Some think the US could have a balanced budget by 2008. If tax rates and economic growth rates remain unchanged, I would buy the 2008 contract in size.
If the Democrats roll back the capital gains and dividend tax cuts, then I would sell a little 2008.
Cross-posted from CaveatBettor.
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I’d rather have tax futures. More to the point in terms of hedging (also compared to presidential contracts for the most part).
Both contracts are interested —tax futures AND balanced budget.
Jason: I love tax futures, but that is not an idea which I independently thought up myself. In fact, I probably read about it on your blog a long time ago.
The tax code and how my accountant comes up with what I owe is too opaque, year-to-year, for me to play these in size.
Cav, Whatever variance there is in the effective tax rates that an accountant can produce, the highest marginal rate should explain a lot of it.