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The Dow Falls By Triple Digits As Anxiety Over The Senate Tax Plan Grows

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It is becoming quite clear that even if Congress passes a tax reform bill in 2017 that it won’t actually be that significant.  On Thursday, anxiety about the Senate’s version of the bill pushed the Dow down more than a hundred points, and that was the biggest decline that we have seen in two months.  Could it be possible that the massive stock market bubble that we are currently witnessing is about to burst?  Anticipation of what this tax bill would mean for U.S. companies has been the foundation for so much of the euphoria that was have seen on Wall Street this year, and now reality is starting to set in

The Dow suffered its biggest drop since early September as investors reacted to reports that the Senate’s tax proposal would delay tax cuts for corporations for year, a development that pushes back a key part of the plan Wall Street was betting on to provide a boost to corporate profitability.

Reducing our corporate tax rate is very important, because right now we are not competitive with the rest of the western world.  Almost every other major industrialized nation has a much lower corporate tax rate than us, and that encourages major corporations to locate operations elsewhere.

So if we are able to reduce the corporate tax rate to 20 percent, that is likely going to mean good things for the U.S. economy and more jobs for U.S. workers, but unfortunately the Senate version of the bill would delay that tax cut until 2019

The top corporate rate would drop from 35% to 20% in 2019, a year later than it would in a revised bill approved Thursday by the House Ways and Means Committee. That change, which reduces the overall cost of the tax cut package, delays one of President Trump’s main priorities for overhauling the tax code, but administration officials did not seem concerned during a brief appearance with Hatch on Thursday afternoon.

And then if the Democrats take back control of the White House in 2020, they would probably jack corporate tax rates back up to where they were before, and so in the end the change would not make much of an impact at all.

Other than reducing the corporate tax rate, the Senate version of the “tax reform bill” does not actually accomplish that much.  The following comes from Zero Hege, and it is a good summary of what is contained in the bill…

  • 20% permanent corporate tax cut delayed by 1 year
  • Complies with the $1.5 trillion cost (will cost $1.44 trillion)
  • Preserves 7 tax brackets: top tax bracket is 38.5%, down from 39.6%
  • Doubles standard deduction from $12,700 to $24,000 (married couples)
  • Ends state and local tax (SALT) deduction; keeps business deduction
  • Keeps the mortgage Interest deduction cap at $1 million
  • Preserve the estate tax, doubling the current $5.49 million exemption for individuals
  • Raises the child tax credit to $1,650 from $1,000
  • Sets 10% tax rate for US companies with IP in foreign low-tax jurisdictions
  • Full expensing of capital investments for five years
  • Preserves 401(k)s IRAs,
  • Sets repatriation rate at 12% for liquid assets, 5% for illiquid assets
  • Carried interest loophole unchanged
  • Electric Vehicle tax credit is spared (good news for Elon Musk)

This bill also repeals the alternative minimum tax, and that is a change that has been needed for ages.

But overall, our members of Congress are simply rearranging the deck chairs on the Titanic.

We have the most abominable system of taxation on the entire planet.  I once spent an entire year studying our tax code, and at the end of that year I came to the conclusion that the best thing that we could do would be to throw the entire thing in a shredder and start over.

Today, the tax code is more than two million words long, and the regulations are more than seven million words long.  I used to have to lug these books to class with me, and that was not pleasant.  Our system greatly favors the wealthy, because they can hire lobbyists to influence members of Congress, and they can pay accountants and tax attorneys to find every single loophole possible.  Meanwhile, ordinary people like you and me always end up with the short end of the stick.

The next time you are talking to a politician, ask them to defend our current system of taxation.  None of them will be able to, because it is an abomination.

Ultimately, I would like to abolish the IRS and the income tax completely.  We did not have an income tax between 1872 and 1913, and it was the greatest period of economic growth in U.S. history.

Of course we would need to greatly reduce the size of the federal government in order to do that, and that might take a while.  So in the short-term we could go to a flat tax or a fair tax, both of which would be greatly superior systems to what we have right now.

Simply reducing rates a little bit and tinkering with the regulations is not going to fundamentally change anything.  Real tax reform means getting rid of our current abominable system entirely, and if I am elected to Congress that is precisely what I am going to fight for.

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Economy

Uber Paid Hackers to Keep Massive Breach a Secret

Hackers stole personal information on 57 million Uber Technologies Inc. customers and drivers in October 2016, as part of a massive data breach that the ride-hailing service willingly hid from victims and U.S. regulators.

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Hackers stole personal information on 57 million Uber Technologies Inc. customers and drivers in October 2016, as part of a massive data breach that the ride-hailing service willingly hid from victims and U.S. regulators.

Uber told Bloomberg on Tuesday that it paid the hackers responsible $100,000 to delete the stolen data and keep the breach quiet. The company declined to disclose the identities of the offenders and said it is confident that the stolen information was never used.

“None of this should have happened, and I will not make excuses for it,” Uber chief executive Dara Khosrowshahi said in a statement acknowledging the breach and cover-up. “While I can’t erase the past, I can commit on behalf of every Uber employee that we will learn from our mistakes.” (See also: Uber Will IPO in 2019.)

According to Bloomberg, the hackers gained access to names, email addresses and phone numbers of 50 million Uber customers around the world, as well as personal information of about 7 million drivers, including 600,000 U.S. driver’s license numbers. Uber added that more sensitive information, such as location data, credit card, bank account and social security numbers, wasn’t compromised in the October 2016 attack.

Khosrowshahi said that the company has since tightened its security and “obtained assurances that the downloaded data had been destroyed.” Uber’s newly named CEO added that two of the employees responsible for failing “to notify affected individuals or regulators” following the attack were ousted. Chief security officer Joe Sullivan is believed to be one of them.

Uber’s co-founder and former CEO, Travis Kalanick, was made aware of the breach one month after it took place, the company told Bloomberg. Kalanick reportedly found out about the matter shortly after Uber settled a lawsuit with the New York attorney general over data security disclosures. (See also: Uber CEO Travis Kalanick Resigns.)

News of the company’s breach and cover-up has already prompted New York Attorney General Eric Schneiderman to launch an investigation. Bloomberg also reported that Uber is being sued for negligence by one of its customers.

“Uber failed to implement and maintain reasonable security procedures and practices appropriate to the nature and scope of the information compromised in the data breach,” according to the complaint filed Tuesday in federal court in Los Angeles.

Hackers have successfully infiltrated numerous companies in recent years, including Yahoo, now owned by Verizon (VZ), Time Inc.’s (TIME) MySpace, Target Corp. (TGT), Anthem Inc. (ANTM) and Equifax Inc. (EFX). (See also: Yahoo Says All 3 Billion Accounts Were Affected in 2013 Attacks.)

Read more: Uber Paid Hackers to Keep Massive Breach a Secret | Investopedia https://www.investopedia.com/news/uber-paid-hackers-keep-massive-breach-secret/#ixzz4zLLDGrL4
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Economy

The Great Retirement Con

A pension is what’s referred to as a defined benefit plan.

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This report was originally published by Adam Taggart at PeakProsperity

The Origins Of The Retirement Plan

Back during the Revolutionary War, the Continental Congress promised a monthly lifetime income to soldiers who fought and survived the conflict. This guaranteed income stream, called a “pension”, was again offered to soldiers in the Civil War and every American war since.

Since then, similar pension promises funded from public coffers expanded to cover retirees from other branches of government. States and cities followed suit — extending pensions to all sorts of municipal workers ranging from policemen to politicians, teachers to trash collectors.

A pension is what’s referred to as a defined benefit plan. The payout promised a worker upon retirement is guaranteed up front according to a formula, typically dependent on salary size and years of employment.

Understandably, workers appreciated the security and dependability offered by pensions. So, as a means to attract skilled talent, the private sector started offering them, too.

The first corporate pension was offered by the American Express Company in 1875. By the 1960s, half of all employees in the private sector were covered by a pension plan.

Off-loading Of Retirement Risk By Corporations

Once pensions had become commonplace, they were much less effective as an incentive to lure top talent. They started to feel like burdensome cost centers to companies.

As America’s corporations grew and their veteran employees started hitting retirement age, the amount of funding required to meet current and future pension funding obligations became huge. And it kept growing. Remember, the Baby Boomer generation, the largest ever by far in US history, was just entering the workforce by the 1960s.

Companies were eager to get this expanding liability off of their backs. And the more poorly-capitalized firms started defaulting on their pensions, stiffing those who had loyally worked for them.

So, it’s little surprise that the 1970s and ’80s saw the introduction of personal retirement savings plans. The Individual Retirement Arrangement (IRA) was formed by the Employee Retirement Income Security Act (ERISA) in 1974. And the first 401k plan was created in 1980.

These savings vehicles are defined contribution plans. The future payout of the plan is variable (i.e., unknown today), and will be largely a function of how much of their income the worker directs into the fund over their career, as well as the market return on the fund’s investments.

Touted as a revolutionary improvement for the worker, these plans promised to give the individual power over his/her own financial destiny. No longer would it be dictated by their employer.

Your company doesn’t offer a pension? No worries: open an IRA and create your own personal pension fund.

Afraid your employer might mismanage your pension fund? A 401k removes that risk. You decide how your retirement money is invested.

Want to retire sooner? Just increase the percent of your annual income contributions.

All this sounded pretty good to workers. But it sounded GREAT to their employers.

Why? Because it transferred the burden of retirement funding away from the company and onto its employees. It allowed for the removal of a massive and fast-growing liability off of the corporate balance sheet, and materially improved the outlook for future earnings and cash flow.

As you would expect given this, corporate America moved swiftly over the next several decades to cap pension participation and transition to defined contribution plans.

The table below shows how vigorously pensions (green) have disappeared since the introduction of IRAs and 401ks (red):

(Source)

So, to recap: 40 years ago, a grand experiment was embarked upon. One that promised US workers: Using these new defined contribution vehicles, you’ll be better off when you reach retirement age.

Which raises a simple but very important question: How have things worked out?

The Ugly Aftermath

America The Broke

Well, things haven’t worked out too well.

Three decades later, what we’re realizing is that this shift from dedicated-contribution pension plans to voluntary private savings was a grand experiment with no assurances. Corporations definitely benefited, as they could redeploy capital to expansion or bottom line profits. But employees? The data certainly seems to show that the experiment did not take human nature into account enough – specifically, the fact that just because people have the option to save money for later use doesn’t mean that they actually will.

First off, not every American worker (by far) is offered a 401k or similar retirement plan through work. But of those that are, 21% choose not to participate (source).

As a result, 1 in 4 of those aged 45-64 and 22% of those 65+ have $0 in retirement savings (source). Forty-nine percent of American adults of all ages aren’t saving anything for retirement.

In 2016, the Economic Policy Institute published an excellent chartbook titled The State Of American Retirement (for those inclined to review the full set of charts on their website, it’s well worth the time). The EPI’s main conclusion from their analysis is that the switchover of the US workforce from defined-benefit pension plans to self-directed retirement savings vehicles (e..g, 401Ks and IRAs) has resulted in a sizeable drop in retirement preparedness. Retirement wealth has not grown fast enough to keep pace with our aging population.

The stats illustrated by the EPI’s charts are frightening on a mean, or average, level. For instance, for all workers 32-61, the average amount saved for retirement is less than $100,000. That’s not much to live on in the last decades of your twilight years. And that average savings is actually lower than it was back in 2007, showing that households have still yet to fully recover the wealth lost during the Great Recession.

But mean numbers are skewed by the outliers. In this case, the multi-$million households are bringing up the average pretty dramatically, making things look better than they really are. It’s when we look at the median figures that things get truly scary:

Nearly half of families have no retirement account savings at all. That makes median (50th percentile) values low for all age groups, ranging from $480 for families in their mid-30s to $17,000 for families approaching retirement in 2013. For most age groups, median account balances in 2013 were less than half their pre-recession peak and lower than at the start of the new millennium. (Source)

The 50th percentile household aged 56-61 has only $17,000 to retire on. That’s dangerously close to the Federal poverty level income for a family of two for just a single year.

Most planners advise saving enough before retirement to maintain annual living expenses at about 70-80% of what they were during one’s income-earning years. Medicare out-of-pocket costs alone are expected to be between $240,000 and $430,000 over retirement for a 65-year-old couple retiring today.

The gap between retirement savings and living costs in one’s later years is pretty staggering:

  • Nearly 83% of retired households have less saved than Medicare costs alone will consume.
  • One-third of retired households are entirely dependent on Social Security. On average, that’s only $1,230 per month – a hard income to live on. (source)
  • 34 percent of older Americans depend on credit cards to pay for basic living expenses such as mortgage payments, groceries, and utilities. (source)

As for Medicare, the out-of-pocket costs could easily soar over retirement. The Wall Street Journal reports that the current estimate of Medicare’s unfunded liability now tops $42 Trillion. Such a mind-boggling gap makes it highly likely that current retirees will not receive all of the entitlements they are being promised.

And the denial being shown by baby boomers entering retirement is frightening. Many simply plan to work longer before retiring, with a growing percentage saying they plan to work “forever”.

But the data shows that declining health gives older Americans no choice but to leave the work force eventually, whether they want to or not. Years of surveys by the Employment Benefit Research Institute show that fully half of current retirees had to leave the work force sooner than desired due to health problems, disability, or layoffs.

Add to this the nefarious impact of the Federal Reserve’s prolonged 0% interest rate policy, which has made it extremely hard for retirees with fixed-income investments to generate a meaningful income from them.

The number of Americans aged 65 years and older is projected to more than double in the next 40 years:

Will the remaining body of active workers be able to support this tsunami of underfunded seniors? Don’t bet on it.

Especially since their retirement savings prospects are even more dim. With long-stagnant real wages and punishing price inflation in the cost of living, Generation X and Millennials are hard-pressed to put money away for their twilight years:

(Source)

Public Pensions: Broken Promises

And for those “lucky” folks expecting to enjoy a public pension, there’s a lot of uncertainty as to whether they’re going to receive all they’ve been promised.

Due to underfunded contributions, years of portfolio under-performance due to the Federal Reserve’s 0% interest rate policy, poor fund management, and other reasons, many of the federal and state pensions are woefully under-captialized. The below chart from former Dallas Fed advisor Danielle DiMartino-Booth shows how the total sum of unfunded public pension obligations exploded from $292 billion in 2007 to $1.9 trillion by the end of 2016:

(Source)

And the daily headlines of failing state and local pension funds (IllinoisKentuckyNew JerseyDallasProvidence — to name but a few) show that the problem is metastasizing across the nation at an accelerating rate.

Affording Your Future

The bottom line when it comes to retirement is that you’re on your own. The vehicles and the promises you’ve been given are proving woefully insufficient to fund the “retirement” dream you’ve been sold your whole life.

That’s the bad news.

But the good news is that the dream is still attainable. There are strategies and behaviors that, if adopted now, will make it much more likely for you to be able to afford to retire — and in a way you can enjoy.

In Part 2: Success Strategies For Retirement, we detail out these best practices for a solvent retirement, including providing 14 specific action steps you can start taking right now in your life that will materially improve your odds of enjoying your later years with grace.

For far too many Americans, “retirement” will remain a perpetual myth. Don’t let that happen to you.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

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Economy

North Korea’s ‘Unpredictability’ Scares Winter Olympics Visitors

North Korea’s antics are having an effect on the Olympics.

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North Korea’s antics are having an effect on the Olympics.  With less than three months before the Winter Olympics open in Pyeongchang, South Korea, the Games are struggling to draw visitors from home and abroad, largely because of fears about the secretive and unpredictable neighbor to the North just 50 miles away.

As of November 16, organizers say they’ve hit just 41% of their sales target of 1.06 million tickets, with sales in South Korea even weaker than those by international tourists, according to USA Today.  Anbritt Stengele, the founder of Sports Traveler, a Chicago-based travel agency, said she’s never seen such a sluggish market.

“The interest level is very low for this Olympics,” said Stengele. “We had Sochi (Russia) in 2014, and that interest level was lower than Vancouver (in 2010). But this one is even lower than Sochi. I would just classify it as extremely light interest. Sales have been stagnant.” She and other travel agents say there are a few factors that are affecting interest in the Winter Games, and a good many are from fears about North Korea aggression.

Stengele said North Korea is a big factor, as global tensions are running high over threats exchanged by President Trump and North Korean leader Kim Jong Un. Kim has conducted a record number of ballistic missile tests this year, as well as a test of its most powerful nuclear weapon to date. Both leaders have threatened to annihilate the others’ country if they order a first strike.

North Korea also has a massive artillery aimed directly at South Korea, and that’s unsettling to travelers who wish to see the games.  Stengele also said she’s heard concerns about whether travel insurance will cover cancellations in the event of a “disruption” by North Korea and the lack of accommodation options such as name-brand international hotel chains at the venue locations.

It isn’t just American tourists who are cutting their travels to South Korea because of fears that the chubby dictator in North Korea could start launching missiles anytime. South Korea has been suffering from a massive drop in visitors from China, in large part because of  the deployment of a U.S. anti-missile defense system last May that has angered the communist government in Beijing.

h/t : SHTFPlan.com

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