I recently retired after 39 years in Financial Services. Along the way, I believe that I learned a lot, not only about Economics and Financial Markets; but, about a number of other topics. In today's World, everything is connected--Foreign Affairs, Politics, Medicine, Education, Technology, etc. Also, with today's ever-changing World, it is important for everyone to keep up with what is going on--both at home and abroad. We have to be very curious.
Posted in Investment Primer on November 26, 2017
When I began this blog, in February of 2012, I had expected it to focus mostly on financial topics, following my 39 year career in the securities markets. For a secondary theme; however, some of life’s journeys—describing my retirement, the need for young new parents to have a will and life insurance so they could choose suitable custodians for the infant, in the event they cannot, etc.—should also be included.
I have personally encountered some health issues recently, which is why I have only written a few posts over the past several months; but, this one is really one for my family who might ask “Why not an American bond fund?” Michael Haasenstab, of Franklin Templeton, is a Fixed Income Manager whom I had been placing clients with his several mutual funds, when I was working, for two different reasons.
Now, why am I describing the great qualities of who I believe is the absolute BEST? Eight months before I retired, I invested 25% of our total portfolio in the Templeton Global Reserve Fund, one of several he manages. During that six years, however, it now represents 23%. That’s not bad in the current low interest rate environment, specially when stocks are charging ahead!
Dr. Haasenstan can trade any bonds, and had even owned U. S. Tax-free municipals when that market had been nearly frozen shut-in 2008. That lack of restrictions allows him to invest in any country, and in any type of bond that he chooses. Currently, he believes that U. S. Bond rates will rise, which would cause market values to drop proportionately. I certainly agree, especial with the Republican Pray in charge of both Congress and the White House. Bond prices and yields, incidentally, usually move in opposite directions.
Lately, he wishes to buy an attractive bond, but he doesn’t like the underlying currency, such as the Euro, Haasenstab can buy the bond, but “short” the currency. (Shorting a currency simply means borrowing something you doubt the value (or merit) of, and which you intend to sell later, when you wish.)
I am an aggressive investor, had remained fully invested during The Great Recession, and we came out in quite good shape. In a recent post, I described how I came to realize that most securities firms were too focused on keeping client portfolios quite close to the current industrial breakdown of the Standard and Poor’s. In essence, maintaining the status quo.
So, I broke away, focusing more on Technology, and increasing the weighting in Health Care slightly. Since early in the year, this strategy has worked really, really well. Obviously, no one knows what the future holds. Those two related posts are linked, as follows: Part One and Part Two.
As I mentioned at the beginning, this post is mostly intended to explain to my family why I have used just one bond fund—a global one—to anchor our joint portfolio. Initially, it accounted for 25% of the portfolio and, frankly, I never worried about it’s performance, as long as I didn’t invest it in stocks. During that six years, however, it now represents 23%. That’s not bad in the current low interest rate environment, specially when stocks are charging ahead!
I do have a couple more posts in mind; however, I am currently preparing an investment plan—a few Tech stocks, ETFs and the one bond fund for when my wife and daughter will have when they have to take over the management of our investment portfolio. Obviously, I surely will never know if they did, in fact, follow the plan or, perhaps, contact the financial advisor that my brother uses. As I wrote earlier, this is just another one of life’s adventures.
NOTE: Two topics that I hope to write posts about when, and if, possible are:
!. How many financial advisors are automating themselves out of their current jobs.
2. The horrible MISTAKE that was Vietnam actually began over a millennia ago.
LAST WEEK WAS A REALLY DOWN ONE FOR THE STOCK MARKET, ESPECIALLY TECHNOLOGY. TIME TO SELL? PANIC? NO WAY!
Posted in Investment Primer on November 13, 2017
The market doesn’t ever go straight up, nor does it go straight down! Besides, investing should always be considered a long-term vehicle for building you resources to fund education, the new house, retirement, etc. And certainly, it should not be engaged in for a mere one-to-three years.
The current upward climb in stocks is just a continuation of the sustained economic rally that started during President Obama’s Firm Term. If the numbers look bigger, keep in mind that, let’s say, a one percent rally, or decline, with the Dow Jones Industrial Average at today’s 23,000, will be significantly more than the Dow declining toward 6,500, which George W. Bush let for Barack Obama.
Lately however, many investors’ euphoria has been based on the assumption that the GOP Tax Scam would jumpstart the market run-up even more. That sort of thinking should have been quickly dismissed by anyone who looked back at the Republican Party’s recent inability to “Repeal and Replace” Obamacare. In essence, after ten months, the Trump Regime has produced no meaningful legislation: just photo-ops!
When you see a market decline, there are several key points to consider: Does it effect the overall stock market? Just one industrial sector (health care, financials, tech, etc.)? Or, is it limited to just a few stocks? And then, try to find out what happened, and does it look temporary, or might the problem(s) be permanent in nature?
Those who jump, either to buy or to sell, without knowing what is going on, and why, often find themselves regretting their quick trigger soon afterward. And many astute investors often find value when particular stocks or sectors have become oversold!
Over the past decade, several economists have won Nobel Prizes for their research, proving that the markets are irrational. Before you consider making any changes in your investment portfolio, just think: are acting rationally—or irrationally?
Posted in Investment Primer on November 9, 2017
There have been various calls, from different quarters, to break Amazon up. Those have been mostly due to the Seattle behemoth’s eating into the retail business of many others—big box stores, stand-alone businesses and even mall stores, such such as venerable Macy’s. In essence, however, Amazon is just doing what Wal-Mart, and other big boxes, did to smaller retailers, years before.
Amazon doesn’t have a monopoly on the retail sector; rather, it had just anticipated that Americans, as well as overseas customers, were ready for a new way of shopping—On-Line. Most of the other stores in the sector; however, can certainly invest in similar advanced systems, but they haven’t. Wal-Mart, for instance, would cause massive layoffs in the various job occupations from which it draws its customer base. And, the mall stores and stand-alone retailers mostly have long-term store leases at their current locations.
My suggestion that Amazon split into two separate corporations—let’s say Amazon and Amazon Web Services—is due to, what I believe are, significant operational differences between the two business segments. As shown on the chart below, Amazon has two different sectors. Most Americans are well aware of Amazon’s retail business; but, few know how active, and expanding, it is in technology—Amazon Web Services.
Amazon is the largest provider of cloud computing, has its own robotics company—which has improved its own logistics systems, as well as provides robotics to other companies globally. It has also been been expanding its Artificial Intelligence operations. To me, the retail and AWS segments should be totally split into two different corporations, with Amazon shareholders receiving their proportion number of shares in each.
First off, the mindset for managing retail is quite different from that of the AWS segment. So would the occupational skills of both the employees and management of the two. The chart below shows the differences between retail and AWS, regarding Revenue and Operating Profit.
Revenue, between North America and its International operations was $123, 768 million in 2016. AWS, on the other hand, was a mere $12,219 million—or just 10.0% of Amazon’s Total Revenue. Operating Profit was even more revealing. AWS had $3,108, as compared to the net combined retail profit of just $1,100 million.Lastly, AWS had a Profit Margin—operating income divided by net sales or revenue—of 25.4%, while that of Retail was only 1.03%.
I am an Amazon shareholder; however, I still believe that the break-up, between the two dissimilar business segments, would make good sense. There are so many dissimilarities between retail and AWS, that the split is certainly called for, in order to improve the overall Amazon operation.
Currently, AWS distracts from the retail operations and, I believe that retail also holds AWS back. In summary, this is truly a case where the two halves would be more effective—and more valuable—than the total!
Posted in Investment Primer on November 5, 2017
Have you ever noticed the various similarities between the two narcissistic bullies—Kim Jong-Un and Donald Trump? Both are obese, have birds’ nest hair-dos, and seem to walk around endlessly, clapping at nothing.
The 33 year-old Kim, by the way, really is a twin; however, he is believed to have had his brother assassinated at the Singapore International Airport earlier this year. So much for brotherly love!
Both “Leaders” (using the word quite loosely) seem to focus on advancing their own status, rather than doing what is best for their respective countries. Kim exhausts most of North Korea’s resources on the Weapons of War, as the starving, impoverished North Koreans have been totally destitute for decades.
And, the 71 year-old Donald seems hell bent on eradicating the legacy of former President Barack Obama, America’s first Black President. Rather than focus on his promised major policies, Trump has created a Regime, which has operated through chaos and disruption, ever since he took office.
Trump, more so than Kim, has apparently escalated the stand-off between the two nations. He seems to have misinterpreted North Korea, which merely stated that it would launch a missile “near Guam.” Neither nuclear missiles, nor Guam were cited as part of the launch in the North’s announcement. Also, if Kim really did want to attack the U. S., wouldn’t he have targeted San Francisco, Seattle or, at least, Honolulu?
Kim, is also not the brightest light bulb in the box. Most recently, he claimed that Trump was trying to initiate a Nuclear War in advance of his currant Asian Trip. Now, since Trump’s first three stops—Tokyo, Seoul and Beijing—are all close to any potential Nuclear Fallout, it seems that Supreme Leader Kim seems to be trying to match Donald Trump in the Lunacy Game.
Both Kim and Trump appear to thrive on power, and saber-rattling is their way of demonstrating it! And neither one seems to care about the innocent civilians—both at home and in other nations—who might perish from it!
DONALD TRUMP NEVER GETS HIS HANDS DIRTY! HE DIRECTS HIS SURROGATES TO DO HIS DIRTY WORK FOR HIM, INCLUDING STEVE BANNON, THE PUPPET MASTER, WHO IS CURRENTLY ATTACKING HIS POLITICAL ENEMIES.
Posted in Investment Primer on October 27, 2017
Which ever way the wind blows, Donald Trump chooses afterward as to whether, or not, he played an active roll in the whatever happened! When things go well, Donald is out front, claiming every last bit of credit—regardless of whoever rightfully was responsible. On the other than, however, when the shit hits the fan, Donald acts like that was the first that he had heard of it. Trump never gets his hands dirty!
For instance, when four Army Green Berets were killed in Niger, earlier this month, it took him twelve days to even acknowledge it, and then he began running feud with one of the widows. Apparently, the soldiers were ambushed under questionable circumstances, and the Pentagon has been investigating.
Trump stated recently that he did not “technically” authorize the combat action. Now, Donald, isn’t that your Secretary of Defense running the Pentagon? Why would the so-called Commander-in-Chief receive a free pass, while the battlefield commander could be relieved of his Command?
Here’s where Steve Bannon, the Puppet Master, plays a vital role on Donald Trump’s behalf!. This prior post provides an earlier description of Steve Bannon’s role in the Trump Regime.
In that earlier post, I had suggested that Donald Trump allows Bannon, who maintains a close relationship with the Ultra Fringe White Supremacist Wing of the Trump Political Base, to pull many strings from behind the scenes. Over the past nine months that Trump has been in office, Bannon has played his evil role, off and on, both from within the White House, and from The Shadows. Through it all, Bannon and Trump have retained a close personal relationship.
Bannon has been attacking political opponents of Trump, and without shirking back into the shadows. Perhaps the most visible target recently has been Majority Leader Mitch McConnell (R-KY), who Trump has previously castigated; however, he is currently counting on McConnell to pass his Health Care and Tax Scams. Meanwhile, Bannon has established a Super Pac to Dump Mitch.
Lastly, let’s consider the 25th Amendment, which, at least temporarily, enables a majority of the Vice President and Cabinet, to relieve the President when they believe that he is unable to fulfill the duties of his office. When Donald Trump supposedly “Drained the Swamp,” he seems to have replaced the inhabitants with even more dangerous swamp creatures.
Just about every Cabinet member is a billionaire, who had worked in the various industries, which they are now supposed to regulate? Would they truly damage the respective industries that they expect to return to? Apparently, Trump selected the fresher, more dangerous Swamp Creatures, so they wouldn’t dare countermand his regulatory goals!
Meanwhile, Steve Bannon is shirking more openly, this time; but, still pulling the strings which Donald Trump wants to keep hidden.
Posted in Investment Primer on October 26, 2017
Over the past 50 years, automation and the machines (robots, machine-reading, big data, artificial intelligence, etc.) have been creeping into our workplace, replacing workers in performing various routine job functions. And, unlike other historical labor disruptions, the advance of machines—performing the tasks they have been programmed to do—is being felt throughout the entire industrialized world.
To better understand the advance of the machines, both in memory and speed, let’s review “Moore’s Law”. Gordon Moore, before he co-founded Intel, 50 years ago remarked that the capacity and speed of silicon chips will double every two years, over the next ten. Well, fifty years later, that hypothesis is still on target, and it is often used to describe the exponential advances of computers as their capabilities accelerate over time.
For instance, the computer that took the astronauts to the Moon in 1969 was merely comparable to the Nintendo of that era. The capacity of today’s iPhone, however, is considerably faster, and can perform more functions, than the fastest super computers of even 30 years ago. So, how are schools preparing our children for the labor market of the future?
It seems that that many school systems, over the past ten to fifteen years, have emphasized the STEM subjects (Science, Technology, Engineering and Mathematics), while de-emphasizing the Arts and Humanities for college bound students. Such a focus can make the job skills of such employees similar to those of the machines, and thus easier for the machines to displace.
Skills that reflect the humanity of the worker—such as intuition, relationship building, good writing skills, an ability to cope with adversity, creative thinking–may set him or her apart from their co-workers, in similar jobs. “This is Money” provides a fairly in-depth list of job occupations that are most, and least, likely to be replaced by automation.
For the most part, school curricula, through the 12th Grade, appear to have changed little over the years. As the advance of the machines continues at an ever-increasing speed, school administrators and teachers need to be honing their skills, and begin to plan for the challenges of the Twenty-First Century, which has already arrived. Business, government and labor also need to be part of the planning process.
Many computer engineer jobs have already been outsourced to India. And, this time, many white collar jobs, requiring college and advanced degrees—such as associate attorneys and some radiologists (yes, M. D. s), who perform many routine functions, may also be at risk. That’s why it would be important for the employee to set him or herself apart from their colleagues.
Since automation will impact the entire labor market, to one degree or another, the number of displaced workers could easily outnumber the available jobs, and probably drive the pay scales. That’s where the Arts and Humanities skills may set some employees apart from the crowd, and help them keep their jobs!
Posted in Investment Primer on October 22, 2017
Surely, most people realize that you cannot trust anything that Donald Trump and the GOP say. The Tax Plan, which they released this past Wednesday, was a charade–focusing on what the middle class might expect, while burying the real meat, which they don’t want us to see. This plan is intended to reinitiate the Bush Era tax cuts, skewed to the top one percent. Additionally, they are selling the repeal of the Estate Tax–from which only 6,000 of the very wealthiest families will benefit–which adds to the top one percent of taxpayers. Those cuts, early on in Bush 43’s first Administration contributed t The Great Recession (4Q07-1Q09).
There is no “reform” included in the proposal; but, rather, that is merely to enhance the appeal to the middle class. Trump and the Republicans have claimed ad nauseum that America has the highest personal and corporate tax rtes on earth. Au contraire, both of those rates fall in the dead center, after deductions and loopholes, according to the OECD organization of industrialized nations.
Oftentimes, Donald Trump meanders around in various directions, suggesting one thing and then another; but in the end, he often reverts back to something that he said on the campaign trail. Rather than get bogged down analyzing a his short outline, I am including a blog post that I published last January. As you can see, little has changed after his nine months in office.