Move over, Communist China, Hillary Clinton wants to bring your central planning policies to our economy and stock market. Punishing investors for making money is not the only brilliant gem on her laundry list.

Hillary Clinton’s stealth attack on the investor class and corporate balance sheet continues. Ironically, I agree with her comment on the “tyranny of today’s earnings report.” I have griped about it for years. In fact, this does not have anything to do with corporate America and hiring. In the end, it only removes the prerogative of individual investors. That said, the average holding period of stocks is abysmal.

The willingness to sell at a loss, but not at a profit, has created wild gyrations and is crushing the investing experiences for too many individuals. The average hold time has gone from six years to less than six months. There is no way a good company becomes a bad company within six months, even if the stock is lower.

However, the fact is that as more individuals have gotten into the market, the action reflects more on Main Street’s angst. Rich people have the comfort of holding and riding the waves, while the average investor, having seen or endured two to three market crashes, believes that the end is around every corner. Still, there’s no doubt stocks that made monster moves in the last couple of weeks from Google (GOOG), Amazon (AMZN), to Netflix (NFLX) have left behind a pile of individuals who have taken financial losses during the numerous dips, pullbacks, and corrections in those names.

It’s a great cautionary tale as we deal with a market that’s obviously lost its footing. It’s not a situation where there’s fear in the air, but one where the afternoon selloff is like clockwork; thereby discouraging would-be buyers from stepping up as (there has been very late buying that presumably is sold during the early morning that bounce the next morning). Shares in a lot of good companies will be sold at a loss this week, which is a reflection of emotional selling. By the same token, I get that it is hard to live with big losses.

It is why it’s important to understand that the shares of great companies often come back, even names such as International Business Machines (IBM) and McDonald’s (MCD). They might see their shares at all-time highs next year.

Furthermore, I advocate that you must have names in your portfolio that are working right now, allowing you to hold a few high pedigree - high potential dogs. It’s a delicate balance, but long-term knee-jerk reactions and focusing on not living with pain just makes it worse in the long run. As for a federal government headed by Hillary Clinton, punishing investors for making money in less than 2 years, it will largely not only stop people from investing, but it also will not have any impact on corporate America or job creation.

Capital Gains Tax & U.S. Presidents
39.9%	Ford
28%	Carter
20%	Reagan
28%	Reagan
20%	Clinton
15%	Bush
23.8%	Obama
39.8%	Hillary

Jeff Bezos Revenge

For years, Jeff Bezos was ridiculed for building a company rather than bolstering the bottom line.  Actually, it was fine with investors for a long time until it wasn’t last year. It’s true, the company posted earnings last week and have been more disciplined, but the fact is that Bezos' main focus is building a great company, not engineering earnings that beat the Street by a penny. Yet there are a lot of companies who are caught up in earnings reactions.

True, investors can take stocks to the woodshed on the smallest of earnings misses, but five-year plans should be five-year plans, regardless of fickle investors.

By pointing this out, I continue to say, however, it is not the federal government’s business to force business investment. Or spending it in ways it wants, even under the guise of avoiding a so-called “quarterly capitalism.” As for the government picking winners and losers as Hillary suggested with her gushing comments on “investing” in wind and solar, it can get even worse if the government somehow takes a de-facto seat on every board of directors.

Of course, this kind of crony capitalism is the real killer of jobs and innovation by punishing effective industries. While pouring gobs of money into those who do not  generate any jobs; “quarterly capitalism” is not the worst thing in the world, and boards of directors should fight it; however, Hillary is looking to be the arbiter of good and bad investments while spending taxpayer money on boondoggles.

Deja Vu All Over Again

Then, there’s the Export – Import (Ex-Im) Bank. It was created on February 2, 1934, by FDR to make loans to the Soviet Union. These days, we are told it is designed to help small businesses. In fact, the fattest and richest companies in America get to feed at this trough. The bank even lends money to foreign companies who compete against domestic companies.

Government officials, including Barack Obama and Hillary Clinton say the Ex-Im Bank helps minority and women businesses….but the fact is that their share of the pot is infinitesimal.

Sumnmertime Blues

Moreover, there is not panic, but it is obvious the market is in trouble. It does not make it the end of the road, but it is a legitimate time to ask if it is the end of the bull. I do not think the Bull Run is over, but it has been due for a real test and this is shaping up to be one, not unlike last October. There’s not anything new other than doldrums and angst over the would-be catalyst. Essentially, the market is sideways for the year and it feels worse; beneath the surface, it is a lot worse.

It’s clear the Dow under 17,500 on a closing basis could trigger more selling.

Today’s Session

China's market got hammered and that's pressuring our market which was already vulnerable. I like these test for the bears, but the fact of the matter is, unlike many others, I'm not as concerned about China's market. (While their market was rallying 160% in one year, it never made our news, not even a mention on our obituary pages.) Of course we still worry about China, the buyer of raw materials and our finished goods.

We need to relax for the moment and be prepared for the market to find a near term bottom. I'm still looking for a huge year-end rally hopeful after we've digested a symbolic Federal Reserve move. In the meantime, we drift lower and that means great stocks will get cheaper which is good for investors that are prepared to pounce.

Comments

we already have central planners: the Fed and congress/lobbiests via the tax code Joe Brown on 7/27/2015 9:55:12 AM

It would big consideration in how much and in what stocks I would go with Jack Alspaugh on 7/27/2015 10:02:55 AM

Investing would be less attractive, and trading more attractive. For any investing, I would favor strong dividend payers, 4-5% or more. It is no that capital gains should be treated differently. It is that nobody should be paying over 20% tax on any part of the first $1M when house prices are $250K+ in the cheapest parts of the country. If Congress wants to change something, it should be to favor dividends, not capital gains. Capital gains (and stock prices) are dependent more on speculation than actual corporate performance. Bob G on 7/27/2015 10:07:40 AM

I am trying to be a smart trader and obviously, it is all about what you keep rather than what you make. Therefore I feel that the tax consequences would weigh heavy on the decision to sell and potentially cause me to hold a stock longer than I should and risk a decline. Julie K on 7/27/2015 10:09:26 AM

ObamaCare is reported to have helped 11 million people (3%). On the other side of the coin, it has increased the cost on the 270 million people who had health care before ObamaCare (84%) and reduced their choices and access. This is the "Signature Achievement" of President Obama. What a failurw! Chris Reinhardt on 7/27/2015 10:34:57 AM

I disagree with Bob G. I think it would be the opposite. Higher capital gains would make trading less attractive. Your return would have to be decidedly higher to compensate for the higher tax you will pay. Investing for the long term (I guess longer than 6 years) would be more attractive. Also, I feel that it always comes down to corporate performance. There is also always speculation, but the earnings have to follow. Julie K on 7/27/2015 10:36:29 AM

If you want to see who's drilling the markets, strip all of the less than 5000 share sales from the ticker. That shows what the big money is doing, abet without visibility in the dark pools. Steve on 7/27/2015 10:48:59 AM

I would only buy and sell in my Roth Marie on 7/27/2015 11:00:07 AM

I retired at 74 and sold the stock in my business so I could pay capital gains of 15%. The Muslim-Marxist has raised it and now Hillary. I am also heavily invested in the market which will stop with more capital gains. The GOP leadership is as bad as the Dems. william wortman on 7/27/2015 11:32:42 AM

Why should capital be taxed at a lower rate than income (labor)? Is that fair ? Talk about class warfare ! Harold sader on 7/27/2015 12:33:06 PM

Harold, I would say because of the risk you take in investing that capital. Julie K on 7/27/2015 1:25:15 PM

Harold the reason capital shouldn't be taxed at a higher rate is pure and simple "double taxation". Why continue to give BIG GOV. more and more of our money...only to waste it on partisan politics? I have had enough of TAXATION! Let us keep more of the money we earn and this will get this economy booming, otherwise it will continue to shrink and big government will just get bigger and want to devour more of our money and assets! jane on 7/27/2015 3:28:50 PM

I would stop investing. She has lost her mind or what I call "she is outside her mind." She is only pandering to the far left. I really do not think she will be the Democratic candidate. I feel the DNC is just waiting for an excuse to dump her. Bob Medkeff on 7/27/2015 4:13:03 PM

There shouldn't be ANY capital gains tax at all since that money has been taxed already! Mark Scully on 7/28/2015 11:18:23 AM

time to start a LLC. I believe this is on way for a individual to doge the tax. hnwilson on 8/1/2015 12:27:58 AM

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.