2024 Second Quarter Newsletter

AI is getting many headlines and rightfully so. I think it is the start of new ideas and abilities that have not yet been thought of. I equate it to the start of the computer revolution in the 80’s and 90’s. The desk top computer made business and life completely different. The speed and accuracy were unmatched. Jobs were eliminated (middle management) and more jobs were created to help the computer industry. AI is just beginning. There will be jobs lost and probably more jobs gained.

One other benefit for AI; productivity. That is where many of our future ideas and profits will come from. If government can stay out of the way, as they did with the computer, our children’s lives will be much different than ours. Of course there will be problems. Hopefully, our children will rise to the occasion and solve them. I hope they will be better students of industry than we are now.

There are two active armed conflicts in the world and it appears the US says one thing and then does another. The principles of a free society are being eliminated and we seem to be unable to bring forces to help. Yes, there are moral questions to be answered, but if an individual invades my house, I will do what I have to do to protect, survive and provide for my family. I do not have answers for today’s conflicts and it does seem to me that the adversary has more rights than the defendant.

The economy looks strong on the surface. The Fed seems ready to start reducing the US interest rates, but not until the job is done. Although lower, inflation seems to be hanging on and reducing it to 2% may be difficult. Higher for longer sounds OK to me. Core inflation may continue for many months. Real interest rates are the rates minus inflation.

Employment is excellent and unemployment is very low. This may result in more spending and more profits for corporations which may mean higher stock valuations. Stocks are performing very well since last November and they appear to be in a position to continue. Look at the corporate earnings reports that will start mid-April. If they are higher, they may support the current valuations. If not, caution is the word. Up to now, tech has supported the markets and it is reflective of the AI movement. The other 90% of the stock markets are starting to see some growth and I think that will broaden out the returns. The world is in a recession, so foreign equities may have a way to go before they can catch the US equities. The US economy is the world’s bright spot.

Private equity is again in fashion because it supposedly has better returns and potential. Please remember, those investments are somewhat opaque and not very liquid.

Both parties want to use the courts to advance their positions instead of trying to work within congress. Maybe that is impossible in this polarized political world. It used to be for the good of the country. Now it is for the good of the party or the good of self and then let’s punish the opposition. I think we should discuss our differences and not make it a choice between them or us.

Higher corporate taxes sound great until you realize that the corporations just pass them through to the consumer with higher prices.

The State of the Union speech was nothing more than a partisan attempt to get elected. Yes, it is somewhat normal to do so, but there was no talk about being together and working together toward a common goal. Maybe I am naive. I thought that is what the State of the Union was supposed to cover.

Reports say China is having a difficult time economically. I wonder if Xi will do something like Putin does (and did) in an attempt to get the population behind him; bring on a war or create a public catastrophe. Maybe China will attack or isolate Taiwan. Because of our budget, we might be unable to help. As you know, the world is dangerous and getting more so. I wonder about our defense budget which may be inviting a problem. Ukraine needs ammunition, Israel needs support.

In the next few months, we will be inundated with political ads letting us know how good their candidate is or will be. That may be a stretch of someone’s imagination. I will detail my thoughts in the next letter. One thought for Mr. Biden’s campaign: If he were to be elected and then die, Ms. Harris would become president. Would that mean Mr. Shumer and Ms. Warren would be running the country from behind the scenes?

Please check your beneficiaries for ALL your retirement plans and insurance contracts. It is most important that they are up to date with your wishes. Once you have passed, it is impossible to read your mind as to what you wanted done with your property. Call us; we are here to help you. If your contact information changes or has changed, please contact us so we can correct your records.

Please let me know what topics you would like us to comment on for our future letters. As you know, we write these, Kevin, Linda and Jim.

Thank you for your business and trust. We are here to help you with your investments, insurance and other questions you may have. We try to solve problems, not create them.

Sincerely,

James F. Mangam, Jr., CFP, CLU
Kevin C. Mangam, CPFA




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