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.