camp. The last Q showed us that there could be a 15-30% haircut in store for earnings….and that is in every sector across the board.

Today’s rally was nice and we’ll take it, but i think we would have seen a more substantial rally if we had substantial news to confirm problems are getting fixed for real.

Markets need more than just cocaine to act insane to the upside…..

 

GLT

[youtube:http://www.youtube.com/watch?v=ZiQoVv0FSKQ 450 300]

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