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Will Bitcoin Survive the Crackdown?

Most of our concern about bitcoin and other cryptocurrencies has been the fact that they have no intrinsic value to fall back on when the bubble pops. Now another factor has been added to the bitcoin equation. Regulators in China and South Korea are talking about shutting down cryptocurrency exchanges. That news threw bitcoin and others into a tailspin as investors pulled their assets from the world of cryptocurrencies. Nations like China are trying to keep wealthy investors from moving assets offshore. Unfortunately for the governments, investors can use bitcoin to move millions without government oversight, taxes or regulations. As bitcoin and others have grown they have become an issue for governments across the globe and regulation of the cryptocurrency world is overdue. For those with investments in this area will bitcoin survive the crackdown?

CNBC notes that bitcoin plunges below $12,000 on the news.

Bitcoin plunged to a six-week low Tuesday after comments from South Korea’s finance minister renewed worries about a crackdown in one of the largest markets for digital currency trading.

On Monday, Bloomberg reported that authorities in China were planning to block domestic access to Chinese and offshore cryptocurrency platforms that allow centralized trading. Regulators will also target people and companies that provide market-making, settlement and clearing services for centralized trading, the publication said, citing unnamed sources.

And on Tuesday, a Chinese central bank official reportedly said that authorities should ban the centralized trading of digital currencies, adding weight to concerns of further suppression of the country’s cryptocurrency market.

People first got into bitcoin because of the argument that it was a new way to move money and hold assets efficiently and privately. Then, as the value bitcoin grew it became a mania as people emptied their bank accounts and put second mortgages on their homes to get in. People who are so desperately leveraged will be the first to bolt for the door when it appears that various crackdowns will drive the price down. That sort of rush for the exits tends to accelerate as the price falls turning the demise of assets like bitcoin into self-fulfilling prophecies.

Will There Really Be a Crackdown on Cryptocurrencies?

A valid question for folks with assets tied up in bitcoin and other cryptocurrencies is if various governments will really close centralized cryptocurrency exchanges. China is likely to take action and the reason will be its concern about capital flight and the damage that loss of investment capital would cause China’s economy.

The business news is full of reports and speculation about capital flight out of China. Foreign investment was essential to China’s rapid growth over the last decades. Foreign investors are pulling money out and wealthy Chinese are moving their money offshore. Will capital flight kill the Chinese economic miracle?

China’s foreign currency reserves have shrunk at the same time that its public and private debts are soaring. Many who made their fortunes on China’s rise as an industrial power are hedging their bets and moving money offshore. This comes at a bad time for China because they need to increase internal investment and liberalize their economy. That will not happen if there is a shortage of cash. One of the routes out of China for capital is the world of bitcoin. Thus it is likely that China will shut down exchanges or at least demand more transparency in order to control capital flight.


Invest in Gene Editing Companies

The world of medicine is about to change. Diseases that had no treatment and conditions that cause lifelong suffering may well be cured at the source. Biotechnology has advanced to the point where the human genome can be edited and fixed! Companies that are on the leading edge of this new technology will not only change the world of medicine and your life. They can be profitable as well. Three gene editing companies in particular are worth your attention as noted in an article in the Motley Fool.

If you’re looking to invest in stocks positioned to benefit from a literally game-changing technology, check out stocks of biotechs that are focused on gene editing. The future of medicine is likely to be radically transformed by therapies that involve the insertion, deletion, or replacement of DNA.

Three of the hottest gene-editing biotech stocks on the market right now are Sangamo Therapeutics (NASDAQ:SGMO), Editas Medicine (NASDAQ:EDIT), and Intellia Therapeutics (NASDAQ:NTLA). But which of these is the best pick for investors? Here’s how these three gene-editing stocks stack up.

As always with new technologies, the issue of profits depends on how well the technology works, how efficiently it can be applied, how large a market its product will have, and whether or not a company will control its market niche or have to compete with other similar technologies. The other issue for medical treatments is passage through the FDA process to demonstrate effectiveness and safety of use.

Here are the three companies highlighted in the article and the diseases their therapies are intended to treat.

Sangamo Therapeutics: Hemophilia A, amyotrophic lateral sclerosis, beta-thalassemia
Editas Medicine: Sickle cell disease, beta-thalassemia, cystic fibrosis, Duchenne muscular dystrophy, and editing of T-cells in treating cancer.
Intellia Therapeutics: gene-editing therapies to target treatment of up to 10 indications and using gene editing in hematopoietic stem cells and chimeric antigen receptor T-cells

The company with the most solid results so far is Sangamo. In order to invest in gene editing companies and make a profit you may want to pick the most likely winner with a treatment that is far along the FDA pipeline. However, the stock will have a higher price the closer its treatment is to going on the market. If you are going to invest in gene editing companies in the search of the highest profit you need to get in early and consider investing in several or order to catch the eventual winners when their share prices are cheap. The current state of the art technology that is driving the world is gene editing as called CRISPR-Cas9.

CRISPR-Cas9

According to New England Biolabs CRISPR-Cas9 is the newest and best tool that has opened the door to effective gene editing.

The development of efficient and reliable ways to make precise, targeted changes to the genome of living cells is a long-standing goal for biomedical researchers. Recently, a new tool based on a bacterial CRISPR-associated protein-9 nuclease (Cas9) from Streptococcus pyogenes has generated considerable excitement.

This was first noted in the 1980s but not confirmed until the last decade. Using this tool from nature will allow bio tech companies to design treatments for wide range of genetically based diseases. One issue is patent rights to use the treatment and in that regard Editas has won court battles for patent rights which opens the door for them to develop and sell gene therapies based on the CRISPR technology.


Why Apple Will Not Be Hurt in a Crash

As the stock market moves higher, more and more analysts are predicting a correction if not a stock market crash. If you have made money in this bull market is it time to make some adjustments just in case? Last year we wrote about how to prepare for the next stock market crash. Tech has been the leader in driving the market. Consumer stocks are the traditional refuge when the market tanks. If tech has been the leader then we might expect tech stocks to take the biggest hit with a correction or a crash. One of the tech leaders is Apple, AAPL. Its share price has gone up nearly fifty percent in the last twelve months. One might expect AAPL to take a big hit during a market correction. But, unlike other tech leaders, Apple does not have a stratospheric P/E ratio. In fact, Apple’s P/E ratio of 18 is amazingly tame in comparison to Netflix at 193 or Amazon.com at 511! Another reason to trust that Apple will not correct significantly if the market falls is the company’s cash hoard offshore of more than $200 billion. But, the biggest reason that Apple will not tank in a market correction is that Apple is not just a tech stock but a consumer stock as well.

People Cannot Live Without Apple Products

Warren Buffet generally avoids tech stocks because he says he cannot predict how much they will worth 5 and 10 years in the future. Unlike a tech product, a Snicker’s bar or bottle of Coca Cola, is predictable. So, why does the Oracle of Omaha own so much Apple stock? He says the stock is more of a consumer stock than a tech stock. Apple has amazingly strong brand name and extremely strong customer loyalty. This is because the company has focused on the customer and ease of use of its products. And it has built a range of interlocking products and services such as ITunes and various useful apps. Many people cannot live without their iPhone and other Apple devices and services. This brand loyalty to a wide range of products and services is what will help Apple retain earnings even if the wider market crashes. And those earnings, as well as repatriated offshore cash, are why Apple will not be hurt in a stock market crash.

Will Apple Be the First Trillion Dollar Company?

At its current rate of growth Apple will pass the trillion dollar mark in market cap in 2018. In fact, if more people buy Apple due to its consumer stock aspects, it could still pass a trillion dollars even if the market crashes.

What Could Go Wrong?

There is speculation that Apple could buy Netflix according to Investor’s Business Daily.

Analysts at Citi said there is a 40% likelihood that Apple (AAPL) will buy Netflix. Apple is expected to repatriate $220 billion in cash under the new tax laws. The Citi analysts said Apple has more than enough cash to buy Netflix.

On one hand this would make sense as an addition to Apple’s range of services. On the other hand it could raise Apple’s P/E ratio (Netflix=193 vs Apple=18). We asked if the new tax code would help with your investments. Here is an example of how Apple’s offshore cash could fund an outright purchase of Netflix with no other cost to AAPL.


Hackers Create Fake Bitcoin Wallets

Our attention to the current bitcoin feeding frenzy has been focused on how closely it resembles previous boom and bust cycles. (Could You Be a Bitcoin Billionaire, What Should Bitcoin Be Worth?) But there is another concern as more and more investors pile into cryptocurrencies. Hackers create fake bitcoin wallets to steal your money. How does this work?

A Virtual Currency

If you have money deposited in a bank in the USA your money is backed by the full faith and trust of the US government. Your deposits are insured by the FDIC (Federal Deposit Insurance Corporation) up to $250,000. And, instead of depositing your money in the bank you can receive paper currency and coins and hold your money in your hand. In the case of a virtual currency like bitcoin and others neither of these is the case. If someone hacks the computers of your bank you can still get your money back via the FDIC. If hackers hit your virtual currency you are toast.

Hacking of Cryptocurrencies

Every year there are several hacks of cryptocurrency operations ranging from a few million to hundreds of million worth of value. For this to happen, the cryptocurrency company has to have neglected its security and a hacker has to have had the skillset to get into their system and transfer currency out of wallets into another wallet under their name. But there is a simpler way for hackers to steal your bitcoins. They can set up a fake wallet. How does that work?

Folders, Wallets and Virtual Compartments

When you save a document on your computer you put it in a folder. There is no physical folder but rather computer code that designates where the computer can find and retrieve your document. And, of course, there is no document but rather computer bits and bits that when retrieved look like a real document on your computer screen. In a similar fashion there is no real bitcoin or other cryptocurrency wallet but rather computer code that allows the system to keep track of how much cryptocurrency value is yours.

Fake Bitcoin Wallets

CNN Tech has a good article about how hackers take advantage of Bitcoin.

“Whenever something gets this much publicity and popularity and there’s a potential to make what appears to be free and easy money, the criminal aspects of the world are going to take advantage of it,” said Mike Murray, vice president of security intelligence at mobile security firm Lookout.

In order to use bitcoin, you need a digital wallet to receive, send, and store cryptocurrencies. By creating fake wallets, hackers can take advantage of people new to bitcoin and other digital currencies who might not realize the difference between legitimate companies and fake apps.

Unsuspecting people hear about the bitcoin feeding frenzy and decide to get in. They find an app on Google Play or somewhere else, download it, and send money. Unfortunately, these apps are set up by hackers who have nothing to do with cryptocurrencies and are simply stealing your money. To the fact that bitcoin is due for a crash please add the fact that hackers create fake bitcoin wallets to your list of concerns when investing in cryptocurrencies.

Will The Tax Code Overhaul Really Help Your Investments?

As Congress votes on the first major tax code overhaul in three decades, stock markets across the globe are in rally mode. After details of the final product came out it is clear that pass through tax benefits to real estate investors, like Mr. Trump, may be substantial. But will the tax code overhaul really help your investments? Apple may get a downgrade because analysists think the iPhone product cycle may be getting old. And, do all stocks benefit from changes in the tax code? The New York Times tallies up the winners and losers of the tax bill.

President Trump has called the $1.5 trillion tax cut that Republican lawmakers are on the verge of passing a Christmas present for the entire nation.

But the fine print reveals that some will get a much nicer gift than others, the benefits will change over time, and some will be left out in the cold. Real estate developers and technology companies could see big tax cuts, while low-income households and people buying health insurance could lose out.

With the bill finally headed to a vote this coming week, taxpayers are scrambling to determine whether the legislation renders them winners or losers.

If their analysis is correct real estate developers like the family of the president will make out well and perhaps the likes of Apple will get help in the event of a fading product cycle. Important parts of the tax code overhaul are the reduction of the corporate tax rate and the significant reduction of the tax on repatriated corporate profits. Shareholders of companies with billions of dollars stashed offshore my see increased dividends and soaring share prices as corporations take advantage of the new tax code and bring money back home to the USA. Who has the most offshore?

APPL: $216 Billion
MSFT: $128 Billion
CSCO: $68 Billion
QCOM: $30 Billion
AMGN: $36 Billion
ORCL: $48 Billion
GE: $35 Billion

Business Insider provided these numbers and writes that the tax plan could bring $250 Billion into the USA.

The repatriation tax holiday outlined in the plan, for which details were released on Thursday, is designed to incentivize US-based companies that do big business overseas to bring those profits back home.

By Goldman Sachs’ calculation, S&P 500 companies hold $920 billion of untaxed overseas cash, and the firm estimates that $250 billion of that would be repatriated. Looking at all US-based companies, Citigroup says there’s a whopping $2.5 trillion of capital stashed internationally.

Not all offshore cash will ever be repatriated because US multinationals have expenses in their offshore operations and it makes no sense to send money back to the USA to get taxed and then send it back offshore to pay wages or build new manufacturing and shipping facilities. And, while companies like Apple have huge stores of offshore cash there are smaller companies with only a billion or so for whom repatriation will be a much bigger deal for their investors.

What Should Bitcoin Be Worth?

The cryptocurrency feeding frenzy continues as you can now trade bitcoin futures. So much has been written about how bitcoin trading is like the tulip bulb frenzy in Holland centuries ago. But those who believe in bitcoin believe that the cryptocurrency will eventually replace currencies like the dollar, euro and yen. If you are interested in making money in cryptocurrencies or their futures contracts you need to have a basis on which to make your decisions. The question is what should bitcoin be worth? Investopedia poses the question, why do bitcoins have value.

Currency also provides a universal measurement for accounting purposes. For instance, without currency, it is difficult to compare companies that sell different goods. Currency is used as a store of value, which makes saving, investing and banking easier.

Some currencies, like gold, have value because they are useful as a commodity. Government fiat currencies, like the U.S. dollar, have value because governments grant them legal tender status and only accept taxes through them.

Bitcoins do not have value as a physical commodity like gold and are not widely accepted as legal tender like dollars.

Bitcoin has value to those who by them for the following reasons.

There are buyers and sellers of bitcoin making it possible to buy bitcoins with dollars and to buy dollars with bitcoins. For those in the bitcoin world bitcoin is an accepted currency.

Bit coin is also decentralized making it hard to tax and hard to trace. Ongoing criticism of bitcoin is that drug dealers use the cryptocurrency to move their ill-gotten profits.

For those worried about governments printing more money to pay their debts there is a limit to how fast bitcoins can be mined and there is a cap on the total number of bitcoins so inflation will not take away bitcoin value.

And bitcoin is being used as an investment because the price is rising.

And last of all the cryptocurrency world is a social network that feeds on itself.

But, What Should a Bitcoin Be Worth?

The Forex market shows us that the value of any currency is relative to the value of others. Thus one trades dollars for euros and Swiss francs for yen. The value of a nation’s currency is based on central bank monetary policy, the strength of national economy and the stability of its political system. None of these are factors with bitcoin. Bitcoin is valuable because people see its value going up and want to get in on the profits. The base value of bitcoin is probably somewhere above zero as there is a benefit to some of keeping their transactions private.

Although some have called bitcoin a fraud that is not the case. Bitcoin is an alternative way to hold wealth and hopefully for bitcoin enthusiasts, to buy things. But what should a bitcoin be worth? Anyone trading bitcoin may be making profits but what happens when one approaches retirement? Will bitcoin hold its value over the years or will the wild swings in value accelerate making it risky as a long term holder of wealth? Short term trading of bitcoin with money that you can afford to lose may be profitable but this is not a widows and orphans stock that you can buy and forget about in your old age or you will wake up to find that bitcoin is back at $1.

Could You Be a Bitcoin Billionaire?

Bitcoin just keeps going up despite repeated comparisons to the Dutch tulip bulb mania and crash centuries ago. Now, according to the news, there are two bitcoin billionaires, the Winklevoss twins. These guys successfully sued Marc Zuckerberg for $64 million claiming that he stole the idea for Facebook from Harvard Connection, of which they were co-founders. That is where the money came from to buy bitcoins. Business Insider notes the billionaire status of the Winklevoss boys as bitcoin goes above $11,500.

Bitcoin’s rise comes amid continued interest in the digital currency from both ordinary investors and institutions. Last week it emerged that exchange operator Nasdaq could follow rival CME Group in launching bitcoin future contracts next year, a sign that professional investors are increasingly taking the asset seriously.

Former Olympic rowers Cameron and Tyler Winklevoss disclosed in 2013 that they owned $11 million worth of bitcoin. The cryptocurrencies meteoric rise since then – it has risen over 1,000% this year alone – has propelled that investment to over $1 billion, according to the Telegraph.

Could you be a bitcoin billionaire? First, it helps to start with a few million and then you need to go back in time to at least before the start of 2017 for the most recent impressive run up. But people are still putting money into bitcoin so it would appear that folks still expect to make money, a lot of it, on bitcoin. Is that realistic?

The Other Side of the “Bit” Coin

The folks who believed that paper money would become worthless back in the 1970s bought gold. They did so again in the first decade of this century. Now bitcoin seems to have taken the place of gold for those who distrust other means of investing, creating and holding wealth. What do other billionaires think about bitcoin? Coin Desk quotes both Carl Icahn and Warren Buffett in saying that bitcoin seems like a bubble.

Billionaire investor Carl Icahn has jumped on the bandwagon of financial bigwigs saying bitcoin is in a bubble.

The investor further compared the bitcoin market to 18th-century Mississippi land bubble before it finally collapsed. “To me, this is what this is,” he said.

His comments follow similar comments from investor Warren Buffett in October, describing bitcoin as a “real bubble.” Buffett said at the time, “People get excited from big price movements, and Wall Street accommodates,” while criticizing the idea of applying a value to bitcoin.

If you listen to these guys the odds of you being a bitcoin billionaire are pretty small even if you invested a billion today. Our question is if this is a version of pump and dump seen with penny stocks traded over the counter. In a traditional pump and dump scheme there are folks who have an established position in a stock. They promote the heck out of it and sell when their hype brings in buyers and drives the price up. Although the bitcoin market is a lot bigger than a penny stock market cap the mechanics could be the same with a few folks in dominant positions able to manipulate the market for their personal gain. If you have money that you can afford to lose you might want to put a little into bitcoin to see if you can make a little money but this is not where to put your retirement savings.

When the Chinese Market Implodes What Happens to Your Investments

As US investors consider the odds of a stock market correction investors in China are already selling stocks. The Financial Times reports on a fresh China stock selloff.

Chinese stocks were back under pressure, as concern about a government crackdown on leverage levels continue to unnerve investors, leaving sentiment fragile.

The CSI300, a composite of stocks listed in Shenzhen and Shanghai, fell 1.3 per cent to a near-three-week low after notching its biggest one-day fall in 17 months on Thursday amid concerns over rising corporate bond yields. Since the start of trade then, it is down by over 4 per cent, trimming its year-to-date advance to 22 per cent.

The decades-long Chinese economic expansion was based on borrowing to build manufacturing and export capacity and has left the China with a huge amount of private and public debt. The situation in China is reminiscent of that in Japan in the late 1980s when their economy seems all set to take over the world and then hidden debts stifled growth and sent them into a quarter century of deflation. Thus the Chinese economy may be in for a reset or may implode leaving things in shambles for years if not decades. Our concern is when the Chinese market implodes what happens to your investments?

Are You Invested in China?

A lot of foreign direct investment has gone into China. Likewise if you own some is it time to sell Chinese stocks as we asked a couple of years ago. The point is that if you own Chinese stocks directly or as ADRs and have seen them go up over the years it may be time to take a little profit before the sheer weight of debt and heavy handed regulation causes their economy and markets to implode.

How Will a Chinese Crash Affect Your Investments Back Home?

In the early days of the Great Recession it was Chinese borrowing, investing and purchasing that helped the global economy get back on track. Buying German machines, paying for Japanese management and buying raw materials from the whole world helped the global economy when it was most in need. And if China implodes it will buy fewer raw materials and fewer German machines and pay less for Japanese management. That will cause a ripple effect throughout the global economy. Everyone who buys from or sells to someone else will feel the effect. If nations respond with higher tariffs or devaluations of their currencies a global trade war could ensue. When the Chinese market implodes what happens to your investments that rely on exports, imports and global trade? US retail stocks look good after a successful start to the Christmas shopping season. But according to CNBC there is now a 70 percent change of a US stock market correction.

Don’t panic, but there is now a 70 percent chance of a U.S. stock market correction, according to research conducted by fund giant Vanguard Group. There is always the risk of a correction in stocks, but the Vanguard research shows that the current probability is 30 percent higher than what has been typical over the past six decades.

Vanguard, which manages roughly $5 trillion in assets and is a proponent of long-term investing, isn’t sounding the alarm bells to scare investors out of the market. But according to Vanguard’s chief economist Joe Davis, investors do need to be prepared for a significant downturn.

“It’s about having reasonable expectations.”

Look at your investments and which will depend on foreign trade or which are investments in foreign countries that could be hurt by another recession. Buy and sell accordingly and be ready when the Chinese market implodes

Should You Be Investing Offshore?

The US stock market rally may have run its course. But the old saying is that there is always a bull market somewhere. Should you be investing in foreign stocks? Money Watch writes about why foreign stocks are beckoning US investors.

Investors in Wall Street’s long-running bull market are obviously a very happy bunch. But many who now question just how long the party will hold up have started looking elsewhere to move at least part of their money. And these days, the international equity markets are beckoning – enticingly so.

Indeed, recent trends have fueled rallies in Europe and the emerging markets, analysts point out, although the US equity market continues to have an enormous lead on the rest of the world after the financial crisis. Many global market analysts note that prices are no longer cheap by historical standards, but even so, international stocks look more favorable compared with US stocks.

As earnings continue to drive growth the best places to be may well be Europe or in emerging markets. Further down the list is China where there is still great promise but also increasing risk based on excess manufacturing capacity and an awful lot of debt that just keeps increasing.

The underlying risk in investing in China is still that the government controls the economy. An example is the recent shadow bank clampdown that briefly drove Chinese stocks higher. Bloomberg writes about how investors drove stocks higher in the belief that the government will move in to cover bad debts.

Chinese stocks rallied in late trade as markets took a closer look at the nation’s new plans to rein in shadow banks and some traders speculated that state funds would act to stem excessive losses.

While analysts applauded the plan as an important step toward curbing risk in China’s financial system, they also warned of turbulence as markets adjust to outflows from popular shadow-banking products. The government directives, set to take effect in 2019, are the latest in a series of moves to reduce financial risk that have whipsawed financial markets this year.

China is trying to change its economy from a borrow, produce, export and grow model based on increasing markets when markets are not going to keep increasing forever. Likewise many emerging markets show promise but investors need to be aware of the resource curse of boom and bust cycles in economies that depend so heavily on selling the raw materials used by more advanced economies.

Brazil rode high during its commodity boom and has been licking its wounds ever since. Venezuela bought friends in the Caribbean with discounted oil and now its citizens cannot find milk, diapers or toilet paper in the stores. Beware of the resource curse of boom and bust cycles in commodity dependent economies.

However, these economies have gone bust with the onset of the Great Recession and are growing again. Look at the World Bank information on foreign direct investment to see where the smart money is going. Then consider US multinationals that do business in these regions or funds that invest in the region and help you diversify your risk. Last of all consider ADRs of individual companies if you are investing offshore.

Should Investors Be Scared as Markets Cool Off?

Did you lose a lot of money in the 2008 stock market and real estate market crashes? If so you probably wish you had listened to that little voice in your head that said it was time to take profits and sit on cash for a while. It was not like there was no warning. Look at Google Finance and you can see how the SPDR S&P 500 ETF Trust peaked in late 2007! For the next twelve months the market was in an ever-steeper decline.

SPDR S&P 500 ETF Trust

Anyone who listened to that little voice and got out saved of money and had more to re-invest after the market bottomed out. Which brings us to the point of this article, should investors be scared as markets cool off today?

Every Rally Eventually Corrects

Whenever the markets in stocks, bonds or real estate get overpriced there is eventually a correction. Strong earnings have been keeping this one alive but so has the hope and expectation of substantial tax cuts. Most recently the stock market is off because the long hoped for tax relief may be longer in coming than expected. Reuters writes that global stocks fall on U.S. tax reform doubts.

Uncertainty over a U.S. tax reform deal pushed world stock markets further away from recent record highs on Monday.

There was caution as investors waited to see whether a U.S. tax deal would be hammered out soon. U.S. Senate Republicans have unveiled a new plan that differs from the House of Representatives’ version and there are few signs of a compromise.

“All eyes are on what the Senate and the House of Representatives will do on their tax bills,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities. “That there is debate is not surprising at all. Still, it is an uphill moment for markets.”

The immediate concern of the markets is whether we see US taxes cut next year, the year after or not at all. The concern for long term investors is whether or not tax cuts are such a good idea. We wrote about this in our article about Republicans, Economists and tax cuts.

As congressional action progresses so will the belief that tax cuts are in the wings. And thus the market may reignite and continue to go up. But eventually, what drives stock prices is the strength of the economy and one of the factors that drives or impedes the US economy is the cost of the nearly $18 Trillion US debt. In the end the issue comes down to who is right about tax cuts, the Republicans or the economists.

This is not an esoteric argument. Stock traders may make short term profits from the enthusiasm generated by the possibility of tax cuts. And short term investors may do well from stimulated business activity. But long term investors like the Warren Buffetts of the world are essentially betting on the US economy and too much debt will kill any benefits of tax cuts on economic growth and on stock prices. In short congress needs to get this right.

So, should investors be scared as markets cool off? The old saying is that you do not have a profit until you have taken a profit because any hot market be it real estate, stocks, gold or bitcoin can cool off in a hurry. Anyone with an eye toward a successful and secure future will hedge their bets at some point, diversify and hold a bit more cash.


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