The Amazon Tax

In these cash-strapped times legislators everywhere are trying to find creative ways to raise revenue. California, for example, is issuing IOUs to help temporarily ease its cash crunch. Lawmakers in both Rhode Island and North Carolina are trying another tactic: they are trying to tax the internet.

Before we pass judgement, however, a little background is in order. Way back in the mid 1990's, when the nascent internet was just developing "ecommerce" in earnest, Congress decided it was best not to tax the internet so as not to nip in the bud the growth engine that ecommerce was deemed to be. State legislatures were and still are very worried about lost sales tax revenue. If a company has no physical presence in your state, the state can not collect sales taxes from it. So when Amazon ships a book from Washington to Colorado, Colorado can not collect sales tax because Amazon has no presence in CO. Washington does not tax Amazon's sales (unless in WA) because the shipment to CO is inter-state commerce, protected from tax by the Constitution.

Idiot Revisited: Fisher

A while back, last September 9th to be exact and right before the world really fell apart, I took some flack for calling the Dallas Fed President Richard Fisher the economic idiot of the week. If you don't recall why, let me help you. As the world was rapidly deflating in a giant credit crunch, Mr. Fisher's position was described in the Fed's meeting minutes as

"While the financial system remained fragile and economic growth was sluggish and could weaken further, he saw a greater risk to the economy from upward pressures on inflation." [Emphasis mine]

A few months later he changed his tune and accepted that the right thing to do during a credit crunch is not tighten credit, but rather expand credit and liquidity. Thankfully, Bernanke already knew this.

I raise this issue again because Mr. Fisher was in the news again today. Bloomberg reported on some of his remarks this week. I'll quote from Bloomberg's article (again, emphasis mine):

Skeptical of Recovery

I admit it. My brain hurts. The financial/economic world isn’t making a whole lot of sense to me right now. Current consensus is that the worst is over, “green shoots” are taking root, and that growth is just around the corner. The stock market goes up on news deemed “less bad” and interest rates have also risen based on the idea that inflation will return with growth- how can it not return with all the stimulus and liquidity put into the system? Yet somehow I can’t help but remain skeptical of this growth story.

Long-Term Bond Funds

I was just working on a review of a new client’s 401K and I noticed a holding called “XYZ Long-Term Bond Fund”. Fine. Nothing terribly special about that. However it occurred to me just how misleading such a fund name can be to the uninitiated.

Many people not versed in financial matters might see this choice and think “I’m investing for the long-term, this is for me.” In their mind, retirement is far off, perhaps twenty years or so, and investing in 20 or 30 year bonds might seem like a perfect fit. Unfortunately, things aren’t so simple and the funds named like this can be very misleading.

Pirates

Anyone notice we're about to go through a whole summer with out a Pirates of the Caribbean movie? I have. But this posting isn't about that. Pirates, of course, are in the news. They're the new big enemy, the crazier-than-Hitler types we love to read about and wish our governments would squash.