Editor's Note: The market has pared its losses, but we can expect some chop over the next few days. Shah is worried that this volatility could distract from a major investment opportunity - one that could get this entire country back to growth again. So he wanted us to get this out to everyone today. Here's Shah...
The stock market was supposed to have a major beef with Donald Trump's election.
Now that Mr. Trump is the president-elect, market-watchers are asking, "Where's the beef?"
Well, as far as stocks are concerned, as I see it this afternoon, there looks to be a lot of red meat in the economic future President-elect Trump's proposing, and as U.S. investors start to "get it," they're rotating into select stocks instead of shedding portfolios as everyone expected.
Now, it's still a little too early to tell what investors are or aren't going to fully embrace, since we don't know who President-elect Trump will surround himself with, or what his agenda will be.
But this is no time for investors to stand by with their "wait-and-see" glasses on, not when there's this much money to be made (and we're so well positioned to do it)...
Smart Investors Will Key In on This Right Away
There's one arena of investing opportunity in our future that's a no-brainer, because it is the central pillar of Donald Trump's economic plan.
In a word, it's "infrastructure."
America's infrastructure is in deplorable condition. Politicians have wasted all the resources at their disposal for decades and not attended to modernizing infrastructure since the late 1960s.
That's going to change under President Trump, and you can take that to the bank.
It's simple, really. It's not just not about modernizing airports and highways and bridges and ports and schools and everything else that needs rebuilding. It's about everything that rebuilding our infrastructure has to start with, what it produces and how it all benefits America's economy, that matters.
We already know the Federal Reserve's economic health prescriptions have done everything for the benefit of the big banks they set out to save and make profitable again and almost nothing in trickle-down terms for America's hollowed out middle class and the country's underserved lower socioeconomic classes.
With the Fed out of effective ammo, fiscal stimulus is going to be the new gunpowder.
Investors, worried that fiscal spending, amounting to hundreds of billions - if not trillions - of dollars, are understandably nervous about infrastructure spending pushing interest rates higher, rising deficits, and busted budgets.
Actually, none that has to happen. In fact, there's a lot of good that Mr. Trump's team can effect on all those fronts.
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
Use Offshore Cash to Fund the Boom
First of all, spending on infrastructure can be substantially funded by some of the 2 trillion dollars of corporate cash nestled overseas right now. It could be repatriated at a discounted tax rate of 10% to 15% and setting that tax windfall aside into an infrastructure pool.
Second, proposed corporate tax cuts from 35% down to 15% can and should be phased in, while at the same time eliminating tax deductions and adding the additional taxes collected resulting from reduced deductions to the infrastructure pool.
In effect, corporate taxes would be lowered, but the net effect of corporations losing deductions at the same time would result in a slower reduction of net taxation. That's precisely where more infrastructure money should come from.
Additionally, increased investment spending on the part of corporations knowing their net tax rates will fall over a phase-in period, of say four years, and will help stimulate economic growth.
Third, and this is important, rising interest rates aren't a bad thing.
The Fed's been so worried about deflation, it's been pouring money into banks. That's why rates haven't been rising. The perception that fiscal spending will put upward pressure on interest rates is correct.
What the Fed doesn't get, frighteningly, is that rising rates create inflation, allowing us to reach the 2% inflation prescription the Fed's been dangling in front of us all along.
Deficits don't have to rise and budgets don't have to blow up. Though they may for a year or two, they will quickly be brought down by the economic growth.
Putting so many people back to work in good paying jobs, especially the army of workers looking for jobs with benefits to lift them out of poverty, will ease the burden of our growing social safety net costs. It will help balance budgets and eventually lower the deficit.
This has to be done right, as I've suggested here, but infrastructure spending could be the panacea that cures many of America's economic and social-stratification ills and lifts all boats in its rising tide.
That's what the markets should be looking at today; it's what investors should be looking at today. Whether they'll see this or not in the next couple of days is anyone's guess.
Shah's going to be back at Insights & Indictments on Friday to update his readers on specific infrastructure plays to make now - and which to hold off on for a while. Click here to get his free service for yourself twice each week. You'll also get his new investor briefing on how to profit from low to negative interest rates.
Follow Shah on Facebook and Twitter.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.