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Financial Focus

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By Michael E. Russell

Michael E. Russell

After many years running the most politically active financial empire, Socialist George Soros is passing the baton of his $27 billion Open Society Foundation to his son, Alex.  

Those of us who cringed at many of George Soros’s comments and investment strategies longed for the day when he would retire. Unfortunately, the elder Soros who contributed unabashedly in excess of $1.5 billion to extreme causes has picked the second youngest of his five children to be the Foundation Chair. Alex will also serve as President of the Soros super PAC and is the only family member on the investment committee for Soros Fund Management, a private investment management firm.  

The younger Soros will now oversee a philanthropic empire, funded from the many billions that George Soros made from finance.  I am sure that many readers are impressed by his financial acumen. However, those of us who worked in the field remember that in 1992 Soros shorted the British Pound and reportedly made a profit of $1 billion dollars.  Unfortunately, he almost broke the Bank of England! A hero to some, certainly not me. I will leave it to the readers to do their own research on the Soros empire. Just trying to get you motivated to see how some people get filthy rich.  

Allow me to mention an investment icon to look up to, Warren Buffett. At 92 years of age, he appears to be as sharp and engaged as ever. Mr. Buffett has been extremely active in the stock market this year, as well as last year, highlighted by the purchase of 25% of Occidental Petroleum. He probably read my article last month about how I felt the Japanese market was undervalued because he now has holdings in five Japanese trading companies worth $20 billion dollars. Once again, another reason to subscribe to TBR News Media. I believe he has done very well on his own without my advice. Buffett’s Apple purchase is now worth more than $165 billion dollars, quite a bit more than the $30 billion he invested. 

In 1965, Warren Buffett took over Berkshire Hathaway. Due to his efforts over the past 58 years, the fund generates $35 billion dollars in annual earnings power. A $20 dollar investment in 1965 is now worth more than $500,000, an incredible $25,000-fold increase. No wonder he calls Berkshire Hathaway his Mona Lisa.

Another financial icon who I admire is Jamie Dimon, the CEO of JP Morgan Chase.  Jamie has few peers in his field. His advice is sought by many world leaders when he travels abroad. JP Morgan Chase is now the country’s top bank, putting distance between itself and Bank of America, the bank that loves charging client fees. 

Jamie has proven to be an exceptional CEO. The bank had a very strong 2022 when it had the highest return on tangible equity among its peers. Dimon avoided huge losses experienced by Bank of America by not investing assets in bonds at historically low rates in 2020 and 2021. JP Morgan stock returned 30% last year, tops among its rivals. Jamie Dimon was the leading advisor to Federal Chair Jerome Powell and Treasury Secretary Janet Yellen. I would have preferred that they had listened to him more often. Hopefully, now they have him on speed dial.

As far as the market — we can look for further rate increases due to continued inflation concerns. For those of us looking for safety, a 5% 2-year Treasury bill looks attractive. My favorite stock, Nvidia, has paused recently closing at $422, up a mere 195% year to date. 

For those of you Crypto folks, Tether’s stablecoin will rake in $6 billion dollars of profits this year. Tether Holdings is the issuer of the largest stable coin which are like crypto cash. Typically, they hold a $1 price backed 1/1 in reserves.  It now has $83 billion dollars in deposits.  With rates increasing, Bitcoin and most of crypto have dropped in value, while Tether has become the world’s most profitable digital asset. It has kept most of its assets in U.S. treasury bills; a 5% return on $83 billion dollars is not chump change.

I hope most readers realize that some things that I write are meant to be tongue in cheek, however not all! Have a wonderful July 4th and God Bless America.

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. 

Over the last ten years, NVIDIA’s shares have risen more than ten thousand percent, the best performance of any company in the S & P 500 over that period.

By Michael E. Russell

Michael E. Russell

As we start off summer with a beautiful Memorial Day weekend I think back to the many sacrifices of the men and women who served in our Armed Forces. They fought to defend our freedom and defeat tyranny all over the globe.  I especially think about my father-in-law, Dr. Sherman Mills, who served in Europe during WWII.  

Dr. Mills was a D-Day surgeon who survived Normandy and the march into Germany. Upon discharge he came home to Long Island and worked as a physician in Port Jefferson, attending to patients in his office, at their homes and at St. Charles and J.T. Mather Memorial Hospital; a man of the greatest generation. Papa, you are missed. 

Well, how is your money doing? For those of you who have followed my articles over the past year, I repeatedly spoke of the company NVIDIA. Ring a bell? NVIDIA invents the GPU and advances in Artificial Intelligence (AI), HPC, gaming, creative design, autonomous vehicles and robotics.  Their stock was trading at $122 on October 14, 2022. It closed this past Friday at $389.46.  This past Wednesday the stock surged by $81, an increase of 29% in one day.

NVIDIA’s remarkable increase in value represents the emergence of a new American corporate giant. Its market value is now more than $1 trillion. It now joins the likes of Apple, Microsoft and Amazon. Over the last ten years, NVIDIA’s shares have risen more than ten thousand percent, the best performance of any company in the S & P 500 over that period. Incredible numbers, but here are some other numbers to look at.

Tesla, at its peak in November 2021, was up 19,000 percent over the prior 10 years.  However, ten thousand percentage points of that gain have disappeared as reality has hit home. NVIDIA, as well as other semi-conductor companies, are in a remarkably lucrative spot in our technology ecosystem.  Their silicon chips are in high demand, whether it be cloud-computing, crypto, or, God help us, AI.  

Is the horse out of the barn or is it still a place to invest? Just remember, pigs get slaughtered. For those of you who own this stock, it may be wise to take some money off the table or put in some stop–losses.  

As I write this it appears that house speaker Kevin McCarthy and President Joe Biden may have a debt ceiling deal after we had to worry about a potential U.S. Treasury default for the first time in history. McCarthy still has to convince the hard-liners in his caucus that this is a viable budget. We will know by June 5th. The American people have been tolerant of the shenanigans of our elected officials in Washington, but a default would be political suicide for many of these clowns!

Back to AI:  the more I learn, the more concern I have. Two weeks ago, Sam Altman, the chief executive of the San Francisco startup OpenAI, testified before members of a Senate sub-committee and spoke to the need for regulating the increasingly powerful AI technology being created by others like Google and Microsoft. In addition, Geoffrey Hinton, who is considered the Artificial Intelligence pioneer, spoke to the inherent dangers of AI. He made many bold statements, including his regrets for his life’s work. Wow! Major concerns include generative AI, which is already a tool for misinformation. He also considers AI a potential risk to all mankind. Stay tuned.  

On a positive note, it appears that the banking fiasco has abated for now. The major money center banks have stabilized the markets by buying up assets of smaller banks. In the meantime, Janet Yellen and Jerome Powell appear to be lost in the forest without a compass.  

Once again readers, if you are looking for stability, Treasury yields on the 2-year bill are approaching 5%. With inflation slowing somewhat, not a bad place to put some money. Until next time.

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. 

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. 

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. 

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. 

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. 

METRO photo

By Michael E. Russell

Michael E. Russell

Happy New Year to all! At the very least, we can say that we are off to a rousing start. The Dow Jones Industrial Average rose a phenomenal 700+ points this past Friday. Not bad; another 7000 points and most of us will be even. 

My wife states that I always look at the glass as half empty. Somewhat true, but as I write this article, it is Happy Hour; consequently my glass is half empty!

There are so many things to write about. Where to start? Oh yeah, how about our new Congress Person representing New York’s 3rd congressional district. Brought to you by Saturday Night Live, Mr. George, you can’t make it up, Santos. Let me think about his credentials. Baruch College, NOPE. Worked at Citibank, NOPE. Worked at Goldman Sachs, NOPE. Jewish, NOPE. Jew-ish — that’s correct! 

Why do I write about this clown? [I don’t want to offend clowns, sorry]. I write about him because I hope they put him on the Congressional Finance Oversight Committee. A person that claimed he earned $6500 in 2020 was able to donate $175,000 to the Nassau Republican Committee in 2021 and lend his own campaign committee $750,000 in the same year. The man is a genius! How do you do that? I hope to be able to interview him for the next article. Boy oh boy, what we could learn. Alright, enough on this topic. UGH!

Starting with the bad news, it appears that Bed Bath & Beyond will have to close all of its stores — ran out of cash. They were never able to recover after the pandemic.

Sorry to digress, but speaking of clowns, it seems that Party City is also going into bankruptcy. So much for the song, “Send in the Clowns.” I really couldn’t help it!

Tesla is having its share of problems. It is cutting the cost of cars to be sold in China by 30%. Hey, what about us? Elon Musk appears to have become distracted by his purchase of Twitter. He needs to hire a new CEO for Twitter to show investors that he is refocused on Tesla. 

Growth stocks lost their luster in 2022. The Russell 1000 Growth Index fell by 30% versus a 10% decline in the Russell Value Index. This was the widest gap in many years. It appears that high interest will be with us for a quite a while since Treasury yields are the highest in 20 years, thus giving us somewhat of “risk free” returns for the short term. This makes growth stocks less attractive for the present due to falling multiples. Even though the Value Index fared better, an investor should still look at only the companies that have strong balance sheets, thus weathering this awful inflation period we are in.

Companies that looked like they would grow forever made some terrible decisions. Prior to the year 2020, Amazon doubled its staff to more than 1.5 million. Alphabet [Google] increased its staff more than double to 180,000!

What do we do? The 60/40 portfolio model looks much better today than it did 12 months ago. Bond yields are much higher and stock prices are much lower. Bear in mind however, despite falling more than 20% in 2022, the S&P 500 is still trading around 17 times earnings, nearing its historical average.

Please be aware that tomorrow, Friday, brings the start of fourth quarter earnings season, with some of America’s giants — Bank of America [BAC], United Health Group [UNH], JPMorgan Chase [JPM], and Delta Airlines [DAL] — reporting results. The consensus is that several S&P 500 companies are to report fourth quarter losses for the first time in quite a while.

Even though there are more electric vehicles on the road, our giant oil companies have seen their stock prices close to double. Check out my favorite, Exxon Mobil [XOM] — $62 in January 2022, closed Dec. 31 at $110. Make sure you fill up this week!

Once again, wishing all a healthy and prosperous 2023.

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. 

Pixabay photo

By Michael E. Russell

Michael E. Russell

As I have mentioned in previous articles, crypto currencies are hard to understand.  I have tried to explain crypto exchanges to the readers while not fully grasping all of the nuances involved in their workings.

We had a financial meltdown in 2008 caused by the corporate giant Enron. We now have a much bigger fiasco caused by a 29-year-old named Sam Bankman Fried. This MENSA wannabe was able to do a Harry Houdini act by making 8 billion dollars in investor funds disappear overnight.

Here are a few of the victims: The Ontario Teachers Pension Plan lost 95 million dollars.  More than 100 affiliated companies are filing for bankruptcy. This financial genius has caused a situation so dire, FTX, Fried’s company stated that it doesn’t know where the assets went or who its top creditors are.

Have no worries folks because Congress is setting up committees to investigate what went wrong. Good news there. UGH! This in itself is a big problem. Apparently, Mr. Bankman Fried lobbied many elected officials in Washington hoping for loose oversight of crypto exchanges.

During the 2022 election cycle, Fried donated approximately 40 million dollars to Progressive Democratic candidates. Senator Kirsten Gillibrand of New York said she would donate the funds she received to various charities.  Nice!  How about having these funds returned to investors?

A question to be asked is why this financial collapse is being investigated after the mid-term elections? Just one more reason for term limits! Point of interest Senators Mitch McConnell and Chuck Schumer have been in office for more than 78 years combined. Come on already!They promise to fix problems that they are responsible for. TERM LIMITS, TERM LIMITS!!!  Wake up everybody.

Enough ranting, what’s next?  Where to invest? As I grow older, Healthcare stocks seem to be a a great area to put money.  Why?  Well, let me explain. This morning I had my 12th doctor visit this month and another one tomorrow to close out November.  During the 1970s Healthcare was 8% of U.S. GDP [Gross Domestic Product]. Today it is more than 20%.

As citizens get better health care and live longer, they also in most cases accumulate more wealth.  Due to more disposable income the Financial services sector is also a place to potentially invest. Within this sector there are areas that should do well over the next five years including Artificial Intelligence, Quantum Computing, Computational biology and CRISPR-related investments. CRISPR gives us exposure to companies specializing in DNA modification systems and technologies.  

What should we be doing in December?  Consider making tax-loss trades to book 2022 losses so that you can offset future gains. The S & P 500 lost a quarter of its value at the indexes low this year. Since October it has regained some territory making it down a mere 15%!  Taking some money off the table and putting it into one and two-year treasuries, yielding 4.5% is not a bad idea. With North Korea, China and Russia rattling their sabers, some safer investments should be considered.  

Here is some advice for pre-retirees. Next year, you will be able to contribute up to $22,500 to your 401K or 403b and other retirement plans — an increase of $2,000.  Americans can also contribute an additional $6500 if you are over the age of 50.  In addition, IRA maximum contributions are now $6500.  

For those of us older folks, bond yields north of 4.5% make a portfolio of 60% stock, 40% fixed income attractive. A final thought, with the S & P down roughly 16%, here are some stocks to ponder. Are they an opportunity? Perhaps. Apple down 16% year to date.  Microsoft down 27%. Alphabet down 34%. Tesla down 45%.  Netflix down 52%. Amazon down 39%. I am not necessarily recommending them, but give them some thought.

I would love to hear from some of you that read my monthly article. I can be reached at [email protected]. From my family to yours, I wish you a happy and healthy holiday season and a prosperous 2023.

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. 

Pixabay photo

By Michael E. Russell

Michael E. Russell

When we were kids, Walt Disney gave us the Mouseketeers.  Today Elon Musk has given us the The new Musketeers. Elon Musk has millions of followers, especially Cryptocurrency fans. There is great enthusiasm among many that envision a new Twitter which will no longer utilize selective censorship.

Some of the MAGA folks are hoping that (former U.S. President) Donald Trump will have his account reinstated. Many analysts believe that Elon overpaid for his purchase of Twitter. 44 billion dollars is surely a boatload of money. How do you bet against the wealthiest person on the planet? As a hobby, he sends a rocket into space every other week. Amazing.

Jamie Dimon, Chief executive of JP Morgan Chase is clearly in the corner of all those who believe Twitter had censored too many people. Musk made a clear statement when he walked into Twitter headquarters carrying a sink and proclaimed, “let this sink in” and promptly proceeded to fire all the executives and terminate the Board of Directors. To be continued…

If anyone cares, the stock market had an amazing month. From a low of 28,600 in early October to a close of 32,861, that is not too shabby. A gain of 4,261 points or 15%. If this continues, I will be back to even in seven months!

What does the market expect following these pivotal midterm elections?

According to historical data, stocks usually perform strongly following the midterms. Since 1962 the Standard and Poors (S & P)500 index has underperformed in the 12 months leading up to the midterms and outperformed in the 12 months following them. The S & P averaged a 16% return in the following year, more than twice the average 8% return in all the 12-month periods ending on October 31st since 1961. The strongest parallel occurred after the 1994 midterms. President Bill Clinton had to wrestle with an overwhelming Republican wave that took control of both the House and Senate.

Does this sound familiar? The Federal Reserve was engaged in a very aggressive tightening phase, roughly doubling the fed-funds rate to 6% from 3%.  he similarities are striking. Democrats currently control the Executive Branch and both houses of Congress. These are not my numbers, but the political pundits see a 69% probability that they lose both the Senate and the House.

I am not writing to make a political statement, only to speak as to the potential stock market response.

Today’s world is vastly different from 1994. Back then Alan Greenspan was Chair of the Federal Reserve. He preemptively increased rates which kept the inflation rate in check.  Jerome Powell may be a nice person, but he is no Alan Greenspan! Oops, sorry Dan Quayle. The market surprised everyone in October, even CNBC’s Jim Cramer.

There are many potential roadblocks ahead for the market. Putin in Russia, Xi in China and Kim Jong-un in North Korea. No nice guys in this group. For those of us senior citizens, remember U.S. Treasuries, 1-2-5 and 10 years yielding over 4.2% New York State tax free. Municipal Bonds yielding close to 5%. Please remind our local bankers that 0% interest on checking and savings accounts is not very neighborly.

Whatever the results of the midterm elections, I pray that things get better for all of us.

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. 

Pixabay photo

By Michael E. Russell

Michael E. Russell

What a week!  Monday the Dow rose 765 points.  Tuesday the Dow rose 826 points.  Wednesday the Dow lost 40 points, a well-deserved rest. Back to the new reality.  Thursday the Dow dropped 347 points followed by a loss of 630 points on Friday. Still, a gain of 1.5% for the week. 

Is the market building a base at these levels? Were the gains of the past week what we used to call a “dead cat bounce” in a Bear market?  Really hard to say.

Earnings are starting to weaken while consumer debt increases. An example of the cost of debt this year is as follows: Let us say that a family wishes to purchase a home while secured a $480,000 mortgage. Last year the cost would have been $2023 per month with an interest rate of 3%. That same mortgage presently would cost $3097 per month with a rate of 6.7%. Over a 30-year period you would pay an additional $385,000 in interest. These increases are taking a substantial portion of the middle class out of the real estate market. This is only one segment of a problematic economy.

Expectations of how many more rate increases the Federal Reserve will make is a big part of what is driving the price action in the stock market. The present administration is having a problem with conditions overseas.  President Biden just met with the Crown Prince of Saudi Arabia. It was hoped that this meeting would lead to a production increase of 2 million barrels of oil per day.  

Guess what? Upon Biden’s return, the Saudi’s announced a decrease of the same 2 million barrels per day. Productive meeting! On top of this, the President stated that we are facing a “potential nuclear Armageddon” the likes of which have not been seen since the Cuban Missile Crisis that President Kennedy faced in 1962. Nice thought to go to sleep with!!

Time to ease up a bit. The Federal Reserve cannot start cutting rates until the Consumer Price Index drops in half from its current level of 8.3%. In the meantime, investors should be taking advantage of U.S. Treasury yields. The 30-year bond is yielding 3.6% while the one- and two-year notes are yielding in excess of 4.1%. This is called an inverse yield curve.  4.1% for one year sure beats the 0.001% the banks are paying. Not very neighborly!  

We may be getting close to a market bottom plus or minus 10%. Many financial “gurus” are suggesting a large cash position in investor portfolios. Brilliant! This after a decline of over 30% in the market. Where were these people in January and February?  

Is crypto currency a viable investment now?  Bitcoin was supposed to be an inflation fighter. However, the worst inflation since the early 1970s has coincided with a 60% drop in Bitcoin’s price over the past year. It was also stated that Bitcoin is “digital gold.” Not proven true. Gold itself has outperformed Bitcoin, losing just 6% of its value. 

Ethereum, which is the second largest blockchain, has had a major upgrade which may fuel money going into crypto. Readers need to do their own research pertaining to crypto. My last thought on this topic: crypto strategist Alkesh Shah of Bank of America still feels that bitcoin and other cryptos are still viable long-term investments. As an aside, I really don’t have a long-term horizon. 

On a pleasant note, my wife and I just returned from Scotland where we visited our granddaughter at the University of St. Andrew, an incredible experience.

The economy there is booming. We did not see vacant store fronts. Much pride was shown in their communities; cleanliness and politeness were everywhere. I was very interested in the opinion of the Scots vis a vis the vote to break from the UK. 

I will breakdown opinions in three groups. The youth have little interest in the monarchy, the senior citizens still admire the monarchy due to their memories of WWII. The 40–60-year age group I found most interesting, although my questions were asked at a single malt scotch distillery. The point was made that Scotland is a land of 5.5 million, like Norway and Sweden. The British Pound is in free fall, which is threatening government and corporate pensions. The Scots are upset over Brexit. They wished to stay within the European Union. 

As we get closer to Thanksgiving, let us hope that the Russian people put pressure on Putin to leave office or better yet, the planet. Best regards to all and enjoy this beautiful Fall season. 

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.