| Home | Links | Audio | Podcasts | ||||||
|
|
Transcript from Jerry's appearance on Fox News Channel's Cashin' InOur "Cashin' In" crew this week: Wayne Rogers, Wayne Rogers & Company; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Dagen McDowell, FOX Business News, and Jerry Bowyer, National Review Online.Stock Smarts: Flattening Taxe$ Want to fix the tax mess here in America? President Bush says look at the little country of Estonia. That country is thriving after Communist rule and many say its flat tax system is a big reason why. Could the president even sell that here right now? Jonathan Hoenig, Capitalistpig Asset Management: Well, I don't think he could sell it but if he could, Terry, this country would rule the world for the next 500 years. I mean, flat taxes are practical and they are also moral. The tax code used to be two pages long, it's now 17,000 pages long. It's seven times the size of the Bible. We waste $80 billion a year just figuring out how to comply. A flat fax would be a major benefit for this country. Terry Keenan: Jerry, does the president have the political capital at all to push anything like this through? Jerry Bowyer, National Review Online: No. I don't think he has the political capital to push a flat tax through. He spent that political capital on the idea of Social Security private accounts, which may have turned out to be a bit of an overreach. But that doesn't mean he couldn't accomplish something. Things would be better for him if he had a Republican Congress and he could set the initiative. He can't do that. But you don't need to go so far as completely redesigning the tax code to simple it. Jonathan's right. I used to be a tax accountant; the code is really thick. Jonathan Hoenig: It encourages paper shoveling, not actual productivity. Terry Keenan: It also encourages cheating in some ways. Jerry Bowyer: It does. And it encourages a lot of waste. A lot of that code and a lot of those regulations are about technical enforcement matters that are about the timing. They're not about who pays taxes or how much they pay. They are about when you pay them. You could get rid of a lot of that complexity without really creating winners and losers. Terry Keenan: But Wayne, the tax system has gotten more progressive under this president in the sense of lower rates for the low-income earners. Wayne Rogers, Wayne Rogers & Company: Yeah, and Jonathan is right. I don't know much about taxes except that I don't like them and I assume nobody really does like them. Congress is also to blame here. The congress is idiotic when it comes to taxes. We've got somebody else who is going to be the head of one of those committees who is not the brightest light in the chapel. Jonathan Hoenig: Do you support the progressive tax system? The whole idea that it shouldn't be flat, that the rich should pay more as a percentage of their income than the not-so-rich. Do you support that? Wayne Rogers: Jonathan, I'm not into the theory here. You've got to support the military, you have to support the court system, and you have to support certain activities in the government. Now, you might go to a flat tax of some kind. It could be a value-added tax. That might be a way. Europe has value-added tax. That is a flat tax. Terry Keenan: But is this all "pie-in-the-sky" Jonas? Jonas Max Ferris, MAXfunds.com: It is "pie-in-the-sky" for Bush. I mean no government is going to get rid of the prospecting tax in the America. The public likes it, you're taxing the rich more, it's part of making the minimum wage stay the stay the same. As far as why these countries do it; they have trouble collecting taxes in Russia and those countries, so they have to have a very simple code or everybody cheats. It would probably benefit us, especially from the simplicity point of view. Dagen McDowell, FOX Business News: I get giddy just thinking about the possibility of having a flat tax because it would just make doing your taxes so easy. But I can't imagine that the government would ever push one through because politicians need something to do, they need to justify their paychecks. And what do they do? They just buck up the tax system. They add exemptions; add breaks to appease their constituents. We had a simplification 20 years ago and we just threw it away. Terry Keenan: Jerry, you advised Estonia in putting in its flat tax system. Any lessons you can take from there that could actually be applicable here? Jerry Bowyer: They contacted me about privatization. I was a privatization czar for a big city here in the U.S. and they weren't sure they wanted the private market, but I was contacted by Estonia and it was amazing. This formerly communist country liked private markets. Here is what I think. Clearly it is working for Estonia. That little country is the little country that could. They are growing gangbusters. So is Latvia. These Baltic states are really doing well. They are attracting capital. Terry Keenan: Does it cut back on the tax fraud that we see rampant in Russia? Jerry Bowyer: It cuts back on tax fraud and encourages growth. Wayne is right; this is kind of a theoretical discussion. Jonathan Hoenig: But it's also moral. It doesn't just work in practice; it works this theory, too. Democrats want a progressive tax like Karl Marx did. Jerry Bowyer: We're not going to get it, so— Dagen McDowell: Another thing. It would mean getting rid of the mortgage interest deduction. You can only imagine in the short-term how that would hurt the housing market. Wayne Rogers: Everybody has said how complicated the tax system is. Congress can't do something that takes one sheet of paper, how are they possibly going to attack something that is this complicated. They can't do. You would have to start over from scratch and it's not going to happen. Terry Keenan: Jonas, do you think that the president could at least float this idea as a counter to the democratic congress trying to raise taxes going forward? Jonas Max Ferris: No, this is harder to flow than the Social Security reform and that was with Republicans on his side. It's not going happen. But the complexity here is the deduction side of the equation. Not the tax rate or how that goes up as you make more money. It's the thousands of things that are put in, the mortgage deduction, this and that. That's what makes it complicated. Dagen McDowell: Maybe the next president can come in and propose a new tax system, tax reform and fixing the entitlement programs at the same time. Jonathan Hoenig: Maybe you do it under the theory of equal treatment under the law. That somebody shouldn't be punished, or that somebody doesn't have fewer rights just because they make more money. Wayne Rogers: The only way you are going to get this accomplished is that you are not going to have an elected official to do this. You have to have a dictator. That's the only way it will happen because nobody is going to have the political capital to run this through the congress and you have a whole group of people who are either dishonest, moronic and — I mean, they got elected for reasons that are beyond me. Dagen McDowell: You need to move to Estonia, then. Wayne Rogers: You can't cure a problem with people who don't know what the hell they are doing. Cashin' In: Hou$ing My$tery! Existing home prices continuing their decline, but new home prices were actually up in the latest report. What does it mean for the housing market? Jerry Bowyer, National Review Online: There are a lot of statistics that swirl around this and it gets a little overcomplicated. This is not the "Da Vinci Code". Housing economics are pretty simple. You have a number of people who are in the country at any given time. You have whether those people are employed or not, whether they get a mortgage, whether their income is going up or down and whether their interest rates are low enough to be able to make a mortgage payment. And when you look at those fundamentals, we have a population that is growing. The scare story last month was ‘oh, no, we reached 300 million people, what are we going to do with them?' The story this month is, ‘oh no, we have too many houses.' Put the people in the houses and I think we've got this one solved. Wayne Rogers, Wayne Rogers & Company: I couldn't disagree more. We have an oversupply. It is supply and demand; it's that simple. We have an oversupply of houses in almost every market, certainly in all of the markets that are expanding. And Jerry, you are wrong. The prices are coming down faster. We haven't gotten to the bottom yet. Interest rates will decline, will that help? Not unless there are buyers out there. You have got to go through this period of price adjustment and then foreclosure. Listen, at the same time, by the way, insurance is rising very rapidly and people can't make that monthly payment. They don't buy on a total value. They buy if they can make a monthly payment. Dagen McDowell, FOX Business News: Absolutely right, home prices need to come down 5 percent, 10 percent, even more in some areas in the next year, to make homes affordable for people. If you can negotiate a price that is that much lower today: great. But if not, wait. Terry Keenan: New home prices went up a little, but do you buy those numbers? Jonas Max Ferris: They are throwing in new cars. That price is not that relevant. The used home prices are more relevant. Prices have come down a little. They are going to come down more. But it's not all just statistics. There is an element of speculation and nuttyness where you think it's going to go higher and you want to pay more. That has left the building, basically. Prices are going to go away until that whole speculative area is gone. I think you've got another 10 or 15 percent to go nationwide but it is a better time than last year. You have really low rates, lower than a year ago right now. So in that that sense, a good time to buy. Terry Keenan: Jonathan you have been more optimistic than your buddy Wayne, are you still. Jonathan Hoenig, Capitalistpig Asset Management: In terms of publicly traded securities, real estate is still hot. Terry Keenan: But that's not residential, necessarily. Jonathan Hoenig: Of course, it doesn't make a difference to your home. Markets move and a 5 percent decline in the value of your home really concerns you, maybe you are too leveraged. To me, you have to live somewhere. Owning a home is part of the American dream and you find a home you can afford and like my parents and grandparents, pay your 30-year mortgage and live in it for a while. Wayne Rogers: But Jonathan, you are making the right statement: you said ‘find a home you can afford,' and that is the key. It is not the price of the home. It's whether you can afford to carry that mortgage, and those payments that have to do with insurance and taxes. That's what counts. Dagen McDowell: Well, one frightening thing is if the rest of economy doesn't cool off more, maybe the Fed steps back in, hikes interest rates and housing has another leg down. The Fed has to stay on the sidelines for this to work itself out in the next year, Jerry Bowyer: This country is growing by, on average, 1.5 million people per year and we are building 1 million homes per year at the current rate. So at some point in the near future, we catch up with that reality and we do a lot of home construction. Best Bets: Fast Moneymakers! The names our crew says will make your December one for the record books. • Wayne's Pick: Las Vegas Sands (LVS) Friday's close: $90.70 52-wk High: $96.90 52-wk Low: $38.07 Wayne Rogers, Wayne Rogers & Company: I like Las Vegas Sands. I have liked the gaming stocks all along. I held it at one point in the Cashin' In Challenge; I probably should have held it the whole time. I would have been better off. I still own it myself personally and I like it very much. Earnings are up, I think it's expanding and their investment in Macao is going to be terrific. Terry Keenan: And Jonas, we saw this week that Kirk Kerkorian is selling his GM stock, upping his MGM stake. He likes these casinos as well. Jonas Max Ferris, MAXfunds.com: Two casinos, $30 billion market cap. That's $15 billion per casino and seems a little rich. I know it's a great business, but $15 billion for a building? Not for me. Jonathan Hoenig, Capitalistpig Asset Management: I know it's been strong but I don't know. There is something about the gaming stocks that kind of feels greasy to me. Not on my list. It's a sector I'm not really in right now. Wayne Rogers: Whoa. You play in the stock market but you won't play in the gambling market? What are you talking about, Jonathan? Jonathan Hoenig: I think my odds are better in the market than at your blackjack table, Rogers. I've got a better pick. • Jonathan's Pick: MCG Capital Corp. (MCGC) Friday's close: $19.57 52-wk High: $19.58 52-wk Low: $13.63 Jonathan Hoenig: It's one of these business development companies. I recommended Ares Capital a couple of weeks ago. I think this is a very strong sector of the market. We own it in my hedge fund. We own a lot of these business development companies and I think this is one of the few areas of strength that I'm finding that I'm really chasing after in equities right now. Jonas Max Ferris: I mean, I like the idea of getting private equity to the individual investor but you don't want to be in the club that takes you as a member, and private equity is a thing that you can't get in with $1,000 and get a good investment going. And you're paying a 50 percent premium to net asset value. That's a Warren Buffet valuation there. I don't think these people are as good as Warren Buffet. Terry Keenan: Wayne would you be gambling on Jonathan's stock here? Wayne Rogers: Yeah, I like it. The question was what is going to happen in the next 30 days and I think that's a good play. A terrific stock to own, it's underaccumulation, had a breakout this last week, I think it's good. • Jonas' Pick: Barclays (BCS) Friday's close: $53.89 52-wk High: $55.21 52-wk Low: $40.72 Jonas Max Ferris: I'm going with the safest of the three picks. I'm a little worried about the market in December. I'm going with Barclays, a giant international bank. My big angle is they are king of ETFs right now with the iShares business. That's where all the new money is going. Terry Keenan: But if worried about the market, why would you like it? Jonas Max Ferris: Because all the money is going into these funds. In one month, I think the flow is in ETFs. You have $10 trillion in mutual funds. There's a high dividend, and that dividend is becoming more valuable every day the US dollar collapses a little more. This is a safe bet for December. Wayne Rogers: Not for me. If I'm going to go into banks, I will look at another money center bank. Money Mail Question: "I read that we are banning sales of luxury items like iPods to North Korea. Will this tactic work?" Jonathan Hoenig, Capitalistpig Asset Management: This is worthless. It makes us look so weak. If you want to get under his skin, why not address the problem and bomb this guy's nuclear sites. Make him incapable of having a nuclear weapon. That will annoy him a lot more than denying him his iPod and his Johnny Walker scotch. This is a waste of time. It's worthless. Wayne Rogers, Wayne Rogers & Company: Well, I don't know why Jonathan wants to bomb everybody. Why don't you just go assassinate him? Jonathan Hoenig: Not everybody, the people who are threats to this country and our allies, as Kim Jong Il is. Wayne Rogers: You could send in a hit squad and that's the end of him. It's a weak thing. You are slapping a guy on wrist; it doesn't mean anything. If we don't have some way to boycott them and to really make him suffer, not the people, but make him suffer then we shouldn't be doing it. Terry Keenan: And it's not going to hurt Apple (AAPL) stock if we did this. Jerry Bowyer: No, it's not going to hurt American business if we do this. I don't know, I looked at the list of what we were going to embargo and there was liquor and cigarettes on there. I think we should give him as much liquor and cigarettes as he wants and we will get rid of problem a little sooner. But I don't know about the video games. They're getting pretty violent. Dagen McDowell, FOX Business News: You want to give liquor to a guy with his finger on the button? That's crazy. So what if it's symbolic? Jonathan Hoenig: Why not get rid of button. Jerry Bowyer: In his case, he gets saner if he were drunk. And the cigarettes will end the problem in a couple of years. I wouldn't give him the video games - he is too violent enough already. Terry Keenan: But Dagen, it's a pretty broad spectrum between nuking him on one hand, like Jonathan wants to do, and taking away his iPod, which is evidently what we want to do. Isn't there something in the middle? Dagen McDowell: It does illustrate the type of sanctions that we need to come together as nations and impose on North Korea. Not just us, not Japan but also China and South Korea. Jonathan Hoenig: It's not nuking him: it's de-nuking him. Terry Keenan: Ok, you don't want to nuke him, just want to blow out the nukes. Sometimes you don't know with you, Jonathan. Jonathan Hoenig: With me, of course. Terry Keenan: But Wayne, to Jonathan's point, though, it does show that we don't really have much of a strategy. We are employing a time-out strategy that the parents use for their toddlers, to this threat in a country that is part of the Axis of Evil. Wayne Rogers: The best part of Jonathan's statement is correct: it's idiotic. If you think you're going to slap him on the wrist about this, this is crazy. It makes no sense. Dagen is right. You get everybody together and boycott the son of a gun. Shut him down. Jerry Bowyer: We traded with the Soviets and they fell. We didn't trade with Fidel and he's still there. Trade with this guy and open up the country. You can find the above transcript here |