Earlier today at 6 AM EST German Factory Order numbers were released that showed a plus 2.2 percent gain month over month. Yet last Friday, May 5th US Factory orders were released that showed a negative 4 percent growth rate month over month.
Now it’s no secret that Germans in general are amongst the most industrial, productive people on planet Earth and ironically Germany has some of the toughest labor laws on the planet. You may be asking but how can that be? Having worked for a German owned software company in the past (SAP) has provided me with a unique insight as to their culture and work ethic. Make no mistake about it, whereas the Germans provide the most extensive benefit and vacation package I’ve ever seen; they do so for a reason.
They will go to any extent to make something happen. Want proof? I recall on one occasion having to setup a demo for a major corporation in the US. We worked 21 hours straight and got 3 hours of rest but the next day that demo was ready and shown to the prospect. Bottom line, they bought the solution.
There’s no such reality as one colleague letting down another. It just doesn’t happen. There’s also no such reality as a CEO getting paid 400 times what the average worker makes, that doesn’t happen either. In fact years ago then SAP CEO Hasso Plattner once commented “if I paid what the US is paying their people in terms of salary, bonuses and stock options; they’d hang me in Germany.” Of course we need to take this in the proper context as it was said in the late 1990’s; early 2000’s when everyone was making more money.
Fast forward to the present time; many of my followers have asked well it that’s true and the US is doing so badly why are the US markets advancing on an almost daily basis? Every day it seems as though the markets are advancing to higher highs. How can that be? Well as traders, let’s put our thinking caps on. Earlier this year the US government mandated a 5% increase in capital gains taxes; meaning that whatever income is derived from passive investments or trading this year, you will be taxed at a 20 percent rate versus 15 percent under the Bush Tax Cuts.
At first everyone (including the Smart Money) was concerned that this was going to slow down investment. On the contrary it seems to have the opposite effect. Why? Well let’s think about it. If you’re a high net worth individual and you know that you face a 5% increase in taxes yet you’re not interested in a reduction of your lifestyle, what can you do?
Invest more, trade more, and increase the scope and volume of your investing such that you can augment the negative aspects of a tax increase. And the Smart Money? They have no problem telling you that the markets are going up indefinitely which is pretty much what they did in the 1990’s and early 2000’s.
Want proof? Look back at the Clinton years when the tax rate was 39.6 percent. The markets were doing pretty good then, weren’t they? Of course back then the US really did have a strong economy.Get the 5 most predictable currency pairs