The speaker of the House moved quickly back in May to pass a huge additional Covid stimulus bill- $3Trillion- Wow! Much of the media expects for a new stimulus bill to be signed by the President since the payments to the people expires next week in part because the President has signaled his willingness to sign another stimulus bill.

I beg to differ.

While the House is led by the quick moving Pelosi- the HARE- the Senate more deliberate in its  nature to begin with is run by a Majority Leader McConnell often compared to that most deliberate of the tortoise family (bowing to Aesop)- the TURTLE.

How do the Democrats benefit (and the GOP lose) from the quick signing of another stimulus bill?

Let me count the ways:

1. The Democrats have chosen to maximize American’s fear of Covid by encouraging governors and mayors to enforce various mandated lockdowns (social distancing, mandated wearing of masks, keeping businesses- restaurants, bars, gyms…etc…restricted or actually closed).

2. The ability of Democratic-run states and cities to keep their constituents locked down depends heavily on them getting the stimulus money to pay the bills without working

3. Keeping unemployment high is greatly enhanced by keeping schools closed forcing in many cases parents to stay home- and again it is the Democrats that threaten to keep schools closed

4. Democratic sponsored protests- BLM and Antifa- benefit from the protesters getting stimulus money for nothing and therefore open to frequent (or as in Portland OR nightly) riots and looting which is linked to the progressive/BLM policies of reducing the credibility of law and order (reliable police protection)

5. The Democrats are hopeful that their policies increase the chances of an election win in November

Note who runs the Senate- it ain’t Democrats. Therefore I predict that Turtle in the Senate will refrain from passing a bill that the Hare in the House can agree on. To be sure there will be ‘serious’ negotiations and many speeches and news reports as August begins- but no signing ceremony at the White House. 

How does this delay impact the economy?

I believe the impact on the economy of the delay will be largely positive. Finding a job when faced with no more government money becomes drastically more important. And the more people working the stronger the economy. The Democratic Governors and Mayors will find that the pressure to reopen the schools will quickly mount which will further increase the momentum of the economic rebound. The effectiveness of scaring the public about the pandemic will decline and the pressure to reduce the mandates (ie reopen the country) will increase in part because the evidence- primarily from Europe- of schools opening safely and economies reopening is mounting.

I predict the minority communities linking with suburban soccer moms will put increasing pressure on their largely Democratic politicians to Make America Great Again (to coin a phrase) my moving closer and closer to the GOP bill. This could result in the timing of ultimately getting a stimulus bill passed depending on when the Hare buckles due to fears that the GOP minority in the House is close to getting enough Democrats to pass a bill without her- in effect- the Turtle’s bill.

MY SPECULATIONS:

I currently hold four future positions: three of them- long silver, short the stock market, and short lumber are vulnerable to a stimulus delay (and strengthened economic outlook) so even though I like those positions longer term,  I will keep tight stop positions and be ready to go to cash. The fourth position- long natural gas futures I may add to since it is still cheap and helped by a stronger economy.

I will hold on to my current stock longs- ONDK @ 78 cents, NEPH @ $7.60, and HNRG @ 64 cents…

Best

Political Bob