Markets closed after a wild trading session which saw positive and negative swings as tax reform details emerged and Jerome Powell was nominated as head of Federal Reserve. At the close the Dow posted another record high gaining 81 points to 23,516 on heavy trade.
The Republican tax proposal was released today and the debate began with supporters and opponents lining up and sounding off. Shares of H&R Block fell sharply as the new tax filing system could cut them off at the knees. Home builders also fell on a reduced mortgage deduction. Apple CEO Tim Cook supports tax reform after calling the current system “archaic”. Tax lawyers will be busy but could also be threatened depending on the outcome. My approach is to sit back and let the dust settle since a bill this significant could have profound effects on the economy. It reminds me of a story about President Nixon when he, in an effort to “defend the American hot dog”, changed the beef content requirements by a couple of percentage points which sent the hot dog industry into turmoil and led to some businesses going under. Changes in policy at the federal level can have ripple effects.
Facebook reported earnings last night and while they were well ahead of expectations CEO Mark Zuckerberg said that efforts to ramp up oversight of advertising and keep the Russians at bay will increase costs significantly. The company reported a 47% increase in revenue and a 77% increase in net bottom line profits.
Tesla posted its biggest quarterly loss yet as glitches with the Model 3 rollout have prevented the ramping up of deliveries. While revenue was up 30% the company posted a loss per share of $2.92. Ouch! Shares were whacked by 7% and Hedge fund manager David Einhorn aka Silky Seamore, who painfully shorted Tesla was able to breathe a sigh of relief.