by Louis Navellier
December 14, 2021
If the Biden Administration blocks Nvidia’s attempt to take over ARM Holdings, China could move in to grab the British giant. If so, you can thank our FTC for interfering with U.S. commerce and weakening one of the dominant industries in the U.S. I am not saying we should sell Nvidia or any other technology stock we own, but I find it ironic that an industry that used its billions and its social media influence to help Joe Biden win in 2020 is now being punished by Biden’s bureaucrats. This may help to explain why, despite robust economic growth, the approval rating for the Biden Administration has plummeted.
Another example of the Biden Administration interfering with U.S. business is that the Securities & Exchange Commission (SEC) subpoenaed Lucid Group (LCID) on the details associated with its Special Purpose Acquisition Company (SPAC) deal prior to going public. Lucid is led by ex-Tesla engineers, and I’d say their electric vehicles are far more efficient than any EVs offered by Tesla or its competitors.
The fact that the Biden Administration is promoting the less-efficient EVs made by union shops is raising questions about whether the U.S. is truly serious about making a successful transition to efficient EVs, since Lucid, Rivian (RIVN) and Tesla (TSLA) have not been included in any of the Biden team’s attempts to boost EV sales. Frankly, as entertaining as it was to watch Joe Biden doing acceleration tests in the GMC Hummer, that 9,000-pound SUV is not going to lead the planet in fighting climate change!
Ironically, Tesla’ss CEO Elon Musk told The Wall Street Journal that he is opposed to the proposed EV tax credits by the Biden Administration, which provide a bigger tax deduction on union-made EVs, as well as federal funding for EV charging stations. Musk said, “Honestly, I would just can this whole bill.”
Transportation Secretary Pete Buttigieg responded to Musk’s comments by saying, “We think it’s very important to fund EV charging stations and to … buy down the cost of electric vehicles.” Buttigieg also reiterated that the Biden Administration believes in “the benefits of union jobs,” and added that an EV credit of up to $12,500 per vehicle could help buyers get into an electric car that they wouldn’t be able to afford without the $12,500 credit. He also stressed the importance of EVs being “made in America and creating good-paying jobs.” To me, this sounds like Pete Buttigieg is running for President in 2024.
“Non-Transitory” Inflation Spins Out of Control
After the Fed “Over-Primed” the Pump
Another reason why the Biden Administration and the Fed are under fire is that it is now widely perceived that inflation has spun out of control because the Fed has “over-primed the pump.” The Labor Department reported on Friday that the Consumer Price Index (CPI) rose 0.8% (a 10% annual rate) in November. Food prices rose 0.7% in November, while energy prices surged 3.5%, led by a 6.1% increase in gasoline prices. In the past 12 months, gasoline prices have soared 58.1%. Used vehicle prices rose 2.5% last month and have risen 31.4% in the past 12 months. Excluding food and energy, the core CPI rose 0.5% in November. In the past 12 months, the CPI and core CPI have risen 6.8% and 4.9%, respectively.
The Treasury Department was selling lots of securities last week and although some yields rose slightly, the 10-year and other long bond yields were relatively stable. Specifically, the Treasury Department sold $36 billion in 10-year bonds on Wednesday with foreign buyers accounting for about 69% of all bidders. The bid-to-cover ratio was a healthy 2.43, so the 10-year bond yield only rose slightly, to 1.518%.
Since there continues to be robust demand for Treasury securities, that should allow the Fed to taper a bit more rapidly and reduce its quantitative easing from $90 billion per month to $75 billion, or less, when they convene the Federal Open Market Committee (FOMC) today – with their decision due tomorrow.
As always, Wall Street loves to “climb a wall of worry,” but I expect that since the 10-year Treasury bond remains an oasis and fourth-quarter U.S. GDP growth is expected to be stunning, a strong U.S. dollar will continue to attract foreign capital and keep interest rates artificially low relative to inflation. This essentially means that growth stocks as well as dividend growth stocks will remain an oasis for investors.
Except for inflation, most of the economic news released last week was very positive. For instance, the trade deficit plunged 17.6% in October, compared to September, due to soaring exports. Also, since the U.S. trade deficit declined so drastically in October, the first month of the quarter, economists will likely revise their fourth-quarter GDP estimates higher. The Atlanta Fed is first to do so, estimating fourth-quarter GDP growth at an 8.7% annual pace, up from its previous estimate of an 8.6% annual pace.
Also, the Labor Department reported on Thursday that the weekly claims for unemployment declined to 184,000 in the latest week, down from a revised 227,000 in the previous week. Continuing unemployment claims rose slightly to 1.992 million compared to a revised 1.954 million in the previous week. Weekly unemployment claims are now running at the lowest rate in 52 years (since September 6, 1969), so the Fed should finally pivot away from its unemployment mandate and shift to its inflation-fighting mandate.
Tomorrow’s FOMC statement as well as the November retail sales report (also due out tomorrow) are shaping up to be the catalysts that could push the stock market higher in the second half of December.
Navellier & Associates does own Tesla (TSLA), for one client, per client request, General Motors Company (GM) in a few accounts, and Nvidia (NVDA), in managed accounts. We do not own ARM Holdings (ARMH), Lucid Group (LCID) or Rivian Automototive (RIVN). Louis Navellier and his family do not own Tesla (TSLA), General Motors (GM), Lucid Group (LCID), Rivian Automototive (RIVN) or ARM Holdings (ARMH), personally. They do however own Nvidia (NVDA), via a Navellier managed account.