Not Done Yet: Trump Cooking Up Major Tax Cut Bombshell

Guest Piece by Tom Beck of Portfolio Wealth Global

In 2019, the Federal Reserve’s stimulus packages – which shocked the markets, since they represented a full U-turn in terms of policy, compared to the aggressive tightening in 2018 – were one of the primary reasons that the stock market soared by so much.

On multiple occasions throughout 2019, stocks hit new all-time highs. In the 4th quarter, this really intensified and reached historic rally levels. Stocks were green almost on a daily basis.

The FED’s balance sheet expansion is one of the major catalysts, as well as the pro-growth Phase 1 deal that China and the U.S. signed yesterday for the willingness of buyers to pay higher prices.

The result is that the stock market is now the most expensive ever, as far as price/sales ratio goes:

Courtesy: Zerohedge.com

This isn’t a good sign for stocks, nor for the economy, in general. To me, it means that these artificially-low interest rates are causing investment firms to purchase stocks, even though they don’t really want to, as well as prompting CFOs to issue large buyback programs over spending funds on machinery, research and growth.

The lack of viable alternatives for the trillions of dollars in managed money is creating a situation in which fund managers are acting out of necessity, not out of pure reasoning.

Warren Buffett, who isn’t under any pressure to make any moves, has patiently amassed an enormous cash position, which will surely serve shareholders when the time comes to buy big.

Courtesy: Zerohedge.com

As you can see, the FED is not trigger-shy on its unofficial QE4 plan.

Everyone’s been focused on this monetary easing, but the Trump administration is preparing a tsunami of fiscal stimulus in the form of another round of tax cuts for the middle class and lower-income demographics – and they plan to roll it out in 2020!

This means that, on top of the already $1.1T deficit, tax receipts are set to decline dramatically.

The monstrous economic engine, the boom in the markets, the low unemployment rate, the confidence of consumers; all of these are what Trump is banking on to get re-elected.

It seems Trump is looking to make all voters know, right around the time of elections, that he is ready to take drastic measures to let the free enterprise system work, by reducing taxes.

Obviously, if he is re-elected, he’ll have to focus on balancing the budget, which is a whole other major topic.

This week, the impeachment took another step towards the Senate, when the House voted to advance the two articles of impeachment to trial.

It’s coming and it’s happening during an election year. This is a very unique time in American politics, to say the least.

There are many moving parts here and it will be truly fascinating to see how the public reacts and follows these issues, at the same time as the Phase 1 deal taking effect and with the president’s economic advisor, Larry Kudlow, purposely leaking or teasing, as I see it, a Tax Cut 2.0 later this year.


Courtesy: Zerohedge.com

As you can see, Goldman Sachs views this as a time of very complacent behavior on the part of investors, who are not considering any potential loose ends with Iran, on the potential of complications on the impeachment front or backlash from the rollback of Repurchase Operations by liquidity-addicted investors.

You can truly notice the elevated risk appetite, when you look at the low yields that investors are willing to accept when lending money in the junk bonds segment.

It’s back to 2007 levels:

Courtesy: Zerohedge.com

It’s clear to see that people are feeling good, in general. Investors have their guards down and their radars turned off for Black Swan scenarios.

This doesn’t mean that anything imminent is coming, but what it does tell you is that most investors are willing to pay top dollar for their stocks.

It’s a good opportunity to scan the portfolio for any companies which may be receiving too much attention, and you can capitalize by taking profits, partially or totally.

Like I said, we live in an era that is dominated by central banks and we must factor that into our thoughts:

Courtesy: Zerohedge.com

Is this a scary-looking chart or what?

There’s no massive war or terrible crisis happening, yet central banks have put a chokehold on markets. In England, Japan, the European Union, in the states and around the globe, there is too much debt (compared with GDP) on the central bank and government level.

These sorts of things don’t unwind smoothly and with the proposed tax cuts later this year, the budget deficits look grim.

No solutions so far; the bubble intensifies.

 

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

4 thoughts on “Not Done Yet: Trump Cooking Up Major Tax Cut Bombshell

  1. Jimmy MacAfee - January 18, 2020

    A pertinent point: it’s a worldwide debt bubble, not just a US problem. There is talk of a new monetary system, sometime after 2020, with Central Banks stripped of their usury.

    For example, it is claimed that the Klepto-Commies in the Deep State stole some 7 billion of Ukraine money, and put it into an American firm, and then re-lent back to Ukraine for the Ukrainians to have to pay back with interest. The IMF is also involved, if not in this scheme, in many schemes like it.

    The current system is this: debt is wealth; debt equals profit. The system manufactures money based upon debt. When you borrow money, your debt creates wealth – not for you, but for others who buy and sell your debt as if you were an indentured servant. This is NOT the essence of Capitalism, but the essence of Feudalist Slavery, not too different from what was done to sharecroppers.

    There will be a major re-set of debt, and a lot of owners of debt will be dumped in the street unceremoniously – unfortunately, this COULD include stockholders.

    Debt is a tax, and everybody is encouraged to indulge in it. A lot of people who have gotten out of debt make these lenders’ teeth gnash, because they use debt to steal people’s property and other assets – (which is also what the healthcare system is set up to do.) Find ways to be debt-free, maintain enough liquid assets to protect your illiquid assets and don’t allow yourself to be made into a serf.

    And finally: inflation is used to make people get out of cash. This may come to bite the Oracle of Omaha in the butt, if he holds too large a cash reserve. Or he may be waiting for the inevitable worldwide bankruptcies that will occur when no one is willing to negotiate the loans they’ve sucked people into. As it now stands, people are fighting to purchase debt at lowered rates, and this may be a good thing for a correction (a long-term correction.) Debt can be restructured – and hopefully will be – and Warren Buffett might not have the great deals he hopes for. (After all, he got suckered on TEVA.)

    The IMF must be held accountable for creating a lot of the debt bubble, for incentivizing poorly constructed loans to people (nations) who cannot afford to pay the loans back, and whose financial plans for these countries are unwise and devastating to the economies of these same countries. At the same time, the leaders of these countries need to be held accountable for putting their citizens at risk by organizations which want to see slavery re-instituted in the name of Debt. American politicians who have participated in such schemes also must be made accountable for skimming the profits made by the lenders (think: relatives of Joe Biden, Nancy Pelosi, Mitt Romney and others.)

    Taxation is also another form of debt-collection. President Trump – (I’m not speaking for him in any of this) – understand every bit of what I’m saying, and a lot more.

    By the way: Mini Mike of China wants to tax the poor a whole lot like Solomon’s son did to Israel, which caused the split of that nation; Mini Mike says the poor need to live under a benevolent dictator (him) who will tell them how to live their lives. (This is exactly the opposite of what President Trump plans to do.)

  2. Gregg - January 18, 2020

    Question: Did the treasury bring in more money or less money during the first full year after the Trump Tax Cuts? As far as I can remember, every time there is a tax cut, government revenues increase; when taxes go up, the opposite is generally true – especially in the long term. Obviously there is a point in the Laffer Curve where actual tax revenues will be lowered if the tax rate is set too low. I’m sure Trump’s economic team has that point targeted.

    Everyone needs to understand that when Democrats are in power anywhere, one way or another, taxes go up, yet the budget is never balanced. Taxes are a necessary evil, and the left, including Bush the first, uses them as a means to first and foremost control the people; every dollar taxed from anyone is a dollar of liberty and freedom taken away from the productive citizens of this country. I defy anyone to name a time where a tax increase actually truly resulted in a legitimately balanced budget and set any government (federal, state, or local) on a path of fiscal responsibility or led to individual prosperity. Yet, tax increases are sold to the public as the only way to advert “fiscal crisis”.

    Supposedly, every state has in its’ constitution a requirement to balance its’ budget every year, but looking at the 2019 “The World Almanac” (page 67 and elsewhere), you will see the “Debt at the end of fiscal year” of all fifty states is $1.160 TRILLION!. Every state has each of its’ citizens in debt between about $900: TN – which is at, or near the best, and $8,048: AK – which is at, or near the worst, with $6,925 per capita debt for NY and $7,409 per capita debt for NJ, as some other examples of highly taxed states. Furthermore, this does not cover the “unfunded liabilities” such as underfunded pensions for teachers and gov. employees!

    Bottom line: Almost without exception, the highest taxed states have the largest per capita debt liability and no amount of additional taxes will solve their fundamental debt problem, and their politicians don’t want it to. It is all about controlling people and behavior; NY’s Gov. Cuomo even said last year that the “evil” rich are the most mobile and are leaving NY which further exacerbates his state’s fiscal woes, but he still says NY “progressive” taxation policies are good policy. This is irreconcilable with logic and fact.

    The fiscal problems with governments, at all levels, is the SPENDING and NOT the revenue. One of my biggest hopes for Trump’s second term will be that he ultimately and legitimately balances the federal budget and forces all state and local governments to truly balance their budgets by weaning them off the federal government teat.

    Balancing our various budgets and ultimately reducing government debt and reducing its’ future underfunded obligations will do more to ensure the stability of our currency than any other monetary manipulation the FED might make. Failure to do so will ultimately lead to a total economic collapse as a bill which we cannot pay will eventually come due.

    1. Jimmy MacAfee - January 18, 2020

      People who work in government funded agencies should not be allowed to serve on City and Town councils, because there is an automatic conflict of interest – and they are rarely held accountable for those conflicts. They engage in “I’ll fund you if you fund me” behaviors, which result in money being shoveled to useless organizations. Tip O’Neill once said, to paraphrase: “all politics are local.”

      People think of large government expenditures as the most costly, but it’s the aggregate of all the smaller items that really break the bank, even in large cities.

      We’ll see places like NYC and SF disintegrate from high taxes in our lifetimes, and it won’t register on most Americans’ list of concerns. SF is doing a huge number of suicidal things (in addition to choosing a bizarre Leftwing District Attorney) https://dailycaller.com/2019/11/11/chesa-boudin-san-francisco-attorney-general/

      They plan to put an additional tax on empty storefronts. Now THAT should encourage people to open businesses there! Your business fails, and then you pay even more taxes and won’t be able to sell your property! https://reason.com/2019/12/10/san-francisco-ballot-measure-would-tax-empty-storefronts-in-attempt-to-boost-retail-sector/

      SF might not succumb to an earthquake, but between the voters, the homeless shatting in the street and insane elected officials, the days of the crappy city are numbered.

Comments are closed.

Scroll to top
%d bloggers like this: