- The upside to the failure of “repealing and replacing” Obamacare
- Trump moves on to his next big priority… which is far more doable
- The $2.5 trillion pile of money Trump and Chuck Schumer want to redistribute
- Legal weed as a partial solution to a $5 billion budget gap
- The real story behind “the rich” asking to be taxed more
- Reverse swamp drainage… a duo of weak economic numbers… “separating health care from medical insurance”… and more!
Ooh… how profound…
The vote in the House on “Obamacare Lite” did not take place as scheduled yesterday. Not enough “yes” votes to assure passage. So supposedly, it will take place today. Passage still isn’t assured. Supposedly, the president will give up on further “repeal and replace” attempts.
OK, and then what?
Whatever the outcome… if today really does put the matter of Obamacare reform to rest… it clears the way for a more doable Trump priority.
Which brings us to a small item on the newswires this morning: “Treasury Secretary Steven Mnuchin said on Friday that he will push for ‘comprehensive’ tax reform by Congress’ August recess, according to Reuters.”
If you have a good memory, you know that’s not new. Mnuchin said the same thing on CNBC before the market open on Feb. 23. As we pointed out that very day, the market should have responded by screaming higher… but Mnuchin offered no specifics, and the major U.S. stock indexes stood still.
A month ago, that August timeline looked fanciful… because the Trump administration was bound and determined to get Obamacare reform done first, oblivious to the likelihood it would run into a legislative buzz saw.
But suddenly August looks possible no matter the outcome today: If the bill passes, the president chalks up a swift victory. If it fails and he’s serious about cutting his losses, he can quickly move on.
Mnuchin is dreaming if he thinks both personal and corporate income taxes can get done by August… but corporate tax reform is totally within the realm of possibility.
Overhauling personal income taxes is fraught with risk, subject to GOP infighting just as happened with Obamacare reform.
But as we said earlier this week, corporate tax reform is one of the few items on Trump’s agenda for which he can line up support from Democrats. Senate Minority Leader Chuck Schumer’s been itching for years to get corporate tax reform done.
Corporate tax reform would easily propel the stock market to substantial new all-time highs — even at a time when valuations are rich and the economy is still only so-so.
Don’t take our word for it; take it from a Wall Street bigwig who’s been stroking checks to Chuck Schumer’s campaign committees for two decades — JPMorgan Chase CEO Jamie Dimon.
As we explained last year, the key to corporate tax reform is the huge pile of money U.S. corporations are holding offshore, the better to avoid it getting taxed at the highest rate in the developed world. We’re talking anywhere from $1.4 trillion to as much as $2.5 trillion.
Any reform plan will entail a tax holiday of sorts in which big companies will “repatriate” that cash, where it will be taxed at a substantially lower rate, perhaps only 10%.
“If all companies did [with repatriated funds] was pay dividends and buy back stock, think of that as QE4… and far cheaper, in my opinion,” Dimon told reporters 10 days ago.
That is, the stimulative effect would be comparable to the Federal Reserve’s periodic money-printing efforts between 2008–2014. “It is fuel to the system.”
But how much fuel, exactly?
Our team has invested several months of research to get at that question. We got started before the election, knowing corporate tax reform would happen no matter who won. We studied previous episodes of corporate tax reform to develop a proprietary trading formula.
We now have the answer. It is a staggering sum at stake. And using this formula, you could make up to 2,872 times your money.
Little wonder our research staff has taken to calling it the “Trump moneybomb.” Will you be ready when it goes off?
Here’s your road map to prepare for that moment. No long video to watch, we promise.
For all the drama in Washington the last 24 hours, you wouldn’t know it looking at Wall Street this morning.
Nearly every asset class sits where it did at this time a day ago. The Dow rests a little below 20,700. The 10-year Treasury yields 2.41%. The bid on gold is $1,247. The dollar index sits at 99.7.
The economic numbers of the day include durable goods orders — up 1.7% in February. That’s not bad, but a closer look reveals the always-volatile aircraft segment is driving most of that increase. Take out transportation and the monthly growth is a much more modest 0.4%. Take out military hardware and you end up with a decrease of 0.1%. Hmmm…
The “flash PMI” number is also out today — a snapshot of demand for goods and services so far in March. At 53.2, the number is well above the 50 dividing line between growth and contraction… but it’s also the weakest in six months. Double hmmm….
And now a no-brainer for that fiscal basket case known as Illinois state government — legalizing and taxing recreational marijuana.
The Prairie State has gone without a proper budget since mid-2015. The Republican governor and Democrat-controlled legislature have been at loggerheads. Sometimes there are stopgap measures in place, other times not; at one point we’d mentioned the state was issuing IOUs to lottery winners. Last November, Gov. Bruce Rauner warned the pile of unpaid bills could swell to $13 billion this year. Politicos on both sides agree the budget deficit could exceed $5 billion.
With that in mind, two lawmakers have introduced bills legalizing recreational cannabis. “Every bit of new revenue will help to close the governor’s $5 billion budget gap,” says State Sen. Heather Steans (D-Chicago).
Neither Gov. Rauner nor House Speaker Mike Madigan — once called “the real governor of Illinois” by Chicago Magazine — has weighed in on the bill. But the news reinforces something we said a month ago. Voters led the way in the first wave of marijuana legalizations; now state lawmakers are picking up the baton.
[Ed. note: As you know, Ray Blanco and his team recently cracked the “secret logic” behind the extreme moves in certain penny pot stocks. And they expect one of those moves as early as next week. If you want in, you need to act before next Wednesday the 29th. Begin here.]
Ah, nothing like gazillionaires being generous — with your money.
From The Associated Press: “Eighty people including George Soros, Steven Rockefeller and Abigail Disney wrote to lawmakers and Democratic Gov. Andrew Cuomo saying they and other top earners should pay more to support schools, roads, bridges and programs to help poor and homeless residents of the state.”
Heh… There’s nothing stopping them from writing a big ol’ check to support state government if they choose. But of course, that’s not what they’re talking about: They’re proposing to raise what are already some of the highest state income taxes in the country for “top earners.”
Which, as we’ve pointed out for a long time, is a very loaded phrase. The AP story cites Kathryn Wylde of the Partnership for New York City, who points out most of the letter’s signatories don’t earn taxable income from a job. They have inheritances or interest on investments.
“It’s people like you or me that are paying a large hunk of their earned income in taxes,” says Ms. Wylde. “Most of us are paying well north of 40% in New York City.”
Yes. Every few months we’re compelled to recite a salient passage from the 2009 book Endless Money by our acquaintance Bill Baker — who manages money for the very wealthy.
“Tycoons such as Soros and Buffett can call for higher taxation of income,” he wrote. “This is a very cynical and downright mendacious strategy, for they know full well this burden would fall primarily upon members of the upper middle class, who have not yet achieved the threshold that would permit them to shift income to tax-minimizing structures…
“Once a certain threshold of wealth is achieved, taxpayers have some latitude in structuring when and where income originates.”
Thus, Google executives Larry Page and Sergey Brin “pay themselves just $1 in W-2 income,” Baker wrote, “but each year, they may accrue millions or even billions of dollars of unrealized capital gain.”
On that score we see the last-ditch version of Paul Ryan’s Obamacare Lite bill would leave an especially nasty tax in place for six more years — a 0.9% tax on couples’ wages over $250,000 ($200,000 single).
That hits a lot of two-income couples who are busy earning-and-burning in high-cost-of-living locales. And it’s not indexed for inflation.
Talk about a burden falling “primarily upon members of the upper middle class”…
“Jumping into a debate that is as contentious as health care may not be the wisest move I ever made — but what the hey!” writes a bold reader.
“To begin, let me paraphrase Ben Franklin by saying anyone who will trade freedom for security deserves neither and will lose both.
“In this case, we are trading freedom of choice regarding medical insurance and managing our own health care in exchange for the security that someone else will decide what is best for us and is going to pick up the bill.
“If the dunderheads in D.C. want to debate anything related to health care, it should be how years of misguided regulations, errant dietary guidance (such as: Eggs are good for you — Oops, they aren’t — Uh, well, they are OK…) and rampant government meddling in personal affairs have helped lead to a population that now faces chronic obesity and out-of-control adult onset diabetes, just to mention a few.
“As for medical insurance, auto insurance does not include preventative maintenance, nor does home or life.
“If I choose to drive a new car or live in a large house, my insurance costs more than someone who chooses to drive an old clunker and lives more modestly. My insurance premium does not subsidize repairs on the other person’s car or their home, nor does their premium subsidize mine.
“The same should be true for medical insurance: Live an unhealthy lifestyle, pay a higher premium. Of course, there are those who are high risk through no fault of their own, so as a society we may choose to help defray their extra insurance premium in this instance.
“And yes, getting old means higher risk of health issues, so higher premiums. However, in the process of getting older, one should have been able to prepare for this eventuality and should not need to be dependent on the young and healthy to carry this extra burden. If all that being young and healthy gets you is the chance to pay a portion of the insurance premiums for some who are older, then being young and healthy may not be all it is cracked up to be!
“If we separate health care from medical insurance (and get government out of the middle of both), we might stand a chance of getting this right. If we stay on the current path, we only need to listen to the words of Mr. Franklin to know the outcome.
“As always, love The 5!”
The 5: Alas, “separating health care from medical insurance” would deprive the insurance companies, Big Pharma and the hospitals of the vigorish they extract from us, however indirectly.
And you heard exactly no one in Washington talking about that during the “repeal and replace” discussion these last few months…
Have a good weekend,
The 5 Min. Forecast
P.S. As we go to virtual press, House Speaker Paul Ryan has “rushed” to the White House (that’s The New York Times’ word) to tell the president he doesn’t have the votes to pass Obamacare Lite.
But as we said yesterday, maybe in the long run it won’t matter — not if science can develop what our Ray Blanco calls a “universal cure machine” that can quickly and inexpensively diagnose cancers long before they spread.
And it’s Trump who’d likely get the credit for saving millions of lives and billions of dollars… to say nothing of handing a substantial windfall to early investors.
We urge you to tune out the noise from Washington this afternoon… and tune into this instead.
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