Well, another week has gone by and Joe Biden has proven that he is more anti-business than Obama ever was. His latest attack is “waiving patent rights” for companies who make vaccines (like Pfizer and Moderna). I was nonplussed when I heard this! I didn’t know that the government had that power. What is the purpose of a patent if it can be taken away by government fiat? If anyone should have the right to waive a patent – it is the company who owns it – not the government. More importantly, this serves as a disincentive for companies to produce vaccines (and other drugs) if their rights can be taken away with the stroke of a pen. Finally, this plays into the Chinese’s hands – they have been stealing US intellectual property for years and now Biden is giving it away without the Chinese stealing it – they get it for free thanks to their Uncle Joe!
Also, on Biden, he refuses to acknowledge that government largesse is keeping people home instead of working. Many workers are earning more on unemployment supplemented by the overly generous stimulus checks than they can by returning to work. There is both anecdotal evidence from small business owners that people won’t come back to work and empirical evidence from the latest BLS report as well. It is hard to blame someone for staying home when they could make the same (or more when you count paying for child care) by staying home as they could by returning to work. It is time to end the extra Federal incentives for unemployment! And we should return to the old rules that a person has to be actively looking for work to collect unemployment since many employers are saying that they desperately need workers!
And have you heard the latest attacks on Facebook, saying that it practiced anti-competitive policies by purchasing Instagram and WhatsApp? I remember many people criticizing Mark Zuckerberg for these purchases. Instagram was acquired by Facebook in 2012 for 1 billion dollars when it had a total of six employees- people back then thought Zuckerberg was crazy! No, it turned out that he was a visionary who recognized a growth opportunity for his company. The same story goes for WhatsApp – Facebook acquired it for 19.3 billion dollars in 2014. Again, the company was criticized for overpaying. So to the folks who are criticizing Facebook now – you can’t rewrite history and call these purchases monopolistic now – they weren’t considered that way when Facebook acquired the companies back then! The purchases could have just as easily turned out to be disasters – it is part of capitalism to take risks and possibly reap the rewards.
As to the Growth Fund, I am pleased with its performance. Did you notice that Align Technology’s stock price has been on the rise? This is because more people want to improve their appearance since businesses are opening up. It looks like the market is validating my pick from January 30th! As for the other stocks in the fund, stay the course, even for the 4 non-performers. They will improve by year’s end.
On the Income Fund, all of the stocks have performed admirably. Again, stay the course, but perhaps take a little “off the table” from the top performers if you need to raise cash. And don’t worry about Pfizer, in spite of Biden’s best efforts, Pfizer has a good pipeline and will do fine – sit back and collect your dividends either in cash if you are semi-retired like me or reinvest them if you are still working.
As for the economy in general, as I previously espoused, I am concerned about inflation. Cooper prices are at a record high and lumber has increased by 280%! And here is more evidence from the Treasury department: the semiannual rate on I-bonds is now 3.54% based on an inflation rate of 1.77%. The previous inflation rates were 0.84% for November 2020 and 0.53% for May 2020. So be prepared for interest rates to rise on less safe investments like corporate bonds with a resulting decrease in price.
Speaking of savings bonds, they are not as terrible investment as you might think, especially as a long-term safe investment or gift. The traditional EE bonds only pay 0.1% but they are guaranteed to double if held for 20 years; this equates to an annual rate of about 3.5%. So they are still a nice gift to a newborn child or grandchild (just hold them for 20 years and don’t let the kid touch them!). And I-bonds offer a low cost way of protecting yourself from inflation. Check out www.treasurydirect.gov for details.
Well, that’s about it for now. Happy investing and Happy Mothers’ Day!
Barron’s magazine from yesterday agrees with both of you. Lots of “Help Wanted” ads down here in Atlanta area. But why would I work if I can stay home and get $32K equivalent?
https://onthemarkinvesting.com/wp-OTMcontent/uploads/2021/05/Barrons_20210510_23_1.pdf
Very cogent narrative, Dan. I’ll add that a long overdue increase in the minimum wage MAY drive some people back into the workforce, but won’t solve the issue. UI (like most social relief programs) was never intended to be a long term solution, rather, short term relief. As a lifelong Democrat, I’m embarrassed for my party, as the party of “Labor” has now become the party of “No Labor”…..and I find it amusing that some pundits are likening Biden to FDR. As Joe Manchin said, “FDR didn’t send anyone a check – he gave them a damn job!”