The Color Of MoneySubmitted by RetireWiseCFP on July 10th, 2021
What is money? What does it do? Why do we need it? Money has been misunderstood, incorrectly defined, and, most important, wrongly desired. It has been written, "For the love of money is the root of all evil…." With about 30 years’ experience with clients and families, I have learned the following: Money may not buy happiness, but money does buy opportunities.
Where are we now?
The economy is doing well. People are going back to work. Airports are congested. Hotels are busy. The stock market is reacting, not evenly but nonetheless positively, to favorable indicators in the economy. The stocks of oil companies that have been dead money over the last four or five years suddenly have come to life. They were the best-performing stocks over the previous three months. As long-term investors, what are we to make of energy stocks? I hope they continue to do well; but my game plan is to sell them, take the money, and buy the energy companies of the future. We will always need energy, but I do not think oil will be dominant years from now. The future belongs to greener energy companies, i.e., wind and solar companies.
Where do we go from here?
My plan going forward is prudent: to own both conventional and clean energy companies. As the price of oil rises and traditional energy stocks become more robust, I will systematically sell them and roll the money into clean energy. Conditions are ripe for astute investors to buy green energy. There is global and local momentum for green companies. In my last letter I discussed green opportunities in the automobile industry. The same now goes for the mother of all industries—utilities. Utilities are the backbone of all industrial economies, and they tend to be the most mundane in investors' portfolios. We are finally at the point where green utilities are becoming cost neutral and can stand on their feet vis-à-vis conventional utilities. This is a huge step. Of course, I am on the prowl for best of breed and will make my bets on your behalf accordingly.
On fixed income and alternatives:
What a difference three months make!!! For the first time since 2008, my friends, if you are counting along with me—that is 13 years—the Federal Reserve Bank may have no choice but to raise interest rates. We are seeing real and measurable inflation for the first time in 13 years. The Fed and the Biden administration may have jammed too much money through the pipes as they attempted to get the country moving again and overheated the economy. I hope that indicators like the Producer Price Index (PPI) will come down and remain down in the coming months. Otherwise, the economy may enter a negative vortex and not get out until the full negative cycle plays out. That will not be good for a lot of reasons.
From my deep dive over the last three months, I have concluded that Bitcoin is here to stay. The biggest problem with Bitcoin is the company it keeps. International bad actors—ransomware hackers, North Korea, etc.—use it as their currency of choice. Bitcoin’s lack of transparency scares governments: if they cannot control "money" within their borders, they cannot control their economies. Ultimately, that is an irreconcilable conflict that could lead them to ban Bitcoin and other manufactured monies. In a battle between computer geeks and governments with real guns, real prisons, and even nuclear weapons, guys with weapons and prisons will win.
There are new opportunities ahead as the American and the global economies transition from conventional to green energy. I am reminded of 1999, when the whole nation began to get into the internet in a BIG way. Everything was transformed. It was no longer a niche product, service, or concept. The same is happening now with green energy. It is time to get on board the Green Opportunity Train. The color of money and the opportunity are both Green.
Femi T. Shote, MSF, ChFC, CFP®
Accredited Investment Fiduciary®