From its name to its strategy to its battle-tested manager's background as a high-yield credit researcher, Fidelity Leveraged Company Stock lives (FLVCX) and dies by its mandate.
Twenty-two year Fidelity veteran Tom Soviero has run this unusual mid-cap blend fund since July 2003, delivering wildly volatile yet in some ways utterly predictable performance. En route to a category- and benchmark-shellacking cumulative return of nearly 153% between his arrival and June 2011, the fund has enjoyed approximately 1.3 times the category's gains--and an almost exactly proportionate share of its losses.
Just as predictable: As they often do with such volatile vehicles, investors have had a difficult time using this fund well. The mammoth gap between its 10-year total return (13.6%) and investor return (3.2%) makes it a nearly perfect example of the kind of funds that reward the kind of patience not many investors actually have.
Saturday, July 30, 2011
Wednesday, July 27, 2011
Band bullish
[8/4/11] Ouch! This is no way to greet a guy who's about to celebrate his 60th birthday (Friday). Stocks plummeted out of the starting gate today, bedeviled by an array of troubling news—from Europe's ongoing sovereign-debt woes to the increasingly obvious economic slowdown on our own shores.
At the closing bell, the S&P 500 index had plunged 4.8%, its biggest daily percentage loss since February 2009. Oil tumbled more than $5 a barrel, and even gold—the traditional safe haven in times of financial upheaval—ended near its low for the day, off $7.20 an ounce for the session and more than $25 from its intraday high.
It goes without saying that I didn't foresee this killer wave.
[7/27/11] Is your head spinning yet? Wall Street’s emotional roller coaster is taking investors on the ride of a lifetime.
Back at the turn of the year, strategists at the big brokerage firms were shouting themselves hoarse in an effort to outbid each other’s upside predictions for the stock market. Then the European sovereign-debt crisis broke loose again in May.
Share prices plunged, and so did the mood of the crowd—into bleak pessimism. By mid-June, one typical headline was blaring, NASDAQ FLASHES MAJOR WARNING SIGNALS. Another muttered, in dark technical mumbo-jumbo, IS THAT A DEATH CROSS?
For better or worse, these emotional appeals are part of the investment game. Seasoned investors learn to ignore them or, more usefully, to interpret them as signals for contrary thinking. The euphoria early in 2011 was reason for caution; the more recent panicky commentary gives grounds for optimism.
Enough grounds, in fact, that I’m raising my year-end target for the market. With the S&P 500 companies now likely to chalk up operating profits of $98–$100 per share for 2011, I think the index will bounce as high as the 1420 to 1450 range during the fourth quarter. I’m assuming a modest P/E ratio of 14.5, comfortably below the average of the past 20 years.
For you Dow watchers, my new target works out to a range of 13500 to 13750. Stay cool and calm—you’ll be rewarded!
-- Profitable Investing, August 2011
At the closing bell, the S&P 500 index had plunged 4.8%, its biggest daily percentage loss since February 2009. Oil tumbled more than $5 a barrel, and even gold—the traditional safe haven in times of financial upheaval—ended near its low for the day, off $7.20 an ounce for the session and more than $25 from its intraday high.
It goes without saying that I didn't foresee this killer wave.
[7/27/11] Is your head spinning yet? Wall Street’s emotional roller coaster is taking investors on the ride of a lifetime.
Back at the turn of the year, strategists at the big brokerage firms were shouting themselves hoarse in an effort to outbid each other’s upside predictions for the stock market. Then the European sovereign-debt crisis broke loose again in May.
Share prices plunged, and so did the mood of the crowd—into bleak pessimism. By mid-June, one typical headline was blaring, NASDAQ FLASHES MAJOR WARNING SIGNALS. Another muttered, in dark technical mumbo-jumbo, IS THAT A DEATH CROSS?
For better or worse, these emotional appeals are part of the investment game. Seasoned investors learn to ignore them or, more usefully, to interpret them as signals for contrary thinking. The euphoria early in 2011 was reason for caution; the more recent panicky commentary gives grounds for optimism.
Enough grounds, in fact, that I’m raising my year-end target for the market. With the S&P 500 companies now likely to chalk up operating profits of $98–$100 per share for 2011, I think the index will bounce as high as the 1420 to 1450 range during the fourth quarter. I’m assuming a modest P/E ratio of 14.5, comfortably below the average of the past 20 years.
For you Dow watchers, my new target works out to a range of 13500 to 13750. Stay cool and calm—you’ll be rewarded!
-- Profitable Investing, August 2011
The Cooties Option
Washington DC -- The political theatre surrounding debt talks took a strange twist this weekend at the White House when Republicans stormed out of the meeting, accusing President Obama of having the cooties.
With both the broad outlines and specifics of the debt ceiling negotiations having been settled for weeks, both Republicans and Democrats faced a common challenge: how to sustain audience interest until the last minute when the deal would be signed.
The original script for "Epic Clash" (as the mini-series became known inside the The White House) called for increasing levels of acrimony with a series of strident accusations and "disconnects" leading to dramatic break offs in the talks. But when Republican House Speaker John Boehner stormed out of talks last Friday, and ratings of the series plummeted, a script rewrite was the only real option, especially with the unfolding News Corp hacking scandal diverting audience attention. Even the carefully choreographed performance of a "visibly angry" Obama at his "hastily called press conference" failed to engage viewers who already had started settling into their weekend rituals of beer and baseball. Suddenly, the White House script writers knew they needed a game changer to revive audience interest.
Focus groups made clear their disgust with the political process describing it in terms that had leaders of both parties concerned. "Boring" was the most damning indictment and the White House scriptwriters worst fears were confirmed when it became clear that the tired themes of "increased taxes vs spending cuts" were not sufficiently entertaining to keep the audience involved in the unfolding drama. Their market research report tellingly concluded, "Viewers need a character based subplot with a more visceral appeal and personal hook to sustain their level of interest, although the solvency of the U. S. government is at stake."
According to informed sources that requested anonymity, the so-called Cooties Option (Code Name: CO) had been on the table since the talks began months ago, but President Obama had initially dismissed it as "silly" and "demeaning of the political process." One well placed source was even more blunt, saying "neither party wanted anything to do with it."
But when Obama faced a revolt from fellow Democrats for caving into Republican demands, suddenly the "Cooties Option" came into play again. It presented Obama with the ability to box Republicans into a corner as not only unreasonable, but also completely "off their rocker." Obama harbored reservations about latent "racist overtones" of the Cooties Option, but those concerns were blunted when research showed that the "Cooties Theme" had been used effectively in comic strips such as Calvin and Hobbes and Dilbert as well as popular movies like Grease, and Pulp Fiction and several episodes of The Simpsons, all with significant ratings boost and no significant racist backlash.
With both the broad outlines and specifics of the debt ceiling negotiations having been settled for weeks, both Republicans and Democrats faced a common challenge: how to sustain audience interest until the last minute when the deal would be signed.
The original script for "Epic Clash" (as the mini-series became known inside the The White House) called for increasing levels of acrimony with a series of strident accusations and "disconnects" leading to dramatic break offs in the talks. But when Republican House Speaker John Boehner stormed out of talks last Friday, and ratings of the series plummeted, a script rewrite was the only real option, especially with the unfolding News Corp hacking scandal diverting audience attention. Even the carefully choreographed performance of a "visibly angry" Obama at his "hastily called press conference" failed to engage viewers who already had started settling into their weekend rituals of beer and baseball. Suddenly, the White House script writers knew they needed a game changer to revive audience interest.
Focus groups made clear their disgust with the political process describing it in terms that had leaders of both parties concerned. "Boring" was the most damning indictment and the White House scriptwriters worst fears were confirmed when it became clear that the tired themes of "increased taxes vs spending cuts" were not sufficiently entertaining to keep the audience involved in the unfolding drama. Their market research report tellingly concluded, "Viewers need a character based subplot with a more visceral appeal and personal hook to sustain their level of interest, although the solvency of the U. S. government is at stake."
According to informed sources that requested anonymity, the so-called Cooties Option (Code Name: CO) had been on the table since the talks began months ago, but President Obama had initially dismissed it as "silly" and "demeaning of the political process." One well placed source was even more blunt, saying "neither party wanted anything to do with it."
But when Obama faced a revolt from fellow Democrats for caving into Republican demands, suddenly the "Cooties Option" came into play again. It presented Obama with the ability to box Republicans into a corner as not only unreasonable, but also completely "off their rocker." Obama harbored reservations about latent "racist overtones" of the Cooties Option, but those concerns were blunted when research showed that the "Cooties Theme" had been used effectively in comic strips such as Calvin and Hobbes and Dilbert as well as popular movies like Grease, and Pulp Fiction and several episodes of The Simpsons, all with significant ratings boost and no significant racist backlash.
Sunday, July 10, 2011
Walter Schloss and value investing
[7/10/11] Here is how Warren Buffett once described Walter's investment method:
Walter has diversified enormously, owning well over 100 stocks currently. He knows how to identify securities that sell at considerably less than their value to a private owner. And that’s all he does. He doesn’t worry about whether it it’s January, he doesn’t worry about whether it’s Monday, he doesn’t worry about whether it’s an election year. He simply says, if a business is worth a dollar and I can buy it for 40 cents, something good may happen to me. And he does it over and over and over again.
Like all investors who do what’s supposedly impossible and beat the market, Walter Schloss had his rules. In 1994 he typed them up onto a single sheet of paper – 16 bullet point guidelines.
Factors needed to make money in the stock market:
# 1 - Price is the most important factor to use in relation to value.
# 2 - Try to establish the value of the company. Remember that a share of stock represents a part of a business and is not just a piece of paper.
# 3 - Use the book value as a starting point to try and establish the value of the enterprise. Be sure that debt does not equal 100% of the equity. (Capital and surplus for the common stock).
# 4 - Have patience. Stocks don’t go up immediately.
# 5 - Don’t buy on tips or for a quick move. Let the professionals do that, if they can. Don’t sell on bad news.
# 6 - Don’t be afraid to be a loner but be sure you are correct in your judgement. You can’t be 100% certain but try to look for weaknesses in your thinking. Buy on a scale and sell on a scale up.
# 7 - Have the courage of your convictions once you have made a decision.
# 8 - Have a philosophy of investment and try to follow it. The above is a way that I’ve found successful.
# 9 - Don’t be in too much of a hurry to sell. If the stock reaches a price that you think is a fair one, then you can sell but often because a stock a goes up say 50%, people say sell it and button up your profit. Before selling try to reevaluate the company again and see where the stock sells in relation to its book value. Be aware of the level of the stock market. Are yields low and P-E ratios high? Is the stock market historically high? Are people very optimistic etc?
# 10 - When buying a stock, I find it helpful to buy near the low of the past few years. A stock may go as high as 125 and then decline to 60 and you think it attractive. Three years before the stock sold at 20 which shows there is some vulnerability to it.
# 11 - Try to buy assets at a discount [rather] than to buy earnings. Earnings can change dramatically in a short time. Usually assets change slowly. One has to know much more about a company if one buys earnings.
# 12 - Listen to suggestions from people you respect. This does not mean you have to accept them. Remember it’s your money and generally it is harder to keep money than to make it. Once you lose a lot of money it is hard to make it back.
# 13 - Try not to let your emotions affect your judgement. Fear and greed are probably the worst emotions to have in connection with the purchase and sale of stocks.
# 14 - Remember the work of compounding. For example, if you can make 12% a year and reinvest the money back you will double your money in six years, taxes excluded. Remember the rule of 72. Your rate of return [divided] into 72 will tell you the number of years to double your money.
# 15 - Prefer stocks over bonds. Bonds will limit your gains and inflation will limit your purchasing power.
# 16 - Be careful of leverage. It can go against you.
It sounds simple but it is difficult to put in practice due to the difficulty to control emotions.
[7/8/15] Your Essential Guide to Walter Schloss Investing
“Basically we like to buy stocks which we feel are under-valued, and then we have to have the guts to buy more when they go down. And that’s really the history of Ben graham. That’s it.”
Warren and Walter met at a Marshell Wells shareholder meeting, while the company traded below net current asset value, and ended up sharing an office at Benjamin Graham’s investment firm in the 1950s. At the time, Graham charged both with finding net net stocks and both ended up adopting that same strategy in their own private practices years later.
While Buffett eventually moved on to buying large well-protected firms in the 1970s, Walter Schloss was able to earn one of the most enviable records on Wall Street by sticking to Graham’s original framework. As Buffett put it in Superinvestors of Graham-and-Dodsville,
“…He knows how to identify securities that sell at considerably less than their value to a private owner… He simply says, if a business is worth a dollar and I can buy it for 40 cents, something good may happen to me. And he does it over and over and over again. He owns many more stocks than I do – and is far less interested in the underlying nature of the business; I don't seem to have very much influence on Walter. That's one of his strengths; no one has much influence on him.”
[10/2/15] The Profoundly Simple Wisdom of Walter Schloss on Producing Towering Returns
Schloss didn’t play by Wall Street rules. He took the unorthodox route of ignoring news and tips, sticking to cigar butts and holding thousands of stocks over his lifetime.
We’ve seen how small investors can beat the professionals on Wall Street by not playing by the same rules.
Walter Schloss was such a man.
Well he was a professional but not in the normal sense.
He didn’t play by Wall Street rules. He took the unorthodox route of ignoring news, ignoring tips, sticking to cigar butts and holding thousands of stocks over his lifetime.
Walter has diversified enormously, owning well over 100 stocks currently. He knows how to identify securities that sell at considerably less than their value to a private owner. And that’s all he does. He doesn’t worry about whether it it’s January, he doesn’t worry about whether it’s Monday, he doesn’t worry about whether it’s an election year. He simply says, if a business is worth a dollar and I can buy it for 40 cents, something good may happen to me. And he does it over and over and over again.
Like all investors who do what’s supposedly impossible and beat the market, Walter Schloss had his rules. In 1994 he typed them up onto a single sheet of paper – 16 bullet point guidelines.
Factors needed to make money in the stock market:
# 1 - Price is the most important factor to use in relation to value.
# 2 - Try to establish the value of the company. Remember that a share of stock represents a part of a business and is not just a piece of paper.
# 3 - Use the book value as a starting point to try and establish the value of the enterprise. Be sure that debt does not equal 100% of the equity. (Capital and surplus for the common stock).
# 4 - Have patience. Stocks don’t go up immediately.
# 5 - Don’t buy on tips or for a quick move. Let the professionals do that, if they can. Don’t sell on bad news.
# 6 - Don’t be afraid to be a loner but be sure you are correct in your judgement. You can’t be 100% certain but try to look for weaknesses in your thinking. Buy on a scale and sell on a scale up.
# 7 - Have the courage of your convictions once you have made a decision.
# 8 - Have a philosophy of investment and try to follow it. The above is a way that I’ve found successful.
# 9 - Don’t be in too much of a hurry to sell. If the stock reaches a price that you think is a fair one, then you can sell but often because a stock a goes up say 50%, people say sell it and button up your profit. Before selling try to reevaluate the company again and see where the stock sells in relation to its book value. Be aware of the level of the stock market. Are yields low and P-E ratios high? Is the stock market historically high? Are people very optimistic etc?
# 10 - When buying a stock, I find it helpful to buy near the low of the past few years. A stock may go as high as 125 and then decline to 60 and you think it attractive. Three years before the stock sold at 20 which shows there is some vulnerability to it.
# 11 - Try to buy assets at a discount [rather] than to buy earnings. Earnings can change dramatically in a short time. Usually assets change slowly. One has to know much more about a company if one buys earnings.
# 12 - Listen to suggestions from people you respect. This does not mean you have to accept them. Remember it’s your money and generally it is harder to keep money than to make it. Once you lose a lot of money it is hard to make it back.
# 13 - Try not to let your emotions affect your judgement. Fear and greed are probably the worst emotions to have in connection with the purchase and sale of stocks.
# 14 - Remember the work of compounding. For example, if you can make 12% a year and reinvest the money back you will double your money in six years, taxes excluded. Remember the rule of 72. Your rate of return [divided] into 72 will tell you the number of years to double your money.
# 15 - Prefer stocks over bonds. Bonds will limit your gains and inflation will limit your purchasing power.
# 16 - Be careful of leverage. It can go against you.
It sounds simple but it is difficult to put in practice due to the difficulty to control emotions.
[7/8/15] Your Essential Guide to Walter Schloss Investing
“Basically we like to buy stocks which we feel are under-valued, and then we have to have the guts to buy more when they go down. And that’s really the history of Ben graham. That’s it.”
Warren and Walter met at a Marshell Wells shareholder meeting, while the company traded below net current asset value, and ended up sharing an office at Benjamin Graham’s investment firm in the 1950s. At the time, Graham charged both with finding net net stocks and both ended up adopting that same strategy in their own private practices years later.
While Buffett eventually moved on to buying large well-protected firms in the 1970s, Walter Schloss was able to earn one of the most enviable records on Wall Street by sticking to Graham’s original framework. As Buffett put it in Superinvestors of Graham-and-Dodsville,
“…He knows how to identify securities that sell at considerably less than their value to a private owner… He simply says, if a business is worth a dollar and I can buy it for 40 cents, something good may happen to me. And he does it over and over and over again. He owns many more stocks than I do – and is far less interested in the underlying nature of the business; I don't seem to have very much influence on Walter. That's one of his strengths; no one has much influence on him.”
[10/2/15] The Profoundly Simple Wisdom of Walter Schloss on Producing Towering Returns
Schloss didn’t play by Wall Street rules. He took the unorthodox route of ignoring news and tips, sticking to cigar butts and holding thousands of stocks over his lifetime.
We’ve seen how small investors can beat the professionals on Wall Street by not playing by the same rules.
Walter Schloss was such a man.
Well he was a professional but not in the normal sense.
He didn’t play by Wall Street rules. He took the unorthodox route of ignoring news, ignoring tips, sticking to cigar butts and holding thousands of stocks over his lifetime.
How Vanguard came to start the first index mutual fund
In 1970, there were 355 equity mutual funds, and we have now had more than three decades over which to measure their success. We’re first confronted with an astonishing—and important—revelation: Only 147 funds survived the period. Fully 208 of those funds vanished from the scene, an astonishing 60% failure rate.
Now let’s look at the records of the survivors—doubtless the superior funds of the initial group. Yet fully 104 of them fell short of the 11.3% average annual return achieved by the unmanaged S&P 500 Index. Just 43 funds that exceeded the index return. If, reasonably enough, we describe a return that comes within plus or minus a single percentage point of the market as statistical noise, 52 of the surviving funds provided a return roughly equivalent to that of the market. A total of 72 funds, then, were clear losers (i.e., by more than a percentage point), with only 23 clear winners above that threshold.
If we widen the “noise” threshold to plus or minus two percentage points, we find that 43 of the 50 funds outside that range were inferior and only seven superior — a tiny 2% of the 355 funds that began the period.
[via roberts1001, 3/10/10]
Now let’s look at the records of the survivors—doubtless the superior funds of the initial group. Yet fully 104 of them fell short of the 11.3% average annual return achieved by the unmanaged S&P 500 Index. Just 43 funds that exceeded the index return. If, reasonably enough, we describe a return that comes within plus or minus a single percentage point of the market as statistical noise, 52 of the surviving funds provided a return roughly equivalent to that of the market. A total of 72 funds, then, were clear losers (i.e., by more than a percentage point), with only 23 clear winners above that threshold.
If we widen the “noise” threshold to plus or minus two percentage points, we find that 43 of the 50 funds outside that range were inferior and only seven superior — a tiny 2% of the 355 funds that began the period.
[via roberts1001, 3/10/10]
Monday, July 04, 2011
John Templeton: 16 Rules for Investment Success
“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.
The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”
Sir John left us with many such tenets that we can rely on during these times and it would serve all investors well to review many of them. In 1993, Templeton published “16 Rules for Investment Success.”
Below is a summary of each point:
The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”
Sir John left us with many such tenets that we can rely on during these times and it would serve all investors well to review many of them. In 1993, Templeton published “16 Rules for Investment Success.”
Below is a summary of each point:
Sunday, July 03, 2011
Minnesota shuts down
ST. PAUL, Minn. (AP) — Minnesota’s state government is closed for business.
It shut down at 12:01 a.m. CDT Friday, the victim of an ongoing dispute over taxes and spending between Democratic Gov. Mark Dayton and Republican legislative majorities. Talks fell apart well before the deadline, leaving state parks closed on the brink of the Fourth of July weekend, putting road projects at a standstill and forcing thousands of state worker layoffs.
Even before the final failure, officials padlocked highway rest areas and state parks, herding campers out. The full impact will hit Friday morning as thousands of laid-off state employees stay home until further notice and a wide array of services are suspended.
Critical functions such as state troopers, prison guards, the courts and disaster responses will continue. On Friday morning, former Supreme Court Chief Justice Kathleen Blatz will begin the court-appointed job of sifting through appeals from groups arguing in favor of continued government funding for particular programs.
Republican lawmakers had been gathered at the Capitol for hours as they demanded that Dayton do what he had said for months he would not do: Call a special session so they could pass a “lights on” budget bill to keep government running. The governor insisted he would only agree to a total budget solution that incorporated the many facets of state spending.
“I think the governor’s insistence that we pass a full budget is not going to be of much comfort to Minnesotans who are going to see delays on the highways because construction projects stop,” said Senate Majority Leader Amy Koch, R-Buffalo. “It‘s not going to comfort people who can’t use our state parks, or who can‘t get a driver’s license.”
The shutdown in retrospect was something of a slow-motion disaster, with a new Democratic governor and new Republican legislative majorities at odds for months over how to eliminate a $5 billion state budget deficit. Dayton has been determined to raise taxes on high-earners to close the deficit, while Republicans insisted that it be closed only by cuts to state spending.
Even after the shutdown looked like a certainty, Dayton and Republicans did not soften their conflicting principles. Dayton said he campaigned and was elected on a promise not to make spending cuts to a level he called “draconian.” He said he has been more flexible than Republicans in trying to compromise in order to acknowledge their principles.
“I’ve gone halfway, and I’m not going to go further,” Dayton said.
Many Republicans have been equally firm. House Speaker Kurt Zellers, R-Maple Grove, suggested Thursday night that Dayton had other motives.
“This is about shutting down government for a political purpose,” Zellers said.
Republican Sen. Michelle Benson said earlier in the day she wouldn’t budge on raising taxes or new revenue in any form.
“If we don’t start taking a different approach to how we manage our government, we’re going to swing from one bad economic circumstance to another,” Benson said. “We can’t just keep throwing more money at government and hoping that makes things better.”
Dayton has proposed raising taxes on couples earning more than $300,000 and individuals making more than $180,000. He said Thursday night that he had offered to target the tax increase to even higher earners, those making more than $1 million a year.
Republicans have opposed any new taxes or new revenue sources, arguing instead that the state should rely on spending cuts, including deeper reductions in health and welfare spending than Dayton is willing to accept.
Some GOP moderates have talked of breaking the impasse with other means of raising revenue, such as eliminating tax breaks or authorizing a casino. Dayton has said he is open to such ideas.
After budget talks broke down Thursday night, neither Dayton nor Republicans gave any immediate indication of when or in what fashion they might continue.
[via pbo / Where's Jesse Ventura when you need him?]
It shut down at 12:01 a.m. CDT Friday, the victim of an ongoing dispute over taxes and spending between Democratic Gov. Mark Dayton and Republican legislative majorities. Talks fell apart well before the deadline, leaving state parks closed on the brink of the Fourth of July weekend, putting road projects at a standstill and forcing thousands of state worker layoffs.
Even before the final failure, officials padlocked highway rest areas and state parks, herding campers out. The full impact will hit Friday morning as thousands of laid-off state employees stay home until further notice and a wide array of services are suspended.
Critical functions such as state troopers, prison guards, the courts and disaster responses will continue. On Friday morning, former Supreme Court Chief Justice Kathleen Blatz will begin the court-appointed job of sifting through appeals from groups arguing in favor of continued government funding for particular programs.
Republican lawmakers had been gathered at the Capitol for hours as they demanded that Dayton do what he had said for months he would not do: Call a special session so they could pass a “lights on” budget bill to keep government running. The governor insisted he would only agree to a total budget solution that incorporated the many facets of state spending.
“I think the governor’s insistence that we pass a full budget is not going to be of much comfort to Minnesotans who are going to see delays on the highways because construction projects stop,” said Senate Majority Leader Amy Koch, R-Buffalo. “It‘s not going to comfort people who can’t use our state parks, or who can‘t get a driver’s license.”
The shutdown in retrospect was something of a slow-motion disaster, with a new Democratic governor and new Republican legislative majorities at odds for months over how to eliminate a $5 billion state budget deficit. Dayton has been determined to raise taxes on high-earners to close the deficit, while Republicans insisted that it be closed only by cuts to state spending.
Even after the shutdown looked like a certainty, Dayton and Republicans did not soften their conflicting principles. Dayton said he campaigned and was elected on a promise not to make spending cuts to a level he called “draconian.” He said he has been more flexible than Republicans in trying to compromise in order to acknowledge their principles.
“I’ve gone halfway, and I’m not going to go further,” Dayton said.
Many Republicans have been equally firm. House Speaker Kurt Zellers, R-Maple Grove, suggested Thursday night that Dayton had other motives.
“This is about shutting down government for a political purpose,” Zellers said.
Republican Sen. Michelle Benson said earlier in the day she wouldn’t budge on raising taxes or new revenue in any form.
“If we don’t start taking a different approach to how we manage our government, we’re going to swing from one bad economic circumstance to another,” Benson said. “We can’t just keep throwing more money at government and hoping that makes things better.”
Dayton has proposed raising taxes on couples earning more than $300,000 and individuals making more than $180,000. He said Thursday night that he had offered to target the tax increase to even higher earners, those making more than $1 million a year.
Republicans have opposed any new taxes or new revenue sources, arguing instead that the state should rely on spending cuts, including deeper reductions in health and welfare spending than Dayton is willing to accept.
Some GOP moderates have talked of breaking the impasse with other means of raising revenue, such as eliminating tax breaks or authorizing a casino. Dayton has said he is open to such ideas.
After budget talks broke down Thursday night, neither Dayton nor Republicans gave any immediate indication of when or in what fashion they might continue.
[via pbo / Where's Jesse Ventura when you need him?]