Under the stigma of being tagged in 2018 as the most non-productive Congress of all time, DC reps are working hard to create and pass by Thanksgiving the biggest tax code rewrite since 1986. Tax changes and simplification are potentially huge, but details are being kept under wraps in hopes of staving off sabotage from a huge wave of lobbyists, determined to preserve loopholes that benefit their clients.
To pay for reductions, Gary Cohn said elimination of federal deductibility of state and local taxes (SALT) would remain in the final bill. And despite the President’s assurance that no changes would be made to 401(k) tax-deferral, tax-writer Kevin Brady told reporters he would not rule out changes such as lowering the annual cap on contributions from $18,000 to $2,400 (hence increasing federally-taxable income on a short-term basis).
The global turn against governments remains front-and-center in Catalonia. Massive protests followed Madrid’s announced sacking of Catalonia’s president and dismissing of its parliament—hours after the region declared itself on October 27 an independent nation (the same as America’s declaration against the King of Britain). Carles Puigdemont responded by refusing to be fired and calling for “democratic opposition,” with a promise of building a “free country.” With not all Catalonians in favor of leaving, riots are becoming commonplace and Spain is teetering on the edge of civil war.
With just 7.5% of the Spanish population, Catalonia produces 20% of Spain’s GDP. Its history goes back nearly 1,000 years, while Spain didn’t exist until the 15th century… Of more importance globally is that the EU is inadvertently sending signals to other European states, particularly Italy, that it is NOT supporting democracy; rather, it is welcoming migrants, while standing by as Spain mistreats its residents. One consequence of this development has been a renewed rush of European safe-haven money into U.S. stocks.
Martin Armstrong reported that contrary to what mainstream media (MSM) would have you believe, conditions—especially jobs—in Britain are much improved, following BREXIT. On reflection, why would MSM report that shaking loose global bureaucracy is a good idea?
Bannon takes control. Breitbart’s Steve Bannon, freed from the confines of White House politics, is taking a gloves-off approach to establishment Republicans. Bannon has begun recruiting a slate of conservative populist candidates to run against Republican incumbents, warning that no incumbent up for re-election in 2018 is safe other than Ted Cruz (who is actually ineligible to run – but that’s another story).
Bannon’s efforts—reflecting the deep sense of dissatisfaction of many conservative Americans—has already resulted in Roy Moore’s election in Alabama and announcements by Senators Flake and Corker that they will not run for reelection in 2018. “Establishment Republicans are in full collapse. They’re not even fighting back. They’re out of ideas, guts and out of money.” Bannon is reported looking for volunteers to run!
Slow our slide into bankruptcy – please! And so the State of Illinois successfully peddled $4.5 billion of new debt yielding 3.74% last week to yield-hungry suckers, er…investors. It will use the proceeds to pay down some of its $16.6 billion in unpaid bills—or possibly more, since the Illinois Controller just admitted she doesn’t know for sure what the size of its unpaid backlog is.
Obamacare rates are going up next year and here’s a look ahead by Avalere at what the tab is going to be. The national median hike is 35% for an average 50 year old on the Silver plan, and ranges from 69% in WY to rate reductions in ND, AZ and AK.
MARKETS – for the week ending October 27
Real money continued sliding: gold was down $8 to $1272/ounce and silver 33-cents to $16.75/oz.
US stocks eased higher: the Dow and S&P were up 0.5% and 0.2% to 23434 and 2581, respectively. The market continues to defy all time low levels of mutual fund cash and a growing chorus of pundits citing historical comparisons for a potential crash. In contrast, Martin Armstrong is pointing to the increasing flow of foreign capital, to whom the U.S. market looks relatively safe.
Mining stocks (the XAU Index) plunged 4.0% to 81.57.
Crude oil (the WTIC Index) surged $2 higher to $53.90/barrel.
Commodities (GCC Index) rose 0.7% to 19.08.
Currencies. The Federal Reserve Note (= dollar, via USD Index) continued its ascent, rising 1.3% to 94.82 on the promise of federal tax cuts and perhaps even tax reform.
Cryptocurrencies. Bitcoin bumped its head on $6000 and settled for a $5700 close, up $200 for the week. Over the weekend it surged back above $6000, opening Monday morning at $6300 on news that Catalonia is considering a blockchain-backed e-residency program.
US Treasury bonds continued falling: 10-year and 30-year yields rose 3 and 4 basis points, respectively, to 2.43% and 2.93%.
About the Author
Wayne Peterson is Manager of Wayne Framework 2, LLC, author of “But What If I’m Right?” and publisher of the Transformation Watch newsletter and weekly Crypto Analyst Newsletter. For free weekly receipt of these financial blogs, subscribe here.