Posted on 11/07/2012 8:44:18 AM PST by Hojczyk
A newly re-elected President Barack Obama will push for higher taxes -- including a dividend-tax hike that will cause a substantial drop in stocks, Pimco's Bill Gross told CNBC Wednesday.
Obama will get little time to enjoy his election victory Tuesday, as he will have to get to work quickly with Congress to avoid the nation's "fiscal cliff" of looming mandated tax increases and spending cuts.
One likely remedy for revenue-raising will be to take the current dividend tax rate of 15 percent and hike it five to 10 percentage points, said Gross, co-CEO at the firm that runs the largest bond fund in the world and has $1.8 trillion assets under management.
"Obama ran on a higher-tax agenda," Gross said during a "Squawk Box" interview. "Marginal income taxes go from 35 to 40 (percent), capital gains from 15 to 20, dividends from 15 to who knows what...so they could go high, high and higher."
Risk-averse investors prefer dividend stocks, which are common in pensions and mutual funds even though they've largely underperformed other market indexes over the past four years. Consequently, Gross said, higher dividend taxes would make those companies less attractive and thus take the stock market down 5 to 10 percent.
That's "the ultimate danger here for the stock market," he said. "Dividends are sheltered in 401(k)s, they're sheltered in pension funds. At the margins investors pay dividend tax rates. To the extent that you raise them from 15 to, say, 25 (percent), that implies in terms of equaling after tax rates another 5 to 10 percent down in terms of stock prices. We've been very spoiled for the last 10 years."
Ron Florance, managing director of investment strategy at Wells Fargo Private Bank, said he is positioning clients for the rougher tax road ahead.
(Excerpt) Read more at finance.yahoo.com ...
They will be able to say “we gave him what he wanted...and NOW look at this mess”.
The quickest road to American renewal, at this point, is to give the left everything it wants and watch society quickly crumble like a house of cards. Like pulling off a band-aide. Do it quickly, and four years from now we'll have real change.
And in some ways they'd be correct:
1) Bush set the standard for unbridled illegal immigration in order to give Walmart etc. a cheap exploitable labor force.
2) Bush bailed out rich, irresponsible liberal Democrat bankers in NYC at the expense of everyone else. This set the precedent for Obama's TARP II and GM bailout, which lost us Ohio.
3) Bush and Delay set us on the road to fiscal ruin by officially adopting the Democrat model of giving free stuff to people as a means of buying their votes, meaning we no longer had an anti-handout opposition in the entire country.
4) Bush set the standard for the rise of the American police state with the Patriot Act, Homeland Security, and the TSA. He did this to avoid the politically incorrect, but logically prudent policy of racial profiling.
In the end, Obama's fiscal and economic policies are nothing but a continuation of Bush's second term. The irony is that Obama ended up being "four more years of George Bush."
let it all come....let it all fail....
I will pressure my senators to refuse to work with obama on the dems on this mess unless it is in the context of spending cuts. If that mean tax cuts expire then so be it. The only thing we have left right now is to muck up the works.
I don't understand TARP and now we will never know where that money went...but even Glenn Beck implied that it had to be done...
Untrue. If the banks had failed, there would have been NO loans to ANYONE for a long, long time.
Housing would have dived further, many more business would have failed for lack of credit.
What Bush did were LOANs, not bailouts and the TARP has mostly been paid back. What Obama did was bailouts.
Obama's Porkulus was the bailout (not loan) which we will never see again.
Federal revenue never exceeds 20% of GDP.
We’re at 19%.
Raising tax rates won’t help.
Bush did all that, yeah, and damn him. But now perhaps the time is right for a wider perspective. If you’re gonna go back to 08, 04, 02, you gotta go back to the last guy and the last guy. The real tipping point was 1937. The states stopped mattering in 1865, and the electorate gave up in 36. SCOTUS was the last holdout, and caved in despite popular perception only after FDRs packing scheme failed. Why I’ll never know, but they handed the keys to the kingdom over, and the gates were open.
Then it was only a matter of time. How long could accumulated capital—physical, psychological, cultural, etc.—hold out against the more, more, more assumption of the basic functions of life by the central state? How much ruin could there br in the nation? Well, I have no idea, but I do know we’ll find out, because there’s no stopping the juggernaut. The so-called Reagan “revolution” rearranged slightly the deckchairs, no more.
Firstly, companies are not normally coerced into taking loans. Secondly, loans are normally structured, and not left to be repaid, if ever, whenever the borrower gets around to it. Certainly they aren’t considered to have been theoretically repaid merely because they could be repaid, or could were the business was liquidated, but aren’t in fact. Thirdly, loans normally cost something. Finally, loans normally aren’t a given on the side of the lender, and can’t be relied upon in the future because the lender had guns and can take people’s money and the Too Big to Fail philosophy has been by implication permanently in force.
Nevertheless, they were loans which have been mostly paid back and not "bailouts".
Problem is, hyper-inflation is possibly coming and will wipe out your cash assets. I'm in the same bind. Whether to sell off stocks and bonds now and convert to cash and other assets that accumulate minimal interest offset by higher taxation and inflation, or to ride out the losses until better times. Last couple big downturns, I stayed in the market and rode it out and my assets grew. If I sold, I would have lost most of it. Converting to metals is a gamble (but better than holding lots of cash). Putting it in property is also a gamble. We're losing ground all around.
I don’t think you will see any taking of 401(k)’s, at least not directly.
Instead, you will see means testing of Social Security and Medicare, so that your post-retirement net spendable income is nearly the same whether you have a 401(k) or not.
Agreed, Sequestration will be his way of saying”don’t blame me, it was the radical tea party congress fault for not working across part lines”.
Democrats in Congress were looking into that after he was elected the first time. I have to think it will happen again.
“really a tax on cities and states”
That would be classic, since the feds now pay for so much that cities and states used to pay for...
A story as old as civilization.
And a side dish of seed corn!
Let ‘em blame Bush.....while they’re dumpster diving for something to eat. It’s already happening in New York.
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