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  • Scrooge McDucks

    Pimco managing director William H. Gross:

    Having benefited enormously via the leveraging of capital since the beginning of my career and having shared a decreasing percentage of my income thanks to Presidents Reagan and Bush 43 via lower government taxes, I now find my intellectual leanings shifting to the plight of labor. I often tell my wife Sue it’s probably a Kennedy-esque type of phenomenon. Having gotten rich at the expense of labor, the guilt sets in and I begin to feel sorry for the less well-off, writing very public Investment Outlooks that “dis” the success that provided me the soapbox in the first place. If your immediate reaction is to nod up and down, then give yourself some points in this intellectual tête-à-tête. Still, I would ask the Scrooge McDucks of the world who so vehemently criticize what they consider to be counterproductive, even crippling taxation of the wealthy in the midst of historically high corporate profits and personal income, to consider this: Instead of approaching the tax reform argument from the standpoint of what an enormous percentage of the overall income taxes the top 1% pay, consider how much of the national income you’ve been privileged to make. In the United States, the share of total pre-tax income accruing to the top 1% has more than doubled from 10% in the 1970s to 20% today. Admit that you, and I and others in the magnificent “1%” grew up in a gilded age of credit, where those who borrowed money or charged fees on expanding financial assets had a much better chance of making it to the big tent than those who used their hands for a living. Yes I know many of you money people worked hard as did I, and you survived and prospered where others did not. A fair economic system should always allow for an opportunity to succeed. Congratulations. Smoke that cigar, enjoy that Chateau Lafite 1989. But (mostly you guys) acknowledge your good fortune at having been born in the ‘40s, ‘50s or ‘60s, entering the male-dominated workforce 25 years later, and having had the privilege of riding a credit wave and a credit boom for the past three decades. You did not, as President Obama averred, “build that,” you did not create that wave. You rode it. And now it’s time to kick out and share some of your good fortune by paying higher taxes or reforming them to favor economic growth and labor, as opposed to corporate profits and individual gazillions. You’ll still be able to attend those charity galas and demonstrate your benevolence and philanthropic character to your admiring public. You’ll just have to write a little bit smaller check. Scrooge McDuck would complain but then he’s swimming in it, and can afford to duck paddle to a shallower end for a while. If you’re in the privileged 1%, you should be paddling right alongside and willing to support higher taxes on carried interest, and certainly capital gains readjusted to existing marginal income tax rates. Stanley Druckenmiller and Warren Buffett have recently advocated similar proposals. The era of taxing “capital” at lower rates than “labor” should now end.
    Read the whole thing here: http://www.pimco.com/EN/Insights/Pag...e-McDucks.aspx

  • #2
    The Decline of the Tea Party

    Today, the problem isn’t the New Left, but the radical right, which has dominated American politics at least since the rise of the Tea Party movement in 2009 following the election of Barack Obama. It’s too soon to say for sure, but recent events suggest that some of those previously supporting the Tea Party have had their Harvard library moment. There are signs of a pushback among the wealthy, conservative elites and the business community that may see the political pendulum begin to swing back toward the middle.

    No one particular event seems to have created this moment. The government shutdown is one, the impending Republican loss in the Virginia governor’s race is another, and so is the dawning recognition that the right-wing war on the poor and glorification of profits and wealth may have gone too far.
    http://economix.blogs.nytimes.com/20...ea-party/?_r=0

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    • #3
      More from the Pimco/Gross essay:

      ...another large company – I shall name it Company X to be safe – is again representative of an excess that may haunt America’s future. X is a well-known corporation that, to put it simply, has grown earnings and earnings per share accompanied by nearly flatline revenues. This troubling trend began nearly a decade ago – sales having increased by only 9% since 2003 – barely a percentage point a year. Its most recent quarter in 2013, as a matter of fact, showed no improvement, with revenues actually declining by 1% instead of moving up.

      Profits, however, increased because the company cut expenses along the way. Earnings per share (EPS) did even better, because X used some of its cash flow to buy back stock instead of reinvesting much of it in new plant and equipment. What struck me was not this unmasking of company X’s secret sauce to elevate its stock price, but the similarity of this corporation to the plight of the broader U.S. and even global economy. Never have American companies sent a greater share of their sales to the bottom line.
      Anyone have a guess on what company this is?

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      • #4
        The problem is that when you tax captial gains at a higher rate people stop moving money and revenue goes south.

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        • #5
          Gross's 3 main points:

          1) Growth depends on investment and investment in part depends on an equitable rebalancing of personal income taxes, capital gains and carried interest.

          2) The era of taxing “capital” at lower rates than “labor” should end.

          3) Investors in the U.S. and elsewhere must look for investment in the real economy, not share buy-back maneuvers that artificially elevate stock prices.

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          • #6
            Originally posted by TonyR View Post
            More from the Pimco/Gross essay:

            Anyone have a guess on what company this is?
            So the got efficent and met the same demand with less overhead and that's problem?

            Look...everyday technology is replacing people. I've replaced 20 in the past year. These people need to evolve their game and become viable again....or roll over and die. Those are the choices.

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            • #7
              Garcia, I think you're missing the larger point here...

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              • #8
                Originally posted by TonyR View Post
                Garcia, I think you're missing the larger point here...
                Oh I get what he's saying. I am just saying that buying back the stock vs investing in the "real" economy are not the driving factors. I am saying the technology is and we live in a time where it's just the begining.

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                • #9
                  Our problems are significant, Mr. President, and “Obamacare” and the signing up for it is far down the list of what we need to correct in order to move in the direction of “old normal” growth rates. Surely a few astute observers in Congress know that as well. Until we can more equitably balance “Scrooge McDuck” tax rates to rebalance wealth and “GINI coefficients,” while at the same time focusing on investment in the real as opposed to the financial economy, then the prospects for markets – whatever the asset class – are anything but “golden.”

                  This is why I consider Obama a modern day James Buchanan. He has taken the most pressing and critical issue of our times and simply ignored it. Right now, our government is more concerned about gay marriage. It's like living in Wonderland. We are sliding toward doom and worried about who stole the tarts.

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                  • #10
                    Originally posted by Garcia Bronco View Post
                    So the got efficent and met the same demand with less overhead and that's problem?

                    Look...everyday technology is replacing people. I've replaced 20 in the past year. These people need to evolve their game and become viable again....or roll over and die. Those are the choices.
                    I saw an HR class titled: Challenges Recruiting the Millennial Generation.

                    wow there's a whole new can of worms ........

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                    • #11
                      The Koch Brothers do not endorse this thread.

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                      • #12
                        Originally posted by Pony Boy View Post
                        I saw an HR class titled: Challenges Recruiting the Millennial Generation.

                        wow there's a whole new can of worms ........
                        Okay...over the past 90 days I've been interviewing them and hiring a few. I find that the mix of people who can perform is about the same. It's important to denote that the best ones spent time in one of the armed services.

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                        • #13
                          Originally posted by Garcia Bronco View Post
                          Okay...over the past 90 days I've been interviewing them and hiring a few. I find that the mix of people who can perform is about the same. It's important to denote that the best ones spent time in one of the armed services.
                          I think one of the issues with the generation in question (Millennial) is the ability to retain them at work and keep them motivated. A lot of them seem to move around a lot -- myself included.

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                          • #14
                            Originally posted by Garcia Bronco View Post
                            Okay...over the past 90 days I've been interviewing them and hiring a few. I find that the mix of people who can perform is about the same. It's important to denote that the best ones spent time in one of the armed services.
                            The Millennials tend to reject the traditional 9 to 5 work week and it makes sense that an employee with a military background would be a better fit.

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                            • #15
                              Originally posted by Pony Boy View Post
                              The Millennials tend to reject the traditional 9 to 5 work week and it makes sense that an employee with a military background would be a better fit.
                              What are you basing this opinion on? In my experience, the "traditional" 9 to 5 work week doesn't exist anymore. Look at the jobs being created these days and tell me they fit the traditional 9 to 5 work week. Out of everyone under the age of 35 I know, I would say the vast majority (75%+) do not work 9 to 5 jobs, and almost every one of them would kill for that kind of freedom. I know I would have when I was still working.

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