• 15 Aug 2011 at 7:37 AM

Opening Bell: 08.15.11

Warren Buffett: Stop Coddling The Super Rich (NYT)
WB: “Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality. Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get. But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate. My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.”

SEC Reviews S&P Math, Possible Ratings Leak (Bloomberg)
The Securities and Exchange Commission is scrutinizing the method Standard & Poor’s used to cut the U.S.’s credit rating and whether the firm properly protected the confidential decision, according to a person with direct knowledge of the matter.

China: Debt Crisis Could Be Major Turning Point For US (CNBC)
“The worry is that China is going to take over and the West will collapse,” Dr Tim Stanley, a research fellow in American History at Royal Holloway College, told CNBC. “In the last 20 years, there has been a lot of talk along the lines of ‘China doesn’t play fair in world trade.’ That has evolved into ‘China owns the US.’”

Former Fed Economist: World Repeating Japan’s 1997 Mistake (Reuters)
The big mistake that Japan made then, said Richard Koo, was that its government was trying to reduce its budget deficit, while the private sector was still deleveraging — the same policies currently being pursued in the U.S., U.K., Spain and Portugal. “What we learned is that when the private sector is minimizing debt… you need governments to be in there, taking (this debt from) the private sector and putting (it) back into the income stream,” he said.

Bull kills its third man in 10 years during festival in eastern Spain (Guardian)
An inquiry was launched on Sunday after a 29-year-old man was gored to death by a bull during a festival in eastern Spain. The man, whose name was not released, died at a hospital in the town of Xativa on Saturday. A regional government official said an investigation into the goring had been opened. The 500 kilogram bull – named Ratón – has killed two other members of the public during festivals over 10 years. Because of the animal’s reputation, his owners reportedly earn €10,000 (£8,750) each time it appears at a festival. “He’s the one that gets the highest prices,” owner Gregorio de Jesus said of Ratón. “But still he works out the cheapest because wherever he goes organizers double the ticket price.”

Citigroup, Goldman Boost France Bank Ties (Bloomberg)
Citigroup, the third-biggest U.S. lender, boosted gross “cross-border outstandings” with French banks 40 percent to $15.7 billion from Jan. 1 through June 30, according to the company’s quarterly report. Goldman Sachs increased claims by 31 percent to $38.5 billion in the first half, its report shows. The filings don’t disclose collateral the banks received or hedges.

Bernie Madoff ditched by his wife of 52 years as she seeks reconciliation with son (DM)
According to Madoff’s biographer, Mrs Madoff has not visited her 73-year-old husband since their son Mark committed suicide in December. ‘Ruth has not seen Bernie since Mark’s suicide and I think the remnants of the family will now pull together,’ said Diana Henriques, author of ‘Bernie Madoff: The Wizard of Lies’. ‘Ruth visiting him in prison was a major impediment to her being reconciled with them,’ she told the Daily Express. The couple met at high school in New York and married in 1959. Mrs Madoff worked on Wall Street before joining her husband’s company and founding the Madoff Charitable Trust.

Sterling No Refuge As King Eyes Stimulus (Bloomberg)
Amid a background of rioting and looting across the nation, Chancellor of the Exchequer George Osborne said on Aug. 11 that the U.K.’s recovery will “take longer and be harder” and Bank of England Governor Mervyn King signaled a day earlier he may resume pumping cash into the economy to boost growth. Investors have responded to the worsening outlook by pulling money out of the country at the fastest rate in at least two decades.

Suit Alleges Favoritism By BNY Melon (WSJ)
Florida Attorney General Pamela Jo Bondi, in a state-court suit filed Thursday, said the $128.9 billion Florida Retirement System Trust Fund wasn’t one of the chosen clients. Instead, the fund was left in the dark and was charged improper and “hidden” costs…Virginia Attorney General Kenneth Cuccinelli II also sued BNY Mellon on Thursday and alleged a “false price” for about 73,000 currency trades. The two lawsuits were filed within 11 minutes of each other and come after Virginia and BNY Mellon failed to reach a settlement in a mediation session.

All That Glitters Is Not Gold (NYP)
Boiler-room hustlers are in the midst of a golden age — spinning their legendary sales scams by selling fool’s gold instead of their worthless penny stocks. A flurry of deceptive and downright fraudulent scams are cheat gold aficionados out of their cash as well as any promise of paper gains they’d expect while the precious metal makes headlines by skyrocketing to last week’s $1,801-an-ounce milestone. Instead of joining the party, however, many of the unsuspecting investors even get talked out of buying the ordinary gold bars or pure gold coins they covet — under false warnings that Uncle Sam can “confiscate and melt” them. Instead, they’re often suckered into purchasing decommissioned foreign coins laced with tiny portions of gold worth barely a third of what they pay for the coin.

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Comments (42)

  1. Posted by someguy | August 15, 2011 at 8:01 AM

    You know, Warren Buffet talks big about how his taxes are too low, but it’s funny how he never just writes a check to the U.S. Treasury for the amount he thinks he was undertaxed. Go ahead Warren, nothing’s stopping you.

    Of course, we all know if taxes went up, Buffet would dodge them, just like he does now. He’s just a shill for cronies in the Administration.

  2. Posted by Master of None | August 15, 2011 at 8:21 AM

    Oh Warren, you are such a masochist. And so controversial!

    Of course, this was a perfect opportunity to argue for a consumption tax (or VAT if you like) that would actually be a fairer way to address the inequalities in people’s standard of living. But did you do that? No, no you did not.

  3. Posted by Tuckhead | August 15, 2011 at 8:33 AM

    Raton is the NKI

  4. Posted by 25th Hour Trader | August 15, 2011 at 8:45 AM

    "…warnings that Uncle Sam can 'confiscate and melt' them."

    They can have my gold coins when they pry them from my cold dead hands.

    -Gold bug who no longer thinks this after finding out that the 10 coins he bought at $1,800 an ounce turned out to be nothing more than surprisingly tasty chocolate.

  5. Posted by VonSloneker | August 15, 2011 at 9:16 AM

    So tired of your act Warren…

    I'll support your proposal Warren, provided:

    (1) The tax would also levy a one time ad valorem tax on any charitable foundation (salary vehicles) you've created so your family will always have a place to pick up free money.

    (2) Any family limited partnerships, GRATs, SKINs or any other estate tax avoidance shell games you're playing are similarly taken apart and taxed.

    (3) Concentrated stock positions (e.g. BRK) valued at over $200 million will be subject to redistribution to the US Treasury Dept.

    …one of these days Warren is going to get his wish. To his chagrin he will not be dictating the terms of the redistribution of his wealth. If we can't reverse course quickly, the IRS will go further, faster and confiscate more than he can imagine.

  6. Posted by Guest CFA | August 15, 2011 at 9:40 AM

    I am done listening to WB on taxes until he announces he is not donating his estate to the Gates Foundation and has instead bequethed it to the US Govt. for debt reduction. Anyone is free to pay whatever taxes they want in excess of the statutory rates. Go ahead WB, your move. If this is such a good idea, see how many others follow.

  7. Posted by Eaton Beaver | August 15, 2011 at 9:41 AM

    In simple terms, Warren doesn't want to live in a United States that is run like Mexico.

  8. Posted by Guesttt | August 15, 2011 at 10:03 AM

    I'd like to see a Buffett/Ron Paul ticket.

  9. Posted by Stewie G | August 15, 2011 at 10:08 AM

    When the bull was asked for his motive in goring harmless individuals running alongside him seeking a cheap thrill, he responded "because it's fun, it gives me energy, and it's a great way to stay in shape."

  10. Posted by John Kerry | August 15, 2011 at 10:18 AM

    Boy am I glad Teresa's money is all in municipal bonds.

  11. Posted by Wealthy Bastard | August 15, 2011 at 10:32 AM

    If Congress would just pass tax laws to help me stay rich, that would be great. But do you know how much it costs these days to buy a Rep or a Senator?? It's outfuckinrageous!! I like those folks and they have great parties populated with "high pussy" ( a wink and a nod to a supermodel who reads these threads!) but someone has to do something about the high, rising cost of stopping tax assaults on my wealth!

  12. Posted by Intrigued | August 15, 2011 at 10:37 AM

    Tell me more about this voluntary tax system. I think you're really on to something! The budget will be balanced in no time!

  13. Posted by GuestGhost | August 15, 2011 at 10:41 AM

    It seems to me that since Sam Ro was given the pink slip, the good people at DB have been slow to get to the first post after Opening Bell.

  14. Posted by Ingrate | August 15, 2011 at 10:51 AM

    It seems to me you should kill yourself.

  15. Posted by Warren Gutter Buffet | August 15, 2011 at 10:51 AM

    Will you blow me where the pampers is?

  16. Posted by merkin capital ptnrs | August 15, 2011 at 11:06 AM

    It's merkin bitch, and I'm back.

  17. Posted by Justin | August 15, 2011 at 11:28 AM

    Hey Warren,
    Your idea is all fine and good for now, but what happens when the middle class is making those wages due to inflation and then are socked with that much higher tax rate.

    After all the Alternative Minimum Tax was intended to only be for the rich when it was first passed.

  18. Posted by Justin | August 15, 2011 at 11:31 AM

    Was he red? Did he have wings?

  19. Posted by Justin | August 15, 2011 at 11:32 AM

    Hi Sam

  20. Posted by ohplease | August 15, 2011 at 11:56 AM

    Don't even know where to begin with your logical fallacies. Go back to Forbes.com

  21. Posted by Guestbox | August 15, 2011 at 12:00 PM

    Ron Paul/Tyler Durden ticket FTW!
    (clarification: Tyler Durden from the book/movie, not the financial blogger)

  22. Posted by Tommy Townsend | August 15, 2011 at 12:24 PM

    I submit the alt min tax could be significantly reworked: include progressive tax rates on long term capital gains and qualifying dividends for a start.

  23. Posted by Guest | August 15, 2011 at 12:27 PM

    Yeah, right. All it takes is one guy to life our country from this hellhole we are in.

    Even if WB did it, would you follow? Moron.

  24. Posted by Justin | August 15, 2011 at 12:36 PM

    The entire tax code could be reworked, but that's not the issue.

    The point is that inflation turned it in to middle class tax even though it was ORIGINALLY intended to make rich people "pay their fair share".

    The same thing will happen to WB's proposal long after he's dead and doesn't have to deal with it.

  25. Posted by PermaGuestII | August 15, 2011 at 12:37 PM

    What's the logical fallacy behind saying we should eliminate tax shelters?

  26. Posted by Guest CFA | August 15, 2011 at 12:38 PM

    You're obviously an idiot who doesn't understand simple English. I wrote you are free to pay whatever taxes you want "in excess of the statutory rates".

    So, I'll help you. 'Excess' means the amount by which one thing is greater than the other. 'Statutory rates' means the rates which are required by law. So, I was saying you are free to pay any amount you want that is more than (i.e.: is in excess) of that amount which is required (i.e.: the statutory rate).

    If you are interested in more information on this system that's already in place, go to: http://www.treasurydirect.gov/govt/resources/faq/

    Please feel free to send them as much of your money as possible. Be sure to report back how much you sent them and what % of your total net worth that was.

  27. Posted by Dick Fuld | August 15, 2011 at 2:06 PM

    This fcking guy!? Like we should take him seriously. C'mon!

  28. Posted by VonSloneker | August 15, 2011 at 2:48 PM

    Apparently you begin with an "appeal to authority." First look up "irony" then go find out what an appeal to authority is.

    -Rhetor Butler

  29. Posted by VonSloneker | August 15, 2011 at 2:57 PM

    +10 Since I can only click +1

    Buffetology: a tax rate enforced caste system, administered by the government.

  30. Posted by Intrigued | August 15, 2011 at 3:54 PM

    Hey Guest CFA! Thanks for the link. Forgive me; I guess WB isn't talking about raising the "statutory rates". I don't understand English so, I'll take your word for it. It seems to me that you may be deflecting here by suggesting that the treasury accepting "excess" taxes somehow invalidates anyone suggesting that they and others should be taxed at a higher rate. Since the Treasury started accepting these 'contributions' in 1961, all of $81.7 million has come in. That, unfortunately, is not going to get our fiscal house in order.
    http://www.washingtonpost.com/business/economy/sh

    -Guy who thinks Tax and Spend is more responsible than Borrow and Spend

    p.s. sorry about your little pink one bro.

  31. Posted by guestalicious | August 15, 2011 at 4:11 PM

    what's the point of having a billionaire dad if he gives it all to that friggin dweeb Gates??

    – Becky Quick's love child

  32. Posted by Rain_Maker | August 15, 2011 at 4:36 PM

    I love how all you finance bros get your lacrosse shorts in a bunch when a multi-billionaire comes up with the novel idea of paying the same tax rate as his secretary. I mean is that really too much to ask for?

  33. Posted by Rain_Maker | August 15, 2011 at 4:40 PM

    You are also free to shove horse feces in your mouth. That doesn't mean it will help. One person paying excess taxes will not help. A mandate for everyone to pay more taxes will.

    Don't get your lacrosse shorts in a bunch.

  34. Posted by PermaGuestII | August 15, 2011 at 5:42 PM

    Because 99 times out of 100, the guy with a billion in the bank will rent a platoon of lawyers and accountants to ensure that he will not pay higher taxes no matter what, even if it means he has to declare residency in the Republic of Bashkortostan. The guy who actually winds up *paying* the tax is the guy making $200k/yr– which in New York, at least, when you figure in taxes, rent/mortgage, food, etc. is going to leave you with *maybe* an extra $1-2k/month: probably less depending on whether you have kids. Enough for a comfortable middle-class life? Sure– but hardly wealth beyond dreams of avarice, and not enough margin that an extra $700-800/month in taxes ((5% * $200k)/12) isn't going to be a meaningful bite.

    Also- why not the other way 'round? What if the secretary paid the same 17% rate as the billionaire?

  35. Posted by Rain_Maker | August 15, 2011 at 6:02 PM

    BECAUSE 99/100 the guy will try to get out of paying taxes??? That's why the tax rate for the wealthy is so low??? Do you know how ridiculous that rationale sounds? Are we that lazy, that we won't bring taxes up to where they need to be, because people may try to get around them? So we don't even try?

    Believe me, I agree that living on a few hundred thousand in NYC is not as easy as it sounds. So why not just at least start with people making 500k or 1mil/year? Really anything right now to close this deficit.

    We can't balance the budget on cuts alone. First we cut taxes for the richest Americans. Then we invaded the wrong country. Then we paid the price for financial regulatory indiscipline. Something has to give.

  36. Posted by Einstein | August 15, 2011 at 6:12 PM

    As if we needed further proof in the validity of MBA >>> CFA.

  37. Posted by Einstein | August 15, 2011 at 6:16 PM

    Check your tax calculation again, UBS.

    Hint: tax rates are marginal

    – dude who expects DB readers to be able to compute basic tax calculations

  38. Posted by Rain_Maker | August 15, 2011 at 7:42 PM

    I'd trust Bill and Melinda Gates before I'd trust the US Government with money.

  39. Posted by PermaGuestII | August 15, 2011 at 8:22 PM

    Thanks for the hint. At what point in the above did I specify an actual tax bracket? Or are you telling me that $10,000/12 does not equal $833.33?

    -Dude who thought tax accountants too boring to read DB

    PS: Aren't you dead?

  40. Posted by Guest CFA | August 15, 2011 at 9:24 PM

    That's exactly my point. If WB would donate, say $50 billion (they accept stock too!!), that would be over 500x what they've collected in 50 years. Everyone else that thinks that's a great idea can do the same and those of us who don't can keep our money and still pay our statutory taxes.

    You don't have to have Congress force you to pay more. Unlike so many requests of government, this actually doesn't involve an Act of Congress–just a check and a stamp. Paying more money into an inefficient, bloated bureaucracy doesn't sound like a great solution to me because all they will do is spend it on other inefficient, bloated programs. At least the voluntary program has the benefit of directly paying down debt. There is no assurance higher taxes would lead to either (a) more revenue or (b) lower debt (as opposed to more spending).

    -Guest with an MBA and CFA who thinks forcing Washington into spending way, way less and leaving rates alone is even more responsible

    p.s. don't forget to tell us how much you send.

  41. Posted by 100wattWarlock | August 15, 2011 at 10:20 PM

    All you lucky bastards!

    -guy who files his taxes down-under and pays an average 40% in income tax every year

  42. Posted by PermaGuestII | August 16, 2011 at 9:52 AM

    I was replying to your implied q as to why people get upset when billionaires talk about raising taxes– it's because they believe (rightly or wrongly) that somehow, someway the govt will wind up screwing them instead of the ultra-rich.

    Personally, by the way, I do think it ridiculous that WB pays 17% in taxes– but since the top tax bracket is 36% I assume he's reduced his tax rate by either a) collecting only dividends instead of salary or b) employing a host of completely legal tax dodges to shelter income.

    IMHO the best– and most fair– thing to do would be to throw out the tax code and start over w a flat (or flattened) deductionless code a la Bowles-Simpson…