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By Michael E. Russell

Michael E. Russell

What we do know is that often, history repeats itself. We tell our children that they need to learn from their mistakes.  However, we never seem to follow our own advice. So where are we?

Trying to get a handle on how to manage our investments is proving to be difficult at best. The stock market is following every comment by Federal Reserve Chairman Jerome Powell, hoping for a guiding light. 

This past Friday, stocks dropped after a strong opening despite a solid August payroll report. The report showed solid job growth, increasing labor force participation and slowing hourly wage increases. Perhaps this shows that inflation may have peaked. The report was positive enough to unlikely change monetary policy. In spite of this the S & P 500 Index still fell 1.1% with the Nasdaq Composite down 1.3%. This capped an awful August in which the S&P 500 fell more than 4%. That followed July’s 9% gain, the market’s most solid month in more than two years.

Okay folks, the lesson for today is which month to believe. Is this the start of a new bull market or is it a bear market rally?

Let’s talk about a sector of the market that is extremely perplexing. Social media is probably the most influential innovation of the 21st century. Think about this. In 2022, if an event does not appear on a social feed, it never really happened! Most of Wall Street has been blind-sided by social media’s troubles. With every passing year, digital advertising is near a point where the market is saturated.

Case in point: Facebook. This stock, under its new name Meta, traded at $175 during 2017. This past Friday, it closed at $160. Over the past five years it traded as high as $380. As we have learned this past year, market realities eventually trump technology.  (Note:  trump with a small ‘t’).

I have not spoken about Crypto in a few weeks, so here are some thoughts. If Bitcoin is crypto’s answer to gold, Ethereum is the closest thing it has to its own internet.  For example, any person who wants to mint a new token or spend $150,000 on a Bored Ape non-fungible token, or NFT, probably uses the Ethereum network.

As of today, more than $3 billion in transaction volume flows through Ethereum daily. About $60 billion in crypto assets sit on its blockchain through third-party apps.  Other than Bitcoin, there is no network that is more critical to crypto’s infrastructure going forward.

A stock I have owned, Nvidia, has been a casualty of a slowdown in hardware purchases. Recently, on the company’s last earnings call, it was stated that the stock has suffered from a slowdown in gaming and other core areas. It was also stated it could not predict how reduced crypto mining might hit demand for its products. 

All of this new technology is growing way too fast for me. I am still having trouble learning all of the features on my iPhone. 

With school classes resuming and the holidays fast approaching, here are thoughts on some retailing stocks. Target (tgt) looks to be a cheaper stock based on its P/E ratio than Walmart (wmt). There is a potential for 20% upside from its Friday close of $164.  It trades at less than 16X earnings, while Walmart trades at 22X earnings — a 33% discount. 

On the interest rate front, it looks like Chairman Powell will be calling for two more rate increases of 50 to 75 basis points each. Banks will be charging more for car, personal, business and mortgage loans, while paying little if any interest on your savings accounts. Hmm, not fair!!

Just a thought …With the President’s new plan on school loan forgiveness, would it not be a good idea to convert your 30-year mortgage to a school loan? Probably not legal, also just kidding! On a closing note, I just cannot wait for the IRS to put the 87,000 new inspectors to work. Have a great September.

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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By Michael E. Russell

Michael E. Russell

Sometimes it makes my head hurt trying to understand how Washington works. The Federal Reserve raises interest rates in order to curb inflation.  Immediately following these actions, Senate Democrats passes the Inflation Reduction Act with the blessing of the White House.

This bill goes counter to what Jerome Powell and the Federal Reserve are trying to accomplish. Jim Kramer on CNBC calls this bill the “Spend Our Way To Oblivion Act or SOWOA.”

If you own stocks, this could be a problem.  For many U.S. companies the bill includes a tax on stock buybacks. This will impact the way companies address their capital. A 15% book tax which hurts companies with net operating losses will force them to issue debt in order to raise capital.

Senator Chuck Schumer proudly states that this bill will allow Medicare to negotiate prices with drug companies. Really? This is not quite correct. Beginning 4 years from now, Medicare will only be negotiating on lowering prices on 10 drugs. Schumer also states that the bill will create higher paying Environmental Engineering jobs. This potentially will lead to hyper wage inflation.  Just look at last Friday’s employment figures. 

Environmental groups are euphoric over the bill, providing the potential for an additional 500,000 high paying jobs. That’s awesome, but where are the applicants to fill these positions? This is the type of wage inflation that the Federal Reserve is trying to rein in.

It appears that commodity inflation has peaked, but now we will have to contend with labor inflation by creating jobs we have no ability to fill, other than to take from the private sector. I don’t want to beat a dead horse, but every time Fed Chairman Jerome Powell tries to get a handle on inflation, the Federal government throws him a curveball.

The people of this country for the most part are hard-working and good-hearted.  The stock market has politics, of course. We all want to slow global warming or better yet, STOP IT. However, what is occurring in Washington has the potential to destroy our free enterprise system. The government is printing money and spending it like sailors on shore leave. A final thought on this, TERM LIMITS.

On a positive note: We have had a nice bounce during the month of July. The jobs number this past Friday appears to show that we may not be on the verge of a recession, but it sure puts pressure on the Fed to increase rates. 

Stock news. GE is splitting into 3 different companies. Those individual stocks could perform very well.  Think back to the split up of AT&T into 7 different entities. I am still a big fan of ExxonMobil, even though it is already up 50% this year. JPMorgan has come down from $165 in January to $114. The potential for a higher price is very possible, while being paid with a nice dividend. Last, but not least, Proctor and Gamble. Most of us use their products on a daily basis, like toothpaste and laundry detergent, don’t we?

Until next month, try to stay cool.

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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By Michael E. Russell

Michael E. Russell

My wife Barbara and I were lucky enough to spend the past week in Vermont. A respite like this gives one the chance to see what is occurring in the economy from a different perspective.

Sitting on the front porch in the morning I watched truckers hauling lumber and building supplies up and down the road. I decided to check out the nearby diner to hear what the local populace had to say. It sure sounded familiar: prices on the rise, shortage of employees and a real concern as to the direction the country was headed.

However, restaurants were full, many of whom were New Yorkers! Other tourists were taking in the beauty of southern Vermont.  So where are we?

The Federal Reserve is expected to raise short-term interest rates by three quarters of a percentage point later this month. This will lift the benchmark rate to approximately 2.5%. The probability of another one percentage point rate by the year’s end will hopefully cool down inflation which is approaching 9%.

The market has looked favorably on the current moves by the Federal Reserve that were done over the past two weeks. In the short-term there have been some widespread commodity-price declines and other signs of inflation slowing.

The bond market has responded in a positive way. The yield on the ten-year treasury has decreased by one quarter of a percentage point. It currently is at 3.1%, down from 3.1 in early June. This includes a 2% increase in the past week alone!

The S&P is currently projecting earnings for 2023 at under 16x earnings. The 2022 earnings is close to the same number. What this says is that the current 2022 projection on the earnings yield which equates to profits divided by the current index level is close to 6%, twice the ten-year treasury yield!

Looking at other indices is showing that that there may be opportunities in area other than the S&P 500, which most investors follow.

The S&P small cap 600 is currently priced at less than 12x estimated 2022 operating earnings. This a number that hasn’t been seen in a long time. This index and corresponding exchange traded funds may provide for portfolio growth.

As I have mentioned in past articles, the money center banks have provided dividend yields ins excess of 3%. These dividend yields have given support to their stock prices.  Bank of America, Goldman Sachs trade at near book value. Citigroup, which has improved its balance sheet by controlling expenses and increasing its net interest income, is trading at half its book value.

Even though short-term earnings are not looking robust due to a drop in mortgage origination fees and weaker investment banking opportunities, all dividends appear secure.

What is Warren Buffett up to? This week he added to holdings in Occidental Petroleum through Berkshire Hathaway. He now owns close to 20% of the company in a stake worth more than $20 billion.

By the way, Berkshire Hathaway is holding close to $100 billion in cash and cash derivates I expect Buffett to put several billion into picking up value stocks.  As an aside, the $100 billion in cash will give Buffett a profit in excess of $5 billion annually. NICE!!!

In summary, where are we? Not exactly sure. West Texas Crude Oil has dropped to $98 a barrel, some “experts” are projecting a drop to $65. We can only hope! Mortgage rates have dropped to 5.3% and the June jobs number beat expectations.

Boris Johnson is gone, Elon Musk says no to Twitter, Janet Yellen threatens China with sanctions, China threatens Taiwan, etc, etc. Now Monkey Pox!!! Can we just catch a break and enjoy the rest of the summer? Sure hope so. 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. 

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Gas pump. METRO photo

By Michael E. Russell

Michael E. Russell

The state of our economy reminds me of the skit performed by Bud Abbott and Lou Costello in the 1950s. Who’s on first, what’s on second, I don’t know who is on third! What a mess!

Treasury Secretary Janet Yellen admits to a series of mistakes by her department and by the Federal Reserve. President Biden is now going to Saudi Arabia to ask them to pump more oil while shutting down our own pipelines. I find it difficult to believe that inflation is only up 8.6% year over year, a statistic issued by the Fed. Gas at the pump is up 60%, meat up 62%, vegetables up 55%, air travel up 34%; I just don’t get it.

I feel like a grandparent who tries to help the kids with their math homework. It is somewhat confusing to me that 2 + 2 no longer adds up to 4, etc., etc. I guess our kids are all going to become economists and work for the Federal Reserve.

I do not want to be the bearer of bad news, but I think a reality check would be in order. I will use the Federal Reserve number even though they exclude food and housing. Really! On inflation, there can be no dispute. Friday’s report that consumer prices shot up by the highest number in 40 years cannot be considered a surprise. Reports issued by the University of Michigan’s consumer confidence survey showed the most downbeat sentiment on record, mainly due to historically low unemployment and soaring prices. 

It appears that notes from the Federal Open Market Committee (FOMC) indicate that Fed Chairman Jerome Powell intends to raise rates one-half percent this month and again in July. Futures also indicate another half percent increase in September.

The change in attitude at the FOMC since March is extremely troubling. The inflation numbers caught them completely by surprise.  Why didn’t they just ask people who were filling their gas tanks and shopping for food?  They sure knew that inflation was running rampant. Just a few more statistics, because Washington D.C. makes me crazy.

Larry Summers, who served as Treasury Secretary from 1999-2001, issued an economic research paper this past week. To quote, “In order to bring down core CPI to the 2% range would require the same extreme monetary restraint exerted by former Fed Chairman Paul Volcker which resulted in back-to-back 1980s recessions.” Once again there are plenty of smart people out there who have been stating that the Fed is way behind the eight ball. Example:  former Alliance Bernstein chief economist Joseph Carson has been screaming for more than a year, “The Federal Reserve is missing the boat.”

Let’s talk about stocks. The Standard and Poor’s P/E has dropped from 21 to 16. This number, 16, is normally considered to be a reasonable P/E to purchase stocks. However, if interest rates are still too low and earnings forecasts drop, don’t be surprised if there is more damage done to the stock market. The market is down 10 out of the last 11 weeks. I blame the Fed’s ineptitude in dealing with inflation, plus the war in the Ukraine and the lasting effects of the pandemic.

What do we buy? Drugs! Not street drugs, but great drug companies. The pandemic and the need to stay home and eat and eat and eat have caused a lot of us to get fat. So, let’s look at companies that make insulin. Why?  It manages blood sugar levels which help weight control. Eli Lilly (LLY) just received FDA approval for Tirzepatide for diabetes apparently with good results. Novo Nordick (NVO), a Danish company is the world’s top maker of insulin. Novo’s drug sales for obesity doubled year over year to $480 million. They are projecting a nine-fold increase in sales.

Some news that hit the wire this past week:

1. Twitter agreed to share data on false accounts with Elon Musk, thus putting the $44 billion takeover back on track.

2. Jet Blue airlines increased its offer to purchase Spirit Airlines.

3. Kohls is in talks to be purchased by Franchise Group for $8 billion.

As our parents told us, “if you don’t have anything good to say, stop talking.” On that note, please enjoy our wonderful weather. If any of our readers know how to keep the geese off the front lawn and the deer out the garden, please let me know. 

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 E. Russell

Michael E. Russell

It has been a tumultuous 90 days. Investors are currently on the path to seeing one of the worst years in stock market history. This statement was made by several strategists at Goldman Sachs on CNBC.

This could be considered a reasonable position to take, but why? Well, to point out the obvious, stocks and bonds are off to a horrible start, while consumer prices continue to increase. Also, no baby formula!

If you extrapolate this bad news to the end of the year-even though we are barely halfway through Spring, diversified investors may see the potential for significant losses after inflation.

I take a less dire view. Big stock downturns are normal. Over the last 72 years, the S&P Index has fallen more than 20% from its high on ten different occasions.

There are many differences about this decline. The current decline is approximately 18% from the January high. The major difference is that the current decline has occurred after a market that never seemed to stop going up.

Another interesting point is that during the career of Warren Buffett, the average Bear market has taken about two years to go back to even, while a few have stretched to four years or more.

How about this statistic: the NASDAQ has been positive every year since 2008 UNTIL this year!

My take is that expectations need to change. Crypto currencies have fallen off a cliff. Some investors think it wise to buy in at these lower prices. I disagree. Until Crypto currencies are regulated, losses could be devastating. A case in point is Crypto exchange Coinbase Global which totally missed earnings estimates. The company stated that customers could lose their assets if it were to declare bankruptcy.  Coinbase CEO Brian Armstrong tweeted a clarification, saying “we have no risk of bankruptcy.” 

Unfortunately, I remember the same statements made by the CEO of ENRON.

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A Georgetown law professor recently spoke of crypto bankruptcy risks. His point was that even though the contracts say you own the currency, you have the potential of being a general unsecured creditor if there is a bankruptcy.

For those with strong stomachs, there are plenty of companies with strong cash flow, good growth potentials and decent dividends. Never flee the market. Historically, the stock market outperforms most other asset classes. Domestic stocks represent the businesses that keep America strong.

An interesting point was advanced by Vanguard. They recently calculated that since 1935, U.S. stocks have lost ground to inflation during 31% of one year time periods, but only 11% of ten-year cycles.

I believe investors could begin to add to their portfolios shortly, with the caveat that this market may still have some downside risk. However, keep in mind that the S&P was trading at a P/E of more than 21x in January while currently trading at 17x earnings. Some technical analysts believe that the bottom line may be 15x.

Trying to time the bottom line is futile.  Keep in mind that the average annual return for the S&P since 1988 is 10.6%; 34 years of growth.

The view espoused at Morgan Stanley is that there may be a little more downside risk. But Lisa Shalett, Chief Investment Officer, states that segments of the market are priced. For upside surprises, these include financials, energy, healthcare, industrials and consumer service companies.

We still must be concerned about Russia/Ukraine and China/Taiwan.

In my next article I will mention some stocks with good growth potential. Hoping for a market bottom soon!

Until then, enjoy the rest of Spring and stay healthy.

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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The price of fresh vegetables is skyrocketing in 2022. METRO photo

By Michael E. Russell

Michael E. Russell

The world is in a complete state of flux. Wholesale prices are the highest in more than 40 years. Year over year the price of vegetables has risen 82%, grain prices 43%, meat and fish categories rose an average of 34%. Then there is energy! Home heating oil, diesel and gasoline rose 106%, 64% and 60% respectively.

As the war in Ukraine rages on, one major problem is that world food and energy supplies are threatened given the amount of crops, fertilizer and oil that come from that region.

As prices continue to rise, household income is being eaten up. Thus, discretionary spending is shrinking. There is a measure compiled by economist John Williams who utilizes a CPI methodology used 30 years ago by the Federal Reserve. This index, he states, shows that family income had to rise 17.4% from a year ago in order to have maintained last April’s standard of living. This is the highest increase since 1947, the year I was born. But it’s not my fault!!!

How do all of these numbers reflect in the stock market? Up to now, corporate margins have held up, some even making new highs. But, as we all know, pricing power isn’t infinite. Here are the market performance numbers as the Federal Reserve tries to put the brakes on inflation, something Chairman Powell and Fed Governors have done a very poor job with, at least, 10 months too late.

Down Jones — 5.9% YTD

S&P — 7.84% YTD

Nasdaq — 14.66% YTD

The trend for this market is clearly down, at least in the short term. What does this mean for investors? I believe it is time to reevaluate your portfolio’s. Those with a shorter term horizon should look at the utility sector, which has risen 6% YTD. Readers with a longer investment horizon would be wise to use a down market to add to core holdings. IBM, Qualcomm, Nvidia, Exxon Mobil and JPM have very strong balance sheets. Management teams at quality corporations have shown the ability to keep their focus on the bottom line.

AT&T is becoming a pure telecom play again. This 150-year-old company spun off Warner Brothers to Discovery. Investors should be happy with AT&T’s focus on wireless and broadband. If you look at the Nasdaq’s biggest percentage movers this month, pharmaceuticals and biotech firms have led the pack.

It is hard to recommend new purchases at the present time; however, it is no time to panic. Keep track of your holdings and keep in touch with your financial advisor.

During this holiest of holiday seasons, I pray for world peace and a healthy and happy year ahead.

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 E. Russell

Michael E. Russell

As I sit here on Sunday morning pondering what I would recommend to readers, I find myself in a quandary.

Ukraine is in the forefront of the news, while Canadian truckers are being arrested and having their bank accounts taken due to their opposition to Trudeau and his position on masking and vaccinations.

Is it time to put money to work during these uneasy times? Emotionally an investor could think not. History says otherwise.

Once again, the reader only has to look back in time and realize that sound investment decisions can be made at any juncture. 1929, 1952, 1987, 2001, 2002, 2008. These dates were extremely stressful to the investor. Sell, hold or buy? DECISIONS, DECISIONS!

Today, it is more of the same. Companies that we have mentioned are still financially strong with solid balance sheets. Yet, they are being punished by this market! Do we sell shares in these companies while earnings are robust?

Is 5G now a passing fancy? Not so.

Increasing interest rates will bolster the balance sheets of many Money Center and Regional banks. It is fair to say that even though the ten-year treasury is now yielding 2%, our checking and savings accounts are still yielding close to 0%! Thus, bank earnings and balance sheets are stronger than ever.

I believe that based on past history, investors should think about adding or starting a position in some great companies. Dollar cost averaging is a smart way to start or increase your positions. Emotion should not play a part in selling a stock. 

Banks need to watch their loan portfolios and manage the risk as to their non-performing loans.

We are all aware of the supply chain problems thus effecting the costs of goods and services.

With all of this in mind, we need to remember a basic tenet; try to have enough liquidity to cover 6 months of household and business expenses. It is especially important now to monitor your debt load due to higher interest rates.

Let us look at some stocks that have been mentioned before. Qualcomm is certainly a quality investment at these levels, even during this volatile market period. It is reasonably priced with a P.E. ratio of 14x forward earnings with a solid dividend. Morgan Stanley is another sound investment idea. The company is buying back $3 billion in stock each quarter while paying a 3% dividend. 

Still a favorite is Nvidia. This company has exceeded even the highest expectations of forward guidance for earnings. A great CEO, Jensen Huang, has Nvidia positioned to take advantage in the growth of 5G. For those suffering from cabin fever, look at Disney. Increase pricing power and high occupancy rates at their theme parks suggest good earnings growth.

In closing, let us hope the people of Ukraine will be safe. By the time this article is published we will probably know if Russia has decided to invade.

Be safe and stay healthy. 

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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By Michael E. Russell

Michael E. Russell

Interest rate hikes are in the forecast for 2022. But how many?

Jerome Powell, Chairman of the Federal Reserve has a perplexing problem: how to curb inflation, while not derailing the economy. Most analysts are expecting 3 to 4 increases, while Jamie Dimon, JP Morgan Chase CEO thinks 6 or 7 are possible.

What does all this mean? The Consumer Price Index rose7% in December from its year ago level. What caused this? COVID, supply chain issues, the government printing money as if there was an unlimited supply?  Maybe. We need to be aware that no mention is made of our 30 TRILLION-dollar deficit that is growing by the hour. It appears that fiscal irresponsibility is the norm in our Capitol.

Another factor that is being ignored is what is called The Misery Index. This index came about during the Carter administration. During the late 70s, stagflation was rampant. We all know about inflation. I have mentioned price increases in my previous article, but little is mentioned in the media as the effects on middle and lower-income Americans.

A problem that will concern us in the coming months is one in which the Fed stops the repurchase of approximately $60 billion of Treasury and Agency securities each month. This means that the market will have to absorb more than $300 billion of maturing bonds in 2022. This may cause liquidity problems.

What about Crypto? Some investors purchased Bitcoin in 2010 at prices hovering around $100. On January 3 of this year, it rose to a price of nearly $61,000. Wow! A reality check has hit some investors. Those making purchases at that level have seen it fall to a level $36,000, a substantial drop.

As I mentioned previously, the lack of regulation and knowledge on the part of Washington warrants concern.

This week, the Dow Industrials lost 4.6%, the S&P dropped 5.7% and the Nasdaq slumped 7.6%. Is this the start of a 15-20% correction, maybe? The Nasdaq highflyers took some hits the past few weeks. Case in point, Netflix.  On January 3, it was priced at $597 a share. This past Friday, it closed at $397, losing 110 points on Friday — loss of 34% in 3 weeks.

This is the time for investors to evaluate their holdings and determine what their short-term liquidity needs are. Several of us have seen the crash of ’87, the Enron fiasco, the attacks on 9-11 and the severe drop of 2008. Those who stayed the course remained patient and had nice gains in their portfolios.

Remember, there are great companies to invest in. This may be an opportunity to start buying at these levels. I will mention a few that look promising. Nvidia, a chip maker with great earnings potential. I am a big believer that our major oil suppliers will make a transition to cleaner fuel, reducing the carbon footprint. Occidental Petroleum and Exxon Mobil are standouts.

Until next month, buckle up your seat belts!!

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 E. Russell

Michael E. Russell

The S&P rebounded with the biggest weekly increase since February. There have been some encouraging signs, specifically, that the Omicron variant may have less severe symptoms than the Delta variant.

A major concern is growing inflation. Fed Chairman Jerome Powell has radically changed his position on fiscal tightening. This is due to severe price increases that we have seen over the past 6 months.

This week, at the conclusion of the FOMC meeting, we will have a much clearer picture as to what the FED is thinking.

This past week all sectors of the market were higher. Tech and energy were the leaders, while discretionary and utilities did well also. These 2 sectors were up 2.5%

The U.S. Department of Labor reported initial jobless claims fell again. The numbers indicated almost full employment.

CPI data which measures the prices to consumers for goods is used as one measure of inflation.  November numbers indicate a 0.8% on top of a 0.9% advance in October.  These numbers are troublesome in that they are the highest in more than 40 years. For those of us that were around then, think about the years of the administration of Jimmy Carter. As a side note, I remember that the administration sold the Presidential yacht Sequoia for $60,000! I thought that the Treasury was down to its last $60,000.

What to expect for 2022

Wow! So many things to ponder. Putin-Ukraine, China-Taiwan, OPEC, Southern Border Immigration.

The energy sector will be one to focus on. Gas and oil prices are already up 50%.

Supply chain issues will still be in the forefront. Cargo ships are laying at or outside the port of Los Angeles; some have been there for more than 50 days.  A shortage of chips, meat prices up 30%, vegetables up 22%, etc. With all of this inflationary data, the stock market keeps going up. The reason for this is simple. TINA! — There is no alternative.

I am a staunch follower of Jim Cramer.  I closely monitor what the holdings are in his charitable trust. Here are some of my favorites: Abbot Labs, Advanced Micro Devices, Alphabet (Google), Amazon, Apple, Chevron, Costco, Ford and Wells Fargo

Costco is a well run company, opening new facilities in France and China as well as 19 more in the U.S. As I mentioned before, containers destined for Costco are delayed for up to 2 months. If the supply chain issue is resolved, the earnings should be even more robust.

Ford should be looked  at also. Their truck division, specifically the all electric F150, should add to earnings.

To summarize, the stock market should continue to climb with 5-10% corrections interrupting its upward momentum. For those crypto currency followers, I would expect some government regulation to occur.

From my family to yours, we wish all a great holiday and a happy and healthy New Year!

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 E. Russell

Michael E. Russell

To the readers who have missed the Investing 101 column by Ted Kaplan, I have spoken to his lovely wife Elizabeth and will try to follow in his footsteps.

To say that present times are challenging is an understatement. Supply chain issues, higher gas prices at the pump, heating oil and natural gas prices are expected to increase by 60% this season. We have seen shortages at the supermarket and shortages of corks for wine bottles!!! We have housing shortages, federal deficits approaching $25 trillion. We have an economy that is still robust with 10.2 million jobs unfilled.

The 10-year treasury is now at 1.62% and  analysts are expecting an increase to almost 3%. We have not seen rates this high in almost 12 years. A key measure of the bond market as quoted in The New York Times expects inflation to increase by 3% per annum over the next 10 years. It appears that the Federal Reserve will have to take major steps to halt this inflation creep.

In spite of these negative factors, investor’s wealth increased by $9.7 trillion, 23.5% for the year!

That being said, the University of Michigan’s survey stated that this has not trickled down to the average family. Their economic outlook shows the lowest confidence in the economy in more than 10 years. What this says is that employment is up, wages are up, but their income in real terms is down. The Consumer Price Index has jumped 0.9% in October, bringing the year-over-year increase to 6.2%. The most in more than 3 decades!

For many investors, according to Randall Forsyth of Barron’s, the growing concerns about rising prices and interest rates present a problem. In this scenario, bonds may not serve as a buffer in the classic 60/40 equities to bonds portfolio.

Morningstar is looking for a 7.5% gain in equities next year while analysts at Bank of America believe the S&P will be flat.

With all the potential negative news out there, I still believe there are stocks with solid dividends that have potential for growth.

A conservative play is New York Community Bank, NYCB. This bank has over 1200 branches with a dividend of 6%.

I believe that the major energy suppliers are attractive at these levels. Energy demand is high and will continue to be so.  ExxonMobil, XOM, is currently trading at $63. This is 25% below its 5 year high. It is paying a 5.5% dividend.

In closing, let me wish everyone a healthy holiday 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. 

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