If there is one reason the market has doubled in the past four years, aside from the creative power of entrepreneurialism, its intrinsic ability to earn a return that is mutually beneficial to the public at 10% a year, and the earnings yield interest rate yield differential, it's the reduction in capital gains and dividends taxes instituted by the current US administration in 2003. Thus, I note with interest that the new president of France, Nicholas Sarkozy, claims that the vote in his favor is a mandate for cuts in the Service rate. This offers the same prospect for advances in French entrepreneurial activity as it did in the US.

When I was chief finder for thousands of acquisitions over 20 years, I could tell that the after-Service amount that owners received was the key to every transaction and that nothing was a greater motivator to them then the difference between capital and ordinary gains, with preferences truly crucial. However, the US cuts of 2003 are scheduled to sunset in 2010, and most politicians don't realize how important an incentive the rate is. The easiest way to kill an economy and a stock market is to let rates increase. This, according to Albert Jay Nock, is the Roman way of inevitable destruction and despondency. And I have found in my own studies that there will be much incentive to create despondency and destruction in 2010 by public officials acting in their own self interest, as predicted by the public choice theorists, who gain so much when the number dependent on redistribution is increased merrily as the economy sinks into revulsion.

Thus it's a great countervailing signal in France today, and perhaps it will serve as an offset to the coming revulsion in 2010 if public choice theory predictions in the US come true.

Louis Vincent Gave adds:

There was actually a lot of good news in this French election, beyond Sarko's obviously encouraging result.

Good News #1: The complete implosion of the far left. The communist party only did 2%. So they will have very little legitimacy in calling on strikes and blocking the whole country as they did in 1995 when Ch-Irak tried to reform the pension system. Better yet, the communist party could now go broke as it did not make the 5% of the vote necessary to get public funding as a political party … it couldn't happen to a nice bunch of people.

Good News #2: This dismal score for the left occurred when the participation in the election reached OECD records (close to 85% of people voting). Very encouraging for democracy.

Good News #3: the National front of Le Pen is basically imploding and may not survive the retirement of its charismatic (but completely nuts) leader.

Good News #4: The Socialist Party is, this morning, starting to tear itself to shreads looking for the reasons as to why they have lost the third presidential campaign in a row.

All in all, a lot to be happy if you are French and reform minded right now.

Jeff Sasmor notices:

07:24 TASR TASER: Sarkozy wins election; $100-120 mln order could drive $4.00 in incremental value per share - Merriman (9.53 )

Merriman notes Sarkozy was elected to a five-year term. Firm ests that the opportunity in France is worth as much as $300 mln in revs to TASR assuming the purchase of a TASR and TASR Cam for each of the 250,000 police officers in the Police Nationale and Gendarmerie Nationale. Firm says according to what TASR mgmt has last heard, a Sarkozy victory could mean the near-term purchase of 100,000 TASERs, which they est that could represent up to $100-120 mln in revs.


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