Eclectic, idiosyncratic, eccentric

Each of us has a unique set of countless formative experiences that provide the context for one’s worldview, identity and values. Each of our stories is uniquely eclectic.

Just as our inputs are unique, so too are our responses to those inputs. Each of us is idiosyncratic. I see the variety of earth’s idiosyncratic creatures as part of life’s mystery. The human journey draws from our eclectic experiences to create a life that is both idiosyncratic and related to all creation.

In old age, as we become increasingly comfortable with our idiosyncrasies, others may see us as eccentric. As I accept my eccentric nature, I’m more able to accept the eccentricity of others. Any faith worth its salt eventually sees that everyone and everything is connected.

This week’s posts will summarize how 40+ years of building an investment portfolio has connected me to the larger, more important process of building a life. This has shaped some of my bedrock faith themes. I’m excited that, at age 72, I’m just now beginning to see how the pieces of the puzzle all fit together.

From a 7:48 minute YouTube video by the Salvation Army in Australia. After some Old Testament context, at the 4:00 minute mark, the focus shifts to Jesus. Matthew 13:51-52 is relevant to putting the pieces of life’s puzzle together: Jesus asked, “Are you starting to get a handle on all this?” They answered, “Yes.” He said, “Then you see how every student well-trained in God’s kingdom is like the owner of a general store who can put his hands on anything you need, old or new, exactly when you need it.

Better Investing

In 1951, three Detroit area investment clubs formed the National Association of Investment Clubs to share some basic tools to study stocks. NAIC began a monthly magazine, Better Investing, a key nationwide resource for the growing number of clubs.

In 1981, two of my clergy mentors invited several of us younger clergy to form a club. We began with 12 members in February, 1982. The Dow Jones Industrial Average was 780. Over the 23-year life of the club (1982-2005). we helped start another club and a regional chapter of investment clubs.

Investment clubs still exist, but the Internet has made them less essential. As the percentage of individual members grew, NAIC changed its name to National Association of Investors Corporation, and today it operates simply as Better Investing.

BI’s basic tool is a semilogarithmic graph, the Stock Selection Guide, that plots ten years of annual data (company revenue, pre-tax profit, earnings per share, dividends per share, annual per share price range), to project a potential high and low price for the next five years and a buy, hold and sell range.

BI believes the average person, with solid tools, can make sound investment decisions based on Four Principles: (1) Invest regularly, regardless of market fluctuations; (2) Reinvest all dividends and profits; (3) Buy high-quality companies with consistent earnings growth; and (4) Diversify by size and industry.

Interest rates & generative AI

The week’s posts began with a question: Could this be an inflection point for financial markets, with colliding realities (such as a strong economy vs. rising interest rates)? Several high profile tech companies reported earnings this week, affirming the powerful potential of generative AI.

My big “takeaways” from this week have been (1) current interest rates are beginning to depress the economy and the stock market; (2) savvy investors will anticipate declining interest rates. From Brad Gerstner, on CNBC’s Halftime Report, October 26:

“I hope that the message Chairman Powell and the Fed (hear) is that enough is enough. We have a war in the Middle East. We have deteriorating consumer behavior…. We have 20% credit card loans, 10% car loans, 8% mortgages. The economy doesn’t need any more of this. They have accomplished their objectives…. We’re at the end of the rate-hiking cycle, though the market has yet to price that in.”

“I can have an AI chat … on things like what’s the best hotel on the west side of New York, and I can ask them if there’s availabllity and what the price is. They’ve given me a personal assistant in my pocket. And that’s here today.”

From “The days of rising interest rates could soon be over,” by Nicole Goodkind, CNN, October 11, 2023

Our dynamic, complex world

Financial markets are dynamic. Innumerable, inter-related factors create buying and selling pressures in multiple markets, such as bonds, stocks, commodities, precious metals and currencies.

Interest–paid to savers and paid by borrowers–has risen sharply. Is our strong economy overdue for a recession? Jobs seem plentiful, workers are hard to keep, yet debt and delinquency levels are rising.

More Americans participate in financial markets, but wealth is more concentrated among fewer people. Much of the stock market’s value is more concentrated among fewer companies.

COVID-19 led to big fiscal spending by Congress and relaxed monetary policy by the Federal Reserve. This historic stimulation stoked inflation, which was met by a strong reversal of monetary policy.

Underneath all this, we have growing geopolitical strife globally and nationally. Our social, educational, political and religious Institutions are under increased pressure. And, the heat is rising.

The next three posts will focus on coherence amid this complexity, from (1) some savvy investors, (2) a well-named non-profit organization, Better Investing, and (3) some bedrock faith principles.

From “Financial Planning: A Step-by-Step Guide,” by Kevin Voigt and Alana Benson, NerdWallet, August 7, 2023. (Many Internet articles share similar themes: Make a Plan, Save Regularly, Avoid Debt, etc.)

Shaping the future

My stock market focus is dividends, but much of our economy is driven by seven tech companies not known for dividends. Microsoft and Apple represent 3.0% and 2.9% of my IRA, but I pay attention to all seven because of their outsized influence (for good and ill) on society, the economy, the stock market, and corporate ethics. From Diana R. Baechle:

The Magnificent Seven (Amazon, Apple, Google (Alphabet), Meta, Microsoft, Nvidia and Tesla) make up more than a quarter of the US market, and their stellar performance has driven the US market’s outperformance so far this year. But this overblown market concentration is unsustainable and may result in a swift reversal, exposing investors to greater risk.

As these seven companies race for leadership in Generative AI (artificial intelligence), Gene Munster of Deepwater Asset Management said, “Microsoft is optimizing Open AI on Azure. … Microsoft is going to be the first beneficiary of AI. We’ve seen it in their Azure business…. We’re going to see it (in) Copilot.” Munster said, “Google’s answer to OpenAI is their new Gemini platform.”

From “Google is investing more in AI but doing it ‘judiciously’, says Deepwater’s Gene Munster,” from a 4:39 minute segment on CNBC’s Fast Money, October 24, 2023

Windows into the economy

Today, after the 4 PM (ET) stock market close, Microsoft (MSFT) reports quarterly earnings. It’s one of just two companies, along with Johnson & Johnson (JNJ), that has an AAA credit rating from Standard & Poor’s–a higher rating than the US Government’s.

Our local newspaper piqued my childhood interest in the market by publishing company stock prices. Old companies appealed to my interest in history. New companies emerged (and sometimes failed), which gave me a sense of what makes a company successful.

You can learn a lot about a company management’s relative competence, honesty and clarity by listening to quarterly earnings calls, which are available online. Do the CEO and CFO communicate clearly? Are they respectful and forthcoming during analysts’ Q & A? Do they inspire?

Sometimes, a new CEO is impressive from the very beginning, such as Microsoft’s Satya Nadella. This afternoon’s earnings call may discuss the economy, their involvement in artificial intelligence (AI) and their recent $69 billion purchase of game company Activision Blizzard.

Today’s Microsoft earnings call will be at 5:30 PM (ET). Alphabet (GOOG), Google’s company name, also reports this afternoon. Meta Platforms (META), Facebook’s company name, reports tomorrow. Amazon (AMZN) reports Thursday. These four companies are among what some call “The Magnificent Seven.”

From “Microsoft CEO Satya Nadella Says What Separates Successful People From Everyone Else Really Comes Down to 2 Words,” by Marcel Schwantes, Inc., October 11, 20i23

An inflection point?

This week could provide an inflection point for financial markets. The 30-year mortgage rate is 7.63%, rising from 2.80% three years ago. During CNBC’s Halftime Report on Friday, Josh Brown said the major factor putting downward pressure on stock prices is upward pressure on interest rates, and Joe Terranova said he was moving quickly to hedge his portfolio against a potential market decline.

Many closely-watched companies report quarterly earnings this week. Analysts will look for projections about campanies’ business prospects. Brown, Terranova and others I respect are cautious, focusing on companies with strong free cash flow and less reliance on debt. Lower stock prices create higher dividend yields, making the issuance of both debt and equity more costly, inhibiting growth.

My participation in financial markets focuses on relatively safe and growing common stock dividends for supplemental retirement income. Periods of market volatility tend to reflect economic dislocations that swing investor sentiment from optimism to pessimism (and vice versa). Market reactions to the upside and downside can provide investment opportunities for those with patience and discernment.

This week may present some company case studies for us to explore.

From “Fed approves hike that takes interest rates to highest level in more than 22 years,” by Jeff Cox, CNBC, July 26, 2023

Financial markets

This could be a volatile week in financial markets. Years of very low Fed-induced interest rates and extraordinary COVID-19 fiscal stimulus, followed by a sharp Fed policy reversal have created significant tremors in financial markets, exacerbated by world and national political conflagrations.

This week’s posts will focus on financial markets. But first, some quick thoughts. The House struggle underscores two democratic principles: (1) secret ballots can save us from cow-towing to tyrants; (2) pluralities are sufficient. Is the requirement for a majority vote for Speaker a partisan dinosaur?

The unfolding Middle East tragedy could spur some much-needed international common sense, with President Joe Biden providing steady leadership in a difficult situation. I’m reminded of a short biblical story that offers a way of making decisions that settle conflicts and empower all parties.

Eighty nations have placed satellites in orbit. The United Arab Emirates is aiming for Mars. The James Webb telescope has discovered a massive jet stream on Jupiter. Australian astronomers discovered a “radio signal” from 8 billion years ago.

From “Stock-market volatility gauge hits highest since March. Still not a ‘buy’ signal, technicians say,” by William Watts, MarketWatch, October 20, 2023

From Sputnik to Kuiper

It was October, 1957. Our neighborhood street light was on a pole with a round metal covering that protected an incandescent light bulb. I remember people gathering under that dimly lit space one evening to look upward to see the Soviet Sputnik satellite. Fast-forward 66 years to Amazon’s Kuiper.

Our son Rob alerted me to this development. From GeekWire comes this news:

United Launch Alliance says the first prototype satellites for Amazon’s Project Kuiper broadband network have been placed atop their Atlas V rocket, with launch from Cape Canaveral Space Force Station in Florida set for Oct. 6. …

… Project Kuiper … aims to put more than 3,200 satellites into orbit to provide broadband internet access to millions of people around the world who are currently underserved. … a competitor to SpaceX’s Starlink satellite network, which already has more than 2 million subscribers.

From “Amazon satellites are placed atop Atlas V rocket for milestone launch on October 6,” by Alan Boyle, GeekWire, September 23, 2023

What AI means to me

Artificial intelligence has stormed its way into the headlines. The value of NVIDIA stock reached $1 trillion when their AI platform appeared to be setting the standard, an achievement many years in the making and not likely to be overtaken quickly by another company.

Our son Rob has been dealing with chronic fatigue for over a decade. A potential breakthrough may be happening in an Oxford University led study that uses AI to literally fast-forward research that identifies blood cell differences among ME/CFS patients, multiple sclerosis patients and a healthy cohort.

I’m happy for NVIDIA investors. I’m ecstatic about the potential for AI to greatly speed-up the process of medical research. The study is in early days, but the potential is immeasurable, giving new hope to those who suffer from ME/CFS, MS and perhaps long-COVID. To me, AI means hope for medical research.

A one-year chart of the price of one share NVIDIA Corporation common stock, from Seeking Alpha