Chief Justice John Roberts
Her passing is simply a reminder that none of us is immortal, yet her spirit remains alive in the many whose lives she touched and inspired.
It’s almost irreverent to change topics, however I must in an attempt to decipher any impact in the world of investing. Though there is minimal immediate and direct impact to us, depending on when and who is selected, the length of the confirmation process and to what degree Republicans are willing to accept the legitimate ‘honor’ of carrying the hypocrite label, particularly on the cusp of an election; any consequence will be over the long haul. Therefore, we can momentarily ignore the replacement issue assuming the drumbeat of commentary masquerading as ‘news’ can be tuned out.
There are three issues today that come to mind in our sliver of the world that are probably worthy of attention.
Election Impact
Generally there is minimal impact on the markets as a result of an election. One has to assess the how large the majority is, state of the economy and ability to enact new initiatives. Unless the incumbent wins, these can only get started in late January. With Covid-19 still among us, if Biden were to win, his initial focus would have to be combating this enemy otherwise we can brace ourselves for more of the same.
Regardless of the candidate supported, prudence dictates the alternative outcome has been at least considered by investors. Most of us already have the bulk of our portfolios slanted in a Trump direction as he is what we have. Should he win a second term it would have little direct impact unless inflation or a rampant pandemic second wave should arrive. The largest initial impact I see from a Biden win is a hike in the capital gains tax.
Should the Democrats win, the actions on the table for me are:
- Cash in some of my winners that no longer carry the same strategic value
- Ensure my annual tax-loss harvesting is performed – where applicable
- Ramp up a portfolio shift to be tax advantageous as I had to do with Trump – which was a multi-year process.
China Tension Escalation
The dance that Trump performed beginning with his TikTok Executive Order has come to an end with an approval now that American companies have wrested an ownership stake from China. Whether the app is truly a National Security Threat is debatable – plausible but only theoretical at this juncture. Going with conjecture here … perhaps the emergency is it diverts too many eyeballs to entertainers such as Sarah Cooper whose side hustle is mocking the President’s own words through lip sync. Wasn’t there an old adage of Bad Press being better than no press?
Anyway, soon after his Senate enablers get on board his band wagon once again, he pulls the rug out from under them (once again). Makes one wonder as to why there seems to be a lack of common sense in that chamber. As my late mother was fond of saying, “Fool me once, shame on you. Fool me twice, shame on me.” Is there a verse of being fooled multiple times?
The reality is without a consistent approach that treats everyone with the same rules, companies will migrate to exchanges in other countries ignoring New York. When a level playing field is available in London, Tokyo, Singapore, Hong Kong and others; why concern yourself with transactional business dealings that border on shakedowns just to have access to the most fluid market. Frankly, there’s not a lot of difference nowadays with the rise of fintech. Keep an eye on the increasing number of Chinese listings in Hong Kong rather than the US as part of this decoupling.
Note: Friday, I did add to my Apple position, this time at $106.985
Dividends in 2020
Howard Silverblatt did a mid-year review on S&P dividends that I’ve been noodling over for a couple of months. Basically I’ve been comparing my portfolio metrics with his data to arrive at a similar conclusion. The difference in my results is that I was able to frontload a good portion of my 2020 payments effectively delaying a good portion of the pain into 2021. My approach is slightly more conservative where he sees a current 6.4% annualized where I see a 5.17% 2021 with a current upward trend. So we’re in the same ballpark – ugly either way. The other difference is he applies suspensions as cuts where I didn’t. But I am looking at suspensions in more detail now that 4th quarter is upon us and will probably include some of these in the tax loss harvesting category, starting with Cracker Barrel.
Here’s to a profitable and safe week to us all!
