Hey There Income Hunters,
While we wait on Biden’s pick for the Fed chairman — with the odds still 70% Jerome Powell gets reappointed — I took a look ahead to how passable the reconciliation bill is and who the winners are.
What are the chances for passage?
Looks like the soaring CPI has pushed Sen. Manchin further away from supporting the $1.75 trillion bill.
Democrats need all 50 Senators to get the legislation to Biden’s desk, so Manchin can hold the bill hostage, though a vote is expected today.
This guy Manchin does sound like the smartest guy in the room … He tweeted this out on where he stands …
“The threat posed by record inflation to the American people is not ‘transitory’ and is instead – getting worse,” signaling his hesitancy to support more fiscal spending.
He is obviously just positioning himself to get the spending amount even lower … I think the bill will still pass.
No matter what, there are a few goodies in there and today I’ll run through them and what sector may perform best.
Clean Energy Benefits for Longer
The biggest winner in the framework is clean energy … the final version of the bill appears to have a similar amount of tax benefits and spending as the initial despite the framework’s much smaller overall cost.
The clean energy provisions appear to last for 10 years in the framework, while nearly every other proposal would last for a shorter period than previously proposed.
Latest on the EV credit in the House $1.75 trillion BBB Act:
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- EV car buyers will get an instant $8K EV rebate for M3s < $55K
- They will get an instant $8k for M-Ys < $80K if AGI doesn’t exceed $250K for individuals or $500K for couples.
- Although Sen Manchin will likely kill the $4,500 bonus for union-made EVs.
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The Fiscal Stimulus of the Reconciliation Bill IS Disappointing Overall
As you can see the net Fiscal stimulus starts at .6% GDP in 2022, and then trends lower over the rest of the period.
The effect in the later years is the $2 trillion in budgetary savings from higher taxes. The pain is always pushed out to the future administrations.
How do WE make money on EV and infrastructure spending?
I think there are two commodity plays that make sense right now ….
The electric vehicle play is copper because electric vehicles require more than 4x the amount of copper than for combustible engines — and that’s just the beginning.
The demand for copper for EV charging is supposed to rise more than 1000% by 2030.
For the infrastructure build, Coal will be in great demand. Per Bloomberg:
“Almost every lump of coal that U.S. miners will dig out of the ground next year has already been sold, as surging natural gas prices prompt utilities to burn more of the dirtiest fossil fuel.”
The transition to clean energy will take much longer than predicted because there was never a natural increase for energy demand put into the equation.
Bring It Home
The Fed continues to talk tough about inflation and every time they do, we get a pullback in various sectors of the commodity market.
Right now, copper and coal offer decent value and although we may see more volatility into year-end, you can make some nice profits holding both into the end of Q1.
I expect Q1 to be a strong growth quarter as the world reopens and that will boost two of the commodities most in demand.
Have a great day and as always …
Live and Trade With passion,
Griff