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.  


As far as the growth fund is concerned, I am still pleased with the fund in general.  On Facebook, I think that the current concentration of the media on the “whistleblower” appearance will eventually calm down and FB will recover.  FB is still the primary choice for both small and large advertisers, so the current weakness is a buying opportunity.  As for the Chinese stocks in the portfolio – what can I say?  Every investor (including me) makes mistakes.  I think China is not investable until there are changes at the top in the Chinese government.   When other high level officials in the government see their investment values drop – they may intervene and push Xi Jinping out.  One can only hope.  And as I said, this may take years but there is historical precedent when the “Great Leap Forward” was eventually repudiated by CCP leadership.    As for the other stocks in the portfolio, I advocate trimming but not selling all the top performers if you need a bit of cash.


On the income fund, note the increase in Merck (MRK).  I cannot honestly claim that I predicted the COVID pill, but I am pleased with the results!  This also points to the superiority of American  pharmaceutical companies – they have the wherewithal to do R&D and develop new drugs and treatments.  Let’s hope that Congress doesn’t take away their pricing power with another stupid law.  Other countries limit drug prices at the expense of American manufacturers but are happy to use American innovations!  On the other stocks, some investors are dumping Pfizer and in particular, Moderna,  because of Merck’s drug.  This is short-sighted and foolish – vaccines are still the most effective defense against COVID and are vital to taming this horrible disease.  So do not sell your Pfizer – I am certainly not selling!  Sit back and collect (or reinvest) your dividends.  Speaking of sitting back and collecting dividends, don’t worry about 3M, there is some weakness today, but the economy will improve eventually and 3M will improve as well.  I would not sell anything in this portfolio, except, again,  maybe trim some of the top performers if you need a bit of cash.


Finally, another note on the stock market in general.  A younger friend of mine came to me worried about the market.  His colleague was recommending selling stocks in his 401k as a “major crash” was coming (apparently this colleague is Nostradamus and can see the future!).   Anyway, I told him that trying to time the market is a fool’s errand.  I asked him: “do you need the money right now?”  If you do, you should not be in the stock market.  If you have a 10-year or more investing horizon, you should let your 401k be on auto pilot and dollar cost average.  And as I mentioned, I advise keeping 10% in cash or cash equivalents and be ready to buy on a large of dip of 5% or more – you will be rewarded as Mark’s back testing has proven.  Most of you reading this note know this but this is still good advice for young people in your personal circle.  


Thanks, happy investing and please stay strong and healthy!






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