The Tax Cut And Jobs Act aka The Third Act Of Betrayal

Whether you own a business, run one, or are an aspirant to one day have the pleasure and responsibility of entering this strata, one thing is assured: Your true understanding, along with outright bewilderment of just how much time, effort, and money you’ll devote to both taxes and regulatory adherence, along with the burdensome costs of all its complexity, was/is never fully understood until you finally, for lack of a better term, you become “The Boss.”

Yet, once you do? The immediate avalanche of an ever-increasing, never-ceasing, onslaught and landslide of regulatory paperwork and bills remind you just how burdensome, as well as costly, it all is just to keep the doors open. Never-mind trying to grow.

This example is applicable from the solo-practitioner, all the way up to the global conglomerate. The only difference is in size and scale, for the net effects are the same.

It doesn’t matter what side of the political aisle you stand, and this isn’t a rant about one political party or the other. This is about business, and the promises made to it under the guise of “Elect us, we’ll get it done!”, pure and simple.

The current party in power, along with a president, ran on a platform of bringing that relief, and here’s the key: with immediacy as the default. Had the results last November ended in reverse with Ms.”What Happened” winning via running on the same platform? My current ire would be the exact same. Period.

I’ve said this before, and I’ll say it again, I never expected the president (actually, any, for clarification) to be a tax policy, or regulatory wonk. He is, for lack of a better term, the embodiment and the mouth piece to not only initiate the overarching idea, but also, to both sell the idea, as well as keep selling it.

Congress is where the minutia takes place. But (and it’s a very big but) this is where that minutia is supposed to not only support the directives, but also match it, in scope and scale. This latest tax plan does anything but, while making a complete mockery out of the entire business agenda.

We are currently hearing about “corporate rate cuts” and more. All sounds great. But if you look at the details of how this is supposedly going to get enacted, one has to wonder – if they’ll have to pay double, to get half. For as the details of what’s hidden within, as what’s not, continue to roll out, it’s now beginning to make the repeal debacle of Obamacare look downright masterful.

We keep hearing about how this, or that, has to be paid for. (i.e., estimated $1.5 Trillion) The arguments have merit. However, where were these arguments and their suddenly righteous stoic defenders when a budget was treated as something of an archaic idea over the last 8 years, all while adding some $10 Trillion with nothing more than a passing glance? (i.e., A doubling of the entire burden since the founding, in only 8 years.)

The only thing more offensive to this sudden self-righteousness of debt considerations are the ways being proposed as to pay for these so-called “cuts.” As always, they appear more and more like sleight of hand than anything proposed. Again, it’s a mockery to anyone who can add 2+2 and come up with the correct answer. (i.e., it’s 4 by the way in case you graduated after 2008)

Say what you want about needing to meet arcane rules (e.g., “Byrd rule”) in this body of congress, against the other. It may have made some form of sense in the beginning of the entire process after the election back in November. But now? This stinks to high-heaven similar to listening to a Facebook™ “by-golly-gee-whiz” apology tour for not being able to decipher the data for who paid or didn’t, for what advertising, when their raison d’être is to be the, and most, proficient at it in the world!

Now, suddenly, a “tax plan” has to be rethought, retooled, and resold because “by golly gee whiz” it’s not like they knew what might be needed, of let’s say, a year ago. You know, just like when they were going to repeal and replace Obamacare on day one – then they won – now it can’t be done. But they’ll just keep on trying by-golly. After all: It’s a very hard process getting things done when suddenly those pesky voters who voted you in actually want what they voted in enacted.

It’s beyond repugnant what we’re now hearing as “excuses.” We first heard it in responses to regulatory reforms, then healthcare, now its taxes. Three times a charm I guess, right?

The President has made some reforms on his own via executive action. Some have been quite needed, however, executive action is the worst way to run a nation. Businesses can not, nor will not hire, expand, or even look to stay in business if the rules can change at any moment via the stroke of a pen.

Without the surety of the rule of law, enacted through the understood legislation process, building in permanency – things are going to go from bad to worse, and quickly. “Hopium” only lasts so long. And the “hope” that was promised is now deflating faster than one from a lead balloon.

The entire run up aka “The Trump Trade” since the November election has been fueled by nothing more than hope. Yet, that hope, at that time, had a sense of not only surety, but also immediacy. Again, after all, now all three branches were controlled by the one party that ran on the idea: Give us the power – and we’ll give it back to you.

So far that’s been true, it’s just now those “voters” are being asked to bend over as to receive it. I’ll just say his: That’s not what the business community had in mind.

The GOP had pleaded for years “Give us the power, we’ll get it done.” And now they have it – and they’ve done everything in their power to throw monkey-wrenches, sand, and more into the gears. The only thing worse has been their utter refusal to actually put anything meaningful on the president’s desk to sign whether it was regulatory, healthcare, or tax related.

This president has been almost begging for anything, and I mean just that, anything. And not only has the GOP not delivered squat, but in actuality they’ve done just that, put it in a little brown paper bag, and left it on the doorsteps of the WH. Then rang the proverbial “bell” on national TV with fanfare and more. It’s been a stink bomb from the moment it was introduced, and the smell grows stronger by the day, appallingly so.

As always, there’s no need to just take my word for it. As I explained in a previous article, the double-dealing, Three-card Monte tactics that are being applied to this entire process came even more to light when one of the more in-the-loop tax advisors Steve Moore of the Heritage Foundation™ found himself out-of-the-loop after just meeting with congressional members, as they explained what was supposed to be in the bill.

Now, we have another: Steve Forbes. Regardless of what you think of him, or his views. What he is, is, much like Mr. Moore: an insider.

Yes, he has his political leanings, and has even run for office. However, with that said, he is an unapologetic business advocate. He is also one who leans, more often than not, as one who’ll give the benefit of the doubt to the GOP, especially when cutting taxes of any type are involved. And what does he think of this current tax plan? Hint:

“Steve Forbes destroys the GOP tax plan — and explains how Republicans ‘betrayed’ Trump”

Sometimes is not just the message, but who’s saying it, that matters just as much.

© 2017 Mark St.Cyr

There’s Now Just One Question Remaining

There’s now only one question remaining, but it’s now the most important question to both ask, as well as, honestly answer. However, before you try to answer, I would like to point out three now known facts that were, at one time, the catalysts for why this question could be ignored. Ready?

  1. The Federal Reserve has now officially begun The Balance Sheet reduction process.
  2. Obamacare or healthcare reform legislation is officially DOA.
  3. Tax Reform is now officially DOA
  4. Bonus point fact: The Debt Ceiling debate/debacle is now, once again, about 30 days away.

Now that you have the above for context, let’s add a picture to help fill in any voids, if you will. To wit:

(Chart Source)

So what’s the question you ask? Fair enough, it is this…

If you’ve been a BTFD (buy the f’n dip) disciple all these years, as said by the great Harry Callahan

…”you’ve got to ask yourself one question: Do I feel lucky?”

How you answer is going to make a lasting impression from this point going forward. Of that, I am sure.

© 2017 Mark St.Cyr

Tax Bill: Russian Roulette Republican Style

Regardless of what side of the political aisle one sits there is one thing that is indisputable: Since the November presidential election, one year ago, the “markets” have been on a one-way rocket ride into black-sky territory. Never before have they been so high, which also implies, that never before have they had so much room to fall.

What is now becoming more apparent, by the day, is the political party which could reap the rewards should they coalesce around enacting legislation to help not only bolster it, but foster it for years to come, appears to be on some form of political death wish.

The real issue is this: With every lucky “click” that passes (think: no immediate market reaction to the healthcare debacle for one) – it is the establishment (aka Republican RINO or Party-elders) that appear hell-bent on further loading another round into the chamber, all out of sight from their own so-called brethren. Only to then pass it directly into their hands with both a smile and a nod.

It’s moved beyond reproach where it’s a pure, unadulterated disgrace, as well as dangerous game to play with the “markets.”

As I stated earlier, since the election, the “markets” have been on a one way rocket ride. This has manifest in the face of the Fed. raising rates, reinvestment (aka roll-over) discontinuation, implementation of balance sheer reduction, ongoing threat of WWIII, terrorist attacks, mass shootings, and more, much more.

And yet – the “markets” have not only been resilient, it would seem they have reached some form of band where the term geosynchronous orbit is more inline than “all time highs.” i.e., These “markets” now seem impervious to what’s happening on the ground from which they were launched.

But gravity has a way of humbling those that mock it, does it not?

The fuel for these “markets” to reach this altitude has been what many of us have coined as, “The Hopium Trade.” (THT) and not what every so-called “smart crowd” proclaim. i.e., “Good data, good earnings.”

THT has been the main propellant to which the entire business complex (from the solo-practitioner and small business owner, to the global conglomerate) has attached its own hopium-wagon. Healthcare reform, tax reform, spending reform, ________(fill in the blank reform) had been the promise. And what’s being delivered is absolutely anathema to what had been sold.

And the so-called “Tax Cuts And Jobs Act” of today is just the latest refute from any prior alluded promises.

In what can only be described as repugnant, it has been learned that not only was the top rate kept at 39.6%, but the coup de grâce to any remaining integrity, was that the republican party, via its own hand, inserted and tried to keep secret, that it created an even higher tax bracket within the code of 45.6%. Now known as a “stealth tax” or “bubble tax.”

The insult to injury that taxes anyone with a modicum of common sense is this: If this is both contained and was withheld from the public eye reminiscent of the latest JFK files release. WTF else is not only in there, but not in there, that they’re not telling anyone?

This is the same, as I alluded in my headline, of not just playing a deadly game, but increasing the odds for catastrophe by adding an additional round after every lucky squeeze via one’s own hand! The only thing worse (which is precisely what has happened) is in doing so – you now hand the additionally armed weapon to your brethren with not only a smile, but fanfare that this will help their “tax headaches” to go away, “Just trust us.” Again, it’s beyond reproach.

Remember, this is not the result or byproduct of some negotiation that was hammered out between two political sides. e.g., Left – Right, Rep. – Dem., et cetera. No, this is was included and inserted via the republicans solely! And (and this point can not be made too forcefully) was intentionally hidden.

If there was any doubt that this was anything other than an intentional omission, I offer the following via Danny Vinik of Politico™. To wit:

It hasn’t been advertised by Republicans, who have described their plan as maintaining the current top tax rate of 39.6 percent. And it goes against decades of GOP orthodoxy that raising taxes on the rich discourages work and reduces economic growth. Reached by phone, Steve Moore, a tax expert at The Heritage Foundation, said the surcharge was news to him. “I was just in a briefing with the White House on this,” he said. “They didn’t mention that. It seems kind of bizarre to me.”

Whether or not one agrees with the policy or not, along with the views of Mr. Moore, is immaterial. What is irrefutable is that GOP officials intentionally did not bring up the issue with even one of its more in-the-know and well-connected voices.

This is omission with fraudulent intent, in my opinion. It also borders on, scratch that, actually is – utter stupidity.

Too think (let alone believe) something such as this would not have exponentially negative consequences can only be answered via the prism of sheer arrogance. It’s absolutely disgusting, as well as disturbing.

The issue at hand is that every understands (at least those who apply critical thinking) the president is not a policy wonk. He’s not going to be able to cite tax law and more, with all its idiosyncratic possibilities and effects. However, what he is, or represents – is – the reason and fuel for the “markets” current trajectory. He is, for lack of a better term: the embodiment and representative of the idea, or the mouth piece for it. i.e, Tax reform, regulatory reform, healthcare reform et cetera.

The party (or chambers if you will) are where the minutia is supposedly hammered out to fit the vision of what is called for. What we’re seeing delivered via that process is anything but. And, in actuality, is more akin to double-dealing, back-handed, shady dealings for self-enrichment within an echo chamber. It’s all going to backfire miserably in my view, and soon.

To be clear: this isn’t an endorsement for either party or candidate. This is about how business has to view the political landscape and prepare accordingly, whether it be a democrat or republican that put the proposed legislation forth.

When he (the president) campaigned, as did the entire party, the repeal of Obamacare was supposed to be taken to mean just that, tax cuts, again, were meant to be just that, along with regulatory reform, and more.

But now? Now, we have come to realize (as well as to terms) any, and all of it, has meant anything but that.

Only via the president himself taking executive action to eliminate or repeal certain provisions has there been any resolution on the edges. A process that, once again, allows for it all to annulled, and again, reinstated via the stroke of a pen.

Businesses can not, nor will not, make plans or commit resources to Capex or hirings based on regulatory or tax codes that have no permanency in their implementation. We may have seen some initial front-running by some, but that will end faster than it began once it’s deemed they’ve been politically duped, once again. Period.

Whether or not one agrees with the President, one thing is abundantly clear:

Every time he has openly pulled-the-political-trigger to possibly end this game of russian-roulette via the “markets.” With every lucky squeeze (think: the ongoing healthcare debacle and more, and the “markets” non-reaction too it) it’s been his own party, the party which now controls both houses, with a president willing to sign just about anything, that’s delivered nothing except for a now ever apparent, ever-the-dangerous, now fully loaded political weapon.

Again, not only does the establishment appear to be not working honestly with the administration. But, secretly, continually adding subsequent round after round into any remaining politically open chamber. Then smiles, and kindly hands it back, all on live TV!

This newest revelation proves out that allegory. It’s now beyond repugnant.

It does not matter what side of the political aisle one sits, for this is not about politics per se, this is about business. And it is that assemblage of the entire business complex of the United States that is the life blood of this nation, its people, and its finances.

Regardless who is in office currently, or whom is controlling all branches: these business entities that are so desperately needing relief from much of this socialist, crony-capitalism, with overtones of communistic intrusion, had great hope that maybe, just maybe, relief was on the horizon. It’s been a roll-of-the-dice to start with. That was assumed, or knew, going in.

Again, they/we all knew, or assumed, the “dice” were always loaded. What has been appalling is that the republican party itself, the party that ran on a platform that got it elected to begin with, has not only switched the dice, but replaced the “game” entirely with something far more dangerous, where now there’s a “fully loaded” political weapon pointed directly at the “markets” head.

How the “markets” respond from here is anyones’ guess. Yet, it’s not that hard to assume it ain’t gonna be pretty now that they know the game has not only been switched from a game of chance, but rather, to one where it’s known too all that the final empty chamber has not only been revealed…

But reloaded.

© 2017 Mark St.Cyr

A Possible Trifecta That Demands Attention

Today, being Thursday, is probably one of the most important days one needs to pay attention to, whether you own a business, run one, or you’re employed under your own version of the entrepreneurial mindset. e.g. What I coined “The Business of I.” For this may be unlike many times prior for its potential ramifications to roil “markets”, hence releasing shock waves throughout the entire business complex.

Yes, I feel today is shaping up for just that – no hyperbole intended. Doesn’t mean it will, but the potential for it is extremely high, in my opinion.

I use the above “trifecta” reference, because I feel there are three specific finish-line-crossings, if you will, that are setting up for a complete change of what everyone believes, or thinks, about the current state of the “markets.”

If, or when the “roses” are presented at the conclusion, if I’m correct, the scent of roses are not going to hide the rotting stench of just how dead and bloated these “markets” truly are. (Cue: STP’s – Dead and Bloated – here)

The first of the trifecta happened yesterday after the close of the “markets” with Facebook™ (FB) reporting earnings. To the casual observer, and next-in-rotation fund manager, as usual, “They hit it out of the park.” In fairness there were “beats” everywhere. Although, I will contend, if you look closer and use the lens of “are these numbers the result (e.g. benefactor) of a last gasp consolidation throughout the entire social media complex”, still applies. Yet, that’s not where the real action, if you will, currently is.

What suddenly appears to be becoming far more obvious to many is something I asked almost a year ago. e.g., The ‘Real’ Question: What’s Facebook’s True Valuation Without “Fake”? To wit:

“There are two hot topics post the U.S. presidential election. One is “fake news”, the other is Facebook™ (FB), and its involvement in it.

The accusations and the defenses against have been all over the board. Both figuratively, as well as literally.

Management from Mark Zuckerberg on down have been professing when it came to anything “fake” it wasn’t of their doing. And gee-whiz-by-golly they’re going to do whatever it takes to make sure anything “fake” never sees the “like” of day again.

Sounds great, in theory. But there’s a very real fact that must now be considered…

If “fake” news was so wide-spread, and so devoured on FB that it had the ability to not only influence, but rather, to overturn political norms and ruin the election of what everyone in media on down believed; that this election was merely a formality on paper because, it was clear to all of them, Mrs. Clinton would win not just walking away, but running?

That would mean FB now has to alienate (i.e., by now not delivering “news” these people wanted to see) millions, upon millions, upon millions of now current users. What does that imply to their now “real” (ooopsy, again!) metrics going forward?
If the above hypothetical has the ability to be true (and from a business perspective it sure has) the very fact that FB will now openly censor, mark, tag, possibly defame (whether intentionally or not), and more articles of news, or anything else shared on its platform. Two questions have to be asked:

First: How many FB customers decide they don’t need or want a “mommy” deciding what they can, or can not, read or share? Second: How fast does that process begin, and by how many?

No matter what side of the political fence you’re on matters. The only thing that matters is what all this means from a business perspective to FB’s bottom line. For as much as everyone likes “free”, without Wall Street (or the Swiss Central Bank) buying? FB moves to AOL™ status quicker than you can say “You’ve got mail®.”

The immediate reaction to their earnings was the typical moon-shot higher, then suddenly, it reversed with FB closing in the red, or down, in after hours trading. So far, in the pre-market, that selling has remained. What happens next is anyone’s guess. But this is where, “its different this time” might show its hand a little differently. Here’s why, again, to wit:

“We’re investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits.”

That quote is from Mark Zuckerberg during the report. Congress, or others, just might think that line of corporate “oh gee golly whiz” contrition drivel sounds just fantastic. However, you know who doesn’t want to hear that “profitability” is less important than anything else? Hint: Wall Street. How much further, or longer, the so-called “profit taking” continues today is something to keep an eye on. Let’s now get onto the second.

It’s already been released that the President will name Jerome Powell to succeed Janet Yellen as Chair of the Fed. Until it’s made with an official statement, it’s still unresolved. However, once the official statement is made (expected at any time today) the place to watch is the $Dollar and all its correlations and pairing (e.g., USD/EUR et al) watching for any signs of stress that may affect sectors that are closely correlated. (Think shipping, and trading partners and such.) This is where the real action may take place over the coming days, weeks, and months.

Then there’s the third, and it is here where everything can go awry: The release of what is, and what is not, in the so-called “Tax Cutting Bill.”

If, and I don’t say this lightly, if the proposed cuts are seen, or show, they’re nothing more than specious talking points? This entire rally since the November election lows is at risk. And by “risk” I mean of falling apart in ways similar to falling off a cliff.

With the healthcare fiasco still fresh in many a mind. If the supposed “tax cutting” resembles anything of the sort as was unveiled during the healthcare debate? All I can say is: look out for what “it’s different this time” can mean in reverse.

There is one last “finish line cross” to watch, for those on the lookout to see if some rendition or possible “fourth horse of the financial apocalypse” is to be seen on the horizon. And that comes after today’s market close when Apple™ reports.

If the reaction to whatever the report is negative? That would cause concerns, because that would fill the criteria of what’s known in horse-betting parlance as a “Superfecta.” And if that takes place? All I can say about the “markets” going forward from here would be this is:

All bets are off.

© 2017 Mark St.Cyr