My view that stocks are now in a bubble is further bolstered by the fact that the roughly $4 trillion dollars of global bonds still sporting negative yields (down from $14 trillion last year though the figure is rising again with German 2- and 5-year bund yields plunging back into the red) and European and Japanese central banks are still behaving as though the world is in the midst of a financial crisis. Low-interest rates provide a bogus discount rate that the stock market uses to justify exorbitant valuations, creating a vicious cycle of irrationality that led to our current situation. All financial assets are trading at values divorced from their ability to generate the cash flows necessary to support them.

The truth is, investors are bidding stock prices to one record after another based on nothing more than fairy tales.

One of those fairy tales is that corporate tax reform is going to cure what ails the American economy, but when you look at the numbers it appears even Jack’s beanstalk wasn’t that big.

With all due respect to President Trump, his proposed reforms aren’t going to be nearly enough to fix our problems.

Here’s why…

Trump Means Well, But His Hands Are Tied By Conflicting Interests

Since the election, stocks have appreciated by approximately $2.5 trillion. Yet corporations will pay only about $320 billion of taxes in 2017, suggesting that investors are discounting full repeal of corporate taxes (which isn’t going to happen) by a multiple of roughly eight times.

Throw in regulatory reform and you may come closer to this number, but by any stretch of the imagination, the effects of Mr. Trump’s economic policies are more than fully priced into the market. Since corporate taxes are not going to be fully repealed and few if any corporations come close to paying the highest statutory 35% tax rate anyway, the likely impact of reform is likely to be far more muted than the market expects.