Markman: Tax Crusaders Aiming at Partnerships

May 10, 2011, 12:31 pm EDT

You may have noticed that a few of the nice, quiet, unassuming energy master limited partnerships — energy stocks with high dividend yields — blew up in the middle of last week. Here’s why.

It seems that certain people in government have decided that rather than cutting back on spending to balance the budget it might be a better idea to tax successful companies more. Hard to believe, I realize, that government officials could be so naive. But here’s what I found out.

According to Reuters, the Obama administration is considering a plan to force more businesses to pay corporate income tax as part of an overhaul package that could be unveiled as early as this month. Under the proposal, entities with more than $50 million in gross receipts would pay the corporate income tax, instead of the individual income tax they now pay. Partnerships like law firms, hedge funds and MLPs would likely be the most affected. Read 

5 Myths & 5 Ugly Truths About the Fed

May 8, 2011, 8:10 pm EDT
5 Myths & 5 Ugly Truths About the Fed

Misinformation about the Federal Reserve abounds these days. And that misinformation cuts both ways – for every conspiracy theorist who labels the central bank and its chairman Ben Bernanke as the root of all economic evils, there is a brainwashed Fed defender who asks for just a little more time or a little more understanding.

I don’t pretend to be impartial when it comes to the Federal Reserve – I have my list of personal gripes both with Fed policies, as with the vocal alarmists and apologists who fail to look holistically at the role of America’s central bank in the 21st century global economy. But as a trained journalist, I must admit that what disappoints me most is the lack of an honest debate about our nation’s fiscal policies and its caretakers.

So here is my humble attempt at clearing the air and starting an important conversation about our central bankers: a hard look at common myths and ugly truths about the Federal Reserve. Read 

Markman: Obama’s 7.5% Solution

May 5, 2011, 10:48 am EDT

An election year is staring us in the face and the most remarkable things occur when elected officials suddenly face their career mortality. I learned a long time ago that the No. 1 job of politicians is to get re-elected, and the higher they are in the hierarchy the more levers they can pull.

In this context, consider the fact that no post-war president has been re-elected with the unemployment rate of more than 7.5%. Jimmy Carter and Bush pere both lost with 7.7% unemployment rates. (Clinton, you may remember, won in 1992 with the mantra, “It’s the economy, stupid.”)

So you can bet that President Obama and Federal Reserve chief Ben Bernanke realize that the current unemployment rate over 8.75% is not going to cut it, and have Fed analysts and the administration economic team of Goolsbee, Sperling, Geithner, Daley, Locke and Immelt on the hunt for a surprise proposal to put people back to work in a hurry. 

Almost 60% of Americans are expressing disapproval for the administration’ s handling of the economy, which puts the administration on the wrong side of history. And I don’t think the country really understands how weak GDP growth really is now, as forecasts by credible economists are coming down by the week, to as low as 1% to 2% annualized. Read 

Weiss Ratings Rates U.S. Credit

May 4, 2011, 4:55 am EDT

Last week I sent out the single most important press release of my lifetime, which announced to the world that Weiss Ratings had begun issuing ratings on the credit worthiness of sovereign nations. And that we had given the U.S. a rating of C, just two notches above junk.

That ranking puts the United States in 33rd position among the 47 countries we cover. China, Thailand and Malaysia get much higher ratings. Even the government finances of the Philippines, Indonesia, Bulgaria and Mexico are stronger than ours.

Only a handful of countries get a lower rating than the U.S., including, as you might expect, Ireland, Greece and Portugal. Read 

Wall Street Loves Weak Dollar and Weaker Fed

May 3, 2011, 3:00 am EDT

Since early 2009 (when the U.S. stock bull market began), the U.S. dollar has collapsed. The Brazilian real is up 56%, from 41 cents to 64 cents. The Canadian dollar is up 35%, from 78 cents to $1.05. The Swiss franc has also risen 35%, from 85 cents to $1.15. The New Zealand dollar is up 60%, from 50 cents to 80 cents, while the Australian dollar has risen the most, 70%, from 64 cents to $1.09, reaching a 29-year high. Even the relatively weak euro and British pound have risen by 16% and 20%, respectively, since early 2009.

In his widely publicized press conference last Wednesday, Federal Reserve Chairman Ben Bernanke deflected questions about the dollar to Treasury Secretary Tim Geithner, saying the dollar was Treasury’s domain. Theoretically that’s true, but the Fed’s seemingly unconscious attack on the dollar over the last decade has caused more damage to our currency than all of Treasury’s policies combined, or all of the over-spending by Congress and the combined Bush-Obama administrations of the past decade. Consider these four entirely unprecedented actions and policy decisions by the Fed in the last 33 months alone:

1. The Fed doubled its balance sheet in three months during late 2008. Fed borrowing rose from $411 billion on Sept. 10, 2008, to $1.76 trillion on Dec.10. Since then, gold has doubled. Read 

Will Bin Laden’s Death Burst The Commodity Bubble?

May 2, 2011, 1:40 pm EDT
Will Bin Laden’s Death Burst The Commodity Bubble?

News of Osama bin Laden’s death is driving investors to sell commodities like oil and gold. And if it speeds up a political consensus that it’s time to withdraw American troops from Iraq and Afghanistan, it could be the trigger that bursts the commodity bubble.

To profit from that bursting commodity bubble, consider shorting three commodities exchange traded funds (ETFs). Why? With near 16:1 rates of borrowing to buy over-priced commodities, the peace dividend that could result from bin Laden’s death would boost confidence in the dollar and send commodities prices plunging driven by traders who sell to repay all the debt they took on to inflate the bubble.

Commodity prices are trading far above their historical averages. For example, the average price of barrel of oil between 1946 and 2011 was $18.94 a barrel and between 2001 and 2011, oil averaged $57.02 – it now stands at $112 — nearly twice the decade average. And the average price of gold between 1900 and 2010 was $157.07 an ounce — it’s now $1,576, ten times that long-term average. Read 

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