Alone With My Thoughts – 07/26/2023
Rags to Riches The world lost an iconic legend last week when Tony Bennett passed away at 96. Tony Bennett captivated the nation, most notably a young Frank Sinatra, who famously claimed in a Life magazine article that “for my money, Tony Bennett is the best singer in the business.” Speaking of money, Tony Bennett represented everything good about successful investing. He was innovative, with an incredible knack for re-creating himself time and time again. He thought long-term, achieving 19 Grammys, with 17 of them coming after he reached his 60’s. He was frugal, as he ands his manager son mapped his 200 appearances a year to perfection. From Ray Charles to Lady Gaga, he was diverse and willing to take a little risk. Cheers to a national treasure.
Alone With My Thoughts – 06/26/2023
“We would be careful not to give in completely to FOMO (fear of missing out), as a skipped hike is not a pause, inflation still handcuffs the Fed…” Benjamin Bowler, BofA Securities. The FOMO is definitely out there, what with Morgan Stanley upgrading Nvidia, this past Friday no less, to overweight. Thanks for the update guys, the now trillion dollar chipmaker’s stock is up 193% year to date. And FOMO is finally reaching out to the broader market, with all 11 S&P 500 industry sectors up during the month of June. It may be ok to join the party now, who doesn’t like a good party, but again, they say nothing good happens after midnight…
Alone With My Thoughts – 06/01/2023
“When you come to a fork in the road, take it.” Yogi Berra. The stock market road typically has plenty of forks to take, but this year we have seen a road that gets narrower and narrower. For example, If not for the seven largest tech stocks, the S&P 500 would be negative for the year and not up over 9%. The AI inspired gold rush into tech has been pretty remarkable and continues with the recent push in Nvidia, now a Trillion dollar company. Narrow stock market leadership has not always bode well for diversified portfolios and we need to battle the FOMO of the artificial intelligence crowd. Sometimes it is good to stay in your own lane.
Alone With My Thoughts – 05/22/2023
Home buyers are feeling a bit like Hannibal Lecter, what with homeowners handcuffed to low mortgage rates. A recent Wall Street Journal article by Nicole Friedman, pointed out that the reluctance of these homeowners to sell differentiates the potential downturn in housing from other periods of rising interest rates. This idea of going from a historically low interest rate to a much higher one will most likely stunt the supply of homes for the near future. As of March 31, nearly two thirds of primary mortgages were at rates below 4%. For investors, the net effect could provide an opening for builders, an opportunity for home remodeling, and possibly dull the Fed’s attempt at to slow inflation. Moral to the story, interest rate moves, both up and down, are not without unintended consequences.
Alone With My Thoughts – 04/28/2023
The tech heavy Nasdaq has been leading the way in 2023 after a horrendous prior year performance. As we leave the month of April, the Nasdaq has gained about 16% year to date, led by familiar big tech names like Amazon, Meta, Google, and don’t forget Microsoft. The sales numbers have been impressive…Amazon clocking in with over $100 billion in quarterly sales, Google (Alphabet) with more than $60 billion, and Microsoft with over $50 billion. As the arms race for AI takes off, there seems to be cash available for the perceived next big idea. At the midway point of earnings season, about 75% of companies have beat expectations and through the first quarter, $77 billion has flowed into equities. This, along with tight employment, will hopefully portend a “soft landing” for the economy and maybe even softer inflation rates.
Alone With My Thoughts – 02/20/2023
During a recent interview, growth stock investor Cathie Wood remarked that “innovation solves problems”. That is one of the beauties of investing, entire industries seemingly come out of thin air when the times get tough. Most recently, the pandemic brought us Zoom Video which is now a $22 billion dollar household name. Think of Moderna, another pandemic problem solver. And as we come out of an unprecedented economic shutdown that inadvertently is causing a major shortage of workers, witness the lowest unemployment since 1969, Amazon is adding about 1000 robotic “workers” per day. “That means Amazon could have more robots than employees by the year 2030” continued Wood. Innovation and savings are the keys to economic growth and its hard to bet against the ingenuity that is here at home and around the world.
Alone With My Thoughts – 01/24/2023
It has been a good month for Philadelphia…Not only are the Eagles vying to be in the NFC championship game but the Philadelphia Exchange indices are leading the way in the market. Look at the PHLX Gold/Silver index up 12% year to date, PHLX Semiconductor index up 10%, and the PHLX KBW Bank index up 6%. A late day rally on Friday has helped give stocks a nice run to start the year and three positive weeks for the Nasdaq. To quote two of our most famous traders from the Philly exchange (by way of the movie, Trading Places) Louis Winthorpe III “Looking good, Billy Ray.” Billy Ray Valentine “Feeling good, Louis.” Data as of the close of business 1/20/23.
Bruce “The Boss” Springsteen and the Anatomy of a Value Stock
Bruce Springsteen continues to have a prolific six-decade career as a Rock and Roll mega star. He has sold over $140 million records, which makes him the Warren Buffett of contemporary music. His long-term success can only be envied by investors as long-term is our overriding mantra. But Bruce as a value play, let’s look… Value investing can easily be described by a quote from Charlie Munger…”All intelligent investing is value investing…acquiring more that you are paying for. You must value the business in order to value the stock.” It involves going against the favored crowd, anticipating the prospects years down the road, the ability of a company to scale, and the opportunity for long-term wealth generation. The Wall Street Journal recently highlighted the 50-year anniversary of the release of the Bruce Springsteen studio album “Greetings from Asbury Park, N.J.” in January of 2023. Upon its release, the album garnered little fanfare as compared to the “shiny new” progressive rock bands of the time like Jethro Tull and the Moody Blues. The album only managed at its best to reach 60th place on the US charts (two years after its release) and did not even chart in the UK. The reviews were good, but the masses did not see the value. Springsteen was well known in his market and extremely diligent at his craft, but was considered “a cheap, bar band take-off of Bob Dylan”. The rest is history…after tireless touring all over the country, the band became more than the east coast leader of the Jersey Shore Sound and after the release of “Born to Run” they were off to the races. The “Greetings” album, which took years to even chart, ultimately did chart in the UK at 41 in 1985 and is ranked 37th on the Rolling Stone’s list of greatest debut albums. Value is in the eyes and the ears of the beholder, whether the art form is music or investing. As for 2022, the recap is well known now. It was a very difficult year for both stocks and bonds (fixed income) as the Fed realized they missed the mounting inflation problem and continues to attack higher prices with interest rate hikes to slow the economy. We continue to believe that current inflation is a direct result of the record amounts of stimulus added to the economy because of the Pandemic and will most likely just need time to dissipate through the system. For the record, value investing was the best house in a bad neighborhood as the Dow was down 8.78% last year versus a drop of 33% for the Nasdaq, 19% for the S&P 500, and not to be outdone, a drop of 11% for fixed income. Looking ahead, we believe that a combination of earnings that are stable, mixed with a significant drop in prices from peak inflation could help us bounce back in the year ahead. Whatever happens on Wall Street, we will continue to search for value in our investments and look forward to seeing everyone personally in the New Year. Thank you again for your confidence in our firm.
There is Always A Bull Market Somewhere
With stocks and fixed income both in the red this year, we continue to remind people that “there is always a bull market somewhere”, making the case for a diversified portfolio. 2022 to date has certainly tested the resolve of investors, the classic 60-40 stocks to bonds allocation model is suffering its worst performance since the Great Depression, currently down about 18%. We have had some re-assuring good news in several stocks that many of our clients own (full disclosure). For example, a huge spike in energy costs has lifted Chevron up 56% year to date. In the arena of health and bio-tech, Regeneron just recently had the first FDA approval for an eczema treatment (Dupixent)for adults. The stock is up 17% this year. With the attention and funding going into infrastructure projects, combined with high crop prices, John Deere has managed a 15% increase this year. Finally, as the Fed combats inflation with higher interest rates, regional bank NBT is up close to 24%. The point is, stocks move with the market in both bull and bear markets, but having a diversified portfolio with investments that don’t always correlate with these moves can help mitigate the risks. Performance data as of 11/4/2022. Past Performance is no guarantee of future results.
Alone With My Thoughts – 10/17/2022
It is October and we have entered the Clown House of volatility with intra-day swings of 5%+, so buckle up for the ride. For markets, the Fed’s reaction to inflation is the key, as higher interest rates are kryptonite to stock values. Unfortunately, politicians do not seem to understand the basics. If you throw literally trillions of dollars into the economy at the same time there are supply issues, you will by definition get inflation. The Fed will then raise rates to slow the spending and cool off the economy. Hard stop. If the government continues to print money, the Fed cannot raise rates high enough and fast enough. Politicians need to stop handing out money to voters. A recent Barron’s article. “States’ Stimulus Spending is a Negative for the Fed”, points this out, that states are prepared to spend $31 billion in stimulus programs. For example, Kirsten Gillibrand is doing the Thruway tour touting the $1 billion dollars of funding for higher heat costs this year. Feel good moment, yes, helping combat inflation…just the opposite. Social security going up 8.7%, a nice boost for seniors and a nice boost for inflation. Forgiving student debt, does not forgive higher inflation. The bottom line, inflation-relief measures tend to increase inflation which crushes the working class. Beware the Clown bearing gifts.