selections VFIAX and MGC has gone up all year and would have kept your money safe while rewarding you with some dividends and some nice capital gains. We continue to believe the next six months will be more of the same. Much of this belief is based on a summation of the current economy we posted on earlier this year that those companies, very large corporations and mega sized private businesses, are prospering under an Obama administration. The very businesses Obama preaches against are the very ones he is using in his crony capitalism. As they say watch what people do, not what they say, so smart people figure out the deal and adjust your investing accordingly.
Let's call this new normal the "political economy". The trend is a general malaise brought to you via a sub 2% growth. One can only imagine what just a small uptick in the economy to a 3% growth would produce, but with the high regulatory environment and high taxation on small business this will not be occurring in the near future under Obama. Remember the Reagan recovery was producing 5% growth rates and above quarter after quarter and with less regulations and less small business taxation jobs boomed. Small business is where 70% plus of new jobs come from and right now they are not hiring. Big companies shed jobs to increase profits and only add jobs when absolutely necessary,
This is an asset rich/income poor economy based on cheap money and financial engineering via large government deficits and huge federal reserve debt purchases of government debt. So people who have money and corporations who have assets benefit from pushing money into assets that produce capital gains and not income. More potential to gain wealth from lower taxed asset growth than higher taxed income producing assets. Note how publicly traded companies have spent huge sums of profits and cash flow to buy back stock and not create jobs because there is no opportunities in a slow growth economy. Took us awhile to figure this deal out, but we did and since then we personally have prospered handsomely from the decision.
Now those of us who have large holdings of stocks and financial assets and those who have real estate in places like New York and San Francisco are doing very well in the Obama economy. Having access to credit is a plus as well since buying on cheap credit, below 4% sometimes, and investing in assets that gain due to federal largess and federal reserve engineered asset growth just adds to the money being made by the wealthy in this economy. Truth is that regulation by Obama is actually helping big business and banks because they can spread the cost over a larger customer base and squeeze out small business competitors. Point in action is note that Walmart is all for a minimum wage increase because they know it will hurt smaller operators nipping at their business model.
Young folks and many who voted for Obama are actually the ones getting hurt in this "political economy". There is much lower home ownership as many can not afford homes that have gained value or in jobs that are such low pay the monthly payments are above their reach. ,Those jobs offer young people little career experience or important early learned job skills, and there is little or frankly no upward mobility to be obtained. The American Dream open to so many just three decades past has become out of reach for many young people in this new normal.
Technology and so called green industries have prospered under crony capitalism where tons of taxpayer money has been funneled into a politically correct business model approved by the political masters. Until Americans and most importantly young Americans decide that they want a better future this is our economy. True wealth comes from earned success and not from financial engineering and as we noted in the first paragraph here wise investors will continue to place assets in mega capital business until the government leaders quit using financial engineering to stymie that approach.
We own VIFAX.
No comments:
Post a Comment