Author: Matt Thalman

Watch The Inflation Numbers

Posted on by Matt Thalman

During the first few trading days of March 2023, we watched the stock market falter, housing demand cool, the 10 Year Treasury Bond rises to a 4% yield, and the 30-year fixed mortgage increase above 7%.

This all came after several hotter-than-expected inflation reports hit investor confidence.

The Federal Reserve has also cut back on its interest rate hikes, going from an increase of 75 basis points to 50 basis points, down to just a 25 basis point increase. Those reduced rate hike increases were due to inflation reports trending in the right direction.

However, reports coming out now show inflation has not yet been tamed after the hikes were slowed. And this is having both big and small investors and some Federal Reserve members calling for faster rate hikes in the future.

David Einhorn, who had a 36% return in his hedge fund in 2022, recently said investors should still be bearish on stocks and bullish on inflation in 2023. Einhorn was short US equities in 2022 and performed very well for his hedge fund investors.

Former Pimco Chief Executive Officer Mohamed A. El-Erian recently wrote in Bloomberg that he favors a 50 basis point rate hike at the coming Fed Meeting. He further noted that three Fed Members have publicly announced their wiliness to increase rate hikes by 50 basis points at coming meetings, despite all agreeing to raise rates by just 25 basis points at the Feb 1st meeting.

Federal Reserve member James Bullard is one of those three Fed members who have come out and announced he favors faster rate hikes in the future. Bullard believes inflation can be beaten in 2023, but only with aggressive rate hikes until it begins to come down. His concern is that inflation doesn’t come down but re-accelerates, and we are forced to relive the 1970s.

With the next Federal Reserve meeting just a few weeks away, now is the time to start planning your portfolio. There is a good possibility that even if rates aren’t increased aggressively at the March meeting, they will be increased multiple times over the coming meetings. Continue reading "Watch The Inflation Numbers" →

The Market Is Looking Expensive

Posted on by Matt Thalman

If you are a trader, you don’t care how the market stacks up to past fundamentals.

But, if you are a long-term investor, knowing how the market appears today from a fundamental standpoint, compared to other times, is something you want to keep an eye on.

Knowing when the market is becoming expensive or even overpriced is essential because that tells you it may be time to start taking your foot off the gas. Or the other side of that coin is that the market appears cheap or underpriced.

These times are when the words of Warren Buffett, “Be greedy when others are fearful and fearful when others are greedy,” stand out the most to me.

Buffett is trying to tell investors that when others are buying, despite stocks and the market as a whole being very expensive, you should be concerned. He also says that you should be greedy when others are afraid, likely because of market turmoil and stocks are selling off. Buffett gives you a straightforward, back-of-the-napkin blueprint of when to sell and buy.

With that all said, I don’t believe there are hard-pressed rules on this is when to sell, or this is when to buy.

However, I think now is a time that you should start considering when you will sell or, at the very least, start planning your next moves based on how the market reacts to the coming weeks or months.

One reason I believe we may be hitting a peak is because of general market sentiment. Towards the end of the summer, most market participants, the talking heads on news outlets, and even Wall Street (i.e., the big banks) were saying a recession was very likely in 2023.

However, the market was rallying during that time, then we peaked in August and finally sold off in September. During the fall, the markets were mostly flat, and then things spiked in January. Now the thinking is we may not hit a recession, and inflation may be behind us. Is the market feeling like it could be getting greedy?

But what about the complex data showing us the markets may be overvalued right now? Continue reading "The Market Is Looking Expensive" →

When the War In the Ukraine Ends

Posted on by Matt Thalman

A recent publication from the Kellogg School of Management at Northwestern University discussed the benefits of the post-war reconstruction as a good investment. They use post-World War II as an example of how much money should be spent and how it benefits the war-torn country very quickly.

The paper pointed to specifically The Marshall Plan following World War II. The Marshall Plan had two goals; European economic recovery and the containment of the Soviet Union. Stabilizing Europe’s economies were vital to promoting income growth around the world and entrenching democracies in Europe.

Whenever the Ukraine War is over, I think the Marshall Plan should be adopted identically from what happened 80 years ago since we will essentially be trying to do the same thing in Ukraine as we did all over Europe back then.

However, it will be much more expensive this time around. Post World War II, American leaders sent roughly $130 billion (In 2010 dollars) to help with the European reconstruction of railways, utilities, roads, and airports, the same type of facilities that will need to be rebuilt in Ukraine.

However, economists estimate that restoring the lost infrastructure in Ukraine will cost at least $200 billion, and that figure will climb the longer the war continues. And remember, $200 billion is to rebuild Ukraine.

After World War II, the Marshall Plan not only gave funds to countries that had been friendly to the US during the war but also to Germany and Italy.

The belief back then and now is that not helping to rejuvenate all parties involved after the war ended would only cause more issues later down the road. That has some people thinking that Russia and even Belarus could see new investments from outsiders when the war ends, perhaps not in a straightforward financial manner but in other ways, such as new business opportunities and deals.

At this time, no money has started flowing back into Ukraine to help rebuild the country or increase business and the economy.

But, a deal has already been made between Ukrainian President Volodymr Zelenskyy and BlackRock’s (BLK) CEO Larry Fink that has BlackRock coordinating the investments to help rebuild Ukraine when the war is over. Continue reading "When the War In the Ukraine Ends" →

Oil & Gas Stocks Are Here To Stay

Posted on by Matt Thalman

During his State of the Union address, President Joe Biden noted that the U.S. will still need oil and gas for at least another decade. This comes as the President has pushed for a significant transition in our country to renewable energy.

President Biden has fought against the oil and gas companies since the beginning of his tenure. He has told Americans that we need to reduce our reliance on oil and gas and move towards renewable energy as soon as possible.

The President has pushed for legislation to make renewable energy more affordable. All this while telling oil and gas companies that they need to invest more to grow supply but not offer them the same concessions.

More so, the Biden administration has tried to reduce the number of oil and gas leases the federal government can sell. Thus making it more difficult to increase supply. Some government policies are also making the industry smaller since new and smaller companies are getting squeezed out due to regulations.

I think most people would agree that burning oil and gas is not ideal for the environment and more so that we need to reduce our reliance on foreign oil and gas producers such as Russia (which we primarily have done since the start of the war with Ukraine) and those countries in the middle east that are not so friendly to the U.S.

However, it will be more than even the decade President Biden admitted to in the State of the Union address until we are indeed off the oil and gas addiction our country currently has.

For example, even the most aggressive state legislation coming out of California and New York doesn't ban the sale of internal combustion engines until 2035, more than a decade from now. While electric vehicle sales rapidly increase in the U.S., they are growing from a super low starting point.

The reality is that the government is making it more difficult for oil and gas companies to expand supply either with laws, not selling leases, or banning gasoline vehicles in the future, making long-term investments less appealing. This inadvertently pushes oil and gas prices higher and makes these companies more profitable.

And remember, this is all during a time when the President, a Democrat, is not 'pro' oil and gas. Take a moment to imagine how well the industry could be doing if the President and Congress were both 'pro' or even indifferent about the oil and gas industry.

So with that being said, let's look at a few exchange-traded funds that you can buy today to possibly play the boom the oil and gas industry may be setting up for over the next few decades. Continue reading "Oil & Gas Stocks Are Here To Stay" →

AI - Do You Have It in Your Portfolio?

Posted on by Matt Thalman

In late January, the world of artificial intelligence went mainstream when popular online media company BuzzFeed announced it was planning to use artificial intelligence software called API to help it generate content.

OpenAI, the company that created API, also made the more popular ChatGPT, released in November of 2022.

API and ChatGPT have been used to write emails and create quizzes and listicles. It has even been used to write reports on popular books and other essay-style assignments for high school and college students.

While we have all heard about the potential of artificial intelligence for years, BuzzFeed taking the plunge and using it to create content is a big deal.

For most of us, this is the first time we can say we are seeing the technology firsthand (well, at least that will be true when we see our first AI-created quiz or article).

Up until now, AI has to most people, just been a pie-in-the-sky idea that we weren't sure how it was going to affect our lives. Or how we would interact with AI technology on a day-to-day basis.

BuzzFeed using AI, makes it real now.

And now that it is real and not just a research project some technology company in California is spending money on, maybe now is a good time to put some real money into it.

Unfortunately, OpenAI, the creator of these AI chatboxes, is not publicly traded. But, a number of other companies are developing similar technology and are publicly traded.

However, since we are still very much in the infancy stages of AI technology, my suggestion is not to try and cherry-pick the AI winners today but bet on the idea that AI as a technology will prevail. The way to do that is with Exchange Traded Funds.

Exchange Traded Funds that buy companies developing artificial intelligence and robots will expose you to the whole industry but reduce your single stock risk. Let's take a look at a few ETFs that are focused on AI, and then you can decide which one is right for you. Continue reading "AI - Do You Have It in Your Portfolio?" →