This is the second installment in an ongoing series where Marc Bautis, Wealth Manager and Founder of Bautis Financial, comments on hot topics in the financial industry. Today, Marc is joined by Kayla Waller, Bautis Financial’s Paraplanner.
Meme Stocks Are Back
If you have been following the stock price of AMC Entertainment recently, you might think that the market is projecting all 300+ million Americans will be headed to the movie theater… every day for the next five years. But in reality, the Reddit Raiders are back and meme stocks are on fire again. AMC is trying to take advantage of their high share price by selling more shares.
How did investors react to being diluted by AMC issuing new shares? They drove the stock price up another 90% the following day. Maybe the surge of investors flocking to AMC is due to their offer of free popcorn and exclusive screenings.
We’ve seen this story before — back in January — when AMC’s stock price went from $4.96/share on January 26th to $19.90 on January 27th, then to $8.63 on January 28th.
Parents, Encourage Your Kids to Be Cybersecurity Analysts
With two major ransomware hacks in the past month — impacting the supply chain of gas and meat — it’s no surprise that more money is going to be spent on preventing cybersecurity hacks. Hackers hitting a supply chain that impacts consumers is not new, but the frequency is accelerating and alarming. Another hacking trend that is accelerating are smartphone security breaches. If you’re interested in discovering how you can protect your smartphone from hacking, join our June 24th webinar.
Will deploying soldiers and lobbing missiles during war become a thing of the past and future battles be fought with cyberattacks and biological warfare? However extreme cyber warfare gets in the future, it is a new field of focus and would probably be a lucrative career choice.
Some of the behavioral biases that we have as investors are harmless, however some can cause poor performance. In the upcoming weeks we are going to focus on some of the biases that investors have and what can be done to avoid them. It’s interesting how prevalent Regional home bias can be.
Biden’s Budget Proposal
Last Friday (right before the holiday weekend and Congressional recess) President Biden released his budget proposal. While most people assume that the $6 trillion dollars of spending will be paid by tax hikes alone, there will be plenty of IOU’s issued by the Treasury to cover the deficit.
Two tax surprises in the budget proposal include the increase in capital gains tax retroactive to April 28th, and the repeal of stepped-up basis requiring a gain to be recognized at the time of gift or of death, rather than when the recipient later sells the asset.
Warren Buffet has historically shunned dividend paying stocks. He’s said that if he needs income, he’d just sell a portion of his holdings, thus realizing a capital gain. When dividends and capital gains are taxed at the same rate the tax implications are the same. If the capital gains changes in the budget proposal go through and they are taxed higher than qualified dividends, we may see investors focus on the dividend payers.
Is Stagflation Likely?
Commentary by Kayla Waller.
A debate that will continue to make headlines in the coming months is whether or not the U.S. will experience stagflation. Stagflation can be defined as a period of time with high unemployment and high inflation. Others may define stagflation as a period of weaker growth and increasing inflation. April’s CPI numbers, weaker than anticipated job growth and other economic indicators have some individuals believing their criteria for stagflation has been met. The Fed has expressed that instead of stagflation, we are experiencing transitory inflation. According to the Fed, this is temporary, and prices will fall within months.
One way to assess stagflation is by looking at the misery index, displayed below. The misery index was developed by economist Arthur Okun as his way of expressing frustration in the 1970s during a period of high unemployment and high inflation (stagflation). In April, the misery index was 10.3, one of the highest readings since 2011. However, it was not a period of stagflation in 2011 and will likely not be this time either. According to forecasts by Moody’s, the misery index is expected to decline over the next few years.
The Fed has adapted and has more tools for controlling inflation now than it did during the 1970s. Should this period of inflation prove not to be transitory, the Fed should be able to use its extensive tool kit to ensure price stability and to maximize sustainable employment.