No bad (2,500 page) legislation getting passed this week in Congress is great news for America’s economic future.  From what I’ve been able to study and read, there were so many tax increases, pork spending plans, and entitlement expansion this would have been disastrous legislation for our economic future.  See fascinating U.S. Debt Calculator link .

The current debt per citizen is $86,000, $228,000 per taxpayer and growing. The legislation that’s being discussed would blow that up much faster.

The stock market reacted positively to it not getting passed this week and possibly ever.

Why?

Shockingly, at least two government leaders actually said on camera the proposed multi-trillion dollar legislation cost ZERO dollars.

This is the equivalent of ringing up a massive shopping bill and saying it didn’t cost you anything because you paid with a credit card.

Understand the government (both parties) doesn’t produce anything. They only redistribute our hard-earned money or print new money to pay for the promises they make to get reelected. When the Federal Reserve prints money it devalues the money we have saved and earned (inflation).

Inflation is a loss of purchasing power for existing dollars. 5.3% is the inflation rate the US is tracking in 2021, up from 1.4% in 2020. Inflation data link  Inflation through August at a 30 year high! The policies in place right now will continue to have a ripple effect for the foreseeable future.

Oh and Oil prices just hit a 7 year high: Link to oil price article

The best hedges for inflation are real estate and stock ownership.

The current immigration and Covid related (mask & vaccine) mandates are disrupting our country’s economic engine.

For example, vaccine mandates in NY restaurants have caused a massive loss in business:

LINK – NYC Restaurateurs: Business Down 40 to 60 Percent Due to Vaccine Mandate

Some hospitals are mandating their staff to get the vaccine and many in the medical field (frontline Covid nurses) are responding by giving up their careers rather than getting the vaccine. What does that say when many “in the know” and giving up their career over it? One example video link.

The same is true for some police forces and airline workers… This isn’t going away soon and probably won’t end well.

In my world, I respect the choices of others and I’ll choose what I put in my body.

Portfolio

I’m not worried about Corporate America through all of this as most big firms seem to be benefitting the most from everything that is going on. Sadly, often at the expense of small businesses.

By Corporate America, I’m referring to large companies most are publicly traded companies (stocks).

Technology stocks have some short-term risks if interest rates go up, but I don’t see interest rates going up more than ½ of 1 percent anytime soon. In September, we saw this happen as interest rates (10 year Treasury Bond) increased and many tech stocks lost 3-10%.

In summary, it’s normal to have volatility with stocks. Most years they go down over 10% from peak to trough at some point during the year with scary headlines causing fear. Acting on fear is what causes poor (sell) decision-making and is what you want to avoid.

Bonds have never looked less attractive from a portfolio perspective and the interest they are paying (1-3%) is less than inflation.

Q. Why own bonds at all?

A. Most people can’t sleep well at night with their life savings all in stocks due to the inherent volatility. The older we get (nearer retirement age or older) the less we can sleep with big downswings in our portfolio value.  Adding bonds to your portfolio tends to greatly reduce the overall portfolio volatility (and lowers long-term potential returns). Also, when stocks go down and people panic, they tend to sell stocks and buy bonds which drives up bond prices.

As you know, everyone’s situation (time horizon, risk propensity, goals, etc.) differs and it’s best to customize to fit you.

Let me know if you would like to discuss how your portfolio is currently positioned.