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ETFs can diversify your portfolio.

By Michael Christodoulou

Michael Christodoulou

Mutual funds offer investors a chance to own shares in dozens of companies, as well as bonds, government securities and other investments. But you might be able to broaden your portfolio further by owning another type of fund — an exchange-traded fund (ETF).

An ETF, like a mutual fund, can own an array of investments, including stocks, bonds and other securities. Many ETFs are passively managed in that they track the performance of a specific index, such as the S&P 500. In this respect, they differ from most mutual funds, which tend to be actively managed — that is, the fund managers are free to buy and sell individual securities within the fund.

Another difference between ETFs and mutual funds is that ETFs are traded like stocks, so shares are bought and sold throughout the day based on the current market price, whereas mutual funds are traded just once a day, at a price calculated at the end of the trading day. Whether this ability to make intra-day trades is meaningful to you will likely depend on how active you are in managing your own investments.

For some people, the main attraction of ETFs is their tax advantages. Because many ETFs are index funds, they generally do much less buying and selling than actively managed funds — and fewer sales mean fewer taxable capital gains. These ETFs are somewhat similar to index mutual funds, which are also considered to be tax-efficient, as opposed to actively managed funds, which constantly buy and sell investments, passing on taxable capital gains to you throughout the life of the fund. 

Keep in mind, though, that mutual funds that trade frequently may still be appropriate for your financial strategy. While taxes are one element to consider when evaluating mutual funds, or any investment, other factors, such as growth potential and ability to diversify your portfolio, are also important.

ETFs typically also have lower operating costs than mutual funds, resulting in lower overall fees. Part of the reason for these lower costs is that actively managed mutual funds, by definition, usually have larger management teams devoted to researching, buying and selling securities. By contrast, passively managed ETFs may have leaner, less-costly management structures.

But while most ETFs may share the same basic operating model, many types are available. You can invest in equity ETFs, which may track stocks in a particular industry or an index of equities (S&P 500, Dow Jones Industrial Average, and so on), or you can purchase fixed-income ETFs, which invest in bonds. ETFs are also available for currencies and commodities.

Of course, as with all investments, ETF investing does involve risk. Your principal and investment return will fluctuate in value, so when you redeem your ETF, it may be worth more or less than the original investment. Also, liquidity may be an issue. Some ETFs may be more difficult to sell than other investments, which could be a problem if you need the money quickly. And because it’s so easy to move in and out of ETFs, you might be tempted to “overtrade” rather than following an appropriate long-term investment strategy.

A financial professional can evaluate your situation and help you determine whether ETFs are suitable for your needs. At a minimum, they represent another investment opportunity that may prove useful as you work toward your financial goals.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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Daniel R. Liff

Morgan Stanley recently announced that Daniel R. Liff, a Managing Director, Financial Advisor in the Firm’s Hauppauge Wealth Management office and a resident of Setauket, has been named to Forbes Magazine’s 2023 list of Best-in-State Wealth Advisors.

Forbes’ Best-in-State Wealth Advisors list comprises a select group of individuals who have a minimum of seven years of industry experience. The ranking, developed by Forbes’ partner SHOOK Research, is based on an algorithm of qualitative and quantitative data, rating thousands of wealth advisors and weighing factors like revenue trends, AUM, compliance records, industry experience and best practices learned through telephone and in-person interviews. 

“I am pleased that Daniel R. Liff is representing Morgan Stanley,” commented Dino Carfora, Complex Manager of Morgan Stanley’s Hauppauge office. “To be named to this list recognizes Daniel’s professionalism and dedication to the needs of his valued clients.”

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Artificial Intelligence. Pixabay photo

By Michael E. Russell

Michael E. Russell

Two weeks ago I had the scary experience of watching 60 Minutes on CBS. The majority of the telecast pertained to A.I. (artificial intelligence). Scott Pelley of CBS interviewed Google CEO Sandar Pichai. His initial quote was that A.I. “will be as good or as evil as human nature allows.” The revolution, he continued, “is coming faster than one can imagine.”

I realize that my articles should pertain to investing, however, this 60 Minutes segment made me question where we as a society are headed.

Google and Microsoft are investing billions of dollars into A.I. using microchips built by companies such as Nvidia. What CEO Sundar has been doing since 2019 is leading both Google and its parent company Alphabet, valued at $1.3 trillion. Worldwide, Google runs 90% of internet searches and 70% of smartphones. It is presently in a race with Microsoft for A.I. dominance. 

Two months ago Microsoft unveiled its new chatbot. Google responded by releasing its own version named Bard. As the segment continued, we were introduced to Bard by Google Vice President Sissie Hsiao. The first thing that hit me was that Bard does not scroll for answers on the internet like the Google search engine does.

What is confounding is that with microchips built by companies such as Nvidia, they are more than 100 thousand times faster than the human brain. In my case, maybe 250 thousand times faster! 

Bard was asked to summarize the New Testament as a test. It accomplished this in 5 seconds. Using Latin, it took 4 seconds.  I need to sum this up. In 10 years A.I. will impact all aspects of our lives. The revolution in artificial intelligence is in the middle of a raging debate that has people on one side hoping it will save humanity, while others are predicting doom. I believe that we will be having many more conversations in the near future.

Okay folks, where is the economy today?  Well, apparently inflation is still a major factor in our everyday life. The Fed will probably increase rates for a 10th time in less than 2 years.

Having been employed by various Wall Street firms over the past 4 decades, I have learned that high priced analysts have the ability to foresee market direction no better than my grandchildren.

Looking back to May 2011, our savvy elected officials increased our debt-ceiling which led to the first ever downgrade of U.S. debt from its top triple A rating from S&P. This caused a very quick 19% decline in the S&P index.  Sound familiar?

It appears that the only time Capitol Hill tries to solve the debt ceiling impasse is when their own portfolio is affected.

This market rally has been led by chatbot affiliated companies. These stocks have added $1.4 trillion in stock market value this year. Keep in mind that just 6 companies were responsible for almost 60% of S&P gains.  These are the 6 leaders: Microsoft, Alphabet, Amazon, Meta Platform, Salesforce and of course, Nvidia.

In the meantime, the Administration states that inflation has been reined in.  What stores are they shopping in? Here is the data release from Washington. Year over Year changes March 2022-March 2023:

• Food and non-alcoholic beverages up 8.1%

• Bread and cereal products up 10.8%

• Meat and seafood up 4.3%

• Electricity up 15.7%

When 1 pound of hot dogs rises from $3.25 to $7.50, that is not 8.1%. When Froot Loops go from $1.89 to $5.14 we are in trouble. The bureaucrats in D.C. make up numbers worse than George Santos.

On a positive note, the flowers are starting to bloom, the grass is starting to grow and we live in a special place. Of historic significance, we happen to be home to the second oldest active Episcopal Church in the United States. This year Caroline Church in Setauket will be celebrating its 300th anniversary. Congratulations.

Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor. 

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METRO photo

By Michael Christodoulou

Michael Christodoulou

Another school year will soon come to a close. And if you have young children, they’re now a year closer to heading off to college or some other type of post-secondary education or training. So, if you haven’t already done so, you may want to start preparing for these costs.

And they can be considerable. During the 2022-23 school year, the average estimated annual cost (tuition, fees, room and board, books, supplies, transportation and other personal expenses) was nearly $28,000 for public four-year in-state schools and more than $57,000 for private nonprofit four-year schools, according to the College Board.

Of course, some students don’t pay the full bill for college. Any grants and scholarships they receive can bring down the “sticker price.” Still, there’s often a sizable amount that students and their families must come up with. To help fill this gap, you may want to explore various strategies, one of which is a 529 education savings plan.

A 529 plan offers several key benefits. First of all, your earnings can grow tax deferred and your withdrawals are federally tax free when used for qualified education expenses, such as tuition, fees, books and so on. You may be eligible to invest in a 529 plan in most states, but depending on where you live, you may be able to deduct your contributions from your state income tax or possibly receive a state tax credit for investing in your home state’s 529 plan. Tax issues for 529 plans can be complex. Please consult your tax advisory about your situation.  

METRO photo

And 529 plans aren’t just for college. You may be able to use one to pay K-12 expenses, up to $10,000 per student per year. (However, not all states comply with this 529 expansion for K-12, so you might not be able to claim deductions and your withdrawals could be subject to state tax penalties.)  

A 529 plan can also be used to pay for most expenses connected to apprenticeship programs registered with the U.S. Department of Labor. These programs are often available at community colleges and combine classroom education with on-the-job training.

Furthermore, you can now withdraw funds from a 529 plan to repay qualified federal private and student loans, up to $10,000 for each 529 plan beneficiary and another $10,000 for each of the beneficiary’s siblings.

But what if you’ve named a child as a 529 plan beneficiary and that child doesn’t want to pursue any type of advanced education? If this happens, you, as the account owner, are free to name another family member as beneficiary.

And beginning in 2024, you may have even more flexibility if a child foregoes college or other post-secondary education. Due to the passing of the Secure Act 2.0 in December 2022, unused 529 plan funds of up to $35,000 may be eligible to roll over to a Roth IRA of the designated beneficiary.

One of the qualifications for this rollover is to have had your 529 plan for at least 15 years. To determine if you qualify for this rollover, you will want to consult your tax advisor.

A 529 plan has a lot to offer — and it might be something to consider for your family’s future.

Withdrawals used for expenses other than qualified education expenses may be subject to federal and state taxes, plus a 10% penalty. Make sure to discuss the potential financial aid impacts with a financial aid professional as Edward Jones, its financial advisors and employees cannot provide tax or legal advice.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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Invest in your future on Earth Day. METRO photo

By Michael Christodoulou

Michael Christodoulou

It’s almost Earth Day, when people around the world focus on ways of protecting and preserving the environment. And the lessons from this occasion can be applied to other areas of life — such as investing.

Here are some themes to consider:

Sustainability – From an environmental perspective, sustainability encompasses a range of issues, such as using natural resources wisely. As an investor, you, too, need to protect your resources.

So, for example, to sustain a long-term investment strategy, you won’t want to dip into your retirement accounts, such as your IRA and 401(k), to pay for major home or car repairs or other unexpected, costly bills before retirement.

You can help prevent this by building an emergency fund containing several months’ worth of living expenses, with the money kept in a liquid, low-risk account. And once you’re retired, you need to sustain your portfolio so it can help provide income for many years. For that to happen, you’ll need to maintain a withdrawal rate that doesn’t deplete your investments too soon.

Growth potential – Many people plant trees to celebrate Earth Day, with the hope that, as the trees grow, they’ll contribute to cleaner air. When you invest, you also need growth potential if you’re going to achieve your goals, including a comfortable retirement.

So, your portfolio will need a reasonable percentage of growth-oriented vehicles, such as stocks and stock-based mutual funds or exchange-traded funds (ETFs). Yet, you do need to be aware that these investments can lose value, especially during downturns in the financial markets. You can help reduce the impact of market turbulence on your holdings by also owning other types of investments, such as bonds, government securities and certificates of deposit (CDs).

While these investments can also lose value, they are typically less volatile than stocks and stock-based mutual funds and ETFs. The appropriate percentage of growth and fixed-income investments in your portfolio depends on your risk tolerance, time horizon and long-term objectives.

Avoidance of “toxins” – At some Earth Day events, you can learn about positive behaviors such as disposing of toxic items safely. And in the investment world, you’ll also want to avoid toxic activities, such as chasing “hot” stocks that aren’t appropriate for your needs, or trading investments so frequently that you run up commissions and taxes or jumping out of the markets altogether when there’s a temporary decline.

Consolidation – Getting rid of clutter and unnecessary possessions is another lesson some people take away from Earth Day. All of us, when we look around our homes, could probably find many duplicate items — do we really need two blenders or three brooms or five staplers? When you invest, it’s also surprisingly easy to pick up “clutter” in the form of multiple accounts. You might have an IRA with one financial company and brokerage accounts with two or three others.

If you were to consolidate these accounts with one provider, you might reduce correspondence — even if it is online — and possibly even lower the fees you pay. But perhaps more important, by consolidating these accounts at one place, possibly with the guidance of a financial professional who knows your needs and goals, you may find it easier to follow a single, unified investment strategy.

Earth Day only happens once a year — but it may provide lessons for investors that can last a lifetime.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

 

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Pixabay photo

By Michael E. Russell

Michael E. Russell

Let us talk about Tik Tok. Americans spent over 50 billion hours on this App during 2022. It is perhaps one of the fastest growing businesses in the world today. This company generated $9 billion in revenue last year with analysts projecting more than $14 billion this year. This is a ten fold increase since 2020.

A short tutorial. Tik Tok is a subsidiary of Byte Dance which is China based. Are we getting a little uncomfortable yet?  Tik Tok CEO Shou Zi Chew spent 5 hours on the hot seat testifying before the House Committee on Energy and Commerce. Not a comfortable place to be. Representative Cathy McMorris Rodgers, a Republican from Washington State, stated that Tik Tok is “a tool to manipulate America” forcefully declaring it should be banned. During the hearing it was asserted that Chinese President Xi Jinping is the real power behind Tik Tok.

Shockingly, both sides of the aisle don’t believe that Chew’s testimony stating that Tik Tok is not an agent of China rings true. Both Democrats and Republicans see Tik Tok as a geopolitical and social media risk.

Something has to give. It is highly unlikely that the status quo will remain in place. A possibility is that Tik Tok is banned. First Amendment problem? Another is an outright sale. In that case, Meta, Alphabet and Snap could be potential big winners. Just a note: 95 million Americans use Tik Tok daily for an average of 90 minutes a day. No wonder our kids are not outside riding their bikes. This situation should be followed closely by all of us. Banning Tik Tok and other Chinese based apps will certainly lead to retaliation on U.S. companies. However, the Congress sees Tik Tok and other social medias as increasingly dangerous to the mental health of our youth. To be continued.

How about this market!

Silicon Valley Bank and Signature Bank self-destructed. UBS Group, my former employer, took over Credit Suisse in order to keep it from collapsing. A Swiss Bank, really!

In spite of the banking sector getting pummeled, the Nasdaq had its best quarter since 2020, up 17%. A stock I have been touting, Nvidia is up 101 points in 3 months, not too shabby. Back to the banks. With investors wary about depositing money in banks due to the government selectively choosing which accounts to insure, where do we put our money? Some investors have moved back into the crypto-currency market. UGH, short term memory. 

We have witnessed Sam Bankman Frieds FTX exchange crash this past June. Crypto has given us a year full of scams, arrests, bankruptcies and billions in lost value.  In spite of these spectacular events, crypto currencies such as Etherium and Bitcoin are up 40% this year, i.e., Bitcoin was at a low of 16,700 early January closing this past Friday at 28,716.  For the life of me, I am having trouble calculating these numbers on my abacus … not enough beads.

In closing, let me speak to the tragic loss of Dr. Mark Funt, my daughter Sarah’s father-in-law. Mark was a great presence in our community. A highly skilled physician, loving husband, father, and a special Poppy to his grandchildren. He will be sorely missed. We love you MIF.

Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor. 

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Pixabay photo

By Michael Christodoulou

During your working years, you generally know how much money you’re bringing in, so you can budget accordingly. But once you’re retired, it’s a different story. However, with some diligence, you can put together a “paycheck” that can help you meet your income needs.  

Where will this paycheck come from? Social Security benefits should replace about 40% of one’s pre-retirement earnings, according to the Social Security Administration, but this figure varies widely based on an individual’s circumstances. Typically, the higher your income before you retire, the lower the percentage will be replaced by Social Security. Private pensions have become much rarer in recent decades, though you might receive one if you worked for a government agency or a large company. But in any case, to fill out your retirement paycheck, you may need to draw heavily on your investment portfolio.   

Your portfolio can provide you with income in these ways:

Dividends: When you were working, and you didn’t have to depend on your portfolio for income to the extent you will when you’re retired, you may have reinvested the dividends you received from stocks and stock-based mutual funds, increasing the number of shares you own in these investments. And that was a good move, because increased share ownership is a great way to help build wealth. But once you’re retired, you may need to start accepting the dividends to boost your cash flow.

Interest payments: The interest payments from bonds and other fixed-income investments, such as certificates of deposit (CDs), can also add to your retirement income. In the years immediately preceding their retirement, some investors increase the presence of these interest-paying investments in their portfolio. (But even during retirement, you’ll need some growth potential in your investments to help keep you ahead of inflation.)

Proceeds from selling investments:  While you will likely need to begin selling investments once you’re retired, you’ll need to be careful not to liquidate your portfolio too quickly. How much can you sell each year? The answer depends on several factors — your age, the size of your portfolio, the amount of income you receive from other sources, your spouse’s income, your retirement lifestyle, and so on. A financial professional can help you determine the amount and type of investment sales that are appropriate for your needs while considering the needs of your portfolio over your lifetime.  

When tapping into your investments as part of your retirement paycheck, you’ll also want to pay special attention to the amount of cash in your portfolio. It’s a good idea to have enough cash available to cover a year’s worth of your living expenses, even after accounting for other sources of income, such as Social Security or pensions. In addition, you may want to set aside sufficient cash for emergencies. Not only will these cash cushions help you with the cost of living and unexpected costs, but they might also enable you to avoid digging deeper into your long-term investments than you might like.

You may be retired for a long time — so take the steps necessary to build a consistent retirement paycheck.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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METRO photo

By Michael E. Russell

Michael E. Russell

After a rocky start this past February, I am really looking forward to St. Patrick’s Day.

The world economy is showing resilience despite higher energy and food prices as well as rising borrowing costs. This is troubling in that the Federal Reserve may have to continue raising rates in order to bring inflation under control.

The World Bank has been blindsided by the growing vitality shown by the economies of the U.S., Europe and the surprising data coming out of China.

At the close of 2022, the World Bank was predicting that 2023 would be one of the weakest years for the economy in decades. Well, so much for having advanced degrees from the Wharton School and Harvard! I probably should not have said that, but couldn’t help it.

To explain, when the U.S. Central Bank raises rates, emerging markets borrowing costs rise causing currencies and exports to weaken. It is important to note that the 5 major emerging markets are Brazil, India, South Africa, Russia and China.

There is nothing in the near term that indicates that Fed policy has slowed growth and inflation. Many analysts are now saying that a recession will be delayed until 2024. Let us hope that they continue to be wrong! There was a cartoon in last week’s Wall Street Journal that says it all. At an economists meeting a speaker was looking at a report and stated, “This opinion is vague, it needs to be made extremely vague.” And so it goes, always certain but seldom right.

Even the brightest of the bright make mistakes. Goldman Sachs Group Inc. has admitted that its plan to be the bank for everybody failed miserably. Goldman should have stayed with the business model that had worked for decades, managing the wealth of institutions and high net-worth individuals. This model has generated steady fees, no matter what the direction of the market. As an example, their Asset and Wealth unit generated almost $10 billion in profit last year. Why would they want to start servicing checking accounts? Wharton School, Harvard? Oops, sorry again.

Back to the market. February showed that inflation isn’t slowing as fast as expected. Bond and Stock markets underperformed as interest rates spiked. The 10 year treasury bond hit 4% while 1 and 2 year notes reached 5%. The S&P dropped 2 ½%, Dow Industrials down 4.2% and the Nasdaq down 1%.

U.S. equity funds declined by 2.2% cutting the yearly gain to less than 5%. Energy, Science and Technology were the best performers showing losses of less than 1%. At the close of February, Gold fell 5.5%, the worst loss in more than 18 months. Until inflation eases, Gold will probably continue to show losses.

This past week, Barron’s listed what it considers the 100 most sustainable U.S. companies. I have mentioned many of those companies in previous articles. One that I have strongly recommended is Nvidia [Nvda]. This stock was up 13% one day last week. I consider this U.S. company a long term holding in a portfolio. Nvidia is at the forefront of Artificial Intelligence [AI]. The U.S. government is partnering with Nvidia to help harness the power of A.I. to help solve some of society’s biggest challenges. [Purportedly]! They have now teamed with Microsoft to build a massive Cloud A.I. computer. The company has given robust forward guidance estimates for the next 5 years, thus my recommending holding for the long term. As a caveat, AMD is always a threat as well as Intel.  

Lastly, I really love these 2 year treasuries at 5%.

I hope each of you enjoy the coming spring which hopefully will bring lovely weather. On a closing note, happiest of birthdays to youngest son, Andrew Patrick, born on St. Patrick’s Day. Have one on me!!! 

Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor. 

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Stock photo

By Michael Christodoulou

When you’re working, you may spend decades contributing to retirement accounts such as your 401(k) and IRA. Once you’re retired, though, you’ll likely need to begin withdrawing from these accounts to help pay for your living expenses. In fact, you’ll be required to take money from them at a certain age — but that age requirement is changing, and it could lead to changes in your financial strategy.

Let’s look at some background behind this development. You put in pre-tax dollars to a traditional IRA and 401(k), so your contributions can lower your taxable income and your earnings can grow on a tax-deferred basis. Eventually, though, you must take withdrawals from these accounts or face tax penalties. (A Roth IRA does not have the withdrawal requirement; you can essentially keep the money intact as long as you choose.) 

As part of the SECURE Act 2.0 of 2022, the age at which you must take these withdrawals — technically called required minimum distributions, or RMDs — has increased from 72 to 73. So, if you turn 72 in 2023, you now have another year before you’re required to take RMDs.

The SECURE Act 2.0 also mandates that, in 2033, the RMD age will increase again — to 75 — so, depending on your current age, you may have even more time to plan for the effects of RMDs. Of course, you may need to start taking withdrawals from your retirement accounts before you reach either RMD age — 73 or 75 — so the additional time may not mean much to you. But if you can afford to wait until you must start taking RMDs, what issues should you consider?

Perhaps the most important one is taxes. Your RMDs, which are based on your life expectancy and account balances, are considered taxable income in the year in which you accept the money. If you have sizable amounts in your traditional IRA and 401(k), these RMDs could be large enough to bump you into a higher tax bracket, leading to greater taxation of Social Security benefits and a Medicare surcharge. So, the ability to delay taking RMDs can be beneficial from a tax standpoint, at least for a time. On the other hand, by delaying RMDs, you might eventually have to take bigger taxable withdrawals from your accounts that may have larger balances because they’ve had more time to potentially grow.

You could address the issue of taxable withdrawals by converting your traditional IRA to a Roth IRA before you’re faced with RMDs — and now, you have more time to do so. Roth IRAs have no RMDs, and since a Roth IRA is funded with after-tax dollars, your withdrawals are tax free, provided you don’t begin taking them until you’re at least 59½ and you’ve had your account at least five years. Again, though, taxes are the issue — any pre-tax dollars you convert from a traditional IRA to a Roth IRA will be taxable in the year of the conversion. To reduce this tax hit, you could space out the conversion over several years.

When thinking about delaying RMDs or doing a Roth IRA conversion to avoid RMDs, you’ll need to consult with your tax advisor. But the new RMD age limits do give you more flexibility in these areas, so think carefully about how you might benefit from the added time.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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Pixabay image

By Michael E. Russell

Michael E. Russell

Surprisingly the stock market has started off very strong. I wasn’t sure this would be the case. There are days when the market makes me feel like Fredo Corleone when he says to Michael that he is SMART, but apparently not so.

The S & P was up 6.5% in January with another 1.5% this past week. The NASDAQ is already up 11% for the year. Incredible! Almost all of the sectors that were crushed in 2022 have led this rally. Technology, financials, entertainment and commodities have recovered nicely. The groups that held up well in 2022 when the S & P fell more than 20% are all underperforming — consumer staples, utilities, and healthcare; these groups are all down approximately 3%.

There have been some crazy upward moves by many stocks. Tesla is up 85 points so far this year; NVDA up 68 points, year to date; Netflix up 72 points … I could go on. Viewers of CNBC have heard many analysts speak highly of NVDA. With the advance of artificial intelligence, this company seems to have found a special niche — a long-term holding.

The Federal Reserve raised rates by the expected 25 basis points. A day later, non-farm payrolls increased by 517,000. This was more than 2½ times the economists’ consensus forecast. The unemployment rate fell to less than 3.5%. This level has not been seen since the mid 1960s. Chairman Powell probably wishes he waited two more days before he announced the Federal Open Market Committee’s ¼% increase. The number would have been closer to ½%. I believe that we will see more rate hikes in the future.

I read some comments made by Warren Buffett’s vice chairman, 99 year-old Charlie Munger. Charlie has been an outspoken critic of bitcoin and all other unregulated digital tokens.  He wrote an article in the Wall Street Journal stating  “cryptocurrencies are a predatory scam targeting ordinary citizens.”  He further stated that “cryptocurrency is not a currency, not a commodity and not a security, instead it’s a gambling contract with a nearly 100% edge for the house.” He made a reference to the British Parliament’s passage of the Bubble Act in 1720. This Act banned trading speculative stock. I think Charlie was in the Parliament at the time of the vote!  Wow, 99 years old and still calling it correctly.

Speaking of surprises, Amazon officials have stated that they will probably have a loss this quarter. How can that be? There are 100 Amazon trucks a day in my neighborhood.

Interest rates have come into play. The 10 -year Treasury is yielding 3.5% while the one and two-year Treasury yield is 4.2%. This is called an inverted yield curve — short term rates yielding more than longer term rates. It does not pay to buy a long term bond while shorter duration bonds yield substantially more.

I try to end each article on a positive note but that is difficult this time. The Federal deficit has now reached a staggering 30 trillion dollars. You read that correctly, 30 trillion dollars. What this equates to is that every man, woman and child in this country are on the hook for $102,000 each. This number can only increase with the spending by the administration and congress. The madness must stop. Our elected officials don’t seem to care that we are reaching a point where this deficit cannot be repaid. We have been printing money with little thought as to how it gets paid back. Our Governor has proposed another $775 million dollars for Long Island schools. Where is the money coming from?  

Remember this article was written this past Sunday. A lot can happen in four days.  Did I just hear a balloon pop? No, a balloon was shot down. That will show them. In closing, I hope consumers are price shopping.  Gas prices vary as much as 80 cents a gallon.  Gouging? Probably. Cucumbers are 99 cents at one supermarket and $2 at another. Better cucumber? More importantly, happy hour prices at some local watering holes are all over the place. Please shop wisely. 

Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor. 

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