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Charles Lewis Sizemore, CFA has been a frequent guest on Bloomberg TV and Fox Business News, has been quoted in Barron’s Magazine, The Wall Street Journal, and The Washington Post and is a frequent contributor to Forbes Moneybuilder, GuruFocus, MarketWatch and InvestorPlace.com.

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What Tax Reform Could Mean for Stocks

Date: Friday, December 15, 2017 9:29 PM EDT

There’s an old joke that the Founding Fathers wisely chose a patch of land located along the Potomac River as the site of our nation’s capital because it’s a place so miserably humid in the summer and so bitterly cold in the winter that our elected representatives would choose to stay away most of the year, thus have fewer opportunities to make a mess of things.

Alas, centralized heat and air conditioning made the swamp habitable, and Washington, D.C., has been infested ever since.

Most of what our government does is, at best, a waste of time and, at worst, downright harmful. But Congress (mostly) got something right in its tax reform package, which the Senate approved earlier this month.

The bill is by no means perfect. It falls far short of its stated goal of simplifying the tax code, which remains as convoluted as ever. And some taxpayers – particularly high-earners in California, New York, and New Jersey – will get hosed and actually end up paying more of their money to government. For most individual taxpayers, the reform package is a nonfactor, neither much of a positive or much of a negative.

But the corporate rate reduction is a very big deal, with significant implications for the broader market and the recommendations I make to my Peak Income subscribers in particular.

America’s largest multinational companies have close to $3 trillion essentially “trapped” offshore. They don’t bring it home because doing so means giving 35% of it to the government. Instead, companies essentially borrow against their offshore cash by issuing bonds.

What do you think will happen to new bond issuance once all of that offshore money starts making its way back home?

It will pretty much grind to a halt. (In case you’re wondering why so many Wall Street bankers have been lukewarm, at best, towards the bill, here’s your explanation. It will all but kill their lucrative bond underwriting business, as their largest customers will no longer need their services.)

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