Highway To Hell

In 1979 AC/DC recorded the album "Highway to Hell" which featured the song of the same name. The album was the sixth recorded by the Austrailian group and its second highest seller behind "Back in Black". The lead singer for the group was Bon Scott who died the next year on Feb. 19, 1980. By 2006 "Highway to Hell" was a 7X platinum seller and reached the Top 100 chart in the US. The album is considered one of the greatest Rock albums ever made. The stock market seems to also be on a highway to hell so far this year. Many people are worried about their retirement accounts as they watch them continue to fall to levels not seen for many years. Anyone who was heavily invested in technology stocks has suffered especially heavy losses. It seems like financial markets have encountered the perfect storm of conditions: The war in Ukraine, high inflation, a rapid ramp in interest rates, threat of recession, lower corporate earnings, food insecurity, energy insecurity, trade tensions, and supply chain disruptions just to name a few. So how does an investor navigate these ugly events? My first reaction to the difficult investing environment is to develop a defensive strategy. I feel like the Federal Reserve is offering me a rare chance to derisk my portfolio by raising interest rates on Treasury Securities and certificates of deposit which are federally insured. Just today I bought a two year cd which is paying an effective rate of 4.9%. Even most local banks and credit unions are offering attractive rates on short maturity cd specials. While I don't think rates have topped out yet, I know that with every increase in the Fed Funds Rate is a step closer to the end of this tightening cycle. This may be the last opportunity I have during my life to generate interest income with almost no loss of principle. The recent bear market rally is based on the concept of a Fed pivot, which is a point where the rate hikes slow or are paused. I think I have a better chance of catching Santa stuffing my stockings than seeing a pivot this year. My Christmas list includes a 5%+ rate on CD's in the coming months and a 3/8 cordless Dewalt impact driver, (just in case Santa reads this blog). With all the layoffs announced by big tech companies and the cloudy forward guidance given by CEO's, I doubt this rally has legs but I will take what I can get out of this market. Anyone who needs to free-up some cash to buy fixed income at this time has my blessing. While scanning over my stock portfolio, I can't help but notice how cheap some stocks have become. Homebuilders have been hit especially hard due to the increase in mortgage rates. Most companies in this space are trading at multiples of 5X or less. Some financial companies are also very cheap. Brighthouse financial is trading at about 4X as well as some wireless providers. Mining companies are also way too cheap, Cleveland Cliffs' PE is in the low single digits as are some gold miners. These stocks won't stay this cheap forever so it may be a good time to start nibbling on some of the bargains. Between picking up some yield on Treasuries and CD's and buying select stocks dirt cheap, I plan to exit the Highway to Hell and start climbing the Stairway to Heaven.