My opinion on Tax Inversions.

Ever since the Pfizer, Allergan deal, there have been many talks about how "un-patriotic" it was for Pfizer to move its tax base to Ireland. Well, to those people, I have a question for you guys. If you were the CEO of a firm, and had an opportunity to pay 12.5% on all sales compared to 35%, would you take that opportunity? Of course you would. It is ridiculous to think that Pfizer was in the wrong of wanting to commit to an inversion acquisition that would lower its companies tax rate by more than 25%.

If inversion deals aren't the problem, what is? Well, the problem is the US Government. The US Government has established a 35% tax rate on all US companies revenue stream, including revenue stream abroad. Compared to an average tax rate of 26% worldwide, the US has one of the highest tax rates in the world. It's excuse? Some claim that it is a privilege to be domiciled in the US and paying the high tax rate domestically and for all income made abroad is the "tradeoff". That is COMPLETE insanity. In a world of globalization, the US is slowly looking a lot less attractive than it used to be.

Apple's Tim Cook, in an interview with 60 minutes, was asked why he had billions in revenue parked offshores. He replied, simply by saying that it was preposterous that he would have to pay over 35% to the government if it were brought back to the US. And I completely agree with him. Apple, a company that makes 2/3rds of its revenues offshore, should not be taxed 35% for the privilege of being domiciled in the US.

If the US wants to be a competitive and an attractive place to start a business, it must commit to a tax reform that does not TAX at such high rates domestically and abroad. My proposal is to lower the tax rate domestically near the average of 26%, and DRASTICALLY decrease offshore revenue to single digits. Some might argue that this would dramatically lower government revenue, which would result in less expansionary fiscal policy. But to those people, what do you think these high taxes are doing? Say you had 100 billion in revenue. With the US tax rate in place, this would result in about 35-40 billion in taxes going back to Uncle Sam, not including other state taxes, etc. This 35 billion to 40 billion could've been used in R&D, or company expansion which would create more jobs and a growing economy. What happens when an inversion occurs and a company is domiciled offshores? Well, that company will commit to R&D and expansion within that country, taking away jobs that could've been created in the US.

All I am saying to Repubs and Democrats is: DO THE US ECONOMY A FAVOR AND FIX THE TAX CODE. DO NOT DIS-INCENTIVIZE COMPANIES AND PENALIZE THEM FOR WANTING TO LOWER THEIR COMPANIES TAX RATE. A BUSINESS'S PRIME GOAL IS TO GIVE THE BEST VALUE TO ITS SHAREHOLDERS. FIX THIS NOW BEFORE THE INVERSION RATES GET HIGHER!

Why the Federal Reserve was correct

The Federal Reserve, for the past year, has been flirting with the idea of raising the interest rate benchmark from 0% up to .25%-.50%. Well, on December 16th, they have finally answered the wishes of finance experts everywhere. They rose rates very marginally, and are expected to continue to do so as inflation picks up.

Was this too late? In my opinion, no. I do not think the rise in interest rates was late at all. I think the Federal Reserve did the right thing and wait the interest rate hike out until it was adamantly clear that macroeconomic conditions were sufficient enough for them to do so. Although I also think the Fed's hike was also due to a credibility issue (promised rates would increase in 2015), I think that a small hike was definitely justified.

To go back through the year, we have had an unbelievable amount of volatility. The Greek debt crisis. The Chinese stock-market plunge. The Chinese yuan devaluation. Oil price drop and much more! These obstacles were all in the Fed's way to increase interest rates and these problems still exist today. While the hysteria surrounding these problems were at all time highs, the employment numbers for September and October were dismal. This caused a huge fear with investors and also the Fed that the global economic slowdown was slowly creeping into the US economy.

... Then, things started to calm down. Payroll numbers increased by an expected 200k+, global stock markets slowly got back to shape, and so on.

No doubt that the US Economy is at full employment and is ready for a small hike. Monetary policy for the past decade has remained at emergency-like policy for way to long. At about 5% unemployment and a moderate 2-3% GDP growth, an increase was fully justified.