One of the features that distinguishes a bull market from a bear market is how participants react to news. In upswings, investors either shrug off discouraging information, or at worse show an initial negative reaction, then pile back in. You see the reverse in corrections: securities prices don’t respond to good news, or do so only temporarily.
Yesterday, another bearish pattern asserted itself: investors viewing developments once seen as positive in the reverse light. As the New York Times says it all: “Discussion of a Fed Cut Only Stirs Up Concerns About a Weak Economy.” Investors are suddenly concerned about the information content of Fed moves, and apparently less trusting of the Fed’s ability to pull off a rescue.
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Let Bearmania Embrace You!
During the second quarter of 2007, the Internal Revenue Service (IRS) completed the examination phase of the audit of the Corporation’s federal income tax returns for the years 2000 through 2002 and issued a Revenue Agent’s Report (RAR) to the Corporation. Included in this RAR were proposed adjustments to disallow certain tax deductions and include additional taxable income relating to certain leveraged leases referred to by the IRS as “SILOs.” The Corporation filed a protest of this proposed adjustment as well as certain other of the RAR adjustments with the Appeals office of the IRS. We believe our tax treatment of the SILO position as true leases for U.S. income tax purposes is supported by the relevant facts and tax authorities. Further, issuance of the RAR did not change management’s estimate of the ultimate resolution of positions included in the UTB balance. However, final determination of the audit or changes in the Corporation’s estimate may result in future income tax expense or benefit. The Corporation’s federal income tax returns for the years 2003 and 2004 remain under examination by the IRS.