"I Won't Back Down"

      Tom Petty recorded this song in April of 1989 as the lead single on the album "Full Moon Fever". The song,  written and recorded by Petty and Jeff Lynne, included George Harrison and Roy Orbison as vocalists. Petty's musical career was inspired by watching the Beatles perform live on the Ed Sullivan show. The album peaked at #3 on the Billbord Top 200 and was certified 5X platinum in the USA. Sadly, Tom Petty died of an accidental drug overdose in 2017.

     The message I derive from this song is to hold your ground in the face of uncertainty like the period we are now facing. People like me, who like to research and pick their own investments, and even professional investment advisors put a great deal of time and energy into choosing the right investment mix for themselves and clients. Why should we abandon all that work every time something happens in Washingtom or talk of recession is all over the financial news media? I have lived through many recessions, regime changes, financial crises, hyper-inflation, wars, and even a global pandemic and every time my portfolio recovers and goes on to new highs. The "experts" on TV would love to scare people into selling stock at a market low and convert to a large cash position but that is exactly what NOT to do. The fact is that you should be buying when good companies are being punished by policies beyond their control. 

     Nearly every evening, while I enjoy my favorite beverage, I watch my favorite financial show "Fast Money" on CNBC. The panelists and guests are very knowledgeable about stocks, bonds, trade, and political risks. I will listen and try to learn from them but rarely act on their recommendations because their message is largely geared toward traders, not investors. They are expressing opinions which are often debated and hotly disagreed on. Everyone has an opinion and I have mine. I can be right on my forecasts just as often as the experts and wrong just as often too. I don't need their mistakes added to my own. It is also important to remember that these people must fill one hour of content every night. This results in a lot of rambling talk that really tells you nothing about the direction of markets. Sometime I think that divergent opinions are staged just to spice-up the show and provide minutes of content. I won't make investment decisions based on financial drivel.

     If you make your own financial decisions, stay true to your choices of stocks, bonds, asset allocation, and tax strategies. If you find that your investments are out of favor, just wait and the pundits will love them again for the same reasons that you found them attractive in the first place. Like Tom sang, "Hold your ground, don't back down. Just remember, like the experts, you have the right to be wrong.

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".

        

Baby It's Cold Outside

 This song was written by Frank Loesser in 1944 and first performed in his New York apartment at his housewarming party as a way to let his guests know that it was time to leave. It was so popular that he and his wife were invited to all the high society parties so they could end the evening with the duet. In 1949 MGM Studios bought the song and used it in their dud movie "Neptune's Daughter". In 1950 the song won an Academy Award for Best Original Song in a movie. The song has become a seasonal Christmas song but the movie was originally released in June of 1949. There have been so many recordings of this song over the years that it would be impossible to list them here. The version released in 2014 by Idena Menzel and Michael Buble' is the one I listened to for this post.

     Something else that has grown cold recently is the stock market. My portfolio has become a frigid wasteland. Many analysts are forcasting a gloomy 2025 for the stock market, citing the notion that the Federal Reserve Bank will not lower interest rates anymore during the year. There is also concern that the new administration will impose new tarrifs on China, Mexico, Canada, and European countries. The magnificient seven, or now called the mag 8 with Broadcom's, entry are also in a funk due to the slowdown in capital spending in the tech sector. Another factor may be that a rotation is occurring out of the growth stocks and into value stocks. Anything with a high multiple (PE ratio) is at risk of profit-taking at this time. Add in the rise in long term interest rates even in the face of the fed funds rate cuts and stock investors are nervous about just what that means.

     Market fluctuations are a normal and necessary function of stocks. Sometimes certain sectors and the  stocks within just get too frothy. The euphoria around AI simply got ahead of itself and needed some time to catch up with reality. In the meantime, some of the left-behind value stocks that have solid earnings and pay good dividends are attracting attention. So is the AI story over? My take is HELL NO! It will take some time for the companies that have invested many billions of dollars in new Data Centers and software to begin to see some return on their investments. In the meantime the valuations of some of the most promising stocks involved in the AI revolution are coming down. Even mighty Nvidia has seen its stock slump lately. I have no intention on selling my stake because even though the growth is slowing, it is still going to grow earnings faster than most other stocks this year.

     My strategy for the new year hasn't really changed much from last year. I still like getting over 4% on my cash and CD's. Money market funds haven't lowered their yields as much as I feared when Powell cut rates last month. I have directed some cash to local banks' CD's because they are not callable like brokerage CD's are. Shopping around for the best local rates still results in over 4% yields. The best rates are short term (one year or less) and thats fine because rates may rise late this year if inflation spikes back up. My holdings include growth, value, cash, and fixed income so I will stand pat until the spring thaw.