Tim’s Tidbits 12.21.17

Wall Street loves the new tax law as strategists rushed to increase S&P 500 targets for 2018. Credit Suisse Group AG now predicts that the benchmark index will end next year at 3,000, up from a previous target of 2,875. In addition, Wells Fargo & Co.’s Chris Harvey boosted his projection to 2,863 from 2,784. The new found optimism is largely due to the expected increase in companies earnings per share (EPS) from the decrease in corporate tax rates. The final tax bill lowers the maximum corporate tax rate from 35 percent to 21 percent, the lowest since 1939.

Now guess which sector will benefit most from the tax overhaul? Financials, of course. The biggest U.S. banks could see an average 13% increase in EPS from a drop in the corporate tax rate, according to Goldman Sachs. Overall, the bill could boost earnings for S&P 500 companies by 9.1 percent, according to equity strategists at UBS.

Although, President Trump may delay signing the bill till January to prevent automatic spending cuts for Medicare. If Trump signs the tax bill this month, it could trigger steep automatic spending cuts early next year to a raft of programs. But if Trump waits until January to sign the bill, the spending cuts would be delayed until 2019 — after next year’s congressional elections — giving lawmakers a full year to prevent them.

Congress gave final approval to the $1.5 trillion tax package Wednesday, sending it to Trump.

In other trending news, the NYSE formally files with the Securities and Exchange Commission to list two ProShares bitcoin ETFs that would allow traders to bet on how the volatile cryptocurrency futures contracts will perform. NYSE files to list bitcoin ETFs, bringing cryptocurrency a step closer to mainstream | CNBC

Mind you, that back in March 2017, 1 bitcoin surpassed the price of 1 oz of gold and now 1 bitcoin is worth roughly as much as 1 POUND of gold. Hodlers rejoice. In lieu of this, the cryptocurrency and blockchain companies have come out of the woodworks. The mania has just begun. This week an unheard of micro-cap company touting ‘Long Island Iced Tea’ has suddenly pivoted into a blockchain company. In result, shares soared a modest 200% at opening and the company said it’s still going to make iced tea and other juice beverages.

Iced Tea Company’s Stock Soars 500% After Name Change | Newser

This reminds me of the scene from The Big Short with Selena Gomez and Dr. Richard Thaler, father of behavioral economics. The two breakdown how a synthetic CDO works at a blackjack table, one bet on a hot hand then creates multiple other bets all dependent on the outcome of a single bet or asset in our case. Take for example, CBOE Global Markets and CME Group, allowing trading in bitcoin futures, a synthetic contract based on bitcoin. Now add another layer of synthetic speculation through ProShares Bitcoin ETF and ProShares Short Bitcoin ETF. The underlying securities and value in these ETFs are based on synthetic futures contracts that are betting on movements in the price of bitcoin. It’s truly amazing how the underwritters can validate the value of this product. An innovative strategy to say the least, however, dangerous for investors who don’t understand the product. Caveat emptor.

On Bitcoin, Richard Thaler says He “Needs Selena Gomez to Explain That” | WN.com

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