Just when you think it is time to kick back and start on your summer reading of a couple of great novels, life smacks you in the face.
In this case, you have conflicts in the Middle East escalating between Israel and Iran.
It seems the Israelis can’t stop engaging everyone around them.
I’m not indicting them for misconduct, but they are ready to fight everyone.
I think this will be the Black Swan that will send this market south, but what do I know.
It has yet to send crude prices through the roof, as they climbed above $70 per barrel.
This could offset the recent pull back in inflation pressure.
It is remarkable how little the tariffs have moved the inflation needle, but it surely will have an effect soon.
It makes it harder for the Fed to drop rates this week.
This is all happening with the S&P 500 holding close to 6000 and within 2% of an all-time record.
What does make sense is tat this market may get fatigue.
The multiple of price to earnings is historically high. I am concerned that the general momentum pushing this market ever higher will run out of true believers. That does not mean a crash, as some suggested this market needs a 20% pullback.
It may mean another correction to allow those who love to buy the dips to get another shot.
I have been intrigued by the recent move in Southwest. You have a company that caught the eye of Elliot Investment Management, one of the world’s largest activist investors.
They obtained seats on the Southwest board and changed policy. The airline climbed almost 30% in value. Sometimes there is a need for new ideas and policies.
Some may see these activist investors as solely serving their own self-interest, like Boone Pickens of our historical past.
It seems to me they see hidden value. It is not like the company is not competing well, they just needed to find other areas to derive revenue. One of the clearest signs of a good company is great management, but you never know when alternative ideas might improve the situation. It might be time for investors to take advantage of the recent recovery and take a little profit off the table.
It’s like having to pay your quarterly tax to the government or when you are ahead in Vegas pulling a little bit back off the table into your pocket.
I make it a practice either at the casino or the track to take a bit back if I get ahead.
I can’t tell you how many times I’ve seen those who get ahead and then lose that - plus more.
Taking a profit is not a sin, just a reward for your efforts and you don’t realize such until it is cashed.
Given that we just celebrated the 250th anniversary of the army, I suggest that you consider companies that deal with the Defense Department.
Palantir had a rocket ship ride north and the likes of Northrup, RTX and Honeywell pay exceptional dividends.
Speaking of quarterly cash flow, those energy stocks may not be dead after all. While we move to renewable energy, we are much further away than most realize.
Our demand for energy is growing faster than you can imagine.
The only real answer currently is fossil fuels.
Alternatives will come, but they will take time and they don’t fit the need when demand rises quickly at peak periods.
