Commentary for week ending 10/23/2021

My commentary for this week will be relatively brief.  But I need to say something about Facebook (FB).  There have been a lot of comparisons to FB to being the “big tobacco” stock of 2021 because of the threat of legal actions.  Personally, I think that is fallacious as FB is a vital part of small business and I doubt that any legislation will stop it from collecting ad dollars.  I regard any weakness as a buying opportunity – not a reason to sell.  But let’s suppose that FB is like Altria ( née Phillip Morris).   Many years ago I bought 1,000 shares of Phillip Morris at about $18/share.  That 18,000 dollar investment netted me thousands of dollars thru growth, dividends and spin-offs.  Of course FB doesn’t pay a dividend but it makes it up in growth.  My point here is that hated stocks which fulfill a want like tobacco in the case of Altria or advertising in the case of FB, they often overcome adversity, thrive and grow.  read more

Commentary for week ending 10/16/2021

There are five essential principles of management. These include planning, organizing, directing, controlling, and leading.  Why did I start with these sentences?  Because I believe that this administration (and frankly, most of the previous ones) do not follow these basic principles.  They all seem to be good at directing and controlling but are sadly lacking in skill with the other principles.  A current example is the Biden administration’s energy policy.  Some of his first acts were to cancel the Keystone pipeline and to ban new drilling on federal lands.  But there was no coherent plan on ramping up clean energy policies while basically “keeping the lights on” with fossil fuels.  The administration is now reacting to high energy prices by recognizing that fracking may not be as bad as it seemed and asking the Saudis to increase production!  Jeez!  How about having a plan first instead of being reactive rather than proactive?  Here is a simple analogy (but I think illustrative) example from my prior life as a manager:  a direct report (read: a resource like energy) is being transferred to a new manager but they still have projects to complete under my responsibilities (read: “administration”).  Did I transfer the person and hope for the best on their projects for me?  No, I worked out a plan with the new manager to gradually shift the person’s responsibilities to the new manager while completing the projects for me (read: organizing and leading).  I think that if the current administration had followed these basic principles, we would be in better shape today with our energy situation. read more

Commentary for week ending 10/02/2021

News from the “puzzle palace” (otherwise known as Washington, DC):

  • Senator Elizabeth Warren calls the Chairman of the Federal Reserve “dangerous”.  Really?  Jay Powell may be too dovish for my tastes, but he is a fine man and I would hardly call him “dangerous”.  Senator Warren should apologize for her level of invective.
  • Congress is still struggling to pass the infrastructure bill.  As I previously stated, we need to improve our roads, bridges, airports, broadband, etc.  But the 3.5 trillion dollar Democrat “wish list” is a bridge too far.  
  • The administration wants banks to report transaction information on any account with more $600 to the IRS.  This is completely absurd and is an an unfair burden on small banks and businesses.  More importantly, the effect on tax compliance seems questionable.  I was talking to a friend in the IT department of a major bank and he was happy about this one.  Why?  Because it means virtual permanent employment for him as he would need to design, code, and debug thousands of lines of code to support this stupid requirement!  Here is more information:  ABA Letter to Senate Finance and House Ways and Means Committees: Views on Tax Information Reporting Proposal | American Bankers Association
  • Congress wants to virtually close IRA investing to high earners (glad I already built mine).  See this:  Why Is Everyone Talking About the Mega Backdoor Roth IRA? | The Motley Fool
  • The talks on the debt limit are patently ridiculous, since we those funds have already been appropriated and spent.  It is similar to an individual buying goods and services on their credit card and then refusing to pay.  If there is a “debt limit”, it should be done before the money is spent, not after!  Seems obvious, doesn’t it?  But not in the “puzzle palace” (oh, sorry, Washington, DC!).

On the market in general, I think we are in for some more trouble.  Limited supply of both goods (particularly chips) and service (i.e. workers) are putting us on the road to more inflation.   Anyone who has taken a beginning economics class will recognize a supply/demand curve imbalance that will only reach equilibrium with price increases.   read more