Taxes and Spending

[bills_fan_in_raleigh]

The risk can be quantified if you know the zip codes associated with those MBSs. Tom apparently has access to that info. I had this discussion with a guy two weeks ago about how these next few weeks would be the time to start scooping up distressed debt. Warren Buffett is starting to think the same thing. He's also 'betting on America' by buying all sorts of Goldman Sachs convertibles (discounted as though they're not convertibles).

Good time to stick money in Berkshire Hathaway and watch what Warren is doing.

[jjamie12]

The risk can be quantified if you know the zip codes associated with those MBSs.

While true, any owner of these MBS (and any buyer worth their salt, too) already has this knowledge.

 

Edit: Further, what you do with this knowledge separates the wheat from the chaff. Just because you know the zip codes doesn't *necessarily* mean you know what the risk is. You have a better idea, for sure. But, as I said, literally everybody should know the zips of the individual loans in any bond that you are buying. It's public knowledge in the case of most MBS, and anyone who buys a 144a most certainly gets the zipcode information from the seller prior to the transaction taking place.

[bills_fan]

Good time to stick money in Berkshire Hathaway and watch what Warren is doing.

 

 

Its always a good time to do that...that is if you have an extra $133,300 laying around.

[DC Tom]

Its always a good time to do that...that is if you have an extra $133,300 laying around.

 

My mother was just asking me about Berkshire Hathaway. "We were watching the ticker yesterday, and I saw this stock go by, Bark-something."

 

"Yeah, mom. Berkshire Hathaway. Warren Buffet's company. How can you work in a financal company and not know about that?"

 

"Are you going to buy any of it?"

 

"No, mom. They don't sell hundredths of a share."

[DC Tom]

The risk can be quantified if you know the zip codes associated with those MBSs. Tom apparently has access to that info. I had this discussion with a guy two weeks ago about how these next few weeks would be the time to start scooping up distressed debt. Warren Buffett is starting to think the same thing. He's also 'betting on America' by buying all sorts of Goldman Sachs convertibles (discounted as though they're not convertibles).

 

 

More than that, even. It's almost too bad I'm honest.

 

 

But yeah..."Toxic" doesn't refer to the quality of the vehicle as much as the fact that no one wants to touch them. As I said in another thread...you've got situations where a five mil bond issue backed by four mil in performing mortgages backed by three mil in real property valued at effectively zero. It's got to have SOME value. Bills_fan pointed it out too - there is P&I being paid out, so as an accounting exercise it has got to be possible to value these things.

[HopsGuy]

It's got to have SOME value. Bills_fan pointed it out too - there is P&I being paid out, so as an accounting exercise it has got to be possible to value these things.

 

Maybe Manny Derman can divine a model?

 

"No, mom. They don't sell hundredths of a share."

 

They do trade in 30ths, though.

[TPS]

Thanks for the answer.

 

But I'm not asking from the perspective of 'optimal fairness,' nor as a criticism of the Obama plan per se.

 

I'm really just trying to get to the question of how would a democracy behave legislatively if a clear majority of voters paid no income tax? Would the temptation to propose spending programs to be paid for exclusively by increasing in income taxes (on those who pay them) rather than other sources become irresistable to politicians and voters alike? What would be the check on that form of 'tyranny of the majority,' other than opaque economic arguments unlikely to sway the common voters short-term interests?

 

To me the idea of 50% of households paying no income taxes is a sort of psychological alarm bell.

I think the more important question is if it's a "clear majority of registered voters." What percentage of the poorest 50% actually vote relative the top 50%?

[finknottle]

I think the more important question is if it's a "clear majority of registered voters." What percentage of the poorest 50% actually vote relative the top 50%?

 

Yes; but it's the same idea - the trend is always to remove people from paying income taxes, never to add. Eventually we get to the point where the majority of voting voters have no incentive to hold the line on rates, and therefore the politicians have no incentive not to target the payers.

[Booster4324]

Yes; but it's the same idea - the trend is always to remove people from paying income taxes, never to add. Eventually we get to the point where the majority of voting voters have no incentive to hold the line on rates, and therefore the politicians have no incentive not to target the payers.

 

Let us discuss total taxation then. Despite my repeated pleas, no one seems willing. Well no one of the conservative bent at least.

[bills_fan_in_raleigh]

Let us discuss total taxation then. Despite my repeated pleas, no one seems willing. Well no one of the conservative bent at least.

my proposal is simple flat tax everyone pays and no deductions. Very simple form income * 0.10 = tax owed.

[Booster4324]

my proposal is simple flat tax everyone pays and no deductions. Very simple form income * 0.10 = tax owed.

 

I think you have to factor in some form of cost of living deduction. Basically, bare minimum cost for someone to clothe, house, and feed themselves. Children (up to a certain amount which is open to debate, I say 2) are factored into the equation. Otherwise it is a complete flat tax and no other federal taxes at least. No gas taxes mainly, let the fed explain why they need the money.

[finknottle]

Let us discuss total taxation then. Despite my repeated pleas, no one seems willing. Well no one of the conservative bent at least.

 

I don't mean to suggest those who pay no income taxes are paying no taxes at all. Simply that once a revenue vehicle is paid for by a shrinking voting minority (whether it be income tax, cigarette taxes, or whatever), that vehicle becomes an irresistable target to politicians. Why raise money broadly for a spending program (pissing everybody off, like with a gasoline tax) when you can say it will be paid for entirely by some minority group (like cigarette smokers, or slots junkies)? Morality aside, I think it is particularly dangerous to start doing this with income taxes, since unlike behavioral activities such as smoking or gambling, making money is probably something the state ought not to discourage through tax policy.

[Booster4324]

I don't mean to suggest those who pay no income taxes are paying no taxes at all. Simply that once a revenue vehicle is paid for by a shrinking voting minority (whether it be income tax, cigarette taxes, or whatever), that vehicle becomes an irresistable target to politicians. Why raise money broadly for a spending program (pissing everybody off, like with a gasoline tax) when you can say it will be paid for entirely by some minority group (like cigarette smokers, or slots junkies)? Morality aside, I think it is particularly dangerous to start doing this with income taxes, since unlike behavioral activities such as smoking or gambling, making money is probably something the state ought not to discourage through tax policy.

 

Brother, I want a flat tax with the only deduction that is for everyone (rich or poor) and primarily benefits those of lower income. No taxes on gambling, cigs or gas. Straight flat tax and if the fed feels the need to stop gambling or smoking (one could add overeating at least to the list if one went with the liberal plan) they should seek other methods. Fine the company or something. But at the least, we need to know how much they are really taxing us.

[molson_golden2002]

Brother, I want a flat tax with the only deduction that is for everyone (rich or poor) and primarily benefits those of lower income. No taxes on gambling, cigs or gas. Straight flat tax and if the fed feels the need to stop gambling or smoking (one could add overeating at least to the list if one went with the liberal plan) they should seek other methods. Fine the company or something. But at the least, we need to know how much they are really taxing us.

A consumption tax when Consumer spending drives the economy? I don't think that's the way to go