Category: zerohedge

Authored by Irina Slav via OilPrice.com,

When President Trump came into office, he openly resented the major trade deficit with Asia’s number-two economy and vowed to remedy the situation. While his words smacked of economic protectionism to many, the latest news about China-U.S. economic relations reveal a different picture.

While back in February the U.S. president talked about trade wars, last week he and Xi Jinping struck a deal that would see China receive more U.S. natural gas, as well as additional beef and poultry.

This week, the chairman of the China National Petroleum Corp., the largest state energy company, told Bloomberg in an interview that CNPC would gladly boost its U.S. oil and LNG imports. “The U.S. has very rich oil and gas resources, and as China pursues a diversification of its crude supply the U.S. will of course be one of the sources. We will consider exploring cooperation in areas such as jointly developing liquefied natural gas facilities and gas transport,” Wang Yilin said.

China can certainly do with the diversification, as its energy needs are growing inexorably. It is already the biggest buyer of U.S. crude, ahead of Canada, importing a total of 8.08 million barrels of oil in February. China imports this much oil on a daily basis, so in the scheme of things, US oil imports are a relatively small portion of the overall, based on China’s average daily import rate for the same month, but this figure will certainly grow with Beijing’s diversification drive.

The news is even better for U.S. gas. When the Trump-Xi deal was announced, shares in Cheniere Energy, currently the only LNG exporter in the country, jumped by 3.3 percent. The trade deal will likely provide a major boost for other LNG export hopefuls, too. However, not all will be easy.

First, China’s diversification is not necessarily focused only on the U.S. On the contrary, Beijing is unlikely to succumb to overreliance on one single source of energy. What’s more, U.S. LNG may find it tough to compete with supply from Australia and Qatar. All that without even mentioning the Power of Siberia gas pipeline that will see China import 38 billion cu m of gas annually, starting in 2025, strengthening ties between Beijing and Moscow.

In a recent report, the CNBC quoted analysts as suggesting the competition may prove too stiff. “China is much nearer and much cheaper to ship from Australia, for example, or Qatar,” said S&P Platts’ regional director for energy pricing, Alan Banniser. According to him, Europe is the most logical market for U.S. gas.

Wood Mackenzie’s Massimo Di-Odoardo, for his part, told the CNBC that the trade deal put the U.S. in a position to benefit from gas import growth to the tune of US$26 billion annually but he, too, was cautious, adding that this “will depend on its competitiveness versus other global alternatives and Chinese buyer appetite for exposure to U.S. gas prices.”

The average price per thousand cu ft of U.S. LNG in February was US$5.99, up from a trough of US$3.65 per 1,000 cu ft reached in October 2016 but much lower than the US$16.67 from November 2015. Prices fell sharply between November 2015 and February 2016 as a lot of new supply came online and a glut ensued.

The glut is still here, and there is no gas-related OPEC to try and do anything about it, so prices are bound to stay low for a while longer. For how long, it is difficult to say. The good news is that demand for LNG will grow – according to Shell’s first ever LNG Outlook, by 4-5 percent annually until 2030. Capturing a piece of the Chinese market may be a challenge but the rewards to be reaped sure look like it’s worth it.

via http://ift.tt/2qyb2iZ Tyler Durden

It’s all fun and games “buying the f**king dip” until someone mentions the ‘i’ word…

The level of ‘talk’ is different this time.

Source: @Not_Jim_Cramer

And the bookies are seeing money flow…

Source: PredictIt

However, we suspect after tonight’s comments from McCain (what was McCain promised to clear Trump’s name?) and the appointment of a Special Counsel (Trump would never allow unless he was clean), that this time will not be different as “impeachment” odds will likely tumble.

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After apparently finding out about the appointment of former FBI Director Robert Mueller as Special Counsel in an investigation into his alleged collusion with Russian during the 2016 campaign only after the order was already signed by the DOJ, Trump issued the following statement:

“As I have stated many times, a thorough investigation will confirm what we already know – there was no collusion between my campaign and any foreign entity.  I look forward to this matter concluding quickly.  In the meantime, I will never stop fighting for the people and the issue that matter most to the future of our country.”

NEW! Statement from President Donald J. Trump http://pic.twitter.com/DTEy8ILKGF

— Zeke Miller (@ZekeJMiller) May 17, 2017

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Another large-scale, stealthy cyberattack is underway on a scale that could dwarf last week's assault on computers worldwide, a global cybersecurity firm told AFP on Wednesday.

Meet Adylkuzz – the new cyberattack that "is much bigger than WannaCry."

Instead of completely disabling an infected computer by encrypting data and seeking a ransom payment, Adylkuzz uses the machines it infects to "mine" in a background task a virtual currency, Monero, and transfer the money created to the authors of the virus.

 

Proofpoint said in a blog that symptoms of the attack include loss of access to shared Windows resources and degradation of PC and server performance, effects which some users may not notice immediately.

 

"As it is silent and doesn't trouble the user, the Adylkuzz attack is much more profitable for the cyber criminals. It transforms the infected users into unwitting financial supporters of their attackers," said Godier.

Proofpoint said it has detected infected machines that have transferred several thousand dollars worth of Monero to the creators of the virus. The firm believes Adylkuzz has been on the loose since at least May 2, and perhaps even since April 24, but due to its stealthy nature was not immediately detected. Proofpoint's vice president for email products, Robert Holmes, told AFP...

"We don't know how big it is" but "it's much bigger than WannaCry",

 

"We have seen that before — malwares mining cryptocurrency — but not this scale," said Holmes.

It uses the hacking tools recently disclosed by the NSA "in a more stealthy manner and for a different purpose." As InfoRiskToday details…

The SMB flaw (file-sharing network protocol) targeted by this Adylkuzz campaign existed in all versions of Windows since XP and came to light in April, via a dump of "Equation Group" tools released by the Shadow Brokers.

 

Many security experts believe the Equation Group is the National Security Agency, and that the Shadow Brokers may be part of a psychological operations campaign run by Russian intelligence.

 

One of the Equation Group exploits included in the April dump, called EternalBlue, is designed to exploit the SMB flaw in Windows. If successful, the Equation Group would then often install a backdoor called DoublePulsar onto the exploited endpoint to give it persistent, quiet access to the system.

Rather than freeze files demanding a ransom, Adylkuzz uses the hundreds of thousands of infected computers to mine virtual currency… As InfoRiskToday details…

The WannaCry outbreak began May 12. But Proofpoint says that the Adylkuzz campaign that targeted DoublePulsar and EternalBlue appears to have begun as early as April 24 – nearly three weeks earlier – and hasn't stopped.

 

"This attack is ongoing and, while less flashy than WannaCry, is nonetheless quite large and potentially quite disruptive," Kafeine says in a Monday blog post.

 

In addition, Proofpoint reports that multiple outbreaks that were attributed to the WannaCry campaign, but which involved no ransom notice, may, in fact, have instead been part of the Adylkuzz campaign.

As with WannaCry, the Adylkuzz malware first attempts to exploit a system via EternalBlue, and if successful then infects the endpoint with DoublePulsar, Kafeine says.

"Once running, Adylkuzz will first stop any potential instances of itself already running and block SMB communication to avoid further infection, Kafeine says. "It then determines the public IP address of the victim and download the mining instructions, cryptominer, and cleanup tools."

This Adylkuzz campaign is mining not for the world's most well-known cryptocurrency, but rather for monero.

Also known as XMR, InfoRiskToday notes that the creators of the cryptocurrency claim that it's more private and difficult to trace than bitcoin. Unlike bitcoin, it also has no hardcoded block size limit, meaning that – at least in theory – an infinite amount of monero could be mined.

So far it's not clear who's behind this cryptocurrency mining operation. A version of WannaCry seen in February contains code that was used in a 2015 attack tied to Lazarus – a hacking group security experts say ties to North Korea. But anyone could have reused the 2015 code, which is publicly available, Matt Suiche, managing director at incident response firm Comae Technologies, tells Cyberscoop.

"Attribution can always be faked, as it's only a matter of moving bytes around," he says.

As InfoRiskToday.com concludes ominously, the discovery of the cryptocurrency mining botnet shows that organizations that fail to patch their systems aren't just at risk from flashy attacks, such as WannaCry, but also stealthier attacks that don't always announce their presence.

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Authored by Darrell Delamaide via MarketWatch.com,

Dystopia is here. It’s not just the “imagined place” of the dictionary definition or a future state of dystopian novels. It is very real and right now, at least for those of us trying to follow national politics.

And it’s not just Donald Trump. It’s Barack Obama, it’s Ted Cruz, it’s the New York Times, it’s Breitbart News. It is an alternate universe detached from the world we live in but intruding into it in painful and dangerous ways.

It is a media narrative of political conspirators colluding with a dictatorial archenemy, of an intemperate and delusional leader overturning the institutions of democracy, of a “deep-state” resistance to constitutional authority.

It is a dystopia of rampant hypocrisy, where obstructing legislation, supporting a law-enforcement official who strays beyond the limits of his authority, or boycotting a president’s appointments is evil and undemocratic until it’s your party that wants to do it.

Two dystopian classics have shot back to the top of best-seller lists because the media suggest the authoritarian surveillance societies they portray have arrived. The 1948 novel “1984” and the 1985 novel “The Handmaid’s Tale” are touted as descriptions of where we are headed under Trump.

While the author of “Handmaid,” Margaret Atwood, and the cast of the Hulu miniseries based on it see a Trump administration as the realization of the misogyny depicted in the novel, it’s obvious the U.S. is not about to become a Puritanical theocracy like that in the book.

Critics on both the left and the right dispute the media meme that “Handmaid” is a depiction of the Trump era.

Irish feminist Angela Nagle writes in the left-wing Jacobin magazine that it is neoliberal market forces that are oppressing women, not an imaginary theocratic state.

“The real-world dystopia for the majority of women in the age of Trump is not that they are being forced to have children by a repressive traditionalist state,” she wrote last week, “but that they’re being compelled not to by far more insidious forces, and those that do are financially and socially punished at every turn.”

We are ruled by myths, she continues, but not those in the miniseries. “The mythologies of our age in the West are not enforced by repressive theocratic regimes,” Nagle says, “but by the market command to be free, to be creative, to be flexible, to love what you do for even the most uninspiring of jobs.”

Right-wing media critic Brent Bozell also takes issue with “adoring” coverage of the series in the liberal mainstream media. “This is why conservatives tend to laugh when liberals rail against the scourge of ‘fake news,’” Bozell wrote last week in Townhall. “There is no faker news than the notion that America is on the precipice of a Puritan patriarchy under President Donald Trump.”

As for Big Brother watching us, a la George Orwell’s “1984,” it has become quite clear that the surveillance state made its greatest strides under Obama, though previous administrations had done their part to implement it.

“Obama’s most enduring legacy may be the establishment of the modern U.S. surveillance state,” Penn State professor and Internet privacy advocate Sascha Meinrath wrote in the Christian Science Monitor as Obama left office. “During his eight years in office, Obama has dramatically expanded the reach of U.S. government surveillance, with scores of new revelations of previously unknown surveillance initiatives continuing to regularly come to light.”

Meinrath criticized Obama’s “schizophrenia” in calling upon his fellow citizens to reform surveillance laws and protect privacy even as he unilaterally expanded surveillance by granting “sweeping surveillance powers” to 17 government agencies through an executive order as he left office.

In fact, the hagiography about Obama that began when he first set his sights on the presidency and continues in full force now is an important component in our dystopia. The mythmaking by and for Obama does not square with the experience many people had during his presidency.

The controversial new biography, “Rising Star: The Making of Barack Obama,” by Pulitzer Prize-winner David Garrow claims that many of the people and anecdotes in Obama’s best-selling memoirs are fictional and serve the purpose of creating the myths around him.

He quotes a psychologist to the effect that “someone’s life story ‘is more like a personal myth than an objective biography, even though the subject believes the story to be true.’”

Garrow concludes in a highly critical epilogue that Obama’s pursuit of his ambition to be president became the dominant characteristic of his life. “While the crucible of self-creation had produced an ironclad will, the vessel was hollow at its core,” Garrow says in a much-quoted judgment.

Of course Obama supporters leapt to his defense. New York Times book reviewer Michiko Kakutani calls Garrow’s biography, which runs nearly 1,500 pages, “a dreary slog” and labels the epilogue “a condescending diatribe unworthy of a serious historian.”

In keeping with Washington’s trench warfare, this comment prompted Bozell, in another column, to snort, “As for Obama’s outright lies and evasions, Kakutani offered the conclusion you might expect from a political party commissar,” Bozell writes. “For reliable history, ‘Go back to Obama’s own eloquent memoir,’ she says. In other words, ‘the myth shall set you free.’”

Ultimately, the dystopia of this media narrative has little to do with the world most of us live in — we can hardly recognize it. We do have real problems, however, and it would be helpful if politicians paid attention to them instead of chasing shadows in Washington.

As he took office in 1974, President Gerald Ford said, “Our long national nightmare is over,” describing the 26 months between the arrest of the Watergate burglars and the resignation of President Richard Nixon.

When and how will we end this current nightmare?

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And just like that, Trump may have avoided near certain political doom.

As news was breaking that the DOJ had named a Special Counsel for the Russia probe, a move that will substantially ease political tensions on the Hill (and is a move which the administration would almost certainly not have allowed if it had anything material to hide), another major hurdle for Trump dissolved this afternoon, when one of the biggest “risk-factors” behind a potential Trump impeachment was removed.

Recall that in its initial analysis of the biggest risk factor facing Trump, Height Securities’ Peter Cohn said to keep a close eye on just one republican: John McCain.

Cutting to the chase, Cohn writes that ending Trump’s viability as president “depends on Republicans turning against him”, as impeachment proceedings can only begin with the majority party, and the 25th Amendment (allowing for president’s removal when unable to discharge powers/duties of his office) can only be invoked by Congress and/or vice president, majority of Cabinet.

 

What will Height be closely watching to see if the Trump drama enters a potentially terminal phase: the main catalyst is whether Sen. John McCain, chairman of Armed Services Committee, begins calling for Trump’s resignation, as U.S. national security issues may increase concern among Republican voters.

And while earlier today, one GOP Rep. Justin Amash already suggested that if the FBI memo story is true, impeachment would be appropriate, in the clearest sign yet that Trump may be safe after all, the Washington Examiner reported that John McCain said that calls from congressional Democrats to impeach President Trump are not “rational” adding that “I don’t think very many people take that very seriously,” he said Wednesday.

“All I can do is judge the situation as it is. Every day, we are surprised by some other twist and turn of this issue so I can only respond now and now I do not think that is a rational approach.”

Earlier in the day, Democratic representative Al Green called for Trump’s impeachment on the House floor Wednesday, accusing the president of obstruction of justice.

“I rise today, Mr. Speaker, to call for the impeachment of the President of the United States of America for obstruction of justice,” he said. “There is a belief in this country that no one is above the law. And that includes the President of the United States of America.”

While Democrats urging Trump’s impeachment had new energy following a bombshell report about Trump on Tuesday, ultimately it was all up to getting Republicans behind the push, and it was in this context that JPM said “a Trump impeachment was very, very unlikely.”

Trump – impeachment very, very unlikely and regardless it wouldn’t be positive. There is a lot of talk about Trump impeachment and how a President Pence could be a positive. It is way, way too early to begin having the impeachment conversation. Impeachment is much more a political (instead of a legal) process and w/the GOP controlling both chambers and Trump’s popularity in the party being (relatively) healthy the political dynamics don’t signal impeachment. That could change in Jan ’19 assuming Republicans lose either the House or Senate in Nov ’18 but if that happens the whole pro-growth agenda would grind to a halt. The impeachment bar is very, very high (no president ever has been removed from office as a result of impeachment; two had articles of impeachment brought up in the House before being acquitted in the Senate; one resigned before going through the process). The daily scandals obviously don’t help Trump’s political capital but market expectations for legislative action are already very low.

JPM said this before McCain had made his position clear. Now that the Arizona Senator has also voiced his support of Trump (we ignore Putin’s offer to present a transcript of the conversation with Lavrov, exonerating Trump) any likelihood of a Trump impeachment, absent some stunning finding by the Special Counsel, is materially lower (if not gone altogether), for the foreseeable future.

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The Department of Justice has just announced the appointment of former FBI Director Robert Mueller as special counsel to oversee the federal investigation into Russian interference in the 2016 election, including potential collusion between Trump campaign associates and Russian officials.

According to a letter obtained by CNN, Mueller was appointed by Deputy Attorney General Rod Rosenstein who has promised that Meuller will operate with a “degree of independence” from the DOJ. 

“In my capacity as acting Attorney General, I determined that it is in the public interest for me to exercise my authority and appoint a Special Counsel to assume responsibility for this matter.  My decision is not a finding that crimes have been committed or that nay prosecution is warranted.  I have made no such determination.  What I have determined is that based upon the unique circumstances, the public interest requires me to place this investigation under the authority of a person who exercises a degree of independence from the normal chain of command.”

 

“Considering the unique circumstances of this matter, however, I determined that a Special Counsel is necessary in order for the American people to have full confidence in the outcome.  Our nation is grounded on the rule of law, and the public must be assured that government officials administer the law fairly.  Special Counsel Mueller will have all appropriate resources to conduct a thorough and complete investigation, and I am confident that he will follow the facts, apply the law and reach a just result.”

Here is the full press release from the DOJ:

 

And here is the full order:

????Rod Rosenstein appoints Robert Mueller Special Counsel for #TrumpRussia inquiry. Here is the announcement & order: https://t.co/X6ck3kLT1h http://pic.twitter.com/G2D29ucc4b

— T. R. Ramachandran (@yottapoint) May 17, 2017

 

Mueller, 72, served as FBI director under Presidents George W. Bush and Barack Obama and was the longest serving head of the bureau since J. Edgar Hoover. In the aftermath of the Sept. 11 attacks, as the U.S. was ramping up security, he joined then-Deputy Attorney General Comey in threatening to resign if the White House overruled a Justice Department opinion that domestic wiretapping without a warrant was unconstitutional.

Attorney General Jeff Sessions previously recused himself from any involvement in the Russia investigation due to is role as a prominent campaign adviser and surrogate.

Mueller’s appointment aims to quell the wave of criticism that President Donald Trump and his administration have faced since Trump fired FBI Director James Comey last week in the middle of the FBI’s intensifying investigation into contacts between Trump campaign associates and Russian officials. That criticism swelled on Tuesday evening as excerpts of a memo Comey wrote in February surfaced, in which Comey writes Trump asked him to drop the FBI investigation into former national security adviser Michael Flynn.

While it’s unclear how Democrats will feel about Mueller specifically, Jason Chaffetz seems to like the selection:

Mueller is a great selection. Impeccable credentials. Should be widely accepted.

— Jason Chaffetz (@jasoninthehouse) May 17, 2017

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For the first time since January 2009, sales of cars declined year-over-year in all three of the world’s largest auto markets of Western Europe (-6.8%), China (-1.8%) and the United States (-3.7%).  Combined, these three markets account for roughly 70% of the world’s auto sales (chart per Bloomberg).

 

And while auto OEMs spent the first part of 2017 ignoring the growing signs of trouble facing their industry, some are finally starting to admit that all is not well in autoland.  As we noted a couple of days ago (see “How Is This Not A Recession? Ford To Slash 10% Of Global Workforce“), Ford just announced plans to cut about 10% of its global workforce.  Meanwhile Nissan Motor is forecasting a surprise drop in profit this year and Toyota Motor expects an 18% decline as well. 

As we’ve been saying for months, this is likely just the beginning of what may be a very painful several quarters for the auto industry.  So what else could go wrong?  Here is a just a short summary from Morgan Stanley’s auto team, led by Adam Jonas, of the things that could cause used car prices to crash by up to 50% over the next 4-5 years…which, of course, is probably not great news for new car prices either (Executive Summary:  flood of supply, poor lending standards and desperate OEMs who need to keep new car sales elevated at all costs):

• Off-lease supply: This has already more than doubled since 2012 and is set to rise another 25% over the next 2 years.

• Extended credit terms: Auto loans are at record lengths and lease assumptions (residuals, money factor) are at record levels of accommodation.

• Rising rates: Starting from record low levels in auto loans.

• Overdependency on auto ABS: The outstanding balance of auto securitizations has surpassed last cycle’s peak.

• Record high deep subprime participation: 32% of subprime auto ABS deals were deep subprime (weighted average FICO < 550) in 2016 vs. 5% in 2010.

• Record high units of new car inventory: 2016YE unit inventory levels were near 10% higher than 2015YE, and are continuing to trend higher in 2017.

• OEM price competition: Car manufacturers have capacitized to a 19mm or 20mm SAAR. At this point in the cycle we start seeing more money ‘on the hood’ to move the metal. As new car prices fall, used prices look relatively more expensive, which necessitates a decline in used prices to equilibrate the supply/demand imbalance.

• Increased ADAS penetration: We expect auto firms to achieve nearly 100% active safety penetration by 2020, creating an unprecedented safety gap between new and used vehicles, accelerating obsolescence of the used stock. Rising insurance premiums on older cars could accelerate this shift.

• Trouble in the car rental market: Due to a number of secular shifts, including how consumers access transportation options (e.g. ride sharing), car rental firms are facing stagnant growth, weak pricing and over-fleeted conditions. As these cars hit the auction, the impact on prices could be significant.

And here are the stats…

Off-lease volumes have already doubled since 2012 and are only expected to get worse…meanwhile, lending standards have gradually gotten worse and worse…

 

…as further revealed by the growing share of ‘deep subprime’ loans in auto ABS deals.

 

But lenders are starting to get worried and are tightening lending standards for the first time since the great recession.  (Note: Shows net percentage of respondents reporting tightening standards on consumer loans for new and used autos. Negative numbers indicate loosening standards.)

 

Meanwhile, none of the warnings about a flood of used car volumes about to hit the market has impacted new car volumes being pumped out by the OEMs and pushed on to dealer lots.

 

All of which results in this fairly brutal outlook for used car prices and, by extension, the auto market generally.

 

Dear OEMs, the first step is admitting you have a problem.

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Having done the “good cop” routine earlier today, when it explained why a Trump impeachment is “very, very unlikely” despite growing media speculation that VP Mike Pence may be preparing to step into the Oval Office, now it’s JPMorgan’s turn to play bad cop when previewing “what comes next” for both markets and politics. The reason for that is that according to JPM’s Adam Crisafulli is that question is “one of the market’s problems” because there simply “isn’t any quick action that would help to alter the narrative in Washington” resulting in a quick and painless resolution.

Here is the full note:

What comes next? That question is one of the market’s problems. There isn’t any quick action that would help to alter the narrative in Washington. Congress could pass some legislation but there isn’t any consensus around the “big 3” pieces of the agenda.

 

Trump’s overseas trip (the first of his presidency), naming a credible and acceptable Comey replacement (could happen within days), and publication of the WH F18 budget (due early next week) will help change the conversation somewhat but the Russia/FBI headlines are unlikely to abate anytime soon (the conversation around impeachment is very, very premature – see earlier).

 

The month of May has been pretty quiet on the news front but that will change next week. Of all the events scheduled for the week of 5/22, the most important will likely be the flash PMIs on Wed (the first major eco data point for the month of May), the FOMC minutes on Wednesday (given the importance Fed policy will play in TSY yields).

As a reminder, Wednesday will be a critical day for another reason: that’s when James Comey is scheduled to testify. In other words, the selloff that started today – driven largely by political fears and uncertainty – may get some resolution only a week from today, when depending on what Comey says, the DC scandal may blow over at least partially… or alternatively could get much worse.

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Authored by Ted Bauman via BanyanHill.com,

How do I despise thee, O Congress? Let me count the ways.

Don’t take my word for it: 75% of Americans disapprove of the job our representatives are doing. It’s things like this that explain why:

Whilst only about 13% of U.S. employees nationwide enjoy a retirement fund that assures stable, lifelong income, all 535 members of Congress do … courtesy of Uncle Sam.

Members of Congress participate in the Federal Employees Retirement System, which provides pension benefits of which most American workers can only dream.

Private retirement savers often pay management fees that can exceed 1% annually on lousy investment choices. Members of Congress pay a maximum of 0.039% for funds guaranteed to match the market.

A proposal floating around in Republican circles in Washington would add insult to injury: They want to end the tax-deductibility of your pension contributions so they can give a $1.5 billion tax break to U.S. corporations.

Oops.

Give and Take

Congress is reportedly considering whether to reduce the benefits of contributing to a 401(k) and similar retirement plans.

That’s because it wants to reform corporate taxes, cutting the rate from 35% to 15%. That blasts a meteor-sized hole in the federal budget.

Cue the pension police.

According to the latest report from the Joint Committee on Taxation, the exclusion of contributions to and earnings of defined contribution plans will cost the federal government more than $584 billion over the next five years.

The new proposal would treat all 401(k) and traditional IRA contributions as if they were Roth IRA contributions. You’d lose the tax exclusion of those contributions, but your future 401(k)/IRA earnings and appreciation would be tax-free. Some think this could raise $1.5 trillion in additional tax revenue over the next decade, making the corporate tax slash feasible.

Unless they decide to tax retirement earnings and appreciation too.

End of the Roth?

Right now, any income and gains your 401(k) and/or traditional IRA generate don’t get taxed until you make withdrawals.

But a new proposal would impose a 15% tax on those annual gains, raising another $1.5 trillion over the next decade. That would be even worse than ordinary taxable investment accounts, however, where one can defer capital gains tax simply by not selling shares.

“It’s not really a question of whether retirement plans will get a haircut, but of how much,” said Bradford Campbell, former assistant secretary of labor for employee benefits under President George W. Bush. Replacing revenue lost to tax cuts, he said, is “a game of winners and losers, and the retirement system is poised to be one of the losers.”

My sources in Washington tell me that the Trump team is definitely planning to push a tax reform like President Ronald Reagan’s in 1986 — closing loopholes as well as cutting rates. It won’t be just a tax cut, as had been rumored.

Like the retirement contribution exclusion, the proposals also do away with the state and local income tax deductions. If you live in a place such as New York or California, that’s a very big deal indeed.

Who Cares?

There is no more-contested issue in U.S. politics than federal tax reform. So who is likely to win and lose if tax reform follows President Donald Trump’s proposals?

First, his administration can’t count on unqualified support from the base of voters who put Trump in the White House.

Although low-income voters would probably come out neutral since they tend not to have 401(k) or IRA plans, households earning $50,000 or more — most of which voted for the president — would take a serious hit if retirement contributions were subject to tax upfront.

High-income families probably won’t care one way or another since they tend to hit their retirement contribution limits fairly quickly anyway.

Second, the corporate side of the proposals are fraught. Although Trump’s plan cuts the corporate rate from 35% to 15%, many U.S. corporations already pay less than 15% thanks to loopholes — especially in energy, utilities and heavy industry.

They will probably oppose the plan since it closes those loopholes. That makes passage uncertain.

How to Prepare

Uncertainty surrounding something we’ve come to take for granted — tax-advantaged retirement plans — means you need to look at alternatives as a matter of urgency.

Another alternative is to consider the advantages of life insurance.

As I’ve written about in The Bauman Letter, certain types of whole life policies are much better than traditional retirement vehicles. That’s because the IRS currently treats “distributions” from such policies as nontaxable loans against the policy, which are retired when it pays out at your passing.

Life insurance trusts, on the other hand, might become much more attractive vehicles for passing money on to your heirs if the relative returns to heritable IRS accounts take a nosedive.

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