It seems like almost monthly something gets my dander up – and it’s typically on the political front. Now I try to ignore much of the lunacy whether it’s the botched Afghanistan withdrawal or the ongoing court cases with election fraud allegations as neither of these is an investible event – or if it is, I’m not sure I want to partake in profiteering on human suffering and gullibility respectively.
But when a political position squarely pits Republicans against Democrats on economic issues I sit up and take notice – especially when the arguments are plausible, such as the Republican led effort to end extended unemployment benefits early. The argument being expanded benefits were the cause of the labor shortage by paying prospective employees to remain on the sidelines. The counterpoint being the gainfully employed plus available positions remain below pre-pandemic levels. One of those times when you just have to follow a path to see where it leads.
So 25 Republican states (and one Democratic) took a leap of faith and cut the cord. After two months the first results are coming in and it appears 12.5% of the unemployed came off the rolls when benefits ceased. Score an initial point for the GOP. 87.5% now had no or reduced income resulting in a 20% reduction in household spending in the study group. The loss of federally subsidized benefits exceeded gains by the states in employment. My initial take is this is a case of cutting off ones nose to spite their face. But it’s still early and job growth is increasing. Yet, I have to ponder the ‘what-if’ scenario of all expanded benefits ending on Labor Day. If this study has a large enough sample size to be able to translate nationwide, we could be looking at a weak fourth quarter. It’s still early and the savings rate for 2021 could be a mitigating factor, but all of this should have been considered. Then there are the supply chain issues and inflation …
China
My initial review of the China impact on my portfolio is roughly 25% complete. Yum China operates in an industry where foreign investment is not prohibited or restricted. With the exception of its 90% stake in Daojia (VIE) and their reliance on Wechat (TCEHY) and Alipay (BABA) for payment processing, the only other visible risks are geo-political. They also hedged their bets a little with a secondary listing on the Hong Kong exchange (HKXCY) which is also under review. As Chinese dividends account for less than 0.01% of my total, China is not a major concern of mine. My largest concern is either VIE structure or secondary VIE exposure which has the potential to render significant damage. For YUMC risks exist which that I believe are currently manageable so I will continue to Hold while the two countries continue poking and prodding each other.
SPAC Update
As the new year began SPACs were the investment du jour. Being a consummate purveyor of knowledge (albeit slightly biased at times), I dipped my toes into the fray to gain firsthand experience to share with you. Volta despac’d last week and is the first where I also received warrants. Upon distribution to my account, I’ll add the scoreboard as a menu item on the blog. Overall I am underwater with only two slightly positive. Probably a topic for a post in September. I also need to change the featured blogs as a couple have gone inactive.
In Closing
Not a lot – at least at this point in time – for investment purposes. Just keeping the eyes open and treading lightly down the same well-worn path we’ve been following all year.
Hoping the week ahead is a good one for you!
Seeking Returns 