Great First Week
Mother's Little Helper portfolio was UP today +$628.52.
Overall GAIN YTD: +$2,926.90 (+2.93%).
Our benchmark index, the S&P 500 is UP +2.60%
"Bulls make money, Bears make money, Pigs get slaughtered"
- Jim Cramer (host of Mad Money)
December 28th I made my buys for 2018, you can see the new portfolio by clicking the portfolio link on the web site or (Click Here). We had a good first week. Apparently the stock market doesn't care if I can spell. Thanks to those of you who caught a couple of dopey mistakes.
Every Tweet a Crisis?
Does it seem like every tweet is a call to observe yet another crisis. Frankly I'm exhausted by it all. And I'm not just referring to the President. Everywhere I look I see examples of outrage. It seems like outrage is the first response to any situation. But I can't. My job in this blog is to look at every situation from an investment perspective and figure out the easiest path forward for us average investors. The 2018 portfolio is in response to all that's going on.
So while the world seems to be doing everything it can to create havoc, it seems like investors don't seem to care, or have finally decided to focus on what really matters, earnings, productivity and interest rates. And keep an eye on the bond market. Maybe the thing we need to fear is our lack of fear. The current rally we're in seems like a FOMO (Fear Of Missing Out), where investors see good things coming that suggest higher prices for stocks in the near term, so they're buying up now. The only problem with that approach is that they are buying because stocks are going up. Smart investors are still buying based on fundamentals and looking for good valuations. Yes, there still are companies out there with fair and undervalued valuations.
In this years portfolio we're taking advantage of the global synchronized growth by being 100% invested in index funds that leverage the global stock market. To follow a market index like the S&P, a fund has to buy and sell shares of the companies in the index in order to maintain it's balance. Because these funds have become so large they have become one of the biggest buyers in the market, which in turn pushes up prices. We're also taking advantage of the new tax laws and synchronized global growth. With corporate tax rates being lowered to 21%, the Price/Earnings ratios will get recalculated lower and the values of almost every company on U.S exchanges will immediately look cheaper. When good companies go on sale, expect a lot of buyers to show up with lots of cash pushing prices up higher. With a 15.5% tax rate on overseas cash, expect that a good portion of that cash will come home for a variety of purposes; increased dividends, stock buy backs, acquisitions, increased wages, increased R&D. Ultimately it won't matter what companies decide to do with the cash, because any of these options puts that cash out into the economy and into other people hands to spend, save and invest. The other option is it stays locked away in a foreign country doing little if anything that benefits the U.S. There is nearly as much corporate cash overseas as the Federal Reserve spent during the financial crisis to prevent the U.S from having another great depression. So whether companies bring back $1 trillion, or $3 trillion, the impact will be enormous at either end of the spectrum and our index funds will benefit with less risk than if we had invested in individual stocks.
That's Just For Rich Folk
Not so fast. Those increased dividends, stock buy backs, acquisitions, increased wages, increased R&D are benefiting a whole lot of people. Politicians will throw that old ham out there looking for us all to take a bite, but don't be fooled. There is nothing inherently wrong with a company buying back it's own stock or increasing the dividends they pay shareholders. Companies will invest their cash where they see the best return for it's owners, the share holders. If after considering all their options they decide to invest in themselves, then I'm all for it. Some buy backs are poorly done, but for the most part they are positive for shareholders. When companies buy back stock they pay a shareholder for those shares. That seller then decides what to do with the cash; cash that's now out of corporate coffers and into the economy in the hands of private individuals.
The U.S. continues to hold its position as the country with the largest share of pension assets across the top 300 funds world wide, representing 38.6% spread across 134 U.S. funds. The world's 300 largest pension funds hold $15.7 Trillion US dollars worth of stocks, bonds and other liquid assets. That's over $6 Trillion dollars in the U.S. alone that's invested for peoples retirements. And assets under management are increasing. In 2016 (the last year I can find data) assets under management increased 6.1% for U.S pension funds. Guess what those pension funds are invested in, stocks, bonds, index funds and a variety of other liquid assets.
For those of us that don't have a pension fund our retirement funds are wrapped up in 401K, SEP IRA, Contributory and Roth IRA plans. Guess what those are invested in, stocks, bonds, index funds and a variety of other liquid assets. Those increased dividends, stock buy backs, acquisitions, increased wages, increased R&D are benefiting anyone with one of these accounts.
By the way, if you don't have a pension fund or a 401K plan, there are other ways all that overseas cash finds it's way back to you. People spend it. They spend it on cars, washing machines, rent, food, restaurants, hotels, vacations, clothes, tuition and a whole lot more.
Sit back and enjoy the ride, this year will be an E-Ticket thrill.
Disclosure: I am personally invested long in some or all of these funds that appear in the Mother's Little Helper portfolio or manage these investments for my Mother's portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the MLH portfolio. Since I may on occasion discuss BitCoin and other cryto currencies I disclose here that I personlly own investments in the cryto currencies listed here: VTI, VWO, VEA, VIG, XLE, MUB, Bitcoin, LiteCoin
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.