Commentary for week ending 04/03/2021

Sorry I am bit late for this post.  “Close enough for government work” as the old saying goes.  Speaking of “government”, I assume you have all seen the “infrastructure” bill proposed by President Biden.  I put “infrastructure” in quotes because only about $583 billion of the $2 trillion are for true infrastructure improvements.  The rest are “wish list” items including money for “transformative” projects (whatever that means), child care (!), and other liberal agenda items unrelated to infrastructure.  I think we all agree that we need to improve roads, bridges, airports, etc. but not put money into unrelated items, especially since we are already so far in debt.  As stated before, I would have cut the COVID relief bill in half and spend about a half trillion for infrastructure improvements.  


Biden’s plan for paying for his latest proposal is to raise corporate taxes to 28%.  I think that raising the corporate rate to 28% will simply cause “tax inversions”,  where a corporation restructures so that the current parent is replaced by a foreign parent, and the original parent company becomes a subsidiary of the foreign parent, thus moving its tax residence to the foreign country.  And Biden keeps insisting that “no one making under $400,000 will see their taxes go up”.  But his own press secretary “clarified” that by saying he means a household, so that makes it $200,000 per individual.  And before you say, wow, 200k is a lot of money, think about high-cost of living cities like NYC and SF, and check out this site:  Cost of living: How far will my salary go in another city? – CNNMoney.  Also, Biden is considering taxing capital gains as ordinary income!    Taxing capital gains as ordinary income next year will result in increased stock sales this year and lessen capital investment.  Let’s hope that provision is not passed.  So, to sum up, I think that this “infrastructure” plan will end doing more harm than good.  But let’s hope that some moderate Democrats will delete some of the more onerous parts of the plan.


As for the performance of my funds, note that Barron’s has Facebook on its cover this weekend.  Barron’s agrees with me that Facebook is undervalued.  By my calculations, Facebook’s intrinsic value is about $382/share, so at the current price of $307, that is potential for another 24% gain.  So I still rate FB as a “buy”.  


As for other stocks in the funds, I would say “keep calm and carry on”.  Patience is a virtue in stock investing.   


I hope that you have enjoyed my posts, and, as always, please feel free to comment or email me directly.




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