July 6
Administration policy toward illegal migrants and their families who are law abiding and who are employed is EVIL. Celebrating evil is unAmerican. When I read what Laura Loomer and others say I think of 1930s Germany. See Axios.
Gasoline prices remain low and stable. This weekend the average price of gasoline at the pump is $3.148 a gallon. A month ago it was $3.146 a gallon. One year ago the average price was $3.51. See AAA.
The Qualified Small Business Stock tax provisions are great law. We want more of what venture capitalists do. Humans respond to incentives. Low to no taxes on innovation are a great incentive. The QSBS is extended and slightly enhanced in the BBB.
https://apple.news/Axomt3wioSoWlVxEDTbZxwA
From the standpoint of economic efficiency, the best tax rate on corporations is zero.
For more see below under Economics.
Trump’s BBB Reconciliation bill is bad legislation not because it bends the growth curve of welfare, Medicaid and SNAP in particular but because it extends the individual tax cuts of the 2017 TCJA. Federal taxes on individuals in the United States are too low.
The legislation does not gut the social safety net. Adults who are able to work should work in order to claim government benefits.
https://www.wsj.com/opinion/no-one-is-gutting-the-safety-net-e3029eb4
The basic problem is that Americans want more than they are willing to pay for. Before 2030 the tax bill will come due.
Markets and Stocks
U.S. equities are trading at or near all time highs.
Households are enjoying real income increases. Gasoline prices are low and stable. The labor market is reasonably strong and it is very resilient. A recession is unlikely.
Momentum is positive. The path of equities is higher, but I do expect a modest correction sometime soon. Still, equities go up over time. Stay invested. Don’t speculate or trade. Invest in great companies. Wealth is built over years. Beware get rich quick claims.
Stocks that are trading at $5 or lower are very risky and are almost always bad investments.
Nvidia will maintain an 80% market share of advanced accelerated computing chips through 2026. Application specific chips, will take only a sliver of the market.
The acronym for application specific integrated circuits is ASIC.
@Ray Wang posted: Citi: To justify the cost, ASICs must outperform merchant GPUs like $NVDA ’s solution in specific use cases or deliver significant cost savings. We estimate that the ASICs shipment of $AMZN, $GOOGL and $META together can reach about 4.5m units or more in 2026 and Nvidia would continue to dominate the AI server market, holding over 80% of the market value with both large scale AI models in both training and inference.
Amazon, Alphabet, Microsoft, Apple and Broadcom are all investing in ASICs to compete against Nvidia. But Nvidia’s chips offer superior performance especially when Nvidia’s CUDA software is part of an integrated solution. But Nvidia’s chips are very expensive.
The hyper scalers want to win. They will continue to invest aggressively.
Nvidia is creating new markets: robots, autonomous driving and other applications.
The AI trade is a decade long story. We are in year two.
TSMC fabricates almost 100% of the most advanced semiconductors
TSMC is the main supplier of chips for Nvidia, which leads the market for semiconductors used for AI applications. TSMC also makes the core processors inside Apple iPhones, Qualcomm mobile chipsets, and processors made byAdvanced Micro Devices.
TSMC has said it intends to manufacture chips using its newest 2-nanometer process in Arizona as early as 2028. However, that is several years behind its timeline for 2nm production in Taiwan, suggesting there will still be a period when U.S. companies have to import leading-edge chips.
ASML makes the lithography machines necessary for the most powerful and advanced chips. ASML has a 100% market share. Each ASML machine costs about $350 million.
Rheinmettal, the German defense company is a great investment.
In its quarterly survey the Dallas Federal Reserve reports that oil companies are reducing oil and gas production in response to low prices. Producers also indicated that Trump’s tariffs are raising input costs which will also factor into production decisions.
https://www.dallasfed.org/research/surveys/des/2025/2502
Economics
There are positive business oriented tax incentives in the Reconciliation bill. BBB is not all bad.
The law provides that R&D expenses are fully deductible in the year incurred. Previously, R&D expenses were amortized.
The BBB makes capital expenditures for equipment and factories fully deductible, 100% in the year the investment is made. This provision is retroactive to January 1, 2025. Prior law required depreciation over an extended time period.
The law will expand the deduction for interest expense for debt used to finance capital investment.
All three of these provisions are PERMANENT. They do not expire. This provides certainty.
Venture capitalists, along with successful tech founders and early startup employees, pay little to no taxes on billions of dollars of gains annually, because of the Qualified Small Business Stock, or QSBS provision.
Shares qualify as QSBS if they’re acquired early enough in a startup’s life cycle and held for more than five years. Once sold, capital gains aren’t taxed up to certain limits, which advisers to the wealthy have figured out how to stretch and multiply several-fold. With the right planning, a venture capital investor or founder can end up with hundreds of millions of dollars of tax-free income.
https://apple.news/Axomt3wioSoWlVxEDTbZxwA
Politics - New York State
It’s truly astonishing how fiscally irresponsible New York is. The state budget proposal calls for $254 billion in spending, which is 8.3 percent higher than last year. That comes despite New York’s population having peaked in 2020. It’s a spending increase far in excess of the rate of inflation to provide government services for fewer people.
Ditch compares the New York state budget to the Florida state budget, a sensible comparison since both are big states with major urban and rural areas and high levels of demographic and economic diversity. He finds:
New York’s spending per capita was 30 percent higher than Florida’s in 2000. It was 133 percent higher last year.
New York’s Medicaid spending per capita was 112 percent higher than Florida’s in 2000. It was 208 percent higher last year. Florida has not expanded Medicaid under Obamacare, while New York has expanded it more aggressively than any other state. “For perspective, in 2024 New York spent nearly as much per capita on Medicaid ($4,551) as Florida did for its entire state budget ($5,076).”
New York’s education spending per student is highest in the country, at about $35,000. Florida spends about $13,000 per student. Florida fourth-graders rank third in the country in reading and fourth in math. New York fourth-graders rank 36th and 46th.
Florida has surpassed New York in population and continues to boom. See Tyler Cowen at Marginal Revolution.