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Stock Ideas Investors Daily Edge Carney's Carnage
Stock Ideas Investors Daily Edge Carney's Carnage 
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| This is supposed to be one of the slowest weeks of the year. The big-time traders and specialists on Wall Street always go on vacation during the final week of August. | |
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| Carney's Carnage |
| Wednesday, 12 December 2007 | ||||||||
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Preparing your investment portfolio for election outcomes requires you to set aside political desires and focus on what’s likely to happen. Although there are still more than 10 months until the US chooses its next president, the issues motivating voters have evolved over more than five years. The story is well worn and familiar, so absent a monumental pileup, the big picture says the Democrats will win the White House in 2008 and maintain control of both houses of Congress. And the numbers at online prediction market intrade.com, as they have for more than a year, support that narrative. (Polls are useful, but a guy answering questions over the phone isn’t nearly as motivated as one putting his money where he thinks the vote is.) The bluing of America (of Washington, at least) will impact markets, sectors and companies, but whatever happens Nov. 4, 2008, it will be months, years perhaps, before the election’s impact will show up in the economy and financial markets. The Jobs and Growth Tax Relief Reconciliation Act of 2003 cut the maximum tax rate on dividends to 15 percent, with a rate as low as 5 percent for low-income payers. It also knocked down the rate for long-term capital gains to the same level and reduced the rate on the estate tax as well. US-based investors in Canadian income and royalty trusts have certainly enjoyed the benefit of the dividend tax cut, but the Bush tax cuts, including the Economic Growth and Tax Relief Reconciliation Act of 2001, aren’t likely to be extended as written. Sen. Clinton, relying upon an economic team that looks a lot like the one President Clinton put together during the 1990s, is likely to simply tweak the numbers. Although she voted against extending the tax cuts, including the lower tax on dividend income, candidate Clinton has been silent on the dividend and long-term capital gains reductions set to expire in 2008. She has suggested that the top two marginal rates lapse on schedule in 2010. Sen. Obama is opposed to extending the 2001 and 2003 tax cuts, and Sen. Edwards already announced plans to repeal the 2001 and 2003 tax cuts to help pay for his healthcare proposals. Rudolph Giuliani and Mitt Romney both advocate making the dividend tax cut permanent; doing so would obviously encourage investment in dividend-paying stocks. This doesn’t seem like a populist issue at first blush, but a Democratic candidate capable of articulating the relationship between a lower dividend tax rate for those making, say, less than USD200,000 and encouraging individual responsibility for providing for one’s retirement would pull many votes from the traditionally Republican-leaning investor class.
The Next Cut The US Federal Reserve sliced another 25 basis points off the fed funds rate Tuesday, taking it to 4.25 percent. It’s the third consecutive meeting the Federal Open Market Committee (FOMC) has cut rates. The FOMC also cut the discount rate, the interest rate banks are charged by their regional Federal Reserve Bank's lending facility, by 25 basis points. Excerpted : Maple Leaf Memo This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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