Our close personal friend, Mr. Market, always enjoys an opportunity to give us a little elbow in the side.

One problem with that is that this gesture doesn’t always mean the same thing.

Fortunately for us, most of the time those are friendly little jabs that come with a wink that say ‘You got it right again, Ron!’

Humble as we may be, it is nice to have that extra bit of recognition. But then, there are the times when one of those jabs is a little less welcome, when the jab is more forceful and less friendly, when Mr. Market seems to be saying that he really does not like it when things are less orderly.

Those are the times when things come as a surprise. When Mr. Market is forced to be reactionary he can get a bit testy. If you are a follower of Mr. Market, you may have seen some of his testy side recently. I certainly have. So, what’s bugging him?

Well, there’s a bit of a list actually. Let’s see: There was the (literally) out of the blue strike on the Syrian airfield, the increased hyper-ventilating from the saber-rattling fat kid running North Korea. There’s Putin playing games with Russian bombers off the Alaskan coast. And then there is taxes.

Now, you may be wondering why I threw taxes in with all that other more dramatic stuff. Well, here’s why: The Tax code is now over Ten Million Words Long and it has become so convoluted and complicated that absolutely no one fully understands it anymore. Indeed, recently ABC News found that “In a limited test by the Government Accountability Office in 2014 only two of 19 tax preparers they tested calculated the tax return correctly. Other “mystery shopper” tests by consumer groups have found error rates of 25 percent or higher.” It gets worse. Investors.com notes the following:

The IRS instructions for filing out the 1040 form include a box near the back that estimates how much time it takes to fill that one form out. This year, it’s 15 hours. That’s a 67% increase from 1988. This year, the instruction booklet runs 241 pages. In 1988, it was fewer than 80.

The tax code has become so complicated that even the IRS complains about it. In its annual report to Congress, the IRS’ national taxpayer advocate, Nina E. Olson, writes that the tax code imposes a “significant, even unconscionable, burden on taxpayers.”

Let’s translate this impact into a numerical representation: The cost of just doing the work — to do the calculations, is 409 Billion US dollars. In other words, there is another tax here that has gone largely unnoticed. It is the cost of what it takes to go through the mechanical exercise merely to determine what is owed!

OK, fine. But why is Mr. Market suddenly so interested? Because when presidential candidate Trump said he was going to fix it, that was beautiful music to the ears of Mr. Market. Because he knows that — for just one example — every dollar saved from the ‘TAX’ line on a corporate balance sheet goes directly to profit. And, every dollar that increases profit will improve the value of a company’s stock (other factors excluded). Do this for a lot of companies and you can imagine the effect on the stock market – AKA, the ego of our friend Mr. Market.

So, what’s not to like? And why is Mr. Market having a hissy fit a couple of times a week recently?

Well, it seems that Mr. Market is having some second thoughts about how easy and quick this job of changing tax rules might actually be. President Trump says he wants to drain the swamp but he has discovered that an awful lot of Washington insiders are seriously invested in all manner of Swamp Stuff.

It’s always a good idea to remember that a yuuuuge part of having political power just means that you have access to money — and the power to direct where that money goes. And, Boys and Girls, where it comes from is private citizens and corporations. That explains why so few politicians will ever be serious about tax reform.

My bottom line on this is that Trump will get it done; perhaps not as quickly as Mr. Market had been thinking but I am not betting on the Swamp.

Market Minute 4/21/2017 – Score Another One for the Bulls

Another week, more headlines, negative news from Paris, some companies beat their expected earnings, and others did not; just another week. And markets are taking it in stride. As I looked across a sample of indices this morning, I note that for the week, pretty much all indices are up. That includes large-cap stocks, small-cap stocks, international and even emerging market stocks. Then I went to the sectors, the parts that make up the US indexes. And lo and behold – the aggressive sectors are up (technology, industrials, materials) and the defensive sectors are down (utilities and consumer staples). So, despite terror attacks, political nastiness, and a host of other negatives, the market pushes on. Despite the wiggles and wobbles, this is not a negative market –  it’s earnings season, and we look forward to more good news as time marches on. As Jack often says, ‘a single data point (or a week) does not a trend make’, but on the other hand there have been quite a string of positive months.  

 P.S. – For those of you who asked, the talk with my granddaughter on starting savings early (as opposed to procrastinating) went well. We’re planning to meet about once a month to discuss basic financial principles. And, for any reader who may not know what this is about, please see last week’s e-Letter.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at info@denkinvest.com.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

The Update provides information of a general nature regarding legislative or other developments. None of the information contained herein is intended as legal advice or opinions relative to specific matters, facts, situations or issues. Additional facts, information or future developments may affect the subjects addressed in this document. You should consult with an attorney, accountant or DSWP planner about your particular circumstances before acting on any of this information because it may not be applicable to your situation.

Lincoln Financial Securities and Denk Strategic Wealth Partners and their representatives do not offer tax advice. Please see your tax professional regarding your individual needs.

*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.