ERICOPOLY

Mr Ryan claims to have run a 2:50 marathon. http://news.runnersworld.com/2012/08/31/paul-ryan-says-hes-run-sub-300-marathon/

You can't run the government the way Buffett manages Berkshire. Buffett uses the labor pool as something to be hired and fired as customer demand rises and falls. Implicitly there is a cost to taking care of these people throughout their working lives, and he treats them as people who only needs income when he needs their work. I'm not trying to be hard on Buffett, but that's generally how corporations work and his takes part in this to varying degrees. His system only works if government is there to take care of these people while they are sitting on the bench waiting to get back into the game. Perhaps that is why he is a Democrat. He recognizes that it's not just pennies from heaven.

Here is a simplification plan that I would support: 1) Increase the standard deduction for those earning less than $200k such that it offsets the loss of itemized deductions for that income group as a whole. This ought to boost demand and therefore stimulate the economy because it redistributes the money among everyone earning less than $200k. 2) Eliminate the itemized deductions for everyone. As for the relative loss of revenue in my plan vs Romney's plan: 3) Don't raise it on the demand side!

The Reagan tax cuts were dynamite because for years the purchasing power of the middle class had declined as a result of stagnant tax brackets and rapid inflation. By merely moving the tax brackets, it was a sudden relative jolt in after-tax income for the middle class. They went out and spent it which led to a boom in consumption, thus output/hiring rose to meet this demand, and ever since the Republicans have been saying that "tax cuts on investment lead to booms... just look at Reagan". Oh, and they can say that because Reagan also lowered taxes on investment. So there's room for them to misattributed middle class tax cut economic growth as coming from tax cuts on investment. This was a convenient excuse for cutting investment tax to 15% under GWBush -- not much firepower was delivered to the middle class consumers, but just to the investors. So personally I'd be expecting Romney to have learned from all of that. But no, http://www.csmonitor.com/Business/Tax-VOX/2012/0830/Romney-plan-would-cut-taxes-for-the-rich-Romney-adviser-confirms It looks like he plans to raise taxes on people earning between $100k and $200k, and paying for it by cutting taxes on people making more than $200k. I fear that by raising taxes on the many and paying for it by cutting taxes for the few, we'll wind up with less economic activity as a large number of people have less in their after-tax pay. Romney has clearly stated that this will not happen. Most of the analysts who have come up with this conclusion have done so by making incorrect assumptions (Brookings I believe). The percentage of taxes paid by the rich will not decline. Tax rates will. Liability will not due to elimination of deductions. It is really a simplification plan. It is highly unlikely that the party of tax cuts is going to suddenly stick it to a major income group. Romney's proposed elimination of itemized deductions raises taxes on those earning between $100k and $200k. Perhaps they aren't the party of tax cuts after all.

The demand side is almost by definition underfunded when there is large unemployment. To me the US (courtesy of large unemployment) looks to have an underfunded demand side, whereas Japan doesn't (they have low unemployment). Japan doesn't look forward to demand side growth by getting people back to work. The worst rate they've hit is 5% unemployment. When every household still has a relatively normal income and yet they're still sliding downhill... wow. Demand side tapped out and yet still no growth. The US at least looks forward to the possibility of unemployment coming down -- there is untapped potential demand side gains there. Plus the population is still growing as Sanjeev mentions.

The payroll tax cut was a case of Obama saying it's better for the individuals to spend the money. Same goes for extension of unemployment benefits. Tax cuts on people who already are saving a huge chunk of their income won't encourage them to spend anything. See my comments earlier on the Reagan and Kennedy tax cuts that had a huge demand side component, whereas Romney wants to raise taxes on the demand side. But raising on the demand side in order to balance cuts on the supply side will just lead Buffett to say this: "Well, I have more money but my customers have less. I'm going to cut production instead of raising production, because I fear that when the customers have less they'll purchase less". It's crazy to raise taxes on the demand side just to hold supply side tax cuts in place.

I've never seen anyone take a stab at defining the rate at which we should be growing at this point in the recovery. Normally the people who I hear making your comment are people like Mitt Romney himself, in other words people who are inaccessible to me. However you are accessible so you get the question. What rate of growth do you use as what it "should be", and what is your method of determining this rate? To me it seems such a difficult task, as we've got historical comparisons to Japan yet they had the rest of the world growing to help drag them along. Or we've had the numerous comparisons to past recessions, but they all had different contexts as well.

Are you seriously quoting Denninger? I recommend you actually watch the TARP debate video on his site and see what Ryan and Boehner and other republicans were saying. They explicitly stated their objection to the bill but the need to pass it to avert a disaster. Congress passed TARP , Obamas incoming government deployed it... Now if we could just get a group photo of everyone who was holding their nose while agreeing that TARP was necessary to avert a disaster... Wow, that would probably be everyone who voted for it.

Bought some as well, today. Do you see anything interesting with the options, ERICOPOLY? No, I just own some common.

I already pointed out that the Kennedy tax cut was aimed at the demand side. (unlike the Romney proposal) As for the Clinton cap gains tax cut of 1997... (note the timing of the cuts relative to the largest bubble ever in the stock market, and how the bubble was growing in hyperdrive) well, what have we learned about the spending habits of Americans when their assets are in a sky high bubble and they feel rich from the easy wealth? I'm talking about the mother of all stock bubbles -- that huge stock bubble that grew like a beast in the late 1990s and made people giddy and spend freely as if the good times would last forever... Nah, that wouldn't be relevant, never mind :D

I jokingly called it "The Talibanization of America" to my wife, but then later we were watching Bill Maher and he called Rick Perry's home schooling a "Christian Madrassa". So I guess a lot of people are noticing it too!

"The Revenue Act of 1964 was aimed at the demand, rather than the supply, side of the economy," said Arthur Okun, one of Kennedy's economic advisers. http://www.slate.com/articles/news_and_politics/history_lesson/2004/01/tax_cuts_in_camelot.html This distinction, taught in Economics 101, seldom makes it into the Washington sound-bite wars. A demand-side cut rests on the Keynesian theory that public consumption spurs economic activity When Kennedy ran for president in 1960 amid a sluggish economy, he vowed to "get the country moving again." After his election, his advisers, led by chief economist Walter Heller, urged a classically Keynesian solution: running a deficit to stimulate growth. (The $10 billion deficit Heller recommended, bold at the time, seems laughably small by today's standards.) In Keynesian theory, a tax cut aimed at consumers would have a "multiplier" effect, since each dollar that a taxpayer spent would go to another taxpayer, who would in effect spend it again—meaning the deficit would be short-lived. At first Kennedy balked at Heller's Keynesianism. He even proposed a balanced budget in his first State of the Union address. But Heller and his team won over the president. By mid-1962 Kennedy had seen the Keynesian light, and in January 1963 he declared that "the enactment this year of tax reduction and tax reform overshadows all other domestic issues in this Congress." The plan Kennedy's team drafted had many elements, including the closing of loopholes (the "tax reform" Kennedy spoke of).Ultimately, in the form that Lyndon Johnson signed into law, it reduced tax withholding rates, initiated a new standard deduction, and boosted the top deduction for child care expenses, among other provisions. It did lower the top tax bracket significantly, although from a vastly higher starting point than anything we've seen in recent years: 91 percent on marginal income greater than $400,000. And he cut it only to 70 percent, hardly the mark of a future Club for Growth member.

I've heard Buffett say many times (with a large cash pile) that what ultimately drives him to invest is final demand. Like, for example, you don't add manufacturing capacity if you can't find consumers for your existing output. He's stated time and again that cutting his taxes won't make him invest -- he will only invest if somebody is there to actually buy the final product. This makes perfect sense to me. However it sounds like Romney's plan isn't going to address final demand -- raising taxes on the $100k-$200k range of people isn't going to get Buffett to invest when it leads to less consumption. Or is there a theory that it would actually lead to more consumption because when the ultra-high income people have yet even more money to save it boosts consumption? I don't see how Romney's plan is going to create consumer spending growth with this approach. And if consumer spending growth isn't the goal in order to get businesses hiring again, then what will?

The Reagan tax cuts were dynamite because for years the purchasing power of the middle class had declined as a result of stagnant tax brackets and rapid inflation. By merely moving the tax brackets, it was a sudden relative jolt in after-tax income for the middle class. They went out and spent it which led to a boom in consumption, thus output/hiring rose to meet this demand, and ever since the Republicans have been saying that "tax cuts on investment lead to booms... just look at Reagan". Oh, and they can say that because Reagan also lowered taxes on investment. So there's room for them to misattributed middle class tax cut economic growth as coming from tax cuts on investment. This was a convenient excuse for cutting investment tax to 15% under GWBush -- not much firepower was delivered to the middle class consumers, but just to the investors. So personally I'd be expecting Romney to have learned from all of that. But no, http://www.csmonitor.com/Business/Tax-VOX/2012/0830/Romney-plan-would-cut-taxes-for-the-rich-Romney-adviser-confirms It looks like he plans to raise taxes on people earning between $100k and $200k, and paying for it by cutting taxes on people making more than $200k. I fear that by raising taxes on the many and paying for it by cutting taxes for the few, we'll wind up with less economic activity as a large number of people have less in their after-tax pay.

The shrinking business is their PC business -- so you must be talking about the PC business. These past few years since Michael Dell came back... have they been spending the money on: a) their PC business b) growing a new non-PC business model c) returning cash to shareholders d) b and c My answer is "d". Do you disagree with my answer?

The worries over whether or not Apple will replace Dell in corporate notebooks is really not my worry. My worry is whether Microsoft itself will replace Dell. The Microsoft Surface tablet is what I would purchase myself, and it's what I would choose if I were an IT guy rolling out Windows 8 tablets in a corporation. I don't want all that crap that DELL loads on top of Windows. It all detracts from the reliability and performance of the system. For corporations it just means more software to support and more reliability complaints.

You can sum the non-GAAP earnings since DELL stock bottomed in Q1 2009, discount them by 50%, add them to the 2009 stock low, and that's about where the price of the stock is today. I bought some today/yesterday on the basis that it's really cheap relative to non-GAAP earnings, balance sheet is strong, management is good, it looks to be growing, they return enough to shareholders to meet my cash needs while I wait, and it seems to trade at least as high as $16 every year, including this year where it was briefly above $18.

I am realizing that the investment management field is one where you don't really need to know too much about company analysis. You simply need to know who the best stock pickers are, track their portfolios, and buy their components on big dips. Then you can paper over your incompetence by writing letters that just discuss macroeconomics, which is easy since that too is information that you can just glean from talking heads. I'm not commenting on whether this particular manager is good or bad. I'm just saying... this letter gave me absolutely no information about the manager's ability to evaluate companies, but it sure sounded good when he talked about the economy. So the epiphany is that if one can get away with that... well then I suppose there is room for traders who act like they do research but really don't -- how would anyone suspect from letters like this?

It would be better for investors to set up some sort of mandatory tender facility, where investors are compelled submit stock pro rata to some pre-set aggregrate $ amount. The company would then immediately effect a stock split, so that each investor holds the same number of shares as before. You get a "dividend", but only pay tax on the gain. I like the sound of that. There would be cases where you could be taking a tax loss along with your dividend! This would be the case where you are tendering your shares below your cost basis.

If the general population is anything like me I have a hard time selling stock. Its easy for me to buy but very difficult to sale; especially those companies that have good moat behind it even when I know the company is selling tremendously above intrinsic value. Also, IMO there are times when buybacks are not a good idea when the stock is trading higher than IV. I wouldn't be complaining too hard if management paid me more than IV for my shares. It would work to my benefit. Really there are far worse things, like for example expensive acquisitions where I can't find anything positive to my benefit.

Government Forces Bailed-out Banks to Get BIGGER! Fed reasons Bank of America just isn't big enough and taxpayers will be imperiled if this TBTF bank isn't forced to have an even larger balance sheet! Oh, and by the way we also believe in ending too big to fail! That's the implicit message if a 9% fully-phased-in Basel III bank can't return 100% of earnings.

Take somebody who works for a living. Let's say their employer tells them one day that there won't be a regular paycheck anymore, and instead they are told that there will be "special paychecks" every once in a while, but that the next one could be years away. The employee is reassured that the special future paychecks will be significantly more valuable in real dollar terms. Importantly, the employer is retaining those paychecks and investing them in publicly traded securities. The employee is like... "well why don't you just give me the cash so that I can buy bread at the store, or alternately I can just invest it in those exact same publicly traded securities?" Unfortunately the investor population at large hasn't realized that they could just sell an offsetting number of shares in order to generate a lower-taxed dividend, so instead we have to accomodate them and pay some sort of regular dividend.

Based on the Fed's past language, they will only let them return what they expect in earnings, minus some money set aside for building capital ratios. So basically they won't allow the banks to get weaker (bias towards getting stronger), and will only object to returning all projected earnings if there is more work to be done. I don't know how they agree on what "projected earnings" will be. They are forward looking estimates.

And that is 100% the same issue as with the buybacks. So that noise just filters out and we are exactly as I described it. X equals X.

Tombgrt, I don't know if you are a shareholder or not, but for what its worth I about jumped thru the phone at DELL IR the day of the announcement. I'm sure Longleaf was just in pure shock. Longleaf can just use it's dividend to buy more shares. It should make little difference to them mathematically in terms of the compounding record of their fund.