Final Quarter 2017: Tax Reform Not Enough, Trade Policy Changes Required For Illusive U.S. Economic Growth; Not An End To U.S. Stock Market Bull Run; and, Income Portfolio Fully Exposed To U.S. Common Stock, Free From Classic Income Issues

Lest we forget, GDP (a measure of additional income) is discounted for net trade.

Please reread the previous paragraph…”Lest we forget…”

China’s economy has slowed in recent years due to its buying of $U.S. debt with $U.S. trade surplus (contemporary currency manipulation) suffering U.S. economic diminution. Against this asset of new found wealth central planning over leverages initiatives while disadvantaging U.S. participation.

Popular U.S. opining equates “free trade” with competition – a ruse to maintain status quo cash flows and power structures – and, that to discuss sovereign debt in relation to growth and balanced trade is ignorant, as books are balanced on fiscal $.

Current trade policy is  not a design for equality of effort or balancing trade but a zero sum game.

Contemporary currency manipulation by trading “partners” is disguised by not differentiating passive and active capital allocations. Unlike contemporary understanding that any capital inflow post gold standard regime is constructive, without gold to balance currencies on terms of trade, the deficit countries simply dwindle away by passive inflows (surplus countries buy deficit country sovereign debt – our current bond “bubble”) or, deficit country depreciates its currency to recognize diminutive wealth.

In 1971 U.S. unilaterally declared the $U.S. not to be convertible to gold unshackling constraints to growth and incentives to individual effort. Once again, unilaterally (leadership), U.S. must unshackle constraints on economic growth and individual effort by taxing foreign earnings on $U.S. debt (passive, not constructive to U.S. growth – contrarily contemporary currency manipulation falsely strengthening $U.S.) and reciprocally beneficial trade agreements automatically balancing terms of trade.

Income portfolio and Wall Street: 

We’re only a 15% move from convergence of long term (months to years time frame) and secular trend (years to decades) minimum technical analysis targets.

Contrary to popular money management view, we are not 8 years deep (long in the tooth) into an overreached bull market cycle. Summer 2016 began long term moves for Dow Jones Industrial Average and both Standard and Poor’s 100 and 500 averages (income portfolio relevant indices). Secular bull has been running since 1998. Both DJI and SP100 have reached minimum secular targets both however having room to run to long term minimum targets of 24,500 and 1275 respectively. SP500 secular trend target is 3200, long term trend 2875. Consider cash a desirable position into long term target.

From a technical perspective “blow off” price tops (which can continue for some time) are characterized in the averages and their components at the end of a run. We’re not there yet. More characteristic currently is as a healthy “rolling bear” gouging individual stocks for not recognizing future income streams and continuous sector by sector rotations suppressing averages pricing.

Year End Income Portfolio:

Automatic Data Processing, Inc., The Hershey Company, McCormick & Co., PayPal Holdings, Inc., Synchrony Financial and Vantiv, Inc.

 

 

 

 

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