Whew! If you think it’s a piece of cake to sit in our TV studio in front of bright lights and answer a whole slew of tough questions from our very well-informed, very smart readers, you should try it sometime. But heck, I don’t mind. In fact, I find it very invigorating.
I know, because we just had a marathon one-hour session this afternoon.
We got great questions about my favorite miners that have doubled and tripled in value, the next bull market (or crash) in the stock market, the next correction in gold and what comes after, government debt defaults, bonds and much more. Martin and I fired back very specific answers with no punches pulled. Then, suddenly and without warning, it was over, with a long list of great questions still unanswered. That means we still have a lot of work to do.
But here’s what I suggest you do …
First, if you want to watch the recording, flubs and all, click here.
Second, stand by for the answers to all the questions we couldn’t get to because we ran out of time. We will write them up as soon as possible and send them to you.
Third, there’s one big unanswered question I want to address right now:
What will be the impact of the Trump tax plan?!!
Let me start by saying that this is NOT about politics itself. My sole purpose is to drill down to how politics impact your money. And there are very, VERY few changes in law or policy that impact your money more than tax reform, especially the kind of sweeping tax reform that President Trump has proposed.
The media seems to be all revved up by the idea of class warfare and big budget deficits; and I don’t deny those things are very important. But they also seem to be ignoring some big ideas that could jump-start business investment and boost economic growth:
Big Idea #1: A Boost in the Child Tax Credit
I have kids. They’re only worth $1,000 each as tax credits. That’s pitiful. No way does the Child Tax Credit (CTC) cover the cost of a child.
I could sell my kids to the circus to make up the difference (just kidding). Or, maybe, we could raise the CTC. That’s what President Trump wants to do.
The question is how much. Right now, Trump’s tax plan proposes:
To further simplify tax filing and provide tax relief for middle-income families, the framework repeals the personal exemptions for dependents and significantly increases the Child Tax Credit. The first $1,000 of the credit will be refundable as under current law.
In addition, the framework will increase the income levels at which the Child Tax Credit begins to phase out. The modified income limits will make the credit available to more middle-income families and eliminate the marriage penalty in the existing credit.
Would that be $2,000? $3,000? $4,000? Personally, I think $5,000 would be a good number. That MIGHT start to defray the cost of raising a child and getting them a good education.
Look, scientists and politicians are all warning us that the U.S. birth rate is way too low. Some are talking about a “national emergency.” Well, if you want Americans to have more children, make it less of a financial burden on parents.
And the thing about kids is, man do they boost economic activity! Christmas, birthdays, school, camp, you name it – there’s always something to buy for kids. Never mind trips to the grocery store. Ay-yi-yi, my son can eat!
Big Idea #2: Expensing of Capital Investments
Under the plan, businesses will be able to immediately write off the costs of new investments in depreciable assets.
Why is this important? Because the way things stand now, business investment in the American economy collapsed in recent decades. And that means lower economic growth, fewer jobs, etc.
The idea behind Trump’s tax proposal is to make expensing immediate and simpler. So, companies will have an incentive to spend more money investing in their own businesses.
You want economic growth? This is how to get it.
Big Idea #3: Repatriation of Foreign Profits
The plan says that all cash held overseas by U.S.-owned companies would be considered repatriated, or brought back home. This cash would be taxed at a one-time lower rate. Trump hasn’t said what that lower rate is yet. But the rumor is 10%.
S&P 500 companies are holding $920 billion in cash overseas right now, and not paying taxes on any of it. That’s according to a Goldman Sachs estimate. Goldman says $250 billion of that could be repatriated. But if they’re going to get taxed on all of it, as Trump proposes, they might bring back more.
And if you look at ALL U.S. based companies, there is $2.5 trillion of profits held overseas to avoid paying the 35% corporate tax rate on earnings, according to Citigroup.
Bottom line: This cash could be invested in growing businesses, or it could be sent to shareholders as special dividends. Either way, it will be a huge injection of cash into the U.S. economy.
It’s All Part and Parcel of the Big Cycles
Speaking of cash flowing into the country, one thing our Edelson Institute cycles analysis tells us is this: We’re about to see another, even bigger tsunami of fear money start flowing into the U.S. It will be fleeing upheavals abroad in other countries.
Those other countries will have higher corporate tax regimes under Trump’s plan, by the way. As the plan proposes: “The framework reduces the corporate tax rate to 20% – which is below the 22.5% average of the industrialized world.”
The lower America’s corporate taxes are, the more foreign money will see it as a safe haven.
This creates so many large profit opportunities, it’s no wonder we’ve gotten so many questions about them from readers: Where? How much? What specific investments to buy and when? I trust you may have similar questions and may want to get all our answers. I hear you. That’s why we just held our Q&A session, and why we’re leaving the recording online for a few days. To watch it now, go here, and it will begin playing on your screen right away.
Don’t Look Too Close at How the Sausage Is Made
There’s an old saying that laws and sausages have this in common: You don’t want to look too closely at how they’re made. What President Trump has proposed is going to change a lot by the time Congress gets done running it through the wringer.
But there are real opportunities there. Especially for investors like you and me.
All the best,