Let’s Talk Heresy!

Kort Sessions (kortsessions.com) came about as a result of a 50-year irritation I have developed over the media and its ability through misinformation, group think and political editorializing to do harm to investors of all stripes. What I try to do with this blog is go after the biggest misconceptions that they obsess on and add some sense of rationale as to why the talking heads and pundits might be off base. TAX REFORM AND TAX CUTTING ARE THE PRIMARY FOCUS TODAY.

I have made the point in this blog countless times that the US stock market does not need, either tax reform or tax cuts to prosper (“A Gary Cohn Resignation Would ‘Crash the Market” … “). It has never been about the successful completion of the Trump Agenda, save the deregulation piece that he handled with the stroke of a pen when he came into the White House, it is about an already-solid US economy and the beginning of a synchronized global economic recovery. None of the latter has anything to do with Mr.Trump, despite his boasts to the contrary.

So, it is very distressing to continue to see ongoing media and political focus on this essentially trivial economic issue when other more serious questions need to be addressed. Questions like: do we really need to cut taxes right now or how do we begin to curb government spending and the burgeoning federal deficit?

Do we really need to be cutting taxes right now?

As a dyed-in-the-wool Keynesian, my answer is a very loud, NO! I know that this is heresy to those who are clamoring to get tax cuts as a way to stimulate the economy to, say, 3% plus economic growth, but I’m not buying it. Why? because it seems like we are already beginning to operate at that level with a final reading of 3.1% growth in the second quarter and preliminary reading of 3% in the third quarter. To ice the cake, the October unemployment rate fell to 4.1% , the lowest level in 17 years (5% used to be considered “full employment” and inflationary). Why wouldn’t you hold off on actual tax cuts (fiscal stimulus) until the economy fell into recession, a time when you really needed them. Of course, the other logical Keynesian belief is that you should be using the economic good times to be paying off the deficits you ran during the bad times to stimulate the economy. Where is the ‘Tea Party’ when you really need them? And, where are the Democrats and Republicans on the issue of cutting government spending and waste as way to reduce our deficits ? 

Ex this obvious question about deficit reduction, with a tax cut you run the risk of rekindling inflation as the exceptional monetary stimulus of Quantitative Easing (QE) is being withdrawn at a snail’s pace. We really need to have both tax cutting ability and higher rates in our tool box in the event of future economic air pockets and financial crises.

Do we really need tax reform right now?  Emphatically, I say NO! Why? We really do have bigger fish to fry — deficit spending, North Korea and US troops on the ground and in active combat roles in Iraq, Syria, Niger (and who know where else?). On the issues of both tax reform and tax cuts these have long been promised by the Republican Party. I would love nothing more than to have a simplified tax code and more money to spend and save from potential tax breaks. However, in case you haven’t noticed, TAXES ARE NOT EASY, just as health care was not easy. The idea that you could tackle any of this reform in a matter of weeks, under the gun of the ending of a congressional session and in the shadow of the upcoming 2018 mid-term elections in the current partisan environment, is ludicrous. In my opinion tax reform and tax cuts should be back-burner issues. If it does not get done, it will not be a surprise. Regardless of the way the media spins it, not passing a “Tax Cut and Jobs Act” in the short or long-run will it not have any major negative effect the economy or the secular bull market that we are in the midst of.

So call me a HERETIC. 

What us your take?

The information presented in kortsessions.com represents my own opinions and does not contain recommendations for any particular investment strategies or securities.  I may, from time to time, mention certain securities for illustrative purpose, names where I personally hold positions.  These are not meant to be construed as recommendations to BUY or SELL.  All investments and strategies should be undertaken only after careful consideration of suitability based on the risks, tolerance for risk and personal financial situation.