Is Washington surrendering in war against markets?
Tim Geithner's statement about capital gains and dividend tax rates signals a meaningful shift in the administration's attitude toward the stock market.
By Jim Cramer, TheStreet
If Treasury Secretary Tim Geithner's got the juice, and if his statement on CNBC that capital gains and dividend taxes might stay where they are holds water, then we have lost the principal reason to sell stocks, particularly high-yielding dividend stocks.
Moreover, any signal, especially one expressed on Larry Kudlow's CNBC show, that these two rates will remain low is a sign that the Obama administration recognizes that the stock market is far more important than it thought when it comes to the November election.
Larry and I fought hard for the dividend tax cut, and people in Washington know that. This signal is very important and cannot be dismissed. Until this interview, I regarded this administration as an opponent of capital and an endless champion for labor, particularly municipal, state and federal workers.
Could it be that the investor class -- those brainwashed into using the stock market to save for retirement and college -- has been heard by Obama? Could it be that someone in the White House figured out that the indoctrination of investing in stocks, beginning under Reagan and continuing through George W. Bush, has led to a precarious situation for anyone who believes that stocks don't matter?
By the way, before you e-mail me, I know that dividends and capital gains don't figure into IRA/401k thinking. But that's just a limited understanding of the situation. In fact, they matter tremendously, because retirement-asset net worth will go down substantially if stocks lose value from the tax changes -- and I think they will lose tremendous value. Hence the thrust of my opening: We are losing a great reason to dump stocks, so stocks are less likely to be dumped. Sorry for the circular reasoning.
You can see a possible scenario developing here: The White House and the Democrats in Congress are beginning to see that the whole Big Left Thing is undermining confidence, eroding savings, causing companies not to hire and leading individuals to avoid the risk of creating new enterprises. The fact that this litany is now accepted truth may also have something to do with this new tax stand.
In other words, the Obama administration's war on capital may at last be over, or at least in truce mode. To me, this change may also throw the weight of evidence in favor of Doug Kass' bold 'Fast Money' prediction that we have seen the bottom for the year. Earnings permitting (a big caveat), I would tend to agree that Dow ($INDU) 9,500 -- the overnight futures level bottom -- may be an important floor that will cause people to buy, not sell, the next time it is visited.
Do not minimize Geithner's words. They may have removed the biggest worry for the second half: a tax-derived sell-off that would begin with October's mutual fund year closings and go right up until Dec. 30.
How about another way to put it: PHEW!
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