Copyright ©​ Daniel Cullinane CPA.

TRUMP 2018

​The U.S. relationship with China will be the world's most consequential in 2018. The two big issues, straight from President Trump:

"China's hurting us very badly on trade, but I have been soft on China because the only thing more important to me than trade is war. O.K.?" he said in an interview with the New York Times.
"Caught RED HANDED - very disappointed that China is allowing oil to go into North Korea. There will never be a friendly solution to the North Korea problem if this continues to happen!" he wrote on Twitter.Go deeper: Here are the 7 things to watch with China, from the rise of the Communist Party and its absolute leader Xi Jinping, to the prospects for war with North Korea and China's growing influence in the world.
1. Xi Jinping is determined to reinsert the Chinese Communist Party (CCP) into all aspects of life in China. Xi views restrengthening of the Party as key to preventing a USSR-style collapse, and to achieving the "great rejuvenation of the Chinese nation", as he has said repeatedly.

Why it matters: All of China's domestic and foreign policies need to be viewed through the lens of the the CCP and its goals. The CCP is far more than a simple political party, and its interests and goals are often hostile to those of its neighbors and of Western countries.

2. The recent Party Congress cemented Xi as the undisputed leader of China, the "Chairman of everything" as the country's leadership shifted away from 2 decades of "collective leadership" and instead called to "safeguard Xi's position at the core of the CPC Central Committee and the whole Party."

Why it matters: Xi's power is far from unfettered but he is more of the "decider" than any single Chinese leader in decades. That can be positive for moving quickly and forcefully, but the downside risks are significant if subordinates tend towards sycophancy instead of real policy debate.

3. Expect much of China's 2018 political agenda to revolve around 3 issues: controlling financial risks, reducing poverty, and curtailing pollution. Beijing recognizes it has a massive debt problem and there will be significant efforts to reduce and manage riskier debt. Poverty alleviation is seen as key to maintaining support for the Communist Party and achieving the "great rejuvenation." Chinese leadership has recognized that environmental degradation may pose the greatest risk to the Party's continued rule, and though the ongoing crackdown on pollution is more real than it has ever been, the incentives to pollute are still so great and the multi-decade damage so massive that progress will be halting at best.

Why it matters: By declaring these "three tough battles" the government has announced what the overarching economic priorities for 2018 will be.
Go deeper: At the 19th Party Congress the CCP changed the "principal contradiction", an overarching guide in a Marxist-Leninist worldview, from "ever-growing material and cultural needs of the people versus backward social production" set in 1981 to "between unbalanced and inadequate development and the people's ever-growing needs for a better life". This is not just empty rhetoric and is a clear indicator that Xi and the Party are serious about changing the PRC's economic growth model.

4. The Party has embraced technology, and specifically big data and artificial intelligence, as a key part of the Chinese government's blueprint for becoming a superpower while maintaining Communist Party control. China has huge data sets generated by almost a billion Internet users, few legal restrictions on the use of that data, a rapidly growing pool of talented Chinese AI engineers and extremely favorable government policies, including significant financial support.

Why it matters: The Party sees this next technology revolution as both a way to leapfrog ahead of other nations in its quest to become the leading technology superpower of the 21st century and to enhance its control over the population.

5. President Trump's approach to China is about to change for several reasons: the administration's National Security Strategy very clearly reframed the U.S. government's view of China in a confrontational way, the president believes China is still not doing enough on North Korea, and the administration's "America First" trade contingent is ascendant. Several trade actions are in the planning stages and they will likely hit soon.

Why it matters: Trump has been consistent for decades in his view that China is taking advantage of the U.S. but has held back because of North Korea. As in many other issues we should expect him to revert to his original views, which means far more friction in the U.S,-China relationship is ahead.
Go deeper: Mike Allen and Jim VandeHei write about how 2018 will bring Trump's instincts to bear on trade and North Korea.

6. If the U.S. decides China is not doing enough on North Korea, as the recent tweet from President Trump suggests, a likely next step is U.S. sanctions against more important Chinese individuals and firms, including systemically important financial institutions. Such sanctions would likely lead Beijing to reevaluate its cooperation with the U.S.

Why it matters: President Trump has made North Korea the defining foreign policy challenge of his presidency. The status quo or even a "freeze" of the North Korean nuclear program would be a failure given his rhetoric, so either he ends up looking like a paper tiger or military action becomes more likely next year.

7. China's more assertive foreign policy will continue as the country grows in confidence and power, and as it sees increasing opportunities to capitalize on the vacuum created by Trump's "America First" policies. Beijing's efforts are not welcomed by all but in the absence of American leadership, especially around China's periphery, targeted countries will increasingly gravitate towards China. China will continue to grow influence across the developing, especially in Asia and Central Asia

Why it matters: There is already Western pushback against Chinese influence, particularly in Australia and New Zealand, and there are efforts underway in the U.S. and EU to further regulate Chinese investment, media and lobbying efforts


​CHINA 2018

​1 big thing: 100 days after Maria

It's been 100 days since Hurricane Maria hit Puerto Rico, and the island is still struggling to return to normal, Axios' Haley Britzky notes.

Here's where things stand in Puerto Rico, according to FEMA and the Puerto Rican government:

96% of the island has water.
Almost 70% of the island has electricity, but the U.S. Army Corps of Engineers said electricity likely won't be fully restored until May.
88% of gas stations were open as of today.
8% of supermarkets are still closed.
There are still 392 people seeking shelter, and 24 shelters open and operating.
There are 3,039 FEMA personnel operating on the ground, and 15,000 civilian and military personnel.
All airports and federally maintained ports are open.
All hospitals are open.
More than 168,000 Puerto Ricans have fled to Florida, the New York Times reports.

Why it matters: Many of these U.S. citizens still have no power, and the government is having trouble identifying all of those killed by the hurricane. Carmen Yulin Cruz, the mayor of San Juan, criticized President Trump this week for being "disrespectful to the Puerto Rican people," and called him the "disaster-in-chief."


income tax preparation

​Amazon (NASDAQ: AMZN) is expected to have a huge holiday quarter. However, based on recent history, including the holiday quarter from a year ago, the company could lose money at its industry leading e-commerce business. A positive net income for the fourth quarter 2017 may rely on its Amazon Web Services industry leading cloud business.

In the fourth quarter of 2016, Amazon had total revenue of $43.7 billion. Net income was a tiny $475 million. Amazon’s North American division had operating profits of $816 million on $26.3 billion in revenue. Amazon’s International results was an operating loss of $487 million on $14 billion in sales. In other words, between the two, Amazon’s e-commerce business had operating income of  $329 million, a remarkably small margin.

Amazon Web Services produced almost all of the operating income in the fourth quarter of 2016. The figure was $926 million on revenue of $3.5 billion

In its third quarter 2017 results, Amazon issued guidance which showed that its e-commerce operations could indeed lose money in Q4. Management said revenue for the fourth quarter would be between $56 billion and $60.5 billion. Operating income was forecast to be between $300 million and $1.65 billion. At the lower end of the operating income forecast, Amazon’s e-commerce business will almost certainly lose money, and AWS’s operating income will be necessary to drive a positive bottom line for the company as a whole

CEO and founder Jeff Bezos has once again convinced Wall St. that strong earnings are not necessary for Amazon to be a success. At is takes a larger and larger piece of total retain sales, particularly in North America, huge profits will eventually be the results. However, as revenue rises rapidly, there is still no evidence of that.

The evidence is that Bezos continues to be convincing has show up in Amazon’s share price once again. Its stock is up 55% this year to $1,169. Its market cap is $563 billion. Only Microsoft (NASDAQ: MSFT) at $660 billion and Apple (NASDAQ: AAPL) at $869 billion, are ahead of it.

Amazon’s e-commerce business may not post positive operating income in the fourth quarter, and once again Wall St may not care

​You don't have to wait until 2018 to get a good sense of what next year's smartphones will look like.

What to expect: Because the chips that power such phones have already been designed, we already know that high-definition displays, augmented reality capabilities and support for faster networks will be key among the key features. Also on tap for next year: more competition from Chinese brands and advances in facial recognition technologies. 

More bandwidth: Qualcomm executive VP Christiano Amon says to expect more phones with 4K resolution displays as more video is being delivered in mobile format and more network providers have the bandwidth to support it.

To that end, one nerdy-but-important feature will be support for gigabit LTE — a faster version of today's 4G networks and a piece along the road to the next version of cellular networks, known as 5G.
"Many devices have already come out, but it will become mainstream with all top handsets coming out next year," mobile strategy consultant Chetan Sharma told Axios.

Cameras and sensors: Qualcomm has already said that its new high-end chip will feature improved security as well as support for two features found on the latest iPhones — a portrait mode camera and the use of facial recognition for unlocking the device.

Current Analysis' Carolina Milanesi says the better facial recognition is an easy outgrowth of companies wanting to put improved sensors on the front-facing cameras to support augmented reality.
Speaking of which, Google is looking to add augmented reality support to more Android phones. (Currently ARCore, its rival to Apple's ARKit, is supported only on the Pixel 2 and a couple popular Samsung models.) Look for a lot of next year's high-end phones to support that as well.

More choices: You can also expect more brands in the mix, especially some Chinese brands that have been popular outside the U.S. "Chinese players – Huawei and Xiaomi — are likely to make a big push for the U.S. market," Sharma said.

AI hits the phone: Artificial intelligence will also make its way deeper into the operation of smartphones. "Consumers will feel this in more personalized and better performing apps," Sharma said.

The X factor: Given its more open ecosystem, it's easier to see what's coming to the Android world. Less clear is what Apple will bring when it updates the iPhone in the second half of the year.

That said, one likely trend is to see iPhone X features like facial recognition make it to more of the lineup. Apple has also said it sees augmented reality as a big deal, so expect to see advances on that front as well.


President Trump speaks during a rally at the Pensacola Bay Center on December 8, 2017 in Pensacola, Florida. Photo: Joe Raedle/Getty Images

If you ask some close to President Trump what worries them most about 2018, it's not Robert Mueller's probe. It's that establishment guardrails of 2017 come down — and Trump's actual instincts take over.

Next year will bring "full Trump," said one person who recently talked to the president.

Trump has governed mostly as a conventional conservative — on tax cuts, his Supreme Court pick, and rolling back regulations. Most of his top advisers are fairly conventional conservatives, so that makes sense.

Most of those in his current decision-making circle — even if they're not mainstream Republicans — are defending mainstream Republican principles like free trade and an internationalist view of foreign policy.
But top officials paint a different portrait of Trump when it comes to what he really wants on trade, immigration and North Korea — but has been tamped down by skeptical staff and Cabinet officials.

In private meetings:

Trump keeps asking for tariffs — on steel and aluminum, in particular. He wants a trade war, and has for many years. His economic and diplomatic advisers persuaded him to delay trade actions in 2017.

Those advisers recognize that the day of reckoning will come in 2018, regardless of whether economic adviser Gary Cohn and Secretary of State Rex Tillerson — who advocated restraint — stay or go.
Cohn and Treasury Secretary Steve Mnuchin successfully persuaded Trump not to do anything rash while tax reform was being negotiated.
Trump also saw the advantage of trying to use that as leverage with China to get help on North Korea. He said yesterday in an interview with the N.Y Times: "China's hurting us very badly on trade, but I have been soft on China because the only thing more important to me than trade is war. O.K.?"

And he tweeted yesterday, in response to Chinese ships secretly delivering oil to North Korea: "Caught RED HANDED - very disappointed that China is allowing oil to go into North Korea. There will never be a friendly solution to the North Korea problem if this continues to happen!"

NEW: Look for Trump to take action on trade in the next month. It probably won't be next week, so as not to disrupt the afterglow of the tax cut. But nothing is final.

Trump still wants his wall, and tighter restrictions on legal immigration. He's a true believer on this stuff, and knows intuitively that it keeps his base stoked.
Trump seems most interested in discussing military options on North Korea in these meetings. He is surrounded by advisers who share his concern about the rogue state, but not his fixation on a military strike.

And some top officials have told us Trump's belligerent rhetoric on the subject makes them nervous.
There is a reason the harshest assessments of Trump usually leak after North Korea meetings.Sign up for Axios newsletters to get our smart brevity delivered to your inbox every morning.


Daniel Cullinane CPA

25 Plaza 5 25th fl Jersey City NJ                                          phone 732-516-1648 fax 732-516-9778

MBA Taxation

Daniel Cullinane CPA

2500 Plaza 5 25th fl  Jersey City NJ 07311                                                          phone 732-516-1648  fax 732-516-9778

                 MBA TAXATION