Wow! Donald Trump will be the 45th President of The United States. The polls were wrong. The political pundits were wrong. And I was wrong as well. We’re now going to experience a hammering in all stock markets around the world due to policy uncertainty. Hopefully the sell-off is very temporary like Brexit’s. The only thing I was right about was aggressively saving cash all year and
nibbling on some bonds. I’ve been waiting to build a large bond portfolio for a while and am surprised the 10-year yield is surging to ~2%.
If you stayed up late enough to listen to Donald’s victory speech, you should come away feeling better that everything will be OK if you are a Hillary supporter. Donald spoke with a lot of humility. He talked about bringing the nation back together, working with every country, and helping every citizen. In a word, he sounded presidential. Have a listen if you haven’t already.
As financial freedom seekers, we should accept the outcome and look at the bright side of change. Out with the status quo and in with the new. Let’s see what a businessman can do versus a career politician.
Where It All Went Wrong
It’s now clear Hillary had too many trust issues to overcome. Further, instead of sounding like she was always reading from a script, she could have spoken in a more natural, genuine tone. Charisma counts. Joe Biden probably should have run instead. He must be feeling pretty guilty right about now.
As I wrote in Affirmative Action Based On Income and Wealth, there’s a large part of the country that feels ignored by the establishment. They’ve seen their jobs evaporate due to globalization and their incomes decline over the past eight years. Yet they see Obama being soft on immigration and favoring minorities. Of course they want change.
On the flip side, look at all the states that voted for Hillary. It’s not a coincidence the blue states have seen some of the fastest increases in employment growth, property price appreciation, and wealth creation. When things are going well, the last thing you want is change.
It’s pretty amazing that despite a biased media and tremendous celebrity backing, Hillary still lost. It just goes to show you how bad things are for many Americans.
Here’s a fascinating snapshot of how people ages 18-25 voted. It’s not a big surprise given young people pay less taxes. It’s a good life lesson of not always getting what you want. Be nice to your elders. Your massive inheritances may depend on it!
Time To Get Back To Work
I told myself if Donald wins, I’ll probably do these three things:
- Look for a full-time job again
- Increase the amount of consulting clients (corporate and personal)
- Publish more content
Lower tax rates is an incentive to work harder. I’ve had it really good since 2012, but all good things have to come to an end. Besides, paying for your own healthcare is so damn expensive!
Here is Trump’s tax plan from his website:
The Trump Plan will collapse the current seven tax brackets to three brackets. The rates and breakpoints are as shown below. Low-income Americans will have an effective income tax rate of 0. The tax brackets are similar to those in the House GOP tax blueprint.
Brackets & Rates for Married-Joint filers:
Less than $75,000: 12% (from 10% – 15% currently)
More than $75,000 but less than $225,000: 25% (from 25% and 28% currently)
More than $225,000: 33% (from 33%, 35%, and 39.6% currently)
*Brackets for single filers are ½ of these amounts
The Trump Plan will retain the existing capital gains rate structure (maximum rate of 20 percent) with tax brackets shown above. Carried interest will be taxed as ordinary income.
The 3.8 percent Obamacare tax on investment income will be repealed, as will the alternative minimum tax.
The Trump Plan will lower the business tax rate from 35 percent to 15 percent, and eliminate the corporate alternative minimum tax. This rate is available to all businesses, both small and large, that want to retain the profits within the business.
Besides starting a business, the biggest benefit under Donald’s tax plan is to therefore try and make as much above $466,000 (current married couple income minimum for 39.6% tax rate) as possible. Tough for many to do, but worth a shot. For all incomes less than $466,000, not much changes except for the Net Investment Income tax going away for those making more than $200,000/$250,000 as individuals/married couples.
The sweet spot for maximum happiness continues to be an individual or married couple income of around $200,000 – $250,000. They should hopefully pay an effective 25% tax rate or less as a result, although it’s unsure exactly whether individuals making between $91,150 and $190,150 will really see an increase in their taxes from a 28% marginal rate to a 33% marginal rate. A 25% tax rate is just the right amount for everyone to feel good about contributing to our great nation. It’s also low enough that it may increase tax revenue overall due to lower tax fraud.
I don’t think I’ll have too much trouble finding more consulting gigs and writing more content to boost online revenue. My main problem will be finding a full-time job. After almost five years away from the system, it’s going to be very difficult for me to assimilate. Employers are always skeptical of me wanting to come back to work as well. At the very least, I can entertain you with new job failure stories!
Finally, for those folks who say they plan to move to Canada, come on now. They’ve got some of the most unaffordable real estate in the world, high-paying jobs are not plentiful, and you’ll be freezing for five months a year. Besides, America needs your tax dollars. If you’re a disappointed Hillary supporter who must move, just move to California or Hawaii. Life is really nice out here.
Readers, how are you feeling post election? Have you properly hedged your portfolio for volatility? Are you buying stock in the sell-off? Or do you see money flowing into real estate given the volatility? Now is a great time to revisit my post: Real Estate vs Stocks: Which Is A Better Investment?