Bernanke Volatility
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7/17/12

We are waiting on the Bernank to testify before congress this morning.  The market is up, ready to hang on his every word for some hint of quantitative easing.  Like all good Pavlov’s dogs, we hope to be rewarded if we wait for our master to recognize our need!

Real world politics is winning out over ideology.  French President Francois Hollande followed through on his campaign promises to raise taxes on the wealthy to pay for better pensions and a higher minimum wage that has the effect of raising all wages including those of government workers.

Wealthy families are fleeing France for neighboring countries with lower tax rates.  French citizens will be taxed at 75% on all earnings over $1.25 million.  The previous highest tax rate of 41% is set to increase to 45%.  Sotheby’s Realty reports over 100 French estates sold with values over $2.1 million dollars since the election.  Alexander Kraft, head of Sotheby’s France said “The result of the presidential election has had a real impact on our sales.”

David Cameron, Prime Minister of England, upset the French government last month when he said he would “roll out the red carpet” to wealthy French citizens and businesses that moved to Britain to avoid high French taxes.  Gilles Martin, a Swiss tax consultant, told the local newspaper “Since the socialists came to power in France, I have been deluged with inquiries from rich French people who would rather pay their tax in Switzerland.”

Hollande and his socialist party are charging ahead with their plans to tax the country into submission.  The Telegraph has the story you can read for more details.

Spanish protesters marched through Madrid yesterday, yelling “Hands up, this is robbery.”  Was a criminal act occurring? No.  The protesters are angry over the latest round of pay cuts under Spain’s latest fiscal emergency plan.  Traditionally, Spanish employers (and the government) paid employees a Christmas bonus of one additional month’s pay.  Now the government bonus is gone.

This is a holdup!

Police, firemen, nurses are feeling the pain of the latest austerity measures.  Their wages were frozen in 2010 and now their bonus is curtailed.  The government is also increasing the Value Added Tax (VAT) from 18% to 21%  Miguel Contreras is a nurse and traveled to the capital for the protest.  (Don’t ask how she afforded it.)  AFP reports her saying “It’s intolerable.  The problems of the Spanish state don’t stem from civil servants…It’s unfair and shameful.”

Spain’s two main unions have called for more demonstrations on Thursday.  Spain is set to receive up to $125 billion to bailout their banks from the European Commission.  Many Spaniards are angry the banks are being bailed out, while the government cuts apply to the population.  AFP has the story for further reading.

Secretary of State Hillary Clinton was in Egypt this weekend.  Crowds pelted her motorcade with tomatoes, shoes and shouts of “Monica! Monica!”  She met with the military to encourage them to hand power over to civilians.

Newly elected Muslim Brotherhood President Mohamed Morsi is trying to consolidate power.  Last week he called the parliament back into session to write a constitution.  This was after the Supreme Court ruled one-third of the legislators were illegal office holders and disbanded the body until new elections could be held.

Field Marshal Mohamed Hussein Tantawi, Egypt’s top military official, attended a military ceremony Sunday afternoon after meeting with Clinton.  He told the crowd “Egypt will not fall.  It is for all Egyptians, not for a certain group---the armed forces will not allow that.”

The New York Times reports Christian groups voiced suspicion of Clinton and the U.S.  Youssef Sidhom attended a meeting with Clinton.  He said the ‘discomfort was rooted in the timing of American statements on Egypt, which seemed to “bless democracy” just as Islamists were winning.”

This morning, a Cairo court was in session to decide if the ‘reconstituted’ parliament could write a constitution.  Members of the Muslim Brotherhood were in attendance and shouted “Down, down with military rule.”  They began pushing and elbowing lawyers that were arguing the case before the court.

The presiding judge told the crowd the court would not be intimidated, but suspended the session, then moved and reconvened in a different courtroom.

The market fell into negative territory on Fed Chairman Bernanke’s prepared remarks before he even started talking.  Half way through the morning’s testimony we regained our footing and moved back to the positive column for the day.

Quote:
Republics are created by the virtue, public spirit, and intelligence of the citizens. They fall, when the wise are banished from the public councils, because they dare to be honest, and the profligate are rewarded, because they flatter the people, in order to betray them.---Justice Joseph Story

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