The PlanStrong Financial Forum 11-18-17

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Sunday, November 19th
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Now. From those plans stroll in the broadcast studios he would still play in strong financial forum where you're most. Jim farmer her family crazy little plans strong investment. Hold portions there's still I'm Bruce Morton investing you simply saw. And I didn't. Are very happy produced the lovely Paul Parsons welcome back to the plan strong financial form Paul Parsons is with me and Paul are you had a little vacation last week and he was here and we always like having Alex member it's always great to see you again it's terrific to be back from kinda lying how Florida 85 degree weather here is not quite which you have implore. I think quite blunt skating fan site girls I'm 61 you're just getting smarter aren't a whole lot of the ex CI you know waking up from what I do I think they do when you're younger you just dumber Gary's or maybe gold earned but I'm not sure being Smart is good. But I being dumb you know there's something to be said for being a great you're happy with this weather rumors armor with a goal retriever puppy. Nice to start my whole war I I don't think wreck she notices that the suns. I'll doesn't do well in order to just yeah. Happy slice good picture you know so anyway nobody great to be Barack and what an interesting week we've had all my good yeah it's been everywhere each job. Lots of news well the good news is our own it's good news Koppel we didn't hit an all time high this week I guess that's not good news but we came within a hair's breath and then again I think it was on Thursday afternoon now there are the house I do dare vote on the tax plan can teach you what that did the market jumped up a bit on that news but other than that it it's been a relatively calm time into the markets. Essentially started and ended pretty close not to where they work at this week didn't do much for the whole week. On and as you look around the world pretty much the same is true around the world international stocks didn't do much either so it was kind of even though there was some volatility toward you know compared to historical volatility it really wasn't even volatile again for that you know zillions time in a row we did not have a week where there was a day where there is a 1% up or down wolf Barack and again I keep repeating this but it's so extraordinary I need to go because I think investors are really becoming almost. Immune to even understanding how old news on volatile this whole thing is we've had four days or up. And four days that we're down. 1% or more this year fine and we've probably had I don't know 200 trading days are okay apartment earlier eat out of 200. You know that's 4%. Of the days have moved 1% that means you won 96%. Of the day if you don't it didn't move 1% I mean that's. And that's really quite something has announced. And you mentioned you referenced attacks you'll talk burger later in the program now and and as that goes through. The house and senate we've seen a little bit of up and down bouncy people reacting but no it's not as much as you might expect. Well I think a lot of it has to do with you know kind of handicapping what they're not the tax Phil's gonna go through and and what provisions will survive friend and I think Tom you know earlier this week you saw the bill go down a little. You know overall not a bad week in the markets we like I said Warwick and I think it's. Two tenths of 1% of the all time high and the S&P 500 which as you know. Is an index of our companies a large capital companies capitalized companies in the United States 500 of them and you know it's it's got to be just an amazing story when you look at what we've done year to date in fact your date the S&P 500 is up about seventeen and a half percent including dividends that's you know that's pretty god. And if you look at what it is. Around the world. International stocks are up about 24%. Including Democrats and if you go even took a subset of that which is emerging markets which I don't think China and and India and so forth those are up 34%. Year to date but don't forget you know emerging market stocks are risky in fact that we were required nor are we talk about emerging stocks are emerging market stocks were required to disclose an emerging market investments may involve higher risks than investments from developed countries stink you know the United States Japan Europe. And also involve increased risks due to differences in accounting methods as just some of the half accounting methods are foreign taxation political stability in currency fluctuations or partial risks with a emerging markets in the fact that for years they've underperformed its its about time they out performed at this point right. What do bonds bonds were flat as well stocks were flat bonds were flattened the price of high quality bonds was unchanged. End of the week first beginning of the week the yield on the ten year US treasury is around two point 35%. The US ten years now treating with the yield it's just about ten basis points below work started all of 2017. So big difference stock prices up 17%. And bond prices are actually up just very slightly certainly nothing in the order of magnitude of the 17% return that we've seen with job high quality stocks. What does it look like going forward as far as a bump to the interest rates. And looks really likely I mean if you look at fed futures right now that the probability of at least a point 25% short term interest rate increased. By the Fed before year and that's next month in December and it's now 92%. In in how you know it's not just Fed Funds futures but it's the rest of the bond market as well if you look at the two year US treasury. That yields continue to kind of mural work its way up over the last four to six months and Mac it they Trier EO US treasuries now yielding one point 7% that's up from one point 6%. Just a weaker to go so it continues to work its way up its looks very likely that we're gonna see. The point 25% short term interest rate increase by the Fed in the December timeframe but what's also interesting this week new homes this week Kenny is that it looks like the timing. Of future interest rates in 2018. Is starting to accelerate and according to Fed Funds futures not don't forget the Fed came out and said look we wanna have probably three interest rate increases were forecasting. Three interest rate increases in 2018. And until very recently. The the Fed Funds futures market just didn't price that and it just didn't believe there's Natalee voters learn right now well except something interesting happened in the last couple weeks. On it it's accelerated. When they think the Fed Funds futures actually are accelerating when they think the first interest rate increase is gonna happen 2018. It had been. Kind of may June timeframe that's bump for now to our march. So it looks like we're gonna have the next rate increase after December in March. And now there's even a second probability over a second increased in 2018. That looks like it would happen sometime in the summertime. So it's you know it's possible them the markets are starting to actually believe what the Fed is saying and that's reflected in Fed Funds futures what does this mean she was an investor it means you should start planning on higher interest rates at that and that it's you know starting to synchronize its not just what their saying what the Fed is saying it's what people are actually betting world what professional investors are actually betting on in the Fed Funds futures markets so if you own bonds if you won't short term bonds it's not gonna impact that much but if you won't longer term bonds there's a likelihood you're gonna see interest rates go up a little. If interest rates go up. Then the price of your existing bond with the inferior interest rates will probably go down a little that. So for the first time a long time there's a probability that a bond investors gonna see rising interest rates and they're gonna see actually. Capital losses. On the bond side. No one can guarantee it but it's certainly looks based on these probabilities. That's a pretty likely scenario at this point. All about I called the international bonds and movement there are nothing really you know the yields on the high quality sovereign bonds like from Germany and Japan they stayed relatively flat other tenure German bond is yielding about point 4%. And the Japanese ten year it looks to be around point 05%. That's incredibly low stays range bound between 01 point 1%. And the US dollar any movement there it weakened a little bit against the Euro twelve dollar eighteen and a weakened a little bit against the Japanese yen. Are going 213. Yen per US dollar. Now of course true following oil prices very closely Paul and we saw quite a bit of movement over the last month or so. And if you're an investor are you follow the show you know we've been talking about all right sir we've you know fur. We saw what happened oil the beginning of the year we were up at fifty dollars a barrel and kind of the January February time Grammy it it peaked at like 52 were so dropped all the way down to 43 dollars a barrel well we are up in the mid to upper fifties and lower sixties right now and that's what we've talked about happening on our end and finally it's come to pass in fact prices dropped a little bit this week west Texas I trades around 55 dollars a barrel at the end of the week 62 dollars a barrel for Brent. On and the reason that they were down a little bit this week was because US inventories actually increase from a little but this week which what was not expected to run on and it also reflects the fact that Tom. US production is higher than what we expect it to be kind of going for right now. -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Other leg of the stole what wasn't so sturdy it's getting sturdier that's when we return to support a strong financial reform. This is tall Parsons president of planned strong investment management and you're listening to them plans strong financial forum on WRKO. Boston's talk stations. If you like what you hear on our show and what immediate take a look at your investments and retirement plan called my office at 808897275260. That's 888972. Plan. Securities and advisory services offered through the commonwealth financial network and Finneran SIPC. A registered investment advisory. Okay. I. Moon okay. Don't crumble and strong broadcast studios and the epicenter of journalism this is the plan's strong financial forum with the whole portions president of planned stronger investment management. And I'm Ken carver the anchor desk along with Paul Parsons of Glen strong financial form let me just remind you this is a good time to check out Paul's new web site are split and strong notre rationing and I it's it's just silicone man yeah I'm pretty proud of it are you should be in it looks good and it's an easy out harmful to use which is which is good because sometimes you get on website might look fancy and and then you get lost in it right this one you won't get lost in. See you learn a lot about Paul and the business plans strong. And he can learn how you get a call from Paul get the latest papers from Paul you can listen to the back. In addition to our program you don't do you not like star program but the segment I do with the EPA as well I trust that spirits are we do them we post them both on on the website and I imagine there are some folks who isn't Saturday program are aware of the the Tuesday morning. Yeah we may be working at nine a great deal worse they they can't hear you say grew BV so this would be a good chance to catch up with that. Yet something new that I've started up how. I have that I am really enjoying it GP and I got to gather and we talk about a lot of the investing mega trends in hand and whether it's a big news story of the week preferably not senator Al Franken truck arm but it's it's more you know what is the big thing that's out there whether it's tax bill that could be a trend and technology could be a lot of things this past week we talked about electric cars in China and what was happening all the windows the week before we talked about taxed on what it really meant was gonna happen all that but it's it's fun because it's a different audience I'm on for 678 minutes or something I mean it's actually pretty decent sized segment here. And it's a lot of fun because I think TVs are very good a person that talked to buy our stuff now known. He's a good guy and you guys -- -- along well in the -- every Tuesday -- 9:30 in the morning we have a great conversation but they -- if you're working -- -- radio whatever you can download the podcast on our website -- -- strong dot com go to radio and -- -- down the bottom of the page along with -- with this show you know our weekend show you can download that as well again if -- titles -- the whole thing I I will not begrudge you that I hadn't exactly the same position often but what I do -- I download shows on to my my iPhone -- and then I listen to a -- warm out riding my -- -- on the electrical or whatever -- and it's very -- format to do -- and that we get to you know killing two birds with one stone -- This is one area where we're at a lot like our kids they get my kids listen to podcasts all the time out. And the scenario where I'm finding that folks are raging doing it is well just because it fits into our lifestyle we want to hear things we can't always hear that song using a podcast downloading it does does help that fits into alleged or were able to hear who won here. And it again kill two birds once Omar you're exercising or anyone else. I looked good well want to know why are some doing it with my new apple I'll watch series three home or so care act is on my rational and that I have the the apple. The record listen to your cordless or yards with a view and I can't hijacker got what it is so caucus I can ride might buy a guy can go on the elliptical and I'm not carrying my iPhone anywhere it's already on nothing fantastic. Well Jim folks listen to and even if they're old folks like me and they can actually have headphones on or you can even listen to a laptop you know what anyway you car anywhere you want capsule tortilla that's planned strong dog can't check out Paul's new obscenity the so called his office of course EDD 8972. Plan EDT 9727526. The other thing that we got us several you know pieces of input about the the that the new website was people said. I just wish I knew that I was gonna be able to talk to you directly rather than you know talk to some screener are also other stuff and we actually have a form on the front of the website homepage it just says you know filling your name your email and your I think it's a phone number something and not. And artists and and says I'd like a you know check the box I'd like to talk to call me and are calling. And not and I did that last week or had a great time doing it over the years it's actually shackles is very easy way out to connect us and we can have a compensation because in the end the thing that's so what's a single one of the most common reactions I get what people go from my office doors Q how hard it was for me to come here. Route that yeah it's it's just hard for people to take that first step and I think if you listen to us on the radio and you get to learn a little bit about kind of how weeks saying get how we manage money you go to the website is say OK I see who these people are learn about their backgrounds and that more data here that can really deal with I would like to continue the conversation but you know how or why do that. You know we should we make it easy for all caught. And we have a conversation and based on that you a lot of the times people say you know what I would like to Menendez who you know and that's it's kind of a process and it works pretty well it's certainly makes people more comfortable were happy to. Once again play and strong dot com or you can still call the office ADD 972 Platt. Our ball before the break we're talking about some of the government data that's been released and as some interest in self regarding inflation. Yeah so like I said producer prices were up in October and consumer prices were up in arms over and both of them were at the core levels we exclude you know things that it's actually kinda wildly like energy and food that kind of stuff for autos aren't even when you do that they were up either at her above the Fed's target for inflation that was really important news on the other thing was that retail sales were up in October that was good news as well because you know consumer spending is an important part of our overall economy that's a good reflector of how GDP is gonna be coming up in the future I that was a point 3% month over month October. Cures your other really gold nugget from me now was it wasn't just the regional manufacturing reports were good. This month it's actually been national manufacturer. That turned out to be quite good. And because of that -- to date on indicate that manufacturing. Activity around the country now is expanding at quite a healthy level and -- capacity utilization is up to 77%. Let me explain why both aspects that are important -- is manufacturing activities up a lot that's good that's a good reflection of GDP growth from her life the other thing is if capacity utilization is option that means that manufacturers are using more and more of their available capacity of all their machines but what they do typically is they mothballed their most expensive machines so that they can maximize their profits but as -- get more and more demand they actually have to use more and more of their capacity including some of their less efficient machines those tend to be higher cost that tends to drive inflation up cash so capacity utilization is actually very hopeful indicator for whether or not to some inflationary push as well coming along in the sector as well both of those were good good for GDP. Good for inflation. I would say all of that is good is it rule as it relates to what the Fed would be looking out for whether or not they want to continue to normalized rates. A lot of good data points saying this this Martha this week rather saying yup we got a lot of check marks saying this is supportive of tightening a bit on monetary policy certainly normalizing monetary policy in the states and initial jobless claims to good number great numbered in 249 well wonder you know under the 250 well under the 300 that we look at the you know these are very very good numbers again a very good indicator of of employment in the United States so we kind of hit the three big East Europe you know we've talked about GDP would talk about inflation we've talked about employment those the three million gates of the fat all three of those had very good indicators this this past week. So ball. No as we approach year and yeah it's in January road going to be getting financial statements from wealth management company out and and people to look at those and most of us don't know what they say where they mean I know who is a pet peeve of viewers you are the target on this as we approached the end of the year. Yeah I you know what's adjusting the reason I asked to talk about this week's show Kenny was yet again a we have several knew our clients come and visit with us and they brought all the -- account statements with him and for the life of me I couldn't determine what some other actual performance was for certain periods. And that tells you how paltry. The performance reporting can be on account statements how would many providers out there and the reason I brought this -- was because. One of the reasons we change broker dealers and move to commonwealth financial network which by the way is located turn Massachusetts are headquartered here in Massachusetts was they had unbelievably good technology and especially good technology when it came to reporting both through. Actual investment performance results and then being able to compare those. To a benchmark. And by the way an appropriate benchmark and not a litany of benchmarks let me explain what I mean by that. Can Europe fifty something year old guy good early barely. Democrats are under pressure anyway you're fifty something year old guy you gotta portfolio now you're probably managing and as a moderate moderate aggressive portfolio at this point you don't want to be too aggressive because you know you're not thirty you're not your kids aids and and you don't have that many cycles to get through not my dad's age either and you're not I wouldn't little defense for better or the other side you're not your dad's age it was probably much more defensively this portfolio simply because he's won the game and at this point he's just preserving capital living off a bunch of the proceeds right sure what the reason I mention this is because. When you get your account statement you're if you're gonna see what you did for that particular month quarter year to date whatever it is. And hopefully it's gonna say can you made 16%. This year you're to date now I'm Sophia would not be nice that's OK but is that good. I know you don't know right through it all sounds good note that the SMP. And we talked about earlier mere seventeen and a half percent year to date including give and answering Brent but we know international stocks may 24%. Marino emerging markets late 33%. It is 16%. Good. I don't know Hamas about bonds and the average US arid bond indexes up I don't know 345%. This your. What should your weighted average return beef for your portfolio. I don't know correct in Africa and what we deal. Where is our our broker dealer is not only do we tell you what your actual investment performance was for each account and your overall portfolio. But don't we compare to one number. One number is what he relevant benchmark. Should be for the pro there amount of risk you're taking in your portfolio see you compare how you did vs how you should have done for that same period. So that's that one of the things that we really love about our new broker dealer and what the reason I mention this is if you. Our listeners are out there and you're looking at your statements right now or the next time you look at statements. And UA can't figure out how you did or B how he should've done. Then I'd encourage you call us because we will tell you. And the answer to both of those questions and better yet if you decide to engage just you'll get reporting on that every single period and even so good as to be able to do online for any period that you define. That's how good it is that transparency so important to us because one of the things you're hiring ask for is to manager money capable. And you need to be able to have to be able to measure that you have to say how did I do how should I've done. That's what we deal. You're in touch with all you can call 8889727526888972. Plan. Or as we just mentioned earlier go online to plan strong dot com that's planned strong dot com. If only comeback will shift gears we'll talk about what's going arm of GE when we return to plans aren't financial for this just. All Parsons president of planned strong investment management and you're listening to the plan's strong financial forum on WRKO. Boston's talk station. If you like what you hear on our show and what media take a look at your investments and retirement plan called my office at 80889727526. That's 888972. Plan. Securities and advisory services offered through commonwealth financial network timber Finneran SIPC. A registered investment advisory. And. Says financial talk into your signing and informative. At least it's informative its plans to own financial forum where bold portions president's bold plans stronger investment management. And I can Gerber at the he does along with Paul Parsons and is a class strong credential for a man and a woman covering a lot of information this week all but one news item that. This kind of bothering me was. GE stock what I have reckoning these. These are local boy is now they've they've moved their headquarters to Boston and we've always had kind of a a connection with the G either event in New England company. A Welch for so many on your guy and an ironic. Fabulously capable man Bruno who ran the company for so long and a great company for yeah for many years exactly what's ha well it is so cheap and the reason that we're talking about this is GE is one of those storied companies in the United States that's been around for our 420 years 130 years I don't know how long expand it always as long you know time immemorial have been a part of the major indexes. That that people of use to track really the overall economic health of the market sounds how important it's been it's been just such a integral part of the fabric of our economy that everybody looks at a and then also you know so many retirees and pensioners have owned GE stock because it's had a dividend for sole fact I GE only cut their dividend. Two times in your history mom or 120 year history once during the Great Depression. In the 1930s. And the other time was in 20082009. In the Great Recession. Our and that was because G had kind of wander off course a little bit had gotten into GE capital and they essentially become a bank. We all kinds of financial obligations and they got caught up and all of that disastrous stuff that happened all the financials. As you know associated with Saddam would the Great Recession right 20082009. But very recently. In fact this past week. GE. Had to cut the or dividend and when I say cut they cut it in half. Tomorrow and that's just huge for a blue chip company him width you know these kind of stripes to do something like that but the stock itself has suffered this year mightily and I won at the talk about it because as I say it's very widely held by pension years it's it's very commonly track as this included almost all leads the US large cap. I indexes because of its size nothing else. And it's startling that its underperforming right now we're not in 20082009. Right everybody was stumbling along because the economy was terrible and you know this is thereby themselves here at the you just heard me say in the last segment. The S and p.'s up. You know seventeen and a half percent a year to date GE's down 40% accurate down 41 markets are you know seventeen and a half. Essentially what's happened is their earnings just are not coming to fruition and because their earnings are coming to fruition and their growth outlook doesn't look as robust as I think many analysts had hoped it would be much. Then you know investors are showering audit and the other and that's happening is because they're not generating the cash flow. That they need to be able to support their dividend tax cut the dividend that again it really is it. In packs people's confidence in overall management of the company don't forget they just change CEOs are they want from Jeff Immelt. The businesses right right. And you know the company has already outlined some of the changes that they're looking at for example they're gonna try to sell both their real road business and their white ball business that lightbulb does this is the way so many people think of John of course your right and there are even considering exiting their investment in Baker Hughes which is you know is an oil and gas business I guess just the fluctuations. In our commodity prices for oil and gas is just too much. Opt for a business like them instead what they wanna do and what Flannery is really trying to do is he wants to focus on being a modern industrial company that sells things like. Jet engines which GE makes very well power plants. And MRI machines okay. And he's got his work cut out for him because turning around GE is going to be no less difficult than turning around and ocean liner right it's big. And it's gonna take a lot of Roman a lot of time to deal and I'm so it's gonna be interesting to see whether or not GE can. Really really gain the confidence of investors but all I can tell you is when they announced this dividend cut this past week the stock was down 11%. On the week that's a tough week you know we are bad week. You know that week we talked earlier about the Republican tax bill Paul that's another big story we really should cover. Where is it what what does it mean and what would we learned so far this week. Well this was good news the only kind of a GE story which you know eat your heart goes out for them because it's an important part of our economy. On Dick Dick tax bill was on the positive side of the ledger this week and a there were two big developments that happen. First the house voted this past Thursday to pass the plan that they had unveiled just two weeks ago so it went through what went through pretty fast and very few defections. Although I don't think any Democrats voted for her arm and I know that Al lacks last week mark talked about the senate plan. And and he highlighted the differences between the house and senate versions but the other big change that happened was an addition. To the senate plan that hadn't been contemplated until this last week and that is that the senate is considering including a new provision. To repeal the individual mandate tax of the Affordable Care Act as part of the tax they'll. And the first of all what's individual mandate it's the requirement that all Americans have coverage or pay a penalty into VA CA why are they doing this well. The government would lose the penalty income but. That lost amount would be more than made up for because fewer people would have federally subsidized policies or go on manic edge so the expense. Of big government would have to outlay it actually goes down significantly. So even though they take in fewer penalties no penalties. What they get debt is expand a Smart guy. And sell the CBO the Congressional Budget Office has estimated that repealing the individual mandate could fund additional tax cuts for the middle class by 330. Billion dollars over ten years that's real money and this extra revenue may be used to fund. The state and local property tax deduction in the senate bill so it more reflects what the house bill is doing at the same time on the snows. Are the markets were up because not only because of the house vote but because it looks like investors believe that some version of this tax bill may actually become law you know it's funny you want you read the newspapers you watched the news. Any kind of our discontent whatsoever voiced his immediately highlight. And and frankly for good reason within the senate because there's such a small margin of error there there there there are only 52 Republican senators up plus the vice president could vote as well I if there was a tie it but you know the reality is they can afford very few distractions in the senate but it's gonna be interesting to see how this plays up either the market's gonna be better a couple weeks from now it's going to be worse a couple weeks from now depending on the future of what happens in the senate and all wise Iran that right now. I believe the markets handicapping. That it's more likely than not. That we will see. Attacks don't make it's what do the president's desk before the end of the year course. The tax bill both versions still fairly complicated Paul a doctor David Kelly posted a convicted of a phone call this week. What did you learn from that what he had he I had a little called toxic stings but you need to know about tax reform parent and as usual doctor Kelly from JPMorgan Chase does a fabulous job and I wanted to just pass along some of his observations many of which really rang true to me and I'll go through them quickly cause or sex. The first one is he thinks that descends likely to happen there will be attacks still I think he's right I've talked about a lot of those reasons we don't need to go when of that anymore second thing timing is important. The timing is important because of win this thing goes into play and if the rain delays and it. And the reason for that is because the sooner this is implemented the sooner the economic benefits from it are a realized by the economy. Here's what's gonna happen. The senate should be done the week after Thanksgiving it should be on the president's desk by Christmas. And if all that happens then the IRS will change the withholding tables quickly and it should immediately have a positive or stimulative impact. To the economy. Anything other than that. Will be seen as a drag and I think you'd see the market go in the other direction but vat rate now is we think and doctor Kelly thinks is the more likely passed. Another thing about this tax bill is that it can help productivity. The reason that you do tax cut like this is because what it does. It gets better tools into the hands of workers because lower corporate tax rate. Increases. Frankly the financial return of projects that means people will be willing to do more projects because they're gonna make more money on those projects that this could actually. Hope productivity. In the United States could be very good. Another thing is that the net fiscal impact is actually hard to justify you hear the Democrats say oh this is gonna cost money is just terrible for our fiscal circumstances. Eager the Republicans say. Known on roll you're not counting on enough growth coming from this staying in fact the growth will more than make up for doctor Kelly believes that while there will be some growth it will completely paid for and that there will be some net increase. Ian deficit and debt as a result of this thing again take your partisan hat off your political hat off the the reality from his perspective as he thinks. That there won't be enough growth from the tax cut actually generate enough extra tax income so that doesn't create more deficit. Another thing is that the benefit will be limited on stocks is not gonna just be euphoria for stocks a lot of this is built into the stocks already. As I said here to date the S&P 500 is up seventeen and a half percent but it's gonna be limited for another reason that I wanna go into a with a little math for you when we come back I promise not to bore you but when we come back I want to talk about the math on why this isn't gonna be that huge impact on stocks and don't talk a little bit about which sectors may wind and which ones may lose as result of this tax plan Turkey Europe and Republican to expand when we return plans strong financial form. This is tall Parsons president of planned strong investment management and you're listening to the plan's strong financial forum on WRKO. Boston's talk stations. If you like what you hear on our show and what media take a look at your investments and retirement plan called my office. 8089727526. That's 888972. Plan. Securities and advisory services offered through the commonwealth financial network timber Finneran SIPC. A registered investment advisory. Ground zero for your financial news and economic commentary. This is the plan's strong financial forum where all portions president of home plans stronger investment management. Oh and again we're very idea that does go along with Paul Parsons and his plans are influential forum and remember. Paul's new web site plans strong dot com that same web address but it's a beautiful new website and easy to use planned strong dot com in the number opponent remains the same you going to call Paul's office 8889727526. EDD 8972. Plan. But we do recommend planned strong dot com does it it does look dirty. It's easy to use you can ask for this good who barks the Paul give your phone call back this probably the best way to get to know Paul plans strong dot com. So before the break while we're talking about these Republican tax bill we talked about the senate version retarded of the house version. And now we're talking about doctor David Kelly's interpretation of what this may all mean. Six things that you need to know about tax reform and as I said before the break but first it's likely to happen second timings important the third one it definitely can help productivity. Fourth one the next fiscal impact probably not positive probably negative on her boat the the deficit and the data little bit. The fifth saying the benefit is gonna be limited on stocks. So why why saying that well here's the deal. If there's tax cuts of about one point five trillion over the next ten years that's a 150 billion a year write an upset 150 billion C split that. 5050 between individuals and companies well if S&P companies get city sixty of that 75 billion. That's sixty billion. On total operating earnings of the S&P of one point two trillion dollars is only 5%. So. What that means is may be earnings were up 5% it's just not that big and in impact to the overall earnings themselves. So you know overall it looks like it'll be limited on stocks certainly beyond where we are today. And certainly western beat in to the returns so far. And then finally the sixth point the doctor Kelly brought up was that there are definitely gonna be our sector winners and losers and I talked a little bit about this last week but again I think this is important to emphasize first the ball small caps small companies. Should benefit since they pay the highest current tax rates of their tax rates are going down. Whether it's from 35 to twenty or 396. Down 125. Either way they should benefit significantly from that. Big companies mega cap companies and multinationals. Pay the lowest amount already sold benefit last seed probably you see less improvement with their stock prices as a result and then within kind of industry segments. Energy industrials. Utilities and financials all putt pay relatively high tax rates today so they should benefit the most. While tax and real estate. May benefit the least because they don't pay as much nearly in taxes and those of the sector still. So just a couple things to watch and certainly to want to see if that actually does occur as this thing makes its way through congress owned by the way I should also mention that whenever we talk about taxes we need to mention. The commonwealth financial network or plans strong. Doesn't provide legal attacks advice and you should consult a legal or tax professional regarding your individual situation. Did doctor David Kelley of JPMorgan Chase talk and all about the economy thought he did and again I think it's very consistent. With the cool what we're thinking about her on economic growth he super kind of in the Indian summer. That were a dual 3% growth in Q4 that's a good number for GDP growth and that will to probably two and a half percent next year. If the tax ball gets through especially if it gets are through to consumers. And this surge in growth that will probably ultimately subsided kind of work its way out by the end of next year because of labor market growth that eventually. You know and then people will have gotten into the labor force and that we will kind of Max out in the labor market and dike will dolby ultimately a shortage of good labor factors all ready shortage of good labor and I believe the numbers around two million jobs continue to go unfilled in the United States. Because they require a skill set that just is an Al appearance in plentiful quantities are in the right locations at this point all of that ultimately leads to a slowing of economic growth if you don't have the right match of skills and jobs. So don't the important part our economic growth is it looks pretty good. For all the twenty in the breast 2017 obviously and a good part of 2018 but potentially slowing down a kind of running its course by the end of 2018 that feels about right to make as a released corporate profits he said you know listen nine 95%. Of the fortune five RB out of the S&P 500 or forty done their reporting. Earnings growth is nine point 4% year over year for this quarter and don't forget we are talking at the beginning of the reporting season that we thought that Q3 was gonna be the black sheep. Of 2017. Earnings growth and instead. It's very very close to what Q1 and Q2 earnings growth has been awfully close 10% I know hiring Q1 to Q2 was eleven or 12%. Boy tat not nine and a half 10% certain looks pretty good for Q3. And the same time revenue growth is also particularly good. The reason that or earnings growth is good though there are two reasons that I just wanted to mention one. With that the weaker dollar that's certainly helping companies do a lot of international business make a lot more money and then secondly we've higher oil prices that's really helping the energy companies from all of that's really helping us generate better earnings growth and I thought many people thought we were gonna see in Q3 of 27 team. What does he do while wages are probably just look going forward yeah he thinks wages may pick up a bit but slowly as. We start to CDs labor markets tightened finally I think we're probably start to see some wage growth. And what that'll do along with higher interest rates. Our battle probably start to squeeze margins a little bit and that in itself would probably lead to her earnings growth dropping a little bit from kind of the speech 10% kind of rate 101112%. Rage doctor maybe 567%. Type our earnings growth. On and so overall he's saying that the stated the car of the US economy's quite strong. He's also sank. That's it relates to interest rates that the Fed will raise rates in December and three or four times in 2018 as we talked about earlier. Interestingly he thinks that the ten year US treasury will be at between three and a quarter to three and a half percent yield a year from now that would be fabulous. For long term investors. Sabres who have been waiting patiently for interest rates to go up that's got to be music to an awful lot of people's years that the ten year US treasury could be in the three and a quarter to three and a half range at that point. And by the way one other reminder from him even if there is a bear market in bonds in other words the price of bonds goes down because interest rates are going up. Don't forget. A bear market in bonds isn't the same as a bear market stocks you could still make 22 and a half percent in the US tag bonded tax over the next couple years even if interest rates go up slowly. And so that's a far cry from a bad stock market where you know you can see yourself generating double digit losses thanks very big difference. And the last thing he wanted to mention about it just kind of the overall state of the economy is he sees plenty of opportunity in the US. And overseas but he encourages investors to curb their enthusiasm. You know we've been this has been a very good couple years don't forget 2016. Yes and he made 12%. This year were up seventeen and a half percent he sang. This tax bill should help get us into extra innings but at some point. The party has to end it will probably slow start slowing towards the end of next year and that's why he's saying current era through yes. For folks who listen to your morning show DB you'd like to talk about the future of everything a lot that's again that's on Tuesday mornings at 930 and we highly recommend folks at tune in or at least listen to lose the podcasts on the web site restaurant dot com. Did you talk to Bloomberg about flying cars last week that was pretty cool. Yet this is a cool thing and and you might say why is Parsons talked about flying cars and and the answer is because were always looking for disrupt cars out there and you are flying car I would sorrow and flying anything going taxi Schumer is certainly a disrupt or and this story that came across the line last week and these people are serious are really want to mention this. Here's the deal flying taxis or something that Hoover is interested in developing in the near future in Los Angeles in fact. They wanna start testing this in 20/20. Past three years from now. And is gonna be using vertical take off and landing vehicles that look like oversized. Rooms. I've seen pictures of these things and I have to Italian Kenny you first. Right behind every day he's real irony there are serious about this and similar to helicopters. They take off and land on the top of buildings. Over believes that they compete price competitive with The Who were ex ride so black car ride and a lot of the same distance in that timeframe. And what they're doing. They're partnering with our commercial real stayed owner to develop takeoff and landing hubs on the top of buildings in Los Angeles and then they're also park. Partnering with different technology providers. Including Embraer and bell helicopter. Now with a city notorious for traffic I can't think of a better place to pioneer. More productive ways to get around. So I mentioned this story in the context of disruptive technology. And if you think that. Autonomous driving cars are the actual absolute bleeding edge of disruption while who'll work is actually taking it to the next level. By going to driver Lewis drones for you and me to get from building to building in Washington. Spank you faults again polled the only VB Tuesday morning at 930 will be back here next Saturday afternoon. Of course you can check out all of this it plans strong dot com followed a good weekend have a great weekend disciplined strong financial form of and strong investment management's located ninety Washington street Dedham mass 02026. I can be reached at dvd nines have been 27526. Securities and advisory services offered to commonwealth financial network members finreg SIPC a registered investment advisor Paul Parsons represented at this preview show is for information purposes only and is not a solicitation or recommendation that any particular investors should purchase or sell any particular security the information contained herein is obtained from sources believed to be reliable but its accuracy or completeness nor guarantee you commonwealth financial network nor your represented of Bryant started price indexes are not managed and cannot incur management fees cost her expenses I cannot be invested in directly pass performers and index does not guarantee future results.
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