Eggs-actly!
I just returned from a short visit with family in South Florida. Before we headed south, a dozen eggs in the Target by us was $4.49 (they sold out in an hour); when we returned home, the same dozen was $6.69. Before we headed south, the U.S. and Ukraine were set to sign a mineral rights deal; when we returned home, the deal had blown up. This morning, I went to an eye doctor’s appointment. When I left the house at 8:00 am, tariffs were in place on Mexican goods; when I got to my office at 11:30 am, they were not. When I began writing this letter, tariffs were in place on Canada; now they are not.
Many investors are asking about strategies in light of the new administration’s head-spinning actions. I have made a few changes in the past couple of weeks and will get to them in a minute. Back to Florida for a moment, where we went to a showing of a German movie, I’m Your Man (“Ich bin dein Mensch”). The movie has a familiar theme – a research scientist participates in an experiment where for three weeks she lives with a humanoid robot powered by Artificial Intelligence (AI) that not only has scanned all recorded knowledge but also all of her inputs on what a perfect man would be for her. The robot’s algorithms also integrate new information, i.e., feedback gleaned from her conversations and reactions, that allows it to adjust its behaviors in a way intended to make her happy. In essence, AI has created her dream man. The movie is funny, touching, insightful and a bit unsettling What struck me most was how, when confronting all manner of human idiosyncrasies, the robot (played wonderfully by British actor Dan Stevens) simply accepts the scientist’s behaviors – her actions, reactions, emotions, comments, all of it – as feedback; it never judges the scientist, it only absorbs the new information and adjusts its actions in a way to help the scientist in that moment.
When looking at the markets, it has been easy for investors to put their respective brands of judgment, pro and con, on the new administration’s actions. I’d be lying if I said I haven’t. And while I am totally in favor of having opinions, taking positions on issues and advocating for those that are important to you, I believe all of that is for cocktail parties, dinner table conversations, political gatherings and, of course, the voting booth; it is not for investing. In making buy/sell decisions, I look at the facts in front of us and make decisions based on our statistical analysis of price movements and market momentum signals. Those signals have been indicating increased risk in varying degrees in different parts of the market. In response, I have reduced our equity exposure by selling our entire position in small cap stocks and part of our position in large cap technology/growth stocks. For clients with more moderate portfolios, I have maintained a three-month US Treasury ladder paying interest at slightly above 4% annually.
I do not know in what direction the price of eggs will go, when/where the tariffs will be put in place or what our nation’s foreign policy will be going forward. I do know where I stand on the issues and also know that the market is filled with investors who hold similar as well as opposite views. I also know that when investing, it is not for me to judge those with whom I disagree; it is to accept the differences and focus on how the various views are being expressed in terms of market movement and make decisions dispassionately.
Having said that, I am happy to discuss new policies and actions taken by the new administration in greater detail at any time. Please feel free to reach out to me! I always look forward to hearing from you and am always happy to talk with you.
Thank you for investing with MJB Asset Management.
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.