2022 Second Quarter Newsletter

                Interest rates are still on the way up as The Fed increased short term rates by .75% in June and said more increases are coming.  This makes medium to long term bonds suspect.  Cash is king and has not declined.  Short term bonds appear to be more stable than other investments and are only down 4% to 5% for the year.  Cash from foreigners investing in US bonds is strong which helps make our dollar stronger.  US interest rates are higher and represent stability which is very important to foreigners.

                I listen to the economists and investment portfolio managers I have learned to trust.  For the most part, their views are negative, thinking that a recession is not off the table. They think there is more downside than upside in the stock markets for the next few months; which is the short term.  Short term statements are headlines for newspapers and TV reports, but should be taken with care.  Buying stocks is a vote of confidence in the future. 

                I am a concerned optimist.   In my long history in this great industry, I have never seen anything like this all at the same time: cross currents, war, inflation, strong dollar, politics, COVID, oil, immigration and China, all leading to uncertainty.  I am hoping by mid-August there may be a clearer investment picture for me.  Until then, hang in there.  You have to decide if you are a long-term investor who can buy securities now and wait for the market to turn.  If you are not long term, or you have an immediate need for cash, or you are losing sleep, please let me know.  I can help.

                Inflation and The Fed – sounds like the name of a horror movie.  Instead, it is a dance routine with inflation leading and The Fed following and trying to catch up.  If the two stay in step, maybe a soft landing; if they fall out of step, maybe a recession.  The music is written by politicians with the media playing the instruments.  Inflation has no conscience or emotion.  The Fed does and has to dance and adjust to the music and drumbeat without being political.  The possibility of a recession is there and, if the economy slides into one, The Fed thinks it should be short and mild.

                The war in Ukraine and the restrictions put on Russian oil have contributed to the rise in the price of oil and gasoline.  Mr. Biden has released a lot of oil from our strategic reserves which has accomplished very little and must be replaced in the future.  He is also pressing others to increase their oil production, everywhere but the US.  Oil is oil, no matter where it is produced.  If the world economies need it, why hurt the US workers where production is the least harmful to the environment.

                Ukraine is a tragedy worthy of Shakespeare.  Can the underdog survive?  Are we close to the conflagration I feared as a youngster?  It appears the forces of envy are growing.  Instead of trying to work together to better the lives of the populace, the attitude is: I see it; I want it; give it to me or I’ll take it by force.  At some point this conflict will end and neither Russia nor Ukraine will be better for it.

                For the remainder of this year, I think value will outperform growth.  Value companies are those whose stocks are usually inexpensive, less volatile, may have a strong cash moat and pay dividends.  Growth companies use profits to invest back into themselves for growth and are normally industry disrupters.  In good times, growth outperforms value.  In times like these, value and those dividends look very good.

                The private investment market has received some interesting press lately as our public markets swoon.  There are several reasons I want to stay away from that area: limited information, little transparency, high fees and no liquidity.  They also seem to correlate with the public markets.

                Student loan forgiveness is a hot button in Washington.  It represents a slap in the face to all those students who repaid their loans, those that never had a student loan or went to schools where loans were not needed. Washington’s forgiveness comes from taxes which we all pay.

Thoughts from Jim:

                ~Respect that is demanded is easily lost.  Respect that is earned is never lost.

                ~Respect another’s opinion even if you strongly disagree with them; it is their opinion. 

                   They probably strongly disagree with your opinion.  Be civil. 

                 ~Hate is a strong word. Dislike is a better word; less aggressive and more educated.

                ~If you only spoke to people you knew, then you will not have anyone new to speak with.

                These are my thoughts and opinions in these troubled times.  I stay awake at night concerned about you and what is important to you.  I listen, read, think and discuss what is going on in our world.  Sometimes I wonder if we will tell our youngsters that these were the good ole days.  The US has been fortunate because we have always had individuals rise to the occasion to help steer us through.  Our next leaders will have a big job ahead of them.  It will not be easy.

                Thank you for your trust and business.  Please call me with your thoughts and questions.

                                                                                                Sincerely,

                                                                                                James F. Mangam, Jr., CFP, CLU

The Mangam Agency

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