2020 was a certainly crazy year and 2021 is already off to an interesting start in its own right. While I’m hopeful that the overall global pandemic will begin to wane and the world can return back to somewhat normal conditions, I do foresee certain trends that investors need to be on the lookout for in 2021 and beyond. Today we will explore the 2021 investing trends for investors to watch as presented by MoneyByRamey.com and then also look at how you might be able to hedge your investments or even benefit from the oncoming trends.
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#1 – Increase in War/Conflict
The very first friend that I foresee happening in 2021 and beyond is that there will be increased conflict around the world. I hesitate to use the word increased war, as I don’t foresee any major war breaking out anytime soon, but I am beginning to see small skirmishes occurring and larger sovereign involvement in regions where they may have been quieter over the past few years.
Specifically to the American front, I see this mainly due to President Biden being elected, and the fact that the US is “back to normal” when it comes to the propensity to interfere in worldwide political affairs.
While President Trump maintained more of an isolationist view in regards to America’s responsibility to the world, President Biden will be much more willing to engage in international conflict as it is the typical place of the US.
We have already seen this in the instances in Biden’s short tenure where, only a few months into his administration, we’re already back to bombing Syria, and saber-rattling when it comes to Russia by calling Putin a “stone-cold killer”, and engaging in testy exchanges between US-China in the new administration’s first meeting in Alaska.
#2 – Increase in Domestic Terrorism
Personally, I see domestic terrorism increasing over the next few years, especially on American soil. There are two main reasons for this belief: 1) extremism on the left and right and 2) the open border policy of the Biden administration.
To point #1, there is definitely a rise in groups on the far left and the far right willing to engage in violence or threats of violence to achieve their means. Riots over the past year have shown just how much damage can be done when lawlessness is allowed to run amock. If this is allowed to continue escalating, political violence will take a turn for the worse as groups on both sides begin to arm themselves against the growing violent factions.
Putting aside the riots for a moment, it does seem that the last few years have been much quieter in terms of terror attacks on US soil. However, if we are honest with ourselves, we cannot expect this trend to continue so long as American’s remain at each other’s throats and our southern border remains wide open.
Putting politics aside on whether or not you think the border should be secured or whether the US should be more welcoming of immigrants, the risk of individuals that want to hurt us being able to enter our country goes up exponentially if we are not securing the border. We need to know who is crossing otherwise we open ourselves up to the risk of an increased flow of criminals and terrorists hiding amongst the migrant caravans.
Unfortunately, I do not believe that the US political parties have what it takes to come together and tackle the situation at hand. I believe an uptick in terrorist attacks is inevitable because of the unsecured border.
#3 – Dollar and Cash Devalued due to Rapid Inflation
We’re already witnessing the beginning phases of having the purchasing power of the dollar drastically devalued, especially as the US government continues to print more and more money, which makes the US dollar less and less valuable. Not only do your dollars lose purchasing power, but in doing so, the stage is set for massive inflationary pressures. This devalues both the power of cash holdings and the dollar’s intrinsic value.
The saving grace is that much of the same world is in the same type of situation where many other countries are having their central banks print money at a maddening pace in unison with the United States. This means countries are routinely over-indebted and that the USD is still the ‘best of the worst option’ on the world stage.
This has been the primary reason why we’re not seeing runaway inflation yet and why the US dollar has been steady against other currencies. However, it would be foolhardy to believe the steady trend will hold true, especially since the US government is beginning to normalize endless stimulus directly to individuals. By engaging in printing checks directly to individuals, I foresee non-stop government money printing which will continue having negative effects on cash holdings and the dollar valuation.
The natural effects of continual money-printing will be a rapid rise in the cost of everyday goods. These increases are due to the principles of inflation at work – there is simply more money chasing the same amount of goods, which is going to drive up their prices. We can see this affecting the cost of food items, input cost increases which drive up the cost of producing various goods, increased gasoline prices, etc. This is your dollar is losing its purchasing power.
This will continue to have a radical effect on asset prices of all types – stock prices, house values, land, etc. Take stocks for instance, which I’m currently bullish on – not because valuations are in line with the current stock price – but rather because no one wants to be holding cash in this inflationary environment. Instead investors will be deploying into assets, which includes driving up stock prices to near all-time historic levels.
This is because inflation is picking up at such a rapid pace that if you’re holding cash you are not keeping up with the rate of inflation versus what interest you can earn on your cash position. In my own portfolio, I’m keeping a small amount of cash on hand for emergencies, but the rest is being redeployed into various investment vehicles which earn me a greater rate of return – the stocks, cryptos, Prosper, Fundrise, etc. I do this mainly so that I am keeping up with inflation and not losing value through a large cash position that is losing its purchasing power.
#4 – Increasing Taxes: Both Overt and Covert
As the saying goes, “elections have consequences” – specifically in the US, I fully expect that we’re all going to be seeing our taxes increase, both overtly and covertly.
The overt tax increases will be seen in the form of rolling back tax cuts for individuals and corporations, increased talk of taxes on the rich, and generally higher taxes on good and services, especially on those items that are considered ‘easily taxable’: marijuana, alcohol, gambling, smoking, etc.
While overt taxes will be easily seen, covert taxes will be much harder to distinguish. This is because covert taxes can be found in the form of increasing prices for everyday goods through higher taxation. This is because as the government institutes higher taxes, those are typically hitting businesses that produce our everyday goods and services. Those businesses need to turn a profit – they do not just absorb the cost of these tax increases, but they need to build in those tax increases into the price of its goods and services.
This means that if the taxes go up on a certain good, that company will need to raise its price in order to continue to generate a certain profit level. Therefore, that tax increase on that business, which is meant to be on a more influential individual, ends up affecting everyday consumers by increasing the cost of goods and services the world over. Remember this when voting people into office – taxes on the ‘rich’ affect you directly by taxing you through the increases in costs of goods and services.
In the US, we can expect politicians to look at ways to increase taxes exponentially to pay for the massive money printing, social welfare programs, etc. Make sure you stay abreast of the changing tax code and take advantage of savings whenever possible. The US government is already looking to change rules around 401ks/IRAs, tax cryptocurrencies, and changing the rules around capital gains tax, to name a few.
#5 – Increased Violence in USA
Unfortunately in the USA, I do expect to see more and more violence to continue, especially from the political left group Antifa. I do not believe that we have become a more unified country, and that is driven mainly by the media looking to divide individuals into classes, races, and political ideologies.
I know many individuals out there do not believe the current situation can continue as it is and they want to see change. I am on board with change for the positive and I think the first step is that it is our choice as to the type of media that we consume. The fact is that the media has become propaganda (on both sides) and brainwashes us to believe a certain way. Charles Barkley summed it up perfectly during March Madness:
Keep in mind that is it to the benefit of these big corporations to keep you watching hour after hour, minute after minute. In the era of quickly changing attention spans, corporate media will do anything to create a clickbait headline and get you emotionally riled up. This is ok so long as you buy into their ideology and keep coming back to listen to the news they are pushing. Their goal is to make you fearful of one another and in doing so, paint the ‘otherside’ as the enemy. As fellow citizens, we must fight against this push to divide and conquer and instead unite for the common goal of making the world a better place.
Unfortunately, there are many on the right and the left that buy into the propaganda see everyone else as the problem. The mainstream media in particular is fueling the narrative that we’re divided and will remain so. I do not believe that is the case but many are believing it and driving up violence around the country. Don’t be fooled into this line of thinking – begin seeking out alternative news sources to get the full story.
I personally advocate for the idea that each individual is in charge of their own life, and that when each individual has the goal of living his or her best life, we can work towards creating the best type of society possible.
Don’t be fooled by the politicians who promise you a stimulus check or certain benefits in exchange for more and more control of your life. That politician is a wolf in sheep’s clothing and by harping on the line of divide and conquer, they seek to gain more power for themselves. Stay vigilant.
Need some comedic relief – check out this piece by Ryan Long which displays the current goals of CNN & Fox.
#5 – More Lockdowns (attempts) by Govt’s
Covid-19 is currently on the decline, at least in the US, but I expect worldwide governments to look at continuing their control through seemingly endless lockdowns. While the initial intention of a lockdown may have been good, we are beginning to see through the data that they do not work as intended.
Specifically in the US, many Governors, who were granted emergency powers during pandemic, show no signs of wanting to let go of those powers and restore people to the democratic ways that we are used to.
We as American – and our fellow citizens of the world – need to make sure that we are fighting back against this type of authoritarianism which seeks to tell you when and where you can live your life. In my own life, I have taken the proper precautions to limit the spread of Covid-19 and as a result, I have not contracted the virus. I am planning to get the vaccine in due course, but I have no initial rush to do so.
While I want to be wise when it comes to doing my part to limit the spread of Covid, I’m also not going to let a politician tell me how I can live my life. Who I can be with, when I can be with them, and what I can do with my life are my business. So long as I am not imposing on the rights of others, we should be free to do as we please.
If someone is still afraid of the virus and does not want to risk contracting it, I have no issue with them staying in quarantine and living a life of precaution. But to allow governments to continually lockdown a healthy population is causing more issues than it is solving. Kids falling behind in school, small businesses going under while large corporations are seeing massive benefits, and the rich getting richer – these are the continued outcome of lockdowns and we must not allow ourselves to be subjected any longer.
We need to stay diligent and ensure that we are taking proper precautions, but we must remain hesitant to let those in power gain more power and continue these lockdowns which are setting so many of the ‘little guys’ behind.
#6 – Endless Stimulus
In unison with the governments gaining more power, we are also now seeing the walk towards endless stimulus. Relatively speaking, this is nothing new, as the US government has been engaging in heavy quantitative easing since the 2008 housing crisis. The newest development is that stimulus checks paid directly to individuals is starting to become the norm and not the outlier.
This is a very dangerous spot for freedom-loving citizenry to be. The quote below – attributed to some by Alexander Fraser Tytler but it’s origins in dispute – speaks to this well:
A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.”https://en.m.wikiquote.org/wiki/Alexander_Fraser_Tytler
The current endless stimulus we’re seeing is really a trial run at Universal Basic Income (UBI). UBI has become a term that many individuals believe is a solution as we’re heading towards a more automated world. I tend to disagree, for various reasons.
First and foremost, I believe that many individuals find a purpose in work. If you take away work from a person, you take away their purpose. By printing and sending them a stimulus check, you open up a person to a life of relative meaninglessness. Many individuals find that they lack direction without having to earn a living. Rather than motivate them to live their best life, UBI dampens their spirits and, in the end, makes them wholly dependent upon an entity – in this case the government – for their daily sustenance. For mankind, there is pride in earning a living and making your best life.
Secondly, UBI puts our entire political system in jeopardy. Right now the highest number proposed as direct payments to citizenry has been $2,000 at a time. What’s to stop a politician from saying, “If you elect me, I will give you a $5,000/$10,000/$200,000 stimulus check?”
If you think this can’t/won’t happen – don’t put anything past a power-hungry politician that views endless money-printing as the way to enhance their own political power. It opens our democratic institution to individuals running on how much money they can send directly to individuals and in the process, wreck the value of the dollar and make citizens dependent on big government. Mark my words – endless stimulus will eventually end in disaster.
#7 – Governments Seeking to Outlaw Cryptocurrency Ownership
The last 2021 trend I see happening in 2021 and beyond is that governments will make a push to make cryptocurrencies and alternative payment methods illegal. I’m certainly surprised that we have not seen a bigger push on this yet, though we are now beginning to see some chatter from politicians harping against the ills of cryptocurrencies.
Just as I was beginning to write this article, Ray Dalio came out with the same exact thoughts on Bitcoin’s future.
At the moment, we’re currently seeing Bitcoin becoming more mainstream as more individuals and businesses begin to buy the currency. The large institutions beginning to buy the currency – ergo Tesla – has helped to bolster confidence and drive up the price action of Bitcoin (and other cryptos as well).
Cryptocurrency prices have also been skyrocketing due to the irresponsible monetary policies that the governments are engaging in due to an endless money printing. Bitcoin and cryptocurrency bulls see digital currencies as a way to hedge against reckless government actions that they cannot control.
I’ve been contemplating on this trend for the last few months, wondering why the government hasn’t really begun the crackdown on Bitcoin or other cryptocurrencies? After all, the widespread use of Bitcoin directly competes with the strength of the USD. If the markets lose confidence in the value of the USD and more and more transactions occur in Bitcoin, then quantitative easing measures could lose their effectiveness. This means that central bankers would have much less influence over the general economy.
It seems to me that Bitcoin and other cryptocurrencies are serving a purpose to most central bankers at the moment, especially the US Fed, and thus are not an active target for legal crackdown. Currently, US citizens are using the USD to buy Bitcoin or other cryptocurrencies.
Being that US dollar is being highly utilized in these purchases, it makes the American government see much less risk in the cryptocurrencies at the present moment because the US dollar is still being heavily utilized to buy the currencies. The fact that the USD is being utilized to purchase BTC puts the bankers at ease – for now.
However, the moment that we start to begin to see the inflows into Bitcoin from USD slowing down, and rather Bitcoin/cryptocurrencies being traded between owners more heavily, that is where we are going to get a lot of pushback from governments around the world against cryptocurrencies.
I’m not sure when we’ll see this trend happen, but rest assured we will see an attempt by the governments to ban cyrptos and replace with their own electronic currency. Be on the lookout and make sure you protect your cryptocurrency by transferring it to a private wallet.
2021 Investing Trends: My Thoughts and Investing Strategy
So those are my predictions for 2021 investing trends and beyond – how am I capitalizing?
When it comes to war, I would personally like to see more of an isolationist “Live and Let Live” policy when it comes to world conflict, but being that is not the current case, I’m positioning myself so that I can take advantage of what I see as the inevitable increase in conflict.
In late 2020 and early 2021, I’ve begun adding more defense contractors to my portfolio. One of the main contractors that has been appealing from a valuation perspective is General Dynamics ($GD). I’ve been layering in this company quite frequently over the last few months and plan to keep watching the markets to see if more buying opportunities present itself.
For more info on valuation metrics, see The Ramey Rating
I also own a smaller position in L3 Harris ($LHX) and have my eyes set on potentially Lockheed Martin ($LMT) if the valuation comes in line with my dividend investment criteria.
To see a listing of dividend stocks check out the MoneyByRamey Dividend Stocks Watchlist.
To address endless stimulus, I have begun moving out of cash into more hard assets and stocks. These two asset classes should help fight oncoming inflationary pressures.
I have currently been targeting bigger companies with less beta – Microsoft, Apple, Pepsi, Coke, etc. As valuations present themselves and I accumulate more cash, I tend to move out of it rather quickly.
I am always on the lookout for tax breaks where possible – one idea that I’ve been thinking about is moving my traditional IRA to a Roth IRA, where I will be taxed up front at today’s tax rate but then can make withdrawals tax-free. However, I’m hesitant to do so as we’ve seen tax codes can change rather quickly and nothing is set in stone. I don’t want to make one move now to find out I’ve really done nothing for myself in the long run.
I have been layering in crypto purchases. I currently own ETH, BTC, and Nano. These are much smaller positions compared to my overall portfolio, but I do see the benefit of having these alternative investment vehicles in my portfolio.
The overall key that I’m seeking is an increase in real assets, inflationary hedges, and to diversify my overall investments. There are a lot of risks to hedge and I’m hoping that the political divides across the US and the world can be a bridge and that we can all keep working towards a future of prosperity and peace. Call me a crazy optimist, but that is what I seek.
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