31 Dec Annual Rebalance

DairyQueen

Alexland wrote: »

Also rebalancing is all about boosting your stragglers, however mad it seems, to give them greater scope to shine in future.

Alex.

In a nutshell. Very well put.

A_T

Alexland wrote: »

I
The best result I can imagine for a UK investor in 2018 is that it will be a bit like 2015 with no significant market losses. I am not so negative to think it will be as bad as 2008.

Why do you imagine this is the best result? Based on what? Seems to me there is an element here of psychologically preparing for disappointment suggestive of very low risk tolerance.

Alexland

A_T wrote: »

Why do you imagine this is the best result? Based on what? Seems to me there is an element here of psychologically preparing for disappointment suggestive of very low risk tolerance.

I think you might have jumped a bit ahead there. Its just having a view of market conditions based on fundamentals and historic economic cycles. P/Es are a bit ahead (pricing in best case earnings growth) so perhaps we need years like 2015 again to catch up?

Euphoria might cause share prices to continue to grow above earnings during 2018 but personally I don't think that would be a good result.

Alex

Glen_Clark

DairyQueen wrote: »

trump is a wild cannon. Who knows what kind of ridiculous action he could take that imperils global safety. The man is a first-rate eejit and I, for one, question the stability of the world's biggest economy in his (unsafe) hands.

Loose Cannon, first-rate-eejit, perhaps.
Fortunately the world's biggest economy is not in his unsafe hands because there are wiser heads holding the reins.
Its just that they are not as newsworthy as Trump.

DairyQueen

Thrugelmir wrote: »

Which budget was in balance? Projected Federal Government deficit for the current fiscal year is above $400 bn.

Are the 2 connected. Given that US corporations (who are far being alone) keep their profits offshore to avoid said taxes. At 35% hardly surprising.

You are quite right to challenge my terminology. I was referring to the US federal debt that rapidly built in the wake of Reagan's tax cuts in the early 80s. Prior to that it had been negligible for decades. Rising federal debt has been a feature of every Republican presidency since then. Historic US annual deficit and cumulative debt is summarised here. Map the president to the year and you get the picture. Obama is a notable exception given that his presidency began in the immediate aftermath of the financial crisis.

The annual budget deficit is within reasonable GDP boundaries courtesy of the USA's excellent productivity. However, the nation is reliant on borrowing in order to fund (for example) that enormous military budget and, dare I say?, tax cuts to corporations.

Tax on corporate income currently contributes 9% of the total tax revenue. 47% is raised from individuals in income tax. "Another 34 percent of revenue comes from payroll taxes, which are assessed on the wage or salary paychecks of almost all workers". "By law, employers and employees split the cost of payroll taxes, but research has shown that employers pass their portion of the cost on to workers in the form of lower wages" (source).

So, taxes imposed on US corporations depress the pay of employees but tax cuts don't have the reverse effect. So much for the 'trickle down' benefit of corporate tax cuts.

The prospect of companies contributing even less toward the fiscal coffers may be good news for shareholders (the likely recipients of this largesse) in the short-term but the response from the blue-collar voters who were seduced by Trump's crazy rhetoric, and who swung the election for the tangerine numptie, should be interesting. The entire House of Representatives is up for grabs this year, and so are a third of the Senate seats. What happens when the president is at odds with Congress? Division of powers = stalemate. What happens when the president is as inexperienced and abrasive as Trump?

Even the most critical of emergencies isn't managed effectively by a government whose members are more focused on their electability rather than the national interest. Remember how Congress responded to the financial crisis? Yep... exactly. Nero was busy fiddling whilst Rome burned. Dubya had a heck of a job gaining support from his own party let alone from the Dems then holding power in both legislative branches.

By the end of this year the climate for governing the country, let alone any crisis, is likely to be pretty unstable. The mainstream Republican Party is no fan of Trump. Dems are likely to have a majority in the House; Reps in the Senate; and an inexperienced, bombastic, unpopular politician (approval rating currently only 38%) will be in the hot seat.

I will be staying very exposed to the US markets throughout 2018 in the hope that Trump can be controlled leading-up to the elections in November, and in the hope that a crisis doesn't manifest this year. I think I may be pulling-up the drawbridges this time next year.

DairyQueen

Glen_Clark wrote: »

Fortunately the world's biggest economy is not in his unsafe hands because there are wiser heads holding the reins.
Its just that they are not as newsworthy as Trump.

See my post following this one of yours. The US division of powers is such that 'wiser heads' don't have any major influence. Gerrymandering has undue influence on the legislature (especially the Reps). Trump's power is limited by the Constitution but (unfortunately) the executive branch has carte blanche in too many areas that could effect the markets. More of an issue is the structure of US government. That division of power more often that not not hinders the effectiveness of federal government - especially so when the president is at odds with the legislature.