WWTD--What Would Trump Do?

Take a breath and think about your life savings.   Long before I was in politics, I was a saver and investor.  Investments rescue your small business when you have a bad year. 4 out of 5 small businesses fail in the first two years and only about 5% make it to the 10 year mark. If you want to start a business from scratch, you have to have some scratch.

            Here comes the Trumpzilla vs. Hildebeast show.  What Will Trump Do?  And what will happen no matter who is elected?  Trump and Hillary believe in trade wars. The Hawley-Smoot Tariff, a protectionist trade war, caused an ordinary recession  to become the Great Depression.  Don’t take my word for it, see latest issue of The Economist concerning Trump.  “Mr. Trump has railed against trade deals for decades. . . viewed America’s trade deficit as evidence of foul play or poor negotiating skills. . . For those who believe in the gains from globalization and the American-led order, this is a truly terrifying world-view.”  Bottom line: USA’s economy under either Prez will be lackluster and US stocks are fairly high priced—be cautious.  Invest in property or precious metals or local businesses that serve necessities. 

Business investment hasn’t grown in 2 years.  Why would it?  To expand a biz and create jobs requires $2000-$11,000 per new employee just to satisfy Obamacare.  No new trucks, no new truck driver jobs.   Interest rates are historically cheap and that allows businesses to do “financial engineering” rather than expansion.  That is, you buy back stocks, using your earnings and cheap interest to finance.  We tax business too much.  Our corporate tax rates are the highest in the world and we double-tax income from abroad.  We have the worst depreciation allowances in the world. Obama raised capital gains, income taxes, and dividend taxes.  Is it any wonder that businesses do inversion—buy a tiny little company in Slobovia and claim it as the new parent company where taxes are1/3 as high.  We are over-regulated by federal agencies that used Obama to dream up draconian rules out of legislation that had been on the books for decades. EPA has a war on fossil fuels.  Hillary wants to kill coal and end fracking.  Can you believe this?  From 2009-2015 two industries kept us from being in perpetual recession—smart phones and fracking.  Dodd-Frank red tape holds back lending so business start-ups haven’t.  For the first time in 400 years, America now has fewer start-ups (in the last 5 years) than closures. Trump might fix some tax problems with our economy, but without a systematic plan to take down the bureaucracy or Fed, look for little to change.  We may slide toward Southern Europe.  (Lawrence Kudlow, recent column)   

Trump wants to repeal Obamacare, but has hinted he’d go for single payer.  Hill wants to ‘fix’ Obamacare, whatever that means.  Hill wants $15 min wage.  Trump is open to it.  Recent research shows that when min wage is kept below ½ of median wage ($21,000 or $10/hr.) it works okay. More, and it leads to resistance to hire. The big problem of Trump is knowing what he would settle for.  Hillary would $15 for sure.

 Trump wants to open federal policy to allow more drilling and reduce air rules to save the coal business.  Good ideas.   Frankendodd needs to be repealed but neither candidate is talking this.  And if interest is basically zero, how does the Fed fight a recession.  Low interest kills income from bank CDs and bonds for seniors, who because they have savings, are the investor class.  Just what the left wants—seniors dependent on government assistance and death to the investor class. In Germany and Netherlands, they now have negative interest.  Put your life savings in the bank and each quarter they charge you a bit for the privilege.  Small savers are putting it under their mattresses, but big companies can’t.  Watch for this “solution” to get mention by Democrats shortly.  They have already suggested zapping your 401K by a one-time (Ha!) 1% tax to help the debt. 

Put your money directly into things that government can’t easily tax.  Gold or silver or iridium works.  Rental properties work better, giving an income.  Cash will also be king. Stocks are high, but ownership of American business has always paid.  Europe is awful and Japan and China. Third world is disastrous from debt.  Even Australia, which went 22 years without recession, has overvalued stocks.  Because of the uncertainty, diversify,diversify, diversify.