What say ye?
I’m not changing my stock allocation. So that is a bet on a rising stock market.
I have said for a long time that the election (as it played out) would bring a short term bump in the market, as sideline players jump in at the prospect of deregulation, tax cuts, and increased profits,.
I also predict that tariffs, should they be “punishing” will have a terrible effect on consumers, especially middle and lower income, while tax cuts will flow to the already wealthy. Since the economy is, in the final analysis, powered by consumers, this will have a very bad effect on the market, but it will take time to show up. Several quarters at least, perhaps a year or more. If there are high tariff walls, expect retaliation from counter parties, but depending on where and how that might or might not be a disaster.
The immigrants thing will be unpleasant, but more for show than for effect, and I would not expect it to impact those sectors where immigrant labor is such a large fraction: food processing, home construction, etc. (Yes, there will be some notable raids, much Ike the Untouchables in the 30’s or the Narcs in the 60’s, but overall the effect will be slight.)
Tax cuts for business will not improve American standing (see: Tariffs, above) but will put more money in corporate coffers to be distributed among the already healthy and wealthy.
Speaking of healthy, expect the ACA to get hit again, and with uncertain effect this time. Macro impact? Uncertain, except there will be more personal bankruptcies and untreated sickness. If they try to cut social security or Medicare, expect armies of gray haired lunatics to march to Washington with canes, crutches, and any other implement they can carry.
Once Ukraine falls, if China moves on Taiwan expect war, or if we cower in submission, impeachment (again).
4 Likes
I remember some “enforcement theater” raids on Swift packing plants in the early 2000s.
Steve
2 Likes
There’s a darn good reason to be isolationist when it comes to China moving on Taiwan. The U.S. would lose a hot war with China. And Taiwan isn’t formally an ally – the U.S. doesn’t have a defense treaty the way we do with Japan.
Backing away isn’t “cowering in submission” and there wouldn’t be an impeachment. The Executive decides when to go to war. The Senate can advise in the case of going to war (though they haven’t in recent memory) but I can’t remember a case where the Senate demanded a war when the Executive declined to fight.
Wendy
According to the Constitution, only Congress has the power to declare war.
Not that that has stopped previous Presidents from getting involved wars or “police actions.”
2 Likes
Declaring war pre 20th century chivalry. Now you launch nuclear rockets instead.
The Captain
A CCP takeover of Taiwan would be a disaster for Nvidia (among other things) as I doubt Taiwan Semi would survive intact.
DB2
4 Likes
“An ounce of prevention is worth a pound of cure.”
Benjamin Franklin
The Captain
I doubt China invades Taiwan because the Chinese economy keeps getting.
If only someone had to foresight and political will to pass a law that built computer chips in the United States. Heck, they could have even called it the CHIPS and Science Act!
It’s a shame we don’t have politicians like that anymore.
5 Likes
@AlphaWolf when is the last time the U.S. formally declared war? The invasions of Iraq and Afghanistan (America’s longest war between 2001 and 2021) were never declared wars.
Wendy
As offered in a different thread, one program provides massive government subsidies to make those operations in the US profitable. The other program provides profit protection for the same US based operations, by imposing massive tariffs on imported competition. The bottom line for the US semi producer is the same. The bottom line for the customer varies: the subsidy system makes the product cheap at retail, but the debt burden on the government increases. The other version increases cost for the consumer, but reduces spending by the government.
Steve
Prediction: very low interest rates because that is good for billionaires even if it means high inflation. In some ways the national debt is not a problem if the interest rate being paid is less than the inflation rate.
Well, lenders outside of US government control will require a decent return.
Steve
In theory, Taiwan can be treated like Ukraine. Fund them and arm them enough to hold off China for a while, and then even if China is allowed to “win” in the end, all they get is something that is completely destroyed anyway. The key to this strategy is time … enough time to replicate the advanced chip industry outside the area.
I think China is smarter than that. All they have to do is slowly seed loyalists inside Taiwan, and then in a few decades, a bloodless coup can take place. Similar to Hong Kong (though that one actually had a 99 year contract behind it). Of course, China also has its internal politics, and sometimes that leads politicians to do things that aren’t fully rational.
2 Likes
The one positive I am taking away from the change in leadership is the probability that we will have more time to do Roth conversions at a decent tax rate. I very much doubt the 2017 tax cut will be allowed to expire in 2025.
We are very cash heavy at the moment, and are looking at diversifying that cash investment to accounts in other currency and in overseas institutions. Really know nothing about it at this time, and not sure what the tax ramifications are to holding money overseas, but it is an area of interest for us. That said, I expect to continue earning decent returns on our cash, and I have no clue where else to put it that affords us flexibility and a lifestyle continuation hedge against a decline in our stock holdings.
IP
3 Likes