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Greece is in the midst of a negative compounding story and the only relief in sight is a short to medium term break from the Eurozone within about six months’ time, says Steen Jakobsen, Chief Economist Saxo Bank.

“Although I want Greece to have all the best things in the world I think ultimately it will need to do something which is outside the box,” says Steen.

He believes an exit from the Eurozone within six months is a very likely scenario considering Europe’s desire to try to keep Greece alive for some time yet, particularly ahead of the upcoming German election. Until then Steen sees Europe going through some rough patches before a recovery begins in 2013.

A worst place is ahead for Europe
“The first quarter of next year will be the worst quarter of the debt crisis in terms of growth and the amount of headwind to austerity and the lack of ability to move to a mandate for change,” says Steen. “We will see recovery inside the next four quarters in Europe but we need to go to a worse place first.”

Disintegration and desperation
The main problem for Greece is that none of the promised austerity measures have been implemented. And with no one willing to give up their entitlements this has created a negative compounding story where everything disintegrates and gets worse month by month as seen by the recent social tensions.

Meanwhile, the rest of Europe is so desperate for Greece to continue as if nothing has happened and so it is very likely that within the week Greece will be paid its next tranche of financial aid in order to stay afloat, says Steen.

I keep the position for a while. 

 

Extra dividend to come, Insider buying recently and attractive valuation. 

 

 

Bottom line: For the average wage earner, expiration will raise taxes paid by roughly $2,000 - $3,000 per year.  The tax on dividends will go from 15% to the individual’s (couple’s) rate on ordinary income. The tax on capital gains will go from 15% to 20%, plus a 3.8% surcharge for high-income tax payers.. The inheritance tax will go from 35% with a $5 million exemption, to 55% with a $1 million exemption.

 

Consumers, business owners, and investors all focus on after-tax dollars; after all, it’s the only money you can spend or invest. So the above changes are likely to have the following consequences: Taxpayers will have less money to spend. If you take a look at your current paycheck and subtract 5%, you’ll get some sense of what your paycheck will look like after January 1.

 

If you recall that the 2009 recession resulted from consumers cutting back on spending (voluntarily) by 5%, you’ll get an appreciation for what may happen when their incomes drop by 5% due to increased taxes Dividends will be worth less than before. Consequently, stocks will be worth less than before. As the Federal Reserve has concentrated on driving interest rates lower over the past three years, retirees and other people with savings have gone further and further afield trying to find useful “incomes.” We were recently told of a search for “creative sources of yield,” which implies that the search continues, but is running short of ideas…usually a very bad sign.

 

The higher tax rates on capital gains are likely to result in a rush to realize capital gains through the sale of stocks or businesses before 12/31/12. Those not selling before this date, then, are more likely to allow the tax to be deferred by postponing the realization of capital gains (through the sale of assets) in the future. Many small business owners pay company taxes at their rate as individuals. With more money going to taxes, they will have less money to pay in wages. When faced with a higher tax bill and more regulation, a greater number of small business owners will choose to retire earlier than planned. Over the years, we’ve observed that when tax rates exceed 45%-50%, people do strange things with their money to avoid the tax. Remember the tax schemes of the 1970s?

 

Federal income taxes are not currently scheduled to exceed 45%, but estate taxes are. It will be interesting to see what results. The window for these tax changes to be delayed or further modified is now less than 50 days. This means the decision timeframe for investors to change their actions to adjust for the increased likelihood of higher taxes is closing. (Until November 6, many decision makers waited for the election results, knowing they had 60 days to implement changes after the election.)

 

Ron Muhlenkamp: Whats is the impact? 

 

 

We are programed to cheer and act out our sheep-like roles in partisan politics when, like the game, unless we have money bet on the outcome the actual winner will have absolutely no impact on our lives. The bottom line is that voting percentages generate credibility for the failed American political system. "There's not a dime's worth of difference between the Democrat and Republican parties." George Wallace, 1966 Alabama governor and presidential candidate. Romney lost for two main reasons: First, as he correctly noted during the campaign, 47 percent of American families are dependent on government handouts and they voted for what was in their own best interests; and second, the GOP leadership antagonized the 10 percent of the Republican Party electorate who supported Ron Paul for President. And so over the next four years the people will be provoked and buy more guns they will never have the courage to use to defend themselves against an all-powerful government.The game will go on until the time is up for our nation. It is time we as a generation man up for liberty to redeem ourselves in the tear-filled eyes of future generations. The American people must work peacefully to restore the Articles of Confederation now or else suffer the permanent consequences of the fall of America.