Expensive Stocks by Sector as of December 31, 2013The Financial Crisis Responsibility Fee; Insider Trading 2.0 3.0: Engage!

Representative Dave Camp (R – Michigan), Chairman of House Ways and Means, unveiled his tax-reform plan yesterday, and it includes 1) reducing the number of individual tax brackets from 7 to 3 (10%, 25% and 35%), 2) “income from some types of domestic manufacturing would only be taxed at 25%” (including farming and oil drilling), 3) raising the standard deduction to help simplify the tax filing experience, 4) increase the child tax credit, 5) reduce the mortgage interest deduction cap from $1mn to $500k, 6) eliminate state and local income tax deductions, 7) modify capital gains a bit (60% at ordinary rate, exclude other 40% from tax) 8) tax publicly traded private equity partnerships (excluding energy MLPs) at the corporate tax rate, and 9) introduce a new bank tax, “a quarterly tax of .035% on assets in excess of $500 billion” for the nation’s largest systemically important companies, mostly the big banks (JPMorgan, Bank of America, Citi, Wells, Goldman, Morgan Stanley etc.) but also companies like GE (and maybe Berkshire?).  This is the “Financial Crisis Responsibility Fee” Obama was talking about back in 2010.  Felix Salmon points out the difference, however, between the old Fee and the new one: “The Obama tax was on liabilities: it specifically excluded deposits…and it would have been levied on all financial institutions with more than $50 billion in assets.  It was set at 0.15%, and was designed to raise $90 billion over ten years.  The Camp tax, by contrast, is on assets, which means that deposits sort-of get taxed twice (first tax being FDIC insurance); but that means it can also be set much lower, and the size cap be raised much higher, while still raising the same amount of money.”  Really what it comes down to is a “too-big-to-fail” tax intended to provide incentive on the nation’s biggest banks/insurance/financial-hybrid companies to shrink a little bit (working?).  The general consensus is basically this: look at how courageous Dave Camp is being!  Also, this thing doesn’t stand a chance in Mitch-McConnell-Hell.  Meanwhile, no more “Insider Trading 2.0” for Wall Street: “eighteen brokerages…agreed to end their participation in analyst survey programs as a result of the New York Attorney General’s investigation into the early release of Wall Street analyst sentiment.”  Speaking of analysts, this should win the Oscar for “Best No-Strings-Attached Conversation Between A CEO And His Adoring Wall Street Analyst.”  Finally, in a rising interest rate environment, banks prefer losses they don’t have to talk about (i.e. “Held-To-Maturity” accounting magic).

Feeling Force Fed?  Try Value Stocks.

It may be a good idea to ask cheap stocks to a dance: “In the aftermath of last year’s market party, the most expensive quintile of global stocks now trades at 8.1 times book value, or almost four times higher than the global stock market as a whole…Meanwhile, the cheapest quintile sells at 0.9 times book value, a 57% discount to the market and around its historical average in both absolute and relative terms.  In the past, differences of this magnitude between the valuations of cheap and expensive stocks have heralded outsized value outperformance.”  Meanwhile, here’s 5 tech stocks (MSFT, GOOG, AAPL, ORCL and CSCO) and how they stack up in terms of cash and PE.  Also, James Montier of GMO says we’re in the midst of a “foie gras bubble”: “we’re all being force fed risk assets.  It’s an unpleasant experience, when you’re playing goose to the central bank’s farmer.”  Quite.  Also, here’s 10 Value investing blogs James Montier would just be crazy not to follow.

ARMH: The Unlikely Tale Of How ARM Came To Rule The World

All Silicon Valley tech companies start out of a garage, so the story goes.  Apparently British tech companies start out of “dark alleyways encrusted with bird poop” or something.  Anyways, this is a great story about how the embarrassingly successful lads at ARM have become the David to Intel’s Goliath.

Blog: Social Media Gaining Importance As Investment Tool

“This year, more than half of those surveyed said they investigated an issue after reading a blog, and more than one in four said they have made an investment decision based around a blog post.”

Bitcoin: Foundation Aided Prosecutor’s Probe of Mt. Gox

“Shortly after Mt. Gox’s chief executive officer, Mark Karpeles, quit [The Bitcoin Foundation]’s board on Feb. 24, the group briefed the Manhattan U.S. Attorney’s office with information about the possible theft of as much as $400 million from the Bitcoin exchange.”


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