This post is my take on Cryptocurrencies – Bitcoin, Ethereum, Litecoin, and the like.  I am not invested in any of them but I have read a lot about them.

According to Coinbase (an exchange where one can purchase cryptocurrencies), Bitcoin is up 2,191% this year (as I write this in late December), and Ethereum is up 10, 744% this year (although Ethereum started at $8, hence the bit percentage move).


Get it?  I think it’s clever.

My Takes:

  • Cryptocurrency is not acting like currency at all.  Currency is ideally supposed to be a safe storage of value.  Its value is supposed to be relatively stable.  Cryptocurrency has been anything but.  The value of a currency is not supposed to change in the thousands of percent in a year.
  • Currency is also supposed to be an exchange of value.  You go to the store and buy a book priced at $10 and you give the cashier a $10.  Case closed.  What if you had used bitcoin to purchase something, say an automobile, on January 1, 2017?  You would have paid at the equivalent of $800 per bitcoin.  Say the car cost $30,000 at the time.  At $800 per bitcoin, you would have paid 37.5 bitcoin for the car.  That 37.5 bitcoin then would be worth about $687,375 today as I write this.  You would feel pretty foolish had you bought that $30,000 car with bitcoin a year ago.  Better yet, what if you had used your bitcoin to purchase your illegal drugs through the Dark Web?  They would have turned out to be extremely expensive drugs.  The benefits better have been worth it.
  • Bitcoin is not easy to use to pay for things.  It is not instantaneous, like the exchange of US currency, or even using a credit card.  Transactions using bitcoin are proposed, reviewed and approved by the bitcoin community.  This process can take a fair amount of time.  There are rumors out there that Amazon and other online retailers will accept bitcoin.  I don’t see this happening anytime soon because it takes too long to authenticate a bitcoin transaction.
  • The blockchain technology behind bitcoin may prove more useful than the actual bitcoin.  The purpose of blockchain is to identify an item using a unique, verifiable string of code.  Blockchain can ultimately be used to identify anything.  Simply embed blockchain code into a t-shirt and you can identify it.
  • The rise in the value of cryptocurrencies reveals a high level of distrust in governments, central banks, and their currencies, throughout the world.  Most currencies worldwide are backed by the full faith and credit of the governments that issue them.  Let’s just say that cryptocurrency investors are skeptical of that stated full faith and credit.
  • One attractive feature of bitcoin is that there will be only 21 million of them.  Unlike central banks that can just print more and more currency, the number of bitcoin is capped by the blockchain code.
  • There is fewer than 21 million bitcoin today.  New bitcoin is being “mined” constantly by mega-large computer systems that use a lot of electricity.  “Mining” means these computer systems crunch quintillions of blockchain equations in order to authenticate new bitcoin.  Once authenticated, the new bitcoin is offered for sale to investors through initial coin offerings, or ICO’s.  Bitcoin mining is supposed to end in 2040 when 21 million bitcoin will have been mined.
  • Ethereum, having been introduced later than bitcoin, is more sophisticated than bitcoin and likely will have more practical applications.  Ethereum is also based on blockchain technology but has a more modern programming language than does bitcoin.  Ethereum transactions are confirmed more quickly than are bitcoin transactions, which could mean ethereum may be more useful as a retain currency in the long run.
  • There are a lot of other cryptocurrencies out there trying to gain traction.  It is highly unlikely that any of them will make it.  Be very skeptical if you see a new cryptocurrency out there being touted as the “next bitcoin.”  Don’t drop your ten-foot pole.
  • I don’t have a basis upon which to invest in them now, other than just pure speculation, which I don’t do.  Bitcoin futures are being introduced on the CME and the CBOE, so as they become in play perhaps I can develop some rationale to invest in them.  I certainly would not short them now unless you are prepared for a lot of pain.
  • Cryptocurrencies have been in the headlines lately, and that won’t change.  Let’s all keep an eye on this new asset class and see how it plays itself out.

Outlook for 2018

Hope you are all having a wonderful Holiday season!  One of the holidays is New Year’s Day, meaning that 2018 is nearly upon us.  What do I think is on tap for 2018?  Please read on, and remember that this advice is worth what you are paying for it.  Warning:  These are only my opinions.  I don’t know what will actually happen in 2018, but I see some actions that I think will be factors.

Central Banks

One could reasonably argue that the upturn in stock prices since the market bottomed in March 2009 has been fueled by Central Bank actions through low interest rates and bond purchasing.  The US Federal Reserve has stated that they are ending their bond-buying program that has ballooned its balance sheet to $4.5 Trillion with a T.  They are putting the bond-buying program into reverse, but very slowly.  The Fed’s balance sheet will remain above $4 Trillion for 2018.  The halt in the bond buying, at least, will remove some of the fuel that has propelled the stock market.

While the US Fed has at least halted its bond buying, the European Central Bank has not halted its similar program, and won’t be doing so for at least the next 2 years, although it will slow down.  This will mean that international interest rates will remain low (negative, in some places in Europe and Asia).  The US Fed has stated they intend to raise rates by maybe 0.75% in 2018.  The Fed’s rate-raising initiative will be hindered by low European rates due to ECB bond buying.

The current spread (difference) between 3 month and 10 year US Treasury securities is about 100 basis points, or 1.0% (Source: Bloomberg).  If the US Fed actually does raise short-term rates (they can’t do anything about long-term rates) by 75 basis points in 2018, and 10-year rates remain the same as they are now, that will narrow the 3-month to 10-year spread to 25 basis points, which is really small.  You can lend money to the government for one rate for 3 months, or you can lend money to the government for 10 years and receive 25 basis points more return.  Which would you choose?  I believe it is likely that 10-year rates will rise as the Fed increases rates, but not by 75 basis points.  That means that the Yield Curve will continue to flatten, as it has flattened during the past year.  A really flat yield curve is not a good sign because an inverted yield curve usually portends a recession.

US Stocks

Since the Central Banks worldwide are still providing fuel, stocks will continue to rise.  There may be corrections, but the basic trend will be upward.  There are many algorithmic traders out there today that are programmed to “buy the dips” that any mini-correction over the past year has bounced back quickly.  The rubber band trade has worked, and I believe it will continue to work.  The test will be to see what will happen when there is a “flash crash” or another event that causes an immediate, deep correction that undercuts the Buy signals from the algorithmic traders.  This sort of happened in August 2015 due to an issue with China, and again in early 2016.  Markets have obviously recovered from these China-related issues.  Hedgie Kyle Bass has bet big that there will be another, deeper China crisis.  It hasn’t happened yet but it might.  Barring this type of external issue, look for stocks to increase.

International Stocks

India has been strong and other emerging markets have followed in the past year.  As with US stocks, the fuel is there to keep buying.  Interest rates will remain low.  The threat of geopolitical confrontation remains high.  Isis as a government has been beaten back but of course, terrorism remains a threat.  However, the stock market has shaken off terror issues in the past.  Unless there is a huge 9/11-scale attack, terrorism will not become a huge factor in the stock market.  I like the Emerging Markets ETF (NYSE:  EEM).


Expect to pay more at the pump.  All producers benefit from higher prices.  Saudi Arabia’s ARAMCO wants to go public in 2018 and its offering will benefit from higher prices.  Look also for higher gas taxes as states and locals try to raise money for roads and for general budget shortfalls.  We here in California just got hit with another gas tax hike.  Electric cars make only a small dent.  Tesla is beset by production issues – not to say you should short Tesla stock, but that I believe Tesla’s unit sales will fall well short of projections because they can’t bang out their cars fast enough.


I believe there will be no action regarding North Korea.  I believe that issue will get solved with South Korea and Japan nuking up, which won’t make China happy.  Unfortunately, we will have to live with North Korea’s nukes.  I believe the bigger threat is in the Mideast.  Iran and Saudi Arabia are increasingly at odds (Shia vs. Sunni), and it may not end well.  This is the greatest geopolitical risk area, in my opinion.  I don’t think they are capable of being diplomatic toward one another.  We will see how much the US and Russia get drawn in.


If you are long now in stocks, stay long.  If you are long in bonds, don’t get longer, but don’t sell.  Although I don’t see a major increase in inflation because the forces that have kept inflation low to date remain in place, I think global growth will continue and this will cause commodity prices to increase, including oil.  Keep an eye on Iran and Saudi Arabia.

Happy 2018!!


Superannuation means that you live a really long time.  You become really old.  Too old.  So old that you outlive your money.  If you were born during the Hoover, Coolidge or even the Wilson administration and you are still alive, you are superannuated.  If you are a World War II veteran, you are superannuated.

Running out of money when you are really old is a real problem.  Try as best as you can to plan for it.  There are tools out there to help you, and a good Financial Planner can also be helpful.  My Business School economics professor used to tell us that our objective should be to die owing nobody and with our last remaining dollar in the bank.  While that may be taking it to an extreme, the point is that you should enjoy your life and spend what you have but no more.

Social Security Website

If you do nothing else, you should check out the Social Security Association’s website on Life Expectancy.  It’s free and it only takes a little time.  Here is a link to the website:

Here is a quote from the website:

When you are considering when to collect retirement benefits, one important factor to take into account is how long you might live.

According to data we compiled:

  • A man reaching age 65 today can expect to live, on average, until age 84.3.
  • A woman turning age 65 today can expect to live, on average, until age 86.6.

And those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.

The SSA website then gives you a calculator, wherein you input your date of birth and it calculates how long you are expected to live.  I am almost 57 and I am expected to live another 26 years.  If I make it to my full retirement age of 67, I can be expected to live another 18.3 years.  The longer you live, the longer you are expected to live thereafter.  Consider the last sentence in the quote above:  If you make it to Age 65, you have a 25% chance of making it to Age 90.

Social Security 

While many within current younger generations believe that they will never collect Social Security because the SSA will run out of money before they get old enough to collect it, I believe this is unlikely.  There will not be actual cuts in Social Security.  I believe the fix will come by increasing the annual salary maximum that is subject to Social Security tax.  The maximum for 2018 is $128,700, meaning there is no Social Security tax paid on earnings above $128,700.  As demographics become more and more unfavorable for Social Security (meaning more people are collecting and fewer people are paying in), something has to give, and I believe the tax will be raised by moving up the salary cap.  The point I am making is that one’s Social Security income will still be there even when they get really old.

Other Actions to Consider

  • Don’t File for Social Security at least until you reach your Full Retirement Age.  If you don’t know what your FRA is, that same SSA website can help you figure it out.
  • If possible, wait until after you reach Full Retirement Age to file.  If you wait 1 year after your FRA to file, your benefits will be 8% higher.  That’s a good return on a 1-year investment that will really help if you make it to 90.
  • Save More Now.  Easier said than done, but essential if you think you might live a long time.
  • Look in the mirror and reflect honestly on your own health.  If you are getting on in years but you are still very healthy, eat well, and not on a lot of medications, Congratulations!  But you may be facing a money problem when you get to be really old.
  • Your living expenses will probably tail off as you get older.  Consider how much you spend now staying active, and while you hope you will be able to continue with your activities, consider how much you really will be able to do in terms of active vacations that you pay for now.
  • If you have to go into a home, while a home may sound expensive, it is “all inclusive”, meaning you will have little in the way of outside expenses.  Planning to have enough money to move into and to afford a nice independent living or another type of facility is a really a good objective.
  • If you are a son or daughter helping your parents plan for the future, it may be best to get a financial planner involved.  Kids don’t listen to their parents, and vice versa.  A planner can be very helpful and can help preserve familial relationships.

There are a lot of other things you can do, but at least be aware of the issue of outliving your money, and become familiar with the Social Security website for tools to help in making decisions.



McDonald’s has been on a roll lately (NYSE: MCD).  Its stock is up 41% in 2017 and is at an all-time high as I write this blog.  Check it out:

Here is a link to an article on that analyzes the company:

The purpose of this posting is to provide my opinion as to why McDonald’s has done as well as it has because it could have gone the other way.  Remember Burger King?  I don’t much, either.


I don’t go to McDonald’s very often, but I do go sometimes.  Have you been there lately?  Anyhow, since I go there infrequently, I think that gives me a better sense of how much McDonald’s has changed over the years.  It’s like, if you see kids every day, you don’t notice how much and how rapidly they grow, but if you only see those kids once every few months, you think, “My, how they have grown!”  That’s me, for McDonald’s.  My, how it has changed!  Or, try this mental exercise:  Think about going to McDonald’s 10 or even 20 years ago, and think about your most recent visit, and then think about how different it is now.  Here are some of the changes that I have noticed.  I am sure there are others, as well:

  • All-day breakfast
  • Emphasis on cleanliness (I’m sure there are locations that are dirtier than others, but my sense is they are trying to keep their locations as clean as possible, unlike other fast food restaurants)
  • WiFi
  • More modern look and fixtures
  • TV
  • Retirees hanging around and chatting, especially during the morning
  • Menu items that come and go, and return again (such as McRib)
  • Good coffee

Good Management

Kudos to McDonald’s management for doing all of these things!  The emphasis seems to be improving the customer experience in the restaurants.  Management saw Starbucks’ success and said, “You know what?  We have good coffee, too!  And we have a lot of well-located restaurants.  And our locations have tables that are conducive to customers sitting down and talking to one another.”

The point is, McDonald’s management didn’t stick to their knitting.  Instead, they changed.  They innovated.  They saw what competitors did that was successful and copied it.  They knew their markets and their customers and saw how they could provide a product and a service that was needed.  They showed how much they cared by keeping their restaurants clean, by keeping them updated and modern, and by continuing to reinvest back into their business.  The McDonald’s brand, the Golden Arches, is known worldwide, as it has been for many years.  Management has been wise enough not to squander that strong brand name.


I think there is a lesson to be learned therein.  McDonald’s could have continued to serve hamburgers as they had done for the previous 50+ years.  They could have milked their business and pulled as much money out of it as they could and not reinvested back into their restaurants.  They could have decided to just tip their hats to Starbucks and not tried instead to go after their coffee business.  They could have continued to view themselves as a restaurant rather than a community gathering place.  Instead, McDonald’s management looked forward and thought about how to grow their business rather than preserve what they already had.  They played offense instead of defense.  Not that playing defense is bad, but the only way you can grow is to play offense.  You can take that as a lesson for your own business, career, or even your life.

Paying Off Your Debt

If you watch financial planning segments on television, or if you listen to them on the radio, one of the most frequent pieces of advice by the show hosts is that you should pay off your debt.  The most prominent TV personal advice person, whose initials are S.O., is now largely retired and living in the Caribbean.  She was a strong advocate of paying off debt.  On the radio, the most current advice advocate, whose initials are D.R., strongly criticizes, and almost berates, people who go into debt in order to live beyond their means.  My question is:  Is their advice correct?  Is it always correct to pay off your debt?

Eat Your Vegetables

Advising someone to pay off their debt is the equivalent of telling someone they need to eat their vegetables.  They know they need to do it, but they don’t like the sacrifice they need to make to do so.  Overweight people know they need to lose weight by cutting back on high-calorie foods and eating more vegetables.  Indebted people know they need to stop spending so much.  In fact, it may be more difficult to pay off debt than it is to lose weight.  People get into debt because they make $100 but spend $120.  If they cut out spending the extra $20, they are just breaking even, and not paying down their debt.  They need to spend only $90 or even $80 to actually pay down their debt.  Cutting their spending from $120 all the way down to $80 is a 33% cut in spending.  That’s a difficult thing to do and one reason why paying off debt is so difficult.  It means saying “no” to eating out, parties, event tickets, travel, and a lot of other fun things.  It may mean living a monastic life, if only for a short time.  This is very difficult for young people, or for anyone, for that matter.  I speak from experience.

Credit Card Debt

Another problem is that debt is expensive.  Most people, when they go into the “debt spiral”, do so using credit cards.  Credit card debt is expensive!  Even during this low-interest-rate era, where the US Government can borrow for a 10-year term at rates barely over 2%, credit card issuers still charge interest in the high teens for unpaid credit card balances.  That is great for the issuers’ gross margins but bad for those who carry outstanding credit card balances from month to month.  Using my earlier example, if someone saves $20 of their $100 paycheck, some of that $20 will go to pay past sins in the form of credit card interest.

Auto Loans

Auto loan debt is not bad in and of itself.  It is bad for you if you are using a car loan to buy a car that you really can’t afford.  Nice, expensive cars are very appealing and a status symbol especially here in the US of A.  Car companies and auto dealers plaster the airways with car ads, even during Christmas!  Anyone can afford the latest German import, right?  Well, no, they can’t.  Don’t forget to figure in the insurance cost.  To their credit, the car companies have greatly improved quality over the years, meaning that repairs are less frequent.  At least that is some good news.  It is very difficult not to give in to temptation and buy a nice car that you can’t afford.   Car loans are ok and pretty reasonable if you buy a car that you really can afford.

Student Loans

The problem with student loans is that new graduates don’t start off their working careers with a clean slate.  They start off already in the hole.  Think long and hard before knowingly going to a school that will necessitate that you (or your child) borrow a lot of money to go there.  The rates and repayment terms may be good but the debt may force you in a direction that you don’t really want to go.  This is a whole other blog topic.

Home Loans

The housing market is in much better shape now than it was in 2007, at the start of the financial crisis caused in part by subprime home lending.  Population and family formation has grown since 2007 and the housing stock has not kept pace, meaning that demand exceeds supply right now.  Because of high costs and other building restrictions, it is highly unlikely that builders will overbuild over the next several years.  This is good news and bad news.  The bad news is that home prices are high and likely won’t be coming down, while wages remain stagnant.  It is difficult to find a house to buy that you can afford.  The good news is that, once you are in and you own your home, and you can actually afford the payments and upkeep, the home probably won’t lose value and become “underwater” on the mortgage, which was the situation during the financial crisis.  As with auto loans, the home mortgage is ok as long as you can afford the payments.  If something goes wrong, at least you can probably sell the house and get out clean.


Don’t overspend.  Live within your means.  Don’t buy too nice of a car or house.  Don’t go into credit card debt if you can avoid it.  Go to community college and State U, or to a trade school, if it would otherwise mean you need to go into deep debt to go to the University of Private.  Don’t step off into the debt spiral.  Eat your vegetables.

Jobs and Wages

I am writing this on Friday, December 8, 2017.  The Department of Labor released its monthly jobs report earlier today.  There is a lot of good news on the employment/unemployment side but perplexing news on wages.

The good news:

  • Unemployment is way down to 4.1%, which is at least a 17 year low.
  • Employment is up, as the economy added 228,000 jobs in November.

The perplexing news:

  • Labor force participation rate remains low, at 60.2%.  It was 63.4% in 2007, prior to the financial crisis.  If you think about that 3.2% difference times the size of the American workforce, that’s a lot of workers who aren’t working for one reason or another.
  • Wages are up, but only by 2.5%.

The sources for my data are articles in the Wall Street Journal, linked here as follows:

Why is this news perplexing?  Because if the unemployment rate is that low and the economy is really adding that many jobs, one would think wages would go up and more people would want to work.  Supply and demand laws – if demand for workers goes up more than supply, then the price should go up.  But it’s not – at least not that much.  What gives?


There are several reasons that I believe may contribute to the low labor participation rates and depressed gain in wages:

  • Demographics:  The percentage of workers and of the general population that are older is rising.  The Baby Boomer generation is retiring in droves as they reach their 60’s and even their 70’s.  There aren’t enough younger workers to replace the Boomers.
  • Corporate mergers and downsizing:  If an older worker is a victim of layoffs through poor corporate performance or due to a merger with another company, “made redundant” in British parlance, the older worker is more likely to “take a package” from the former employer and say Sayanora to working again.  Hopefully, they had a good financial planner to guide them through what they need to maintain a decent lifestyle for the rest of their lives, which could be a long time.
  • Work is difficult:  Work is a 4-letter word for a reason.  If one has the wherewithal to avoid working, one may very well choose to do so.
  • Plateauing of personal preferences:  For a lot of people, I believe there is a desire for a basic level of lifestyle, and the money required to pay for that lifestyle.  Above that, if one has to work very had for the marginal gains in one’s lifestyle, many people decide it’s not worth the marginal work.  Especially if that person is older.  “I have all I need to live well.  Why should I bust my butt for something I don’t really need at this point in my life?”
  • International labor competition:  Like it or not, we are in a global economy.  If you like to shop at Wal-Mart, where do you think all of that stuff comes from?  Most likely other countries.  Not the USA.  Except maybe for the food.  Those other countries do not pay their workers like we do here.  That’s who American companies and American workers have to compete with.  The global economy keeps US wages low and it will continue to do so.
  • Disincentives for smaller businesses:  Licensing and regulation hinder new businesses from forming and from growing.  Continuing compliance with these regulations is expensive for businesses.  For instance, in the financial services and banking industry, many smaller banks have opted to merge rather than to continue to pay for compliance with greater regulations.  Fewer smaller banks mean fewer options for small businesses to grow.  All of this keeps wages low.
  • Housing underperformance:  Housing and other construction is one area where employment typically grows during a period of economic growth.  Yet, since the housing crisis of 2007-2008, growth has been there, but proportionally much less than in previous recoveries.  Housing prices are strong and resale housing inventory is very low, but new housing construction is not robust enough to fill the gap.  Much new housing construction caters to the upper-middle and upper end of the market.  There are not nearly enough new housing being built for entry-level and working-class buyers in areas where there has been job growth.  Costs and fees are so high that lower-end new housing doesn’t pencil for builders or investors.  Consequently, employment in construction is not as high as it should be and wages therein are kept lower than they should be given 4.1% unemployment.

There are probably other causes for this low unemployment/low wage growth situation that we currently have.  We need to figure out how to increase wages.  I believe in reducing the costs and the regulations that are hindrances to economic growth.  Others believe in raising the minimum wage and increasing oversight of how workers get paid.  I always believe that less government is the answer, but there are and will be cities and states that will address the problem differently.

Growth vs. Value

Hopefully, you have a 401k or a similar retirement plan.  Or, maybe you manage your own IRA. Typically, when you look at how to invest that money, you look Morningstar or a similar service and you decide among various mutual funds.  Morningstar classifies equity (i.e., stock) funds as either Value or Growth (or a blend of the two).  They also use Small Cap and Large Cap, but that’s not part of my point.

If you have tried to diversify your equity funds, perhaps you have put some of your money into Growth funds and some of your money into Value funds.  Over the past year, if you have allocated thus, you have probably noticed that your Growth funds have gone up more than have your Value funds.

Growth Rules

According to a recent Wall Street Journal article, growth stocks have outperformed value stocks by 19% this year alone.  Here is the link to the article:

I believe there are several reasons why growth stocks have outperformed.  Some are mentioned in the WSJ article, and some are not.  Here are my thoughts:

  • It is difficult to find “value” when the indexes are trading at all-time highs, as they are as I write this blog.  “Value” implies that an asset is undervalued, and undervalued assets are harder to find if everything is up.
  • The markets haven’t had a major correction for almost 10 years.  It is during and coming out the other side of corrections when one finds the best value investing opportunities.
  • Interest rates are low, so TINA – there is no alternative to investing in stocks.
  • The Tech sector has been particularly on fire and tech is not a sector one looks at to find value, typically.
  • Value stocks are usually found in more mature industries or sectors.  New technologies and new entrants to the marketplace are forcing out more mature players.  The best example is Amazon and online retailing wreaking havoc on the traditional retail sector.
  • Index investing is particularly harmful to value investors.  Value investing is rooted in the superior analysis of individual businesses and learning something about an individual business that the rest of the market is unaware of.  Index investing is the antithesis of that type of thorough analysis.  As more and more money flows toward index investing and away from the traditional search for undervalued assets, the values of the assets which make up the indexes get inflated to the detriment of the value assets.

Value Opportunity?

If Growth has outperformed and Value has been left in the dust, does that mean Value is dead?  Or does it mean that there are opportunities to find undervalued opportunities?  I don’t know, but it is something to keep your eye on.  If you believe in Mean Reversion – that Growth and Value stocks will trade within a certain range of one another, and that the past year has been an anomaly and that the historic range will return – then possibly Growth and Value stocks will start again to trade in tandem.  But does that mean that the 19% of over-performance by Growth over the past year will be rectified?  Again, I don’t know, but I would look to the future rather than the past.


If Growth and Value stocks are to return to historical proportions, then I would say there will need to be a catalyst to make that happen.  In other words, one or several of the reasons why Growth has outperformed over the past year will need to change.  Do you believe any of the bullet-point reasons I outline above will change in the near future?  They very well may, particularly if something on the outside changes – perhaps a geopolitical catastrophe, or another disruptive tech phase, or an investing bubble exposed.  The stock market has always corrected in the past.  Could this time be different?  Unlikely, but we will see what form any correction takes, and how deep it is.


I am not recommending that you reallocate some of your Growth funds over to Value funds because Value is undervalued.  I am simply pointing out a phenomenon in the stock market over the past year and providing my take on why this has occurred.  Remain vigilant.



WalMart vs. Amazon

It’s the Christmas Shopping Season and we are all looking forward to the Battle of the Heavyweights.  No, I am not referring to boxing, the sport.  I am referring to Big Box vs. Online.  Big Box is WalMart, and Online is dominated by  Like McGregor vs. Mayweather earlier this year, wherein MMA-fighter McGregor agreed to a boxing match against boxer Mayweather for big money, WalMart vs. Amazon will be played out in the milieu of online retailing, which is Amazon’s forte.  Upstart Walmart (can any firm as huge as WalMart be considered an upstart?) has beefed up its online presence.  WalMart is now offering different pricing for the same products online vs. in the store.

WalMart Advantages

I believe WalMart can gain market share in online retailing because I believe they have some advantages over Amazon:

  1. WalMart has more proprietary products that are sold directly by WalMart or  Think of Amazon as a website middleman wherein you can purchase products offered by other, independent producers or retailers.  Often, on Amazon, you are not purchasing an Amazon product. has some of that as well, but mostly you are purchasing directly from WalMart.  You can also limit your product search to WalMart-only products.
  2. Speaking of Search, I believe WalMart’s search and product screener is superior in some ways to that of Amazon.  In Amazon, of course, you can type in the product that you are looking for and you can go right to that product.  In, you screen down to the product that you are looking for, and you can view a number of options within that product.  I believe WalMart’s screener allows you to view a greater number of options from which to make a purchase decision.
  3. I believe WalMart’s website is more user-friendly and easier on the eyes than that of Amazon.  Amazon’s website can be information overload, thereby making it difficult to make a decision.  WalMart’s is more orderly, in my opinion.
  4. WalMart has a greater inventory and selection of some products, less of others, than Amazon.  I’m not a retail expert, so I don’t know which product lines favor WalMart, but some do, and this is an advantage for them.  Amazon’s inventory selection sometimes gets thin.

Amazon Advantages

  1. Amazon Prime.  WalMart doesn’t have anything like it.  Shipping costs can quickly eat up any savings you might have on a particular product.  Currently, WalMart offers free shipping on some products, or if you spend more than a certain amount (when I checked today it was $35, which isn’t a high hurdle).  But, Amazon Prime and its shipping and other product benefits are a big Amazon advantage and one that will foster customer loyalty for Amazon.
  2. Shipping:  Time will tell if and how WalMart can match Amazon with regard to the various shipping costs and options offered by Amazon.  Amazon even has the US Postal Service working on Sundays!
  3. Amazon is an organizational and logistic miracle.  I don’t know how Amazon gets it all done and on time, especially working with third-party shippers such as the USPS and UPS, in addition to working with the third-party retailers who sell through  Kudos to them and all they do.


I am not advocating purchasing WalMart stock, Amazon stock, or in pair-trading one against the other.  I do believe WalMart has some advantages over Amazon, and that if WalMart can match or come close to Amazon regarding shipping, I think WalMart can gain market share.  We will see how this plays out over this Christmas shopping season.  This is something to keep an eye on when sales and earnings results come out during the First Quarter of 2018.



Reallocate Your Retirement Savings

The end of the calendar year or the beginning of next calendar year is a good time to review your account balances in your retirement savings accounts (IRA, 401K, and the like).  This post serves as a reminder:  Don’t neglect this year to do this.   You should every year.  Many people don’t.  If you don’t, you are shooting yourself in the foot.  Also, don’t use no double negatives.

% Allocations

If you have a 401K plan, you probably had an idea of how you allocated your money when you opened the plan.  Your employer’s plan probably had several investment options – mutual funds in different categories.  Maybe a Large Cap US Growth Fund, a Small Cap Fund, a Bond Fund, an International Fund, and maybe several others.  You likely opened your account and said something like “I will put 25% each in 4 different funds in 4 different categories.”  That is a typical, sound investment decision.

If you have an IRA instead of a 401K, you probably started small and only bought 1 or 2 positions and didn’t diversify.  That’s ok when you are younger, but as you get older, if you are still contributing to that IRA, you need to diversify and you need to think about a percentage allocation into broader categories, using mutual funds or ETFs.


French author Marcel Proust wrote, “In Search of Lost Time”.  Scottish singer Al Stewart sang “Time Passages”.  Both are about the passage of time.  What else happens as time passes?  Correct:  Your account balances change.  Hopefully, they grow.  What won’t happen is that your positions won’t change in the same proportions.  Again, don’t use no double negatives.  If you were 50% stocks and 50% bonds a year ago now, you aren’t 50/50 now; you are probably something like 60/40 stocks because your stocks portfolio grew more than did your bonds.  What should you do now?  First of all, realize you are in this position.  Second of all, look at re-allocating your portfolio.

Two Methods

You can reallocate by one of two ways:  You can sell stocks (or whichever account is now above your goal percentage), and use that money to buy the category that is under your goal percentage.  That way you can reallocate immediately.  Alternatively, you can leave the current balance alone, but put more new contributions into the under-allocated position until you are back in line.  That way you don’t sell any of the over-allocated position, the one that outperformed, and it will take more time to get your overall portfolio back in line.

Sell High, Buy Low

Investors are sometimes reluctant to reallocate their retirement portfolios back to their stated allocation percentages because, at the heart of it, reallocation involves selling a better-performing asset to buy more of a lower-performing asset.  That’s a hard mental bridge to cross.  Reallocation is based on the underlying premise of mean-reversion:  Asset classes that outperform during a short time period (such as a year) will underperform during some future time period.  By reallocating now, you are betting that the mean reversion will occur over the next year.

Get Rich vs. Don’t Lose

This is not to say, for instance, that you think bonds will outperform stocks, with both going up.  Instead, reallocation from stocks into bonds is a downside-protection play.  Stocks have outperformed bonds over the long period, but stocks are more volatile, with some rotten years mixed in with some excellent years.  Bonds are more steady and have at times (but not always) negatively correlated to stocks, meaning bonds go up when stocks go down.  Thus, when you reallocate from stocks to bonds, you are trying to keep from losing, rather than trying to win more.  Sounds maybe like a country music lyric.


Plug for my services as a financial planner:  There are several theories out there on how and when to reallocate.  Strategic allocation bands are one of the theories.  Also, how often should you look to reallocate, or simply monitor the portfolio to see if you should reallocate?  There are several theories out there on this as well.  It is all good intellectual fodder.  However, the point with this posting is that you should not forget to look at your 401K or IRA or other retirement portfolio and reallocate it to your original percentage allocation or to your new percentage allocation based on the changes in your current life circumstances.  I can help with any of these issues.  It is always good to have an educated, experienced third party opinion.