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Mind on Money: Time to do what’s necessary

By: Marc Ruiz Last Updated: June 27, 2022

My wife, Tracy, and I took a short vacation, celebrating our anniversary, to Utah last week. The trip was planned around an invitation we received to the Ford Performance Driving School in Park City. The invite was included when we purchased her new Ford Explorer ST last fall.

We arrived to a full room at the program overview dinner and sat with a friendly couple near the back. The race school program overview was impressive. The instructor announced that the fastest time in the program’s autocross event would receive a trophy as well as a shout-out post on the school’s Facebook page. When the trophy was announced the excitement in the room notched up a level, as drivers from across the country sat up a little straighter, looking around to gauge the room.

The couple we were sitting with was a little younger than us, but old enough to be interesting. The wife worked in local government; the husband flew F-15 fighter jets for the Air Force. After dinner we meandered down to the hotel lounge for a cocktail.

While the moms talked about parenting college kids, my new friend and I were enjoying each other. He had a dozen questions about investing; I had two dozen about flying fighter jets. The conversation was fun, but it also kept circling back to the driving trophy as we continually sized each other up; surely one of us was going home with the top gun spot.

I’ve been driving or riding fast things for 40 years. ATVs/UTVs, motorcycles and high-performance pick-up trucks. I’ve even attended a couple instruction sessions in race cars and race carts at the Auto Country Club near Joliet. Surely, my skills and experience were enough to win against this group, even against a fighter pilot, who clearly had similar expectations.

Autocross is done in a large parking lot on a course built of orange safety cones. The courses typically consist of three or four 180 degree turns, some weaving and some straightaways. The course was challenging, my time was three seconds behind the leader (not the pilot), my spirits were crushed. No trophy for me.

After the program I had a four-hour drive to Moab to sulk in my failure. During my sulking, I came to the realization I was trying to drive the Ford Explorer like an ATV or racing cart. Fast into the turns, using slides for momentum, accelerating out of the 180s. But the Ford Explorer is a modern all-wheel drive SUV, with anti-lock brakes, stability and traction control and sensors everywhere. The event was designed to illustrate these great features. So even though winning the autocross was my top priority, I was unable to give up on what I wanted to do, and do what had to be done to win the race. Failure was the result.

Last week President Biden also announced fighting inflation was his top priority. The very important question will now become, can the administration give up the things it wants to do, to do what must be done to address this serious problem?

As economic forces go, persistent high inflation presents great risks to our economy, our markets and our society. Addressing the current trend will require tough decisions and coordinated efforts.

The Federal Reserve is waking up to this reality, and pressing the economic brake pedal more aggressively, but the Fed didn’t create this problem alone, the federal government must also do its part; unfortunately I am not sure this administration is up to the task.

The Biden administration wants to focus on carbon emissions, it wants to redistribute wealth to its preferred constituencies, it wants to tax and spend. All these things will cause us to lose the inflation race, in my opinion.

It’s important to remember, while climate change is presented as fact, it is actually firmly still in the realm of the theoretical. I happen to believe the theory is sound, but the risk not urgent. We can reduce carbon emissions over time. But this will be accomplished by prosperity and innovation, not by tormenting the carbon fuel industry; driving energy costs through the roof, attempting to create an artificial "true price" for carbon, at a time when prices across the economy are already unstable.

Cancelling student loan debt is a thinly veiled vote-buying entitlement program. Doing so would push another $360 billion of cash into the economy at a time when excess household liquidity is already contributing heavily to inflation. Regardless of one’s opinion on this issue, now is not the time.

During its first year in office, the administration managed the $1 trillion infrastructure bill, and the $1.9 million “Rescue” bill, despite inflation already beginning to flare. While this money was earmarked, it hasn’t all been spent. I believe the administration needs to pull back the reins on spending these dollars, reducing the deficit and aggregate demand until inflation cools down.

I feel the Federal Reserve is gaining credibility in the eyes of investors. As we gain more confidence regarding Fed policy to address inflation, I expect investors will start looking to the government to do its part. If the Biden administration is unable to illustrate understanding and competence addressing the issues surrounding inflation, I’m afraid the tough conditions for investors will continue and the race may even be lost.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. Precious metal investing involves greater fluctuation and potential for losses. Past performance is not a guarantee of future results. Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company. Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.