"Subject: Eliot Spitzer Now Posting???"
[NRO Staff  03/03 04:51 PM]

More mail:

I've been following the discussion avidly — and have just finished reading the book — but wanted to comment on Angelo's recent post, which is talkin' crazy.

I really don't mind government keeping an eagle eye on big business....from the abuses we've seen in the media, big business needs it, but there's no need to go all Eliot Spitzer and not just punish but further tax behavior that may or may not be good for Christians and "crunchies."

Short term capital gains are already taxed at a much higher rate than long term capital gains, so the tax laws already encourage a long-term perspective. If you're buying stocks, its ridiculous to suggest you should be severely punished for a basic market fundamental — the ability to sell the stock at what you deem is the perfect time, whether it’s a day or a decade later. That's how the stock market works, and has worked since its inception. If I'm going to accept the risk of purchasing a pure stock, even if it is speculative, then I need the escape hatch of being able to sell it, whether it's going up or down,

Angelo seems to be conflating stocks with mutual funds, an entirely different animal designed for different purposes. It's true that mutual funds should be long-term investments....and any time a money manager sells a stock, he passes the tax hit along to the client, so clients should seek out mutual funds that put their money where their long-term mouth is, such as Vanguard or American Funds, and look for low turnover ratios. But even the most respectable money manager will need to get rid of a stock quickly, based on his wisdom, experience and judgment, and why slap a set of one-size-fits-all regulatory handcuffs on this ability?

The greedy people who rushed into dot-com mania got the market smackdown they deserved when the market corrected itself, and hopefully they are now a little wiser. We're now seeing a "flight to quality" with money coming into reputable mutual funds companies, rather than crazy, flavor of the month tech funds driving demand. There are also a plethora of "socially responsible" funds for anyone who wants to avoid companies touting sex, drugs and rock and roll.

Unfortunately, we're also seeing the motherlode of ham-fisted regulation being enacted across the financial services industry, as regulators show up a day late and a dollar short, well after the bear market has turned back into a bull market, meting out punishments and raking companies over the coals for minor infractions because the consumers refuse to take responsibility for what is, at heart, the silly investing decision of jumping into stocks and funds at the very height of the bull market, and buying high instead of low.

I work for a moderate-sized financial services company — and work very closely with one of the huge investing giants — and it has been a fascinating few years. But it's also a good lesson in how we as Americans are taxed up, down, backwards, forwards and sideways, multiple times on the same money. I understand the need for taxes, but the deeper you get into the financial services, the more clearly you can see that the multiple layers of taxation are unfair.

One last note on the quarterly reports: one thing that WOULD help the market is reining in analysts who go into buy/sell hysterics if companies quarterly earnings are off by so much as a dime. That's where a lot of the damage comes from....but again, what are you going to do, tax them?