Sunday, January 19, 2003


One aspect of President Bush's "stimulus" plan that has been overlooked in the furor over the dividend plan, is the treatment of the "marriage penalty". This is unfortunate, because the marriage penalty, and how to address it, was a right wing issue during the Clinton Presidency; President Clinton vetoed Congressional action addressing the marriage penalty in 2000... The argument is that the current system unfairly penalizes 2 income married couples by taxing them filing together at a higher rate than if they filed separately - however, the way the GOP wants to fix it will instead unfairly benefit those married families with only one wage earner - yet more "special rights" for one group of people at the expense of others - particular those who are prevented by law from getting married in the first place.

Anyway - good background article in today's NYT about the conservative social policies behing this aspect of the marriage penalty part of the tax bill.:

Marriage Penalty, Except When It Isn't


IF politicians of almost every stripe agree so readily about an issue, it is usually worth a closer look.

Such is the case with an important but barely debated component of President Bush's $674 billion tax-cut plan: relief from the "marriage penalty."

It is hard to find an idea with more mom-and-apple-pie appeal. Who wants to be against marriage? Who wants to be for higher taxes? Who would defend a tax burden that seems both unfair and capricious, a result of anomalies in the law?

As any two-income married couple knows, the marriage penalty kicks in when the husband and wife combine their incomes on a joint tax return and suddenly find themselves in a much higher bracket. A couple who together earn $80,000 owe hundreds more than two singles who each earn $40,000.

Small wonder that Democrats, who have attacked Mr. Bush's overall plan as reckless and overwhelmingly tilted toward the rich, have said virtually nothing about plans to alleviate this problem.

But for all the complaints about the marriage penalty, the current tax code is in many ways heavily biased in favor of married couples, especially those with children. Tens of millions of families actually receive big marriage bonuses, which would become even bigger under Mr. Bush's plan.

Consider the tax loads of three different households, each with an annual taxable income of $60,000. In an analysis prepared last week by Deloitte & Touche, the accounting firm, a single person with no children would owe $7,943 under current law and receive a tax cut of $345 under Mr. Bush's plan.

By contrast, a married couple who have two children and file jointly would pay $3,300 under current law and $2,400 under the Bush plan. Did someone say marriage penalty?

Defenders point out that the married couple have more mouths to feed, more clothes to buy and more house to pay for. But consider the third household: a single mother with one child. She would have to shoulder child-care expenses that a married couple with a stay-at-home parent would not. Yet she would owe $1,800 more than the married couple under current law, and her tax cut would be about half that of the married couple.

The big winners under current law and the Bush plan are the Ozzie and Harriets — married couples with only one breadwinner and two or more children.

Two-income married couples are in some respects the biggest victims of the marriage penalty, and their problems do not disappear under the Bush plan. Single people pay the highest taxes of all, under current law and the Bush plan, though a single person earning $60,000 may still end up paying less than a husband and wife who together earn the same amount.

There are technical reasons behind all this, but they seem to stem from a surprisingly intense political battle waged by influential conservative groups determined to encourage stay-at-home moms.

"The people who are treated the best are families with stay-at-home spouses, who, not surprisingly, are an important constituency for Republicans," said Edward J. McCaffery, a law professor at the University of Southern California and the author of "Taxing Women" (University of Chicago Press).

As far as two-income couples are concerned, "the more equal they are as earners, the higher the penalty will be," Mr. McCaffery added.

NE big reason for the bigger tax burden may be the role played over the years by Phyllis Schlafly, the indefatigable foe of feminism and of anything in the tax code that encourages women to leave their children for outside work.

Ms. Schlafly has pushed for child tax credits, which are given for each child in the family and would be increased to $1,000 from $600, and opposed tax breaks for the costs of child care, which are not being expanded.

She has fought for years to ensure that marriage-penalty relief flows to families with stay-at-home moms as well as two-income households. Mr. Bush's plan would raise the standard deduction for any married couple. When he proposed a special 10 percent tax break for two-income families in his 2001 tax bill, Ms. Schlafly raised a storm and helped kill the idea.

"Giving a tax cut only to two-earner couples would send the radical feminist message that the government sees no value in a homemaker's work at home," Ms. Schlafly wrote at the time, urging her supporters to write and call important Republicans on the House Ways and Means Committee.

The upshot is good news for the Harriet Nelsons of the country, unless, of course, Harriet decides to be a lawyer and make some money herself.

Saturday, December 21, 2002


I'm not gonna let nobody run me off. I
So there.


Tuesday, December 17, 2002


It has recently come to my attention, from a variety of sources, both in bloggerdom and in TRW that what I have to say isn't really that important (or valid, LOL) and that all I'm doing is wasting people's time and/or energy. So in doing my little bit to make the world a better place, I'm pulling the plug on this little venture, as well as my "contributions" (HA!) to the blogger world. There's lots of people out there with more talent and more valid things to say than I do, so I don't want to waste anyone else's time more than I already have - and for what I have done, I most humbly apologize to all.
Happy holidays and a great 2003, and have nices lives, everyone.

Wednesday, December 04, 2002


Heh-heh. It happened first thing Monday morning - during that sweet spot in the news cycle when the "Black Friday" (the big shopping day after Thanksgiving when the retail stores finally go into the black for the year) news boosting the Dow up over a hundred points within a half hour to 9043 (yay!) and then the disappointing ISM manufacturers report came in at 10 am and everything sunk from there. It reminded me of those heady moments when the networks had called Florida for Gore and it looked like Gore would be our next President LOL - just an illusion. The reversal continued well into today, but volume is orderly and declining and the daily price range is staying withing current bullish upward trending price channels. A few days in the 8700-9000 range may be a nice rest area and allow a recovery from overbought levels to begin new assaults. On a technical and longer term basis, the Dow has been staying above an upward sloping 20 day Moving Average line for a few weeks now, and even more importantly, the 50 day moving average line has finally started to curve upward. There are various minor economic reports coming out this week such as ISM services,. Productivity revisions, car sales, etc., but the key, I think, for the week and for the streak, will be Friday's Unemployment Report - how that affects the market Friday will be whether or not we roar back at 9000, or have to wait further into the future for another shot. We are rapidly approaching a huge long-term weekly index resistance which started in March 2000 and has beaten back every feeble attempt to breach it since. Right now it's also in the low 9000s magic area where the August top lies and the 200 day moving average awaits and Bear Market weekly resistance wall is waiting to be pierced. So it doesn't bother me too much right now that we hit 9000 and pulled back right away. The significance of what happens once the Dow hits all that trouble on the other side is no less than the fate of the W bottom put in place in the pain of July and October, and basically starting all over again with a whole new setup to finally kill the long bear market soemwhere down the road. So it really may all come down to one report this coming Friday. It's gonna be HUGE.

Friday, November 29, 2002

Thanksgiving 2002

It's Thanksgiving - a nice pause to appreciate our abundance and celebrate our community and spend the day preparing the ingredients for the awesome Friday-after- Thanksgiving sandwiches that I lust after all the rest of the year.

I know I'm on record as thinking that the Dow would hit 9000 by Thanksgiving. Came pretty close, as the Dow finished at 8931 after a day that was impressive in lots of "technical" ways in addition to posting a hefty 255 point advance. But check this out - tomorrow, Friday, the market closes early, at 1PM (EST) Normally, one would expect that many of the big money guys aren't supposed to be around and that things should be lackluster. But consider this - the last time this setup happened - this past July 4th, which occured on a Thursday with a short Friday following, the Dow went up 324 points, partly in relief that we had made it rhrough the holiday with no terrorism. I'm not sure if terrorism against Israelis counts or not - but it is very conceivable that Friday could be the day. And of course there I went and jinxed it. LOL

On the plus side, Wednesday's action closed virtually at the top of the daily range - bulls in control on good economic news. If the bulls remain in control when the market opens Friday, it could spook the shorts sellers, which will induce them to buy to cover themselves, which creates demand, which pushes prices up. And, especially at a market turn such as now, there will be a certain pressure on money managers to jump in lest one miss the big market movement - which also creates demand, which also pushes prices up. So all this can feed on itself and build a self-feeding momentum. And if Friday, there are no huge blocks of shares available for sale because of the holiday, it could have a dramatic imapct on short term upward price movement, and just as on July 5, prices could soar. We're only 145 points away from the August high of 9077. That's only 1.6% which is certainly doable.

And I could close this with something cheesy such as "and boy wouldn't *that* gives us something to be thankful for" - But I won't.

Friday, November 22, 2002


OMG - where to begin? This was the 7th week of the Oct 9-10 rally - and what a special week it was. And even more exciting, it set in place an even more exciting week next week. So where to begin?

OK - the most important. You ever hear the term "head and shoulders" pattern? Stock prices tend to mark certain patterns. And what certain recognizable patterns show is how the psychology of a recent stock price movement affects the immediate futuie movement. I'll get around to and explain in detail several basic chart patterns some day in the future when I learn how to post charts and diagrams and stuff, but for now let's stick with the descriptive and I'll keep it simple

Consider the chalk outline of a dead guy on the sidewalk lieing face down. Start at his left arm - mentally draw a line up the arm, making a right turn at the shoulder. Slope the line a little bit between the shoulder and the neck, then up the head, over and down the other side, dip slightly and out to the right shoulder and down the right arm. You have just drawn a "head and shoulders" pattern. Stock prices rise, hit a small high (1st shoulder), pull back slightly, head back up again to a higher high (the head), retreat again, down below the first smaller high, then up to the level of the first high again before dropping back down fior good. It's a common pattern, and is considered a "bearish" signal - the market had 3 chances to advance, it didn't, becasuse the 3d high was only as far as our 1st high, and so the bulls abandoned ship and the bears took over, buying demand dried up and prices went down.

Going into this week, up until Tuesday, we had a *classic* head and shoulders pattern going. The first high (left shoulder) was on Oct 21 when the Dow hit 8547. The second, higher (head) top was reached November when the Dow hit 8800. and the third (right shoulder) was started November 12 when the Dow's high was 8504 (on it's way down into the 8300s) and continued sideways through Tuesday the 19th when the Dow closed at 8474. But, suddenly, Wednesday, a strong rally started in the morning, and never really stopped for 2 days, pushing the Dow back over the 8800 mark, but, more importantly, completely breaking the "head and shoulders" chart mold and it's inevitable fatal down trend. I can't stress just how important this is for the psychology of the market. All the stuff during election week - the Republican election, Pitt's resignation, the rate cut - all the stuff that everyone expected would push the market up, and didn't at the time, finally came through this week. I'll explain why that is sometime in the future too - has to do with the concepts of "overbought" and "oversold" and various ways of measuring that stuff too.

Now let me explain why this is so important. Back in July, the market began a bottoming process that should be the end of the big bear market which started in March 2000. This particular type bottom is called a "W" bottom, because it resembles the letter (Duh). We hit the first downpoint of the W on July 24. Rebounded up to that middle high on Aug 22 of 9077, and dropped back down to the second low point on Oct 9. Now, one of the things that confirms the actual "W" bottom (also called the double bottom) is when the price coming up the far side passes that middle high point. If we had dropped down in the "head and shoulders" we could have destroyed the "W" setup and would have had to start all over on a different setup - but now, we are still on our way to "W" confirmation. And that is important. Picture yourself a money market manager - one of the big boys. You have to have certain rules and one, is that you don't buy certain type stocks as long as there is a bear market. A confirmed "W" bottom signifies the end of a bear market. and the buying rules for the big boys change in a good way.
Speaking of "big boy" rules, there's another basic big boy rule that we are also getting close to changing also - the 200 day moving average rule. One of the basic rules of the big boys is that you don't buy a company or a fund who's price is below the 200 day moving average. There are a couple of ways to figure the moving average - I won't bore you here with the details ,but right now the 200 MA for the Dow is in the low 9000 range - which also, conicidently, is real close to the confirmation of the "W" bottom. So theoretically, sometime next week, or the week after (I have predicted on Atrios' board a 9000 Dow by Thanksgiving, and I stick by that), we will get very close to passing 2 extremely important psychological values and have a very good chance of officially killing the long bear market.and maybe even igniting a December rally - but that's going to involve a discussion of "overbought" and "oversold" - so we won't go there yet :-)

Suffice to say, though, long live the head and shoulders!

Monday, November 04, 2002


It's been 4 weeks now since the October 10 re-test of the low. Most major indicies (Dow, S&P, Russels, etc.) are up in the 10-13% range. The NASDAQ composite is up 16% - and various beaten down sub-indices in the tech sector (Philly semiconductor index, for example) have gained over 30%. Looking GOOD.

This could be a key week to see if this rally has legs or not - three events could potentially have huge impacts on the market this week and should determine where we go from here.

1) The Microsoft settlement - The judge signed off on the Bush Administration sell-out, I mean, settlement on Friday. This removes a huge legal cloud of the giant software maker - and remember the market HATES uncertainty. Microsoft is huge - at one time not too long ago it had by far and away the largest market capitalization of any company in the world (martket cap = number of shares outstanding X price per share). Microsoft is a key component of the Dow, the S&P, *and* the NASDAQ - and it is no coincidence that the high-water marks of the markets back in 2000 coincided with the initial order to breakup Microsoft (As an aside, speaking here as an antitrust professional (bet you didn't know that), IMO, Microsoft was guilty, guilty, guilty - and it was only the fact that Bush came into office is saving them from being broken up - which IS the appropriate remedy for Microsoft's illegal activities - but that's all water under the bridge now). Anyway, now that the threat of breakup is completely gone, look for MSFT, as well as the general market, to get a huge boost off of this news.

2) The election - Repeat after me - "The market HATES uncertainty". I don't believe that the market is overly partisan, but the fact that "regime change" in Washington is possible in the ballot booth creates uncertainty. Look for a market boost, regardless, once the election is over.

3) The rate cut - with the not-so-great economic numbers of the past month, specualation in the past week has centered on a rate cut at the Fed FOMC meeting on Wednesday afternoon. The Fed has 1.75 basis points left to get to zero - and I would doubt that that they would use up 50 of that all at once, so I don't expect to see a cut of more than .25% on Wednesday (I predict that, just as they lowered the rate right after 9/11, that the Fed will also lower the rate again when we attack Iraq). A rate cut does a lot to help the financial sector and any sectors such as housing which are dependent upon the credit markets. Additionally, it lowers the cost of corporate debt and makes companies more profitable by reducing debt costs. A rate cut almost always produces a nice boost - so hopefully this week we'll see one. On the down side, the market can be quite a baby - once expectations set in, no matter how realistic or unrealistic, if those expectations aren't met the markets gets real upset and sulky. If there ISN'T a rate cut on Wednesday, look for a terrible day.

So, is a positive "perfect storm" in the offing this week? Quite possibly we might hit the Trifecta. Look for other possible market boosts such as the resignation/canning of SEC Chairman Pitt.

On a technical basis, what we want to see is the Dow hit, and pass the August high of around the 9000 mark - this will absolutely confirm the "Double-Bottom" pattern started this summer, and would be a huge psychological boost. Right now (Monday morning), the pre-opening Dow is already up 100 and is over the 8600 mark. With the big news this week, reaching that all-important 9000 level this week shouldn't be out of the question. The big question is, if the Dow does hit or pass 9000 this week, if it will be able to close on Friday over that level. If it does,. that will be HUGE.