Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Ride the Tiger with CD -- Ignore unavailable to you. Want to Upgrade?

To: Canuck Dave who wrote (119241)	6/19/2008 10:40:57 AM
From: E. Charters	Respond to of 313059

There is a combination of things going on obviously. I don't think anyone is saying that suddenly out of the blue came an army of traders who got a sudden light bulb in head idea due to what they alone perceived as an oversold market. What I recall was a sudden retreat of about 50 institutions due to their own margin calls due to something called paper evaporation commercial style. Something to do with homes. Panic in the market caused people to fly to cash as everyone feared everyone fearing the same thing and doing what people do about fear, flight, before they got a chance to. Atlanta Markets were burning. In that atmosphere the cool headed trader threw water on his face, glycerine in his eyes, belladonna drops on his pupils, ruffled his shirt, tore at his tie and went down the to bars with a wild eyed look crying "it's all over." (After putting in more sell order than he owned stock by a wide margin. Buying calls on the S&P just to be safe.) So we have both phenoms. Withdrawl of capital, retail flight, and shorting the resultant. If something is going down assuredly can you blame a trader for shorting? Blame him for "creative shorting".. hmmmm maybe should reg that a tad. But strangling the liquidity of the market is not such a good idea if the law makers get happy. They did that in 1967 and the market went dead for 8 years. Even Falconbridge could not raise money with all the new rules from Kidd Creek, and the capital gains tax-slap. Short sales by promoters and phantom stock has been with us since the stock market began. No doubt when Lief the lucky sold time sharing on his Sable Island Condominium on the Rejyavik Stock market (yes, he really did that!) some people pre-sold their shares to other people before they actually bought any. If I know Leif's sister, Freydis Kortforretning, I wouldn't put is past her. P.S. the model for the Ferengis on Star Blechh was the Norwegian people. Traders who would go nowhere except if there was a profit in it, and would skin their mother alive for a nickel was the known modus operandi of the Viking. If the Canuckistan Gov't wants to get their market going in a hurry all they have to do is reduce the PP level to 50K, amount required for qualification of a sophisticated investor to 150K per year or 1 million net worth, reduce capital gains taxable amount to 40% of gain on FT and 25% of gain on non-FT and make flow thru at say 120% deduction applicable to ALL stocks CDN, not just mining. Then charge the tax on flow thru only to the difference between buy and sell, instead of on the whole bag. And allow flow thru on investment or development on properties anywhere in the world. Allow foreign PP's, even on flow thru stock from qualified investors from anywhere. In 6 months the CDN stock market indexes would increase by 60%. The resulting cash flow influx from foreign investment would even out the tax losses perceived from the give back. Plenty of foreign investors want a hand in developing our mining, and they need a break with dual tax systems in order to invest. How would flow thru from foreigners work? On the capital gains, simple drop it to zero where it is spent on a CDN property (for foreigners). That is fair because they have to pay CG in their own countries. I estimate the cash flow resulting into CDN mining enterprise at about 6 billion a year, as long as it was allowed towards development. If half that was CDN and the stock doubled in value, the tax gain to the government would be on 1.2 billion. A net of 600 mill. I don't think they would be losing out. Add in the salaries of employees in the industry on that much development per year and they would be net positive on what they are collecting now in a depressed industry. It is obvious they would collect more if they allowed the mines to be built. That is not happening now. I would say with losing our 20 billion a year auto industry as it seems we are now, then we had better consider this sort of departure from the norm and consider it fast. I think Harper would have a hard time getting that done without a majority. The liberalis never got it when it came to taxes. They were always punitive, preferring the fat cat Ottawa syndrome and Civil Service Incorporated, business be damned. With no profits everywhere, I don't see how they figured business, especially small business were fat cats. The dividend picture just did not support that concept. The government skim of created wealth has to come down. If it exceeds 10% off the top it is far too high. Right now cap gains on FT stock is 15% off the top @ 30% TB. They give back on taxes say 30% if you are in that bracket and then a tax kick back or credit of 13.5% in Ontario with the fed credit (after tax on the tax). So 43.5% give back since the deduction is 100%. Cost of stock in real dollars is 56.5% of total price factoring in deductions and credits. If the stock goes up 50% they claw back 30% of half of 1.5 or 22.5% of the original sum you invested when they extract the CG pound of flesh. It is very near the heart of the matter. You make 48.5% after tax on your sum invested if you sell at a 50% gain. (0.7 X 1.5 + 0.435) It requires a 70% loss in stock price to break even on not investing even at 30% tax. 0.3 - (0.5 x 0.3 X .3) + 0.435 = 0.69 or you retain 70?% on a 70% loss! At a tax rate of 30% that is break even. If the stock does not go up, you sell at same price and pay a tax of 30% of 50% which is 15% of total price. So you gain 0.85 + 0.435 = 1.285 or 28%. That is after tax. It is not a good idea to RRSP or RESP flow thru as you pay tax on 100% if you take it out. You lose the CG effect of paying tax on 50% of the gain. Better to leave FT outside the tax havens. Flow thru is not a bad idea. It is really hard to lose money. 1.7 billion sold last year. They should expand it a bit and keep the legs under CDN mining such that domestic companies can get back into production and we don't have to sell our industry to foreign interests outright as we did with Stelco, Noranda, Inco and Falconbridge. Even if foreign money is technically behind it, it gets a good chance to make good, and CDN management such as it is can stay in place. We can pretend to own what we own. EC<:-}