Alone with My Thoughts – 8/20/24
Time in the Market Iconic Wall Street observer Jeremy Siegel reminds us in a recent Barron’s article that stock investing is the most volatile asset in the short-term and the most stable asset in the long-term. Most volatile in the short-term and most stable in the long-term. Traders are chasing the next great earnings opportunity or corporate development. Investors, in contrast, are more concerned with compounding earnings, dividends, and share buybacks because that is where wealth is created. This message is so simple, yet so many fail to understand it.
Alone with My Thoughts – 6/25/24
We Need a Diet Shot for Governments Last Thursday, the Wall Street Journal reported that France was facing disciplinary action from the EU for running a high budget deficit. Not only are the French dealing with this deficit, they are also above the EU requirement of no more than 60% of debt above GDP. In the US interestingly, our debt is about 100% of GDP and just this past week our deficit is now projected to be about $2 trillion for the year. Good news, we are not a member of the EU, bad news, our interest on our debt is now almost $1 trillion dollars a year, or about the same as our entire defense budget (or for those keeping score, about 30% of our tax revenues so far this year). Mon Dieu!
Alone with My Thoughts – 5/14/24
The stock market can be so emotive. From the elation of riding the wave of the “next biggest thing” like AI to the despair of outdated technologies (think Kodak, VCR’s, and Blockbuster). As for amazement, consider that Sam Bankman-Fried is sitting in jail for the next 25 years as a result of his crypto financial fraud schemes. It has now just been reported by both the Wall Street Journal and Barron’s that his schemes owe investors $11 billion dollars and that after liquidation, the fund has about $15 billion dollars to pay off the aforementioned creditors. So…he gets 25 years and investors “gain” $4 billion on his strategy. Rarely, if ever in history, has financial fraud resulted in a windfall for investors. The feeling of perplexion comes to mind…
Alone with My Thoughts – 2/15/24
Super Planning The recently played Super Bowl will go down as one of the most exciting finishes ever, as the KC Chiefs pulled out an overtime victory. Andy Reid, the future Hall of Fame coach of the Chiefs, did what he does best, and what the greatest coaches do best, and that was to make adjustments at halftime. Many people will consider getting a financial plan, to help map out their financial future. Instead of a financial plan, we try to look at it as financial planning, meaning that life will throw us many changes, curve balls, and situations that may require halftime adjustments. Speaking of Super Bowls, “Just because you made a good plan, doesn’t mean that’s what’s going to happen.” Taylor Swift
Alone with My Thoughts – 2/1/24
A record high in the S&P 500 was made on January 2, 2022 and now, just over two years later, we are making record highs on a daily basis. Here are three takeaways…One, the S&P has now made up for the viscous declines of 2022. Secondly, an interesting stat that comes from Ned Davis Research (thanks to our friends at Riverfront and JPMorgan) shows that making new highs after at least a one year time period, have historically resulted in positive performance over the next 3, 6, and 12 month periods. Finally, with the expectation of future rate cuts from the Fed in 2024, has there been other times when the Fed cut rates while stocks were making new all-time highs? 2024 is off and running.
Alone with My Thoughts – 1/25/24
A common investment theme around here is that “savings and innovation equal economic opportunity”. The 2023 market certainly benefited from that view even though an MIT study had previously indicated that innovations are less likely to trigger economic growth because the big ideas are harder to find. With two letters, AI, innovative new technology arguably single handily carried the market through the first three quarters of last year. After pausing in October, the rest of the year was led by medical innovations, most notably in weight loss and to a lesser extent Alzheimer’s. As we look to 2024 and beyond, the future remains bright for innovative solutions to the world’s most vexing issues. Hopefully, potential gains on Wall Street may follow.
Alone with My Thoughts – 12/26/23
We don’t know what AI is going to unleash in the future but in 2023 it saved the day. After a disastrous prior year, when the Fed began their interest rate hikes to the sea, excitement on Wall Street over AI has lifted tech stocks and the major averages. At the end of October though, the “magnificent seven” accounted for most or all of the gains for stocks. Then in early December, the Fed finally abruptly pivoted, rates went from 5% to less than 4%, and the markets broadly took off across the board. Instead of a Santa Claus rally, we can call this the Santa Claus Pivot. Enjoy the holiday season!
Alone With My Thoughts – 11/14/2023
Next time you are shopping for a birthday card, look at the lowest level of the rack. There you will find birthday cards for 100-year-olds. Think about it, birthday cards commemorating that huge milestone. In fact, ages 85 and older is considered the fastest growing segment of the US population by percentage, and those over 65 should double in number in less than 20 years. For investors, the idea of retiring and going completely into bonds is probably a risky strategy, when confronted with inflation. Stocks and growth assets may then be a bigger part of portfolios for a much longer period of time. Speaking of time, the best time to invest is today, releasing the exponential compounding to do its thing. Thanks to First Trust for the birthday wishes, even if they are jumping the gun.
Alone With My Thoughts – 11/1/2023
The Mendoza line is baseball jargon from the seventies for the supposed threshold for offensive futility of hitting at an average of .200. Players can be above or below the Mendoza line (named for major leaguer Mario Mendoza, a lifetime .215 hitter). There are several Mendoza lines on Wall Street currently…lines that when crossed get everyone’s attention. For example, the Mendoza line for the ten-year treasury appears to be 5%, above that and money flows from stocks to bonds. Gasoline has a Mendoza line at $4 per gallon, above $4 and the economy begins to slow. Bitcoin has seen somewhat of a Mendoza line at $26,000 and has made a recent significant rally to $34,000 plus. For stock traders, the 200-day weekly average is at $3,945, which is a line we do not want to see crossed.
Alone With My Thoughts – 09/11/2023
Beware the Man Behind the Curtain The finance industry has always made investing seem complicated and mysterious to many of us. As a form of job security, the more dependent their clients are, the more “silver bullet” products and plans can be sold. But like the Wizard, once the curtain is pulled back, investment success can be relatively simple…spend less than you make, have a financial plan with the guidance of someone that understands your goals, and invest in great companies and mutual funds. The first step is to do the simple things that you can control and then ignore the man behind the curtain.