An article in the WSJ has this little tidbit about the upcoming stimulus plan:
As for the business tax package, a key provision would allow companies to write off huge losses incurred last year, as well as any losses from 2009, to retroactively reduce tax bills dating back five years. In effect, this would entitle companies to receive cash from the government that they otherwise couldn't have claimed.
This approach was talked about for a while last year and then the noise died down. If it becomes law, it is not too hard to think of a few stocks that would reap large benefits: specifically, that would be companies that incurred huge losses – there are a few of them out there.
One set of beneficiaries would be homebuilders, which have been taking serious write-downs, but made a lot of money in the course of the housing bubble. Many of them have written down their deferred tax assets, but could now carry the losses back 5 years and get refunds. My holdings in Toll Brothers (NYSE:TOL), Ryland (NYSE:RYL) and KB Home (NYSE:KBH) should benefit. Maybe some of the distressed homebuilders would do even better.
Bond insurance companies such as MBIA (NYSE:MBI) and Ambac (ABK) could also benefit, again because they have taken huge impairment and mark-to-market losses after operating very profitably for the five years running up to the housing melt-down. They have so far been successful in maintaining their deferred tax assets are good, but carrying the losses back would make that potential problem go away.
How about Fannie Mae (FNM) and Freddy Mac (FRE)? I seem to recall something about how Freddy Mac's entire shareholder's equity consisted of deferred tax assets which they had no reasonable basis to claim they would ever make enough money to use them. Carry them back another few years, there had to be some profits somewhere in there.
With 2009 losses also included, the opportunities to book losses and turn them into refunds could be substantial. Tax lawyers and accountants very possibly could develop refinements, angles, strategies and tactics to maximize the proceeds of this congressional largess.
I almost feel guilty owning the stocks. But now that I think of it, I have another idea. Maybe the opportunity to carry losses back five years should be extended to private investors too. I have incurred some very distressing losses on owning these types of money losing stocks, but if I could just carry them back to the years where I made money and paid taxes, that would be wonderful and in point of fact only fair, just, right and proper. Everyone deserves a slice of the pie, or a spot at the trough, or a slab of pork, maybe a rasher of bacon: that's for sure, this is America in the 21st century.
Instead of EIC, we need ILC, investment loss credit. I am not talking about a deduction: I mean a credit. So, if you lost money you could just apply to Uncle Sam for a refund. After all, you were patriotically trying to provide capital to enhance the economic might of the country, and suffered losses in the process. But now the gummint is providing the capital and then sending you a tax bill for it and cutting your balls off in the process. If Paulson would have done what he should have done and bailed out Lehman (OTC:LEHMQ), everything would of been OK but no he was on a mission to stamp out moral hazard and he stamped it out for sure that day. He also stamped out a couple trillion of stock market value but by God he saved us from moral hazard and for that we should be grateful. Hallelujah Amen.
It would of been simpler and easier to just enforce a few rules that was already on the books and they got there because the last time those greedy bastids trashed the whole effin economy somebody said there oughta be a law and there was a law passed and it is called the Securities and Exchange Act of 1934. That law says stuff about manipulation and so on that is as clear today as the day it was written and it means a lot of those CDS guys and naked short-sellers and Ponzi schemers and hedge fund operators and over-leveraged investment bank crooks should be doing time and I mean hard time. They need somebody to clean off all the seagull droppings at a National Park in the San Francisco Bay that would be Alcatraz so they could spend twenty years on the rock cleaning up seagull poop and that would serve them right for what they done with their lying and cheating and stealing and twisting and manipulating and sleaze-ball antics. Right now they are using fire hoses to spray the poop away but them perpetrators should be down on their knees cleaning it up with their toothbrushes before they brush their teeth in the morning and so on all day until they brush their teeth again before they go to bed at night.
TARP should stand for Tom Armistead Relief Program.
If you don't have some clue what the gummint is gonna do next you can't figure what to buy sell or give away. It is hard enough separating the sheep from the goats, the wheat from the chaff, the scotch from the soda, and so on but now on top of that you gotta figure who is getting the TARP funds or bailouts and now it's tax breaks. If you can't figure out who the gummint is gonna bailout next or take down next or lard them down with pork next you ain't gonna make any money as a matter of fact you will lose it faster than a drunk can piss away his paycheck.
You look at the WSJ today, they are talking about banks and capital, and there you have NCC and WM, they had plenty of money and they was taken over or sold out or acquired and Paulson done it and that Bair woman she had a part in it too and they wasn't broke they was as good as that bank Jimmy Stewart run which was as good as gold.
Please accept my sincere apologies for this rant: I had a dysphoric eruption. I should also apologize to Mark Twain and William Faulkner: I stole some of their ideas.
Disclosure: Author holds long positions in MBI, ABK, TOL, RYL, KBH, and no positions in other stocks mentioned.