Commentary for week ending 07/10/2021

My apologies for being a bit late on commentary.   Also, my apologies for picking OLLI, BABA and VIPS as they have performed terribly.  But their underperformance points makes my point on diversification – by allocating no more than 5% to any one stock, poor performance is ameliorated by good performance of the other stocks in the portfolio.  On OLLI, I still think it is undervalued, and I recommend holding it.  As for the Chinese stocks (BABA and VIPS), I think that the Chinese government is trying to send a strong message to the company owners that they are in charge.  But they will soon recognize that if they want the extraordinary revenues from these companies to continue, they will have to remove their jack boots from these companies’ necks.  


Speaking of government jack boots on necks – I assume you saw the latest from President Biden.  Biden has signed an executive order that allegedly targets what he says are anticompetitive practices in tech, health care and other parts of the economy.  Once again, he is proving to be more anti-business than Obama – he seems to hate any successful business.   His FTC czar is already going after Amazon’s purchase of MGM – she should recuse herself from any decision on this case, since she has shown prior anti-Amazon bias.  As for the rest of the order, I think most of it is political posturing to satisfy the progressive win of the Democratic party, which seems to be in gathering even more control of him.  Let’s hope that Congress will keep him from going too far with many of his misguided policies – which in my opinion will be counterproductive and actually make the US less competitive with the rest of the world.  


Back to performance of the funds.  On the Growth Fund, note that 17 of the 20 stocks are in the “green”.  On the top performers, as I have repeatedly said, maybe take a little “off the top” to lock in some profits.  Another strategy would be to sell covered calls to collect some income – of course, this would limit your gains if your stock gets “called away”.


On the Income Fund, stay the course.  And I would add to your position in Merck (MRK).  I think Merck is undervalued and should fetch about $100 within a year.  


On the market in general, it has been somewhat difficult to understand – with the ten year note reaching a low of 1.25% on Thursday and the stock market counterintuitively went down instead of going up.  I think much of the market’s “cognitive dissonance” is confusion as to what both the Fed and Congress will do as well lighter trading volumes magnifying price changes.  Personally, I think interest rates will still go up by early next year, but only time will tell.


Speaking of interest rates and income, recall that I mentioned the virtues of Series I US Savings Bonds.  Well, Kiplinger agrees with me:

Earn 3.54% With Series I Bonds | Kiplinger

I-bonds make an excellent place to stash up to $10,000 per year, assuming that you have at least a one-year time horizon.  They also make a nice gift for a new baby.


Well, that’s about all for now.  Happy investing!  








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