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Day 78: The Thesis Unfolds

The Mother's Little Helper portfolio was down today -(0.34%) for a LOSS of -2,144.65 . Overall GAIN: +$26,174.66 (+4.34%). 76 stocks in the black, 45 are still in the red.

Today I made a small change to how the portfolio is displayed. Stocks are now organized by their overall return instead of alphabetically. A quick look at the top of the portfolio will show you where the greatest gains are coming from.

On March 6th I made the following call:

"On March 10th the monthly employment numbers come out, the last piece of data Janet Yellen is waiting on to pull the trigger on hiking interest rates. On March 15th the Fed will announce a decision, which I think will be a rate increase. Keep in mind that rates will still be at historically low levels. The market will initially sell off on interest rate fears and then the buyers will come out. The sell off is always unwarranted, especially since higher rates will mean greater profits for the banking industry. Most of the buying money will flow from the bond markets to the stock market as the increase in interest rates will drive bond values lower. This is the setup that will drive the stock market to the next rung on the ladder."

March 10th: Employment numbers came out and they were great, by any view, they were great.

March 14th: We got a little sell off because of lower oil prices, weather and listless investors.

March 15th: Tomorrow I say we get a 25 basis point increase in interest rates.

March 16th: The market will continue lower. Eventually the banking stocks restart their rally.

Let's keep an eye on the bond market to see if money flows from bonds to stocks, I think this is really important and could be setting us up for some serious problems if the US 10-year rises above 3.03%.

I've stopped trying to make sense of the oil trade. Stocks are returning to a pattern of following oil up and down. I've said this before, when oil is cheap it's good for business, especially those businesses that have high distribution costs and rely on rail, trucking and air freight. Yeah, that's almost every business. So if cheap oil is good for the bottom line of businesses, why do investors keep selling off on lower oil prices? I'm a little suspicious of how fast and fine tuned this trade has been. Someone needs to have a chat with the algorithm coders.

My next call? Healthcare and taxes. Some kind of a healthcare bill will get passed soon, no matter how many Republicans hate it. Will it be better or worse? I don't know. But it's going to get passed soon because what the Republicans care about the most, and so should the Democrats is to get tax reform passed. Sacrilege you say! No, I'm just pragmatic. Healthcare for everyone that the country can afford is hard unless we just put everyone on Medicare and decide that the entire health insurance industry should be left to fail. Remember $750 billion to prop up our financial industry; well we don't really want to go there again. We just need to keep tweaking it, stop renaming it, and focus on constant improvement. That leaves taxes.

A big tax reform bill will do several things; 1) put more money in the control of business and individuals, 2) businesses will hire more people, 3) more new business starts will occur, 4) wages will increase, 5) more people will have employer sponsored healthcare, and 6) everyone is under estimating the value of repatriation of overseas money. My preference would be that congress passes a tax bill that allows corporations to repatriate money at a very low rate if the money is used to invest in capital expenditures, hire more people, invest in R&D, mergers and acquisitions and programs that provide retraining and education for anyone who wants it. Any money used to buy back shares, raise executive pay, or just park it and forget it should get taxed at a higher rate. The basic premise should be to invest in your business, in America and your workers, or leave it overseas and just look at it.

Stay Invested

Clay Baker

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