Non-Farm Friday – Is America Working?

MOST of the money rich people make is investment income.

Dow 22,000, Nasdaq 100 6,000, Russell 1,400, S&P 2,475!

NOW we have something to celebrate over the holiday weekend. We had a fantastic week trading the Futures – other than my Dow shorts, which got crushed (see yesterday's post) but I'm still in them over the weekend – just in case North Korea nukes us or gets nuked or if people realize the GOP tax cuts are nothing more than a massive transfer of wealth from the Middle Class to Donald Trump, his family, and his friends.

Notice on Paul Ryan's Simple Tax Postcard, that line 2 says "Add 1/2 of investment income." Half? What about the other half? That's an interesting way to sneak in a 50% tax cut for the rich, isn't it? MOST of the money rich people make is investment income. And, as noted by VOX:

One is that line 3’s reference to “specified savings plans” is completely punting on the question of what the specified savings plans are.
The other is that in lines 9, 10, and 11, the form achieves simplicity by saying nothing at all about what the relevant credits are or who is eligible to claim them and in what quantity.
To make either of these provisions work, you would, in practice, need to work with some additional forms.

The reason a tax form is complicated is because it's real. Paul Ryan and Donald Trump's fantasy post-card is no different than the current 1040EZ form except it's laid out differently (and omitting details like you name, address, date, signature…) and, of course, in order for this to work you'd have to put your Social Security number on an open post card – like some kind of moron who never heard of identity theft. Yet morons are Ryan and Trump's base and they are eating this stuff up and it's not those morons I have a problem with but the morons in the MSM who report on this stuff without brining up how obviously stupid it is.

According to the Tax Policy Center, the GOP plan could reduce federal tax revenue by as much as $7.8 trillion over the span of ten years – adding over $10Tn (50%) to the deficit after intersest (which will no longer be deductible). Multi-millionaires in the top 0.1 percent of the population are looking at an enormous windfall that will boost their after-tax incomes by 12-20 percent. Middle class families would get relatively little. And if that multi-trillion dollar revenue hole is actually offset by spending cuts as Republicans say they want to do, middle class families will end up worse off. As noted by our own BioDieselChris in Member Chat:

You can already see some pretty insidious shit going on here, like in the "standard deduction" versus "mortgage interest + charity." So no more real estate tax deduction, no more unreimbursed business, or medical (over 7.5%) or miscellaneous (over 2%) deductions huh? That's a massive tax hike for the middle class, and really the middle class, which the Schedule A (deductions) favors the most, those are the ones who broach the MFJ 12,700 standard deduction and often have 20k in mortgage interest, real estate tax and charity and are in the 25 and 28% brackets. So cutting these is a huge tax burden for the middle class.

As usual, the markets are celebrating the idea of tax cuts for the rich and we've gotten very rich this week, with our Long-Term Portfolio jumping over $100,000 (16.66%) since our 8/18 review. That's right, the same exact positions left completely untouched gained $100,000 in less than two weeks – not a bad collection of calls, right? The Short-Term Portfolio, however, which we use to hedge against losses in the LTP, lost $3,200 – so more like 15% total gains in our paired portfolio strategy.

Next week I'll be on BNN's Money Talk with Kim Parlee and we're going to start a brand new portfolio which we will track on the show as well as at Philstockworld, where we're hoping to match the success of our Nasdaq Portfolio, which made over 100% in 4 months (see yesterday's report for those trades, which include a great hedge on the Nasdaq). As you can see from the link above, we shares our Trade of the Year idea on Wheaton Precious Metals (WPM) on the show and that trade is already up $12,250 (612%) from our net $2,000 entry with 4 months to go – those are the kind of trade ideas we'll be sharing in our new portfolio so tune in, or SUBSCRIBE and get hundreds of other great ideas.

By the way, even at this level ($14,250), the full payout of the spread is $25,000 at $22 (WPM is now $20.78) so you can still make $10,750 (75%) in just 4 months, picking up the scraps that are left by our Members – not bad for you cheapskate readers!

Now, on to new business. Non-Farm Payrolls were, as we expected on Monday, a miss at 156,000 vs 189,000 expected by leading economorons and both June and July were revised down 20,000 jobs each so a complete disaster and we'll see if "THEY" can maintain the market highs into the holiday in the face of this obviously TERRIBLE data but, of course, the spin will be that this keeps the Fed on hold, so all is well on Wall Street, right?

That's 3 straight months of declining payrolls with Aug coming in like May while you need to chop 10% off June and July from the chart – go Trump! Keep in mind the July report was a 20,000 beat (now adjusted to no beat) on Aug 3rd and the Dow popped from 22,000 to 22,100 on that fake news. On July 7th, we got a fake June reading of 230,000 jobs and that took the Dow from 21,350 all the way to 21,650 the following week. So how much of the BS gains will unwind in the face of reality? This is why I stuck with my Dow Futures (/YM) shorts.

The indexes would be down already but the Dollar took a tumble back to 92.30 on that news (less people working means less need for Dollars). We still like the Dollar (/DX) long at 92 or over the 92.50 line with tight stops under the lines.

Oil and gasoline should be calming down a bit as things have stopped getting worse. We finished our longs with massive profits yesterday (Wednesday's $1.63 gasoline bet (/RB) finished at $1.75 for a gain of $5,040 per contract). I told our Members in our Live Chat Room that I didn't think it was worth the risk holding into today (plus, very greedy after having such amazing gains).

And now the holiday weekend is upon us and it's hard to imagine there's a lot of enthusiasm for holding stocks at record highs when there's a madman threatening to use nuclear missiles in power – and I'm a little worried about Kim Jong Il as well!

There's no doubt that fixing the hurricane damage will be good for our GDP, possibly adding as much as 0.5% ($90Bn) to our GDP but 3.5% "growth" would be considered fantastic. If we can just continue to warm up the globe and wipe out a major city every year – things are going to be great!

Have a nice weekend,

  • Phil