Date: 03/23/2021
Author: Mr. X
Many Americans are just now getting their $1,400 checks from the American Rescue Plan. A new batch of checks is being sent out on Wednesday, if you still have not received yours.
However, this is just the beginning. President Joe Biden is pushing for an infrastructure bill that would distribute a reported $3 trillion dollars on education, jobs, and transportation. Obviously, the specifics of the bill will cause an extremely bitter fight in the closely divided Congress.
Yet the Democrats have already shown they are willing to forgo working with the GOP if necessary. The last stimulus check was broadly popular, despite almost the entire GOP voting against it. The Democrats don’t think they will pay a price for spending even more. They are probably right.
If the debt or the deficit is going to matter, it’s probably too late to do anything about it. Not only is there no political appetite for austerity, it’s also not clear it would work. Instead, we might get a historic test for Modern Monetary Theory and permanent deficit spending.
What’s clear is that the government is going to be spending a massive amount of money. You might consider putting the government’s check to work for you and try to collect some of it. While we will have to check the exact legislative language closely, certain key companies are poised to benefit.
One investor favorite is Enphase Energy [ENPH]. It has been relatively stagnant over the last month, gaining less than 1%. However, it gained almost 4% on Monday and is in a relatively strong growth position compared with a company like SolarEdge [SEDG].
On the other hand, ENPH and the solar sector generally have already received a great deal of attention during the pandemic. A company with a broader range of assets may derive a larger benefit from a stimulus program of this size.
That’s why I’m looking closely at NextEra Energy [NEE]. It hasn’t been carried to triple-digit gains by online-driven speculation. It gained Monday but it’s lost value over the last week and month.
While this might seem a warning signal to some traders, I’d regard it as an opportunity. The danger now is buying at the top of the market, so we want to look at companies that have struggled in the stock market but have valuable assets and a viable business plan in the real world. NEE has a strong emphasis on infrastructure, extensive wind and solar projects, and touts its ESG (environmental, social, government) credentials. It’s perfectly placed for what’s coming.
If the Biden Administration directs a massive amount of funding towards this sector, NEE will have several ways to potentially gain. Don’t overlook NEE.
As a hedge, one might choose to hold silver over gold at this time. Silver is widely used in solar panel production. New methods require less of it. However, if the government provides a large enough boost for solar energy, the increase in total quantity demanded will put pressure on prices. I’d also hold silver physically if you can rather than just holding it virtually.
In times like these, a true hedge really does mean something you can hold with your bare hands and access whenever you want. After all, if those numbers on the screen start moving up too rapidly, it means inflation really is underway – and then the oldest investments, precious metals, become some of the most valuable.
Though I doubt massive inflation is coming, we can’t ignore the possibility when the federal government has no limits on spending. It’s time to make your holdings concrete – by investing in companies that have tangible assets that can receive government funding and precious metals that can guard against reckless fiscal policy.
