Goldman got $10 billion in taxpayer cash in 2008, plus loan guarantees. Yet according to Bloomberg, they only paid $14 million taxes on $2.3 billion in profits. Their effective tax rate went from 34% in 2007 to just 1% in 2008. How’d they do it? Tax credits and, here’s the key “Changes in geographic earnings mix“.
I’m not a CPA, but that screams “tax shelter” to me. According to the Bloomberg piece,
The rate decline looks “a little extreme,” said Robert Willens, president and chief executive officer of tax and accounting advisory firm Robert Willens LLC. “I was definitely taken aback,” Willens said. “Clearly they have taken steps to ensure that a lot of their income is earned in lower-tax jurisdictions.”
It’s good to know that we’re giving trillions in taxpayer dollars to companies who use offshore tax havens. Let’s keep the bonus money flowing to these guys too. The average Goldman Sachs employee got a bonus of $600,000 in 2007, on top of base salary. That added up to $18 billion, double the average on wall st.
I’m agnostic, but will continue to pray nightly for executive bonus clawbacks. It looks like taxpayers are about to shell out $1-$2 TRILLION to buy the toxic assets of these banks. The least we can ask is a return of their ill-gotten gains.
Bailed-Out Firms Have Offshore Tax Havens
GAO: US Firms Use Tax Havens
Hank Paulson’s Ultimate Tax Shelter
Dutch Bank Funded U.S. Tax Shelters
No conflict of interest there. Mr. Geithner’s pick, Mark Patterson, just left Goldman in April. I had hoped for a more unbiased team from Mr. Obama. But this seems like a blatant departure from his pledge to exclude lobbyists from areas where they would be biased. Excerpt:
Melanie Sloan, executive director of the Citizens for Responsibility and Ethics in Washington, said President Obama was retreating from his own ethics rules barring lobbyists from working on the issues they lobbied about during the previous two years. “It makes it appear that they are saying one thing and doing another,” she said.
Goldman Sachs is up 13% today. Let’s keep that revolving door moving.
I’m what you might call a “contrarian”. So when the treasury dept announced that American taxpayers would end up owning the so-called “bad”, or “worthless” parts of banks, I was thrilled. This is exactly the type of situation that Warren Buffet would pounce on. When there’s blood in the streets, buy as much of it as you can, preferrably from the guys doing the killing.
I’m actually working with my accountant on ways to increase my tax liability, and maximize my ownership stake on these “bad” bank assets. I call this the “1d10t plan”, or 1d10tk for short.
And when I saw bank stocks shoot up immediately following the details of the plan, I laughed with joy. Why are suckers buying banks? They already sold us, the mighty taxpayer, all those high-yielding assets that justified their employees’ ridiculously high salaries. Time will tell, but I’m satisfied just knowing that the taxpayer got the better end of the deal. Pretty soon, we’ll ALL be making John Thain money.
Do these sheeple really think that our government would pay unncessary premiums for worthless toxic assets, thereby blatantly ripping off taxpayers and helping their debt-ridden corporate pals? HAH! Like that could ever happen.
China is one of the few places I want to own stock these days. Why? Because I think their economy is most well-positioned to weather this storm. Chinese ETFs are down over 50% from their high last year. Buying opportunity or value trap? I’m going with buying opp. China is a rising global power, and they can tap significant public/private savings to stimulate their domestic economy during the downturn.
China’s average savings rate is around 50%. Most analysts view this as a point of weakness for China, because people aren’t buying stuff they don’t need with credit they don’t deserve. In China, people usually save to buy things they want. Analysts don’t seem to understand this alien concept. All they know is that it sounds boring, and slow! But there just might be something to it.
The two most popular Chinese ETFs are FXI and GXC. But both of these are very heavily weighted towards financials, 41% for FXI, and 30% for GXC. I already own enough banks in America, courtesy of my taxpayer dollars (poorly-run ones, whose financial results are unintelligible. Hmmm, maybe Chinese banks are worth a look too?). Anyways, I’d rather focus on China’s overall economy, particularly domestic spending and growth.
PGJ is a Chinese index fund that seems to fit the bill. It has only 6% exposure to financials, and has been around since 2004. It’s based on the 102 stocks of the Halter USX China Index. It’s comprised of Chinese companies who get the majority of their revenue domestically.
I’ll be averaging into a PGJ position over the next few months. The bottom line is that I want some more exposure to China, but not to banks and finance. Picking individual Chinese stocks is hard, I only own two: BIDU and AOB. So PGJ seems like a good index if you’re looking for non-financial diversification.