Opinions are like belly buttons; everybody has one. Only time will who is right, but I offer and look for opinions that are well sourced. When one is prepared for the most unlikely scenario that
At the Irrational Economic Summit in Austin in October of this year, I had the pleasure of meeting and talking with David Stockman, the former Director of the Office of Management and Budget under President Ronald Reagan. He also served as a Republican U.S. Michigan Representative and worked over twenty years on Wall Street. Often called the Father of Reaganomics, Stockman knows about “the biggest tax cut in history” as he was there when it happened. Not many ‘experts’ have
“When the ‘bidding war’ with the Democrats ended in July 1981, the U.S. Congress had cut the federal revenue base by 6.2% of gross domestic product (GDP) in the out-years. In 2018 terms, that’s a tax cut of about $1.2 trillion per year. By contrast, the “peak year” cut (fiscal 2019, which started October 1, 2018) in the Christmas Eve Tax Cut of 2017 is just $280 billion. That’s just 1.3% of GDP,” wrote Stockman to his paid Deep State Declassified newsletter subscribers on December 4, 2018
Stockman continued, “Even if ‘bigness’ mattered in the formulation of tax policy, the hard numbers put the lie to ridiculous claims by the Donald and his GOP that there is the ‘biggest tax cut in history.’ Debunking this ‘mine is bigger than yours’ boast illuminates why the ‘growth’ boom claimed for the current bill is so preposterous. Indeed, the Christmas Eve Tax Cut of 2017 is, to my knowledge, the weirdest large-scale revenue bill ever enacted. It’s drastically front-loaded, and then it shrivels out of sight after the middle of the decade. When all is said and done, it’s probably anti-growth.”
With Wall Street and Corporate America enjoying the fruits of a permanent 21% corporate rate, Stockman says, “For the middle class and Main Street, it’s like Lucy pulling the football away from Charlie Brown, again.”
I will not take the bet that this
For another qualified perspective, let’s turn to Brian Sozzi who was an analyst at Lehman Brothers for four years at the time of the collapse of the 168-year-old global financial services company in 2008. You may remember my quoting Sozzi when he said on the tenth anniversary of the financial crisis, the securities industry “has learned squat over the past decade.” Now an editor at large at Yahoo Finance, Sozzi wrote, December 4, 2018, “The DOW plunged more than 800 points today amid concerns over an inverted yield curve (it usually predicts a recession), mixed messages on President Donald Trump’s trade deal at the G20 and ongoing fears on Apple’s outlook. But, it’s the continued weakness in financials that should be a cause for concern among any bull looking to get long in a seemingly oversold market. Sozzi provided this chart which “ is way scarier than the DOW plunging more than 800 points.”
Sozzi asserts there are numerous messages from the financials. It may be that banks are coming under pressure more than expected in the fourth quarter thanks to the U.S. housing slowdown. Then there are the disappointing auto sales that cannot help banks. Also, there’s that nagging headache due to the trade uncertainty that could force companies to press pause on mergers and acquisitions deals.
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- Please visit www.westlakefinancialadvisors.com or www.whybepoor.com
- In the upper right-hand corner, click on Risk-O-Meter. Updated every 30 days, we start with our thoughts on the current market direction.
- On the same page, please click on Get Your Risk Number so you can answer a handful of questions that will help you and your clients determine what degree of loss is acceptable to you.
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