Alan's Alert 8-4-2021

 

“Will it blend” was a marketing campaign for a line of blenders.  The guy pictured above (Tom Dickson) is the founder of the company.  He had this viral campaign to put all sorts of things into the blender to see how it would perform.  This spun off into all sorts of appearances on late night tv and the history channel.  Will it blend was a huge hit.  I bring this up because we have a new campaign to follow.  It’s called…  will it pass?

The infrastructure bill has been talked about since Biden was sworn in.  It started off as a $3.5 trillion dollar package but has slowly been losing steam.  It looked like such a sure thing back in February when the administration was meeting with lawmakers to hammer out the details.  Since then, it has gyrated between committees in the House and Senate.  It was cut down to $2 trillion and the green wing of the democrat party started to get in on the process.  Now it has been blended down to a $1 trillion dollar price tag.  Still, it looks questionable if it will pass.  The Hill reports that close to 300 amendments have been filed to be debated and possibly added to the bill and this is just the Senate side of the bill.  Since Nancy Pelosi has recessed the House for 7 weeks, we won’t see the House debate this until late September at the earliest.  Senators currently are warning that a rush to hold a vote would be a mistake.  That means it could drag out for several weeks for the Senate to come to a compromise. 

When the infrastructure bill was first being debated, Robert Wenzel had indicated that this would be “madness on top of madness”.  I agree as there is no money for such a large plan and there are only three ways to finance such a boondoggle; print money, borrow it through bond issuance, or increase taxes.  If money is printed, it just adds more gas to the fire.  The CPI and the money stock reports coming from the Fed would go crazy.  If the proposal is funded through bond issuance, the Fed would have to find a way to monetize it as the pool of bond buyers has been slowly evaporating.  The final route, raising taxes, would cut private sector capital investments and translate to lower productivity and ultimately, upward pressure on consumer goods.  There are no good options here.  The best answer would be to see if the 2700 pages of the bill plus the roughly 300 amendments would blend. 

 

If the infrastructure bill does find a way to pass, it would be a boon for copper.  Copper plays a huge role in renewable energy technology, given its conductivity characteristics.  Freeport-McMoRan (FCX) and Southern Copper Corporation (SCCO) would be the place to be.  They had a big run from September 2020 to late February 2021.  Did the market realize at the end of February that the proposed infrastructure package wouldn’t make it through Congress?  Because both companies have flat-lined. 

 

Changes are coming to the alert over the next week.  I’ve got two projects I’m working on.  One will be completed this week, the other I hope to have done in two weeks’ time.  Stay tuned as I’ll have an update and unveiling on Monday.  There will be no alert on Friday as I’ll be on vacation (yeah!).