Taxes

Investors Are Already Betting Big Against Trickle Down

JM Ashby
Written by JM Ashby

When Republicans pass a firesale of tax cuts for the rich and corporations, their profits will trickle down into the labor market and then directly into the Treasury's coffers, right?

No. That's what Republicans tell us, but it has never worked out that way before and there's no reason to think it will this time.

In fact, major Wall Street brokers are already investing in stocks in anticipation that nothing will be trickling down to the little people.

Fund managers from Columbia Threadneedle Investments, Hodges Capital, and SSI Investment Management are among those that are adding to or holding on to their shares of those of companies such as Texas Instruments Inc, Microsoft Co and Southwest Airlines Co in part because they expect to see more share buybacks or special dividends if a tax reform passes in some form. [...]

Fund managers say that while it is far too soon to tell whether the tax bill will pass, the prospect of increased buybacks is worth taking a bet on companies that would benefit the most from the plan.

“If you have two companies that you are looking at and one would get a bigger boost from bringing back its cash from overseas, that provides an extra level of return,” said Peter Santoro, a portfolio manager of the $11 billion Columbia Dividend Income fund.

The great Wall Street Casino is already firing up to cash in on stock buy-backs and dividend payments that will be made possible by $5 trillion in tax cuts. They also anticipate companies will repatriate their profits from overseas because the House Republican tax bill eliminates taxes on overseas profits.

None of that money is going to be passed down in the form of higher wages for labor. On the contrary, Wall Street investors are also betting big on automation, anticipating that some businesses will use their tax cuts to automate production with robots.

  • Aynwrong

    …Wall Street investors are also betting big on automation, anticipating that some businesses will use their tax cuts to automate production with robots.

    In other words, tax cuts may cause people to lose their jobs. Way to go Trump voters! You ridiculous schmucks!

  • muselet

    Oh, trickle-down works.

    It’s just not money that trickles down.

    –alopecia

  • Badgerite

    Representative Chris Collins (GOP-NY) pretty much admitted what this “tax plan” is all about and why there is such an urgency in the GOP and by trump to pass it. As he has stated, rich donors told him to “get tax reform done” or don’t ever call them again. Same with trump. If he doesn’t deliver this, the donors who pull the strings will let the GOP get rid of him. Pure and simple. He is there for one thing and one thing only. It is all about the money and nothing more. No honor. No country. Just the money and the power that that brings. “Thoughts and prayers” my ass.

  • Dread_Pirate_Mathius

    The great Wall Street Casino is already firing up to cash in on stock buy-backs and dividend payments that will be made possible by $5 trillion in tax cuts.

    For what it’s worth, my current hedge fund (and at least one other that I can confirm) are both betting heavily that the economy falls off a cliff in the next few months. Both firms are massively short several large cap US equities.

    • Do you think that’s because they think that Trump or people close to him are going to be indicted?

      • They are probably making s cycle based analysis, but Trump and minions going down could have that effect by knocking consumer confidence