April 12, 2010, 08:00 EST [img]http://www.joe-duarte.com/images/line_main_top_03.gif[/img] Dr. Joe Duarte's Market I.Q. [img]http://www.joe-duarte.com/images/line_main_top_05.gif[/img] [img]http://www.joe-duarte.com/images/line_main_top_07.gif[/img] [img]http://www.joe-duarte.com/images/000.gif[/img]
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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Taxes, Magic Mushrooms, And Cybercrime Are The Order Of The Day
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[img]http://www.joe-duarte.com/images/pic_04.gif[/img] What's Hot Today: U.S. stock index futures were pointing to a flat opening on Monday. International markets were mixed overnight. The dollar is wobbly and earnings season starts to get heavy today. That means that there are lots of reasons to be very careful in this market.
- 4-Week Bill Announcement 11:00 AM ET
- 3-Month Bill Auction 11:30 AM ET
- 6-Month Bill Auction 11:30 AM ET
- Treasury Budget 2:00 PM ET
Mexico: U.S. Consulate in Nuevo Laredo attacked. The situation in Mexico, with regard to U.S. diplomats and installations is deteriorating. According to The Wall Street Journal: 'Unknown attackers threw explosives into the U.S. consulate in Nuevo Laredo, Mexico, breaking windows and producing a disturbing blast but injuring no one, the consulate said Saturday night. The attack happened around 11 p.m. on Friday evening and involved a "device which landed in a patio and exploded," said Brian Quigley, the consular spokesman. "No employees were injured and nobody was there," he said. But he called the incident "a serious matter." The incident marks the second attack against consular employees in Mexico in as many months.'
Dollar could swoon on Eurozone bailout of Greece. It's early in the news cycle, but if the very early reaction is any sign of what lies ahead, the U.S. dollar could lose its recent exhalted position. According to The Wall Street Journal: "Euro-zone finance ministers agreed Sunday that if heavily indebted Greece were to get a bailout, it could receive as much as 30 billion in loans this year at about 5% interest from fellow euro nations.
The move puts Greece closer to a bailout as it heads into a week headlined by an auction of Greek treasury bills Tuesday. That is seen as a crucial test of whether Greece can still borrow from capital markets. If it can't, it would likely have to turn to the European Union package. The ministers didn't decide to give Greece the aid; that step would require the unanimous assent of euro-zone leaders. But they laid out terms�especially an interest rate�in an attempt to convince wary financial markets that the European Union does indeed have a plan in place."
Worst case scenario could be taxes above 70% for top earners says study. There's an attention grabber. It is theoretically possible that tax rates for U.S. citizens making over $209,000 could be above 70% in the future. According to The Wall Street Journal: "A January study by the nonpartisan Tax Policy Center provides the worst-case scenario. It found that to reduce the federal budget deficit to a sustainable 3% of gross domestic product, the government would have to find an average of about half a trillion dollars each year in new revenue (or spending cuts).
That's roughly how much the federal government spends now on the giant Medicare program." And, oh yes, there are some grizzly details for those folks who deem to try to be successful. According to The Journal, to cover the amount needed by tax increases alone would require "through tax increases on the top two brackets�roughly, families with more than $209,000 in taxable income�top rates would have to go from the current 33% and 35% to 72.4% and 76.8%."
If that happens, the best way to make a fortune as an American entrepeneur would be to become a one way ticket to anywhere travel agent. Prudent folks may want to get started on that travel agency certification; just in case, since so many unthinkable things have happened in the last year.
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[img]http://www.joe-duarte.com/images/pic_04.gif[/img] Taxes, Magic Mushrooms, And Cybercrime Are The Order Of The Day [img]http://www.joe-duarte.com/images/blok_rub_top.gif[/img]
Magic Mushrooms: If Only It Was That Easy To Have A Life Changing Event
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Tax reality, a return to psychodelia, and how the unemployed are preyed upon are setting the tone for what lies ahead as Americans get set to tackle an important election year.
In the U.S., 10% of the population pays 73% of the taxes. And although that holds up quite well with the tenets of Chaos theory and the 80/20 principle, it's still daunting. According to AP: "In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17, according to a separate analysis by the consulting firm Deloitte Tax."
In fact, tax cuts accross the board, for the upper wage earners, and most recently for the middle class have left the U.S. in a situation where "The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners -- households making an average of $366,400 in 2006 -- paid about 73 percent of the income taxes collected by the federal government."
Indeed, the U.S. tax system is already an income redistribution system where "The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment."
To be sure, it's not exactly a free ride as it seems based on those statistics. As it turns out "The vast majority of people who escape federal income taxes still pay other taxes, including federal payroll taxes that fund Social Security and Medicare, and excise taxes on gasoline, aviation, alcohol and cigarettes. Many also pay state or local taxes on sales, income and property." What is startling though, is the effect that the poor economy had on tax receipts. According to AP: "In 2007, about 38 percent of households paid no federal income tax, a figure that jumped to 49 percent in 2008, according to estimates by the Tax Policy Center."
But if you make $50,00 or less, you actuall make money from income taxes. And here's how, according to Deloitte and Touche: "The family was entitled to a standard deduction of $11,400 and four personal exemptions of $3,650 apiece, leaving a taxable income of $24,000. The federal income tax on $24,000 is $2,769. With two children younger than 17, the family qualified for two $1,000 child tax credits. Its Making Work Pay credit was $800 because the parents were married filing jointly. The $2,800 in credits exceeds the $2,769 in taxes, so the family makes a $31 profit from the federal income tax."
Psychodelics Return As Solution To Problems
New government funded research suggests that the use of psylocibin, the active ingredient in "magic mushrooms" could affect one's outlook on life to the point where people in dire straits could deal with their problems in a more constructive fashion.
According to The New York Times: "Scientists are taking a new look at hallucinogens, which became taboo among regulators after enthusiasts like Timothy Leary promoted them in the 1960s with the slogan �Turn on, tune in, drop out.� Now, using rigorous protocols and safeguards, scientists have won permission to study once again the drugs� potential for treating mental problems and illuminating the nature of consciousness."
To be sure, it sounds as if the wild and woolly 60's are back. And to a certain degree they are. Just look around, social causes are en vogue, protesters are in the streets, and there is an unpopular war being waged. Yet, some taking part in the "mushroom" study are saying it changed their lives. A retired psychologist who was depressed and anxious after undergoing treatment for kidney cancer, took the stuff, put on the headphones and had a life changing six hour experience.
According to the report, the experience helped him "overcome his depression and profoundly transforming his relationships with his daughter and friends. He ranks it among the most meaningful events of his life, which makes him a fairly typical member of a growing club of experimental subjects."
In fact, this week scientists who are studying psychodelics as a potential treatment for depression, and other forms of mental illness will be gathering in San Jose, California, to share their data.
The subjects describe the experience as one in which "described their egos and bodies vanishing as they felt part of some larger state of consciousness in which their personal worries and insecurities vanished. They found themselves reviewing past relationships with lovers and relatives with a new sense of empathy."
Maybe someone should spike the water supply in Congress with some of this stuff.
Credit Card Mule Schemes Target The Unemployed
If you're unemployed, don't worry, someone is out there waiting to take advantage of you by using your need for a job for their personal gain in a crime scheme.
According to The Wall Street Journal: "As U.S. job seekers grow more desperate, criminals are using the Internet to con participants into so-called mule operations." Here's how it works: "Cybercriminals post an ad on a job board. Successful job applicants are "hired" or asked to complete a trial project. Scam operators wire stolen money to the applicant's credit card and applicants are asked to purchase such goods as expensive electronics. The applicant ships the goods, often to Eastern Europe, where scam operators sell them. Applicants end up with neither a job nor a paycheck."
Citing data from law enforcement sources, the Journal reports that there may be "hundreds" of these schemes ongoing at the present time. The data is mystifying, even without the use of magic mushrooms. According to the report: "The number of active scams tracked by the leading Web site that monitors them, bobbear.co.uk, grew from 34 in December 2007 to 591 in December 2009. This Web site has become a leading source of data on mule schemes since it began tracking them in 2006 to draw the attention of authorities. U.S. law enforcement frequently turns to the site's proprietor, a private cyber-fraud investigator in the U.K., for data."
Increasingly, Americans are being targeted as the U.S. unemployment situation remains in a quagmire for many. Part of the scheme often includes the promise of a transfer of cash to the victim's credit card from the company. In a case highlighted by the Journal, the credit card transfer was made from a stolen credit card.
So the deal would have involved a stolen credit card being used to transfer stolen money to be used for fraudulent purchases, which would then transfer illegally purchased materials to the sellers. A no cost, low risk proposition for the perpetrator, with the credit card companies, the credit card companies, the retailers, and the mules left holding the bag.
Conclusion
Sometimes it's good to step away from the charts, the ticks, and the dollars and cents just to see what's out there, lurking, waiting to happen, or getting near biting you. Sometimes the next big thing becomes apparent. Sometimes you learn a thing or two.
Today's column may have given us a little of each.
For one, the U.S. tax code has run amok, and is likely to get worse. Talk of a value added tax (VAT) is picking up. Yet, the devil is in the details. That the 80/20 principle, otherwise known as Pareto's rule where the Universe is explained as one which 20% of the capacity does 80% of the work, applies, doesn't make it easy to swallow if you're in the 20% that's doing the work.
At some point, that won't work, and the system will reset. When it does, it won't be pretty.
A return to psychodelics may or may not provide the answer, but it could provide an escape of sorts. And it could also give doctors who won't get paid for seeing patients something else to do with their time. It could also give patients something to do with their time and an opportunity to forget the fact that their insurance won't cover the mushroom trips. In that case, everyone will have a life changing event.
Finally, the rise in victim related crimes seems to have taken a new twist, as the unemployed are now becoming major targets. So far, the winners seem to be the media, who report the wilder and crazier stories that are becoming the rule, not the exception these days.
Alas, we continue to search high and low for that emerging new trend that will lead us to the next bubble. It just ain't here yet, so we have to continue to grind out every little penny that we can by watching the charts, and following our investment rules.
What's worse is that even if you took a nice trip on your mushrooms, and your life was changed, you'd still be at the short end of the 80-20 principle, as your new found enlightenment would mean that you would shoulder the burdens of the unenlightened. How's that for unfair taxation, of your newly found psyche.
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[img]http://www.joe-duarte.com/images/pic_05.gif[/img] Market Moves Watching Procter & Gamble (NYSE: PG) For Signs Of Dollar Effect
Shares of Procter & Gamble (NYSE: PG) could benefit from a weaker dollar and the U.S. Dollar Bull Fund (NYSE: UUP) could suffer a setback.
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Chart Courtesy of StockCharts.com
The Eurozone has come up with a loan program for Greece. The Euro rallied overnight. That means that dollar bulls have to be on the lookout for a change in the trend of the greenback.
If you own UUP (Dr. Duarte owns shares in UUP), the next day or two could be critical. That's because the market will have likely had a look at all the loopholes and nuance hidden in the Eurozone plan. Also U.S. company earnings will have started to trickle out along with U.S. and Eurozone economic statistics.
If the news is bad for the dollar, not only should we expect UUP to fall, but also we should see companies that depend on exports based on a weak dollar to improve. That's where Procter & Gamble and other large multinationals come in, both as indicators and also as potential investments.
P & G has been stuck in a trading range for the last few weeks, as the dollar has strengthened. The stock is oversold, and poised for a bounce. That means that a move above 63-65 would likely be a sign that the market is expecting a weaker dollar.
A move below 23.50 for UUP, especially if combined with a rally in P & G would be a good reason to evaluate any long dollar positions.
