April 15, 2021
I’m not the kind of person that likes to say “I told you so” but today, I just need to say it…
I told you so.
Now, I’m not referring to you, the reader (because like me, I know you get it)… I’m referring to the establishment types in Washington, D.C. that somehow think it’s OK to print money like it’s going out of style… all while simultaneously offering handouts to every Tom, Dick, and Harry that they believe is so deserving of our hard-earned taxpayer money.
Washington is not listening to any kind of responsible fiscal measures, so it’s up to us, the taxpayers, to make sure the politicos get the message: INFLATION IS COMING.
In fact, I’d argue… it’s already here.
Consumer Price Surge
Did you see the Consumer Price Index report on Tuesday?
I realize there are those in D.C. who would like to dismiss it as no big deal and entirely “manageable” (like Jerome Powell at the Fed)… But for those of us who have seen market bubbles of the Federal Reserve’s making before, we know the effects of historically low interest rates for a historically long period of time, combined with asset purchases and (insanely) liberal fiscal policy, will lead to disastrous effects.
Consider the hand the Fed had in both the makings of the 2000 tech bubble and the fiscal crisis of 2008. In both cases, policy was too accommodative (and then, not accommodative enough). It’s like central bankers can’t help themselves… They’re always a day late and a dollar short. I’d prefer the U.S. equity markets and our general economy not be exposed to their incompetence again… but nonetheless, here we are.
The current policies have been called reckless and irresponsible by former President Bill Clinton’s Treasury Secretary, Larry Summers. And the media and cable legend, Leo Hindery (who joined me on this week’s podcast), also worries these policies will lead to much larger problems for the economy down the road.
Twelve-term Congressman. Air Force surgeon. Presidential candidate. Ron Paul reveals the secret to “opt-out” of our bankrupt, increasingly socialist system right here.
Hindery, the founder of the private equity firm InterMedia Partners, who has previously supported Democrats, says the Biden team is trying to accomplish too much, too fast. As a result, he’s worried we may wind up with very little…
“We need to spend about $1.5 trillion on traditional infrastructure, not $2.5 trillion. And we can’t forget that we have already committed ourselves to $1.9 trillion for COVID relief.”
This spending, he says, “will put inflationary pressures on the economy.”
Hindery explains that there is no possible way that you can spend this much money without some kind of inflationary after-effect. As such, he’d prefer to see infrastructure spending go through an infrastructure “bank” as opposed to the U.S. treasury.
As the former CEO of AT&T Broadband, Leo would love to see better broadband access for all Americans. But not the way this administration is doing it… Instead, Leo tells me, we need an infrastructure bank that takes the burden off the American taxpayer and allows for sovereign wealth and pension funds to invest in our infrastructure instead.
In addition, the former founder of the biggest region sports network, the YES network (home to the New York Yankees… for any Yankees fans reading!), told me there is no way we will not see inflation as a result of these spending moves.
Interestingly, though he’s always been more left of center, he also believes that throwing in social spending into the infrastructure bill is highly problematic. I encourage you to listen to the entire interview that has all kinds of nuggets of interesting information.
I think Hindery is right and he, like Summers, isn’t afraid to speak up. Nor am I, for that matter… because inflation is becoming quite real.
Energy prices are up 9.1%! How is that helpful when people are trying to go back to work? March prices for everything, on an annualized basis, were up 2.6%, on the heels of a 1.7% gain in February.
In other words, this isn’t going so well.
The Bright Side… Cryptos, Coinbase, and Gold
Of course, while I don’t appreciate what the double-whammy combo of irresponsible fiscal and reckless monetary policy may be doing to our economy right now, I am a realist… And, as a realist, I watch markets carefully for opportunities. We all know, there is always opportunity…
Bitcoin has certainly benefited from this inflationary environment, with it registering its highest price ever this week – more than $64,000 per coin. Part of the appeal of cryptos lies in the fact that they’re theoretically not governed by a central bank… so they represent a truer form of currency.
That said… At present, given that bitcoin is priced in dollars and the value of the dollar is growing weaker, you can’t entirely avoid the reality that it will take more dollars to buy one bitcoin. Nonetheless, it’s possible that some of that dependence on the dollar will subside in coming years.
More big news this week in cryptos was that Coinbase went public on Wednesday on the Nasdaq Composite Index. It now trades under the ticker symbol COIN. Coinbase is a crypto currency platform that enables people to hold, exchange, or sell cryptos. I’m certain that if management runs this company well, it could be one heck of a business! It’s clear there’s an opportunity in the future of digital wallets – the company’s growth proves that… It has been positively staggering.
As of the first quarter, Coinbase reports it had 56 million verified users, which equates to an 11.3% share of the cryptocurrencies market. Revenue for the first quarter is expected to come in at $1.8 billion, up more than 800% from $190.6 million in the same quarter last year. (The company advises that the results are preliminary and unaudited.)
Meanwhile, Coinbase said its net income grew to between $730 million and $800 million from $31.9 million last year. First-quarter trading volume equaled $335 billion with quarterly revenue topping.
Now, there are risks… Can management effectively run the business? Will blockchain be allowed to flourish without the interference of big government? Will people increasingly buy into the idea of cryptos?
These are some of the questions that Stansberry Research crypto expert Eric Wade and I discussed in a recent podcast, and he addresses them at length here in this free video. Cryptos are not risk-free, but they may offer huge opportunities, so I recommend it’s worth knowing as much as you can about the space.
The other opportunity I’ve suggested people consider is an oldie but a goodie… gold. Whether it’s the pure raw commodity or companies that help capture the benefits of a well-run business in addition to the commodity, gold can be a great hedge for your portfolio.
I’m offering these ideas because I know how frustrating it can be to hear the doomsday reports and think, “what do I do?” Rest assured, thanks to the sophistication and entrepreneurial nature of our markets, there’s usually an opportunity for investors to make money no matter the economic environment in which we live. And, after all, part of freedom includes financial freedom.
Remember: It’s game on. So, until that 10-year Treasury starts spiking to uncomfortable levels, the equity markets will (for the foreseeable future anyway) continue to benefit. Just make sure you’re nimble and able to capitalize on potential upside through a well-diversified portfolio.
Because… I’ll say it again, inflation is here!
- There’s the 20th-century definition of infrastructure as roads, bridges, highways, and airports. But in 2021, streaming broadband is now an integral part of the package.
- The concept of a National Infrastructure Bank would tap the fiduciary community of expansive pension plans and sovereign wealth funds – instead of always relying on the Treasury.
- Mitch McConnell says corporations have no place in politics, but he’s taken more money from Big Business for reelection than nearly anyone on the Hill.
- China’s looking to knock us out as the world’s hegemonic powerhouse, meaning it’s more pressing than ever for CEOs to follow an America-first ethos.
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Publisher, American Consequences
With Editorial Staff
April 15, 2021