What I’m Thinking Today

In honor of the extra day in February this year, and on the eve of Super Tuesday, I thought it was a good time to jot down some random thoughts on the market, the economy and the election. So, in no particular order, here goes . . .

  • I hope you listened to my pleas in the last few newsletters not to panic and sell your quality holdings into the correction. If you didn’t, you’ve enjoyed a gain of almost 1,000 since a bottom was made on February 11.
  • I don’t think February 11 was “the bottom” for the year. We’re likely to have at least one, if not two more, corrections this year. That being said, I do believe the market will be higher over the next few years.
  • I would substantially overweight, or even limit, your investments to blue-chip, dividend paying, U.S.-based equities as most of the rest of the world is a mess and income is at a premium.
  • Although I’m happy to see oil prices firming above $30 I don’t think the pain is over. There is still way too much oil sloshing around the world and not enough demand to soak it all up. When the stories of bankruptcies in the oil patch begin to dominate the national media, that will be time to start buying stocks in the energy sector.
  • Large-cap pharmaceutical and biotech stocks have been too beaten up; some great values are starting to present themselves.
  • There is almost zero chance the Federal Reserve will raise rates this year. The greater chance is that they’ll cut rates, although I don’t think that will happen either, at least not in the next few months.
  • When times get scary, and you aren’t sure what to do, it’s ok to do nothing. Outside of some family accounts, in which I bought some stocks during the downturn in January (which proved too early), I have made next to no trades in 2016. And that’s just fine. Sometimes the best trades are the ones you don’t make.
  • When you’re an investor, it’s paramount that you recognize that markets go up and down. There are good times and bad. Up cycles and down cycles. The sooner you accept reality the better. Then you’ll be able to accept the down down with some equanimity and the good times with humility. Investing properly is a marathon, not a sprint.
  • The stock market does not like uncertainty and one of the greatest uncertainties right now is the election. Notwithstanding Bernie’s surprising resilience, I think most people would agree that Hillary will be the Democratic nominee for President.
  • Less certain, though increasingly likely (and I can’t believe I’m writing this), is that Donald Trump will be the Republican nominee. If he sweeps the majority of the #SuperTuesday states tomorrow, his coronation will be virtually assured. And no sane person could really want that to happen. The closer Trump gets to the presidency the more likely the stock market is to be rattled. And that’s not good.
  • All of the Trump supporters out there who think a vote for Trump is a vote for change (“throw the bums out”) and that he will “Make America Great” again, should stop for a minute, listen closely to what he’s actually saying (or more to the point, what he’s not saying) and ask if he is really the person we want leading this country for the next four years. Perish the thought.
  • Tell the important people in your life how much they mean to you. Spend more time with your friends and your kids. Go out and do the things on your bucket list. Don’t wait to drink that great bottle of wine. Life is too short and too precious to waste a moment of it.
  • Give more of your time and/or your money to those less fortunate and count your blessings for how lucky you are; I do every day.
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I’m Back – Time To Speak Some Truth

After a long absence from blogging, it’s time for me to return to writing more frequently. Between the upcoming election and the turmoil in the stock market, there is plenty to write about. So let’s get to it.

To start things off, I’d like to comment briefly on the election. I will certainly be writing at greater length and frequency in the coming months.(Disclaimer: I am a registered Democrat with fiscally conservative leanings, so nobody is speaking for me in this process.)

On the Republican side, I must admit that I’m surprised that The Donald has made it this far. I completely discounted, and underestimated, the appeal of this loudmouthed buffoon. That being said, it looks like he’ll stick around for a while. I’m also surprised by the appeal of the religious zealot, Ted Cruz. There is very little hope for a centrist candidate in this field of “how far right can we lean” candidates. Iowa and New Hampshire managed to winnow away almost all of the pretenders; Ben Carson remains the only Walking Dead remaining in the Republican Field. I imagine he will be gone by the end of the month. That will leave Trump, Cruz, Rubio, Kasich and maybe Bush to wage battle into March. My intuition says the Bush will be the next one to go, leaving the Final Four to duke it out over the remaining few months until the nomination.

The picture on the Democratic side isn’t much better. All of the pretenders have already dropped out of the race, leaving the equally unappealing Hillary and Bernie. Notwithstanding his big win in New Hampshire, I still don’t think Bernie has any chance of getting the nomination. Which means a very flawed Hillary Clinton will likely oppose an equally flawed (and potentially very scary) Donald Trump or Ted Cruz in the general election. The prospect of having to choose between either one, knowing that the winner will become President of the United States has me rethinking my citizenship.

So what is a fiscally conservative, socially liberal voter to do? Well, outside of the slim possibility that Michael Bloomberg will run, I honestly don’t know. I’m not optimistic. And I believe that collectively, the stock market feels like I do. I think a lot of the poor stock market action can be attributed to the uncertainty surrounding a presidential election with no good candidates. And if that’s true, we could be faced with months of market turmoil ahead. Add to that the slowing growth in China, the plunging price of oil, currency devaluation around the globe and a relatively weak domestic economy and you have a recipe for stock market disaster.

That being said, I want to be clear about something. It is not time to panic. Things are not nearly as dire as they were leading up to the crash in 2008. Outside of the negative consequences of a too-strong dollar, corporate revenues, profits and balance sheets are in very good shape. It is part of the normal and natural part of the stock market cycle that after a prolonged period of gains that we must experience a year or two of negative returns. Then, when the gloom and despair have peaked, it will be time for the next rally to begin.

So stick with your plan. In the world of virtually zero interest rates, owning a diverse basket of blue-chip, dividend-paying stocks, returning an average yield of at least 2%, is your best way to secure your financial future. So buckle up and prepare for a bumpy ride. I’ll try my best to guide you along the way.