45% Capital Gains Tax Proposal
What do you guys think about Biden’s 2025 tax proposal? Without being too political, I was sure no government wants to discourage trading, so this came as a bit surprising. It’s going to disincentivize people from investing as much but to what lengths? Not to mention, even if the direct blow goes to the high earners whose investment income is more than $400,000 annually, the overall impact it could have on the economy should concern everyone.
Calling it the biggest capital gains tax in 100 years feels like an understatement. However, those calling it a ‘nothing burger’ should also be wary. If this law is passed, the combined tax in some states like California and New York can go upwards of 50%. The hike in interest rates will inadvertently join inflation (since capital gains do not fall under inflation), raising the actual figure for those with more than $100 million in net assets well above the numbers shown in the proposal.
Crypto Investors
Crypto investors have also started raising questions. This proposal pulls a clever move on the subsidized environment where crypto investors could sell assets at a loss, claim tax benefits on those losses, then shortly buy those assets back. This is only scratching the surface imo as there is much to be talked about here. Some are even saying that this might push the US into recession. Is that true and how so?
I believe the crux of this proposal is to raise the capital gains tax on the ultra-wealthy and pave the way for introducing an upper limit on accumulated assets. How healthy that is going to be for our economy and society is yet to be seen, but if this proposal passes, expect big changes. While proponents are arguing that this move is aimed at pushing the US economy over 5 trillion USD over the next decade, I’m more interested in how this will change the current trading avenues.
Stabilizing the economy
It’s without a doubt that this proposal has sent shockwaves throughout businesses and garnered pushback from Biden’s opposition. If you ask me, it’s going to level the ground for high income earners and investment income earners, but something tells me more sympathy will be directed toward mom and pop shops than billionaires. This again makes me think it isn’t as bad as if it were a blanket capital gains tax.
According to sources, the wealthiest pay an average of 8.2% tax. They are mainly able to shield their income through investments that are taxed at lower rates. If by taxing the wealthy we are able to shore up medicare, it doesn’t seem like the bad idea some are painting it to be.
Whichever side of the argument you lie on, I want to hear your thoughts. If this calls for a strategy shift, how are you planning on tackling it? If you are a tech investor, this might concern you more than others.
Q1 2024 Analysis: Apple Inc.
Apple, a stalwart of consumer electronics, has a diverse product portfolio spanning the iPhone, iPad, Apple Watch, Mac computers, and an array of personal computing devices. Additionally, its services segment includes the App Store, Apple Music, iCloud, and licensing ventures. It goes without saying that Apple's ascendancy is underpinned by a formidable ecosystem.
They’re credited with robust profitability metrics, unwavering customer loyalty, and an expanding global market footprint. These factors have always been the tell-tale signs for stakeholders that Apple warrants a premium valuation, that is resilient to free cash flow, aggressive capital allocation strategy, and leadership cohort. In a nutshell, I anticipate an uptick in the average selling prices of Apple's devices, further augmenting its revenue streams.
Market Info as of 16/04/2024
Market Cap: 2.67 trillion USD
Current Stock Price: $172.69
52-week range: $199.62 (high) & $162.80 (low)
Earnings Per Share: $2.18 for the 2024 fiscal year
Dividend Yield: 0.56%
Q1 2024 Analysis: Amazon
While revenue expansion may captivate investors' attention momentarily, the ultimate litmus test lies in profitability metrics. However, profitability is contingent upon a critical determinant: gross margin. Gross profit delineates the residual sum post-deduction of the costs of goods sold, thereby constituting the upper threshold of potential profitability.
Historically, e-commerce enterprises have grappled with narrow margins, owing to their operational paradigm. Nevertheless, Amazon has navigated this terrain by diversifying its revenue streams, with its service-centric divisions eclipsing the revenue generated by its core retail operations.
Amazon's current valuation, despite its recent surge, remains below the levels witnessed during the 2018-2022 timeframe, serving as a salient indicator for prospective investors. This trend underscores the potential for Amazon to attain loftier valuations without being deemed overvalued vis-à-vis historical benchmarks.
Market Info as of 16/04/2024
Market Cap: 1.91 trillion USD
Current Stock Price: $183.62
52-week range: $189.77 (high) & $101.15 (low)
Earnings Per Share: $1.01 for the December 2023 fiscal quarter end
Dividend Yield: NA
Q1 2024 Analysis: Meta Platforms Inc.
Optimism concerning Meta's commercial trajectory and stock valuation for the present fiscal cycle is unmoved. Foreseeing a surge in annual earnings per share to $19.92 from $14.51 recorded in the previous year has certainly raised some eyebrows. Moreover, analysts suggest a staggering revenue influx of $158.2 billion for the fiscal year 2024, signifying a remarkable annual growth rate of 17.3% for Meta.
According to experts, if they are better at reaping from the AI sector compared to its counterparts, it may prove challenging for smaller social media rivals to match Meta's exponential growth trajectory. For now, Meta continues to innovate by introducing novel products and services catering to users, content creators, and advertisers.
But what do the numbers say? Well, Meta's bullish performance in recent times is anticipated to sustain momentum. Although its adept utilization of AI technology perpetuates positive investor engagement, the onus lies on the company to demonstrate progress.
Market Info as of 16/04/2024
Market Cap: 1.28 trillion USD
Current Stock Price: $500.23
52-week range: $531.49 (high) & $207.13 (low)
Earnings Per Share: $14.87 for the 2023 fiscal year
Dividend Yield: 0.40%
Q1 2024 Analysis: Tesla
The trajectory of Tesla's TSLA stock has recently encountered turbulence. This has eventually brought the company's capacity to sustain sales growth under question. As a high-growth entity, Tesla is acutely susceptible to fluctuations in growth projections, which can exert a disproportionate impact on its market valuation.
Thus far in the current year, Tesla's stock price has undergone a notable decline of 30.4%, following a staggering 102% surge recorded in 2023. With shares trading at approximately $174 each, the downturn has left the automaker valued at roughly two-thirds of its peak valuation reached in December 2023, when shares were trading at around $258 apiece.
Projections indicate that Tesla's vehicle deliveries are to remain relatively stagnant in 2024 compared to the preceding year's figure of 1.8 million units. Anticipated reductions in average selling prices, particularly in pivotal markets such as China, are expected to exert downward pressure on automotive gross margins, with projections pegging it at 18% for the fiscal year 2024, in line with the results of the preceding year.
Market Info as of 16/04/2024
Market Cap: 505.99 billion USD
Current Stock Price: $161.48
52-week range: $299.29 (high) & $152.37 (low)
Earnings Per Share: $0.57 for the December 2023 fiscal quarter end
Dividend Yield: NA