Former IBM CEO Lou Gerstner is not making any new friends on trading desks. Gerstner bemoans Wall St.'s focus on short term trading rewards but goes one step further and offers a modest proposal to solve the problem. In his utopia, day traders would pay an 80% tax on gains, individuals holding investments for 6 months would pay a paltry 60%, and for those willing to hold on for 5 years, you'd pay nothing (presumably to match the gain).
Gerstner Says Short-Term Gains Should Be Taxed at 80% [Bloomberg]
Posted by guest , Jun 25, 2009 9:43AM
Cool. What a great way to send investment overseas!
Posted by guest , Jun 25, 2009 9:44AM
I agree with him (not completely).They should tax anyone who trades stocks within 5 seconds (high frequency scalpers) at 80%!
Posted by guest , Jun 25, 2009 9:48AM
2- there goes 60% of the liquidity out there
Posted by guest , Jun 25, 2009 9:50AM
Moron. He would be increasing the risk faced by investors, thereby raising his own cost of capital for firms. Clearly working at the Carlyle Group has sharpened his financial acumen. Tell him to go sell populism somewhere else; we're all stocked up here.
Posted by guest , Jun 25, 2009 9:50AM
@3
So you are saying there was no liquidity 10 years ago?
Posted by guest , Jun 25, 2009 9:51AM
I would respond to @2 will a choice expletive but I am daytrading AAPL right now and...FUCK!!...Godammit!!!....OK now it's going the right way and..FUCK!!...FUCKING Speed funds....BASTARDS.....ok...now it's going the right way and FUCK.....dammit!!!!!!...what is wrong with people????? This thing should be going straight....FUCK!!!!....dammit!!!! Bastards!!!
~Day Trader
Posted by guest , Jun 25, 2009 9:51AM
that would totally destroy tim sykes' business model.
Posted by guest , Jun 25, 2009 9:51AM
Why not extend that to the rest of Corporate America? If you make a product and hold it in inventory for less than six months you pay 80% of the margin to Uncle Sam. Bye-Bye Deficit!
Posted by guest , Jun 25, 2009 9:52AM
@5
So you are saying there was an 80% tax 10 years ago?
Posted by guest , Jun 25, 2009 9:54AM
@5 good point, but most of these morons were in college ten years ago
Posted by guest , Jun 25, 2009 9:54AM
@8 for the win!
Posted by guest , Jun 25, 2009 9:54AM
Yes, and CEO's only get a bonus once every 5 years. What a D-bag...
Posted by guest , Jun 25, 2009 9:56AM
just a cheap parlor trick aimed at offsetting poor business practices and inflating company values
Posted by guest , Jun 25, 2009 9:57AM
How about this...any investment made using borrowed money should be taxed at 80%....after all, it's leverage that got us into this mess. cough.. cough..Carlyle Capital Group..cough...cough
Posted by guest , Jun 25, 2009 9:57AM
It would do more for the economy if we just term limited elected Congress to no more than 12 years in office and prohibited tax cheats from serving in a cabinet level position.
Posted by guest , Jun 25, 2009 10:00AM
It seems that hedge fund investors (you know, the real sophisticates) have no problem with lock-ups. Well, that is until the returns turn negative.
I think lock-ups are a good idea. Like 30-year lock-ups. And to promote universal equity ownership, I'm proposing that Congress create a Federal National Investment Corporation (Frankie Iris), chartered to purchase margin loans originated to enable all Americans to own equities.
Posted by guest , Jun 25, 2009 10:01AM
Why can't we just do what Benjamin Dover proposed and ban selling stocks altogether? Then liquidity would be a moot point.
Posted by guest , Jun 25, 2009 10:01AM
GM - I admit it is not worth much as I am very easily entertained - but your dry "(presumably to match the gain)" generated a COL (that is a chuckle-out-loud).
this is progress... progress is good.
well done.
Posted by guest , Jun 25, 2009 10:02AM
GM - I admit it is not worth much as I am very easily entertained - but your dry "(presumably to match the gain)" generated a COL (that is a chuckle-out-loud).
this is progress... progress is good.
well done.
Posted by guest , Jun 25, 2009 10:02AM
I agree. Lets do this too.
If you show up for work at burger king at 8 am and work for 4 hours @ $7/hour the $28 that you earned should be taxed at 80%. I
Posted by guest , Jun 25, 2009 10:06AM
5- I am saying there was way less. Look at the volumes from 10 years ago vs today.
Posted by guest , Jun 25, 2009 10:08AM
@15 FTmotherfuckingW
Posted by guest , Jun 25, 2009 10:11AM
Congrats Greg! 23 comments so far and no insults.
Posted by guest , Jun 25, 2009 10:11AM
Day trading is largely a zero sum gain. Would he then make losses 80% deductible? I suppose what he's getting at here is that short term trading means that shares are changing hands at less than intrinsic value. So be it, I say. If that is in fact true, it creates an opportunity that can be exploited, even by a long term holder (by managing their entry point).
Posted by guest , Jun 25, 2009 10:12AM
I fucking hate day traders.
Posted by guest , Jun 25, 2009 10:12AM
@7: that's good enough for me. Let's do it.
Posted by guest , Jun 25, 2009 10:13AM
I had the misfortune of sitting through a speech of his at the Carlyle investor conference a few years back. Never seen anyone pat himself on the back more than this guy. What a dick.
Posted by guest , Jun 25, 2009 10:14AM
What about just make Goldman Sachs pay tax. Not a special tax. Just the normal ones they avoid.
And kill Rubin (just for fun. No reason).
Posted by guest , Jun 25, 2009 10:20AM
@15&22....HAHAHHAHAHAHHAHA! Take a breath, HAHAHHAHAHHAHAHHAHAHHAHH!!!
Posted by guest , Jun 25, 2009 10:23AM
@27: Greg, or Gerstner?
Posted by guest , Jun 25, 2009 10:25AM
@Greg
I have no problem with this post. Congratulations.
Posted by guest , Jun 25, 2009 10:26AM
Keep it up Greg. Deleting comments won't make your writing any better.
Mom
Posted by guest , Jun 25, 2009 10:34AM
Seize the means of production!
Posted by guest , Jun 25, 2009 10:37AM
@15 FTW
Posted by guest , Jun 25, 2009 10:41AM
Please remind me what exactly would this accomplish? How about not paying a bonus until a trade is closed? Also, I believe the business model is broker/dealer not buyer/keeper.
Posted by guest , Jun 25, 2009 11:15AM
This guy is such a moron. I'm assuming he still wants a low cost of capital and for market makers to take the risk of making markets in his shit stock to make that happen. A guy too stupid to understand the connection between liquidity provided by people making markets (which, in effect, is what "day traders" do) and his company's ability to raise capital more cheaply is too dumb to be a CEO and should have all his comp clawed back.
Posted by guest , Jun 25, 2009 11:16AM
the best ideas come from those who have already made their money
Posted by guest , Jun 25, 2009 11:20AM
how can someone so stupid have been so powerfu...wait nevermind
Posted by guest , Jun 25, 2009 11:36AM
old idea.
http://en.wikipedia.org/wiki/Tobin_tax
Posted by guest , Jun 25, 2009 11:56AM
Let's at least get rid of that ridiculous 17% commodity trader profit tax that Rostenkowski rammed through in the 80's. The Burger King guy should at least not get taxed higher than those meatheads.
Posted by guest , Jun 25, 2009 11:58AM
Let's at least get rid of that ridiculous 17% commodity trader profit tax that Rostenkowski rammed through in the 80's. The Burger King guy should at least not get taxed higher than those meatheads.
Posted by guest , Jun 25, 2009 12:09PM
This is sort of akin to those labor laws in France that severely restrict firing people. It works--workers are rarely fired.
No one will take the risk to lock in a hire though.
Posted by KevinB , Jun 25, 2009 1:39PM
Well, up here in Canada (you remember us? the country with no banking crisis, no mortgage crisis, etc? All our current problems are a direct result of your economic implosion..but I digress), if you trade frequently with holding periods measured in milliseconds instead of months, your net profits (you get to deduct losses and commissions) are considered "ordinary income" and are taxed at regular rates. On the other hand, if you hold stocks a reasonable amount of time, and don't trade so often that you are considered a trader or dealer, any net gains are considered "capital gains", and they are included in your income at 50% of the gain.
In other words, if you hold a stock for a year, sell it for a $10,000 gain, you only add $5,000 to your taxable income for the year. At the top 43% rate, you pay $2,150 in tax, for an effective rate of 21.5%. Not exactly Gerstner's proposal, but it seems to work.
As for all the douchebags saying that this would eliminate liquidity - I've been active in markets for 25 years. I never had a problem making a trade in any listed stock in the 1980's, and unless it was an odd-lot, it was filled in less than a minute. So bend over and kiss your ignorant behinds.
Posted by guest , Jun 25, 2009 4:33PM
@43
In the US capital gains (1yr hold +) is taxed at 15%. Short term (less than one year) [net]gains are taxed at your income level (i.e. 35% for top bracket). Thus, there is an even larger incentive to hold in the US than Canada.
Posted by guest , Jun 26, 2009 1:57AM
@41
Who are you calling a meathead, chowderhead?
-Guy who would run intellectual laps around you
Posted by KevinB , Jun 26, 2009 5:05AM
@44 - Thanks for the info. I don't claim to be a US tax law maven!
But if this is true, WTF is Gerstner on about? Punitive taxation on very short term gains seems pretty stupid. I can understand an incentive for people to hold their stocks for a reasonable period of time, but if J6P wants to take on the quants of Wall Street with his PC and some questionable tracking software, I can't see punishing him for the one time in a hundred he gets it right.