When to Sell

There's a very good chance the market will sell off fairly soon now that the tax law has passed, since stocks had a big run up waiting for it.

However it will probably be after the New Year because if you sell now you probably have taxable gains at a time when you can't do much about them.

Of course the stock market is always a balance between the short term and the long term so if you are willing to watch your value go down for a while, it still has good long term prospects since corporate profits will get a shot in the arm as the tax reduction hits.

We do have that pesky increased debt but in the short term we might see a bit of a boost.

The one thing we do know is that the tax law improves corporate profitability and how they use that money is going to depend largely on the corporation's goals.

Generally profits can be used in a number of ways increased dividends, increased stock buybacks, increased capital investment, increased bonuses or used for acquisition and mergers.

They can also retire debt, but at the current interest rates not sure they will do much of that.

Further looking forward the future increase can also result is some of the same things, but you might see a percent diverted to salary increases.

Each company will decide the best way to use the money.  Some of those uses will have a bit of a stimulus impact, others will not.

The trouble is that the capital expansion investment will tend to reduce jobs as facilities are modernized to be more automated.

Of course stock buybacks and acquisitions also tend to have little impact on main street.

Increased bonuses and wages do, but it is question of how much of an impact this will have.

The small business, pass-thru companies may actually hire.  There is so much variation there its just hard to tell and we don't have a lot of surplus labor right now.  Guess retirees may be coaxed back.

Housing is the big unknown since owning has become less desirable depending of where you live and housing is the one area that impacts local employment directly.  If housing values drop, as many are likely to, the loss of wealth may exceed any tax stimulus but it might not.

If everyone runs out and buys imported goods with that extra money well, the people building smartphones in China will have jobs.

Economics is the sum of millions of individual decisions when you come down to it and maybe the capital will be used to finance domestic things, like solar or wind based technology that will create local jobs.

Maybe not.

Cash is looking pretty attractive in the New Year.

I expect greatly increased volatility, of course I'm frequently wrong.