I’m going through a lot of anger and sadness right now and I am not done with the stages of grief. But we have to find a way to preserve and build wealth. We know tariffs and tax cuts are coming:
We tried that a few years back and it ended in disaster. Deficits soared, ironically caused by the fiscally responsible party, and the economy took a big hit. We seem to want to do it all over again. We also suspect an end to FDIC insurance. And lastly, we’ve been promised “2 years of pain”.
Lots and lots of things went up the day after the election. Wait until Friday and see what has kept its gains, giving you some clues. As for broad ETFs, IWM (Russell 2000 small caps) has done quite well. Financials and banks have also excelled on expectations of more M&A activity.
US debt: 35,000,000,000,000 and counting. How much debt can we support?
I don’t know. The Former Guy once floated the idea of defaulting on Treasuries. He was, after all, a guy who loved declaring bankruptcy. Maybe The Future Guy is going to consider that again. Solve the problem by not paying it back?
Interest rates are likely to soar. So avoid long duration fixed income. And if you go short duration then avoid bond funds and go ownership-to-maturity only. This also means avoid all balanced funds and target date funds. (now I need to check that 529 plan).
We are promised 2 years of pain. Figure a recession ahead and it appears to be planned. Consumer staples as a play?
The tech bros seem to be “in” on this coup. And yes, I called it a coup. Maybe careful selection of tech names, or just go QQQ/VGT.
One tactic mentioned, broad ETFs. I would add split between stocks, REITs, and CDs. So IVV & EFA you get stocks and IYR is US REITS.
The tactic I’ve used for years now, dividend growing stocks (particularly those labeled is dividend aristocrats) and that undervalued i.e. Benjamin Grahams valuation model. The aristocrats have seen all sorts of markets (past performance is no guarantee of the future) and being undervalued gives you a margin of safety (they are already beaten down).
The US is paying it’s debts in script. Massive deficits can continue as long as creditors accept the script.
As an exercise, a few years ago, I added up a lot of Federal programs that subsidize states in various ways. I found that the Federal budget would be balanced by eliminating all of those programs. One of them was the Federal Dept of Education. No, I did not write “2025”, but there is an good philosophical question here “if the people of the state refuse to pay enough tax to fund their education system, why does that become a problem for the Federal government?” Same with Federal aid to state and local police. Federal aid to state and local road maintenance. Federal grants for city blight clearance. I was pleased to see the reduction in the deductiblity of state and local taxes in the 2017 legislation. If a person makes a personal, private, decision to live where state and local taxes are high, why is that the Federal government’s issue to subsidize?
The first thing is to get rid of your anger, at least when thinking about investing. The election circus is over. What is the market saying? That’s much more to the point than what the BS Media or politicians have to say.
The future is AI, EVs, data centers, and their suppliers. Earlier this week i updated my covered call list to test the waters (51 stocks). It looked pretty good but what gave me pause is the potential capital loss when these stocks tank. So I decided to concentrate in what I know, technology. TSLA and ARM, both up.
Ignore the noise. What do you know? Stick to what you know.
About valuation, Warren Buffett says, “Better a good company than a cheap stock.”
I will be investing in small cap companies and being picky about the ones I am in. Most of them will be high Revenue with good earnings. ALL of them will be companies domiciled in the United States.
Don’t panic. And definitely do not sell off your portfolio.
Stocks mostly increase in value. Buy a cheap S&P 500 index fund and keep several years of living expenses in cash or CDs or short term bonds. You will be fine and perform better than 80% of other folks.
The GOP won, and that fulfills what they wanted with their promises (actually pretty normal practice, up to a point). The allegiance of their base is such that I expect the Once And Future POTUS (OAFPUTUS) can change the tactics to reach his goals fairly radically with little consequence (“I just heard a BRILLIANT additional tax cutting idea from Elon, and so instead of complicated tariffs we are going to….”).
We need to see what Congress sends to POTUS, and until then keep on breathing.
Perhaps in your part of the world, but the US has been going retrograde for 45 years. We have heard a lot of wind about unwinding everything related to EVs in the US, and returning to ICE vehicles, as a matter of government policy. Ditto unwinding alt energy. I have not gotten a feel for the attitude about AI. I don’t know if TPTB want to ban it, or subsidize it. The data centers, I agree on. Can’t have “Total Information Awareness” without massive data centers to hold and analyze the data being mined.
Let’s see if the pins get knocked out from under Tesla, in the US, within the next year. Unwinding EPA emissions regs, alone, would take away one of Tesla’s revenue stream. Unwinding the subsidy programs would limit their customer base. I keep wondering how Musk figures he will profit from the new regime, and why Tesla went up yesterday.
Or maybe he has moved on from Tesla. Maybe he doesn’t care about Tesla. Maybe Tesla shareholders are the bag holders in another case of “creative destruction”?
Yes, tax cuts are a priority. And this time paying for them is expected. How will they do that?
Proposal is to save money by cutting infrastructure and environmental spending especially in the Inflation Reduction Act. Maybe by repeal of the Affordable Care Act. We shall see what can get through Congress.
As to investing AI continues to do well for now. How long will it last? Will it give the productivity gains expected? If yes, it has a long runway. But keep an eye on it. Some will fall by the wayside.
Tesla has modern factories fully paid for. A clear competitive advantage. But rising competition and price wars are a problem. And middle range consumers now prefer hybrids. Tesla has none. To me growth prospects are slowing.
Many companies especially retailers are seeing slowing growth. Cutting interest rates should help but big deficit puts limits on it.
Its a goid time for stock pickers. I notice cruise lines are doing well. Must mean people are still travelling and investors think rate cuts will help.
Never thought of that, could be. XAI is outside of Tesla along with SpaceX. Fun fact, Musk moved GPU’s from Tesla to XAI and personnel to help XAI out. Love how his companies are all separate but all the people and resources can be shared. Does that sound legal?
Isn’t that what PE groups do, as they suck a company dry? iirc, that is what Frank Lorenzo did to Eastern Airlines: stripped it of assets, then dumped Eastern into bankruptcy.
