WealthPress Senior Strategist Roger Scott and I have a lot to say about the future health of the economy, especially with President Joe Biden’s plan for a capital gains tax hike in 2021.
Biden is proposing a capital gains tax hike that’ll essentially double the tax rate wealthy Americans (earning $1 million and up a year) pay on investment returns.
The long-standing capital gains tax will jump from 23.8% to 43.4%, including a surtax.
And it’s not just rich people who are going to end up hurting if this gets voted in.
Biden’s plan would effectively eliminate private equity’s most lucrative tax break.
What people don’t understand is this is one of the best parts of the financial ecosystem we have in this country. The private equity system has fostered the growth of brilliant private unicorn companies.
The equity ecosystem has benefited everyone in ways a lot of people don’t understand.
But that’s not the only thing that’s not doing so hot in the markets right now…
Despite popular opinion, Tesla Inc. (Nasdaq: TSLA) isn’t a mature tech company. It’s not a well-developed company like Google parent Alphabet Inc. Class A/C (Nasdaq: GOOGL/GOOG), and it shows.
Tesla’s trading at over 1,100 P/E — the ratio of a company’s share price to its earnings per share — while Google’s is a .03 P/E.
Google is also making a clean $55.3 billion a quarter, and has a couple of monopolies under its belt.
Tesla has none of that.
Yet for some strange reason, everybody and their mother is gunning to own shares in Tesla.
The price of the stock is generally all over the place, and when you look at it on an adjusted return, Tesla moves like a speculative stock… It just hasn’t found solid footing yet.
And getting caught up in the cryptocurrency game hasn’t helped the company a single bit.
Cryptocurrencies are for companies like PayPal Holdings Inc. (Nasdaq: PYPL), not electric car makers…
And the truth is — and I’m not an economist, so let me know if I sound crazy — it just seems too risky to me.
While what seems like common sense to me doesn’t appear that way with Elon Musk, because Bitcoin fluctuates in an almost exaggerated, cartoonish way.
We’re talking about 5% to 15% daily moves in Bitcoin.
So what happens when I go to the Tesla dealership, order the electric car of my dreams, put down a deposit with my bitcoins… and the next day the cryptocurrency is down 10%? Does that mean I’m going to get an extra 10% charge overnight?
Do you see where I’m going with this?
Bitcoin is too volatile as a mechanism to be used as a payment method. Money is a lubricant for the economy used to buy and sell goods, and crypto is just too volatile to let the economy run smoothly.
And we haven’t even touched on how Bitcoin could ruin other companies…
Check out our short video below to learn more about everything that’s wrong with the capital gains tax hike, Tesla and Bitcoin. We also discussed the Fed’s next move, potentially hedging the economy. Be sure to share your thoughts in the comments section below.
P.S. From 1993 to 2021, investors would have lost 10% of their money buying and holding the S&P 500 during the day…
Yet if they’d bought at the close and sold again right at the open, they could’ve seen an 812% increase on their investments.
Where did all the gains come from? Overnight moves.