Tax Cuts and the Surging Bull Market

The market has been soaring through 2017, and basically since the election, but since the announce of the corporate tax cuts in the recently pass Tax Cuts and Jobs Act, the stock market is showing record growth.  Taking the corporate income tax rate from 35% to 21%, is basically a 40% tax cut to Corporate America. And they are celebrating.  

Individual Tax Relief

The recently passed tax reform was touted throughout the election as something good for Middle-income Americans.  While individual rates will decrease, that is only true in the short term.  Over the next eight years these tax cuts to individuals will slowly erode leaving almost a 53% increase to some when that happens.  

By then the idea is that middle class Americans will be in a much better financial place with higher paying jobs that scaling back the tax cuts little by little won’t matter.  It seems we’ll cross that bridge when we come to it.  

Corporate Tax Cuts Trickle Down?

Some experts feel that US corporations will spend their newly found money on their highly compensated employees with dividends and stock instead of investing into their work force with higher wages.  There has already been an increase in announcements of corporate stock buybacks since the Tax Cuts and Jobs Act was passed.  

We will have to wait and see how much corporate America shares in their tax relief with middle income workers – but one thing is certain, tax cuts to companies is fueling a Bull market with never before seen growth.

How High Will it Go?

When we posted our article, How Long Can the Market Sustain its Low Volatility, last September, we were wondering just how long the market will keep its calm.  Well here we are 5 months later, and we are still wondering the same thing.  This unprecedented surge has market analysts everywhere wondering if it’s soaring too far too fast.  Some fear that we’re in a “melt-up”, which is based on emotion instead of fundamentals, is unsustainable, and is always followed by a melt-down.  

FOMO (fear of missing out) is fueling the emotional rise and appears to be pervasive in the stock market today.   We should not assume that the rally during 2017 and the beginning of 2018 will continue, some experts feel that a correction is long overdue.

The stock market today is more like a stock car on high-octane fuel, and we are all just along for the ride, wondering when we’ll take a pit stop for fuel or if we will just crash and burn.

Great Point Capital specializes in equities and equity options, serving the trading community since 2001.  We have a strong network of experienced and knowledgeable traders actively trading the firm’s capital on the most advanced software platform available.  We are one of the few firms offering access to the Takion platform, enhancing your trading performance.  Contact us today to learn how you can earn your maximum potential in times of high or low volatility from experienced traders with proven strategies.  

Wall Street and Corporate America Biggest Winners of Tax Reform

President Donald Trump has campaigned his Tax Cuts and Jobs Act since the beginning of his election as a change that will benefit middle-income Americans.  While it remains to be seen just how much Main Street USA will benefit from the tax reform, one things is clear – the biggest winners are Wall Street and Corporate America.  

With the reduction in the corporate tax rate going from 35% down to 21% permanently, this essentially gives corporations a 40% tax cut.  There is also a 20% tax deduction for all pass-through companies such as LLCs, Partnerships and S-Corps.

This reduction in income taxed to corporations was the main focal point of Trump’s campaign.  These new corporate tax rates take the tax rate of US companies closer to Canada’s 15% rate, or the rate of 12.5% in Ireland.  For the first time in a long time, corporate tax rate in the US is lower than in Mexico which has a 30% corporate tax rate.  

Relief for American Companies Operating Abroad

When American companies earn money overseas, they will no longer owe taxes on that money.  While this could possibly encourage some companies to keep their profits in foreign lands, there are also incentives to repatriate those profits back to the US.  Under the new tax plan, when money is brought back into the US, corporations will owe tax a rate between 8% and 15.5%, which is quite a bit better than the current 35% tax owed on repatriated funds.  This gives companies incentive like they haven’t had before to bring those funds back into the US to further spur economic growth.  

Apple is the world’s most valuable company, and just recent issued a press release in which they announced they will repatriate funds back into the US generating a tax bill of $38 billion – the largest in history.  Their plan also includes investment into capital spending in the US.  

We have been experiencing the longest period of calm in the market in history, even more so than the mid-90’s.  This is reflective of the excitement which some are calling euphoria driving the market continually upwards.  It seems that Corporate America is voicing how they feel about tax cuts.  

Great Point Capital specializes in equities and equity options, serving the trading community since 2001.  We have a strong network of experienced and knowledgeable traders actively trading the firm’s capital on the most advanced software platform available.  We are one of the few firms offering access to the Takion platform, enhancing your trading performance.  Contact us today to learn how you can earn your maximum potential in times of high or low volatility from experienced traders with proven strategies.  

Surging Market Spurred by Politics and Tax Reform

About a dozen listed stocks started the DOW Jones Industrial Average (DJIA) in 1896, with only one original company, General Electric remaining of the 30 American conglomerates that make up the DJIA today.  In 2015, Apple was added to the Dow, showing that it is no longer just made up of industrial companies.  

The DOW passed its first 1,000 mark after 77 years, and during 2017 passed that five times over, ending 2017 close to 25,000.  It only took one month for the Dow to increase from 24,000 to 25,000.  If you think that’s impressive, how about the mid-Jan rally increasing 1,000 in only seven days?  The stock market is setting new records right off the bat in 2018, continuing with the rally throughout 2017, market watchers are curious if any slowdown is in sight?

The Effect of Politics on Economic Growth

The DOW has risen 7,000 points since the election of Trump, along with Nasdaq which has climbed about 38%, and the S&P has not declined even 3% since the election in November of 2016.  

Individual companies have shown significant growth such as Amazon (AMZN) which has jumped 65%, Nvidia (NVDA) which is a tech company based in CA that has soared 213%, Netflix (NFLX) is up 80%, Best Buy (BBY) is up 90% and Bank of America (BAC) is up 85%.

Corporate Tax Rate Cut Spurs Market Rally

As promised, the Tax Cuts and Jobs Act was passed before the Christmas Holidays, taking the corporate tax rate of 35% down to 21% with no date for expiring.  In addition to the C-Corporate tax deduction, other pass through companies such as S-Corps, LLCs and Partnerships will also get a 20% tax deduction.  

The reduction of 35% down to 21% equates to a 40% tax deduction for large corporations, which has seemed to set the market soaring.  This has been the longest period of calm in Wall St. history, reflecting the excitement of investors.  Strong economic growth at home and abroad will be boosted even further by the GOP tax reform, especially the reduction in corporate tax rate.

Corporate America is making it clear how they feel about tax cuts.  

Check out our post on How Long Can the Market Sustain its Low Volatility, and contact Great Point Capital for all your trading needs.  

Great Point Capital specializes in equities and equity options, serving the trading community since 2001.  We have a strong network of experienced and knowledgeable traders actively trading the firm’s capital on the most advanced software platform available.  We are one of the few firms offering access to the Takion platform, enhancing your trading performance.  Contact us today to learn how you can earn your maximum potential in times of high or low volatility from experienced traders with proven strategies.

How to Trade Bitcoin and Blockchain Suppliers

Bitcoin is now available to trade on many exchanges globally, although GDAX and Coinbase are the most commonly used in the U.S.  Bitstamp, Kraken and Gemeni, along with Coinbase and GDAX are among the few that allow direct conversion from Bitcoin into U.S. Dollars.  

Several other exchanges allow you to convert only into other cryptocurrencies or local currencies.  While it is fairly simple to trade on an exchange although it is also very expensive.  Trading fees are typically around .25% of the value which is approximately $45 for one Bitcoin.  Larger volumes would reduce the fee somewhat, and if you are adding liquidity to GDAX it is free.  

There are other issued to be aware of, such as significant arbitrage, and hacking which is a real threat.  

Futures

The two largest derivatives exchanges in Chicago, the CME and the CBOE recently both opened Bitcoin futures.  While this makes it easier to trade on the price of Bitcoin it is still quite costly.  With margin requirements of 40%, you must have more than 40% of your position value on deposit at all times.  

Leverage

The new futures contracts grant 2+:1 leverage while some exchanges will afford 3:1.   Then there are also the CFD or contracts for difference which is similar to futures and are available at 10:1.  With the swings we’ve seen in Bitcoin, the odds are pretty good that a 10% change in price could wipe out an entire account at that leverage.  In fact, there have been many price drops of 10% or more in 2017, and the 20x runup this year would have taken out any short sellers many times over.  

Blockchain Suppliers

Just like in the days of the 1800’s gold rush, companies of value were the ones selling Levi jeans and pickaxes.  Finding companies that are jumping into the cryptocurrency and blockchain space is an option to consider.  

Bioptix is a biotech company that made diagnostic equipment for the biotech industry, they just announced in October of this year that they are changing their name to Riot Blockchain and delving into the crypto/blockchain space.  Since that announcement, their price has run up over 300%.  Reminds us of the dot-com days when companies would double their stock by adding .com to the end of their company name.

While it is getting easier to trade Bitcoin and cryptocurrency, it still is the Wild West when compared to stocks, options and futures.  

To learn more information on trading Bitcoin such as what Blockchain really is, the real situation on arbitrage, the very real threat of hacking, check out our post What You Really Need to Know About Trading Bitcoin.  Contact Great Point Capital to learn more about successful and proven trading strategies.  

Great Point Capital has been serving the trading community since 2001, specializing in equities and equity options.  We and are one of the very few firms able to offer access to Takion Software Platform, enhancing the trading performance of our 100+ prop traders.  Contact us today to learn more about our proven strategies to help you earn to your maximum potential.  

How to Trade Bitcoin on the Exchanges

Bitcoin is available to trade on many exchanges worldwide.  Coinbase and GDAX are affiliated and are the most widely used in the U.S.  GDAX, Coinbase, Gemeni, Kraken and Bitstamp are just a few exchanges that allow conversion of Bitcoin into US dollars directly.  

Some exchanges will only convert into local currencies or other cryptocurrencies.  It is fairly simple to trade on a single exchange, although quite expensive.  Typically, trading fees are running around .25% of the value which for one Bitcoin would equal approximately $45.  Larger volume brings the fee down slightly, while GDAX is no charge if adding liquidity.  

Arbitrage

Different exchanges can have vastly different prices for extended periods, as you might see prices for trading Bitcoin at $17,000 on one exchange and $16,000 on a different exchange.  This seems like easy arbitrage, but it is not easy in practice.  There are only a few select exchanges that allow Bitcoin to be shorted, if the higher price isn’t on one of them, you would have to move Bitcoin there to sell it.  During this time, which can take anywhere from thirty minutes to several hours depending on how overwhelmed the Bitcoin network is, you would be exposed to all of the swings in price of Bitcoin.

You also must have cash to buy Bitcoin at the lower priced exchange, which is not very easy when the exchange will not accept cash deposits but only take cryptocurrency such as Binance, take days to verify bank deposits, charge an outrageous fee for transfers or maybe they just do not allow any customers from the U.S. such as Bitifinex.  

Hacking is a Real Risk with Bitcoin

The Blockchain technology provides an anonymity that makes it virtually impossible to trace any coins that may be stolen.  Your coins and cash are out of your control when they are in the hands of the exchange, this is not a worry when trading stock with your balance with a trusted broker.  

Crypto exchanges are open to the real threat of hacking, however, and you may lose your coins.  This has already happened, with sever exchanges having been hacked since 2012:

• 2012 at BitFloor
• 2014 at Mt. Gox
• 2015 at BitStamp
• 2016 in Bitfinex

These exchanges are new to this business, and may not have a real transparent business structure, so buyer beware when depositing money with them.   Crytocurrencies are not backed by SIPC insurance for the Bitcoin brokers, so it is up to the exchanges to make customer whole in the event of a loss due to foul play.  

To learn more about trading Bitcoin, Blockchain, and a list of the exchanges currently trading Bitcoin, check out our post What You Really Need to Know About Trading Bitcoin.  

Great Point Capital has been serving the trading community since 2001 with expertise in equities and equity options.  We provide Takion software and a network of experienced traders with proven trading strategies to enhance your performance.  Contact us today to learn more and to earn your maximum potential.  

What Traders Need to Know About Bitcoin and Blockchain

We have been seeing Bitcoin as a featured topic of discussion in the trading community quite a lot over the last few months, with astounding price runups in alt-Coins and particularly Bitcoin.  We could produce another story on how much money you would have if only you had invested five or six years ago, but what we really want to talk about is the trading related information.  

Here is what you really need to know about Bitcoin and how to trade on exchanges. First, let’s review what it is and how it works.

Bitcoin, Bitcoin Mining and Blockchain

Bitcoin is just a way to keep track of transactional records without the middleman such as a central authority like a bank or federally regulated office.  Each transaction that has ever been done in Bitcoin is available to anyone that downloads the Blockchain.

The blockchain is a way of keeping track of transactions, sort of a public ledger that is continuously growing with each and every transaction building off of the other.  The chain is segmented into approximately 1 MB blocks of information with protocol for validating new blocks.  Since all the blocks are linked together with secure communication, links to past blocks and time stamps, it is quite resistant to tampering.  By design, the Blockchain cannot be retroactively altered without joint collusion of a wide network.

Bitcoin mining is how bitcoins are created and verified.  People that solve extremely difficult calculations that take about 10 minutes to verify each transaction in a block are Bitcoin miners.  The first miner to solve the problem correctly is rewarded with a new Bitcoin.  Over time, the rewards decrease and eventually no new Bitcoins will be created.  

There are currently approximately 16.8 million Bitcoins in circulation with the supply limited to about 21 million.  

Runup in Price

We don’t want to spread the fever of FOMO (fear of missing out), as no one likes to hear about what they missed, so we will give a brief explanation for the recent hype over the cryptocurrency.  

One of the early developers of Bitcoin wanted to order some pizza with his Bitcoins in May of 2010.  He offered 10,000 Bitcoins to anyone that was willing to bring him a pizza.  Someone decided to accept the payment and delivered those pizzas.  That was the first transaction in the real world of someone accepting Bitcoins.  Some retailers are now taking the coins as form of payment, but this is rare and was unheard of in 2010.  

Early in 2011, Bitcoin was valued at $1, by July of 2011 it had run up to $31 but crashed back down to $2 by December.  It passed the $1,000 mark in November of 2013, dropped back down to $200 by March of 2015, and then set off on the recent historic run to almost $20,000.  There has been several corrections of 30%+ along the way,

So, all these articles that like to tell you how much your $100 investment in Bitcoin from 2011 would be worth today, they neglect to tell you that it felt like you would lose it several times over.

Find out which exchanges trade Bitcoin, learn about the real risks of hacking, and more in our post What You Really Need to Know About Trading Bitcoin.

Contact the trading experts at Great Point Capital to learn more.  We have been serving the trading community since 2001, with more than 100+ prop traders trading the firm’s capital.  We offer access to Takion Software and a network of experienced traders with proven strategies to enhance your trading performance.  

Heavy Machinery Maker Charged with Wrongdoing

Caterpillar Inc. (NYSE: CAT)

Federal authorities raided Caterpillar’s headquarters in Illinois In March of 2017, accusing them of tax and accounting fraud.  In a rare accusation of a multi-national company of tax fraud, the report issued by the Government could result in quite significant penalties.  Federal authorities had been looking at CAT for years, with a whistleblower leak in 2009 leading to a serious investigation which culminated to the raid in March.  

The report focuses on their overseas business and tax transactions involving appropriations of billions of dollars.  US Corporations owe income tax at the 35% corporate tax rate on profits earned worldwide.  They are permitted to defer those taxes, however, until bringing those earnings back into the United States when they will be assessed US corporate income tax with a credit for taxes paid overseas.  Exceptions to the rule exist, with money reported in the form of loans at the center of this investigation.

The report accuses Caterpillar of bringing billions of dollars back from offshore affiliates without paying the proper amount of tax.  The investigation led by the Inspector General of the FDIC, which investigates possible criminal activities from financial institutions, and the United States attorney’s office for the Central District of Illinois, involves a Swiss subsidiary of Caterpillar.  The report outlines that billions of dollars in profits from CSARL in Switzerland from 2007 – 2012 should have been taxed at much higher US income tax rates.  The IRS could potentially impose up to $2 billion in taxes and penalties on profit earned by CSARL.  

Caterpillar claims that the profits were determined to have been reinvested outside the US, and they are contesting the accusations stating that they complied with all tax laws and did not violate any judicial doctrines.  

There is no ruling yet, however many professionals close to the case feel that Caterpillar’s noncompliance with US financial tax laws and reporting rules was deliberate in order to maintain a higher share price.  

Caterpillar is one of the 30 companies in the Dow, and shortly after the raid in March, shares of Caterpillar fell 2%.  In spite of the ongoing investigation, their latest earnings report in October of 2017 was up 27.5% year to date, while trading at a rich 25 times earnings estimates.  

For current information on corporations, trading or investment services you can trust, contact Great Point Capital today.  

Great Point Capital is a member of FINRA offering professional service, wealth management and execution to retail customers.  We are a leader in the equity day trading community with more than 100 prop traders currently trading the firm’s capital with stock leverage. We provide the latest in technology including Takion trading software and our proprietary intra communication platform.  Contact us today to learn how we can take your successful trading strategy to the next level.