In brief:

Everything is too hot, thankfully we’re cooling off

Inflation is not our main concern (despite the media)

The Delta variant will continue to kill, due to misinformation on Facebook and Fox

Government must do its job, protect us from the virus, media platforms, climate change

We have been reducing exposure to the ‘reopening trade’ due to Delta

We’ve added to defensive sectors healthcare and utilities which may outperform as the economy moderates

The global semiconductor shortage likely persists, we bought more

When the market corrects, we intend to buy and add to our favorite secular themes

A comprehensive financial plan is an effective tool against an uncertain future and inept government

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We believe 529 Education Savings plans are the best tax advantaged vehicles to save for education.

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A potential economic boom in the making:

• we have multiple Covid-19 vaccines as I projected 6 months ago (Scientists Will Save Us)

• Biden's $1.9 Trillion Covid relief bill has passed to help those in need

• $1 trillion in pent up American savings could lead to an economic boom

• Federal Reserve Chairman J Powell is focused on getting more Americans back to work

• potential for a large infrastructure bill to improve our lousy power grid, roads, bridges and schools

• despite the recent rise in interest rates, they remain low historically

• finally, a genuine plan to address the climate crisis (including green jobs)

• TSA data confirms Americans are traveling again

• Our economy is expected to grow at least 5% this year, the highest in over 20 years

• Live music is coming back, finally!

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The great thing about investment success is that it’s within our control. Its not dependent on a political party or a president. Build a financial plan, be disciplined about saving, stay invested for the long term, remain diversified, and occasionally rebalance. Regardless of who wins tomorrow (and we may not know for days) our economy is projected to grow above trend next year due to vaccines, more government stimulus, and a Federal Reserve who will continue to stimulate the economy to get more Americans back to work.

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The great thing about investment success is that it’s within our control. Its not dependent on a political party or a president. Build a financial plan, be disciplined about saving, stay invested for the long term, remain diversified, and occasionally rebalance. Regardless of who wins tomorrow (and we may not know for days) our economy is projected to grow above trend next year due to vaccines, more government stimulus, and a Federal Reserve who will continue to stimulate the economy to get more Americans back to work.

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In 1954, 40 year old virologist Dr Jonas Salk delivered to the world an effective (and free) vaccine against polio, a communicable disease that was paralyzing and killing thousands of Americans every year, mostly children. Polio was first identified in America in 1894 in Vermont with 132 cases. In 1916 it spread to New York City where it killed 6,000 (27,000 cases). By the 1950’s there were 60,000 U.S. cases annually. We feared the atomic bomb and polio. But in 1955, 2 million American kids were vaccinated. By 1979, polio had been eradicated from the United States. There are plenty of issues with our healthcare system and Big Pharma. But in the labs of these companies, there is an army of ‘Dr Salks’ determined to save the world from Covid-19. Their work looks promising based on early test results.

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On April 10th, the historic LA Forum was used as a 'mega' distribution center for the LA Food Bank. Over 7,500 families waited 2-3 hours for groceries. A bit surreal that this is Los Angeles, one of the wealthiest cities in America. And a location where I’ve experienced so much joy, The Forum! I’ve enjoyed too many live music shows there to count. Due to the pandemic, the LA Food Bank has gone from feeding 300,000 per month, to over 500,000. The demand for food assistance is skyrocketing. Food banks everywhere need our help.

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Health Savings Accounts might be a great option for you. Jerry Newman breaks it down in this week’s post.

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I reduced our exposure in U.S. technology stocks in the first quarter. It was an unpopular move at the time. The narrative around Big Tech continues to grow more negative, as I’ve warned:

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No way to sugar coat it. It’s been a brutal October, one of the worst on record. It took the stock market 9 months to climb 11% and less than 20 trading days to give it all back. Why? To truly understand the reason you would have to get inside the head of every investor who decided that now is the time to sell. Stocks always fall faster than they rise…fear is more powerful than greed. As I mentioned a couple weeks ago (A Long Way From Neutral), I believe the combination of rising interest rates (which make things we finance more expensive), the trade tensions (including tariffs, which are essentially taxes), along with comments from the Federal Reserve Bank, are the likely reasons for this pullback. 

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For the first time since 2011, the 30-year mortgage rate has topped 5%. What’s the difference between a 4% and a 5% mortgage rate?  $213,862 (on a $1M loan over 30 years, see below). That’s how much more the exact same house will cost you today due to higher interest rates. You need to come up with an additional $600 per month, or $7,128 annually. In a high tax state such as California, one must make an additional $12,000 annually (approximately) to net $7,128. So it’s a thousand bucks a month that will no longer goto travel, dining out, sporting events, concerts, Amazon, etc. 

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