Monday, March 02, 2009

Connect the dots 
26 February 2009: WASHINGTON (AP) — President Barack Obama's budget proposal would shift much of the tax burden from middle- and low-income families to the wealthy, while increasing taxes on many businesses.

Today: Dow hits lowest value in 12 years, dropping more than 3% before lunch.

The market move on Obama's plans for tax increases is entirely rational. Stock prices reflect nothing more than the present value of future dividends and capital gains for a fractional share of a company. If capital gains taxes go up, then the expected future value of any taxable security declines by the proportionate amount.

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