June 9, 2021

We Don’t Just Need a Strong Economy; We Need a Strong Workforce

I’m sure the response to this comment is, why not have both? And my answer is, since the challenge of growth that is being fueled by newly printed money that is then distributed and fuels spending, that’s not sustainable growth. And what happens when the spending stops? Or worse, what happens when the printing runs out? The answer from one side is higher taxes, the answer from the other side is silence.

Taxing private citizens to fight growing deficits is not simple. Rather, raising interest rates increases income, and income is taxable. Increasing wages creates more taxes and the resulting spending increases tax revenues. Much of what I’ve written about regarding infrastructure programs is exactly the kind of work that will generate both corporate tax revenue and worker tax revenue. I mention this because the goal of tax the rich sounds good in a soundbite, and I’m not entirely against the idea. But taxing capital gains, taxing equity trades, is what I see as the government’s exploitation of the recent removal of traditional commission. Does this harm the rich, sure, but it also hurts anyone who owns an IRA or is involved in a 401k plan, and that impacts over 50% (recent Gallup poll) of the private sector. Make the challenge to get 9 million unemployed back to work and manage taxation fairly, not as a punishment is, in my opinion, the better answer.

I also bring this up because so many of the current legislative programs being argued in both houses is in part due to the dense language that hides genuine intent. I’m never surprised that politics works this way, but our government is called the public for a reason. Because if it were really public it would be far more transparent that it currently is. So many are calling for bold changes that are followed by speaking of those it suggests helping, and not by the strategy that its actually going to require. For this reason, I’ve maintained higher cash levels to take advantage of growing volatility while maintaining enough diversity in the portfolios to provide better valuations and much welcome income. Recent investments in the Hybrid portfolios include Lululemon Athletica (LULU), Estee lauder (EL) and Constellation Brands (STZ). Add to this strategy and the technical condition for the Healthcare and Industrial sectors, and Small Cap ETF (IJR) in the Select portfolios are improving as well. The markets, in my opinion, are poised to correct and as the summer progresses and reopening begins to release actual results, that, and the promise of some kind of infrastructure bill being voted on and passed would set the capital markets on the way to a rewarding fourth quarter. In the meantime, it’s back to patience.

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