Morning in Arizona

Morning in Arizona
Rainbows over Canyonlands - Dave Stoker

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Showing posts with label P&G. Show all posts
Showing posts with label P&G. Show all posts

Thursday, November 16, 2017

And It’s Back

Financial Review

And It’s Back


DOW + 187 = 23,458
SPX + 21 = 2585
NAS + 87 = 6793
RUT + 22 = 1486
10 Y + .03 = 2.36%
OIL – .16 = 55.17
GOLD + .70 = 1279.30

Cryptocurrency

  • Number of Currencies: 905
  • Total Market Cap: $225,401,252,418
  • 24H Volume: $11,650,534,328

Top Cryptocurrencies



Name Symbol Price USD Market Cap Vol. Total Vol. % Price BTC Chg. % 1D Chg. % 7D
Bitcoin BTC 7,874.3 $131.56B $5.00B 43.18% 1 +8.26% +9.30%
Ethereum ETH 329.30 $31.59B $784.75M 6.77% 0.04184 -0.48% +2.37%
Bitcoin Cash BCH 900.81 $15.21B $1.98B 17.07% 0.114825 -23.91% +36.44%
Ripple XRP 0.22450 $8.75B $1.00B 8.67% 0.00002874 +7.52% +3.69%
Litecoin LTC 70.980 $3.77B $318.04M 2.75% 0.00887902 +12.13% +7.47%
Dash DASH 419.57 $3.21B $96.41M 0.83% 0.0530133 -0.34% +27.02%
IOTA MIOTA 0.84219 $2.37B $135.08M 1.17% 0.0001082 +7.02% +54.52%
NEO NEO 28.700 $1.89B $40.65M 0.35% 0.00367968 -2.02% -8.87%
Monero XMR 120.02 $1.84B $73.94M 0.64% 0.0152058 -0.80% +0.57%
NEM XEM 0.20351 $1.78B $15.98M 0.14% 0.00002515 +0.60% -7.95%

If you have been following the on-again, off-again path of the tax cut plan on Capitol Hill, it is becoming clear that a tax cut is not fully priced into stocks. Yesterday – bad news about the plan as the Senate linked another Obamacare repeal effort to the tax plan and the first Republican senator defected.

Today – the House passed their initial version of the Tax Cuts and Jobs Act. That certainly wasn’t the only factor contributing to the bounce back in stocks, but it was noteworthy.

Cisco Systems leapt 6.2 percent, its biggest move since February 2016, after the internet gear maker reported a bigger profit than analysts expected and said revenue should grow in its next quarter after two years of declines.

Wal-Mart jumped over 10 percent after the retail giant reported strong third-quarter results and raised its annual profit outlook. Walmart, which has been challenging Amazon by adding products, partners and perks, saw online sales jump 50% in its most recent quarter. Food sales were strong as well, which means that Amazon’s purchase of Whole Foods makes even more sense.

Walmart’s moves to revamp its stores and hone its customer service appear to be paying off as sales at U.S. stores open at least a year — a key industry measure of financial performance — rose 2.7%. Traffic, which has been dipping at many retailers as more consumers shop online, climbed 1.5%.  Walmart shares posted their biggest gain since May 2016.

Procter & Gamble was up 1.3 percent after activist investor Nelson Peltz said an independent count showed he won election to the consumer products company’s board.

Cisco, P&G, and Wal-mart are components of the Dow Industrial Average, so…

Technology sector stocks, which have done far better than the rest of the market this year, accounted for some of the biggest gains in early trading. Data storage company NetApp led the sector, picking up about 15% on a strong earnings report.

The House of Representatives passed tax legislation by a partisan vote of 227-205. That does not mean we have a new tax code. Now, the legislation moves over to the Senate, which has its own, different version. The Senate might vote next week. And because the Senate slides into the driver’s seat, the House was able to pass a badly flawed bill surely would not have passed on its own merits.

But now, Republican representatives can go home and tell their base and their donors that they voted for the tax bill, without having to accept the responsibility of the bill inflicting damage on their constituents.

A new congressional analysis found that the Senate’s revised tax bill would raise taxes on lower-income Americans within a few years. The Joint Committee on Taxation projected that Americans earning $30,000 or less would see their taxes increase beginning in 2021, if the Senate bill becomes law. The committee also projected that Americans earning $75,000 or less would face large tax increases in 2027, after the individual tax cuts expire.

The updated analysis stems from the Senate’s last-minute inclusion of a provision that would repeal the Affordable Care Act’s requirement that most people buy health insurance.

The repeal would lead many lower-income Americans to choose not to buy insurance, and thus not claim tax subsidies that currently help them defray the costs of health coverage. For those that remain, their insurance premiums would go up, probably by 10% or more – wiping out any tax savings and resulting in a net loss.

And because of a 2010 budget law, the bill would trigger automatic cuts to Medicare and other important programs that low-income and middle-class Americans depend on. Medicare used to be considered the “third rail” – you don’t cut Medicare without incurring significant blowback. So, who benefits from the tax plan? The rich and corporations.

Few voters seem fooled. Just 25 percent approved of the tax plan in a recent Quinnipiac poll, while 52 percent said they disapproved of it. Even some Republican lawmakers are beginning to catch on that this tax-cut plan is politically radioactive. The Senate bill is already teetering, with one Republican senator opposed and others voicing concerns. The GOP bill can lose no more than two senators to advance.

Thirteen Republican representatives voted against the bill today, all but one from states that have high income and property taxes. The House bill included a compromise on state and local tax deductions. The Senate bill does not accept the House compromise on state and local tax deductions, or SALT; it eliminates the break entirely, which could cause an exodus of Republican votes in the House if that were to be in the final bill.

And the House bill does not repeal Obamacare’s individual mandate, which the Senate added to its proposal earlier this week.

Wall Street dropped the past couple of days as the tax bill hit a couple of obstacles. Wall Street cheered today as the House passed a bill, but it looks like most of the tax plan has been priced into the market already and the risk of legislation failing seems far greater than the reward of legislation passing. If positive news continues, we could see another bull run from the recent dip, but this is also a good time for caution.

House passage of the tax bill has another – likely unintended – consequence. It might kill off any chance for infrastructure spending. The House bill ends tax breaks for private activity bonds, a key part of public-private partnerships in projects ranging from roads to low-income housing. The administration has said it wants to leverage those partnerships to reduce the direct cost of the president’s building plan”

The National Association of Home Builders’ monthly confidence gauge rose two points to 70 in November. That was the second-highest reading since the housing bubble of 2005. The sub-index that tracks current sales conditions also rose two points, to 77, but the gauge of sales over the next six months dipped one point to 77.

The home-builder lobby has been critical of recent developments in the tax reform debate, arguing that reform will quash demand for new homes. The group warned the bill proposed by House Republicans “eviscerates existing housing tax benefits by drastically reducing the number of home owners who can take advantage of mortgage interest and property tax incentives.”

Arizona released data on nonfarm employment for October. The state unemployment rate dropped from 4.7% in September to 4.5% in October. The state added 18,700 jobs for the month. Arizona Nonfarm employment grew by 1.2% (32,000 jobs) over the year in October. The Private Sector accounted for 32,200 jobs (1.4%). Government employment decreased by 200 jobs in October.

San Francisco Fed President John Williams says global central bankers should take this moment of “relative economic calm” to rethink their approach to monetary policy, warning that to fight the next recession, as with the last, they would need to do more than just cut interest rates.

With many major economies facing slower growth and thus lower interest rates even when unemployment is low, central banks will need to find ways to stimulate their economies that work even when many other countries are also trying to boost their growth.

Williams says strategies that central banks should consider including not only the bond-buying and forward guidance used widely in the last recession, but also negative interest rates that was used in some non-U.S. countries, as well as untried tools including so-called price-level targeting or nominal-income targeting. Central banks may also want to consider setting a higher inflation target.

Meanwhile, Federal Reserve Governor Lael Brainard said today that traditional lenders should demand that online financial companies protect consumer privacy and money interests Banks often pay tech companies for the information they gather on borrowers.

For that reason, those lenders can set high standards in consumer protection and privacy. Brainard said, “Banks have a stake in ensuring that their vendors and third-party service providers act appropriately, that consumers are protected and treated fairly, and that the banks’ reputations aren’t exposed to unnecessary risk”

Sandell Asset Management proposed to take Barnes & Noble private with the help of current shareholders and $500 million in debt financing in a deal that valued the company at more than $650 million, or over $9 per share. But the bookstore chain said the offer did not appear to be bona fide and seemed unlikely to happen.

Casino operator Caesars Entertainment said it would buy privately owned casino and horse racing company Centaur Holdings LLC for $1.7 billion in cash to expand in Indiana.

Emerson Electric raised its cash-and-stock offer to acquire Rockwell Automation to $29 billion, ratcheting up pressure on its smaller peer to engage in deal talks.

Tesla short sellers finally made some money this month. They’ve raked in $890 million in mark-to-market profits since the start of the fourth quarter, according to data compiled by the financial-analytics firm S3 Partners. At least until today.

Tesla bounced back, a little, enough to shake out at least a few short-sellers. In a couple of hours, Elon Musk will unveil a new Tesla a self-driving big rig semi-trailer (electric, of course). The Tesla semi was anything but a 10-4-good-buddy move for Tesla.

While many observers expected a pickup truck to join the carmaker’s lineup of all-electric cars, the big rig was a surprise. Musk tweeted, that the truck would “blow your mind clear out of your skull and into an alternate dimension.” Which seems like a totally fine and not at all hyperbolic way to manage expectations.

Thursday, April 23, 2015

Chips and Salsa

Financial Review

Chips and Salsa


DOW + 20 = 18,058
SPX + 4 = 2112
NAS + 20 = 5056
10 YR YLD – .02 = 1.95%
OIL + 1.32 = 57.48
GOLD – 1.00 = 1193.40
SILV + .02 = 15.85

Record highs on Wall Street today. On March 10, 2000 the Nasdaq Composite Index reached an intraday high of 5,132 and closed at 5,048. It only took a little over 15 years to get back to those levels. The Nasdaq is now up 6.8% for 2015. The Nasdaq Composite now trades at 30 times earnings, versus a multiple of 190 in March 2000; not exactly a value play, but not dot-com frothiness. The S&P 500 hit a new intraday high but could not take out the 2117 record close from early March.

The number of people who applied for regular state unemployment-insurance benefits ticked up 1,000 to 295,000 in the week that ended April 18. Also, the government said continuing claims, which show the number of people already receiving weekly unemployment checks, rose 50,000 to 2.33 million in the week that ended April 11.

Sales of new single-family homes dropped 11.4% to 481,000 in March, hitting the slowest pace since November.  Sales of new single-family homes increased about 19% over the past year. However, sales still remain almost 40% below a long-term pace set over 20 years.

Financial data firm Markit said its preliminary U.S. Manufacturing Purchasing Managers’ Index fell to 54.2 in April from the final March read of 55.7. A reading above 50 indicates growth in the sector. And as the manufacturing sector in the US expands, it is contracting in China.

China’s factory activity declined at its fastest pace in a year, according to HSBC/Markit’s Purchasing Managers Index. China said it will open up bank card processing to foreign firms, sending shares of Visa and MasterCard higher. Morgan Stanley thinks the firms could begin operations in China in late 2016 or early 2017. China said Thursday it will scrap export duties on rare earths and some metal products, including molybdenum, tungsten and some aluminum products, effective May 1. Beijing is attempting to boost exports, which fell 15% year-over-year in March.

Tensions continue to escalate in the Middle East. Earlier in the week, Saudi Arabia announced a cease fire in Yemen; that lasted about one day and then the Saudis resumed their airstrikes. The Saudi escalation of its Yemen campaign is producing exactly the kind of geopolitical tensions that push oil prices higher. Toss in US aircraft carriers and a few destroyers in close proximity to Iranian Navy boats that look like they are trying to deliver arms to the Houti rebels in Yemen, and it makes for a volatile mix. Oil prices are near the highs for the year.

The world is still a crazy place. Reuters reports the Russian Defense Ministry claims US troops are now in the conflict zone of eastern Ukraine to train Ukrainian combat troops. And the Taliban has announced that it will launch its annual spring offensive in Afghanistan later in the week; like it’s a supermarket opening or something.

Meanwhile, five years ago to the day, Greece officially submitted a bailout request…Today, Tsipras chats with Merkel. The Greek and German leaders will meet in Brussels in an attempt to reach a deal on Greece’s debt. The longer these negotiations have dragged out, the closer the opposing sides get to some sort of resolution; they haven’t worked it out yet, but they are closer, maybe.

U.S. and British regulators fined Deutsche Bank $2.5 billion and its British subsidiary pleaded guilty to criminal wire fraud for its role in a scam to manipulate the London Interbank Offered Rate (Libor) and its Euribor cousin – together benchmarks for hundreds of trillions of dollars of financial products and loans worldwide.

Brazil’s state-controlled oil giant, Petrobras, reported its long-delayed quarterly and annual results, which have been stalled by a corruption investigation. The overall loss was $7.2 billion in 2014; Petrobras is writing off $15 billion in overvalued assets and $2 billion for bribery related costs. Federal prosecutors have accused the former executives of illegally “diverting” billions from the company’s accounts for their personal use or to pay off officials. More than 80 people have been charged with bribery and money laundering during the criminal investigation, dubbed “Operation Car Wash.”

Dozens of senior officials and politicians are still under investigation. Brazilian President Dilma Rousseff was chairwoman of Petrobras during many of the years when the alleged corruption took place. She denies any knowledge of the corruption. Her popularity has sunk to record lows because of the scandal and Brazi’s poor economic performance. Dozens of other companies including construction and transportation firms are implicated in the scandal, and over 750 projects are now under investigation. And there is a class action suit, of course.

The Comcast-Time Warner merger is in jeopardy. The FCC has called for a hearing on the Comcast-Time Warner merger. According to The Wall Street Journal, the hearing is a sign the FCC feels the $45 billion deal is not in the best interest of the public. The Department of Justice has also recently spoken out against the deal. And today, Bloomberg reported that Comcast will drop the deal.

Today is one of the busiest sessions for earnings reports, so let’s dig in:
After the close, Google reported weaker-than-expected first-quarter profits, hurt by slowing growth and the rising U.S. dollar. (note – this is becoming a common theme.) Google reported revenue of $17.2 billion, up 12% from $15.4 billion in the year-ago period. Profit of $3.6 billion, up from $3.4 billion. On a side note; today marks the tenth anniversary of the first YouTube video. YouTube’s co-founder, Jawed Karim, posted the video of his visit to the zoo. Google now owns YouTube.

Microsoft revenue rose 6.5% from a year earlier to  $21.7 billion, thanks to the inclusion of sales from Nokia’s mobile-phone business, which Microsoft didn’t own a year ago. Microsoft reported net income of $4.9 billion, or 61 cents a share – in line with estimates. That was down from net income of $5.6 billion, or 68 cents a share, a year earlier.

Amazon posted a sales jump of 15% to $22.7 billion, compared with $19.7 billion a year earlier. And they still managed to lose $57 million.

Starbucks reported same store sales were up 7% in the Americas. Earnings and revenue jumped 18%; profits matched estimates.

General Motors came up short on both the top and bottom line; the problems came from Russia, Europe and South America. Despite ongoing legal problems with deadly ignition switches, GM reported strong sales in North America. The big seller is the Tahoe, a big SUV; no rebates, no incentives, 18 MPG. How quickly we forget $100 a barrel oil.

Caterpillar earnings and revenue came in well above estimates thanks to cost cutting and improved sales in North America. CAT raised its earnings per share outlook for the year.

PepsiCo posted net income was flat at $1.2 billion. Revenue fell 3.2% to $12.2 billion. Earnings per share were 83 cents, missing estimates of 79 cents. PepsiCo says currency exchange rates cut its profit by 11 percentage points this year.

3M revenue and earnings missed estimates with sales down 3% from a year earlier. They blamed a stronger dollar.

Procter & Gamble posted quarterly earnings in line with expectations. But revenue came up short for the fifth straight quarter.  P& G blames the strong dollar and warns foreign exchange rates will continue to be a drag on both sales and profit this year.

Southwest Airlines said its first-quarter profit nearly tripled but forecast a decline in unit revenue for April.

Freeport-McMoRan reported a first-quarter loss of $2.5 billion as it recorded one-time charges of $2.4 billion, mainly for the reduction of the carrying value of its oil and gas properties.

A common theme in earnings reports is a strong dollar hurting sales and profits of US companies. Procter & Gamble, the world’s largest consumer-products maker gets the majority of its sales outside North America, leaving the company vulnerable to a dollar that has gained against a number of currencies. 3M, the maker of Post-it notes and Scotch tape earns almost two-thirds of its revenue outside the U.S. General Motors’ struggled with overseas sales. Freeport-McMoRan grappled with lower commodity prices, directly tied to a strong dollar.

You might think that a strong dollar is about to destroy corporate America, and yet the stock market is hanging out in record high territory. Even though we know that companies use a stronger dollar as a scapegoat, it really doesn’t tell us much about their earnings. It is extremely difficult for an individual investor to know if a company was really hurt or just a little hurt by currency exchanges. You don’t know how much a company actually buys in the local currency; for example, if McDonald’s buys its beef and makes its bread in the same country where they sell hamburgers, then it shouldn’t be a big hit to profits. For others, it might be a very big deal indeed. More often than not, it just muddies the earnings news.

Of the 169 Standard & Poor’s 500 companies that have reported so far, 71 percent beat earnings estimates, according to data from Thomson Reuters; and most estimates had been ratcheted lower. But they did so with help from share buybacks, cost-cutting and other measures, instead of strong sales growth. Despite those beats, analysts are now trimming their profit and sales expectations for the second quarter. Revenue in the first quarter has disappointed – just 44 percent of the early reporters topped analysts’ forecasts – and sales are expected to have dropped 3.3 percent from a year ago. Of the early reporting companies for the first quarter, 59 have beaten earnings estimates but missed on sales, with the trend seen in a wide range of sectors.

Second-quarter S&P 500 earnings could slide 1.6 percent from a year ago. That is down from an April 1 forecast for a decline of 0.5 percent. Sales are forecast to fall 3.9 percent in the second quarter, compared with an April 1 estimate for a 2.8 percent decline. Third- and fourth-quarter estimates are also down since the reporting season began. There could still be negative surprises ahead, and most S&P 500 energy companies have yet to post results, and it’s a safe bet that there will be some ugly numbers in the oil patch.  Stay tuned.

Friday, October 24, 2014

A Solid Week in a Rocky Month

FINANCIAL REVIEW

A Solid Week in a Rocky Month

DOW + 127 = 16,805
SPX + 13 = 1964
NAS + 30 = 4483
10 YR YLD – .01 = 2.27%
OIL – .80 = 81.29
GOLD – .90 = 1232.00
SILV + .01 = 17.31
Last Friday we covered some technical analysis of the equity markets, looking at support and resistance, as well as a short-term bullish pattern, a morning star that had formed. Sure enough, this week provided the follow through on that bullish pattern. Major indices snapped a 4-week string of losses. For the week, the Dow gained 425 points, or 2.5%. The S&P gained 78 points, or 4.1%. And the weekly gain for the Nasdaq was 225 points or 5.2%.
So, where do the markets go from here? The pullback that started September 19th never really materialized into a full blown correction, and there is a feeling that there should be more to the downside, but as of today the markets seem to be firmly in retracement mode. Better to let the market tell you when that retracement ends than to try to impose your opinions on the market. And then remember that we are almost through the treacherous month of October.
The Stock Traders’ Almanac reminds us that “in 64 years before 2014, DJIA and S&P 500 have both declined 26 times in October. However, these October declines were followed by 23 DJIA November-December gains averaging 4.0%. S&P 500 November-December gains have occurred 21 times with a slightly softer average advance of 3.4%. So despite all of October’s horrors, the market has historically finished out the year with a rally far more frequently than not.” A rocky October tends to be followed by solid performance. Again, with the caveat that these are probabilities, not guarantees.
According to Thomson Reuters data through Friday morning, of 205 companies in the S&P 500 that have reported earnings, 69.8% have topped analyst’s expectations, above the 63% rate since 1994 and the 67% rate for the past four quarters. On the revenue side, 59.8% have beaten expectations, slightly below the 61% rate since 2002 but above the 58% rate for the past four quarters. Bloomberg reports that 80% of S&P 500 companies that have released results this season beat profit projections, while 61% surpassed revenue estimates. I think that this means that earnings are so manipulated and analysts’ estimates are a hot mess of smoke and mirrors.
To recap some of the big earnings news this week, Amazon, IBM, and McDonald’s were among the bigger disappointments; Apple, Microsoft, Caterpillar, and 3M were among the bigger earnings winners.
Today’s earnings reports included Procter & Gamble which reported fiscal first-quarter earnings excluding items of $1.07 per share, up from $1.04 a share in the year-earlier period. Revenue slipped to $20.7 billion from roughly $21.2 billion a year ago, missing estimates. P&G announced it will split off its Duracell battery business into a separate company.
UPS reported earnings of $1.32 per share on revenue of $14.2 billion, compared to year ago earnings per share of $1.16 on revenue of $13.5 billion. Earnings and revenue were slightly better than estimates. UPS is having a hard time keeping up with demand. UPS actually ships a lot of packages by rail, and they says major railroads have been struggling to meet demand because the economy is growing, oil is being shipped by rail, and a record harvest means more food is being shipped by rail. Last year a last-minute surge in online consumer promotions left an estimated 2 million express packages stranded on Christmas Eve. And so this year, if they have a similar last minute surge, they say they will charge a premium, or might even refuse to deliver. So much for loving logistics.
Bristol Meyers Squibb reporting earnings of $721 million in the 2014 third quarter, or 43 cents per share, compared with $692 million, or 42 cents per share, in the same period a year ago.
Ford Motor posted third quarter profit of $1.2 billion before taxes, down $1.4 billion compared with a year ago. Net income was $835 million, a decrease of $437 million compared with a year ago. Excluding one-time costs, (also known as the cost of doing business) Ford’s earnings were 24 cents a share, beating estimates of 19 cents. The future for Ford will be riding on the redesigned aluminum body F-150 truck, which will hit showrooms in December.
Several companies that have reported are saying that the strong dollar has hurt results. Amazon, Apple, IBM, McDonald’s, Ford, and P&G all say the stronger dollar hurt results. 3M said earnings were reduced by 2 cents per share. Ford said the dollar cut pre-tax profit by $166 million. IBM said it wasn’t really hurt by the dollar in the third quarter because it hedged, but the hedge is expiring and they will feel the pinch in the fourth quarter. The Dollar Index has been in a strong uptrend since May, finishing this week at 85.79. In July, August and September, the Dollar Index was on a parabolic rise. It now looks like we’re seeing some consolidation in October, with the uptrend still in place.
Sales of new single-family homes rose to a six-year high in September, but August new home sales numbers were revised quite a bit lower, and so it looks like a possible bump in the data. The Commerce Department said sales increased 0.2% to a seasonally adjusted annual rate of 467,000 units, the highest reading since July 2008. Compared to September last year, sales were up 17%. August’s sales rate was revised down to 466,000 units from 504,000 units. The median new home price fell 4.0% to $259,000 from a year ago.
The Labor Department reports seasonally adjusted median weekly earnings were $797 in the third quarter, up more than 2% from a year earlier. That’s a speedier pace than annual growth of less than 1% in the second quarter. This is a measure of full-time workers’ wages and salaries. However, once inflation is factored in, weekly earnings, measured in 1982-1984 dollars, reached $335 in the third quarter, just equaling this barometer of pay in the first quarter of 2008. Which is another way of saying that most people are earning less today than they were 6-1/2 years ago.
Federal prosecutors are investigating Japanese auto parts maker Takata for misleading regulators about the number of defective air bags it sold automakers, including Toyota and Honda. Earlier this week the National Highway Traffic Safety Administration announced a recall of about 4.7 million cars, then expanded the recall to 7.8 million. The Center for Auto Safety has written to federal regulators demanding a criminal investigation into whether Honda properly report the deaths that occurred in its cars. Now a Congressional committee will begin an investigation because everybody is starting to figure out that it is bad when an airbag explodes and sprays shrapnel at drivers. Who knew?
A 10-year veteran Internal Revenue Service (IRS) attorney has sent a letter to Treasury Secretary Jack Lew demanding a congressional audit of the IRS to investigate the agency’s role in allowing US corporations to illegally avoid paying billions of dollars in taxes even as it cracks down on individuals and small businesses. The whistleblower alleges that senior IRS officials have “intentionally undermined the authority of the IRS Whistleblower Office.” Not only that, but the agency has avoided taking action “in cases involving billions in corporate taxes due.” Laws are not applied to large corporations, she writes, but are applied with “draconian strictness to small business, the self-employed, and wage-earning individuals.”
In one case, the IRS was auditing a US company that fraudulently underreported its profits by nearly $3 billion annually. On behalf of the IRS, the whistle-blower had drafted a detailed report proving the fraud, but the agency “closed its audit without ever asking a question or reviewing the documents submitted.” As much as $4 billion in taxes were lost.
In another instance, “a solid case” involving $6 billion in taxes due was “inexplicably shut down,” according to IRS criminal investigation agents. Instead, detailed evidence of fraud and malfeasance “in hundreds to thousands of specific accounts” was ignored. The agent blamed links between senior IRS executives and outside corporations associated with the case.
In the third case, $3 billion in taxes were uncollected and now accumulate year after year. The US company claimed to the IRS that it earns all profits outside the United States, which are then invested overseas, while informing foreign jurisdictions that it earns nothing outside the United States. Although US laws tax Americans “on worldwide income,” the IRS simply closed the investigation despite clear evidence of taxable income.
The IRS Whistleblower Office was created by Congress in 2006 to encourage leaks of evidence concerning large-scale corporate tax fraud. According to the IRS itself, the United States loses $450 billion a year due to tax evasion. But the actual sum is probably much higher. Sounds like excessive lobbyist influence or a revolving door between the regulators and the regulated.
Of course the headline story today was that a doctor who had worked with Ebola patients in Africa, returned to his home in New York City and he has now tested positive for Ebola. I read a serious financial analyst who said that the spread of the disease could limit economic growth, and he thought that might have held back stocks today from bigger gains. Certainly, Ebola has the potential to create all sorts of problems, but so far damage has been very limited in the US: one death, which is one too many; but compare that to the two students killed at a high school in Seattle today, or the 4 deaths from exploding Takata airbags, or the 29 deaths and multiple injuries associated with the GM faulty ignition switch recall. In the past week about 700 people died in auto accidents, 602 fell down and never got up; 1,620 died of complications from diabetes; 13,140 died from heart disease; and 3490 died from lung cancer in the past week. And somehow the stock market was up on the week.
We finish with the “Irony of the Week”, and while there were many strange and ironic happenings this week, the winner is Reynolds American. The cigarette company has informed employees that beginning in next year, they will no longer be able to smoke indoors at corporate offices and buildings.
And what about next week? Well, the Federal Reserve FOMC will meet to determine monetary policy, so that should be entertaining.