People ask me all the time if the reason I am so bearish on companies that lean on the taxpayer to fund their businesses, such as Wells Fargo (WFC) and other too-big-to-fail banks or even Tesla (TSLA), is because I'm taking a moral stance against corporate welfare. The answer is no. I am an opportunist with my money and my investing/trading. And anyway, every single publicly traded company in this country (and around the world) benefits from subsidization and competitive protection from government forces.
You can't avoid investing in welfare stocks. The entire Republican-Democrat Regime, as I like to call it, is totally focused on maximizing corporate earnings and trying to make the stock market go up. The stock market is not the economy. And these days, the incessant subsidization of all things corporate has made for a bifurcated economy -- Wall Street is not Main Street.
Some companies and sectors are more explicit in their need/want of welfare than others. And I try to avoid companies that have built their businesses upon taxpayer largesse rather than building their businesses on actually selling a quality product at a profit.
When it comes to building a business on welfare, let's talk about Tesla, for example. One of the best things to happen to the New Mexico economy in the last couple years was that Tesla chose to take Nevada citizens' welfare checks to build its factory rather than coming to New Mexico and draining our tax pool. If Tesla's factory is such a great investment, it shouldn't need to beg/lobby for billions of welfare dollars to build its factories. If Tesla's cars are actually so great to drive, they shouldn't need to be further subsidized with $8,000 welfare checks written to the people rich enough to spend that kind of money on a new car.
A few years ago, I was widely quoted for saying that "when the Republican-Democrat Regime in power redistributes trillions of dollars from the renters and savers to the bankers, most bank stocks will go up. A lot." And therein lies the rub for investors and traders.
So yes, I remain bullish on the stock market in large part because there will be trillions of dollars of taxpayer money sent to the giant corporations that make up the stock market. Zero percent interest rates compound that effect as they force savers to invest in ever-riskier assets in search of a decent return on their investment. As I explained a few weeks ago, Apple (AAPL) itself, my longest-held and largest position and one of my claims to fame, is directly benefitting from 0% interest rates. Not only that, but Apple's tax rate is far below what a small business pays in taxes.
Tax policies, subsidizing giant corporations that have been enjoying record profits, 0% interest rates -- all this stuff contributes directly to the gross wealth gap in this country. As a citizen and as a TV anchor, I fought hard against this stuff, which some might call fascism. But what are you supposed to do about it as an investor? Look, to be clear, every company that I've invested in gets to benefit from these policies. You can't invest in the stock market at all if you're actually going to take a moral stance with your money against these policies.
To be sure, as a citizen of this great country, I find it necessary to take a vocal stance against corporate welfare. I don't know why we would ever subsidize corporations, which are owned by rich people by definition -- if you have excess capital to invest in stocks of corporations, you are not in the poor side of the income brackets.
We sit around astonished and appalled at the great and increasing wealth gap in this country but we continue to send trillions of dollars of explicit and implicit welfare to the giant too- big-to-fail banks and billionaires such as Tesla's Elon Musk. I don't condone upward redistribution of wealth. Frankly, I'm pretty much against any direct or indirect redistribution of wealth. However, using government resources to take money from the poor and give it to the richest, largest corporations and their investors is outrageous.
But as an investor, I have to factor all this very real dynamics in our marketplace into my analysis. I want to stick with companies that are selling real products or services and generating real profits with those products and services. Those profits are clearly going to be subsidized by the Republican-Democrat Regime for many years to come, and that's just part of the reality of our government's policies. But you want to avoid investing in companies that have built their businesses on those subsidies. For Tesla, for the energy sector, for the too-big-to-fail banks, for biotech -- it's probably as good as it can get on the subsidies and help from the government. I want to avoid and/or short those stocks. I want to stick with revolutionary tech stocks that have real businesses.
Today's Cody Underground podcast is all about this topic as I rant freestyle about it. Check it out.