Should You be Worried?

I am concerned.

It’s only been nine months, but we have good reason to be very concerned about:

Supply Chain Breakdown
Rampant Inflation
Worker protests over human rights (to get vaccines)
Massive increase in violent crime
The biggest ($3.5 trillion) transformational tax and spend bill in history

I’ll have many blue links throughout this blog to source my information.

Supply Chain Breakdown

200,000+ vessels stuck at sea In California– opening ports 24/7 will have very little impact when if you can’t get labor and you can’t get trucks, the merchandise won’t move. US Supply Chain Disruptions Too Great for Biden Christmas Fix: Experts

Record Number of Container Ships Waiting Off Ports of Long Beach, Los Angeles: Executive

Rampant Inflation

The American people continue to see diminishing returns on their paychecks. They are now able to afford less with their monthly incomes because of President Biden’s national inflation crisis. During September, inflation clocked in at another 13-year high, with consumer prices soaring at the fastest rate since 2008.

High inflation is a massive tax on low, and fixed-income people that can afford it the least.

Americans are bracing for heating bills that are expected to be up by a staggering 54%.

Inflation at the wholesale level increased 8.6% in September (year over year) which is the largest increase since they began keeping this statistic in 2010. Curbing US oil production and pipelines so the US would be forced to buy from foreign governments makes no sense and is at the center of the inflation problem. Higher oil prices lead to higher prices for so many parts of our economy.

When the government decides to build a lot of roads and bridges and borrows money from our kids to do it, it takes a lot of lumber. Then lumber prices go up, which means homes cost more to construct and rents go higher. So, don’t think this doesn’t affect you!” Brian Wesbury

Meanwhile, Social Security recipient’s checks are scheduled to increase only 5.9%

Real cost of inflation to average American household: An extra $175 a month

Protesting for Human Rights (against vaccine mandate)

Flights are being canceled due to airline workers calling in sick to protest the jab mandate.

Front line Covid health care workers, nurses are giving up their careers rather than get the vaccine (hmmm wonder why they don’t want the shot?).

Police, TSA (40% may walk out) workers, and other first responders are also ready to give up their careers rather than conform with the vaccine. Thousands in our military are also refusing the vaccine in lieu of being discharged. What impact do you think these people walking out or being fired have?

Wait until the huge travel seasons of Thanksgiving and Christmas come and there are way fewer TSA workers and fewer plane crews reporting to work. Yes, the crap may really hit the fan before year-end. You may want to Christmas shop now.

The Worst Is Yet To Come From Biden’s Vaccine Coercion

I expect many more protests (walkouts) to happen and have a ripple effect throughout the economy. This might actually be great if it gets rid of vaccine mandates and gives the choice back to the people. A full reopen of the economy is the best medicine for the US economy.

Monetary policy is a slow-motion train wreck

Build Back Better (BBB) Bill

On Friday, 10/14, White House Speaker Jen Psaki said the reason nothing is working (supply chain and inflation) is that the economy is doing so well (low unemployment and consumer demand).

If the economy is so great, then why would it need a $3.5 trillion stimulus package? I agree we don’t need any new government spending (redistributing our tax dollars and printing more money).

Build Back Better Bill Actual Text It’s almost 2,500 pages, I didn’t read it, and I bet nobody that votes for it did either.

Some nuggets in the BBB that few people are talking about:

$3.5 Trillion BBB is 8 times the cost of the entire making of the United States Interstate Highway System
$2 trillion tax increase – higher business tax rates than almost every country in the world, including all of Europe and, of course, higher than China (It will be a reason for businesses to move out of USA as it will be cheaper to produce in another country. Terrible for US employment.)
$40 billion in additional death taxes (sorry farmers or business owners, sell your farm/business to pay the estate tax rather than pass it down to your children)
$3 billion for “tree equity”
$80 billion tax hike on small businesses
Double the number of IRS agents
Banks will be tracking every expense of $600 or more (Big Brother?) Can we look at the politician’s bank transactions that vote for this?
$7 billion for the Green New Deal Climate Police (paid workers to enforce whatever the new climate standards may be)
Requiring pre-K staff (child care workers) to have a college degree – where will you find these people and how much more will it cost? What about all the current hard-working child care workers that don’t have a degree???
Free college, tax credits, and Welfare for illegal immigrants
$500 million for culturally appropriate lunches
$7 billion for Ivy League schools (don’t they all have multi-billion-dollar endowment balances?)
$250 million more for health insurance company bailout
Free housing for convicted felons

So much more

What’s in the Build Back Better Bill

The Bad Parts of Biden’s $3.5 Trillion ‘Build Back Better’ Bill

What the “Build Back Better” bill is actually about

What does this mean for your investment portfolio?

Fortunately, my client’s portfolios are well-positioned to meet their retirement and other life goals.

We obviously have never seen a combination of these things in our lifetimes. Thanks to a great uptick in corporate profits the stock market has done especially well the past decade. It really took off since the 2017 Tax and Jobs Act and those tax laws haven’t changed yet which is great. The risk-reward picture for the stock market is not nearly as good now as it has been the past few years. There’s nothing wrong with selling some big stock position winners (especially in retirement accounts (no cap gain taxes)) and waiting this out for a bit with some of your money.

If the BBB bill gets passed as is, it will be a big long-term negative (not necessarily short-term negative) for the economy’s growth. More government dependence and spending ultimately lowers private employment, wage growth, and overall economic growth. I think stock market optimism increased recently (and the stock market rallied) when the (BBB) Bill was temporarily put on the shelf.

If it passes, the economy may be comparable to the post “Great Recession” economy. It moved like a plow horse or slow growth. Flooding the economy with what was called “quantitative easing” is the same government spending concept as much of the BBB bill. Stocks went up steadily in large part thanks to printing money. “Never let a crisis go to waste” It was the debt-infused economic blow-up, “Great Recession” and now the impact from the Covid related economic shutdown. The result in both cases is massive spending bills (tax and printing money) and no one knows where all that money actually goes, except the politicians.

The Supply Chain’s massive disruption isn’t going away soon. I think vaccine-related mandates will last at least through the election in 2022. I cannot imagine both of these issues not having a large negative impact on many sectors of the economy. It’s definitely a major inflation driver. It wouldn’t surprise me if things get worse, the BBB bill will be marketed as an economic savior. If passed, politicians on both sides will smile as they get paid back massively from lobbyists, corporations, and maybe even foreign governments.

Inflation is here to stay for the foreseeable future. That can be good for stocks. Always focus on corporate earnings. Some companies can more easily pass on the increased costs to consumers than others. Those will likely be the winners.

Real estate tends to do well with inflation. Investing in leveraged real estate assets and financing at low-interest rates can work especially well in inflationary times. I love this strategy.

Bond prices move inversely with interest rates. For now, interest rates have been kept near historically low rates. Of course, there is a great incentive for the US Government to keep rates low for all the new bonds it wants to issue going forward. If/when interest rates go up, that will hurt prices in the short run, but it would be nice to make more interest going forward.

I’d like to summarize by saying this is simply another chapter for the history books. America has always prospered through grit, determination, and innovation and it will always find a way to survive and thrive. The grit and backbone of Americans is starting to show itself already and it will win out again this time.

I’d like to hear about your experiences:

Witnessed supply chain-related issues…

Where you’ve personally seen price spikes…

Seen empty shelves…..

Had to wait on deliveries…