I'm worried about this market. We are at the point where it's not about fundamentals per se but about perception and about confidence or lack thereof. But there is a legitimate concern about the macro condition of the domestic economy and the global economy. There is a legitimate concern about political and economic turmoil in Europe. There is legitimate concern about our elections this fall and whether Americans ditch their (previously) cherished notion of self-made success and determination or decide achievement only happens via a collective and somehow we must pay homage to sidewalks.

You know I can understand why primitive societies once worshiped and feared active volcanoes, but we are being told to pay for sidewalks over and over again and to sacrifice our paychecks in the future as tribute.

Legitimate red flags from the market yesterday came from all angles.

Transportation stocks got crushed with names like Kansas City Southern (KSU) and Union Pacific (UNP) down big with tons of volume. The Dow Jones Transportation Average really took it on the chin, off 3.18% for the session. The index is nearing a very pivotal support point.

Apple (AAPL) is collapsing when it could have become a safe haven; it's simply entered into a freefall.

Tech stocks in general are getting hammered even ahead of the much-hyped Facebook initial public offering. It is really remarkable that FB has no coattails whatsoever.

Advanced Auto Parts (AAP) issued a warning and took down names that have firing on all cylinders for a few years. In fact, AAP, Auto Zone (AZO), and O'Reilly (ORLY) have been perfect recession investments. Man it would be great if people were not going to those locations because they were buying new cars, but that may not be the case. Furthermore, high-end retailers Macy's (M), Nordstrom's (JWN), Saks (SKS), and Abercrombie and Fitch (ANF) have been crushed, but yesterday one of the top dollar stores took a kidney punch on earnings.

Then there's the record low yield on 10 year treasuries. That is the biggest red flag concerning confidence among deep-pocketed investors. The yield of 1.7% doesn't even keep up with inflation and yet billions continue to pour in. It's a statement that says less about the greatness of America and more about the weakness in the rest of the world. The dollar is soaring because the Euro is the Euro. But you must know that when they get a chance, and when there's a legitimate alternative the dollar and treasuries, investors will dump them with both hands.

For now, the influx is a reminder of how great we have been in the past and how great we could be in the future. But to accept such a paltry return speaks volumes about uncertainty.

Having said all of these things, good stocks are being taken to the woodshed with bad stocks as if someone yelled "fire" in a crowded theater. This is what makes being an investor challenging. The swoons are seen as a reason to take losses rather an opportunity to become owner of great businesses on the cheap. The problem is the market is hyper-sensitive, and panic is beginning to creep into the mix. This is a tough period, and I'm concerned. I'm more worried, about investors making mistakes they will regret a month, six months, or even a year from now.

The administration scares me a lot more than corporate America. This week we have witnessed the game plan expedited to the point where the money grab moves to lower income brackets. I felt a second term would see an aggressive attempt to redefine rich below a triple-digit annual income. In Maryland, that tax hike on people earning $100,000 will go to pay for union raises of 2%—an incentive to get the vote out even as schools remain closed, and the state will surely lose lots of talented folks. That's the price to be paid as out of control spending means higher taxes, and to be honest, there aren't enough rich people, really rich or $100,000 rich, to go around.

Another example that many people missed is the proposal to go after Eduardo Saverin of Facebook who gave up his citizenship in part to avoid paying more than $60.0 million in taxes. While I think these capital gains taxes are egregious, I don't like the wham-bam-thank-you ma'am style of Saverin who originally hails from Brazil. But for me, the real story is hidden in the fine print. This proposal is looking to punish expatriates that earned more than $148,000 over the years. That is not rich, although the effort to target this income bracket is rich in hubris.

Schumer and Casey's proposal is called the Ex-PATRIOT Act ("Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy" Act).

Under the proposal, any expatriate with either a net worth of $2 million or an average income tax liability of at least $148,000 over the last five years will be presumed to have renounced their citizenship for tax avoidance purposes.

The individual will then have an opportunity to demonstrate otherwise to the IRS by meeting specific IRS requirements. If the individual has a legitimate reason for renouncing his or her citizenship, no penalties will apply. But if the IRS finds that an individual gave up their passport for substantial tax purposes, then it will prospectively impose a tax on the individual's future investment gains, no matter where he or she resides. This would eliminate any tax benefit and financial incentive from renouncing one's citizenship. The rate of this capital gains tax will be 30 percent, in keeping with the rate that is already applied on non-resident aliens for dividends and interest earnings.

So, while the economy struggles, the war on success continues to seek more casualties. By the way, this is the main reason the economy is struggling. Yes, I'm worried about the market and the economy but I think it's a mistake to sell great companies in a huff. In fact my greatest fear is too many investors giving in to their fears - founded and unfounded.

When will the coast be completely clear? I'm not sure, but don't put your head in the sand and don't become too discouraged.

By the way, even though AAP got hit, AZO got an upgrade this morning at Credit Suisse and even though the rails got smacked KSU (my favorite) got an upgrade at Oppenheimer. These are smart upgrades, which isn't always the case on the Street which is often very late. Our economy isn't dead nor has it peaked; only faith in those that could and have attempted to derail and loot success. Again, a great reason for concern, but I don't think they'll win in the long run. As for the spark look for action real soon out of Europe with the ECB taking action to prop banks. Greece is belligerent and is trying to pull a fast one—not only not paying money they've borrowed and squandered but demanding more.

There could be big (positive) news over the weekend. In the meantime it's all about Facebook today, and I don't know how to play it other than to say it might be best to watch from afar unless you have the ability to watch and trade all session long.

Comments

$1,000,000 TIMOTHY P on 5/18/2012 9:29:45 AM

Paine good morning Great commentary but? 500K plus is Rich josef on 5/18/2012 9:44:16 AM

annual income? 10 million dollars. btw: didn't the jews have to give up all their wealth in exchange to leave nazi germany? history repeats... dennis logan on 5/18/2012 9:51:17 AM

maybe money should not be moves if not taxed before moving, virginia hoffman on 5/18/2012 9:56:32 AM

I just watched u & Varney,,, What would U do, If U ran for Preisdent ??? J. W. J. W. Gardner on 5/18/2012 10:16:15 AM

The far left has already partitioned us into the 99% vs. the 1%. Let's be agreeable and use their numbers. "Rich" means your income level is among the top 1% of all income levels. This number, 1%, is special in several ways, and hence would result in a more stable and interpretable definition of rich. Rick Hathaway on 5/18/2012 10:22:57 AM

Annual income has nothing to do with "rich". Net worth is a more relevant measure. But who decides, by either measure, how much income or wealth makes one rich? And by what criteria? Depends upon whom you ask. Bill Wright on 5/18/2012 10:25:19 AM

$1,000,000 irv shayne on 5/18/2012 10:50:12 AM

Forty years ago, $100,000 a year would have been considered "rich." Compounded at 4%, that would put it at around $500,000 a year today. "Very rich" today has to be $1 million or more. Dennis Howard on 5/18/2012 10:59:40 AM

There is no set amount. It is completely relative to the persons obligation and rsik from which they earn the money. Jason on 5/18/2012 11:03:17 AM

I would think if your annual income was 5 million or higher year over year, that could be considered rich Daryl Cluka on 5/18/2012 11:30:43 AM

Rich, is where all of your basic needs are met, you have plenty of disposable income, such that you can buy anything you want! So will power effects buying decisions, not need! harley on 5/18/2012 11:31:09 AM

Rich is someone making over $1 million a year. Denny T. on 5/18/2012 12:06:38 PM

Greece is a total loss. You can put lipstick on a pig, but it's still a pig. Denny T. on 5/18/2012 12:09:23 PM

We were always told that Rich were People who made a $1 Million Dollars or more. Anyone who makes 0 to $999,999 were the Upper Middle Class and so on. Here the President and some State Governments changed all this. Now Rich is $100,000, go figure! Bill Wansaw on 5/18/2012 12:30:13 PM

In NYC, 5OO,OOO In Wash. D.C. whatever you can steal In Junction City, Ks. 2OO,OOO tom wayne on 5/18/2012 1:09:53 PM

Why does it matter? Pass a flat tax, and we all contribute equally, even a po' boy like me. George Stelzenmuller on 5/18/2012 1:28:06 PM

2012 Rich = %500k annual Comfortable = $2.5m annual 1950 Rich = $50k annual Comfortable = $200 annual 2015 under an Obama administration Who knows? Gary D. on 5/18/2012 1:36:57 PM

The income of $2 mln a year or the assets of $10 mln is rich Al K. on 5/18/2012 1:38:37 PM

When I think of rich people, I think of Warren Buffett, Donald Trump, Bill Gates---. Rich people are billionaires and not to be confused with people making $250,000 running a plumbing business or auto repair shop. Somebody should show the daily routine of people who makes $250,000 per year as compared to the very wealthy. Rich on 5/18/2012 2:21:48 PM

$3 million. Patricia Flynn on 5/18/2012 2:37:14 PM

$1,000,000+ of annual income. Gus Hampson on 5/18/2012 3:27:00 PM

If one is single, it is certainly possible to live very well by world standards on less than $48K per year after income taxes. With that, you can own a very comfortable house and have enough left over to save for emergencies if you don't waste it. That assumes that medical costs are controlled by an HMO or some insurance plan. Certainly then, a single can live VERY nicely on $100K, but would need another $50K to go into a retirement fund since singles don't have any children as a safety net in their old age. I would say then that $150-200K for an unmarried person is the threshhold of rich. If married, and with children, costs go up significantly. To be rich, I would say private school is definitely required, since public schools all fail in terms of being a good place to be (even the ones with good acedemics are social disaster areas). Vacations also cost significantly more. I would add $25K per year per person in the family to the $150-200K for a single. So for a family of 6, let's put the number over $300K until the last child is out of college. Put in another $100K per year and there should be no limits on how nicely one can address personal pleasures (within reason). My question is why does a CEO need to have an income of $5-20M without any acccountability to perform well. Most of them are doing as much harm to the company as any good they do, often undermining the foundations by cost cutting and lack of clear vision, in exchange for their harisma to sell the product to some sucker who will never be really happy witht he deal since his product is being understatfed by the cost cutting. Personally, I vote against any board member in a company that pays the CEO more than $2M unless the company ROE is >20% with significant NR growth in good years and no NR pullback in bad years. Bob G on 5/18/2012 4:43:15 PM

I'm not sure because Mr. Buffet, the billionaire, pays himself a minimal salary from his corporations for two reasons; first to keep more working capital in his companies to produce jobs, and secondly, to pay a lower income tax yet, everyone knows he is a billionaire. So I suppose $1 million makes one a millionaire, and any amount under that makes one comfortably affluent. Grace on 5/18/2012 4:49:34 PM

$ 600,000/ year. That equates to $ 50,000 per month which for 1/2 to maybe 3/4 the people in this country strive to make $ 50K per year and think they're doing pretty well for their family. Now I use $ 50k as a round number and you would have to inflate that for the East and West coast some. But if you're making in 1 month what the goal is for a majority of the individuals in this country is per year, then I believe they would consider you rich. James C Rose Hill, KS James on 5/18/2012 5:00:49 PM

any amount that lets you pay your bills and have some left over for savings. Duffy Lasker on 5/20/2012 9:22:44 AM

I'm gonna go with 2 million/year Jetti on 5/21/2012 1:39:59 AM

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