The Three Horse Economy – Week 2

Horse #1 – 2017 Tax Law:

The tax law enacted in late December of 2017 is truly a remarkable piece of legislation and a major positive economic force. If you remember our blog in January, we stated that estimates of the amount of capital orphaned overseas was between $500B and $8T. We based our estimate of the impact of bringing that money back into our economy on the lowest estimate, $500B. During the second week of January the announced repatriation of funds exceeded $500B from the first three companies that stated they were bringing funds back to the USA.

It makes no difference what companies do with repatriated money – bonuses to employees, stock buyback, or capital expenditures. The fact is that the money will go into our economy and the multiplier effect will magnify the impact of those dollars.

The full impact of the new tax law will not be seen until the last quarter of 2018. It is easy to expect that we will exit 2018 and enter 2019 with the economy like a horse in full gallop. That means 2019 will also be an excellent year for the American economy. In turn, the American economy will set the stage for the growth of the world economy. For those of us that remember the growing economy enjoyed after the Reagan tax cuts, this economy is going to be better than that one.

It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is land.