Archive for the ‘Stocks’ Category

Obama’s Proposed Capital Gains Tax Increase Would Kill the Economy

October 13, 2008

This is something that isn’t often talked about, but due to the current state of the economy, it’s important that this is brought up.

To understand what I’m about to say, you need to understand one principle about American economics: When the stock market suffers (or even only the Dow Jones for that matter), people panic, and the economy nose dives.  This is all a bi-product of people paying too much attention to the stock market (particularly The Dow).  I’m not saying that the stock market doesn’t have an actual impact on the economy, but it’s impact is artificially inflated by both the media as well as average citizens.

Now, on to Obama’s proposed increase in capital gains tax:

For those of you who don’t know what capital gains taxes (CGT) are, they’re taxes on non-inventory assets that are purchased and resold at a higher price (stocks, bonds, gold, etc…).  In America, any of these assets held for less than a year are taxed under the same bracket as income taxes, but anything held for over a year is taxed at 15% (unless the person selling the asset fits into the bottom 2 tax brackets (yearly income of $32,550 or less), in which case it ‘s 0%.  These taxes were lowered under bills proposed and signed into law by Presidents Clinton and Bush (one of the reasons that Cliton was President during such a prosperous time was his lowering of CGT).

Senator Obama wants to let these expire and then raise them.  The new tax would be 25% (and I believe 15% for people in the lowest 2 brackets, but I know that it’d be at least 8%).

Now, who pays this tax?  About 87% of the people who pay CGT make less than $100,000 a year (although I will note that there’s a correlation between lower income and paying less CGT, just because people with lower incomes tend not to have as many assets that are taxed under CGT), so this tax increase will hurt the middle class as well as the wealthy.

So, why will this tax increase hurt the economy?  Let’s say that you aren’t in the bottom 2 tax brackets, so right now if you sold your stock and made $1,000, you’d get to keep $850 of that.  If you sell that stock at the same value after Obama’s tax increase goes through, you’d get to keep $750 of that.  Who in there right mind would sell that stock after Obama gets his tax increase through?  The only way that would make sense is if you had a stock that was increasing in value quickly, and you could make up your losses to taxes by holding on to it for a couple more months (but there’s only a small percentage of stocks where this would be the case).

So what we’ll have is massive amounts of people selling their stocks right before Obama’s tax plan goes through.  And who wouldn’t do this?  You get to keep 10% more of your money.  You’d be insane not to sell it, unless you’ll hold on to it for another 4 years and hope the next President will lower the tax, but that’d be a pretty risky move.

So, you have a large amount of people selling stocks at the same time.  Now, do you remember what I said about America’s attention to the stock market?  What happens when everybody is trying to sell their stocks.  People aren’t buying.  The prices of stocks fall.  The media picks up on this, and so do the American people.  Stock prices begin plummeting, and this sends the whole economy into a downward spiral.

And this is why we cannot let Senator Obama win in November.  His CGT increase will ruin the economy for YEARS to come.  It amazes me that the media isn’t picking up on this, but it’s something that needs to be shared with the American people.

Done Ranting,

Ranting Republican
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The Dow Just Closed in Positive Territory

October 13, 2008

The Dow just closed, and after opening 350 points above it’s Friday close, it gained 936.42 points today.

Like I’ve said before, the Dow Jones is looked at too much by the media, but the fact that it rose today will increase morale on Wall Street and will encourage more healthy selling and buying.

Today was a good day for the American economy.

Done Reporting,

Ranting Republican
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The Dow Is Back in Positive Territory

October 10, 2008

The Dow Jones is up 55.19 points.  I said yesterday that the Dow really doesn’t matter in terms of other stocks, but it DOES matter in terms of morale.  And good morale will help the market, because it’ll encourage people to not just sell in a panic.  It’ll take some of the panic away, and that’ll in turn affect the market.  This is good news!

EDIT: That was short-lived.  It’s now dropped to -121.79.  Like I said before, the Dow really doesn’t matter, but when it falls like this, it hurts morale.  Either people need to learn not to care about it as much (which won’t happen), or it needs to go positive. 3:42 P.M. EDT

EDIT: It’s now back to +75.58.  My prediction is that it’ll close in the positive, but we’ll wait and see.  3:45 P.M. EDT

EDIT: It’s down to -72.40.  A few more minutes before 4:00.  3:56 P.M. EDT

EDIT: Well, it was looking like it might come back toward the end, but in the end, it closed down by 128.00.  4:11 P.M. EDT

Done Reporting,

Ranting Republican
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The Dow Really Isn’t As Important as the Media Makes It Seem

October 9, 2008

The media has been constantly keeping track of the Dow Jones Industrial Average (or The Dow as it’s most often called) and making it seem more important than it actually is.  Honestly, how many people even understand what the Dow Jones is?

It’s a stock index – an average (although it’s calculations are a little more complicated than just adding them up and dividing by how many stocks there are).  There are 30 companies in The Dow, and they are 30 companies that are considered to be the largest and most widely held public companies in the U.S.  The average is calculated by adding up the prices of the 30 stocks and then divided by a divisor (this keeps the average from being affected by stock splits, etc…).

So, when you think about it, The Dow could fall 1,000 points, but every other company could see their stock prices go up (now, this is unlikely, and the Dow Jones generally follows the trends of the overall market, but it’s important to note that people are overreacting to the Dow Jones falling).  America and the media are all in a panic because 30 companies’ stock prices went down.  Now, I’m not saying that The Dow is completely unimportant, but I think that we’re reacting way too much to what’s happened to The Dow – and the media HAS NOT helped at all.  They’re playing this up like if The Dow keeps falling, the entire market will fail (and it very well might, but it shouldn’t be just because people panic after seeing the Dow Jones fall).

If you own stock, just monitor that, and make decisions based on what THAT stock is doing.  Don’t worry about The Dow if your stock is doing fine.  The media needs to do a much better job of explaining these things instead of doing what they’re doing now and sending everybody into a panic.

Done Ranting,

Ranting Republican
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