I spoke to a senior venture capitalist who you all know well, and what I learned was amazing.

There are 155 start up ?Unicorn? companies with a combined market capitalization of $500 billion. Most of these are located in the San Francisco Bay area.

They are accounting for an outsized portion of the profits of the US economy. Essentially, Silicon Valley is sucking up the best talent in the world and creating monster profits from whole cloth, much of which is spent locally.

There is nothing like watching history unfold on your doorstep.

And here is the problem.

Unicorns, by definition, are all privately held companies. Breathtaking profits are only shared among the founders, senior employees, and venture capitalists that took the leap of faith to invest during the firm?s early days.

As for the rest of us, we can only benefit from the profits of publicly listed companies, whose earnings fell 3% last year.

So while VC investors are feasting on the hyper growth in the technology sector, the rest of us have to get by with leftovers.

In other words, the Unicorns are eating our lunch.

This wasn?t a problem during the Dotcom boom of yore for the simple fact that almost no one made money back then. That was the time of market share, the big idea, the creative business plan, endless potential, and ?eyeballs?, with profits coming somewhere down the road.

They never showed.

The only thing the public investor missed when the inevitable bust occurred 15 years ago was the horrific capital losses that followed.

BUT THIS TIME IT IS DIFFERENT!

Unicorns are now making serious money.

The largest, the ride sharing company Uber, is worth $51 billion according its latest fund raising round.

It is expected to earn $2 billion this year. That could to rise $4 billion as its international expansion unrolls, and ancillary business lines evolve, like same hour intra-city delivery services.

Unlike past VC cycles, Unicorns are staying private for far longer, and there are many more of them. It seems that managers and owners are trying to milk their investment for all they are worth before letting the public in.

It's only when the companies are about to go low growth, or ex growth, and even ex profits that they are listed through an initial public offering (IPO) on a public stock exchange, like the NYSE or NASDAQ.

That explains the recent diabolical performance of many recent IPOs. After the initial post IPO euphoria, Twitter (TWTR) collapsed 65%, while Alibaba (BABA) took a 54% nosedive. More than half of all the IPOs issued this year are underwater.

Remember, Wall Street is all about selling stocks, not buying them.

This is why I have been advising readers to avoid IPOs like the plague. If you apply for shares and get them, watch out below!

It has gotten to the point where many VC investors are demanding that unicorns quit being such hogs and milking their firms for all they are worth before unloading them.

They want their investments to go public so they can cash out and roll the profits into the next generation of technology investment. This constipation of capital is so serious that it is actually slowing the rate of technological development.

And it?s always better to leave some profits for the next guy, lest the industry evolves into a gigantic pump and dump scheme. At least, that?s what my late mentor, Barton Biggs, taught me.

The unicorns are taking more than just cash from the rest of the country.

There is now a wholesale brain drain under way whereby unicorns are seducing the best managers and programmers from across the country with the promise of lucrative stock options. These have the potential to appreciate several hundred fold.

I have been brought in as a ?supervising adult? at a couple of start ups, and it was an eye opening experience.

While some coders are no doubt brilliant at punching in long strings of ?0's? and ?1?s?, apparently, they don?t teach business ethics, accounting, tax law, or even manners at programming school.

You need to possess all of these skills to create a truly successful and enduring company worthy of the public?s attention.

There is a possible happy ending to this fairy tale. As we approach the end of this economic cycle, which clearly has years to run, unicorns will start eyeing the EXIT doors more nervously. That means going public earlier and at lower valuations.

And public company profits are set to improve in 2016. This year the aggregate numbers suffered mightily from a collapsing energy sector, which saw earnings crater a heart rending 70%-80%.

As companies learn to deal with low oil, their year-on-year comparisons will improve or they will disappear altogether.

We might even make it to unchanged for the troubled industry.

Being the armchair general that I am, I think the markets are now in a situation similar to the 1939-40 ?Phony War? between Germany, Britain, and France (or ?Sitzkrieg? in German).

War was declared on September 3, 1940, but no actual fighting took place. Each side maneuvered troops, but not a shot was fired. The British dropped propaganda leaflets on German cities.

The phony war ended when Germany invaded Poland and Belgium on May 10, 1940, and subsequently overran France, with devastating consequences for the continent.

The financial markets are in a similar ?Phony War?.

We saw massive gaps up in what I call ?The New World Order? stocks of the financials, health care, commodities, and construction sectors.

Bonds and technology shares were mercilessly dumped in an ?ATM Effect? as investors sold their winners to reinvest in the rotational stocks.

No new money is coming into the stock market right now, and we probably won?t see any until next year.

Over the past two years, some $160 billion has been withdrawn from the stock market and moved into bonds or cash.

Will 2017 bring that money back in to take advantage of the vast expansion of tax cuts and deficit spending headed our way?

That will be the topic furiously debated by strategists in the weeks to come.

I am happy to say that I managed to navigate my readers successfully through the violence and the sturm und drang seen in the market in the aftermath of the November 8th election.

I swear to God, in the wee hours of Wednesday morning I called Mad Options Trader, Matt Buckley, and told him to buy the market when the S&P 500 (SPY) futures in Asia were trading down 800 points.

I knew they would open much higher.

I then spent the rest of the night thinking hard, cogitating, and plotting out a new roadmap for the Trump era. I managed to deliver my conclusions in a hastily put together webinar for followers at 12:00 PM EST on Wednesday.

It was my best attended webinar of the year.

It normally takes me two weeks to prepare a webinar such as that. This one took me three hours.

As soon as the index went positive the next morning, I sold everything I had and went 100% into cash, as I knew technology would quickly get slaughtered.

I sold my Facebook (FB) and short volatility (XIV) positions for a profit, and stopped out of Amazon (AMZN) for a small loss, disbelieving my good fortune. Amazon then collapsed an eye popping $70!

As a result, the long-term performance of my Trade Alert service has elevated to new all time highs almost every day during one of the most dramatic weeks in market history.

As of this morning, our six-year performance stands at 218.12%, giving us an average annual return of 36.35% since inception. We are up 26.21% so far in 2016.

The only way to stay in the business for a half century, as I have, is to be able to turn on a dime as I did last week.

Not many people can arrive at a totally new, groundbreaking investment thesis for the years ahead in a matter of hours.

Big hedge funds and institutions will be holding committee meetings over the consequences of the election for months.

This is why I do what I do.

While the earth is shaking, we still have the coming four days of economic data releases to deal with.

Monday, November 21st at 8:30 AM EST, we get the Chicago Fed National Activity Index, a weighted average of 85 monthly economic indicators.

On Tuesday, November 22nd at 10:00 AM EST we get a new update on the October Existing Home Sales.

On Wednesday, November 23rd we learn the Weekly Jobless Claims at 8:30 AM EST. Because of the national holiday the next day, the report is coming out a day earlier than usual.

Thursday, November 24th, all markets will be closed for Thanksgiving.

On Friday, November 25th, traders will be phoning it in, with only the ?B? team actually showing up for work.

At 9:45 AM EST we get the October PMI Services Flash, a survey of 400 US companies, and 1:00 PM delivers us the Baker Hughes Rig Count. No one will notice.

Keep in mind that virtually all economic indicators will be useless for the next two months, because they will only reflecting spending and investment conditions prior to the November 8th presidential election, and will be for a world that no longer exists.

Will the economy improve, reflecting new optimism of a pro business administration?

Or will it get worse, showing the rise of uncertainty pending a 180-degree change in US economic policies and a massive expansion of the national debt.

I think it depends on where you live.

We shall see.

With that, I?m keeping the letter short today so I can head off to the airport to host my Las Vegas Global Strategy Luncheon and attend the Traders Expo at Caesar?s Palace.

Wish me luck at the tables.

Sometimes You Have to Toot Your Own Horn

If you don't want to save yourself a few million dollars in taxes next year, please ignore this article.?

If you do, please read on.

Thanks to Donald Trump's surprise win, the US tax code is about to undergo the biggest change since John F. Kennedy chopped the maximum tax rate of 90% in 1962.

The good new is that there is a lot you can do to minimize your tax bill for 2016, the last year to take place under current law. But you have to take action immediately or at least by December 31.

On rare occasions, changes in tax law are retroactive to the previous year. It is more likely that the new tax rates won?t take effect until 2017, as the changes will be so momentous.

So I got together with my accountant who is extremely prescient on these matters, and has saved me a bundle of money in the past.

The great irony is that most accountants in the country will be attending tax seminars in coming weeks to bone up on tax preparation for the 2016 tax year. Much of what they will be told will be reversed in coming months.

This is going to be one confusing tax year.

I?ll list off the crucial action items:

1) Defer All Income

Taxes are going to fall in 2017, a little for small income earners, and a lot for the wealthy. Any income you can defer into the New Year will get taxed at the new, lower rate, not this year?s higher rate.

The other benefit is that the taxes on 2017 income won?t be due for 16 months, compared to only four months for 2016.

Be sure to dot your i?s and cross your t?s here.

The IRS absolutely hates year-to-year income shifting like this, and they will catch you up at every opportunity. If you have already cashed a check in 2016, the income absolutely CAN?T be moved into 2017.

For those receiving 1099 income, be careful here.

If a check is mailed at the end of December and you don?t receive it until the beginning of January and cash it in January, it will still be counted as 2016 income. That?s because the payer?s 1099 dictates in which tax year the income is reported.

It may be time to have a friendly chat with your payer.

Mismatching Form 1099s and reported income are a major trigger for tax audits (I learned that the hard way).

2) Accelerate All Expenses

Anything that minimizes your 2016 profit to the benefit of your 2017 profit will have the effect of reducing your taxes.

Many overhead expenses, such as utilities' bills and online services, can be paid several months or a year in advance. Renew all those newspaper and magazine subscriptions NOW.

Have a chat with your employees and see if they are willing to accept year end bonuses early. Make sure all of the payment dates are well documented and preserved in case of a future audit.

3) Capital Gains

During the presidential campaign, nothing definitive was said about long term capital gains taxes which now range from 15%-25%.

However, if you were planning to sell stock, your home, or any other investment assets, it might be wise to defer the closing date until January.

That way, if capital gains taxes ARE cut, you will receive an immediate benefit.

4) Carried Interest

Managers and investors in hedge funds have been enormous beneficiaries of the carried interest tax treatment for the past 45 years.

This allows investors in the appropriate tax efficient structures to be taxed at a 15% rate, instead of the 39% or 43% the rest of us pay. Carried interest is considered a principal cause for the rise of the 1%.

From very early in his campaign, Trump promised to get rid of carried interest which he characterized as an unfair advantage enjoyed by hedge fund managers who largely opposed him.

As with everything else Trump has said, no one really knows if he will carry through with this plan.

I doubt even The Donald knows at this point.

5) Obamacare Penalties

We are now in the middle of the enrollment period for Obamacare for 2017 and most other health care plans. Shunning coverage will generate a fine equal to 2.5% of your adjusted gross income.

The repeal of Obamacare is one of the safest bets out there, as it was such a big campaign issue. So if you feel healthy and want to forgo health coverage, you can now do so free of any penalty or guilt.

The cheapest, lowest end health care policies cost $8,000 a year, and have high $8,000 deductibles. That means your medical expenses have to exceed $16,000 a year for you to receive one penny of net benefits.

That buys a hell of a lot of Band-Aids.

As for me, I?m home free, as Medicare kicks in for me on January 1st. That is assuming, of course, that Medicare still exists.

6) Self Employment Tax

Trump has made much of helping small businesses.

The biggest hit these businesses take is the 15.3% self-employment tax. Minimizing net income in 2016 will also have the advantage of moving income into 2017 when it will be exposed to a lower tax rate, or no tax at all.

However, no information on the details of this tax by the new powers that be has been given whatsoever.

One can only hope.

7) Solar Subsidies

With the denial of global warming now official government policy, subsidies to install solar panels or buy electric cars will almost certainly be the first on the chopping block.

These gave buyers a 30% investment tax credit which they could use to offset taxes on earned income or carry over into future years.

Especially hard hit will be taxpayers in the American Southwest who were major buyers of these panels.

The Bottom Line

Keep in mind that all of this is a work in progress, and that this is a fast moving target. Trump knows very little about the workings of the federal government, and I?m sure a crash course is underway.

How much campaign rhetoric gets translated into law remains one of the great unknowns of 2017.

It?s Been Nice! So Long!