Thursday, April 3, 2025

A Calm Voice & A Steady Hand: Revised Edition

In 2016, I wrote a column detailing the voices I listen to. The individuals in and around the investing universe who I found provided consistently good advice in times of scarcity and in and times of plenty. These were the folks I learned my craft from, who guided my best instincts and who steered me around the biggest potholes. These authors, bloggers, podcasters, journalists and corporate leaders made what I do possible. 

In the intervening years, we've lost a number of them: to retirement and to red-pill rabbit holes; one died, another changed things up; a few, in retrospect, were on a long hot streak in 2016 which summarily ended. And then President Ass-hat’s tariffs sent the markets off a cliff for absolutely no reason at all— beyond a misguided understanding of global trade economics plus an infantile need to scare every kid on the playground into handing over their lunch money. Corporations around the world who operate in the US or do business with the US (who doesn't?) are trying to get a handle on severe changes in their cost projections and revenue impacts. Investors everywhere are panicking and stocks are cratering like it’s March 2020. 

So it was time to update my list of the most trusted voices in finance, and to update you as well. (Sadly, and this can't be good: they're nearly all white men! No doubt this limits me and my perspective. I need some new voices.) Most of the rest of the column has remained true even with nearly a decade of perspective; I left it alone. I hope you can find something useful here in your journey. 

    ___________________________


In my twenties, at a time when my marriage was new, my career was stalled and my father’s illness was worsening, I was fortunate to get to know a gifted man. He was a spiritual leader and a counselor, and among his talents was a rare ability to soothe, with kind eyes and a soft voice. When he looked at me, for that moment I was his universe and I felt completely safe. I'm sure he was a wonderful counselor.

The markets lately have been a roller coaster from hell, all big drops and loops and fast hairpin turns, not a single steady climb to be seen. A little soothing and a sense of security would be welcome. 

As I’ve said in previous posts about studying the market and where investing ideas are born, I like to read about business. Clever and observant writers give me most of my ideas not only about what to invest in, but about how those businesses are performing, who they partner with, what their leaders are up to, how they stay competitive, what products are coming down the pipe, and on and on. 

And I’ve mentioned before who I read. But it’s not just academic: these individuals offer analysis, experience, wisdom and also something else— in difficult market moments, these people are the cool and steady hand on the wheel. They reassure me. They remind me that no matter how far the broader market falls, no matter the beating I take on my positions, it will come back. That I’m playing the long game, measured not in quarters or even years but in decades. That no market rout which lasts a few weeks or months can shake my foundational belief that over time, the market rises. Without them, I am lost, sleepless, panic-selling into a dropping market.

In no particular order, with links to their work where applicable:



David Gardner & Tom Gardner: The Motley Fool investment advisory, analysis and podcasts

David and his brother Tom founded the Motley Fool in the mid-90s following a remarkable personal stock picking run, and they continue to run the advisory and wealth-management firm today. David prefers smart, disruptive, low-capital businesses with huge potential, which he buys early and holds for 5 years or more. Tom is the slow-and-steady, more conservative investor, buying established business for long-term gain. Their returns (and their firm!) have performed extraordinarily over the last 3+ decades, and their podcasts and appearances across Motley Fool media teach the rest of us how replicate them in a fun and approachable way. I also recommend their books, which absolutely got me started: Motley Fool Investment Guide; Rule Breakers / Rule Makers, etc



Barry Ritholtz, Ritholtz Wealth Management and Bloomberg Business: The Big Picture blog


A seasoned money manager and award-winning journalist, with a clear 10,000-foot view of what’s happening and why you should care. Barry's new book, How Not to Invest, about avoiding mistakes, is everywhere as he's doing his promotional book tour. In fact I just republished his recent post about the tenets of his book. Barry also hosts the Masters in Business podcast series for Bloomberg, offering excellent long-form interviews with the individuals who move markets. 



    Morgan Housel, The Collaborative Fund: Morgan Housel Podcast
    Blog

    With a deep understanding of markets, the economy and history, as well as the investor psychology, Morgan stands alone. he's written two brilliantly helpful and accessible books about your money and investing: The Psychology of Money 
    and Same As Ever. He has an ability to simply reframe complex concepts and make the technical totally understandable. He has his own blog, posts a regular column on The Collaborative Fund website and is a contributor on the Motley Fool podcast series.



    Tadas Viskanta: Abnormal Returns daily email of relevant links and blog

      An investor, blogger and author, Tadas operates AbnormalReturns.com, where you can find one of the best-curated daily links lists on the financial web. No actual analysis or deep dives, just a list of great articles you can peruse yourself. Much of what’s pertinent to investors on banks, stocks, the economy, trading. And on Saturdays, Tadas adds hot takes from the whole week on health, nature, personal finance, food, cars, real estate and more.




      Kara Swisher & Scott Galloway: the Pivot podast

      Kara Swisher has been one of the most influential technology journalists in the country since the mid 1990s. She knows all the titans personally, has been interviewing them since their garage-startup days. She talks to the market movers: CEOs, politicians, investors, gurus. She never pulls a punch and she sets the record straight, no matter her audience. Her books detail her experiences watching these companies take over the world, from AOL to Facebook, Apple to Tesla. Her latest bestseller is Burn Book.

      Scott Galloway is a professor at NYU's Stern School of Business, a serial entrepreneur and a student of market and brand data— and human psychology. He wrote a hugely enjoyable book called The Four, about some of today’s ‘Magnificent Seven,’ 
      and is frequently invited to CNN and Fox Business to provide explanation and counsel. 

      Their podcast together, Pivot, is a remarkable fusion (and abrasion!) of their keen minds and shared outrage at this moment where tech meets business and politics. This is an addictive listen.



      Ben Carlson, Ritholtz Wealth Managment: A Wealth of Common Sense blog

      With keen observation and an impressive wisdom, Ben provides grounding to the financial community with his buy-and-hold doctrine and get-rich-slow values. Ben’s blog offers intelligent analysis not of individual stocks but of the current environment, what drives him crazy about his industry and the traps we all fall into. His book, Wealth of Common Sense, is one of the best investing guides I’ve read in years.



      Josh Brown, Ritholtz Wealth Management: Downtown Josh Brown blog

      Josh offers a smart and entertaining perspective on the money-management industry, the follies of markets and investors, what should be obvious patterns, as well as on markets and the economy. He weaves in pop culture references like Mick Jagger and The Ramones to make his points more accessible. One memorable post related a volatile bear-market environment to Leonardo DeCaprio's repeated survival trials in The Revenant. 




      Matt Levine, Bloomberg Business: Money Stuff blog

      Matt Levine is a former investment banker who’s graduated to become one of the best, loosest and most accessible finance columnists in the business. He makes the complicated and confusing seem understandable— even when it’s ridiculous. His editors give him wide berth to say what he wants for as long as he wants, and he has a lot to say. Impossibly well-read and informative, even funny. He’s a great read.




      Jason Zweig: The Wall Street Journal: A Safe Haven for Investors blog

      The Wall Street Journal has prided itself on being the go-to news and financial media source for well over a century, and Jason Zweig has been their personal finance columnist since 2008. He appears regularly on radio and TV and he’s written for Time and Money magazines. Jason is the author of The Devil’s Financial Dictionary, and he edited the revised edition of the great Benjamin Graham’s investing masterwork, The Intelligent Investor. No one knows this subject better. 



      Then there are those who don’t write a column or a blog necessarily, but who have outsize impact in the capital markets. These investors have sufficient gravity to pull in board members, executives, journalists, and retail investors like us, who watch them for perspectives and useful ideas. Just by keeping your eyes peeled for news with their names you’ll gain all sorts of insight.


      Warren Buffett, Berkshire Hathaway 

        You already know who he is, because he’s the biggest of them all. Warren is in the financial news somewhere just about every day. No one on the planet has more market wisdom or stock-picking expertise, or more patience. He’ll be 94 this summer and still there is no one in the industry more wise, or more worthy of trust. His instincts and clarity are astonishing. Thousands of analysts, brokers, shareholders and everyday folks seek out his annual letters to shareholders in order to better understand the state of the financial world and learn what ‘Uncle Warren’ sees coming. 



        Jamie Dimon, JPMorgan Chase bank

        Jamie Dimon has been the Chairman and CEO of JPMorgan Chase bank for nearly 20 years. If we get a sensible presidential administration again in the next decade or so, he’s a shoo-in for Treasury Secretary. When the shit hits the fan in the financial universe, he is one of the first and most-quoted individuals. Queens NY born and bred, he is no-nonsense and clear-eyed. And smooth: many suspect his political affiliation but you’d never know from his public persona or statements— his reputation depends on even-handedness and an ability to work with anyone. 



        Peter Lynch, Fidelity: One Up On Wall Street 

        Peter Lynch is long retired, but he’s effectively the godfather of individual retail investing. He took over management of investing giant Fidelity’s Magellan Fund in 1977 and over the next 13 years achieved stunning returns of over 29% per year. He then wrote two bestsellers in the early 2000s to help yo-yo’s like you and me invest smarter: One Up On Wall Street and Beat the Street. Both are bibles in the investor community to this day. Those books are what got me started.




        Tuesday, March 18, 2025

        How Not To Invest - Barry Ritholtz

        Barry Ritholtz is one of the most respected managers and most trusted financial advisors in the business. He's just released a book, How Not To Invest: the biggest and most common investing mistakes, and the dumbest, most wealth-destructive thinking. I haven't read it yet but if its anything like his long-running blog, The Big Picture, it will be full of rational ideas and written just as much for those of us who are not finance professionals. You can also catch some Barry on his Bloomberg podcast, Masters of Business

        I'm republishing his blog post from today, an attempt to strip his book down to a small pile of simple concepts. As usual, he sees things clearly. 

        I highlighted a couple of sentences I found particularly timely this month. Enjoy!

        — Robin


        https://ritholtz.com/2025/03/biggest-ideas-in-hntii/


        It is March 18th! Publication day is finally here!

        The challenge in writing “How NOT to Invest” was organizing a large number of ideas, many of which were only loosely connected, into something coherent, understandable, and, most importantly, readable.

        It took a while of playing around with the concepts, but eventually, I hit on a structure that I found enormously useful: I organized our biggest impediments to investing success into three broad categories: “Bad Ideas,” “Bad Numbers,” and “Bad Behavior.”

        That insight greatly simplified my task of making the book both fun to read and helpful for anyone interested in investing.

        Here is a broad overview of each of the 10 main sections, which can help you quickly grasp the key ideas in the book.

        Bad Ideas:

        1. Poor Advice: Why is there so much bad advice? The short answer is that we give too much credit to gurus who self-confidently predict the future despite overwhelming evidence that they can’t. We believe successful people in one sphere can easily transfer their skills to another – most of the time, they can’t. This is as true for professionals as it is for amateurs; it’s also true in music, film, sports, television, and economic and market forecasting.

        2. Media Madness: Do we really need 24/7 financial advice for our investments we won’t draw on for decades? Why are we constantly prodded to take action now! when the best course for our long-term financial health is to do nothing? What does the endless stream of news, social media, TikToks, Tweets, magazines, and television do to our ability to make good decisions? How can we re-engineer our media consumption to make it more useful to our needs?

        3. Sophistry: The Study of Bad Ideas: Investing is really the study of human decision-making. It is about the art of using imperfect information to make probabilistic assessments about an inherently unknowable future. This practice requires humility and the admission of how little we know about today and essentially nothing about tomorrow. Investing is simple but hard, and therein lies our challenge.

        Bad Numbers:

        4. Economic Innumeracy: Some individuals experience math anxiety, but it only takes a bit of insight to navigate the many ways numbers can mislead us. It boils down to context. We are too often swayed by recent events. We overlook what is invisible yet significant. We struggle to grasp compounding – it’s not instinctive. We evolved in an arithmetic world, so we are unprepared for the exponential math of finance.

        5. Market Mayhem: As investors, we often rely on rules of thumb that fail us. We don’t fully understand the importance of long-term societal trends. We view valuation as a snapshot in time instead of recognizing how it evolves over a cycle, driven primarily by changes in investor psychology. Markets possess a duality of rationality and emotion, which can be perplexing; however, once we understand this, volatility and drawdowns become easier to accept.

        6. Stock Shocks: Academic research and data overwhelmingly reveal that stock selection and market timing do not work. The vast majority of market gains come from ~1% of all stocks. It’s extremely difficult to identify these stocks in advance and even harder to avoid the other 99% of stocks. Our best strategy is to invest in all of them through a broad index. Some terrible trades are illustrative of this truth.

        Bad Behavior:

        7. Avoidable Mistakes: Everyone makes investing mistakes, and the wealthy and ultra-wealthy make even bigger ones. We don’t understand the relationship between risk and reward; we fail to see the benefits of diversification. Our unforced errors haunt our returns.

        8. Emotional Decision-Making: We make spontaneous decisions for reasons unrelated to our portfolios. We mix politics with investing. We behave emotionally. We focus on outliers while ignoring the mundane. We exist in a happy little bubble of self-delusion, which is only popped in times of panic.

        9. Cognitive Deficits: You’re human – unfortunately, that hurts your portfolio. Our brains evolved to keep us alive on the savannah, not to make risk/reward decisions in the capital markets. We are not particularly good at metacognition—the self-evaluation of our own skills. We can be misled by individuals whose skills in one area do not transfer to another. We prefer narratives over data. When facts contradict our beliefs, we tend to ignore those facts and reinforce our ideology. Our brains simply weren’t designed for this.

        Good Advice:

        10. This is the best advice I can offer:

        A. Avoid mistakes (fewer unforced errors, be less stupid).

        B. Recognize your advantages (and take advantage of them).

        C. Create a financial plan (then stick to it). If you need help, find someone who is a fiduciary to work with.

        D. Index (mostly). Own a broad set of low-cost equity indices for the best long-term results.

        E Own bonds for income and to offset stock volatility. Primarily

        Treasuries, investment-grade corporates, munis, and TIPs.

        F. Be tax-aware. Consider direct indexing to reduce capital gains and

        reduce concentrated positions.

        G. Use a regret minimization strategy when sitting on outsized single position gains.

        H. Be skeptical of all but the best alts (VC/PE/HF/PC). If you have access to the top decile, take advantage of it. Otherwise, exercise caution.

        I. Spend your money intelligently: Buy time, experiences, and joy. Ignore the scolds.

        J. Fail better. Understand what is and is NOT in your control.

        K. Get rich: Here are the classic strategies to get rich in the markets, including how difficult each is and their likelihood of success.

        ~~~

        I was just discussing the idea with Morgan Housel and Craig Pierce —  “Is this anything?” and now it is the day it arrives! (Hardcover and ebook are published today; Audible audio version is out tomorrow).

        How did that happen so quickly…?

        You can order it in your favorite formats in the US, UK, or around the world. If you want to learn more before putting down your hard-earned cash, check this wide array of discussions, podcasts, reviews, and mentions.

        This book was a joy to put together, and I have been delighted at the response it has received! Please let me know what you think of it at HNTI at Ritholtz Wealth.

        Thursday, March 6, 2025

        Really Wish I’d Been Wrong

        Unfortunately— and I sincerely wish that this was not the case— I was correct when I said this would go badly. Thousands and thousands of government layoffs. Thousands more deported. Funding frozen, military aid frozen, intelligence-sharing with allies frozen. International relations in tatters. The stock market in free fall. Wall Street types are furious, including a number of billionaires who supported President Trump in the election (though Elon musk seems to be enjoying himself) and who gave to both his campaign and his inauguration fund. Congress is racked with fear and won’t speak out— the potential consequences of ‘disloyalty’ to Trump are simply too high. Even some Republican voters are beginning to have doubts about the crazy they’ve wrought. 

        The US is breaking global trade norms and destroying decades of trust and relationships. Our allies are pinging between shock, rage, frustration and disgust. Even kind and patient Canada is pissed. Other nations can no longer count on America: not for the import and sale of their goods, not for alliance against bad actors, not for military support. The Trump administration has blown it all up. And as much as it saddens me, this is on us. This is what America asked for.

        The latest, as reported by Bloomberg, March 6

        On Thursday, Donald Trump signed a few more executive orders. Among the scores he’s churned out since taking office, these were unique, since they partially reversed orders from just two days ago. 

        It was the latest backpedal by the White House in the face of furious fallout both at home and abroad to his 25% sanctions against Canada and Mexico. With markets plummeting, automakers yowling and Canada pounding its chest, Trump announced he would exempt some goods from both countries, but only for a month. If that sounds familiar, it’s because this is the second month-long delay Trump granted on his own tariffs.

        Today’s announcement came after Trump spoke with Mexican President Claudia Sheinbaum, who has sought to negotiate with the 78-year-old president while Canada Prime Minister Justin Trudeau struck a more strident tone. The Trump administration did take pains to say its other threatened tariffs would move forward as planned in the coming weeks and months, but after weeks of threats, little follow through and now reversals, Wall Street has apparently decided the only safe thing to do is sell. [Highlight mine] The S&P 500 fell to a four-month low. 

        If you’re in the market, you’re somewhere between nervous and full-on panicking. I myself have lost around 15% from my portfolio peak on February 18. That’s a big drop, a huge bite out of my retirement. 

        But I’m not selling. Haven’t unloaded a single share. My stomach is in knots, I’m sleeping poorly, I’m fearful about my kids’ graduate school plans and my home-buying intentions are in question and some future vacations are hanging by a thread. But I’m not selling.

        Why you ask? Because I own some outstanding businesses and there’s nothing wrong with them. What’s happening today, what we can’t stop seeing all around us, is about global trade, is about prices, is about supply/demand and government firings and deportations and interest rates and maybe even the return of inflation or the possibility of a recession. 

        But the stocks I own are shares of businesses which are not causing the problem. They might have to adjust prices, they might sell less stuff, might have to layoff employees to maintain margins or cancel product launches or even shutter a division. But they’re responding to market conditions, as they must, and there is simply no reason for me to not own them anymore. They remain good at what they do.

        If I sell now, into a sliding market, after all the gains I’ve made in the last few years, I’ll still have to pay capital gains taxes on those gains— so that’s 20-35% tax on top of the 15% losses of the last few weeks. 

        Then I’ll have a (smaller) pile of cash that earns me nothing. Sure it won’t keep falling, evaporating value. But what do I do with that cash? I can’t spend it— that’s my retirement fund. I can’t stash it in my mattress because inflation will eat it up over time. 

        I would want to buy back into the markets ‘when they reach the bottom’ of this selloff. Which is … when? How will I know when we’re at the bottom? When will I feel it’s safe to get back in? Likelihood is I won’t trust that if I start buying, it won’t all drop again tomorrow. I’d be late in my selling, and I’d almost surely be late buying it all back. Combined, those will crush my long term returns. 

        Plus I have learned to be disciplined about selling. There are only four good reasons to sell. As scary and disheartening as all this is, the mess we’re in triggers none of those reasons.

        So all I can do, really, is guzzle some Pepto Bismol and leave it in play. Gut it out. Remember, if you’re fairly diversified (or if you primarily own broad ETFs like the entire S&P 500, etc) then things will improve again. Everything we’re watching in the markets is short term awfulness. 

        You’re a long term investor. You own stocks because over years and decades, they appreciate faster than any other asset class. But quite literally, the price for that appreciation is volatility; it’s called the ‘risk premium’— you get paid more for taking that extra risk. That’s where we are right now: the Volatility. 

        Stop watching your portfolio fall. Look away. And wait it out. 

        Reach out with your thoughts, I’d love to hear: robin@zagaco.com



        Friday, February 14, 2025

        24-Hour Trading is a Bad Idea

        I'm on record regarding my misgivings about the Robinhood app, which in addition to 'gamifying' investing, has for some time has offered investors extended-hours trading. Now Charles Schwab has made the same decision, allowing its clients the ability to trade securities pretty much any time. 

        Sounds like a great idea, right? Why be limited by the hours the exchanges are open? Buy and sell whenever you want! 

        But the problem is two-fold. First, off-hours trades have pricing issues because most trading volume takes place during exchange hours, and highly active real-time supply/demand ensures accurate to-the-second pricing data. At moments when not enough shares are changing hands, an investor cannot have confidence that the price they pay at 9pm or 2am is in fact a fair price. 

        Secondly, no one makes their best decisions during the night. You're tired from a full day. Maybe you had a big dinner, or an edible or a couple of drinks. Your circadian rhythm slows your thinking, and slows your metabolism. Executive brain function, critical thinking, logic, mental math, are all operating on a skeleton crew. Which makes it not really a great moment to place a bet with hundreds or thousands of your hard-won dollars. 

        If you primarily use one of these securities trading platforms, and you're the sort who scrolls stock news or 'fintech' while half-watching Netflix after work, I would sincerely urge you to set yourself limits. You get an idea? Sleep on it. You see a story or a post which scares you? Sleep on it. Markets move fast but not that fast. The losses you save by not making a compromised decision in the late evening will speak for themselves. Remember what Charlie Munger said"It's not brilliance. It's just avoiding stupidity."  

        Morningstar's Samantha Lamas's column, below. Happy Valentine's Day all!

        Why Schwab’s 24-Hour Trading Might Be a Bad Idea for Investors


        Robin


        Friday, February 7, 2025

        The Art of Not Panicking - Ben Carlson

        The world is full of unknowns and uncertainties. Right now is a delicate time in global finance, as the President of the United States, one of the largest consumer and financial markets on earth, is rolling the dice. The new administration is conducting a massive high-stakes economic experiment in which investors are among the lab rats: What happens when a huge market employs tariffs not only on particular goods or on imports from particular trading partners but on nearly everyone? What happens, further, when those tariffs materialize overnight and evaporate just as fast— when they are in fact merely threats? How can businesses who buy materials overseas or consumers who purchase goods overseas predict costs, or plan spending?

        Now add in the effect of those tariff countries placing their own tit-for-tat tariffs on American goods and materials? Will buying continue at higher prices for all? Will it drop off a cliff? How can businesses and consumers manage the uncertainty?

        And underlying all of this for investors: What will happen to the revenue of the businesses we own? To profits? How can we plan for that? What do we do with our portfolios in the meantime?  

        My investing colleague Ben Carlson just dropped a column every investor should read: 

        A Wealth of Common Sense - Don’t Panic

        Friday, January 24, 2025

        What 'Billionaire's Row' Means for Investors

        From the very beginning of this column, I have advocated to be always buying in the markets. At times of distress and losses, at times of celebration and gains. Maybe it’s a few percentage points of your paycheck that automatically goes into an S&P500 index ETF via your retirement account, or maybe you regularly set aside a little each pay period and try to figure out where to invest it. But it’s regular and it is in spite of the news, or the interest rate cycle, or the political moment or wars abroad or your feelings of uncertainty. Always. 


        And now, in this moment, I am a bit flummoxed. I don’t really know where to place the funds. 


        Since my last post, we’ve got not only a new (old) president. We have a new GOP-led Congress, and those two branches of government join a right-leaning revisionist Supreme Court. Taken together, at a glance this would appear to be the most uniformly conservative American government in many years. But it’s not actually conservative by any traditional measure. It’s certainly nationalist, isolationist, and pedal-to-the-metal kleptocratic (not one but two Trump cryptocurrencies? Naked cash grab!) 


        Already cracks are showing: a couple of President Trump’s cabinet picks may in fact not get the nod from the Senate. Elon Musk, co-lead of the new Department of Government Efficiency, appears to have summarily axed his supposed partner, Vivek Ramaswamy. And many of the newly signed Executive Orders look like nothing more than empty promises, just red meat for his base, and are very unlikely to survive scrutiny or lawsuits. Trump sees the presidency not as a job but as a performance for which he expects to be well paid. But when the dust settles, even Trump can’t simply rewrite the 14th Amendment to the Constitution to outlaw birthright citizenship. Even Trump can’t unilaterally rename the Gulf of Mexico, annex Greenland, or through sheer force of personality decide how many genders exist. He bullies and postures, it fires up his base, he sells them his dumb $TRUMPcoin, he gets richer, and all of it inflates his ego and generates fear in those who oppose him. Classic autocrat playbook. 


        That said, much of what I discussed in my last post remains true, and is worrisome. Inflation remains a major concern, and many of the president’s promised policy shifts would ultimately drive up prices. The same for mass deportations: if he fulfills his promises, and it looks like he’ll at least try, not only will hundreds of thousands of families be split and people forced from their homes and loved ones— who will do all those jobs? What does that mean for productivity and access to goods? Finally, tariffs are a huge question mark hanging over the economy the next few years. To date, it would seem the president is more interesting in using the threat of tariffs to get what he wants from other nations. But make no mistake, his bluff will be called. Then supply will fall against demand, and prices will rise.


        So what does all this mean to the investor? Often a safe play is to just follow the money. 


        Billionaires bending the knee

        At his inauguration ceremony, Trump’s favorite billionaires were literally trotted out on display for the masses: Tesla’s and SpaceX’s Musk, Amazon’s Jeff Bezos, Meta’s (Facebook’s) Mark Zuckerberg, Google’s Sundar Pichai, Apple’s Tim Cook (only Microsoft’s Satya Nadella and Nvidia’s Jensen Huang were absent). Plus podcaster Joe Rogan, LVMH founder Bernard Arnault, UFC CEO Dana White. Each gave $1million or more to Trump’s inauguration fund— Musk put over $200 million into the election itself— which is to say they bought their way in. They were on the dais, lined up, Trump's acolytes, behind his family but in front of his cabinet picks. I am assuming that proximity to the president here equates to Oval Office access, and that’s surely intentional. We've long known that Trump is susceptible to both flattery and financial quid pro quo. So as a betting man, I’d say those particular companies have a strong chance of getting exempted from any coming tariffs; their expansion and acquisition plans will probably get a green light from the Justice Department.


        What else looks good for your investment dollars right now? Based solely on what we know of Trump and his interests, I’d be looking broadly at the big banks, like JP Morgan Chase, Bank of America and Goldman Sachs. Do I need to mention Trump likes money? That he sees himself as a big shot financier and wants to hang with that crowd? Also ‘Big Oil’ such as Exxon and Chevron. Defense contractors both hardware (warplanes, tanks, missiles, ammunition, spy satellites) and software (intelligence gathering and processing, guidance systems, computer and network security). 


        It gets extra sticky when we start to consider how close to all-time highs much of the stock market is right now. The question everyone is asking: If companies are already so richly valued, how much upside remains? For that matter, the market is highly concentrated: currently the 10 largest US companies comprise about 37% of the entirety of the S&P 500 index. So if you’re an index investor because you like getting the automatic diversity, think for a moment— a huge portion of your seemingly low-risk investment hinges in large part on the success of just 10 businesses (5 of which were represented at the inauguration). My default play, just buying shares of the S&P 500 index and then ignoring them for a decade, is looking a little less certain. But again: I am spit-balling here. No one really knows what’s coming next.


        The new administration is nothing if not transactional. This crowd loves to make deals, and they expect something in return. They’ve exhibited a strong desire for substantial deregulation, which inherently favors big companies over small as the big ones have deep pockets necessary for buyouts and global expansion. So look for big mergers, which spell increased consolidation and further concentration of markets. Forget the old big-business bent of Doing The Right Thing, or Saving the Planet, or DEI Hiring, or Narrowing the Wealth Gap. For now that’s over. As of this week we’re re-entering the era of Might Makes Right. Adjust your portfolio accordingly.

         ————————————————————

        Below are some great pieces I’ve seen recently which address these issues and more. A few are behind paywalls; apologies in advance.  













         

        Thursday, December 12, 2024

        Well That Was a Surprise

        First let me apologize to the two readers who genuinely look forward to my columns. It’s been a very long time since my last post, and I am sorry. 

        I want to tell you what I got wrong.

         

        I didn’t write explicitly about my expectations regarding US election outcome, but I was incorrect in my assumptions and that likely colored the comments I did make. I thought the Harris-Walz campaign would eke out a tight win, finally beginning to close the door on the Trump Republicans and kleptocratic plutocracy in the US. Clearly that did not happen. Good grief did I misread the national mood. 

         

        I was also wrong to think the markets would be basically calm following the election. It’s normal to see a flurry of trading in and out of various sectors in anticipation of a new administration’s economic goals and business priorities, but it usually relaxes and leaves relatively little changed. 

         

        But in this case the new Trump administration has such radical economic plans that investors are moving huge volumes of money into the industries and asset classes that look to benefit most from presidential actions— with help from an allied Congress and an indifferent Supreme Court. From Big Tech to cryptocurrencies to retail to AI to corporate mergers, investors are betting on big changes. So markets have been climbing since November 5: in only 24 trading days, the S&P 500 index is up 5%, and the Nasdaq has risen over 8% and both are clocking repeated record highs.

         

        Sure, I could jump in with both feet to find some interesting plays for you— what to sell, what to buy, how to leverage this moment. But today I want to caution you. 

         

        Because I do not believe this will last. (I could be wrong on this as well, so take it with salt.) I do not believe we are going to see substantial increased profitability, giant long term gains for shareholders or any kind of American business renaissanceI do not believe what’s happening right now will continue because it is not based on reduced costs or new products or market-changing ideas or business expansion or the slaying of foreign competition. Some companies are indeed doing great, but what we’re seeing in the markets— which by definition are forward looking— is merely an expectation of what is to come from the Trump White House. Yes, there will be deregulation and miles of open road for some of the most powerful industries in our economy, and that will reap shareholder benefits. Yes, businesses with ties to the administration will probably realize outsize gains. (Elon Musk’s Tesla and SpaceX? Of course! Amazon thanks to Chief-Suck-Up, Jeff Bezos. Zuckerberg’s Meta has donated to the Inauguration Committee. Tim Cook’s Apple always gets a pass. New crypto-friendly regulators will push Bitcoin …). Investors are literally banking on those changes. 

         

        But what are not yet being factored into market prices are the counter impacts we should expect from other promised Trump administration policies:

        • Deportation of ‘illegals’ by the millions, which will leave industries dependent on migrant populations without a workforce: think agriculture and meat processing, heartland manufacturers, all kinds of construction, the entire restaurant/hotel sector. Prices for those goods and services will skyrocket with fewer workers to provide them, and the job market could implode from the stress. 
        • Deregulation of big business will benefit shareholders at the cost of consumers and small businesses. As large companies consolidate power and resources, effective monopolies will raise prices, widening the wealth gap and forcing more average folks to hold a second or even a third job just to get by. Meanwhile American families will continue to be weighed down by the rising cost of housing simultaneous with a deeply dysfunctional health care system which perennially underperforms even as it overcharges. 
        • Tariffs on imports from around the globe, which will raise prices for consumers and stress US businesses struggling to fill the resulting demand gap. Making it worse, tariffs bring trade wars, with other nations slapping their own tariffs on American made products and commodities, further gumming up global supply chains and reducing affordability and access to goods. 
        • Tax reductions on businesses and the wealthy will mean not only shrinking federal government coffers and necessary cuts to social programs (hard on seniors and the lower and middle classes), but also more spending power to affluent consumers. That will drive spending in an era of already-higher prices and reduced availability, which could in turn start us down an all new inflationary path. Prices finally coming down after 2021-2023 would go right back up. 

        Taken together, these effects will be an albatross around the neck of American business and on our economy. These things will take time to play out, so it won’t happen overnight. But in a year or two, we could be right back where we were. Plenty of manual labor jobs but far fewer workers to fill them in our fields and restaurants, and both fewer options and higher prices on much of what we need to live— food, medical care, transportation, housing.

         

        All of which is to say, enjoy the market bump while you have it. Plan ahead for a rainy day. If I’m right this time, it will be a downpour. Please note, I do not advocate selling and waiting for a safer time! (Never ever ever ..)

         

        In poker, a smart player who’s up will continue to play but might take a little cash off the table. The stock market— really another form of gambling— is no different. When I see unexpected price jumps, especially those that are hard to explain or defend, I try to trim a few positions and pocket those gains. If you’ve been investing a while, you’re probably doing well too. So take a couple percentage points off your most-successful holdings and convert to cash. Then stash it in an interest-bearing savings account where you can access it for unexpected expenses (medical need, job loss, automotive breakdown, emergency travel …). A year from now I expect you’ll be glad for your prudence.