Thursday, September 29, 2016

Money Show 2016 - Stephen Moore

Stephen Moore was part of the lineup for the Opening Ceremonies. His talk was called "Which Candidate is Better for the Canadian Economy and Stocks". He is a distinguished visiting Fellow, The Heritage Foundation. Heritage Foundation is a conservative research think tank based in Washington D. C.

He is optimistic about the American Economy and for regaining American prosperity. Under Reagan after 25quarter, the economy (or GDP) was up by 36%. Recovery has been slower under Obama at only 14.9% after 25 quarters. Average recovery after 25 quarter is 39% and at 3.5% a year. Under Obama GDP grew 2% per year and under Reagan GDP grew at 4% per year. Obama has made a lot of bad decision. (This also applies to Bush).

Obamacare is a disaster. Increasing the minimum wage is causing problems. Obama inherited a bad recession, but so did Reagan. Reagan thought that the government was not the solution, but the problem. What is worrisome today is the drop in people in the work force, especially by young people.

We had a huge boom from 1980 to 2000 in real terms. The real return from 2000 is at .8% when it is normally around 3%. It was under Reagan and Bill Clinton that the economy did well. When Reagan was President he said that tax rates were too high and tax revenue was too low. What he did to fix this was cut tax rates to raise revenue.

(Yes, I got that right. It may be counter-intuitive. Whether tax raises or decreases get you more or less revenue depends on how much of the GDP is going to the Government. From what I understand if the government gets less than 30% of the GDP raising rates can get you more actual money. However, if the government is getting 50% or more of the GDP rising rates can get you less actual money. The last story I heard on this subject was from the UK.)

Possible tax rates under Hillary or Donald is as follows:
  • Small Business Tax - Hillary - 44.6%, Donald 15%
  • Corporate Tax - Hillary - 35%, Donald 15%
  • Capital Gains Tax - Hillary - 46%, Donald 20%
One of the worse investments today is a government bond. The 10 year bond has interest of 1.7%. However, future inflation will not be lower than 1.7%.

Technology can lead the next boom. It took 71 years for 50% of American homes to have a telephone. It took 52 years for all American homes to have electricity. Most homes had DVD players after 5 years. Most had iPods after 4 year. In 1978 the cell phone cost $4000 and was the size of a brick. Today the smart phones are small and cost $200 to $300.

Where will growth be? Who will lead the world, China or US? China will not move ahead of the US. We are at the beginning of a big, big boom.

The biggest risk is on debt if interest rates rise. Today the 10 year Treasury bond has a rate of 1.7%. Over the last 10 years debt has grown faster than the economy. We need to have debt growing slower than the economy.

On my other blog I wrote yesterday about Canyon Services Group (TSX-FRC, OTC-CYSVF)... learn more. Tomorrow, I will write about Great-West Lifeco Inc. (TSX-GWO, OTC-GWLIF)... learn more on Friday, September 30, 2016 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.

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