September 15th, 2021
One Move To Make Before Democrats Ram Through New Spending Spree
Dear Retail Investor,
All the politicians hemming and hawing about budgets, spending, and inflation…
It’s all theater.
All of it.
None of it is serious.
They are going to do whatever they want, disregard the obvious and predictable consequences, and ordain themselves heroes in the process.
The difference this time around though is that the imminent Washington spending spree could spark a major turnaround in one of the most out of favor asset classes.
Let’s get right to it because it’s all set to kick off on September 27th.
It’s All Theater
The U.S. Congress is on the cusp of kicking off one of the largest budgets in history.
The Democrats are in the final stages of negotiating a $3.5 trillion spending bill.
We’re not going to debate the shrewdness of the proposal, the obvious impacts on the economy and inflation, or anything like that.
Instead, we’re going to look at how it’s all likely to play out and how to make money from it.
First off, the $3.5 trillion isn’t going to happen.
It’s just not.
The Democrats need all 50 senators to get on board.
They have 49.
The last holdout, Senator Joe Manchin from West Virginia, has publicly stated he doesn’t support the $3.5 trillion in additional spending commitments.
Manchin even said over the weekend that it “will not have my vote on $3.5 (trillion).”
However, that doesn’t mean a big spending bill won’t pass.
In fact, judging by the careful wording (where anything less than $3.5 trillion could have his vote), a big spending bill will pass.
So the $3.5 trillion is just an opening offer.
The eventual bill will be less. Perhaps much less.
Let’s split the difference and say it’s $1.9 trillion (just to keep it under $2 trillion).
Everybody (that matters!) wins.
The party in power gets trillions in new spending targeted at their preferred constituencies and Manchin comes off as the “big hero” for keeping costs down.
So it’s beyond a good bet that a “shrunken” bill will pass the Senate.
The House of Representatives will pass it (They’ve already scheduled a vote for an accompanying bill for September 27th and you don’t schedule the vote unless you have the votes already).
If history is our guide, the final act of this play was written a long time ago.
All we have now is the theater leading up to it.
But this is just the first half of the story.
The second half of the story is where the opportunity for you comes in.
In the end, this is a historically massive spending bill and, although it may not be as big as it seems, the $1.9 trillion (or $3.5 or whatever the final number turns out to be) will spread over 10 years.
That works out to $190 billion (or $350 billion) per year.
So it’s actually only about a 4% increase on the $4.4 trillion annual budget spent in 2019.
However, the consequences will likely be far greater.
A bill of this size will surely have many “goodies” buried in it for lobbyists and influential industries.
So in addition to the spending and tax hikes, there will surely be higher taxes and plenty of regulatory giveaways.
Altogether, the excessive borrowing, taxes, and everything else are the perfect recipe for reduced economic growth, higher inflation, and putting the speculative bubble that has pushed stocks and cryptos to staggering heights in ever greater jeopardy.
Meanwhile, it is also creating the ideal conditions to wake gold out of its slumber.
And looking at how out of favor gold is at the moment, if gold starts to move, it could really take off from here.
So quit watching the political theater. It’s a waste of time. And there are far better actors doing much more interesting stuff.
Instead, start watching the gold sector now, because the end of September could be the time things really get moving for gold and gold stocks. And they’re primed to move after more than a year of counter-market declines.
Until next time,
– Dear Retail Investors Editorial Team
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