Trump’s Tax Cut a ‘Huge Tailwind’ for Businesses, Rally Resumes
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Former Hillary Clinton supporter Warren Buffett lauded Republicans’ corporate tax reform as a “huge tailwind for businesses,” and the Berkshire Hathaway (NYSE:BRK.A&B) Boss should know, his company went up $34-B in net worth because of deferred tax liability.
Monday, on TV Mr. Buffett extolled the benefits of a corporate tax rate that dropped from 35 to 21%, thanks to congressional Republicans and President Donald Trump.
“We had about $100-B of unrealized gain in equities. When they are sold, you pay tax on that. And previously when the tax was 35%, we would have had a $35-B reserve for taxes against that as a liability. That would drop to about $21-B,” Mr. Buffett said.
“So $14-B, roughly, was a reduction in the amount of tax that when we sell those securities we will pay. It wasn’t cash now. But it reduced a liability. When you reduce a liability, net worth goes up.”
Saturday, Berkshire reported a record quarterly and annual profit, and its net worth increased last year to $65.3%, with almost 50% of that coming from the change in tax law.
“It’s a huge tailwind and it’s particularly a tailwind” for companies, like his, that benefit from bonus depreciation up front on things like railroad cars, in Berkshire’s case.
“It’s a big item. Not as many companies have lots of appreciation in marketable securities, but it’s a big item for those that do,” Mr. Buffett said.
Monday, the major US stock market indexes finished at: DJIA +399.28 at 25709.27, NAS Comp +84.07 at 7421.46, S&P 500 +32.30 at 2779.60
Volume: Trade on the NYSE came in at: 813-M/shares exchanged
- NAS Comp +7.5% YTD
- S&P 500: +4.0% YTD
- DJIA +4.0% YTD
- Russell 2000: +1.6% YTD
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