May 20, 2016

Universal Basic Income: good for stocks and Valora

Switzerland is uniquely positioned to be ahead of the world again by passing a vote to guarantee a minimum annual income for all its citizens. Why? The bill will make an important contribution to the future of Switzerland’s social security system.

How will this be accomplished? Very simply, more money for the poor creates more spending, more spending increases demand and more demand means more profit for companies and their shareholders. Since the Swiss pension system relies heavily on stocks (the state doesn’t pay interest anymore), more profit for shareholders means more available capital at the time of retirement.

For example, if Dr. Stern raises the weekly allowance for his son Thomas (age 7) from 5 to 10 francs, he will undoubtedly buy more toys. However, Dr. Stern won't change his level of consumption. Therefore, overall demand has increased.

John Maynard Keynes and Milton Friedman, the two most famous economists of all times, knew this almost 100 years ago. Why did we lose sight of this basic principle? Because the central bankers mistakenly believe that printing money is all it takes. Most people now know that they were wrong. Japan has been printing money for 20 years to no avail.

Which stocks stand to profit the most from a guaranteed minimum income? Dr. Stern is betting on Valora, with all their Kiosks, Spettacolo, the espresso chain and Brezelkönig, king of pretzels in Switzerland. One can well imagine that the poor want more than what is served at their local soup kitchens, and a good pretzel or a good espresso will now be attainable, instead of previously being unaffordable indulgences. As a Valora shareholder, Dr. Stern will get a better return on his investment.

We now need the majority of Swiss citizens to understand these logical conclusions. The time is ripe.

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