Infrastructure. It is the big legislative issue in Washington, D.C., and it’s a potentially big issue for the economy and the equity markets, depending on how the situation plays out.
As of this writing, there are multiple confusing issues coupled with a lack of clarity on just what might happen, and what it will actually mean for financial markets going forward — and what that means for us, as investors.
So, how do we make sense of all of this? Well, fortunately, I have a Wall Street insider tapped into the machinations in Washington on this issue. And he also happens to be an expert on interpreting this situation from the market’s perspective. Best of all, I get my insider’s views on this, and just about every major market issue, every trading day well before the market opens.
In a moment, I will tell you how you can get this same inside market intelligence along with me, and in a five-minute read each morning, but first, let me share with you what my insider has to say about the state of the infrastructure bill…
The market has experienced infrastructure headline whiplash over the last few trading days, so I want to take a few minutes to update 1) What has happened, 2) If an infrastructure bill is likely and 3) What it all means for markets.
First, as a bit of background, the market “cares” about infrastructure because the federal government spending money to build roads and bridges amounts to economic stimulus. More stimulus means a likely stronger economic recovery, and that’s positive for cyclical stocks and value, which is why they rallied last week on the infrastructure news — and why they dropped on Monday amidst more infrastructure confusion.
However, I want to be clear that while infrastructure is essentially more stimulus, it doesn’t compare, at all, to the COVID-19 stimulus bills. The current infrastructure bill is around $1 trillion in total, but only about $600 billion in new spending, spread over five to eight years.
Point being, the infrastructure bill isn’t going to produce anything close to the economic benefit we’ve seen with the COVID-19 stimulus bills, so we shouldn’t expect it to materially boost the recovery, although clearly it will add more fuel to the economic fire. Bottom line, if the current infrastructure proposal actually passes, it’ll be an incremental positive for the economy, but not anything close to a bullish gamechanger.
So, what is the current state of the negotiations? In a word, muddled.
Late last week, President Biden walked back the “we have a deal” sentiment when he said he would not sign the bipartisan infrastructure bill unless it was accompanied by a “human infrastructure” bill that addresses social issues but also will likely increase corporate taxes (and maybe capital gains taxes). Biden hedged that condition over the weekend, but at this point it is unclear if Republicans will support the bipartisan bill unless there are guarantees it can pass on its own. If not, it is unclear if Democrats will pass the bipartisan bill and the human infrastructure bill on their own.
Here’s why that matters. From a market standpoint, the best outcome is for the bipartisan infrastructure bill to pass on its own, and not have the human infrastructure plan pass. I say that because the net economic impact would be more stimulus (increase infrastructure spending) but no tax increases.
The second-best outcome for markets would be for nothing to happen at all. No bipartisan infrastructure bill and no human infrastructure bill. I say that because while the economy would not get additional stimulus, companies and consumers would not get a tax increase either.
Finally, the worst outcome, again from a market standpoint, is that both the bipartisan bill and the human infrastructure bill pass. I say that because while the bipartisan bill would provide some economic boost, it would not be material and it would be spread over the next several years. Conversely, the increase in corporate taxes designed to fund the human infrastructure bill would immediately reduce expected 2022 earnings (and perhaps expected 2021 earnings, if the bill was retroactive). And that would be a new, unanticipated headwind on stocks.
To be clear, I don’t think this outcome, by itself, would cause a correction. But if it was later complemented by a more-hawkish-than-expected Fed and an uptick in the COVID-19 Delta variant, then we would have the recipe for a correction in the coming months.
The analysis here is outstanding, and it is what you can expect each day from my market insider.
If you already subscribe to one or more of my newsletter advisory services, you know that I put a lot of research into each issue, and that I back up our investment decisions with that in-depth research. Well, a lot of my knowledge is bolstered by my market insider, as he is not only a friend, but he is also one of the smartest and wisest Wall Street analysts I know.
Most importantly, he has earned my trust over the years with his spot-on analysis and wise counsel.
And now, I am proud to share that expert analysis and wisdom directly with you via my new publication, the Eagle Eye Opener.
This publication comes out every trading day at 8 a.m. Eastern Time, and the best part about it is it only takes about five minutes each morning to read. That’s right, in just five minutes in the morning (maybe 10 minutes if you are like me and prefer to read slowly and methodically), you can gain an edge on the markets using the same institutional-level intelligence the pros on Wall Street use to make their big-money decisions.
Perhaps most importantly, the Eagle Eye Opener will help you avoid getting blindsided by market developments not covered deeply in the mainstream financial media.
Think of this publication as a kind of intel playbook. So, if you read it every day, you’re going to know what’s driving the market. You’ll know which way the markets are likely to go… and what to do when that happens.
You’ll also know what to do if it does the opposite.
That means you’ll know what to do ahead of time, whichever way the market swings… and you’ll know why and where the profit zones are.
Now, I am not claiming that this information is some kind of crystal ball, as there is no such device. However, it is the best tool I’ve found, and it’s the same information that Wall Street elites have at their fingertips each day — and now you can have it, too.
Once again, when you subscribe to Eagle Eye Opener, every trading day at 8:00 a.m., I’ll send you proprietary intel that was once for institutional investor eyes only. The intel covers breaking opportunities in:
You’ll also get the latest economic data impacting investors in the market, as well as special features and analysis, such as the infrastructure insights you just read, that take a deeper dive into certain market sectors or developments — and you can get all of this information for under $1 per day!
For me, the content in the Eagle Eye Opener gives me the confidence of being forearmed with this information before the opening bell… all in just about five minutes of your time.
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As you know, knowledge is power. And with the Eagle Eye Opener, that power translates directly into profits.
ETF Talk: Tapping into These ‘Noble’ Stocks
As inflation continues to march on without an end in sight, investors are turning to dividend-paying stocks to provide some refuge from its effects.
While the status of dividend-paying stocks is always precarious — indeed, many dividends were reduced or eliminated after the recent economic downturn — there is a group of dividend-paying stocks whose members have a reputation for stability and consistency in their dividend payouts. Enter the Dividend Aristocrats.
To earn this coveted label, a stock in the S&P 500 must have increased its dividend annually for at least the past 25 consecutive years. There are 65 stocks currently on this list as of 2021, ranging from the unglamourous Federal Realty Investment Trust (NYSE: FRT) to the well-known Coca-Cola Co. (NYSE:KO). In addition, an exchange-traded fund known as the ProShares S&P 500 Dividend Aristocrats ETF (BATS: NOBL) may show a way to tap into these stocks without having to own each one individually.
Like its parent list, the stocks in this exchange-traded fund’s (ETF) portfolio are selected from a list of companies on the S&P 500 that have increased their dividends for at least the past 25 consecutive years. All holdings are weighted equally, and each sector is limited to no more than 30% of the portfolio. At the same time, this methodology results in traditional dividend-paying sectors being overweighted in the portfolio.
Currently, the fund’s top holdings include Nucor Corporation (NYSE:NUE), Target Corporation (NYSE:TGT), Exxon Mobil Corporation (NYSE:XOM), Expeditors International of Washington, Inc. (NASDAQ:EXPD), West Pharmaceutical Services, Inc. (NYSE:WST), Franklin Resources, Inc. (NYSE:BEN), T. Rowe Price Group (NASDAQ: TROW) and the Cincinnati Financial Corporation (NASDAQ:CINF).
This fund’s performance has been relatively strong, even when including the damage done by the COVID-19 pandemic. As of June 29, NOBL has been down 1.55% over the past month and up 4.57% for the past three months. It is currently up 14.19% year to date.
Chart courtesy of www.stockcharts.com
The fund has amassed $8.6 billion in assets under management and has an expense ratio of 0.35%, making it less expensive to hold than many other ETFs.
While NOBL does provide an investor with a way to profit from the Dividend Aristocrats, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.
As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.
In case you missed it…
Effective Communication Is Your Responsibility
Note: Today I am proud to present to you a guest editorial by my friend and colleague Heather Wagenhals. An expert in communications, media and public speaking, Heather’s insights into how to effectively communicate are a perfect antidote for our polarized, tribalistic times. If you want to learn how to be a more effective communicator and to effectively persuade others, this article is for you.
“To disagree, one doesn’t have to be disagreeable.”
These words were spoken by my home-state Senator and the 1964 Republican nominee for president, Barry Goldwater. Sadly, today the idea of disagreeing without being disagreeable is barely recognizable in the public square. These days, extremism is the norm. Forget about terms such as “liberal” and “conservative” or “knuckle dragger” and “snowflake.” Those terms are much too docile.
Now, you are a “masker” or an “anti-masker”, a “Karen” or a “virtue-signaling, knee-taking apologist.” Even within my own Republican party, the rhetoric has become toxic. These days you are either a conspiracy-spreading QAnon disciple, or you’re a “RINO,” or a “Republican In Name Only.”
This labeling and name-calling, including those now-infamous tweets sent from the highest political office in the country, coupled with the lack of respect for our fellow human and the vitriol cast at those who disagree have fomented a pernicious intolerance that we have not seen in this country in decades. All one needs to do is look at the disgraceful Capitol siege that took place on Jan. 6 to know this.
Indeed, tensions are so high that a recent request by a store clerk in Georgia asking a patron to honor a corporate policy to put on a mask was met with a deadly response.
To me, this heinous behavior demands action, because if you are like me, a liberty-loving American who wants the best for her country, it is incumbent upon you to find and create connections with those who are still reasonable in order to make our country better.
You see, in today’s soundbite-fed, personalized social-media-streaming era, we can get lost in our own custom-tailored, perfectly curated and dreadfully myopic world. By avoiding reality through avoiding other perspectives and engaging in effective dialogue with others, we are only doing ourselves a major disservice.
As my friend and editor of this publication, Jim Woods, has written, “The only solution to bad ideas is good ideas.” Well, my corollary to that is that “The only way to put good ideas out into the world is to effectively communicate those ideas, and especially to those who might initially disagree.”
Sadly, today the art of communication seems to have been lost. In a digital age of texting, email, direct messaging via social media apps and 280-character tweets, we seem to have lost our ability to create meaningful connections and to employ all our communication faculties to effectively persuade others.
Yet, I believe there is still time to reach the undecided.
I am of the opinion that there are those who might ardently disagree with my views but who also are still open-minded enough to be willing to be persuaded. I know this because I have this mindset, and the chief reason why is because I don’t want to be wrong in my thinking. And if I can be persuaded by a strong and effective argument, one with facts, logic and emotional content, then so can others.
Of course, the trick becomes: how does one do this? Here again, I’ll turn to Jim’s insights, as he recently wrote, “In order to persuade others, we first must avoid putting them on the defensive with disrespect and insult. If you can do that, you’re already halfway home.”
One way to avoid putting others on the defensive is to understand what’s happening to them when you do just that. Indeed, knowledge of how we think and process information, and how our biology affects us when we greet and interact with other people, will help us succeed in effectively persuading others.
For example, if I had started this article with racial slurs and misogynistic insults and man-hating statements, you would probably get angry with me from the outset. In fact, the minute you or someone you feel a kinship with is attacked, your survival instincts kick in and you will shut down the critical thinking areas of your brain and stop listening.
So, the first thing we must learn to do is avoid “pressing another’s buttons.” If you immediately start hurling labels at others such as “liberal” or “leftist” or “woke progressive,” you are not going to be able to unlock the key to persuasion.
Instead, why not just begin a conversation with a sincere attempt to understand why a person thinks the way they do, and what their reasons are for those thoughts? Indeed, sometimes just the simple power of asking questions can be the most effective form of communication and persuasion.
Think of it as the Socratic method, or what is sometimes referred to as “street epistemology.” The power of asking poignant questions to others, and their own realization that they may hold views without very good reasons, can be a profound tool for initiating change. And you do so without you ever having to pass judgment.
The second thing we can do to help promote better conversations is to assume responsibility for ourselves. In this context, that means understanding that effective communication is 100% your responsibility — not to get your point across, but rather, to elicit the right result. Let me explain.
Have you ever asked anybody to, “meet me halfway” in a negotiation? If two people are involved in communication or negotiation, what do you think the percentage should be? Is it 50/50? Is it 60/40?
The answer is it is 100% your responsibility because that’s the only person you have control over. Here, it is important to consider that the meaning of a communication is all about the response you elicit. So, if you’re not able to persuade others, it’s you who haven’t communicated effectively.
The next time you approach a discussion of any kind, instead of pushing your ideas onto others and exacting your will, try to show them a path and lead them to a better way of thinking. And instead of pushing, try persuading via sincere interest and curiosity in what they believe in.
Finally, remember that great communication and effective persuasion is not about you. It is all about the other person. So, it is not about how fabulous or sophisticated or smart you are, it’s about figuring out the right things to say or the right questions to ask the other person. In other words, force your interlocutor to confront and explain his beliefs. You’ll be surprised how disjointed and how unstable many deeply held beliefs really are.
Once you have helped another realize this, the pump is primed for a deeper conversation about what you think, and how you think your ideas can improve things for everyone.
Note: Catch myself, Heather Wagenhals, Mark Skousen, Ayaan Hirsi Ali, John Mackey, Dr. Drew Pinsky, Jo Jorgenson, Larry Elder, Rich Checkan and a host of other luminaries in just a few weeks, live, all packed into a four-day event right under the nose of Mt. Rushmore? That’s right, it’s time for the best week of the year, FreedomFest 2021. This year’s theme is “Healthy, Wealthy & Wise.” The conference takes place July 21-24, in Rapid City, South Dakota. I will be there as a speaker and as a podcaster, as will Heather Wagenhals. So, if you are looking for a place to celebrate freedom and to immerse yourself in pro-human, pro-reason and pro-wealth ideas, then FreedomFest is for you! To see the full schedule, go here!
When the Sun Don’t Shine
I like it better when the sun don’t shine
I’d much rather watch the clouds go by
Or watch the moon peak into my room
A little rain to make the roses bloom…
–Drive-By Truckers, “Sun Don’t Shine”
If you live anywhere in the Western part of the United States, you know that it has been brutally and uncharacteristically scorching. Record temperatures in Oregon, Washington and Idaho have left many residents hunkering down and trying to do anything to stay cool. So, if you are experiencing this the way I am in Southern California, please make sure you keep hydrated (I prefer Alkaline88 water for this task), plan any outdoor activities in the early morning or well after sundown, and make sure that you check on the well-being of any seniors or others who may be particularly vulnerable to the extreme heat. Oh, and if there is a silver lining to these severe conditions, perhaps it is that we can learn to better appreciate those times when its cloudy, raining — and when the sun “don’t shine.”
Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.