Important Economic Trends During Anarchy – Week 15

2020 – Something Big is Afoot.  Are You Prepared?

More Clarity Amid Mixed Signals

Totally Bizarre… Cubed.  I have run out of adjectives to describe this remarkable time in which we are living.  I have already used “Alice in Wonderland” and “1984”.  Might again.

It was raining so spending some time reading a good book with a mug of sweet hot tea and my gas logs seemed a good use for part of last weekend. I got two of those three, but instead of a good book I spent the time reading the report entitled “Hunter Biden, Burisma, and Corruption:  The Impact on the U. S. Government Policy and Related Concerns.”  Senator Ron Johnson from Wisconsin is the current U. S. Senator that I most admire. The committee he chairs, U. S. Senate Committee on Homeland Security and Governmental Affairs, was one of the two committees that issued the report. The report took much longer to prepare than it should because of bureaucratic resistance to releasing documents. Exactly who do those bureaucrats work for?

Not easy reading. I need to read it a second time to fully understand all of the facts that are presented. You ought to download a copy and read it. But allow me to summarize it for you based on my first reading of it:

  1. The Ukrainian conflict of interest was real. Scary real.
  2. The less reported Chinese conflict of interest was also real and even greater in scope.
  3. In both cases the Biden family wealth was increased significantly.
  4. Neither the President nor the Vice President can be prosecuted for selling influence as our founder’s assumption was that the voters would judge their behavior. That looks stupid.
  5. Combining this report with Clinton’s $100 Million pay day for the approval of the First Uranium deal with Russia, I have a better perspective on Obama’s hot mike comment to President Melvedev of Russia in early 2016 when Obama told him that “After the election I will have greater flexibility”. Read number 4 above again.

Out of last week’s data stream, here are a few “I have never seen that before” data points:

  1. Many Democrats cheered when President Trump became sick with the Wuhan Virus with members of the “media” wishing he would die.
  2. The same Democrats and media complained bitterly when President Trump recovered.
  3. Another Trump supporter was killed. This time in Denver.  Antifa/Democrats and their media friends cheered.  Do you remember a Trump supporter cheering if an Antifa was killed or even injured?  Me neither.
  4. Police in Miami estimated at 30,000 vehicles a parade of Pro Trump Hispanics, many who had immigrated to the USA from countries that had gone socialist (Venezuela, Cuba, Argentina, etc.) but at an Arizona joint Biden – Harris rally – NO ONE CAME.
  5. Biden is airing ads in Virginia saying that Trump will cut Social Security payments and do away with Medicare, obviously targeting we Seniors. But Trump has said the exact opposite.   Such a total lie would be expected from a power demented politician who was losing.  YET, the polls say Biden leads Trump by 9 to 14 %.
  6. Trump has authorized the release of 40 documents without any redactions so that we the public can finally see the facts about Clinton’s email scandal, Clinton authorizing the false Russian Collusion (RC), and the fact that Obama, Biden, Brennan, et al knew in July of 2016 the RC was false yet they continued the false accusations to the appointment of the Mueller SCO. But no documents came out of the bureaucracy.  Deep State?
  7. Biden in Arizona said he was campaigning for the Senate in Nevada. Obama’s doctor was quoted as saying that Biden has two aneurisms.   What is really happening?
  8. I read an article by an investment advisor who normally is pro stocks and bonds but instructed his clients to avoid stocks and bonds in order to put their money in an insured savings account in a bank. He acknowledged that the yield would be lower, but they would not lose their principle.  Remember this statement.

I saw Judge Barrett’s opening comments and some of her responses at the Senate hearing about her nomination to the Supreme Court. Brilliant, real world focused, mother of seven lucky children, happily married, humble. Can we get 8 more Supreme Court Justices like her?

Normalcy returned when the Democrats attacked her. I found the Democrat’s attack empty headed and inane like all their attacks on Republican Supreme Court nominees. They have cried wolf once too often. This childish hazing rite of passage ritual that has served to only diminish the Democrat Senators. It was consistent with their belief it is acceptable to kill babies.

In the real world, the financial markets will rally on headlines about a possible stimulus bill and decline when those talks break down. I recognize that there are folks and companies that have been seriously damaged by the Wuhan virus shutdown. But reality is that the American Taxpayer cannot carry everyone. We already cannot afford our national debt. More debt takes our economy closer to that of a Central American tin dictatorship.

I believe that a second Trump Administration would result in strong economic growth.  If that economic growth is strong enough, we might claw our way back to being able to service our debt.  The unemployment rate today is less than the average unemployment under Obama- Biden.  If Biden is elected, his policies (increased taxes and unfettered spending on every new “shiny” vision) will result in an economic train wreck.  Increased taxes and increased spending will propel the USA to become the economic equivalent of Zimbabwe and Venezuela.  Inflation in those countries exceed 1,000,000 % annually. A great party with a nasty hangover.

Between now and November 3, uncertainty about the election will influence the financial markets and the real estate market.  Over the next few weeks, here are the critical data points;

  1. We are just beginning to receive the third quarter financial results of publicly traded companies. They will be positive as we continue to recover.
  2. Later in October we will receive an update on unemployment. I expect it to decline.
  3. Better clarity will be available after the election results are known.  Cinch up your saddle as the turmoil will continue.

Those data points will offer some guidance about the economy in general and the land market in particular. The current sugar high from the amazing stimulus already coursing its way through our economy is creating economic distortions.  There will be bubbles.

It would take a year for Biden’s Administration to change the tax law so selling assets now should allow the seller to enjoy a capital gain tax about one half of the Biden proposed 40% tax rate (plus state tax).  A 40% tax rate will have a huge impact on the net proceeds from a sale.

It is impossible to tax and spend your way to prosperity, so Biden increasing taxes will result in an economic downcycle one year after the increased taxes become effective.  In turn, increased taxes will lead to an economic downturn which means lower real estate prices.  That combination is why we are advising our clients to sell now.  Please read item 8 at the beginning of this blog.

Currently, in central Virginia the land market is active but price sensitive.  We are hearing antidotally from land brokers around Virginia that they are seeing strong sales with some markets experiencing notable increased prices.  No clarity yet as to a trend or spot occurrence.

The residential land market is red hot because The Fed is forcing mortgage rates below 3% to the lowest levels in history.  Similarly, The Fed is trying to force investors to spend their cash rather than hold it in savings accounts.  The Fed wants economic growth.

Investors with cash are “chasing yield”.  The “creative” investments that occur at this part of the cycle usually look stupid a year later. Stick to the basics.  Reality will return in two stages:

  1. In the spring of 2021 we will reach the trough of the Wuhan Virus Recession.
  2. With The Fed saying they expect to keep interest rates close to zero until the end of 2022, there is the risk of creating a huge bubble in asset values. That means that at the latest 2023 may see a slower real estate market with declining prices as interest rates increase.

A superb tract of land is the best long-term investment. This coming week remember:

“Rejoice in hope, be patient in suffering, preserve in prayer.”

(Romans 12:12   New Revised Standard Version, Oxford University Press)

Capitalism builds wealth, socialism consumes it in self destruction.  I serve an awesome God.  With God on our side, who can stand against us.  Pray.  Hard.

Stay healthy,

Ned

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