EP 148: Covid all around & world talks of Climate change? Capital Gains Tax at 43.4%, China warns Australia

Covid all around & world talks of Climate change? Markets Plummet that Biden wants to raise Capital Gains Tax – as high as 43.4%, China warns Australia over BRI, Syrian Missiles explode near Israeli Nuclear Reactor, Israel Retaliates and more

Sree Iyer: Namaskar. Today is April 23, 2021, and this is episode 148 of Daily Global Insights with Sri and Sree. Here are the main points:

  • Kamala Harris casts her third tie-breaking vote to advance contentious Pentagon pick – Colin Kahl
  • Senate Republicans Called for spending upwards of $568 Billion
  • Markets Plummet that Biden wants to raise Capital Gains Tax – as high as 43.4%
  • Syrian Missiles explode near Israeli Nuclear Reactor, Israel Retaliates
  • Indian Exports of Agricultural and Allied products increased by 18% to 2.74 Lakh Crores in the period April 20 – Feb 21

Sridharji, your initial thoughts.

Sridhar Chityala: Good morning to everybody. And I’m sure that you’re all going to have a wonderful Friday as we come to the end of the week. My initial reactions are as expected, Kamala Harris is rolling on. She has now become the indispensable 51st candidate to cast a critical vote as she tries to navigate the passage of several policy-related matters to the Democratic party. It’s very unfortunate that the Senate is in that situation that’s my first observation. The second observation is that Israel yesterday, we talked about the explosions near the Israeli nuclear reactor there were some perceptions that it could be, you know some incidents around. But today we get the confirmation that it was a Syrian missile strike and obviously its got consequences and Israel is responding. This capital gains tax was talked about, you know, exceeding 1 million by Miss Warren, but obviously, you know, there are going to be several flip-flops by Mr Biden, before it settles down, but the current rate of 39% as against the 20%, prevailing rate, you know, cast apt questions on what happens to the stock market. Everybody invests in the market because the long-term gains are attractive and beneficial but not this kind of tax rate. Those are my initial observations.

Sree Iyer: And in US News, Senate confirms Vanita Gupta as Associate Attorney General, and Senate passes, Bipartisan Asian hate crimes bill together it seems like now the confirmation process is again moving forward Vanita Gupta was a bit of a controversial choice for some of the comments she made but, looks like another lady senator from the GOP, came to her help, sir.

Sridhar Chityala: Well, you know, let’s start with Colin Kahl. Colin Kahl was controversial. We discussed it. He was one of the ex-Obama administration. He was in the security. Colin also advised Obama in the Iran deal, the much-contested Iran deal. It’s interesting to see that his nomination has got through, obviously, it went on party lines 50/50, he is now confirmed as the Undersecretary of Defence policy. Now, it’s not just the confirmation, it also raises concerns, this whole Iran deal itself is being viewed in a very suspicious manner whether the objective should be accomplished. This nomination goes a long way with an additional set of eyes again back in the Biden Administration, looking over the deal.

Vanita Gupta is another person who has had some very provocative remarks. Again, much contested in the Senate, but, eventually, you know, the Senate decided to confirm and moves forward. Yes, one more Indian-American in the Biden cabinet. As far as the Asian hate crime bill, this is relating to the crimes that are taking place in the United States. There’s bipartisan support that says that they condemned and laying out the framework as to the stringency of what can come if this situation continues. So I think everybody supports this Asian Hate crimes bill.

Sree Iyer: Here goes 94 to 1. And moving on Sir, the House Democrats passed DC, statehood bill to make DC the 51st state. How do you think it’s going to fare in the Senate?

Sridhar Chityala: Well, you know, the House has passed the bill, then immediately we have had Democratic Progressive passing, very radical types of comments. They call filibuster racist, they call filibuster is anti-American. They call filibuster as anti-progressive and attempt by vested interests or the GOP. In other words, to stall the progress of an elected government. So that all said she a precursor and this is not something that was supported by the Republican party.  It’ll be interesting to see how, how the voting occurs, and whether it gets nominated, or whether it gets approved, it should have a filibuster. They should have 60 votes because it’s a significant decision in terms of the District of Columbia being nominated as a state. But whether you know, our proverbial logic works or whether they will continue to apply this filibuster and probably bring Kamala Harris the fourth time to get this done, remains to be seen, there’s nothing that can that we can predict serve in the Senate. Everything seems to take a topsy-turvy turn and, you know, on one day you expect that there could be some bipartisan, but then the next day, you see that that’s all cast aside.

Sree Iyer: And now, the Senate Republicans are telling the Democrats should back off controversial court-packing. It seems like I’ve heard this before a few years back.

Sridhar Chityala: Well, Democrats strongly feel that the Supreme Court is very much against the present because it is cast and it is set for life. There are heavy conservatives that make up the Supreme Court bench. So they believe that their Progressive agenda is at risk with that Supreme Court. So they’re trying to exercise their position. And add three more judges or four more judges or five more judges, which gives them the majority through a House legislative process, get the votes, take it to the Senate and again you know put the subtle type of pressure to see whether they can get it done. Senate has effectively Lindsey Graham and others and even some of the ex, I think we talked about this again, you know, Stephen Breyer and so on. Some of the Ex justices who belong to the Democratic Party, even you know, William Rehnquist have made comments that the Supreme Court-packing is not the right thing and the prevailing law should prevail again. I think the present Democratic setup is in no mood to let down and again, if you want me to recall, I go back to Mr Obama’s letter to the Georgia senate elections to the people of Georgia that this is the time our agenda is at risk, all of you should come and vote so that our agenda is accomplished in this specific term. So they’re very clear. They are moving with a maniacal pace either through executive orders or through this process to get things going.

Sree Iyer: House Democrats passed the plan to Stop Travel Bans. Is this the ban to like some Islamic countries, sir?

Sridhar Chityala: I won’t use the word Islamic but countries that have been deemed unsafe and where you are receiving, it could be some of the Latin American countries too.

Sree Iyer:  Is Venezuela is also on the list?

Sridhar Chityala: Yes, I have a feeling Venezuela.

Sree Iyer:  I stand corrected, some countries are banned, let’s put it that way.

Sridhar Chityala: I think now, what they’ve done is President as the commander-in-chief exercise the right consultation with his National Security team and even the defence, you know, application of bank to certain countries. Now, what the House this specific Bill States is that not only the president is not allowed, but he must come up and come to the house and get the house approval before the bans are applied, the counter-argument to that which Democrat says banning selected countries, then many people who have relatives friends and so on. They’re all denied access to see each other is the case that they make which seems to precede a security issue. I have a feeling that they will do compromise if it doesn’t get through the Senate, but this is something that doesn’t need to come to the Senate it holds and I’m not sure that this is good for the United States, is one. And my mind, this is on a day when two alleged security terror suspects again, made it through the border.

Sree Iyer:  And Biden Administration is also cosying up to a controversial UN Agency for Palestinian refugees.

Sridhar Chityala: Well, it is called the United Nations Refugee and Welfare organization, UNWRA. Historically this agency has been used for a number of and specifically the Palestinian refugees in terms of Aid distribution. It is alleged and it is believed that they seem more sympathetic but they’re not condemning any of the acts of violence and other things that emanate from the territories and occasionally, they have passed anti-semitic remarks either and anti-Israel remarks. For Biden Administration to hop down with such an agency, remember recently the United States sent 125 million dollars as aid into the territories. No one knows, what exactly is the accountability on the outcome of the flow of a specific capital but, this just adds one more issue to a number of other issues that are propping up.

Sree Iyer:  In other news US lawmakers back $100 million science plan to compete with China. This hundred million will be directed, where, sir?

Sridhar Chityala: To various research and scientific activities, basically to encourage in all forms of science, including this pandemic and medical and other types of research activities into both government and non-government, by way of Grants, it helps scientific advancement against potential threats that the nation faces.

Sree Iyer:  And US lawmakers intensified bipartisan effort to counter China. Now, this is something that happens at so many different levels, perhaps you can explain it out for us in a little bit of time. What exactly are the things that the US is mulling over?

5Sridhar Chityala:  The US is mulling over four to five areas. We already know what they’re doing on the defence front, which is around the security in terms of protecting, that’s number one. And number two, they also are trying to mitigate any aspects and issues that relate to the supply of critical materials rare Earths, we talked about number two, number three, that they want to have deterrence around the development of next generational Technologies, AI, 5G and 6G. They are collaborating with Japan and other countries especially around the 6G and AI capabilities. The manufacturing of the chips and they are encouraging Taiwan to come in and do that. So, these are very specific programs that the Senate, and the House wants to support so that it can counter any measures that China takes in terms of throttling, the United States issues that are close to the United States, security trade and commerce policies.

Sree Iyer: And laid off Keystone Pipeline workers blast Biden infrastructure agenda. Sir, before I pass the question over to you, isn’t it true that it goes under Obama’s watch that Keystone Pipeline was started?

Sridhar Chityala:  Keystone Pipeline, no, he approved, the environmental agencies came and made a case. He’s stalled it and it was approved subsequently by President Trump.

Sree Iyer: Ok, now please go ahead, sir. So, now you have a bunch of people with well-paying jobs, out of a job and shell drilling is considered unsafe. What do they do? What is the future for them?

Sridhar Chityala:  They all have to go into alternative energy programs and as Mr John Kelly put it as the car has tearing and four wheels, it doesn’t care, it uses energy. So, therefore this guy will be retrained and sent into these new energy fuels that are environmentally safe and efficient, such as electric vehicles, and so on and so forth. So they are not buying into the argument. He says, it is not linear one to one, we all have educated trained and so on. In this, the pipeline is a specific business and a specific skill. We get trained as to how these pipes are laid and how the gas flows through these pipes, as well as drilling and all these areas are very specialized skills and special purpose jobs. So when these guys get laid off which is very highly likely, you know they have no alternate recourse a significant number of people in Middle America is going to be impacted as a result of this.

Sree Iyer: And infrastructure funding news, Senate Republicans have called for spending of about 568 billion. We will share the details of that in just a short. Larry Kudlow says Biden infrastructure plan would kill the economy. And the Republican plan of 568 billion-plus if you would permit me, We put a chart here sir and it is in front of me here and this is essentially the pie chart that says like 299 billion over five years spending on roads and bridges, 161 billion on public transit systems so, this is the Republican plan. And what are your thoughts, sir? I mean, where do you think the two will meet?

Sridhar Chityala: The Republican plan, if you talk about infrastructure, lays out in clear numbers which are roads and bridges, which is part of the infrastructure, public transit system that, Subways, and so on, it’s again a very clear infrastructure necessary in terms of upgrade and Amtrak which is the interstate, you know Railroad and that is 20 billion definitely Amtrak requires if you’re travelling between Boston and Washington DC, it’s very highly used commuting business and Commercial commuting and of course, governmental commuting perform vehicle ensure the story is that that’s a 20 billion dollars. Then, Airports to be upgraded, you know, some of the new, but many of Airports are old, that’s 44 billion. So when you look at that, it’s you’re talking about infrastructure for this country, which is everybody believes that it needs to happen. Now, there are also earmarks for 65 billion that means they don’t need to spend all of it plus or minus and that’s for Broadband. Again, this is Bipartisan that the United States requires Broadband across the entire United States. So, when you take this into context, these numbers do make sense as infrastructure. And what is stuck in this 2.25 trillion of the Biden’s plan has got the whole set of chachkas, including bailing out, the state administration’s and sending money overseas, Etc. So, in terms of the outlay of the expenses, it looks logical. Now, the question is funding this is where, you know, the big battle is going to be, how is it going to be funded? Now, Larry Kudlow’s point is that when you increase corporate taxes it reduces the investments that they make and therefore, tax cuts have enabled the boom in the past four years and sustained growth coming out of the sustained recovery, that happened from 2008 to 2016. So this is where the rubber hits the road, what is going to be the funding plan? There is no clarity as yet whether corporate tax hikes are going to be but, then today we hear another tax hike which is around the capital gains. So, one never knows what it is. But, if I have to bet then knowing what Democrats have done, they just going to through the Republican plan to the into the kitchen sink and then move forward with their 2.25 trillion plan.

Sree Iyer: After all, they have the casting vote in the Senate. And Devin Nunes groundbreaking Trump document is back in Spotlight for our viewers benefit, I think we’re talking about this for the first time in our series. Perhaps, you can expand on it a little bit and the significance of this, sir.

Sridhar Chityala: Well, I think it’s very important. If you go back to the 2016 elections victory, and what proceeded during that particular phase, and what followed after. Right through Trump’s presidency, there was this issue around illegitimacy and there was Russian interference. So the whole thing there was a lot of investigations being conducted.

Essentially, there are two main issues or two main principles first, Devin Nunes document confirmed that the Democratic Party and the Hillary Clinton campaign funded, a Kremlin sourced dossier in 2016 that accused Donald Trump and his allies of various election conspiracy crimes that’s the first theme around the Trump the document that Devin Nunes has brought to highlight.

The second is that the Democratic Finance dossier was used by the FBI to justify four wiretappings for lasting more than a year on Trump campaign volunteer caught a page. The FBI warrant application contained inaccuracies and that news injected real evidence of partisanship as a motive for the FBI’s probe and that was called the crossfire hurricane. So this is the central theme of the issues that originated from this specific document. Then in the subsequent enquiry where Devin went after Christopher Wray the FBI director and FBI director on the issue around using inappropriate evidence and not conceding and colluding and collaborating with the government or the government that was exiting. And Chris Wray’s comment was that the evidence was not Material. Then, the second thing is that Eric Swalwell who runs the hero who still runs I think it’s a security of I don’t remember which committee. He runs one specific company where he runs an intelligence committee and there were issues whether his interests were compromised with China. And the issue here is Eric’s Swalwell two pierce notes of what has happened. How exactly is going to again use? We don’t know. So this is why he has brought this document back into the spotlight to highlight that the FBI intelligence agencies seem to be more collusive with the previous administration which is Obama-Biden and some of them have tipped into the present regime as well. If you see Biden Administration, many nominees are from the old regime.

Sree Iyer: In Global News, the climate Summit begins with Japan and the US boosing targets. Your initial thoughts, sir, because I think Modi has claimed that he has surpassed his targets.

Sridhar Chityala: Japan is 45% and people believe that that is a very very tall order and they need some kind of maniacal innovation in the energy side before they can step in. John Kerry and Biden are talking about 52-53%. Republicans are laughing and are basically saying ‘this plays right into the hands of the Chinese. The very fact that Russians and Chinese readily exceeded to attend this Summit makes it… They are going to sit on the sidelines and watch as Biden tries to get this agenda going and puts his zillions and zillions of capital.

As far as Mr Modi is concerned, India is starting from the base, ground zero situation, when you look at China versus the United States on the scale of economy. India is well advanced in Solar energy. They are also looking at alternate fuels as another kind of vehicle. India is probably the largest solar energy producer in the world. There significant amount of capital that is flowing into, and it naturally fits within the DNA and the agent of Modi. So, India will gradually make its way. It probably will meet its goals quite easily relative to either Japan or China, or Russia, or the United States.

Sree Iyer: In other news, Biden is expected to recognize the massacre of Armenians as genocide. This would probably trouble the Turkish.

Sridhar Chityala: Yes, I think that it’s like peeling the whole history and he wants to recognize the Armenian thing. The Ottoman Empire, which unleashed the fury as genocide and it’s going to see the repercussions. It is almost like we are going into every old historical issue which is contentious, and stirring the pot and waking up on other power to instigate more trouble.

Sree Iyer: Republicans unveiled a bill supporting sanctions on Iran. Now, the Iran deal is off already, are these additional sanctions on them?

Sridhar Chityala: I think that it is not just the sanctions because they are already at 60% uranium enrichment, they have this 25-year oil deal, they have an infrastructure deal with China. I will not be surprised if Russia has some deal with Iran and which also puts India in the hot seat. India seems to have moved from Iran to Iraq, slowly cutting the supply from Iran, and it’s also substituted a considerable amount from Saudi and Iran with the United States. So, the sanctions are meant to target people, the regime and so on. But none of the things that the Chinese have done is going to have any material impact on these sanctions.

Sree Iyer: In other news, the Syrian missiles explode near the Israeli nuclear reactor, and Israel has retaliated for this. Your thoughts, sir.

Sridhar Chityala: I think I’m unpleasantly surprised that the Syrians want to tangle with Israel. We need to see whether it is actually Syrians, or whether it is some Iranian rebels or Iraqi rebels. Syria is a hodgepodge, and nobody knows, which part of the territory is controlled by whom. I know that Central Damascus and the region around Damascus is controlled by Bashar Al-Assad’s forces, but in the rest of the region, it is hanky-panky stuff, It is quite bothering that it is very specifically called Syrian and obviously, Israel doesn’t keep quiet, it has retaliated with, I’m sure, disproportionate force,

Sree Iyer: But usually, Israel’s intelligence is spot on, isn’t it?

Sridhar Chityala: Absolutely spot on. We have not heard from the sources and the people, but yesterday, when the first news broke out, it was very clear that it was near the nuclear reactor. The explosions were seen. Iranians claimed responsibility for the retaliation or revenge against their own attack. Then that thing seems to have backed off your bit, on the back of the specific news. More to come.

Sree Iyer: Yes. And as and when it happens, we will update you. A Car Bomb kills 4 at Quetta Serena Hotel in Pakistan, where the Chinese Ambassador was expected to be present. He was saved because he was late by half an hour.

Sridhar Chityala: Again, in Pakistan, we have no idea of what exactly is going on. It’s supposed to be a strategic partner of China. The BRI initiative is supposed to be one of the key pillars of the trade. There was also Iran, Turkey, and Pakistan deal to plug into the railroad and roadway connecting into Chahbar port and China took it to be a part of its BRI efforts. Whether there is a whole set of splinter groups or ethnic groups, I don’t want to use the word terrorist groups, but there’s a whole number of groups, who have challenged the Chinese footprint in Pakistan, and it is a possibility that they could be responsible for this. They had targeted a Chinese Ambassador who was to be present in the hotel, 12 people died.

Sree Iyer: Well, the headcount has gone up. Now, we have talked about this yesterday, viewers, China warns of serious consequences as Australia scraps BRI. So, Australia is walking away from this. What do you think China can do?

Sridhar Chityala: I think we discussed, what they are saying is this is another fluster that China is making. For every move that somebody makes China has to respond. Australia said it is tearing up the BRI. China is saying you will face the consequences as a result of it. What can they do? Effectively, cut more exports or imports. They can cut more imports that they make or Australia could lose some of the exports going towards China and Australia imports a lot of stuff from China and much critical stuff could be banned. Australia also receives investments into some of the Agro and Energy sectors, that could stop. China is also an investor in Australian real estate. So some of these programs could stop but Australia would have studied all of this and they will not have come to a conclusion as a knee-jerk reaction. They recognize their security and their identity and their integrity as a nation is far more important. So, therefore, I think, both Nations would have done the risk-damage assessment before they went on their respective paths.

Sree Iyer: And we have said this before, the base in Djibouti that the Chinese have. The Chinese aircraft carrier in the Indian Ocean could be a reality, isn’t it?

Sridhar Chityala: It is. I think that we extensively covered Djibouti and we said that they’ve built a huge infrastructure and they can come from the other side into the Indian Ocean. They don’t need to come from the southern side they can come from the Djibouti area. So it’s just one more endorsement that China has plans rolled out.

Sree Iyer: Srilanka detects radioactive material in China-bound ship berthed in Hambantota Port. Now, this is again, China-related and I wonder what the ship was carrying.

Sridhar Chityala: It was certainly carrying radioactive material. The sensors picked it up. It was Antigua registered ship sailing from Rotterdam to going to China. It declared that it is carrying engineering materials required berthing at the port. Any ship that carries nuclear materials must get upfront forward clearance. So there is some kind of contention, but the fact that it has radioactive material coming from Europe is clearly a cause for concern.

Sree Iyer: Yes, and this is not the last word on it. We will keep you updated on this. Also, the United States air-dropped supplies near Senkaku Island in a China-focused drill. Now you see that the action is heating up on the East China Sea also.

Sridhar Chityala:  It is very interesting. We talked yesterday that for almost two to three days, now is the fourth day that Taiwan didn’t get featured. (We spoke too soon) They shifted their attention to the Senkaku Islands. So this is another practice drill that is going on, probably just telling the Chinese, ‘Hey, we are ready to airdrop supplies into the Senkaku Island and conduct evacuation exercise.’ So, therefore, they basically went through the drill and went through the process. This is the first time this has been done sending a clear message that the United States is ready to act in those two places.

Sree Iyer: We’ve told you in the past that Russia has amassed 125,000 troops along the Ukrainian border. Now comes news that Russia has withdrawn some of its troops from the border. Is Putin, blinking?

Sridhar Chityala: Putin is a master strategist. He is an ex-KGB. He comes from the security apparatus of Russia. He knows how to play the game and he’s playing the game, which is effective to state, ‘I am the boss of the Baltic and the Black Sea, and I will do what I want to do and I will do at a time and place that, I choose.’ But remember, he also shut off Kerch Strait. So he is pretty much telling the world that the choices are his, and the actions that flow from them are also his.

Sree Iyer: In Indian news, Indian exports of Agriculture and Allied products has increased by 18% to 2.74 lakh crores from April 2020 to February 2021 period. So the export number is very impressive, sir.

Sridhar Chityala: I think that more and more goods are now getting curated, treated, preserved, and packaged and making their way into many parts of the world. Now, they’re going to develop the food processing industry as well. Remember, in covid times many supply lines were cut and many people couldn’t work, so it is very momentous that India has been able to find markets and also increase its exports of the Agro and its Allied products and build a very good exporting business. In the United States, I live on the east coast. Today, we can get fresh roses, fresh garlands, mangoes which we never used to get from India. All those things are now available and almost instantaneously and amazingly well packed, especially the flowers, and they remain fresh with a little sprinkle of water. It is very good for India, and very good for many of us who are Indian Americans or Americans with Indian ethnic origin that we can still get the supplies as we want as we desire from India through this process.

Sree Iyer: Ola electric is going to build the world’s largest hyper-charging network with 1 lakh charging points across 400 cities in India. That’s impressive. It’s a very big undertaking.

Sridhar Chityala: It is a very big undertaking. I think they are in the scooters and they feel that it’s important for them to have the charging points around the country so that they can be used. You can also see that another company is coming up with a collaboration with India. So this whole electric vehicle and the battery technology is really taking off in India. We announced yesterday that Tesla is making arrangements to manufacture Electronic Vehicles, as well as the charging outlets. All these augurs well for an economy that is ready to take off.

Sree Iyer: I’ll just follow up on what you mentioned. Taiwan Gogoro partners with Hero Motor Corporation to bring its electric scooter, and Battery Technology to India. Hero Motor Corporation is one of the most successful two-wheeler manufacturers in India. It has seen growth for many, many years. This is going to be a very interesting engagement, sir. I hope that this brings the Affordable Electric Scooters to India.

Sridhar Chityala: It also meets the EPA commitments and that makes Mr Modi’s task much easier in terms of meeting his environmental goals.

Sree Iyer: Yes, indeed. The fifth batch of Rafale fighter aircraft, about 5, has arrived from France today.

Sridhar Chityala: Well, I think these Rafale fighters continue to arrive. I think totally they are about 35-40. These numbers keep changing, depending on how they prioritize, but it’s good news for India. Most of it is on the Northern front, but they are keeping something for the Western Front, as well, as essential deterrence.

Sree Iyer: In Global Covid Update, the J&J vaccine is effective even against variants as per the latest field trials. Pfizer confirms counterfeit vaccines in Mexico and Poland. Singapore isolates over 1,200 migrant workers over covid. India reports its highest day spike with 314,000 new cases and 2104 deaths. Sir, your global picture of what you think is happening over the second big outbreak of covid.

Sridhar Chityala: What’s happening in the variants are continuing to create a challenge especially if you are not vaccinated. United States, Israel, UK are some of the countries well on their way with 50% to 100% people vaccinated. So where you have had these dual vaccines and the protocols in place is you’re beginning to see the downward scale in the Active covid cases. The main issue around the rest of the world including Europe is the supply of vaccines, most of the raw material seems to be in the United States. So they are asking the United States to open up the supplies. So that’s number two. Number three is some vaccines, for example, Moderna and at least Pfizer seems to be able to fight off the variants. I’m not sure whether some of the other vaccines like Sputnik or Sinopharm can deal with the variants. So, this is used in quite a few other countries. The good news for India is the Covaxin, we covered this yesterday, which is domestically manufactured, can even deal with the double mutant variants.

So, these are the three main challenges. One is, people need to be vaccinated and many countries don’t have the vaccine to vaccinate their population. Second, the ban of exports is restricting the supply restricting the expansion of manufacturing. Number three is the continued evolution of the variants is bringing about the deacceleration, but it’s not stalling the advancement of the covid in the world.

Sree Iyer: In Markets News, America is reopening as jobless claims drop to 547,000. Powell pledges FED will not allow a substantial overshoot of inflation and today the markets plummet because Biden wants to raise capital gains tax to as high as 43.4% and Biden’s aggressive emission goals will also impact the economy. So with all these things put together, the Dow has tanked more than 300 points, at one point dropping over 420 points, S&P has also given up its earlier games and it also closed at 0.9% lower. Do you think it’ll again bounce back because you’ve been having this yo-yo in the market?

Sridhar Chityala: I just want to wrap up on India’s rising cases is a big concern. I’m told that the oxygen supply is inadequate as it relates to covid. There are different sets of data. I hope India addresses its covid situation because the number is rising to 300-315,000. A couple of days ago it was 200,000. These are astronomical numbers in terms of devising the number of cases.

So now transitioning to markets, this 43.4% came up as a result of the capital gains. Capital gains as of today are 20%. Capital gains have a direct correlation to the markets because you have long-term gains and short-term gains. For the short-term gains, it is 43%. Are long-term gains 43%? No. Long-term gains are also going to be 43.4%. The short-term gains will be treated as ordinary income, tax at ordinary income. They’ve kept a 1 million threshold. Those who earn more than 1 million have 43.4% of the realized gains on the capital gains. Now, this implies that there is going to be a flight of capital in the markets. This is a sentimental and emotional reaction. Eventually, the markets will settle down but this tax issue will be addressed through discussions with Biden. He may budge but the question is he has to find somewhere to fund his astronomical infrastructure budget than other climate budgeted that he also has in mind. Remember, we talked about yesterday, a $1 trillion child welfare budget that he needs to fund and how this is going to be funded remains a contentious issue. He seems to grapple from one to the other.

So, in my view, the markets will continue to rise on earnings, will have gyrations when you have adverse news like this, but in the medium to longer-term, the market movements will be determined by what happens to the tax structure in the United States.

Sree Iyer: As a result of this, possibly Bitcoin -s down to 52,359 and Coinbase is at $290.52. The Dow is at 33,815 and everything, of course, I told you like everybody is now lower.

With that sir, it brings us to a close on today’s episode of Daily Global Insights, has a great weekend. And incidentally, if you would like to add something in the summary, please go ahead, sir.

Sridhar Chityala: I think there is a lot going on in the United States. There’s a lot going on around the world, everywhere, Europe, Middle East South China Sea, Southeast Asia, ASEAN. We don’t even have time to cover Myanmar and the issues around Myanmar. There is a lot going on, on the covid side, there’s a ban, there is a big ban in Tokyo, in the Osaka region. So there is this covid threat looming on a day-to-day basis. So the world is grappling with a number of issues. Now, one of the questions that I ask is, is covid, recovery, and reopening of the economy the number one priority of the world or is dealing with climate and the climate accord the priority of the world? I really have a problem that they should be discussing covid at this Summit that Mr Biden is presiding over where you have all the world leaders, I think leaders of 40 countries are attending this, have got their priorities badly screwed up.

Sree Iyer: Thank you for that input, sir, and have a great weekend. Viewers, do not forget to subscribe to our Channel and also, please join our membership and consider donating to our cause. Namaskar.

Sridhar Chityala: Namaskar and thank you so much. Have a wonderful Friday and have a great weekend.




Please enter your comment!
Please enter your name here