We now have ample evidence that our original analysis was correct about the changes likely to take place under this new government.
To begin with, re-regulation in many sectors and industries has happened at the speed of summer lightning. More centralized control of politicians in Washington D.C. has already taken place. The EPA, the Forest Service (a sub-department of the Department of Agriculture), Energy, and most other cabinet-level departments have rushed to reverse the changes made by the previous administration.
Those of us with a more optimistic outlook had hoped that a shift toward the center of both Democratic and Republican lawmakers and voters would be an equally likely and compelling story. But, at least initially, the center's far left have done their best to regain control through regulation.
We must remember that decisions made solely by Executive Order can be changed immediately after the arrival of a new president. However, those laws fought in the chambers of Congress can only be overturned by a new decision by that body or by an interpretation by the Supreme Court that said laws violate the supreme law of the land, the United States Constitution.
While higher prices have boosted oil and producers in the US and the world, I remain skeptical that the government can refrain from harming the traditional energy sector in the name of global warming. On the other hand, those energy sources that are considered "clean" are doing well.
It's interesting that "optics" is so important, isn't it? A vehicle with an internal combustion engine is considered dirty because it burns those awful fossil fuel residues. But an electric vehicle, which requires serious mining with all the associated environmental problems to get lithium, e-bikes, and more, is considered clean – even if the necessary electricity is still produced by natural gas and, in many cases, especially in China, by coal.
Second, steadily reappears as a continuing force. The fiscally irresponsible factions in the House and Senate will put future generations in debt, and future generations in debt to buy, buy and buy more votes today.
In any case, we are more than just giving $2000 to every American, regardless of need or request. For those suffering from lockdowns and other restrictions, the unemployed desperate for work, etc., this was a nice thing to do. But does Jamie Dimon, who as CEO of JP Morgan earns that much every minute or two, need $2,000? Does Elon Musk or Warren Buffett or those who still have jobs or companies?
Tax irresponsibility always leads to inflation. We must be prepared for an impending depreciation in the . This makes other countries, with healthier currencies, more attractive for 2021 and beyond than they have been. It also makes it easier for emerging markets, with much of their debt in dollar-denominated bonds, to repay their debt and use the freed-up capital for infrastructure and innovation. I will add mutual funds and ETFs for both of these broad sector games.
I will also be adding to my short treasuries holdings such as the ProShares UltraShort 20+ Year Treasury ETF (NYSE:) due to this re-inflation opportunity.
Third, taxpayer-funded grants to DC's new entrants' pet projects are a certainty. We will be told to forget Solyndra and Tonopah Solar (the most recent bankruptcy, this after receiving a $737 million government loan guarantee, both from an Obama administration cookie jar for gifts to campaign workers under the protection of climate change ). There will be a full court press for every company involved, no matter how skewed, at anything they could be portrayed as "climate change" involvement.
Don't feel like fighting it. Finally, remember: the federal government has no money other than that they collect from taxpayers and companies doing business in the US. Since you and I are going to pay for many projects that a normal businessman or responsible company would dismiss as a money pit, we as investors might as well take advantage of them.
Lose it on taxes, get it back on the market. Right now in good conscience I can't just buy an old company with 'sun' or 'wind' in the name – but I know there are responsible companies in this industry and I will research, analyze and then invest in them. Money will be thrown at all businesses, good and bad. Still, I have the idea to stick with the good ones.
I remain open to these three major changes. For all those who fear creeping socialism or unbridled interference, I think we'll have to wait and see. If President Joseph Biden is true to his history of the past 40+ years, he is not one to act with enthusiasm or prejudice. He is a centrist. He has worked well as a legislator, a company where compromise is not a dirty word. (Well, at least not until recently.)
While I personally can discredit many of his cabinet choices, they are more exhausting than firewood. Most are renewals of the Obama presidency. I also imagine that the far left of the center legislators will become increasingly marginalized. I even see a period in which Democrats and Republicans vote for the voters of their state's wishes, regardless of party membership.
There will of course be downward currents, but I see the rest of 2021 taking shape quite well as we are prepared to make some significant changes. Not a bad time to be almost fully invested.
I noted above my old favorite ProShares UltraShort 20+ Year Treasury ETF, which I wrote about before. I'm also seriously looking at a potential emerging markets ETF to take advantage of the declining dollar value of many emerging markets.
I want to buy real EMs. That's why I'm looking at the iShares MSCI Emerging Markets ex China ETF (NASDAQ:). Yes, I realize every other analyst is praising China for crushing it and now expects China to grow as much as 8% this year, the best of any country. As an analyst on China, I don't trust their statistics or their statements.
I also think it's ridiculous to call the second largest economy in the world (1st by purchasing power parity!) a 'developing country' to name. If you want a good international fund with some developing countries (sometimes worth it), take a look at the top countries in the fund's holdings. I bet China makes up somewhere between 25% and 45% of 99% of all "Emerging Markets" ETFs and traditional funds.
They distort the real rate of change for all emerging markets. They claim big rises in stock prices, yet a third to half of all their shares are in China! Hardly an emerging country. (It may be termed this way because the IMF and others use "per capita income" as a measure of which country is emerging and which is developed. That criterion qualifies any banana republic with 1,000 billionaires and 10 million serfs as an emerging country. ).
I would buy EMXC because I already have a lot of fame in the developed world. With EMXC I get the two biggest Asia Tigers + India as the biggest three holdings. That fits better with what I see as innovation without confiscation, good demographics and fair governance.
Here are the largest companies by region:
Source: Fidelity.com
Disclaimer: Unless you are a client of my company, Stanford Wealth Management, I do not know your personal financial situation. Therefore, I am expressing my opinion above for your due diligence and not as advice to buy or sell specific securities.
