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Arnold’s Ramblings 10-26-2011

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Arnold is suffering from excessive frustration again. Arnold cannot watch CNBC, Bloomberg or Fox Business without seeing either elected politicians, unelected politicians or specific political issues receiving virtually all of the attention. Yes, the political happenings do affect business, but not to the extreme that business dictates politics. This entire political environment is extremely unhealthy for both business and government.

Observing the Democrats (and President Obama’s) response to the failure of the jobs bill, it must be noted that it was the Democrat-controlled Senate who failed to pass the legislation. While President Obama and the Democrats blame the evil Republicans for non-passage, it was the Democrats who blocked passage of the legislation.

The 9/9/9 plan from Herman Cain, Republican candidate for president, is interesting. The plan – nine percent national sales tax, nine percent corporate income tax, and nine percent personal income tax — is being attacked by both Democrats and Republican candidates alike. Arnold has spent a considerable amount of time working with the concept and here are the comments:

  1. The primary concern that the “poor” will pay more tax due to the sales tax. Presently the “poor” pays 7.65 percent between Social Security and Medicare tax. With 9/9/9, as Arnold understands it, everything (except housing) will be taxed for sales tax purposes. Since housing costs are normally 35 percent or more of the expenditures of the poor, then nine percent times 65 percent (the remainder of income to be taxed) would be 5.85 percent, thus the sales tax would save the “poor” money.
  2. There would be an exclusion of the income of the poor from the income tax.
  3. Herman Cain’s claim that businesses would reduce prices to offset the sales tax, Arnold believes, is ridiculous. Arnold cannot think of a single case where businesses have eaten the state sales tax, so this is exceedingly unlikely.
  4. With employees receiving their entire income (less 9 percent, when applicable), this would provide enormous amounts of money into the system.

The plan would probably work better as 10/10/10.

  • The DJIA looks lower then higher into year end.
  • Gold continues to stay in a trading range; and probably will not exceed the prior highs, then break down badly.
  • Oil has shot passed $90. If $90 holds then we would appear to be in an uptrend regarding oil pricing.
  • The dollar is still doing well. We should see much higher valuation for the dollar.
  • Interest rates are still way too low, but the 10 year and the 30 year Treasury rates have risen a bit. We will probably test the lows before rates start to rise.
  • Real estate valuations are still heading lower.
  • The economy still is not showing any real sign of resurgence yet.



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