Commentary for the week ending 05/15/2021

This week has shown some signs of market nervousness on inflation, with the S&P 500 recovering on Thursday and Friday after steep losses on Wednesday.  The CPI leapt 4.2%, the sharpest rise since 2008.  So as I have been warning, I think we are probably in for more bad news on the inflation front.  Workers are staying home as a form of a “strike”,  not only as a result of government largesse, but as a method to force employers to raise wages.  This “wage push” inflation will eventually force companies to raise prices, thus causing workers to ask for more money – you can see the pattern.   So I am worried that this will happen this year.  So, how do you protect yourself?  First, don’t panic, as panic is never a good strategy.  Own stocks for the long term and hopefully collect some yield while you wait.  Second, as Mark Twain famously said, “buy land, they stopped making that”.  Hold on to your real estate holdings and perhaps buy a REIT like Simon Property Group (SPG) or National Health Investors (NHI).  Third, invest in energy companies like Chevron (CVX) or Exxon (XOM).  Also, consider a natural resource like water (again, they stopped making that!).  Good choices for this include Invesco Water Resources ETF (PHO) or Invesco S&P Global Water Index ETF (CGW).   Finally, consider investing directly in commodities like gold, copper or even collectibles.  But be careful here, collectible values are in the “eye of the beholder”, and you could get burned.  And then there is bitcoin, but as recent events have proven, it is not for the faint of heart as it is very volatile.


As for the stocks in the growth fund, I may have “stepped in it” by gloating about Align Technologies (ALGN), which promptly lost 10% on Monday!  But I still believe in this stock, and recommend holding it for long term gains.  I am not worried about the current “red arrows” in LULU, NFLX, MPWR, and OLLI.  I see them recovering from their recent losses by year end.  I am less than sanguine about VIPS and BABA, as these Chinese stocks have been rocky lately.  But I would still hold on and I think that they will recover, just not as soon as the others that I mentioned.  Again, and as I mentioned before, if a stock has outsized gains like SLM and FTNT, maybe “take some off the table” to protect your gains, and “play with the house’s money”.  If you had followed my advice with VIPS, you would still have gains.  I hope you did.


On the Income fund, I am pleased that every stock is “in the green”.  Again, maybe take a little “off the table” from the current high flyers if you need cash, but I would hold all of them for the healthy dividend as well capital appreciation.  I own several of the stocks in my personal portfolio including DOW, PFE, LMT, and PM and I am happy I do as they are funding my semi-retirement.   Related to DOW, I also own DuPont (DD), International Flavors and Fragrances (IFF) and Corteva (CTVA).  These are the result of the Dow – DuPont merger and subsequent spin offs.  DuPont is highlighted in this week’s Barron’s as a stock to consider because its chemical businesses will be important for several rebound industries like electronics, industrial, automotive and construction.  At a current price of about $83, I see the stock as undervalued and should be about $92 in a year or so.  It pays a small dividend of about 1.4% so it is not really an income stock, but the other related stocks do pay a nice dividend (DOW pays about 4%, IFF pays 2.2%, CTVA is a dividend laggard as it only pays 1.1%).  


Finally, tomorrow is tax day.  I hope you have already filed or will do it tomorrow.  I will be paying mine tomorrow.  As I will be paying more than a lot of people make in wages, I thought I would take a look at where my tax dollars are going.  Take a look at this website:  Policy Basics: Where Do Our Federal Tax Dollars Go? | Center on Budget and Policy Priorities (  I don’t like that they include Social Security and Medicare, which are funded by payroll taxes – not income taxes – but this is about the best data available.  Note that interest payments will go up as inflation increases and your taxes will go up as well.  


That’s about it for now.  Happy investing and stay healthy!  

Leave a Comment