The Long Run

           The Eagles released "The Long Run" in 1979 on the Asylum record label. In addition to the song "The Long Run", the album contained two other hits in "I Can't Yell You Why" and "Heartache Tonight". The album was certified 7X platnum by RIAA and sold 8 million copies in the US. This was the sixth and last studio album for the original group and for Asylum records. The album debuted at #2 and hit #1 one week later holding that position for nine weeks.

     During market downturns like the one we are experiencing currently, I have to remind myself that investing (not trading) is a long term endeavor. The tarriffs recently announced by the Trump administration is a disruptive force in an already volatile market. Before the tarriffs roiled the stock market, a rotation was underway from the mag seven stocks (AI) into the other 493 stocks of the S&P 500 index. The one thing that markets don't like is uncertainty and currently there is plenty of it. CEO's are uncertain of their supply chains, costs of materials, expansion plans, investment in technology, and production levels which involves new hiring. As a result of this chaos, they tend to do nothing to add growth to their business and the economy. If clarity is not provided soon to the business community, then the R word (recession) may become a reality. If the slow-down in business activity is not enough, consider the fact that the stock market has lost 4 trillion dollars in value in the last month due to trade policies. Don't count on the fed to cut interest rates to bail-out the Trump administration's actions because the net effect of tarriffs is rising prices and more inflation.The next few months will test Jerome Powell's resolve to resist White House pressure and stick with his dual mandate of price stability and full employment.

     The silver lining to all this is that some former market darlings are now on sale at reasonable valuations considering their growth potential. Take Nvidia, it is trading at 24.4 times earnings and projected to grow 44% in the forseeable future. Financial stocks like banks and insurance companies are relativly immune to tarriffs and pay rich dividends. Money market funds are still paying in the 4% range and bank CD's are paying 4-5% on terms around 1 year. Energy companies and utilities are some of the best dividend plays out there and are reasonably priced. Midstream assets like MLP's are not dependent on the price of oil, they own pipelines and storage facilities and make money getting energy from the wellhead to refineries. REITS (real estate investment trusts) own all kinds of real estate and pay excellent dividends. Both MLP's and REITS have tax advantages that can help lower the tax liability if an increase in taxable income is expected (RMD at age 73). They are also good estate planning tools due to the "Return of Capital" feature.

     The good thing about our system of governace is that it can change every four years if the people want it to. This means that bad or misguided policies can be short-lived. While I don't know if the Trump tarriffs will level the playing field for world trade, I do know that they can be reversed by the next president. As a long term investor, I intend to stay the course with my investment strategy by not making any bold moves that may turn out to be wrong. Having a diversified portfolio of stocks, fixed income, mutual funds, etf's and cash is still the best strategy for any environment. My focus at this stage of my life is to minimize my tax liability going forward because of the RMD requirement to start draining my IRA. Instead of being in the accumulation phase of life, I am entering the draw-down phase. This requires careful planning and advice from investment professionals. 

     A sound long term investing plan supercedes recessions, Presidential terms, stock market corrections, economic crises, and trade barriers. It requires a minimal amount of maintenance once it's put in place. The income stream from dividends, interest, distributions from mutuals, and MLP's will provide peace of mind if Social Security or pensions get cut or reduced. The long run is a good mindset at any age. Just remember, "You can handle any resistance if you go the distance in the long run".