IB Net Payout Yields Model

Tax Loss Carryback Proposal Gains Support

According to some news reports yesterday, the U.S. Congress is gaining support for a Tax Loss Carryback proposal. We're not seeing a lot of news about this proposal but it seems to be something that would be very bullish for the worst off stocks in this economy. Any corporation that made a ton of money in 2004-2007 and is now losing truckloads of money would be able to reclaim some taxes paid in those previous years.

It could be a huge boon to financials struggling to raise capital or manufactures that saw boom years and now are struggling to make ends meet in these lean times. It seems odd that Congress would inact such a law to help the hated banks, but then again a lot of the smaller banks could use some help to stay afloat and continue lending. On the flip side it would further help to support companies not allowing the best players to gain deserved market share. Some of the banks in strong capital shape might to see less growth potential with such a bill.

Some of our favorite financial plays such as Regions Financial (RF), Synovous (SNV), and Phoenix Companies (PNX) are all down big today and this week yet they'd probably stand to be the most to benefit. A manufacturer like Terex (TEX) would see some benefits though not to the same extent since they don't appear to face capital issues. A retailer like Liz Claiborne (LIZ) would probably see some decent benefits like the financials.

Its always interesting how the markets seem to ignore or maybe just not notice these proposals. Every article seems to focus on the housing tax credit instead. Or maybe they just need somebody to tell them the benefits before understanding. Now if I just had a large research staff that could determine the biggest beneficiaries of this proposal. Stay tuned to the news to see if this proposal gains steam and be prepared to buy the beaten down stocks. The lack of reaction could just be that insiders know it won't pass. We shall see.

All companies, no matter what size, would be able to apply losses in one of those years to full year taxable income for the prior four years and to 50 percent of income in the fifth year, according to a summary of a plan backed by Senate Majority Leader Harry Reid and Senate Finance Chairman Max Baucus, both Democrats.

The proposal will be offered as an amendment to an unemployment insurance bill working its way through the Senate. Negotiations are still ongoing so the details could change.


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