Mike Maher's  Instablog

Mike Maher
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I have been investing since late 2005. Interested in high yield stocks, options, and financials Currently work as an appraiser, while working towards my MBA. Graduated Rutgers University in 2009 with a degree in Economics.
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  • Pickens and Chambers: Combine Their Plans and Thrive 2 comments
    Nov 8, 2010 12:13 PM | about stocks: FSYS, CLNE, WPRT, XOM, COP, RRC, CHK, CSCO, EPD, CMLP
    John Chambers, CEO of Cisco has been in the news a lot lately for his op-ed about lowering taxes on repatriation of earnings back to the US.  By his measure, there is over $1 trillion in US companies' bank accounts overseas, and the current 35% tax on those earnings keeps the money from coming back onshore.  He proposes cutting the tax to 5%, resulting in a $1 trillion stimulus to the US economy and a $50 billion jump in tax revenue, which he says can be used to fund another jobs bill.

    While his numbers hinge on every company bringing the money home, the numbers cannot be ignored.  Even if most of that $1 trillion dollars goes to paying down debt, or increasing dividends, stock buybacks or takeovers, it is still another $1 trillion coming into the US economy.  When you consider that 2009 US GDP was $14.14 (CIA factbook), it is an extremely large number.

    Now, instead of using the $50 billion to be spent on some jobs bill that I have little faith the government will not waste, what if it were directly applied to HR 1835, the so called NAT GAS act supported by Boone Pickens?

    According to Boone Picken's PICKENPLANS.COM, the US imports 13 million bpd of oil, with 5 million of that being supplied by OPEC.  That contributes to the $1 billion per day spent on foreign oil, and this $1 billion is 2/3 of the trade deficit. (To double check the numbers, the US trade deficit in August was 46.3 billion, so the 2/3 figure is close).  His plan, as outlined in the HR1835 bill, would provide tax credits (up to $64,000) to truckers who purchase 18 wheelers to run on nat gas.  The goal is to get the 8 million trucks in the US to switch, saving 2.5 million bdp of oil.  Further, one mcf of nat gas has the same energy potential as 7 gallons of diesel, but costs roughly $5 vs $21 for the diesel, and natural gas is 30% cleaner to burn.  Pickens hope is that the tax credit for truckers, along with the fuel savings, will cause a majority of those 8 million 18 wheelers to switch to natural gas in the next 7 years.

    The bill also has a tax credit ($50,000-$100,000) for natural gas refueling stations, which will help the infrastructure build out in the US.  Once the stations start popping up, more US consumers will begin to switch their everyday vehicle(estimated at 250 million) to natural gas.  This will further reduce oil consumption and therefore imports.

    The expansion of development of the Marcellus Shale has on its own been estimated to potentially create 200,000 jobs in PA alone according to one Penn State study, and this does not include the manufacturing surge in the rest of the country that would be expected from 8 million new trucks being built in the US.  Also, lower fuel costs would be passed along to the consumer, increasing disposable income and increasing interstate commerce.  Cutting $1 billion per day from the trade deficit would increase GDP by decreasing the drag the negative trade balance has on GDP, and money being spent on fuel would have a greater chance of staying in the US, rather then making its way out of the country to Canada, Mexico, Venezuela, Nigeria, or Saudi Arabia.

    My suggestion is to cut the tax on US companies bringing dollars back to the US to the 5% Mr. Chambers thinks is reasonable, and using the new tax money to help fund the costs of HR1835 supported by Mr. Pickens.  At the max $64000 credit, the $50 billion raised would cover 780,000 new trucks, about 9% of the total Mr. Pickens is aiming for.  Assuming $64,000 is the high end and $40,000 is more realistic, that’s 1.25 million trucks.  All that is done without new government debt, and given all the large deals involving shale gas companies in the last year,  I believe once the bill passes there will be such a flood of private sector money into this sector that the government will not need to kick in new money.

    If this works as I outline it will provide another $1 trillion for the US economy from US companies foreign bank accounts, jump-start manufacturing, lower carbon emissions, lower oil prices and consumption, lower transportation costs, and create hundreds of thousands of jobs in PA, NY, VW, due to new drilling, and be a boon for the US truck manufacturing.  If I am wrong, the US basically got all this done at no cost to the taxpayer, so the loss will be born by the private sector.

    I welcome any and all thoughts.  The US needs all the help we can get right now, and free flowing ideas can only help this country heal.

    Disclosure: ENP NRGY EPD
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Comments (2)
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  • Popps
    , contributor
    Comments (24) | Send Message
    Hey, Mike
    Off the subject, but your article today, "Barron's Takes Another Swipe at Linn Energy" cannot be accessed no matter where I try (ahoo, SA, etc), so congratulations in the blind from my perspective. It must have been so good, someone pulled it. Regards, Popps
    6 May 2013, 11:33 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2867) | Send Message
    Author’s reply » Yup, SA is saying they're having issues with some pages. I have an email into them, I assume they're working to fix it. Thanks for bringing it to my attention
    7 May 2013, 08:21 AM Reply Like
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