If you hate global warming, you got a big win this weekend with the Inflation Reduction Act. But if you care about the stock market and inflation, then you’re missing out big time with the Spend Our Way to Oblivion Act, or SOWOA. In real life, I may be an environmentalist first. But in this other life that says I want to help people make money, this is really SOWOA, as my friend John Ellis, who runs the brilliant News Items newsletter, calls it. The bill is positively Orwellian. I’m a big fan of George Orwell and although he only really gave us “1984” as an explanation for 2022, you can also read “Homage to Catalonia” to get an idea of the nihilistic nature of the democrats that are in reality. proud of this bill. I say this because this is really a letter of favors and revenge, a bill against everything Republicans believe in. It’s like there’s really only one party and that party is desperate to spend money we don’t have to nominally clean up. the environment until, perhaps, that party is expelled from its position at the cross of inflation. Now I know elsewhere on the CNBC site there is great praise, and I mean it, for the bill as our most important piece of legislation to control climate change. And I’m delighted if that’s the case. But that’s not why you come to me. Here’s what you’re getting at me: On the surface, it’s disastrous for many US stocks. A tax on buybacks that really affects how companies will approach their capital, a 15% book tax that hurts companies with net operating losses and may cause them to raise capital, Medicare’s negotiation with drug companies on the price, plus all kinds of suspicious gifts to interests adverse to the oil and gas lobby. It’s as if the Democrats look at what the Republicans have given businesses and shareholders and take it away. Now we know that ultimately, there will be less here than meets the eye. There will be only ten drugs that Medicare can negotiate down starting in 2026. The marketplace handled many of the provisions against energy companies. Freebies to electric vehicle makers were extended and there is a real battery production credit for US companies that will help Ford ( F ) and General Motors ( GM ). Look at this, Ford really wants it. The oil and gas companies did what the Democrats wanted. Now they will do it faster or with less money. Farmers got the usual freebies: this time methane, which is actually a subsidy for oil companies that sell methane like Chevron ( CVX ), which has a pilot program for it. Maybe this is paid? I think so. In reality, all it really does is create precious environmental engineering jobs, or more likely, raise the price of what those engineers are paid, and that’s exactly what we don’t want after Friday’s hot jobs number. Some environmental groups say it could provide more than 500,000 jobs. That’s great, but we don’t have the people to fill those positions, which is how you get the kind of wage inflation that burns the Fed’s efforts. It would have been better to say it’s a tax on companies and their shareholders, but less than what’s needed to cover the new spending that Democrats have been asking for all these years. The bill will likely send the S&P down. Will drug stocks freeze? Drug companies have always felt that this Medicare gift was inviolable, so even if it’s a show, you’re going to get salespeople. I’ll take the other side of the trade on day two or three in Johnson & Johnson ( JNJ ), AbbVie ( ABBV ), or Eli Lilly ( LLY ), all of which will be affected in one way or for several years. Let the dumb money out. I guess some strategist publishes a list or lists of the companies hurt the most by the minimum tax and the buyback tax. I’ve seen some reports about what it might cost these companies, but they seem too subjective to trust. Unfortunately for shareholders, Senator Joe Manchin came close to passing a provision that would have streamlined the pipeline implementation process and made it possible to bring our natural gas to markets that currently use foreign, formerly Russian, oil, but that failed The press says that will be next, but I don’t think anything will pass after this bill, especially something that helps oil and gas. But let’s be holistic here. This deal is a giveaway to everything that isn’t Republican and punishes everything that is. It’s incredibly partisan, and like the Orwellian Spend our Way to Oblivion Act, it’s just one more obstacle to stopping the Fed’s tightening cycle. Now that commodity inflation has peaked, we have to contend with labor inflation, and this bill increases that kind of inflation in an absurd and obscene way, creating jobs that we can no longer fill take them out of the private sector. This is what is really at stake. Every time Fed Chairman Jerome Powell appears to be in charge of inflation, the government throws him for a loop. This is a real nightmare just by the title. There are good-hearted people across the country who want the deficit lower and who may believe the nomenclature. There are environmentalists who knew that the market would have taken care of a lot of this. And there are shareholders who are nothing but lunatics, butchered by a party that is now so anti-capitalist as to make you believe that there are not only two countries when it comes to Roe v Wade and gun control, but there are two when it comes to the stock market; a bull and a bear and the democrats are bears living in the north and west and a couple of places in the midwest. Now I really don’t want to write any of this. I hate politics. The market has politics, of course, and I do not condone or condemn it. I am very much in favor of anything that can slow or reverse global warming. But I’m really here to help you make money, and suffice it to say, my job, and your rewards, just got harder. It is an acknowledgment that the nation did, unfortunately, Democrat and what you see is what you get. Will the markets be smart about this? I guess it’s enough to know that this bill raises wages when the Fed is worried about wage inflation and hits shareholders when we’re worried about being hit. I’d like to tell you that everything will be greener and the deficit is shrinking, but I think there will be spots of green and some areas that will actually be greener. Otherwise, it’s just a series of giant giveaways to companies that were already going to do whatever it took without federal funds. One final word: Stock-owning Democrats should be as dismayed as stock-owning Republicans because this bill alone could be worth 150 basis points of tightening. But maybe Democrats think that causing inflation is fine as long as it only furthers their interests and hurts others, mainly Republicans, who own far more of the stock market than their party. But Powell knows that inflation knows no party. It’s obnoxious and pernicious, although I’m sure this will reduce greenhouse gas emissions by a percent or even two. (Jim Cramer’s Charitable Trust is long ABBV, F, JNJ, LLY. See a full list of stocks here.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust portfolio. If Jim has discussed a stock on CNBC TV, wait 72 hours after issuing the trade alert before executing the trade. INVESTMENT CLUB IS ALTERNATE INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, WITH OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTOR CLUB. NO SPECIFIC RESULTS OR BENEFITS ARE GUARANTEED.
U.S. President Joe Biden speaks on the Inflation Reduction Act of 2022 in the State Dining Room of the White House in Washington, DC on July 28, 2022.
Mandel Ngan | AFP | Getty Images
If you hate global warming, you got a big win this weekend with the Inflation Reduction Act.
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