THE FISCAL BLUE PRINT
WITH COACH JEFF MONTGOMERY
Episode 39: Q&A on the U.S. Coin Shortage, 2020 Elections, Taxes & more!
In this week’s episode, we covered a few different topics based on some of the many questions we have been receiving lately! Question #1: Coin shortages. What’s up with the conspiracy theories surrounding the U.S. coin shortage? Question #2: What could happen because of the upcoming election, how will it affect our economy and more specifically, our portfolios? Question #3: Depending on who gets into office, how could it affect our future tax rates? Do tax rates have any effects on market return?
(2:40) Question #1: Coin shortages. What’s up with the conspiracy theories surrounding the U.S. coin shortage?
There was a recent social media post that went viral claiming that a coin shortage in the U.S. was a sign of an impending one-world government. The false claim included a photo of a grocery store asking customers to pay in exact change or use noncash payment methods. The post went on to profess that this coin shortage was done intentionally and that the mint was no longer printing coins into circulation. Thus, implying that this is the beginning of a plot to instill a cashless society where they would be able to track every single private transaction.
So, let’s tackle this. Why did the coin shortage actually take place? The reduction of workers in the U.S. mint was the initial catalyst for the shortage. “The reduction of workers at the U.S. Mint because of social distancing resulted in a 10% decrease in production in April and a 20% decrease in May,” according to U.S. mint spokesperson Todd Martin.
Because of coronavirus fears, many people have switched to using credit cards and mobile payments to avoid handling money. Meanwhile, the shutdown also forced some businesses to close that would normally help keep coins moving. “With establishments like retail shops, bank branches, transit authorities, and laundromats closed, the typical places where coin enters our society have slowed or even stopped the normal circulation of coin,” Michael White, a spokesman for the U.S. Mint, said in a statement. The organization has since gone to full production starting in June. On June 30th, the Fed announced that they created a task force to handle the shortage. Meanwhile, the U.S. Mint returned to full production in mid-June and expects to produce 19.8 billion coins by the end of the year—7.4 billion more than last year. (according to yahoo finance)
Beware of those touting that the dollar is worthless in an attempt to sell gold and silver. They are in high gear and marketing solely based on fear.
P.S. Over the last 10 years, the ROI on gold has been 7.2%. In comparison, the S&P 500 was up 180.39%. Just remember, if their sales pitch is that we are heading into a cashless society/the dollar is worthless ask yourself this: what are they accepting in exchange for gold? THE US DOLLAR… which they were just touting as ‘worthless.’
(11:11) Question #2: What could happen as a result of the upcoming election, how will it affect our economy and more specifically, our portfolios?
Questions like this are basically a recurring theme every single Presidential election! Let’s talk about change… there is always going to be something that is scary or threatening to folks when it comes to investing in the market. This fear can brutally affect any prudent investment strategy if acted upon.
Lets’ take a look at some facts & data! From 1927-2018, the Republicans held the House (majority) 27 of those years. During those years, the stock market had an annualized gain of about 6.59%. The Democrats held the House majority for 65 of those years and the market was up 11.11% on average.
What about the Senate? The Republicans controlled the Senate for 30 of those years during which the market averaged a 9.4% increase per year. The Democrats held the Senate for 62 years and averaged 9.94% increase each year.
What about the White House? Republicans have been in the oval office for 45 years with an average stock market gain of 4.95% per year. Democrats have been in the oval office for 47 years with an average stock market gain of 14% per year.
Now, although there are some differences, did you notice that all the percentages were positive? The point is that on average over time, the market grew regardless of who was in office or who held the House/Senate majority.
(19:30) Question #3: Taxes: Depending on who gets into office, how could it affect our future tax rates?
What happens if Joe Biden gets into office and he raises taxes as he mentions in his plan? Do tax rates have any effects on market return?
Again, let’s always look at the data! From 1927-2018 we’re going to look at the entire market (small, mid & large cap) performance. (CRSP) When the top tax bracket has been greater than 50%, (50 years) the average annual return in the market was 12.58%. When the top tax bracket was less than 50% (42 years) the average annual return in the market was 10.65%.
When capital gains rates were over 25% (49 years) the market returned 13.89%. When the capital gains rate was less than 25%, (43 years) the market returned 9.2%.
Disclaimer: Please do not take advice from me on this show. As a licensed Fiduciary I am only allowed to give advice to clients. So unless you’re a client I can’t give you advice because I don’t know you. So think of this as helpful hints and education only. And please before implementing any information or ideas you hear on this show always consult your legal adviser, your tax adviser, and your financial adviser………….right? that’s just common sense.