Check out the IRS’s stunning admission of its own mafia tactics

shutterstock 158874281 150x150 Check out the IRSs stunning admission of its own mafia tactics

January 13, 2014
Santiago, Chile

In the 3rd century AD, Emperor Caracalla famously remarked of Rome’s tax policy:

“For as long as we have this,” pointing to his sword, “we shall not run out of money.” (Of course, Rome did run out of money. )

At the time, Roman taxation was so extractive that it drove people into poverty and desperation. Yet the government continued to forcibly plunder wealth at the point of a sword.

Not much has changed.

The Taxpayer Advocate Service, which is an independent office within the IRS, has just released a two-volume report describing the mafia tactics that are being employed by the tax collectors in the Land of the Free.

The Executive Summary alone is 76 pages. And believe it or not, it’s a real page turner.

On page 37, for example, the report states that the IRS largely assesses tax penalties improperly.

Specifically, the Office of the Chief Counsel admonished the IRS that it was not legally authorized to impose accuracy related penalties on certain taxpayers, and that the service should abate those penalties already imposed.

Yet the IRS declined to follow its own Chief Counsel’s legal advice, and it has refused to abate penalties for nearly 90,000 taxpayers.

In the words of the agency’s own Taxpayer Advocate Service, “The IRS’s failure to abate inapplicable penalties signals disrespect for the law and a disregard for taxpayer rights.”

Page 34 discusses how the IRS has abandoned its own checks and balances.

When a taxpayer is deemed to owe the US government money, the IRS is supposed to have a “collection due process (CDP) hearing” to verify that the IRS agent followed the law and consider whether the intrusion on the taxpayer was warranted.

Yet the report states that this has become nothing more than a rubber stamp formality, and that current practices “do not provide the taxpayer a fair and impartial hearing.”

In fact, among the most litigated issues at the IRS, the report states that “taxpayers fully prevailed only about two percent of the time.”

Two percent. If you go up against the IRS, you have a 2% chance of winning. Give me a break. You have more than a 2% chance fighting against the mafia.

Moreover, the byzantine US income tax code, which runs to an incredible 72,000+ pages, “disproportionately burdens those who [make] honest mistakes”, especially as it relates to offshore disclosures.

In fact, the report acknowledges that “tax requirements have become so confusing and the compliance burden so great that taxpayers are giving up their U.S. citizenship in record numbers.”

It’s not exactly Emperor Caracalla pointing to his sword… but IRS’s policies and tactics are not so far off from a police agency.

They disregard the law and the advice of their own counsel. They disproportionately burden honest individuals. They flout due process. And they push people to abandon their citizenship.

These are mafia tactics, plain and simple. And like the Romans, Ottoman Empire, and French monarchy before, the tax system in the Land of the Free has become a desperate farce marked by fear and intimidation.

This is one of history’s obvious marks of a nation that has reached its terminal decline. We cannot seriously expect this time to be any different.

from SOVErEIGN MAN http://www.sovereignman.com/tax/check-out-the-irss-stunning-admission-of-its-own-mafia-tactics-13381/
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Spot The Idiotic Central Banker Statement

With the wild world of central bankers full of double-speak, counter-factuals and well-chosen anecdotes, statements of questionable sanity are not difficult to find. However, Dennis Lockhart, who has already done his optimistic economic damage to stocks this morning just outdid himself. Speaking in his home town, the Atlanta Fed President stated confidently in the Q&A after his speech:

“One of the stupidest things a central banker could do is comment on the stock market.”

Then added:

The stock market is not “a bubble in any way”

“Stupid” indeed, Mr Lockhart…

 


    



via Zero Hedge http://ift.tt/1lWaGur Tyler Durden

Merger Monday – Suntory Buys Beam for 25% Premium ($16Bn)

By Phil of Phil’s Stock World

Mergers are great market boosters.  

They make investors think everything is undervalued in a sector when one company gets bought for high cash premiums and BEAM (Jim Beam) is one of those companies many of us know and love but not, apparently, as much as the Japanese who will be taking over this 110 year-old American Icon. BEAM did not rise 30% last year, making it “cheap” vs other S&P choices and, of couse, the only thing in the World more plentiful than Free Dollars is Free Yen – so why not gobble up some assets while the gobbling’s good? 

The company’s combined portfolio of brands will include Beam’s Jim Beam, Maker’s Mark and Knob Creek bourbons; Courvoisier cognac and Sauza tequila; plus Suntory’s Japanese whiskies Yamazaki, Hakushu, Hibiki and Kakubin; Bowmore Scotch whisky; and Midori liqueur and, if you went from “yeah, I know those” to “who?” while reading that list, then you can see why Suntory values Beam’s distribution network and brand recognition as much as they do the product. 

Suntory is a 1 TRILLION Yen Company and a steady, 4% dividend payer in Japan. A move like this is another bullish signal for the markets as this is the proverbial money coming off the sidelines, when foreign companies begin buying up US companies and Japan is a prime candidate as the Nikkei was up 45% last year – making the S&P look pretty cheap to them. 

If you want to find other companies that look cheap, I suggest the S&P’s 20 Most Concentrated Hedge Fund Holdings, where BEAM was number 7. These are the companies most favored by hedge funds and it’s not the usual suspects:

The Free Money is still out there, as long as you can service a 10-year loan at 3%, any of these companies can be yours and refinancing a decade from now is the next CEOs job – especially if you are a CEO already over 55 and looking to put your stamp on your company with a big move.  

STZ, for example, is a $15Bn company at $80 a share (expect it to move higher on this news) and a series of acquisitions has run it up 110% in the last 12 months. AN is another roll-up story and JCP may seem an odd choice there but, like SHLD, their 1,104 stores are probably worth more than their $2.2Bn market cap (I still prefer SHLD, which is 50% owned by a hedge fund!). 

Following table by Baker Street Capital Management. 

SHLD is making the cut for one of my top 3 picks of 2014, now that it dropped almost 50% since Thanksgiving. Valued at $3.9Bn at $36.71 per share, if we give a $2M valuation to the companies 4,000 stores, we have $8Bn right there along with $2.5Bn worth of brands, a home service business worth $2Bn, Land’s End is a standalone at $1.4Bn, Sears Online is new and worth about $1Bn, Sears Canada and Sears Auto are good for another $1Bn and Inventory alone argues for a few Billion on the Retail side (see excellent Baker Street Report). 

At $8Bn, I was hesitant to call Sears a buy but, at $3.9Bn, a Japanese department store could make them an offer next week. We’re having a special Live Webinar today at 1pm, where we will discuss my top 3 Trade Ideas for 2014.  With SHLD, our intent is going to be playing for a buyout at $6Bn or more ($48+ per share) and it has already been placed in our Income Portfolio (from PSW Member Chat) last Friday at $36.71 with 10 of the Jan 2015 $30/45 bull call spreads at net $6. Our intention is to add short puts (IF) they fall further but, if not, then we’re already $6.71 in the money on our $6 spread with a potential gain of $9 more (150%) at $45. 

Source: Zero Hedge

 

Overall, we’re still “Cashy and Cautious” as the Macros are NOT matching up to the markets’ performance.   Mean reversion can be a real bitch, so there’s no harm in us keeping the bulk of our cash on the sidelines, while we wait to see if this discrepancy can hold up through earnings or not (we’re betting not).  

Long-term, you can’t fight the Fed(s) but we’re not really sure how much longer the Fed, the BOJ, the ECB, the PBOC, etc. can keep playing this game.  The Financial Times points out this weekend that peer to peer lending in China rose from $940M in 2012 to over $4Bn last year and is expected to hit $7.8Bn in 2015 and 6% of the P2P companies in China went bust last year, with many more in distress.  

“The main reasons are the intense competition in the P2P industry, the liquidity squeeze at the end of the year and a loss of faith by investors,” said Xu Hongwei, chief executive of Online Lending House.  He estimated that 80 or 90 per cent of the country’s P2P companies might go bust.

The WSJ reports that “China’s government is gearing up for a spike in nonperforming loans, endorsing a range of options to clean up the banks and experimenting with ways for lenders to squeeze value from debts gone bad.”

Write-offs have multiplied in recent months. Over-the-counter asset exchanges have sprung up as a way for banks to find buyers for collateral seized from defaulting borrowers and for bad loans they want to spin off. Provinces have started setting up their own “bad banks,” state-owned institutions that can take over nonperforming loans that threaten banks’ ability to continue lending.

 

China’s banks reported 563.6 billion yuan ($93.15 billion) of nonperforming loans at the end of September. That is up 38% from 407.8 billion yuan, the low point in recent years, two years earlier

 

India Consumer Price Index (CPI)

Fed-fueled inflation in India is likely to cost Prime Minister Singh his job as prices rose 11% in November and 9.87% in December, fueling voter anger in the World’s largest Democracy.  Despite the big boost from rising prices, GDP in India expanded just 5% last year, the slowest rate since 2003, and will probably grow at that pace in the fiscal year ending March 31, according to central bank estimates.

Our own GDP was boosted in July by a clever recalculation of the value of existing intellectual property, mostly TV and Film assets that added $560Bn to our GDP last year (3.6%).  $560Bn is the GDP of Switzerland, ranked 20th in the World.  Seinfeld alone added Billions to our GDP under the new rules and much of this fancy new math was predicated on companies like NFLX paying Billions of recurring Dollars for old TV shows.  So, as long as NFLX itself, with their p/e of 277, isn’t in a bubble – what can go wrong?  

Have I mentioned we’re Cashy and Cautious?

Click on this link to try Phil’s Stock World FREE! 


    



via Zero Hedge http://ift.tt/1ahSuGU ilene

Japanese Stocks Lose All Post-Taper Gains As USDJPY Dives

The Nikkei 225 is at its ‘cheapest’ relative to the Dow Industrials in the last two months as the behcmark Japanese stock index has now lost all of its gains post the US Taper decision in mid-December. With USDJPY breaking back below 103 and the correlation between it and stocks as high as it has ever been, if BAML is right with its sub-100 target for the FX pair, then the Nikkei could be looking at 14,500 (or an 11% tumble from the highs).

 

Japanese stocks are back below pre-Taper levels… (leaving the NKY the cheapest to the Dow in 2 months)

 

as the correlation between Japanese stocks and the Yen remains as high as ever…

 

Charts: Bloomberg


    



via Zero Hedge http://ift.tt/1ahSu9I Tyler Durden

How A High Freak Algo Halted Bond Trading For 5 Seconds During Friday’s Payrolls Release

It’s just sad now: with every passing day bringing new (and previously unseen) cases of high frequency trading algo-generated market halts or crashes, that none of the regulators are willing to take a stand against this market scourge that we have written about for nearly 5 years now, is a clear indication that the HFT lobby is firmly in control of what were once “capital markets” and that the retail investor is once again, the sacrificial lamb. But while it was one thing for the high freak thugs to control marginal price action through momentum ignition, quote stuffing, hide not slide, flash trades, and all the other well-known manipulative techniques which seemingly are too complicated for the SEC to figure out, in equities where things get really bad is when HFTs start crashing, or at least halting, the bond market at key market inflection points such as during the most important monthly data release, the payrolls release. This is precisely what happened on Friday, when as Nanex clearly shows, a momentum ignition algo sent the ZF (5 Year T-Note future) soaring and resulting in a 5 second – an eternity in today’s nanosecond age – trading halt during the actual release of the BLS report.

How this kind of manipulation continues without penalty, and how this same party can keep getting away with this  – recall from June, “Here Is Today’s 482 Millisecond NFP Leak, The Subsequent Gold Slam And Trading Halts In Treasurys And ES” – is just too mind-numbing to consider any more.

Here is the criminal action from Friday, in pretty charts, courtesy of Nanex:

On January 10, 2013, about 8/10ths of a second before the Labor Department released the widely anticipated Employment Situation Report, trading activity exploded in Treasury futures, sending the prices much higher in less than 1/10th of a second. The buying activity overwhelmed the 5-Year T-Note market causing a stop logic circuit breaker to trip and shut down trading for 5 seconds. During the halt in 5-Year T-Note futures, the news was officially released in Washington, D.C. – meaning that anyone wanting to trade on that news, would have to wait until the halt was lifted almost 4 seconds later (4,000,000 microseconds in high frequency trading lingo).

This isn’t the first time that Treasury futures have been halted (see also 08-Nov-2013 and 07-Jun-2013); however, before June 2013, this was an extremely rare event.

2. All Futures Trades – showing that trading activity before news release was higher than after news release!

3. March 2014 5-Year T-Note (ZF) Futures. Zoom of Chart 1.

4. March 2014 T-Bond (ZB) Futures.

5. March 2014 10-Year T-Notes (ZN) Futures.

6. March 2014 2-Year T-Note (ZT) Futures.

7. March 2014 2-Year Minus 5-Year T-Note (TUF) Futures. This contract also halted for 5 seconds (due to the halt in the 5-Year leg).

8. March 2014 Ultra T-Bond (UB) Futures.

 


    



via Zero Hedge http://ift.tt/1ahStma Tyler Durden

How A High Freak Algo Halted Bond Trading For 5 Seconds During Friday's Payrolls Release

It’s just sad now: with every passing day bringing new (and previously unseen) cases of high frequency trading algo-generated market halts or crashes, that none of the regulators are willing to take a stand against this market scourge that we have written about for nearly 5 years now, is a clear indication that the HFT lobby is firmly in control of what were once “capital markets” and that the retail investor is once again, the sacrificial lamb. But while it was one thing for the high freak thugs to control marginal price action through momentum ignition, quote stuffing, hide not slide, flash trades, and all the other well-known manipulative techniques which seemingly are too complicated for the SEC to figure out, in equities where things get really bad is when HFTs start crashing, or at least halting, the bond market at key market inflection points such as during the most important monthly data release, the payrolls release. This is precisely what happened on Friday, when as Nanex clearly shows, a momentum ignition algo sent the ZF (5 Year T-Note future) soaring and resulting in a 5 second – an eternity in today’s nanosecond age – trading halt during the actual release of the BLS report.

How this kind of manipulation continues without penalty, and how this same party can keep getting away with this  – recall from June, “Here Is Today’s 482 Millisecond NFP Leak, The Subsequent Gold Slam And Trading Halts In Treasurys And ES” – is just too mind-numbing to consider any more.

Here is the criminal action from Friday, in pretty charts, courtesy of Nanex:

On January 10, 2013, about 8/10ths of a second before the Labor Department released the widely anticipated Employment Situation Report, trading activity exploded in Treasury futures, sending the prices much higher in less than 1/10th of a second. The buying activity overwhelmed the 5-Year T-Note market causing a stop logic circuit breaker to trip and shut down trading for 5 seconds. During the halt in 5-Year T-Note futures, the news was officially released in Washington, D.C. – meaning that anyone wanting to trade on that news, would have to wait until the halt was lifted almost 4 seconds later (4,000,000 microseconds in high frequency trading lingo).

This isn’t the first time that Treasury futures have been halted (see also 08-Nov-2013 and 07-Jun-2013); however, before June 2013, this was an extremely rare event.

2. All Futures Trades – showing that trading activity before news release was higher than after news release!

3. March 2014 5-Year T-Note (ZF) Futures. Zoom of Chart 1.

4. March 2014 T-Bond (ZB) Futures.

5. March 2014 10-Year T-Notes (ZN) Futures.

6. March 2014 2-Year T-Note (ZT) Futures.

7. March 2014 2-Year Minus 5-Year T-Note (TUF) Futures. This contract also halted for 5 seconds (due to the halt in the 5-Year leg).

8. March 2014 Ultra T-Bond (UB) Futures.

 


    



via Zero Hedge http://ift.tt/1ahStma Tyler Durden

Supreme Court May Move To Rein In President Obama’s Trampling Of The Constitution

It would appear that there is even a limit for the Supreme Court as to what they will allow President Obama to get away with:

  • *OBAMA’S RECESS APPOINTMENTS QUESTIONED BY U.S. SUPREME COURT

As Bloomberg reports, justices across the ideological spectrum questioned whether President Barack Obama complied with the Constitution when he appointed three members of the National Labor Relations Board during a Senate break.

 

Via Bloomberg,

U.S. Supreme Court justices suggested they may curb the president’s power to make temporary appointments without Senate approval, as the court took up a constitutional standoff between the White House and congressional Republicans.

 

Hearing arguments today in Washington, justices across the ideological spectrum questioned whether President Barack Obama complied with the Constitution when he appointed three members of the National Labor Relations Board during a Senate break.

 

 

A company facing NLRB sanctions, backed by Senate Republicans, says the chamber wasn’t in a recess when Obama made the appointments. Several justices today suggested they accepted that characterization.

 

 

“It really is the Senate’s job” to determine whether the chamber is in recess, said Justice Elena Kagan, one of Obama’s two appointees to the high court.

 

 

The case also may affect 1,000 decisions and orders issued by the NLRB since January 2012, when Obama made the appointments.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/v0Yw-q-KqTE/story01.htm Tyler Durden

Supreme Court May Move To Rein In President Obama's Trampling Of The Constitution

It would appear that there is even a limit for the Supreme Court as to what they will allow President Obama to get away with:

  • *OBAMA’S RECESS APPOINTMENTS QUESTIONED BY U.S. SUPREME COURT

As Bloomberg reports, justices across the ideological spectrum questioned whether President Barack Obama complied with the Constitution when he appointed three members of the National Labor Relations Board during a Senate break.

 

Via Bloomberg,

U.S. Supreme Court justices suggested they may curb the president’s power to make temporary appointments without Senate approval, as the court took up a constitutional standoff between the White House and congressional Republicans.

 

Hearing arguments today in Washington, justices across the ideological spectrum questioned whether President Barack Obama complied with the Constitution when he appointed three members of the National Labor Relations Board during a Senate break.

 

 

A company facing NLRB sanctions, backed by Senate Republicans, says the chamber wasn’t in a recess when Obama made the appointments. Several justices today suggested they accepted that characterization.

 

 

“It really is the Senate’s job” to determine whether the chamber is in recess, said Justice Elena Kagan, one of Obama’s two appointees to the high court.

 

 

The case also may affect 1,000 decisions and orders issued by the NLRB since January 2012, when Obama made the appointments.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/v0Yw-q-KqTE/story01.htm Tyler Durden

Lockhart “Positive” Hawkishness Sparks Tapering Tumble In Stocks (Dow At Lows Of Year)

The Dow is -1.5% in 2014 now – at the lows of the year

 

It was all looking so good. NASDAQ was green for the year (so were Trannies), stocks in general were rising and everyone on TV could proclaim how well the 'market' was handling the taper. Then Dennis Lockhart spoke…

  • *LOCKHART SEES `GROWING CONFIDENCE' IN 2014 OUTLOOK
  • *LOCKHART SAYS U.S. ECONOMY ON `MORE SOLID' FOOTING
  • *LOCKHART BACKS $10 BLN TAPER AS CONFIDENCE IN 2014 GROWS

That's great news right? Wrong? Stocks didn't like it… and NASDAQ rapidly gave up its gains… Fun-durr-mentals remain in control eh? It shouldn't be a big surprise given what Goldman Sachs warned about over the weekend!

The drop actually began at around 1219ET, before Lockahrt's headlines hit Bloomberg at around 1225ET

 

 

as perhaps it was merely a coincidence that he was hawkishly positive and stocks dumped back to JPY carry levels…

 

Which slammed the NASDAQ off its YTD green levels…

 

Late last night the music may have just skipped a major beat after Goldman released a Friday evening note that is perhaps the most bearish thing to come out of Goldman's chief strategist David Kostin in over a year, (and who incidentally just repeated what we said most recently a week ago in "Stocks Are More Expensive Now Than At Their 2007 Peak"). To wit:

S&P 500 valuation is lofty by almost any measure, both for the aggregate market (15.9x) as well as the median stock (16.8x). We believe S&P 500 trades close to fair value and the forward path will depend on profit growth rather than P/E expansion. However, many clients argue that the P/E multiple will continue to rise in 2014 with 17x or 18x often cited, with some investors arguing for 20x. We explore valuation using various approaches. We conclude that further P/E expansion will be difficult to achieve. Of course, it is possible. It is just not probable based on history. 

 

The current valuation of the S&P 500 is lofty by almost any measure, both for the aggregate market as well as the median stock: (1) The P/E ratio; (2) the current P/E expansion cycle; (3) EV/Sales; (4) EV/EBITDA; (5) Free Cash Flow yield; (6) Price/Book as well as the ROE and P/B relationship; and compared with the levels of (6) inflation; (7) nominal 10-year Treasury yields; and (8) real interest rates. Furthermore, the cyclically-adjusted P/E ratio suggests the S&P 500 is currently 30% overvalued in terms of (9) Operating EPS and (10) about 45% overvalued using As Reported earnings.

Cue David Tepper to bring out even bigger greater fools who do believe in his 20x PE multiple "thesis." Cause if 20x works, why not 40x, or 60x, or moar?

* * *

Kostin's full "market is now overvalued" note here


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4eOBOpM1nGw/story01.htm Tyler Durden

Lockhart "Positive" Hawkishness Sparks Tapering Tumble In Stocks (Dow At Lows Of Year)

The Dow is -1.5% in 2014 now – at the lows of the year

 

It was all looking so good. NASDAQ was green for the year (so were Trannies), stocks in general were rising and everyone on TV could proclaim how well the 'market' was handling the taper. Then Dennis Lockhart spoke…

  • *LOCKHART SEES `GROWING CONFIDENCE' IN 2014 OUTLOOK
  • *LOCKHART SAYS U.S. ECONOMY ON `MORE SOLID' FOOTING
  • *LOCKHART BACKS $10 BLN TAPER AS CONFIDENCE IN 2014 GROWS

That's great news right? Wrong? Stocks didn't like it… and NASDAQ rapidly gave up its gains… Fun-durr-mentals remain in control eh? It shouldn't be a big surprise given what Goldman Sachs warned about over the weekend!

The drop actually began at around 1219ET, before Lockahrt's headlines hit Bloomberg at around 1225ET

 

 

as perhaps it was merely a coincidence that he was hawkishly positive and stocks dumped back to JPY carry levels…

 

Which slammed the NASDAQ off its YTD green levels…

 

Late last night the music may have just skipped a major beat after Goldman released a Friday evening note that is perhaps the most bearish thing to come out of Goldman's chief strategist David Kostin in over a year, (and who incidentally just repeated what we said most recently a week ago in "Stocks Are More Expensive Now Than At Their 2007 Peak"). To wit:

S&P 500 valuation is lofty by almost any measure, both for the aggregate market (15.9x) as well as the median stock (16.8x). We believe S&P 500 trades close to fair value and the forward path will depend on profit growth rather than P/E expansion. However, many clients argue that the P/E multiple will continue to rise in 2014 with 17x or 18x often cited, with some investors arguing for 20x. We explore valuation using various approaches. We conclude that further P/E expansion will be difficult to achieve. Of course, it is possible. It is just not probable based on history. 

 

The current valuation of the S&P 500 is lofty by almost any measure, both for the aggregate market as well as the median stock: (1) The P/E ratio; (2) the current P/E expansion cycle; (3) EV/Sales; (4) EV/EBITDA; (5) Free Cash Flow yield; (6) Price/Book as well as the ROE and P/B relationship; and compared with the levels of (6) inflation; (7) nominal 10-year Treasury yields; and (8) real interest rates. Furthermore, the cyclically-adjusted P/E ratio suggests the S&P 500 is currently 30% overvalued in terms of (9) Operating EPS and (10) about 45% overvalued using As Reported earnings.

Cue David Tepper to bring out even bigger greater fools who do believe in his 20x PE multiple "thesis." Cause if 20x works, why not 40x, or 60x, or moar?

* * *

Kostin's full "market is now overvalued" note here


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4eOBOpM1nGw/story01.htm Tyler Durden