Investors may experience a decline in their well being that will parallel the experience of unionized workers in recent decades. The globalization and de-unionization of America’s workforce resulted in declining real income for well paid unionized workers, while those non-union workers who started at the bottom did make some gains because they came up from a low base. For 20 years the Federal Reserve has been cutting interest rates and increasing the money supply resulting in a massive increase in debt that was used, not to create factories and jobs, but was instead used to chase after stock and real estate bubbles. At some time that phenomenon will have a reversion to the mean and then stocks will be deprived
If a U.S. company makes no domestic profit and makes $100 profit in a foreign subsidiary that pays no tax then its income for accounting (not tax) purposes is $100. If the new tax law of 2017 allows foreign income to be repatriated at 10% tax rate presumably the company would so to avoid paying a higher tax rate in ten years when the legislation sunsets out of existence. But then its income after tax would be 10% lower and the company would have to report earnings dropped 10%, even though it would be better off than if it paid a 35% tax many years later. Since a corporation is valued on its after-tax earnings this would reduce the value
There is an idea floating around in the investment world that one can take on a very high amount of risk in equities because (allegedly) stocks always go back up a few years after a crash so all a retiree needs to do is to have enough cash to go several years without selling their stocks to pay for living expenses. Thus, allegedly, a wealthy retiree with $10million can have an equity allocation of 80% or 90%, instead of only 30%. Traditional financial planning theory is that one should allocate bond ownership in proportion to one’s age. For example, a 30 year old should have 30% in bonds, 70% in stocks and a 65 year old should have 65% in
Some people claim that because taxes on long term capital gains and dividends are about 20% lower * than ordinary income then people will run from bonds and put money into stocks. If this was true it would have happened during the 2001 and 2003 Bush tax cuts. Instead stocks plummeted steeply in 2001 and took several years to come close to their old highs in 2007. The behavior of affluent taxpayers is that they may be able and willing to boycott work opportunities, especially for two income couples, if taxes are too high. They may refuse to both earn a living or to take on high risk, high yield things like junk bonds unless they have made arrangements to
Wrong prescription about inflation
Reuters said today that Zillow said U.S. house prices fell for 4.5 years, which is a longer time than the downward part of the Great Depression from 1928-1933. The market is still falling, with significantly more shadow inventory to be placed on the market.