http://www.zerohedge.com/news/2017-05-02/goldman-joins-jpm-bearish-side-although-gartman-remains-bullish-stock-prices

 

When Gartman is Bullish you better short !!!

 

Authored by Mac Slavo via SHTFplan.com,



While we all loved President Trump&rsquo s campaign pledge to bring jobs back to America, there are powerful economic forces at work that suggest the shift to cheap labor is pretty much irreversible.  Yes, Trump has spoken with the leaders of some of America&rsquo s biggest companies and he&rsquo s been successful at getting those chief executives to commit to creating or keeping a few thousands jobs here and there, but when you consider that the competing foreign labor force primarily responsible for manufacturing America&rsquo s consumer goods numbers in the hundreds of millions of people, the notion that we&rsquo re somehow going to see explosive manufacturing growth over the next four or eight years is nothing more than a pipe dream.

But don&rsquo t take it from us.  A Chinese factory worker explains exactly why we have absolutely no way to compete with the near slave-like conditions found in foreign factories:

 

 

Zeng walked CNBC through his decision to spend six weeks in a factory working 12 hours shifts Monday through Saturday, mostly during the night, and what he discovered along the way.

 

&ldquo They just gave me the address of the factory and I just went. I just showed up. When I was there I saw people holding luggage waiting in a long line, so I just stood in the line,&rdquo Zeng told CNBC in an interview.

 

&ldquo When it was my turn they asked for my ID, asked to see my hand and asked me to recite the English alphabet. I got in after that. It took less than 30 seconds.  You don&rsquo t have to apply or have any skills.&ldquo

 

&hellip

 

&ldquo The first thing I can think of from a labor perspective is that the wages are unacceptable for American workers. So, in the factories, I was getting paid about 3100 yuan, or $450, per month. I don&rsquo t think American workers can accept those kind of wages based on living conditions and prices here,&rdquo Zeng said.

&ldquo Even if they relocate factories to the U.S. they&rsquo d replace workers with robots,&rdquo Zeng said. He said Pegatron already uses robots to apply cameras to iPhones, and to drop batteries into the devices. Robots, Zeng said, are more precise than human workers, and precision is particularly important for those two components.

 

If President Trump wants iPhones manufactured in the U.S., Apple will need to front the cost to pay the much higher wages required in the U.S., which means that consumers will have to be willing to pay more. Either that, or it will have to rely a lot more on machines, which won&rsquo t create jobs, and might end up taking them.

 

Source:  Yahoo News

For those who are having trouble visualizing the cumulative effect of what Zeng describes,  this chart pretty much sums it up  and shows how much manufacturing jobs as a percentage of America&rsquo s total workforce have declined since the 1960&rsquo s:



At first glance you may be thinking that we have no where else to go but up.

The problem, of course, is that if you do try to shift jobs back to America, and even if you triple the wages from what factory workers are making in China,  those taking a monthly paycheck and benefits from the government  already make more money for doing nothing than they would assembling mobile phone components for 12 hours a day.

One recipient of welfare summed it up succinctly in the following  shocking interview:

 

 

While workers out there are preaching morality at people like me living on welfare, can you really blame us?

 

I get to sit home&hellip I get to go visit my friends all day&hellip I even get to smoke weed&hellip

 

Me and people that I know that are illegal immigrants that don&rsquo t contribute to society,  we still gonna get paid.

 

Our check&rsquo s gonna come in the mail every month&hellip and it&rsquo s gonna be on time&hellip and we get subsidized housing&hellip we even get presents delivered for our kids on Christmas&hellip   Why should I work?

 

Ya&rsquo ll get the benefit of saying &ldquo oh, look at me, I&rsquo m a better person,&rdquo but when ya&rsquo ll sit at home behind ya&rsquo lls I&rsquo m a better person&hellip   we the ones gettin&rsquo paid!

 

So can you really blame us?

 

 

There&rsquo s always hope, we suppose,  that the millennial generation, currently demanding free college and  living in their parents&rsquo basements, will rocket America into its next great manufacturing boom.

But we&rsquo re not going to hold our breaths.

 

SPVXSP/CSNA 30

NASDAQ: TVIX -  1 May, 7:59 PM GMT-4

 

2016 price is $2116 USD

Now Trading $28.47 USD

 

Once Volatity spike... it will become 3 digit again

 

 

Authored by Peter Schiff via Euro Pacific Capital,

Donald Trump has made good on one of his  most audacious campaign promises  by submitting what he describes as the biggest tax cut in U.S. History. For once, at least, this does not appear to be Trumpian braggadocio.  It really may be the mother of all tax cuts.  But if passed, what may this bunker buster do to the economy? While I have rarely met a tax cut I didn&rsquo t like,  this one just may be more likely to send the economy into a downward spiral than it is to send up to orbit.



As I mentioned in my  January commentary, Donald Trump&rsquo s big-spending, tax-cutting campaign rhetoric  threatened to make him the biggest borrower in presidential history.  He comes to office at a particularly vulnerable time for budget dynamics. After contracting by nearly two thirds from 2010 to 2015 (from the mind-bending $1.3 trillion to the merely enormous $438 billion), the Federal deficit started expanding again in 2016, moving up to $587 billion (Govt. Publishing Office, Office of Management & Budget (OMB). Current projections have it going up nearly every year over the next two decades. The Congressional Budget Office expects it to permanently surpass $1 trillion annually by 2021 or 2022. But these ominous forecasts were made well before anyone thought Trump had a snowball&rsquo s chance of ever becoming president.  Now that he is in the office, those projections will be the floor.  The ceiling is anyone&rsquo s guess.

The forecasts assume that the taxing and spending laws in place during the Obama Administration won&rsquo t change.  The steep increase in projected deficits towards the end of this decade and into the next is largely driven by the retirement of the Baby Boom generation, which will lead to simultaneous increases in entitlement spending and decreases in tax revenue. This brick wall has been hiding in plain sight for decades but the can-kickers in Washington have serially failed to do anything to avert the inevitable collision.

(These forecasts also optimistically assume that the economy never again enters recession, inflation never again rears its ugly head, and that our creditors never get concerned enough about our growing debt to demand a premium for the risk of financing it.)

But now that Trump occupies the Oval office, this date with destiny may come much sooner&hellip and she will definitely be ordering the lobster.

Before I go negative, let me give credit to Trump for picking the right taxes to cut.  He kills the estate tax, an ugly beast that should have been euthanized years ago. Some may see this simply as a gift to the very rich. But legal wizards have long since devised strategies that offer almost complete protection from the death tax. None of these structures offer any real benefit to the businesses these millionaires typically own, or to the economy in general. Killing the tax will cost the government almost nothing, but it will remove tremendous impediments that have prevented family-run companies from growing over generations. He also kills the Alternative Minimum Tax, a complex parallel system of taxation that few understand but somehow manages to ensnare more and more taxpayers every year.

Most importantly, he brings down the corporate tax rate from the globally non-competitive rate of 35% to the much more manageable 15%. Taxing corporations has always been a bad way to raise revenue. Corporations, after all, don&rsquo t pay taxes, which are simply treated as a cost of doing business. The real costs are borne by customers, who must pay higher prices, and employees, who must suffer with lower wages. But high domestic corporate taxes have hamstrung U.S. corporations and greatly contributed to the decline of American manufacturing. A more competitive corporate sector will shower benefits on all manner of consumers and employees.

On the individual tax side, his decisions are much more problematic.  Although Trump makes the sensible decision of compressing the seven individual tax brackets into just three (10%, 25%, and 35%), and doubles the standard personal deductions (thereby saving many people from the hassles of itemization), the headline-grabbing component of the proposals has to do with the lowering of the &ldquo pass-through&rdquo tax rate to the same 15% level that applies to corporations. This means that wealthy business owners, highly paid freelancers, and partners at law firms, medical groups, and management consultancies, will qualify for the 15% rate. This will be a huge windfall to some of the richest people in the country, who typically pay the highest marginal tax rate (currently 39%). And since the top one percent account for nearly 50% of tax revenue, this one provision promises to cost Uncle Sam plenty and to dramatically shake up the corporate landscape.

Small business owners and independent contractors will in fact receive the benefit of the 15% pass through rate. But &ldquo Mom and Pop&rdquo entrepreneurs rarely have income that is high  enough to be taxed at the higher rates. These smaller earners will likely be  be trading a 15% tax for a 15% tax. All the big benefits will go to the really big fish. Whereas the vast majority of Tom Cruise&rsquo s income would have been taxed at the 39% rate, it will now be taxed at just 15%. His taxes will be reduced by nearly 60% from current law. The same holds true, in lesser degree, to lawyers, doctors, and consultants making more than a few hundreds of thousands of dollars annually.

Is there any reason that could justify why a hedge fund manager making a million dollars per year should pay 15%, but a full time CEO at a corporation making half that would be subject to the highest marginal rate of 35%? It&rsquo s absurd. Now I&rsquo m not a big fan of the &ldquo progressive&rdquo tax system, whereby the tax rate goes up with income. I think a &ldquo flat&rdquo tax system, in which everyone paid the same rate, would be better. (Ideally I would like to see income taxes replaced by far less onerous and intrusive consumption taxes). But I certainly don&rsquo t believe in a &ldquo regressive&rdquo tax system in which lower-earning citizens pay higher rates than those at the top. But that&rsquo s exactly what Trump is trying to do.

Given this wide disparity in tax rates, we can assume that the employment landscape  will adjust dramatically.  We should expect that legions of highly-paid full-time employees will start to form Limited Liability Corporations (LLCs) to work freelance rather than as employees.  There are few barriers that would prevent such a shift, and the growth of internet-based work scenarios will continue to break down the traditional barrier between employee and freelancer. Yes, there are some labor rules that seek to separate employees from freelancers, but those rules may be easily circumvented, especially when the reward is so great. Rather than envy the lawyer earning more and paying less, the CEOs of the country will likely incorporate and sell their services freelance to their former employers.

This shift will mean that a great many of the country&rsquo s highest earners will be paying taxes at the lowest rate.  As a result, the reductions in tax revenue would likely be far greater than what is predicted in the standard modeling. 

But unlike most prior tax cuts, the Trump version does not even make any attempt to balance the cuts with corresponding cuts in government spending.  If Trump&rsquo s tax cuts don&rsquo t immediately generate  sustained  4% growth or more, we may be staring down the barrel of $2 to $3 trillion in annual deficits. Is this an experiment that we really want to try?

But even if the reforms can kick the economy into higher gear, thereby creating higher revenues with lower rates (The Laffer Curve),  our current low interest rate environment provides significant obstacles to permit that growth to be sustained.  If growth kicks up to the 4% range, the Federal Reserve will have to accelerate its rate increase schedule. Allowing rates to remain two to three percent below the growth rate could risk an overheated economy with inflation spiraling out of control. These higher rates will act as a stiff headwind to an economy that has grown increasingly dependent on ultra low rates.

But increases in rates would also cost the economy in another way.  Our current bonded national debt is ready to surge past the $20 trillion mark. The Trump tax cuts will push it beyond that very quickly. If the Fed raises rates to keep pace with higher growth, then the Government will have to pay much more to finance the outstanding debt. At $20 trillion, every point of increase in interest rates will cost the government $200 billion annually. At that level, if interest rates were at 3.75%, instead of the current .75%, then the Federal Government would have to come up with about another $600 billion per year in interest payments. (That number will be much higher when the debt grows past $20 Trillion).

But it' s not just Uncle Sam that is over-loaded with debt.  Corporations and households would see their interest costs surge as well with rising interest rates. So what lower taxes giveth, higher interest rates will taketh away. 

Consider the housing market.  Not only will higher interest rates substantially increase the cost of home ownership (through higher mortgage rates), but Trump&rsquo s tax proposals will dramatically increase the cost of ownership for those living in high tax states. Under the proposal, homeowners will no longer be able to deduct property taxes, and a doubling of the standard deduction means a much larger percentage of homeowners will not be able to deduct mortgage interest from their federal income tax. Plus, with the top tax rate reduced from 39.6% to 15%, the mortgage interest deduction will be far less valuable to those higher earners who can still take advantage of it. Higher mortgage rates and lower tax subsidies will increase the cost and decrease the appeal of home ownership.  This could lead to a crash in real estate prices, especially in the high end of the market.  Falling prices could wipe out what little home equity many Americas have left, and lead to another wave of foreclosures. The losses to Fannie Mae and Freddie Mac could be significant, with the costs falling directly on the Federal government, further driving up annual deficits. 

The reality is that years of massive deficits, runaway government spending, artificially low interest rates, and three rounds of quantitative easing, have left the economy so sick that any tax cut large enough to revive it may actually kill it instead.  The only silver lining to this cloud may be that the coming fiscal train wreck leaves lawmakers no choice but to slash government spending. If the real Republican agenda is to starve the beast, its success is assured.