Monday, May 1, 2017

- That Trusty IRS Time Machine

If you guys only knew how import the stuff I have waiting for me is while I write this little comment. But it's in the blog sweet spot, so I figure, I owe ya's.

This story has all the things that are wrong with 21st century Financial 'Journalism', and is also an excellent example of that now quite mature Alinskyite adage about making the political personal. What do you figure this story is about?

Billionaire Robert Mercer did Trump a huge favor. Will he get a payback?

Hmmm... sound interesting, I wonder what the meat of the story is:

The Internal Revenue Service is demanding a whopping $7 billion or more in back taxes from the world’s most profitable hedge fund, whose boss’s wealth and cyber savvy helped Donald Trump pole-vault into the White House.

Suddenly, the government’s seven-year pursuit of Renaissance Technologies LLC is blanketed in political intrigue, now that the hedge fund’s reclusive, anti-establishment co-chief executive, Robert Mercer, has morphed into a political force who might be owed a big presidential favor.

Oh my! "Dobson... fetch my fainting couch and smelling salts. Apparently some Billionaire is trying to influence our tax policy!"

I wonder what the dispute is about:

The IRS recently released a little-noticed advisory stating that its top targets in future business audits will include so-called “basket options,” the instruments that Renaissance and some other hedge funds have used to convert short-term capital gains to long-term profits that have lower tax rates.

But Renaissance, with assets estimated at $97 billion on Dec. 31, 2016, has shown no signs of buckling to the IRS’s demands.

Oh I see. There was a practice which was perfectly legal until the IRS decided it wasn't, and now they want to hop in the trusty IRS time machine and go back to collect new revenue on a practice which they only recently said was illegal.

Basket options, like absolutely EVERYTHING else in the derivatives markets, were specifically designed to evade the spirit of the law, while successfully obeying the letter of it. I have claimed many times without fear of reasoned contradiction, that this is the entire purpose of the derivatives markets.

Idiots in Washington make a law, Geniuses on Wall Street Analyze it and figure a way to craftily subvert it, then the idiots write a new law and try to enforce that. But the idiots will never catch the geniuses without making the laws so broad, that they affect commerce. "It's against the law to make a profit in trading." would essentially shut down the Hedge Fund industry, but I'm sure you can forgive me for assuming that a law like that might have some 'follow on' effects. You think maybe we might have hit that point?

But of course, this is all really about Robert Mercer right? It's not about ex-post facto regulation, or IRS abuse (because who could ever believe the IRS might be abusive.) It's about a rich guy (who we hate) who knows another guy (who we really hate), and is looking for a 'favor' to save himself Billions in taxes.

To call this article 'low information content' would be an insult to all the clickbait on the internet. At least they'll show you a picture of Emily Ratajkowski naked or something. And that's a greater cultural contribution to America than dreck like this ever will be.

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