U.S. Days of Rage
Research for Online Investors

by John Dalt

8/17/11

Dad stopped by this morning for coffee, as he does every day.  At 91 years old he walks and drives slower than he used to, but gets around and is still sharp as a tack.  Our conversation turned to my niece who is touring Europe this week.  She told her parents about visiting one of the concentration camps in Germany yesterday.

Dad said he remembered Munich, rubble everywhere.  He told his fellow soldiers, he never wanted to go back.  The war was hell on soldiers and civilians.  He just couldn’t understand how the Germans could have turned on the Jewish people the way they did.  Many claimed they didn’t know the government was executing those people.

I try to be a student of history, and surely lack understanding in some areas.  But the treatment of Jews and “gypsies” by the Third Reich is explainable by a simple concept, populism.  Hitler needed an enemy, someone to vilify.  A group that could be blamed for all that was wrong in Germany.

When a country’s economy is crumbling and unemployment is rampant, a government needs an enemy.  Someone to blame for citizen’s problems comes in mighty handy when government programs don’t help.  The Jews were an easy target.  They lived differently, they owned shops and businesses.  In many cases, they lived in enclaves among themselves.  Some Germans worked for them so they were viewed as a “privileged” class.

Hitler could paint them as the problem, the reason average citizens were not able to provide for themselves.  He would say, “The Jews wouldn’t hire them, to give them a job and provide for their families.”  Or, “They have all the money, but sit on it and won’t help the country pay our debts and get the economy moving again.”

Pretty soon, the average citizen decided the country’s problems weren’t their fault, but the Jews.  If only they would do their “fair share” and help out the motherland, everything would be better.  The government rounded up 17,000 German-Jews and deported them to Poland.  A family member of one of the families was living in Paris and shot a German Diplomat at the German Embassy.

On Nov. 9th, 1938 German Brown Shirts and citizens burned Jewish synagogues, businesses and homes.  This was known as “Kristallnacht” or the “Night of Broken Glass.”  There was so much plate glass broken; it took six months of Belgium production to replace it in buildings that were not completely destroyed.  The Jews were charged one billion Deutsch Marks to pay for the damage.

All told 1,350 synagogues were burned, 7,000 businesses destroyed, thousands of homes ransacked, 91 Jews killed and 30,000 sent to concentration camps at Dachau, Sachsenhausen and Buchenwald.

Flash forward seventy years when “Joe the Plumber” asked candidate Obama about buying a business that would make over $250,000 per year.  Obama told him his taxes would go up but “when you spread the wealth around, it’s good for everybody.”  Today, the “rich” are not doing their fair share according to President Obama.  Businesses are sitting on hoards of cash.  It is their ‘responsibility’ to hire the unemployed and get our country working again.  Warren Buffet told Charlie Rose that the rich should pay more taxes.

A ‘grassroots’ movement is starting with the above poster circulating on the internet.  It looks like the Arab Spring is going to come to America’s Asphalt Jungle next month.  Their goal is to occupy Wall Street, live in tents, and take on capitalism to spread the word for “Worldwide Democracy.”

The President should be happy.  He has his enemy.  He mentions the rich at every campaign stop. We need a balanced approach (higher taxes) to solve the country’s problems.  We need a tax on corporate airplanes.  His campaign for re-election seems to be based on a populist notion that the rich can be blamed for the lagging U.S. economy.  How stupid.  Doesn’t he remember the luxury tax in 1990?

The luxury tax was a 10% tax on yachts, airplanes, jewelry, furs, and expensive cars.  It was fair; it was a way to make the rich pay their fair share.

Within eight months, Viking Yachts closed one of its plants and laid off 1,100 workers.  Within a year the yacht industry lost 7,600 jobs and one-third of the nation’s yacht builders ceased production.  The U.S. went for being the world’s exporter of luxury yachts to an importer.  By 1993 when the tax was repealed, 25,000 workers had lost their jobs.  Viking Yachts had shrunk from 1,400 employees to just 68.

The Congressional Budget Office (CBO) estimated the Luxury Tax would bring in $5 million in additional revenue the first year.  Instead the Treasury lost $24 million in tax collections because of the layoffs, not to mention all the state and local taxes lost.

The market is struggling today with uncertainty how the eurozone goes forward to handle continuing credit problems with weaker countries.  Watch your stops, buy on dips and sell into strength.

Those who cannot remember the past are condemned to repeat it.---George Santayana

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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