Trusted Financial Advisors’ Latest Commentary

Fear Street

A year and a quarter that started out strong ran out of gas as the Federal Reserve failed to lower interest rates and as a military action (“excursion” “war”, call it what you will) resulted in strangulation of one of the most important channels for waterborne transport of oil, liquified natural gas, fertilizer and helium.  Although the United States is self-sufficient in most of these commodities, Europe, Asia, South America, and Africa are not.  With a global economy and supply chain that are integrated, the situation is affecting a wide range of industries and not in a good way.

The broad S&P 500 Index shed 7.3%. Other than energy producing companies in the United States and some consumer staples, no sector was spared: Tech stocks were off 11.4%, health care down 7%, even normally stable Utilities fell 7.6%. Foreign stocks suffered, but generally not as much as in the USA where indexes are weighted toward big technology firms. Our client portfolios are individually developed, but in general we saw these balanced portfolios produce gains or losses of around 2%.[1]  Most clients have a significant allocation to fixed income (bonds and preferred stock) and these held […]

Given the worrisome headlines and market volatility clients are seeing some stepped up trading activity for their accounts.  It feels like a good time for a brief update.

I sold out our position in the big bank exchange traded fund. This was bought a few weeks ago based on a loosening regulatory environment and strong bank balance sheets, which offered the prospect for stepped up share repurchases and/or dividend increases.  But, emergence of problems in the private equity space, have led to big banks to become suspect, because they may have loaned money to some of these aggressive and obscure investment pools. This was a characteristic of the losses for banks during the Great Financial Crisis. War in the Middle East has not improved sentiment, so with the price trend turning downward I decided it was better to be safe than sorry. Every client took a loss, but a small one.

Here is a recent graphic outlining exposure of important major banks to private equity:

I also liquidated our clients’ position in Meta (Facebook) this week. Below, this “Point and Figure” chart of Meta shows […]