Sarkozy has long supported the tax, which — if it followed European Commission recommendations — would add 0.1% of the value of an equity or bond transaction and 0.01% of every derivative transaction to the EU’s coffers.

The argument against such a tax is that unless it is adopted universally, the uneven playing field would send investors to countries where such taxes are not imposed. The UK’s prime minister stated the case against the tax succinctly:

The idea of a new European tax, when you are not going to have that tax put in place in other places, I don’t think is sensible. So I will block it unless the rest of the world all agreed at the same time that we were all going to have some sort of tax.

While such a tax could raise up to €55 billion in the EU, Bloomberg News notes that consulting firm Ernst & Young believe that such a tax would ultimately cost Europe as much as €116 in lost economic activity and reduced taxes from other sources.

Do they think that firms will not have an interruption transacted business from such a tax?  Capital seeks nations that treat it the best, and in many cases this is the equivalent of an incentive tax because it taxes investors and trading firms whether they make money or lose money.

Paul Ausick

The thresholds will lower the broad market decline percentage triggers, shorten the duration of the trading halts, and also change the reference index.  The existing market-wide circuit breakers were originally adopted in October 1988 and have only been triggered on one day in 1997.

The basic proposals are as follows:

• Lower the market decline percentage thresholds from 10%, 20%, and 30% down to new levels of 7%, 13%, and 20% from the prior day’s closing price.
• The duration of the trading halts that do not close the market for the day would go from 30 minutes, 60 minutes, or 120 minutes down to 15 minutes.
• Rather than six time periods, the only two relevant trigger time periods would be before 3:25 P.P. and on or after 3:25 P.M. 
• The new proposal would strip the Dow Jones Industrial Average as the reference index and would change to the S&P 500 Index as the pricing reference.

Normally, we might not support changes of this magnitude.  Our concern is that the Flash Crash of 2010 was damaging enough that some measures needed to be reviewed.  More importantly than that, some estimate that trading machines, the computer to computer trading, now accounts for up to 75% of the trading in the liquid stocks out there.  That figure varies wildly depending upon the day, but all you have to do is read what we wrote about the dangers of  nanonsecond trading.  

Imagine if the machines actually dumped 1 billion trades upon the market in one second.  A stretch, yes.  Theoretically possible, yes.  If you do not trust our notion on this matter, remember this: a survey on Wall Street noted that high-frequency trading (HFT) is mostly bad for everyone except the HFTs themselves.

A public comment period will take place but here are the full proposals from the SEC site.

JON C. OGG

The new index barometers will join the NASDAQ Water Index and the NASDAQ Water Total Return Index.  Whether this is green or sensible is up to you, but there is a fair question to ask here: How many water indexes are needed?  The new indexes are as follows:  OMX Global Water Index, NASDAQ OMX Global Water Total Return Index, NASDAQ OMX US Water Index, and the NASDAQ OMX US Water Total Return Index.

What is interesting about this and only highlights our key question even more is that NASDAQ is selecting the constituents from the same universe of stock picks as the first two water index readings.  The difference is in the component weightings. The total return indexes reinvest dividend payments and the price returns effectively discount the dividends.

Potable water and its future availability remain the key topics of why your investment portfolio should chase this sector.  Again, the trick is that it is not easy.  It turns out that many “water companies” turned out to be dependent upon the creation of new housing subdivisions over the last fifteen years or that they are tied heavily to government contracts.  General Electric Co. (NYSE: GE) and 3M Co. (NYSE: MMM) are two key holders of water investing, but these water operations are mixed with fluids in these conglomerates and investing in any conglomerate because of one aspect of their business just misses the point of investing.

Along with the theme of water investing for the long-term, we did create a list of Stocks to Own for the Next Decade and that included American Water Works Company, Inc. (NYSE: AWK).

What makes water difficult to invest in is that fluid and hydraulic outfits keep looking to consolidate via mergers and acquisitions.  This fresh Nalco Holding Company (NYSE: NLC) merger with Ecolab Inc. (NYSE: ECL) has the goal of adding $5.4 billion in a combination of cleaning, sanitizing and water management.

We now have ITT Corporation (NYSE: ITT) breaking itself up and one of the 3 surviving companies, its water company, will be called Xylem under the “XYL” ticker on the New York Exchange.

We recently featured some of our top water investments out to 2012 and beyond, including American Water Works Company, Inc. (NYSE: AWK), Insituform Technologies Inc. (NASDAQ: INSU), Tetra Tech Inc. (NASDAQ: TTEK), and others.  This was an expanded and updated module for our Top Water Pick for 2011.

What we do expect as one possible outcome from more index launches is the creation of more exchange-traded funds which track water investing.  There are already ETF products around the Palisades Water Index and Standard & Poor’s indexes.  ETFs do not currently track the NASDAQ indexes in water per our most recent screens.

PowerShares Water Resources Portfolio (NYSE: PHO) has more than five years of history and it has well almost $1.2 billion in assets inside the ETF.  Its international equivalent that includes the U.S. but is more globally focused is the PowerShares Global Water Portfolio (NYSE: PIO) but that one is only about one-third of the size in assets and only about one-fourth as liquid when measuring shares per day.

And then come the less liquid water ETFs, no pun intended… There is also the Guggenheim S&P Global Water Index (NYSE: CGW) ETF, which carries about $250 million in assets and trades about 50,000 shares a day.  The even smaller First Trust ISE Water Index Fund (NYSE: FIW) has about $69 million in assets but trades an average of under 20,000 shares per day.

There are many more ways to invest in water, but you have probably gathered that we maintain it is not an easy sector to invest in.  Many pure-play water companies trade at significant premiums to the broader market.  Even when you go through the individual stock holdings that these water ETFs hold, you will suddenly realize that the term “Water Investing” really translates to “companies which also have water operations.”

JON C. OGG

Strategic investors (and owners) are affiliates of the following: Bank of America Corporation (NYSE: BAC) via Bank of America Merrill Lynch; Citigroup, Inc. (NYSE: C) via Citi; Credit Suisse (NYSE: CS); Deutsche Bank AG (NYSE: DB); GETCO, J.P. Morgan Chase & Co. (NYSE: JPM) via J.P.Morgan; Lime Brokerage; Morgan Stanley (NYSE: MS); Tradebot Systems; and WEDBUSH.

The terms have not been set other than that the firm plans to raise up to $100 million in the sale of common shares.  Don’t look for this to trade to NYSE or NASDAQ as its primary listing.  The firm plans to list its Class A common stock on BZX under the symbol “BATS.”

The company has listed Morgan Stanley, Citi, and Credit Suisse as its lead underwriters for the offering.

BATS develops and operates electronic markets for the trading of listed cash equity securities in the United States and Europe and listed equity options in the United States.

For the first quarter of 2011, it claimed to have 10.8% share of the U.S. equity market and a 2.1% share of the U.S. equity options market; in Europe that was 6.2% share of European trading in the securities available for trading on BATS Europe.  The company is also acquiring Chi-X Europe as a multilateral trading facility and that had a 17.0% share of European trading in the securities available for trading on Chi-X Europe.

Pro forma revenues were $899.9 million for 2009 with operating income of $18.8 million and net income of $11.4 million.

You can join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

The full IPO filing with the SEC is here.

JON C. OGG

Writing this weekend in the New York Times, the informal Obama administration argued that those focused on rising government deficits were showing ” too little appreciation for how stimulus spending has helped stabilize the economy and how more of the right kind of government spending could boost job creation and economic growth.”  It’s a familiar argument from the administration as it tries to refocus voters’ attention ahead of this November’s midterm election.

While it’s probably true that the economy would have been worse without the stimulus, that’s a tough sell to voters who are suffering as GDP eked out tepid second quarter growth of 1.6 percent.  That’s like telling someone who breaks their leg that they should be thankful they are not in a coma.  Technically, that’s true but it does little to ease the suffering from an injured limb.

A stimulus is supposed to give the economy a kick in the butt.  Instead, it acts like a sugar high.   After an initial rush,  business activity begins to taper off as the effects of the stimulus evaporates.  To their credit, some politicians realized this problem. House Majority Leader Steny Hoyer lamented last July that “we need to be open to whether we need additional action.”

That view is backed up by Nobel Prize-winning economist Joseph Stiglitz, who wrote in January “We’ve pulled back from the precipice, but the current situation cannot be described as a strong recovery. … the recession is far from over for those who don’t have jobs or can’t sell the goods they produce.

Fair enough, but what now?  Does Congress pass another stimulus?  How big should it be?  $787 billion?  $1 trillion? $2 trillion? I have no idea.  Moreover, I am also unsure how the government will be able to spend the money fast enough to boost the economy’s fortunes   The bigger question is why the Administration is pushing an idea that has little chance of passing Congress, especially during an election year.

In her Times piece, Tyson speaks of the benefits of increasing federal aid to states and boosting spending on infrastructure by financing $1 trillion worth of additional investment over the next five years.  Such arguments will do little to win over fiscal conservatives who argue that federal spending is out of control.

John Boehner, the Republican who would takeover as Speaker of the House if the Democrats lose control, recently denounced the stimulus as a “failure.”   Though economists such as Mark Zandi of MoodysEconomy.com may quibble with the Ohio Republican, voters would not.  Unemployment is hovering above 9 percent and likely will move higher.  The housing market remains lousy and investors in the stock market remain as jittery as ever. It’s hardly a shock that President Obama’s job approval rating was near a 52 week low.

People in favor of a second stimulus are following the advice of that wise sage Mary Poppins who sang that it took “a spoonful of sugar to help the medicine go down.”  Most Americans, however, will need a lot more than a spoonful of sugar to swallow the economy’s bitter pill.

Jon Berr

The action is a quick admission that something went terribly wrong as the market was in free fall. But, the action, while swift, may be premature. The SEC and CFTC are examining what happened. Some experts believe that an incorrect order placed by a major firm was at fault. Others say that high-volume trading programs which stopped bidding for shares caused the incident. P&G shares moved from down 2% to off 21% in a matter of moments. Floor traders had to make adjustments to bring the stock to a reasonable level.

“NASDAQ OMX reported that we had no technology or system issues associated with the trading that occurred between 2:00 p.m. and 3:00 p.m., ET,on May 6,” according to the exchange.  That allows it to place the blame elsewhere. Using an arcane rule, NASDAQ said it will simply reverse a number of trades. “We have coordinated a process among U.S. Exchanges and therefore, pursuant to NASDAQ Rule 11890(b), NASDAQ, on its own motion, will cancel all trades executed between 14:40:00 and 15:00:00 greater than or less than 60% away from the consolidated last print in that security at 14:40:00 or immediately prior.”

Some traders who actually may have made money as stocks bottomed based on data that they thought was legitimate, will lose billions of dollars in gains. And, investors who lost billions will have those loses wiped out.Among the 296 companies which will have trades reversed were stocks that trade on both the NYSE and NASDAQ such as Accenture and a number of mutual funds, and ETFs.

The NASDAQ said that “this decision cannot be appealed.”  But the fight over the losses and gains of traders during that 20 minute period is not over. There is too much money at stake.

Douglas A. McIntyre

It is impossible to know if the same will happen this time with a rapid change or not. The VIX can go through extended periods of being dormant.  But one thing is true when the VIX gets this low and after you have seen such a strong rise in the stock markets… buying Puts for downside protection to assure gains stay locked-in is generally cheaper than ever.

The iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX) is down 2% at $29.71 and the iPath S&P 500 VIX Mid-Term Futures ETN (NYSE: VXZ) is down 0.4% at $72.20.

JON C. OGG

Money management firm Blackrock (NYSE:BLK) says that much of this huge pool of capital will now move into much safer investments as the people born in the late 1940s and 1950s retire.

Frank Porcelli, who heads U.S. retail for BlackRock, told Reuters that “Baby boomers are increasingly spooked by the turbulent markets of the past year, and concerned with ensuring their funds last through retirements that could last 20 years or more.”

The movement of that much in assets from growth investments, mostly equities, to safer investments in fixed income is likely to take a great deal out of the stock market. Companies which are part of most classic growth portfolios, stocks which represent equity in expanding businesses but pay no dividend, are going to be sold off over the next few years. Firms that fit the growth profile most neatly are corporations like Apple (NYSE:AAPL), Cisco (NASDAQ:CSCO), Intel (NASDAQ:INTC), Oracle (NASDAQ:ORCL), and Google (NASDAQ:GOOG), which have been the backbone of the Nasdaq Composite, are the most likely candidates for liquidation.

The conventional wisdom is that the market goes up and down roughly in concert with the economy. That is about to change significantly.

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Executive Producer:  Philip MacDonald

Sirius has until March 10, 2010 to fix the problem. The issue disappears if the firm’s stock closes above $1 for 10 consecutive trading days.

Sirius is not left with many options. Its shares trade at $.69 and there is every reason to believe that if the company does not have extraordinary earnings for the third or fourth quarters that the stock will stay near where it is.

Sirius has one ace in the hole. Its shareholders have already approved a reverse split of the stock which would move its price well above the Nasdaq lower limit. According to Sirius, “the Company’s stockholders approved an amendment to its certificate of incorporation to effect a reverse stock split at a ratio of not less than one-for-ten and not more than one-for-fifty.”

Reverse splits are a time-honored way for companies to increase their stock prices. Investors always see though the process and often drive shares down once the maneuver is over. They understand a reverse split is a desperate move and says a great deal about what a company’s board of directors thinks about its prospects.

Sirius still has to answer the question whether it can keep its subscriber base and revenue going up. It relies on new car sales for most of its new business. It faces competition from the Apple (AAPL)  iPod and a small army of multimedia smartphones made by handset companies from around the world and marketed by the three big celluar carriers AT&T (T), Verizon Wireless (VZ)(VOD) and Sprint (S).

Sirius may benefit from a reverse split in the short term, but a short term solution is all it is.

Douglas A. McIntyre

Much of the strength in the cancer stock sector is due to moves by Dendreon (DNDN), Cell Genesys (CEGE), and Geron (GERN).Home furnishing stocks are being pushed higher by shares in Pier 1 (PIR) and Williams Sonomo (WSM), both of which are down over 50% year-to-date.

Among the aircraft leasing stocks the price advance leaders are Aercap (AER) and Aircastle (AYR).

The weakest sector over the last week in the Tickerspy survey is exchange stocks, down mostly due to weakness in CME group (CME).

Data from Tickerspy.

Douglas A. McIntyre