I’ve been curious how mass media are describing the Trump Foundation paying off debts owed by Trump businesses as “self-dealing”. To recap, two examples known so far have Trump businesses settling disputes with others by agreeing to an obligation to pay money to a third-party charity, which Trump then paid from his own foundation’s money. Self-dealing is basically doing business between a base and disqualified people who have a link to the building blocks. If the Able Family Foundation needs computers, and Amy Able who runs the building blocks also markets computers, then the basis would be self-dealing if it bought its computer systems from her.
Trump Foundation’s paying off of Trump money will go beyond this. The outcome could have been similar if Trump Foundation, of writing the check right to charity instead, had written the check to Trump who paid off his debts to charity then. This hypothetical is embezzlement clearly, what Trump actually did isn’t different. I suppose it’s also self-dealing but worse.
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Something else I haven’t seen in the conversation of self-dealing is tax evasion. There has been discussion of the different taxes evasion Trump scandal, when he directed that obligations owed to his businesses be paid to his basis, but this is a separate issue. Trump Foundation in place discharged debt owed by his businesses to others, and the IRS calls that taxable income to the businesses that didn’t need to pay your debt. If we’re able to see his returns, I’m confident we’d find that he didn’t pay fees on that discharged personal debt.
Moving from companies to countries, it is clear that the ongoing companies that lose the most from lower essential oil prices will be the big oil exporters. September 16 and December 16 Between, as oil prices retreated, the most vulnerable country (partly because of its reliance on oil for revenues and partly because of geopolitical events) has been Russia.
In the graph below, we catch the carnage in changes in the sovereign CDS spread for Russia (a measure of default risk in the country) and in the Russian Ruble. The harm has been greatest in Venezuela and Russia, with the Russian CDS increasing 137.83% and the Venezuelan CDS more than tripling. The damage stretches beyond the essential oil business to green energy companies, that had benefited from high oil prices within the last decade, and lenders to oil companies, who felt the effects of increased credit risk.
As with the essential oil sector, the extent of the harm varies across sub-groups, higher for the ten largest solar companies than it is for companies across the solar energy string or even more broadly in clean energy. Consistent with the behavior of earnings across stocks across ratings classes, investment-grade energy bonds were much less affected than below investment-grade bonds. The winners from lower essential oil prices are harder to find, at least for a while.
You would expect that companies which have a high proportion of their costs connected to essential oil prices to get the most, and the two areas which were mentioned as beneficiaries were the airlines and trucking companies. 2 trillion in oil and green energy companies. In the long run, the general consensus seems to be that lower oil prices shall be good for the economy and perhaps, for stock prices even. Between 1974 and 2013, there is little evidence that lower oil prices (in either dollar or percentage terms) have had any effect on economic growth (real GDP), interest & inflation stock, or rates prices.
In truth, the only adjustable where there’s a relationship has been the US buck, and lower essential oil prices have resulted in a weakening of the currency historically. Taking a look at the trade off, there are two key benefits that come from lower, essential oil prices. The foremost is that consumers will be spending less on essential oil (for transport and heating) and will thus have significantly more money to spend on retail, leisure, and other consumer discretionary items.
The second is that lower essential oil prices will reduce inflation, at least in the close to term, this provides you with central banking institutions a far more wiggle room in monetary policy little. You will find, however, two potential costs. You may not be considered a market timer, or oil-price forecaster but essential oil prices do impact your portfolio as well as perhaps on your initial investment strategy.