Markets and Stocks
Stocks closed higher yesterday. The broad index rose 0.43% to 7,674 while the Composite increased 0.44% to 26,180.
Equities continue to be concerned about the deficit and Treasury yields.
To lower Treasury yields the Trump Administration must stop trying to fool the public about the size of the deficit and its causes. The federal deficit is driven by spending on Social Security, Medicare and Medicaid as well as the refusal of either party to push for higher taxes on everyone.
Reform entitlements and raise taxes; otherwise the deficit will continue to grow as the American population ages.
Bitcoin is suddenly surging. Bitcoin rises when distrust of the federal government’s ability to control the deficit increases. Bitcoin is a bet on dollar and Treasury bonds depreciation. Though I disagree with Treasury Secretary Bessent’s efforts to lower long term Treasury yields, I have confidence in the long term value of the dollar and Treasuries. The United States faces challenges but so does every other nation. Relatively, the U.S. remains at the top of the global economic pyramid.
Politically, the United States is also stable. Over a year ago, I dismissed fears by many that Trump would become a dictator. I wrote that U.S. institutions are strong, especially the U.S. Supreme Court and the U.S. Senate. These two fundamental structures of the Constitution are pushing back strongly against Trump’s abuses of power. Importantly, Trump is bowing to their authority.
The U.S. will muddle through the next 29 months of Trump’s time in office. But I worry about what follows, a pivot to the left with higher taxes on investment is my bet.
Economists surveyed by Bloomberg see 2.5% GDP growth with inflation falling to 2.5% in 2027.
Nvidia
Nvidia is in discussions to buy Rebellion, a South Korean company that designs chips to accelerate inference.
Nvidia reports numbers next Wednesday. Yet again, NVDA will deliver fantastic results, up over 80% for both earnings and revenues.
Micron
Prices for memory chips are going parabolic.
As Micron’s earnings continue to soar, the share price will rise. Patience will be rewarded.
Co packaged optics stocks
Stocks such Corning Glass, Ciena, Lumentum, Coherent and Marvell should enjoy very strong earnings and revenues, 34% plus, for the next four years and probably longer.
Gold and Silver
The two precious metals are suddenly hot asset classes. Each metal is up more than 10% this month. Momentum should remain positive for the next several months as the market remains focused on the federal deficit. Like bitcoin, precious metals do well when skepticism about the government’s ability to control the deficit rises.
I am using Coeur Mining, CDE and Newmont Mining as my trading ideas for the metals.
Oil
Ukraine continues to pound Russia’s refining capacity. Global gasoline and diesel prices will remain elevated for the foreseeable future.
Prison
It won’t happen but I would love to have coffee with a few of the men that I met in prison. Harlon Salmona is at the top of the list. He guided me in my early days. In spite of having been behind the wire since 1988, he remained interested in politics and economics as well as sports. He had a passion for the New York Yankees. He and I bantered about the Yankees and Boston Red Sox.
Harlon’s father was a prominent figure in the community of New Haven, Connecticut. When Harlon grew up, New Haven was a thriving middle class town with a strong intellectual culture. Yale University is located in New Haven. During the summer of 1972, I spent a lot of time at the Yale University library researching my honors thesis for the University of Connecticut.
Harlon’s father was the lead news presenter on the New Haven, CBS station. His father ran for a seat in the U.S. House of Representatives but lost. The Democrat won. Sadly, Harlon’s father suddenly died of a heart attack when Harlon was 15 years old. To this day, I believe that the early death of his father was an important factor in Harlon’s later decision to work with a drug cartel while continuing to serve as an officer in the United States Coast Guard. For a few years, Harlon lived large, but inevitably he got caught. Harlon murdered his best friend to prevent him from testifying against Harlon.
The family of the deceased has forgiven Harlon. Florida has not, and never will release Harlon. He will die in prison. Young men do very stupid things.
Harlon told me that for the first five years or so of his incarceration, he continued to act like a macho drug dealer. But that caused him nothing but pain and suffering. He realized that his life would be less miserable if he tried to find a little happiness in each day. He accepted his sentence and became a frog on a rock.
Regardless, from time to time, I will dream of walking the Appalachian Trail with Harlon.
It won’t happen but I would also love to talk with Todd to see how he is doing. He is a brilliant man who will also die in prison. His mother did her best. It is my understanding that she still visits him. My son Thomas from time to time writes Todd. Boys need fathers. After high school, Todd chose the fast life of drugs, alcohol and beautiful women. When I knew him a decade ago, he was still a very good looking man.
And I would enjoy spending a little time with the Sergeant from Calhoun who was the librarian for a time and who did not tear up my bunk in the last Shakedown that I experienced. The Sergeant performed a very difficult job with great skill. He ensured that the inmates followed the rules but to the extent possible, he treated inmates with respect.
Respect is a word that is often used in prison by both officers and inmates.
There are several men from my time at TTH that I would like to see: Rocco, Gherkin and Hunter are at the top of the list. But that is a story for later.
I continue to wonder how Smitty fared when he went home. He was in prison for stealing steaks from a supermarket. He had priors. According to Smitty, he had the money to pay for the steak. But he was so drunk that he picked up the meat and just walked out. From our conversations, Smitty was challenged by daily life. He was raised by his mother. He never knew his father. She never made him learn about responsibility and work. When he finished high school, he chose drugs and dealing over getting up and going to work each day. When I met him, Smitty was about 50 years old. He had spent his adult life in and out of Florida’s jails and prisons. He committed many non violent felonies where he would receive sentences of a few years. His last bid for stealing the steak earned him a five year sentence. But for all the priors, he might have been sentenced to probation.