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May the Force be with You!

As millions of people, I was eagerly waiting for Star Wars: The Last Jedi. I even did advance booking  for all my team members back in Oct. The movie did meet the expectations of all the hype. The story line is kept simple and even though it was a bit long, it kept audience engaged. Now the wait starts for Episode 9! 2019 is going  to be big year with Cricket World Cup, GOT final season and Star Wars Final Episode!
The final details of tax bill is out. Let's take another look at some of the "Good, Bad, Ugly" aspects we discussed back in Nov. 
  • Tax brackets went back to 7 but still simplified with lowest starting at 10% and highest at 37%. Generally its good since overall rates have come down for everyone
  • Corporate tax rate reduced from 35% to 21%. They could have settled down with 22% and given more tax cuts to individuals. But we know who controls GOP so this was expected
  • Expands child tax credit - thanks to Marco Rubio. Looks like he is one of the rare ones in GOP who is looking after not so fortunate. Well done Marco!
  • AMT for individuals is still kept. I can't understand how this goes with supposedly simplification of tax-code. They should have got rid of this and instead kept AMT for corporates
  • Changes on how corporate taxes are calculated. It's generally good so that we don't need repatriation debate again. Companies can pay taxes where they earn and bring back money at will without too much financial engineering
  • Education benefits - removed proposal of taxing tuition waiver. Someone must have gotten wiser that higher education is critical for US competitiveness!
  • The most ugly part (specially for CA, NY, NJ residents) of not able to deduct state taxes remains. These are BLUE states and GOP don't give a damn about them. It's politics after all!
  • The biggest tax reforms after 1986 is marginally positive and would sail through congress next week and President Trump would claim as "Biggest Christmas Gift" for American people.
What does it means to stock markets which are already at all time high? Should one follow "Buy the Rumors, Sell the News"? Based on many experts, these tax reforms are:
  • About 50% priced in markets
  • Should marginally improve GDP growth above 2%
  • Should increase corporate earnings by about 5%
  • That means we could see stock markets heading higher by end of year and well into spring. Q4 results and Q1 forecasts would decide overall direction beyond that.
Given all the news and discussions around Bitcoin, you may want check out well-written article in New York Times by Prof. Robert Shiller. 
Bitcoin = Ambiguity + Animal Spirits (there is no economics at play here) and hence no one can predict it's price.
Happy Holidays and May the Force be with you in 2018!
/Shyam

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