Posted on 04/22/2017 7:14:35 PM PDT by ShivaFan
President Trump told The Associated Press on Friday that he intends to release a tax reform plan next week that includes a "massive tax cut" for businesses and individuals. This is what I have been waiting for and have been building my portfolio since December on this hope. I was very concerned when the "Freedom" Caucus damaged the momentum by not accepting reality and being hardliners who could not wait to stage in the required changes needed in the name of what Americans have their hopes in - jobs and the economy. My position is the DOW already "priced in" the AUGUST tax cuts, and with the Freedom Caucus putting everything off kilt, there was no way we would be seeing any tax cuts by August and I feel strongly at that point the markets will "price out" the tax cuts and we will see a 1,500 point drop in the DOW. And, as the markets drop this would also make the agenda of tax cuts even more difficult, the Freedom Caucus handing the Democrats a huge victory especially in the 2018 contested seats, and frankly the economic down turn will be known as “The Freedom Caucus Recession”. Some do not agree, but I feel strongly about it.
My hope however was that the President with the Republicans would shift gear ASAP - and focus on the tax cuts NOW. It appears that may come true, at least I am hoping so.
Even despite the "Obamacare repeal and replace" set back and my concerns that the Freedom Caucus have once again branded the moniker of the "Do nothing Congress, Do Nothing Republicans" that would have a domino effect and hurt the dreams of Americans and investors such as myself, yet I see the President is trying in every way to get the tax cuts going.
My prediction is:
If indeed my hopes come true, and the President announces this Wednesday the beginning of the tax cut agenda - THAT it WILL build the momentum and become a dream come true. And we will see yet again ANOTHER BULL market that will begin right away and we are on our way to DOW 22,000 shortly. I pray it is true, since December even with the setbacks I have made HUGE gains which are the type of gains that anyone can achieve if they understand the dynamics involved and I am pleased so far with 2017! But I think another great opportunity is about to happen, and my "philosophy" or ESP if you will for the rest of this year and into 2018 is, that if there are some who not getting in the game RIGHT NOW they are going to miss one of the rare opportunities that only come up perhaps four times in a lifetime. I suggest folks GET on board - not on board with United or American Airlines but this economic resurgence that I feel strongly WILL happen. That is my two cents, and this may all began as soon as this Wednesday.
To the moon Alice !
A caution: Government Shutdown Kabuki Theater begins its run this week as well. The drop-dead date (wink) would be this Friday.
I’m Bullish
I believe Trump will put in place a great tax plan and significantly reduce expensive and economically onerous regulation.
That said, the market has already baked that into the cake.
When the evidence starts to come in (labor stats and earnings reports), the market will move to the next level.
QQQ is selling at roughly $132.55 and I sold my calls at a strike of $135.00.
I was worried when Trump announced that he would release details about his tax plan on Wednesday, but still not concerned enough to consider closing my position...yet.
I don't think the market will react to his statement in such a way as to put my calls in negative territory...but I am watching carefully.
I am hoping the French election tomorrow will throw the markets into a state of confusion (i.e. drive them lower).
If Trump lowers the corporate tax rate to 15% or less, we will be overrun by foreign companies trying to establish their business here because our energy rate is one third of theirs.
Unemployment will become a memory in the distant past and MAWA (Make America Wealthy Again) will become the order of the day.
But it will take more than talk to move the markets.
It will take the passage and signing of a bill.
Of course, as an investor, I am humble. I have no idea how the markets will react.
But when I have money (even a little bit of money) in the market, my mind is focused magnificently.
Amazing how that works.
All it takes is $100 to give me complete clarity of mind.
Actually, that's a pretty small price to pay for clarity of mind.;-)
It may be hard to believe that the market can run farther, having more than tripled since 2009.
Stocks really have no motivation to show or prove or trade at their calculated value. They spend a lot of time trading at that or those values, but they also spend time trading higher or lower. There would seem to be an inordinately high condition of turmoil in the world right now, but this is not unprecedented. And furthermore, the market has not reflected this kind of chaos by plunging thousands of points. Hundreds, sure, but I would ask my fellow bears: HOW MANY TIMES in the last 7-8 years have the dip buyers NOT been rewarded? (ans: ZERO) Is that an opinion? NO! It’s math. How could the markets be at or within 2% of AT highs if they had not recovered every prior dip?
So stocks do not have any particular need to reflect all the turmoil in the world, particularly at any static moment you may decide to look at and price them. It’s entirely possible that stocks become something of a haven, considering the ROW is in comparatively rotten shape.
There can or should NO, NONE, ZERO doubt that a tax package, if passed, will result in US stocks being worth 15% more than they are. Barring nuclear war, this is IMO pretty much a certainty. So, if you’re in it, you’re in it for this type of outcome. Has the market had a 15% correction since the dark days of ‘09?
Nope.
The worries over Brexit were over in about 30 days. The worries over the election were over in about 30 hours. There is a lesson here.
The upside outweighs the downside. It has very seldom paid to be bearish on US equities. For mere minutes or hours at a time, yes. But for every win by the shorts, the longs have 15 or twenty.
In case there is any doubt, I am plenty bearish in my short term trades. It’s not the right way to be longer term. You can only stay short for very limited times on very carefully selected items.
That is only a Compound Annual Growth Rate of 14.7%. Since the historic average is ~10.5 to 11% it is not hard at all to believe that there is further room for growth. The efficiency increases powered by computer, communications and information advances are enough to think about an additional 5% per year easily.
To me, the combination of changes in tax policy and removal of regulations is going to substantially benefit American industry. When we throw in fracking on public lands, east coast offshore oil, and the revival of coal I expect strong economic growth over at least 4 years, possibly 8.
Only for an investment bought at the 2009 bottom.
What is it from 2007 to now for a buy and hold?
What is it from 2007 to now for a buy and hold?
I make out a 4.2% CAGR for the Dow over the past 10 years. Less than half off the historical average.
My point was and still is that stocks have plenty of room to grow. And, I think the Trump administration policies will be aimed directly at unleashing as much growth as possible.
Obama was much more interested in growing taxes and regulations than in growing the economy. Trump has pitched those objectives overboard, and we will see tremendous growth over his term.
Almost every time we try it, tax reductions spur the economy and lead to revenue increases. Somehow this never sinks in for the RATs.
My personal investments are 100% stocks, no fixed income. I see interest rates rising to normal levels as the economy takes off, but no hyperinflation. There is a huge pool of US labor in the "discouraged worker" class, who will start coming back if jobs and then wages start to improve.
The ror is undeniable. Your number is correct. These reported inflated returns since 2009 are dishonest since most of that gain is just digging back to where things were before the collapse that we have never recovered from.
Up until mid 2000’s returns were on the order of 8%. Is 4% the new normal? I hope not since that bodes zero hope for successful retirement in the 401k horror world. 8% or so historical returns are smooth sailing fat city but the old days of not long ago are looking gone. Zero cost money has become an expectation of normal for at least two new generations. Not 20 years ago the economy did just fine with normal 6 to 7% mortgages and 12% GIC returns. This dirt cheap money has created inflated home prices that are unaffordable at higher interest rates.
I’m hopeful you are correct on low inflation but I’m sceptical for various demographic reasons.
I agree there should be room for growth IF it is possible to recover to historical rates of return of about 7 or 8%. We have not seen GDP growth to support that in over a decade and we may not see it for some time unless congresscreeps get on the stick. If they and trump don’t start and continue delivering it will be horrible for investments. We may never see return to normal in most of our lifetimes.
Over decades the 10 year dips that do happen average out but for a 30 year retirement or even build period a 10 year dip is devastating.
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