HASH

     I used to eat a lot of hash as a kid. It was leftover meat diced up with some potatoes, carrots and onions added and heated up. We added some ketchup to get it down and keep it down. I have some leftover crap on my mind that I wanted to lump together just to get it out of the way. First of all, some people have called and expressed disbelief at how fast this stock market is going up. The worry is that it will turn suddenly and create losses fast. My take is that there are valid reasons for the rapid run-up in stocks. The new tax package is the main reason for an overall repricing of stocks. The tax reduction to 21% for most companies will flow right to the bottom line, increasing earnings. Higher earnings means a higher stock price may be justified. What will the companies do with this windfall? Many have already given employees bonuses and hourly wage increases, but that is just a drop in the bucket compared with the large increases in earnings yet to come. The really big deal is that many companies will increase their already large stock buy-back programs. This is where they go to the market and buy their own shares, thus reducing the number of outstanding shares available to investors. The net effect is that the fewer shares will have a higher EPS (earnings per share), AND like any commodity, there will be a shortage of shares for investors. When the supply goes down, the price goes up, that's just econ 101. Jim Crammer is already hammering on this point on his tv show Mad Money, especially concerning the large bank stocks, which have been buying back their shares by the billions of shares for years. Some high quality industrial companies also have restricted the supply of their stocks, like Caterpillar, 3M, Honeywell, and Ingersoll Rand. Some people, like my wife, thinks this whole thing will end badly. This is why we are moving her retirement accounts into one rollover account where we can react quickly in case we want to bale out. Money moved out of the traditional retirement accounts is usually liquidated upon transfer, so that gives us an opportunity to take a more conservative position with her money, like buying some CD's which have yields approaching 3%. I also wanted to comment on the types of stocks that people ought to be buying now. As I confessed in my last blog, I have held on to some "buggy whip" type companies hoping that they would come back,(ain't going to happen). Look to the future for your new investments with an eye for value. I just read Barons magazine's Roundtable discussion and saw several stocks recommended that I had previously mentioned in my blog. Micron Technology (MU) has a bright future, Lam Research (LRCX) makes the equipment that Micron and others use, so does Applied Materials (AMAT). The future is digital, so that is where your investments should be too. For reasons discussed earlier, Financials are also on my buy list. If individual stocks are not your thing, consider using ETF's (exchange traded funds) for diversification and sector exposure. I like the (XLE), (XLF) and the (XLK). I'll let my readers hash out the details.

Confessions of a Loser

     Just like some Catholics occasionally feel the need to go to confession, I now feel the need to come clean with my readers. I'm not a very good investor. I don't own Amazon, Google, Facebook, Netflix, Bitcoin, Apple, or any other superstocks that have made millionaires overnight. While doing my year-end tax planning, I had no trouble finding some embarrassing losses in my portfolio that I used to offset the gains that I realized during 2017. I also keep lousy records of my investing activity, especially concerning my total yield from holdings. I have been way too conservative with my money for way too long. This means that I have held too much in cash which has hardly paid anything for a long time. Over the past several years, I have used a couple of full service brokers who charged me an arm and leg to sell me some lousy mutual funds that under performed the market. I have also bought several pricey Unit Trusts that almost always lose money. I have even put a modest amount into an Annuity out of desperation just to get a slightly higher yield than banks offered. Needless to say I don't even understand everything about this Annuity that I should. I did own Facebook briefly but I sold it for a modest profit. If I just held it, I would have a very large gain. When it comes to Apple, I thought that the ipad was the stupidest thing I ever heard of. I could go on and on but you get the idea. You don't have to be a genius to be an investor. You don't even have to be above average in intelligence. You just have to follow a few simple rules that I have laid out in some previous posts to succeed as an investor. I hope others can learn from the mistakes that I have made, but the most important point I'd like to make is "Don't be afraid to make your own mistakes".  One other thing, even after all these blunders,  I still enjoy a pretty comfortable retirement. The fact is that only about 52% of Americans own stock. These are the people who are enjoying the huge gains that stocks are racking up right now. Without the dividends and growth that I have reaped from stocks, I would probably be working still, if an employer would even have me. The bottom line is that if an idiot like me can retire early, stay retired, be debt-free, and have a retirement income similar to my working years, you can too.

A Good Time To Buy

     Timing your purchase decisions for stocks can be a fools' game. Why do I say this? First of all, nobody knows when this market will stop going up and reverse course. Everybody knows that it will correct but we just don't know when. If we all just waited for a correction to invest, we may miss out on some substantial gains. Secondly, just like playing the powerball lottery, you probably won't win, but you certainly won't if you don't buy a ticket. Anyone who is not in this stock market yet has missed-out on some impressive gains but that should not keep them out of the market's future gains. Of course, any new money entering this pricey market will be at risk from an inevitable correction. So how can that risk be mitigated? The easy answer is to ease your way into the market by taking small bites of your favorite ETF's or mutual funds. By keeping cash on the sidelines, investors can "average down" on these investments by buying more when they go on sale. Anyone who is saving for retirement through a qualified plan at work should certainly keep up their contributions regardless of the current level of the market indexes. A long term perspective changes the complexion of market timing. Many years ago, I was working on the factory floor and had managed to accumulate some extra money that I wanted to invest. I picked out about six stocks that passed my criteria for growth and income. I was ready to buy those stocks no matter what the market averages were doing. I can remember being ridiculed by my co-workers because at that time, the Dow Jones Industrial Average was setting a new all time high. That was 32 years ago and the Dow was at the lofty level of 1265. By comparison, the Dow was recently off its high and settled at 25,383. Gee, I don't feel so silly now! Believe it or not, I still own some of those stocks from back then. Of the ones that did really well, I sold some shares to recoup my initial investment and redeployed the money into new ideas. Not all my picks were winners but over a long time, the winners should make-up for the losers. That is why diversification is so important. My final thought is about having the right temperament for long term investing. Last year, I was preparing a lady's tax return. When I got to her brokerage statement, she told me that she had to fire her broker and hire a new one because she had lost $500 in one day.  Since we are not allowed to offer financial advice, I just held my tongue. If I could have offered my advice, I would have told her that she had actually not lost anything if she didn't sell. I would have also pointed out that fluctuations in a portfolio is normal and part of stock investing. Additionally, anyone who cannot stand the volatility of stocks should be invested in C.D.'s at their local bank or Credit Union.