Unintended Consequences & The Tipping Point
In prior articles/posts we outlined the primary aim of the tax cuts was to finally create wage inflation through higher economic growth. Our article entitled "Better Watch What You Wish For" outlined that higher wages would result in much fast Fed tightening ie (lower asset purchases & higher rates) and that appears well under way. When an economy is built on debt, rising rates is a very dangerous thing and now it appears we are at the proverbial tipping point economically when rates begin to slow growth. Those effects began in housing and in our view will spread thru the rest of economy as the tax effects wear off. Does mean recession, but it does mean a change in the business environment that business owners need to adapt to. Most importantly, it means a change in viewing risk and required returns for investments.
Most business & their trusted accountants tend to look back not forward failing to view the business an investment (ie Return on Investment/Profit driven vs tax basis). In fact, usually the largest investment a business owner has. But how do you properly plan for your businesses future if you don't look forward. At CCS we combine Accounting, Finance & Economics so business owners LOOK FORWARD to better plan for changes in their business vs back to increase profits & valuations.