Beatle (and other) Mania!
Traveling over the holidays, I turned on the radio in my rental car and found myself listening to an interview with a Liverpudlian septuagenarian named Freda Kelly. The radio had previously been set to Sirius XM Channel 18 – the Beatles channel – and Ms. Kelly, who at age 17 had been hired as the executive assistant to the Beatles’ manager Brian Epstein during the group’s early years, was happily talking about life as a teenager during the global hysteria known as “Beatle-mania.” I was too young to fully understand the phenomenon, though I remember my sister bringing (dragging?) me to the Valentine Theater in the Bronx to see a matinee showing of “A Hard Day’s Night.” To this day (aside from the fact that I had no clue which Beatle was which), one thing stands out in my memory: I could not hear a word of their songs because the predominantly young female audience was screaming louder than anything I had ever heard. (For those who missed the craze, check out videos from the Ed Sullivan show or watch the opening from “A Hard Day’s Night” to get a fairly accurate picture of what it was.)
Markets have manias too, particularly when a new industry grabs the attention of the investing public. Witness the mania surrounding AI (Artificial Intelligence) as evidenced through the common stock of NVIDIA Corporation (“Nvidia”). I have spoken with a number of individual investors, ranging from surgeon to engineer to electrician to retiree, all of whom told me they invest in Nvidia and none of whom could clearly say what Nvidia does, let alone how AI works. To these individuals, the risk of owning an individual stock in a single industry that they do not fully understand apparently matters not, so long as the frenzy continues and the price continues to rise. It has been a good bet of late. Broadly speaking, Nvidia makes, among other things, semiconductors that power advanced computing techniques, including AI and video gaming applications; the company’s stock rose roughly 270% last year. As I said, a good bet so far.
My concern is that in the stock market, “mania” can be synonymous with another word: “bubble.” Bubbles are great until they are not. History has shown that when they burst, the outcomes are not kind, be it tulip bulbs in the 1600’s, internet stocks in the early 2000’s or the housing market in 2008-09. Yet what looks like a bubble can also be the start of something big. When the Beatles hit American shores in 1964, legions of people thought they were a flash in the pan, nothing short of the devil and could not possibly last. Sixty years later, the Beatles remain the largest selling band of all time. AI is still in its infancy, with its share of fierce critics, yet for all we know it could end up being – forgive me — the biggest thing since the Beatles. From an investment standpoint, it remains critically important to balance the potentially enormous gains offered by new and potentially transformative technologies with the potentially enormous risks posed by inflated stock prices or non-diversified individual stock selection. In that regard, at MJB Asset Management, I am taking a more balanced approach for client portfolios by investing in a broadly diversified fund (Invesco QQQ Exchange Traded Fund) that holds Nvidia as well as a wide range of other companies that benefit from AI (e.g., Apple, Amazon and Microsoft).
Beyond the AI craze, I am keeping a close watch on interest rates and the uncertainty coming from Washington, D.C., as a new administration begins to implement economic policies that many economists fear will be inflationary. It is too soon to tell what impact any of those policies will have. However, I will be watching the markets closely and stand ready to make changes to portfolios when necessary. At the moment, we are continuing to hold our positions. Back in my rental car the Beatles channel DJs counted down the annual list of top one hundred Beatles songs as voted by Sirius XM listeners (hint: the #1 song for 2024 was the same as is usually voted the #1 Beatles song). For fun, I invite you to send me your favorite Beatle songs. Mine are “She Loves You” from the early Beatles; “And Your Bird Can Sing” from the middle Beatles; and “Don’t Let Me Down” from the late Beatles.
Thank you for investing with MJB Asset Management. Please give me a call or send me an email if you have any questions about anything in this letter or other aspects of your portfolios. I always look forward to hearing from you and am always happy to talk with you.
And please send your favorite Beatles tunes!
Disclosure: Financial instruments discussed here may not be suitable for all investors. Before investing in any investment portfolio, Client and Financial Advisor should carefully consider the client’s investment objectives, time horizon, risk tolerance, and fees. The opinions expressed here are as of the date reflected and are subject to change. Diversification may not protect against market risk. There are risks involved in investing, including possible loss of principal. Past performance does not guarantee future results.