Alone With My Thoughts – 08/15/2022
The definition of a bear market is pretty straight forward…a 20% drop over 2+ months from previous highs. That is what we are in and there have been only 3 bear occurrences since 2000, with one of them lasting just 33 days (2020). (Technically, the Nasdaq market has now entered bull market territory, having rebounded 20% higher than its recent low). The idea of being in a recession appears to come with a bit more debate…is it two consecutive quarters of negative GDP growth, or a combination of negative growth, high inflation, and an increase in unemployment. While we wait for the bureaucrats to argue the definition, let’s consider two things, one, once they label a recession, we are probably on our way out of it, and two, recessions should be viewed with respect to their level of magnitude. With a strong jobs report and now a cooling of inflation from recent highs, the economy appears to be hanging in there. If the recession remains mild, and inflation tempers, that could be the definition of a recovering stock market.
Alone With My Thoughts – 06/15/2022
Today the Fed took another shot at inflation, raising interest rates by 75 basis points. During the pandemic in 2020-21, and also the Great Recession of 2008-09, the playbook was to throw money at the problem by either keeping interest rates at zero percent or by literally giving people money to spend our way out of a jam. The result of all the free money (trillions with a T) is the aggressive inflation which now needs to be addressed. The multi-trillion dollar question then is…can the Fed raise rates enough to slow the economy without throwing us into a recession and/or a much steeper downward spiral in stocks. The better question may be…are we fighting yesterday’s war and should we be putting our efforts towards freeing up the supply chains, loosening the grip of government controls on US businesses, and letting post-pandemic demand play itself out over a period of time. The only thing that is transitory is any Talking Head taking responsibility for their economic calls.
Alone With My Thoughts – 06/09/2022
Friday’s upcoming CPI report will unfortunately tell us the same story that we are living, that prices are higher and they are sticky at these levels. Inflation can be an insidious threat to our economy, acting like a silent tax on our day to day life. From our friends at 10-K Diver here are some pointers on dealing with inflation. Be a consistent earner, meaning now is the time to be valued in order to maintain and increase your income streams. Continue saving by being even more aware of what and how you are spending your money. Finally, inflation proof your portfolio by investing in companies that have pricing power, very manageable debt loads, and are capital light. Inflation is happening and will be working its way through the system for some time.
Alone With My Thoughts – 05/24/2022
Warren Buffet’s rule number one is to “not lose money”. His rule number two is “see rule number one”. That being said, our goal is to build long-term investment portfolios that can withstand the inevitable bear markets and recessions that cycle through any economy. We also are committed to protecting your assets from the unfortunate tremendous growth in Cyber Fraud. Everyone needs to be vigilant when it comes to their money and its place in the digital world.
Alone With My Thoughts – 05/06/2022
Yesterday, the White House again touted the fact that they have cut federal deficits by historic amounts the past two years. Just keep in mind that the deduction is only in the predicted yearly deficit, in other words the national debt is still going up in historic fashion, but just not quite as fast. In classic political double-speak, the Biden administration would have you believe that they were able to cut the deficit by $350 billion last year, but due to pandemic emergency spending running out, if they had done nothing, according to the Committee for a Responsible Federal Budget, the deficit growth would have slowed by $1 trillion, much more than what they are hanging their hat on. Whether Republican or Democrat, unfortunately our elected leaders do not appear to have the resolve to tackle governmental spending and now we get to deal with the effects of higher interest rates begotten from higher inflation. The more you repeat something the more likely you are to believe it.
Alone With My Thoughts – 12/29/2021
Happy New Calendar Year It is time to flip the calendar on another year and also to reflect on what has been a very impressive market in 2021. Speaking of markets and calendars, the total return on the S&P 500 (the 500 largest US companies) has been quite impressive for the past 95 years, or dating back to 1926. Think about this, over this period we have seen countless historical events…wars, depressions, recessions, embargoes, financial crisis’s, and throw in a pandemic, yet the market has still had a 10.3% average annual return. Remarkable. Even more remarkable, over these 95 years we have only seen seven calendar years where the market is down by 14% or more, just seven. On the flip side we have seen 48 years (more than half) up 14% or more. We cannot predict the future but we can use the odds to our advantage. Here’s to a healthy and happy 2022! (research source Ibbotson Associates)
Alone With My Thoughts – 12/14/2021
According to a recent Wall Street Journal article, the value of tax-loss harvesting is quite impressive. Tax loss harvesting is basically managing long and short term gains to the investors advantage. Using someone in the 25% income tax bracket, their studies show that in a strong market, managing taxable gains and losses can add 1.1 to 1.42% to annual returns. Even more impressive, during significant downturns when the S&P is negative, this harvesting can add about 3.21% to yearly performance. So whether the market has been naughty or nice, tax management can be a gift to returns.
Alone With My Thoughts – 10/15/2021
Thanks to Kevin Caron at www.washingtoncrossingadvisors.com we get to consider this…Back to the old Buttonwood tree in NYC in 1790, when the value of stocks were first calculated, it took over 200 years for the US stock market to top $16 trillion in value. Based on today’s current value, we have risen by $16 trillion in market value since the pandemic BEGAN. A recession and health crisis that produced a $16 trillion gain in value, go figure. One, it shows the law of large numbers and too, it may be pointing to some inflation momentum in financial assets. Speaking of inflation, again this past week, Janet Yellen stuck with her premise that we are in a “transitory” period of higher prices, yet today social security payments were adjusted higher by almost 6%. Social security payments do not go lower so the only thing transitory is the money leaving your pockets.
Alone With My Thoughts – 10/1/2021
Katy Milkman, a behavioral scientist at the Wharton School has written about “the fresh start effect”, or the effect that birthdays, the start of a new season or other landmark dates have on our ability to make changes to our lives. For example, with back to school and the fall season upon us, we may be more inclined to begin a new healthy and or profitable habit. So pump the brakes on the pumpkin lager and pumpkin spice drinks and pour your savings into a compounding investment and kick off a new fall beginning.