Grow Your Portfolio the Intelligent Way

Life’s A Cruel Mistress 

By Jim Woods

You can love her, take care of her, be truly good to her, but the next thing you know, she delivers you a heart-crushing blow.

Yes, life can be a very cruel mistress. 

Allow me to get personal here for a moment, as recent events in the lives of those close to me have prompted me to share them with you today. And in doing so, I hope to illustrate a couple of important points about life that can help us all through pain, sadness and struggle that are an inextricable part of existence.

I just received word that a good friend of mine from my U.S. Army days was diagnosed with a heart problem. This problem is one that will require surgery and the installation of a pacemaker. Now, this man is in his early 50s, doesn’t smoke, hardly ever drinks alcohol and generally leads an active life. Why was he afflicted with this heart ailment? We don’t know, but he is, and that is what he must deal with.

After giving me the downbeat news about his situation, my friend proceeded to tell me that his circumstance was “the good news.” He then told me about what he considered the actual bad news in his life, which was that his wife of nearly three decades had just been diagnosed with stage 2 breast cancer. To combat this disease, she will have to undergo chemotherapy, surgery and then more chemotherapy.

As you might imagine, a shadow crossed my heart when I heard this double-dose of bad news. Unfortunately, the tales of pain and loss weren’t nearly over.

Just a few hours later, another friend of mine told me that she was feeling overwhelming sadness, because it was one year ago today that her husband of 32 years had died due to complications from COVID-19. Her husband also was in his 50s, was very healthy and had no known comorbidities that anyone could identify.

Now, I wish I could tell you this was the end of the woe for the day, but it wasn’t. Late last night, another very good friend and I were reflecting on the sadness he felt regarding his recent separation and impending divorce. I knew that the chief reason for the dissolution of his 20-year marriage was his wife’s struggle with drug and alcohol abuse, which led to her mental and physical deterioration into a person he no longer recognized.

As I slept on the events of the prior day, I woke with a jumble of thoughts that I wanted to put down. The reason why is because I hope that my conclusions can illuminate not only my approach to the world for you, but hopefully they can help you if you are struggling with these same type of difficulties. And even if you aren’t dealing with these now, life isn’t likely to let you off the hook.

There’s a great line in the novel “Fight Club” by Chuck Palahniuk that says: “On a long enough timeline, the survival rate for everyone drops to zero.”

Well, on a long enough timeline, and no matter who we are or how well we’ve managed to organize our lives, nearly all of us will experience profound sadness, crushing loss, deep disappointment and likely intense physical pain that becomes both all-encompassing and debilitating.

Moreover, every one of us, if we haven’t already, will likely have to deal with the pain, hurt and loss associated with the death of either a grandparent, a favorite aunt or uncle, a mother, a father, a brother, a sister, a close friend or even what is said to be the most difficult loss to bear, the loss of a child.

What’s even more intense is that, as humans, we know that we are mortal. We know we are going to die, and we know that everyone we know living today also is going to die.

For me, knowing this allows me to focus on what I am doing right now — in this very moment. Because all we are sure of is that we have this moment. And this moment. And this moment.

This realization that life is now prompts me to ask myself why anyone would ever want to squander the now.

Why would you ever allow yourself to consciously live in a state of negativity, one replete with unhappiness, anger, distress, discontent and malaise over trivial things you have no control over? And let’s face it, nearly everything in our lives we have little to no control over.

Of course, that’s not to say we should feel something other than deep sadness over pain, loss and other adverse circumstances. It is proper to feel these emotions, and you do not want to shut them down or cut them off, as that would be a form of squandering the now.

Yet, think about all of the times we do squander the now by not paying close enough attention to our own minds.

We get mad when someone cuts us off on the freeway. We get upset if the barista gets our coffee order wrong. We become angry because one of the stocks we own slides after the company announces downbeat earnings guidance. But, if you realize that it is your reaction to these things which is the cause of your sadness, and not the actual events themselves, you realize that with a little effort, you can alter your mental state.

The first step in doing this, at least for me, is recognizing that thoughts are the root cause of all of our emotional states. Indeed, the ideas you have in the now are what is affecting you right now. So, if you can consciously identify those thoughts, process them and either let them go, change them or integrate them for future use, you will be much better off when the inevitable wave of life’s sadness slams into your own shore.

By knowing your own mind, and by cultivating a self-awareness capable of identifying thoughts as the root cause of all discomfort, pain and pleasure, arousal and peak experience, you can avoid squandering the now.

Instead, you can embrace the now for what it is, and you can become better at dealing with the good, the bad and the ugly — because life is replete with all of these elements, and that isn’t going to change.

So, do not let your head wander its way into despair. Take control of your thoughts, which one can do via practices such as mindfulness meditation and other active efforts to recognize the content of one’s own mind.

By recognizing the “you” in there, and the content of your inner life, you will put yourself on the path to making sense of the kind of day I had recently, and the gloriously happy days I know I will experience in the future — and everything in between.


ETF Talk: Bet on Health with This Cap-Weighted Fund

Health care is a sector that seems poised to benefit from an array of long-term trends. 

It is a well-known fact that the average age of Americans is increasing due to generational trends and improved health care. As advances in health care make longer lives possible, that trend may very well continue.

There are many ways to benefit from increases in health care stock prices, but one path for investors who may not be interested in the risk associated with individual stocks is exchange-traded funds (ETFs). One prime example is iShares Healthcare Providers ETF (NYSE: IHF).

IHF provides broad exposure to U.S. companies on a cap-weighted basis that are engaged in managed health care and insurance, excluding frequently higher-risk pharmaceutical companies.

Over the last year, this fund has beaten the S&P 500 handily and even managed to deliver a positive return at 1.6%. Its small yield of 0.61% only makes matters better. After struggling early in the year, IHF sprung forward with a nice recovery in March and April. It has also performed well in the last month, which may make it appealing as a momentum strategy.

Chart courtesy of

Top holdings for this fund include UnitedHealth Group (NYSE: UNH), 23.19%; CVS Health Corp. (NYSE: CVS), 13.97%; Elevance Health, Inc. (NYSE + BATS: ELV), 7.92%; Humana Inc. (NYSE: HUM), 4.74%; and Cigna Corp. (NYSE: CI), 4.73%.

Notably, industry giant UnitedHealth Group takes up a sizable chunk of IHF’s holdings due to the fund’s cap-weighting strategy. The company is a solid and stalwart holding that has offered impressive returns over the long haul. After all, companies do not reach $500 billion in market cap without doing a few things right. The solid and steady backbone provided by UNH and CVS Health Corp. may decrease the volatility level of the fund.

Health care is here to stay and likely to continue to advance technologically in the future. We may not know exactly what that will look like, but we can guess that many of the companies represented in iShares Healthcare Providers ETF (IHF) will be involved in that future.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.


In case you missed it…

Tangled Up In Capitulation 

I lived with them on Montagüe Street
In a basement down the stairs
There was music in the cafés at night
And revolution in the air

— Bob Dylan, “Tangled Up In Blue”

Stocks have witnessed a very robust comeback over the past week, and almost under the radar, the Nasdaq Composite has climbed more than 10% over the past month. The S&P 500 and Dow Industrials also have done well, up some 8% and 6.8%, respectively, in the past month. 

So, why the recent rebound in stocks? After all, the Federal Reserve is still hiking interest rates, inflation is still at a four-decade-plus high and the economic data on growth is beginning to show its recessionary colors.

Well, one reason why is that market sentiment is just much too bearish right now, and we know that because some of the best market sentiment indicators are all tangled up in capitulation. 

In this morning’s Eagle Eye Opener, my “secret market insider” astutely pointed out that capitulation, or what he calls “extreme pessimism,” is rampant among investors right now, and that this is traditionally a contrarian signal that predates a big rebound in markets. 

Let’s take a look at an excerpt from this morning’s Eagle Eye Opener, as it will do all of the explanatory heavy lifting…

The S&P 500 closed above the 50-day moving average for the first time since April and traded to a three-week high, as the rally from the June lows continues to gain steam. This is easily the most bullish price action we’ve seen from stocks since March.  

Importantly, there are “reasons” for the rally. Markets have firmly seized onto the hope that we are close to 1) Peak inflation, 2) Peak Fed hawkishness and, as a result of the first two, 3) Peak U.S. dollar strength (which should ease pressure on earnings if the dollar decline continues).  

The “hope” for these peaks is founded on the following: 1) Commodity price declines, 2) The University of Michigan Consumer Sentiment survey falling back below 3.0% for the first time in months, and 3) A drop in the price indices in the Empire Manufacturing survey.  

Notably, this hope flies in the face of what is typically more important data points such as the Consumer Price Index (CPI) (40-plus-year high), the Producer Price Index (PPI) (11% gains yoy and climbing), and massive recession risks in Europe and the United Kingdom courtesy of surging energy prices, following the Ukraine war (which would further weigh on the euro).

Point being, while I very much appreciate that markets are always forward looking and are constantly pricing in “what’s next,” normally there’s a bit more actual evidence underwriting market optimism. Put differently, hope combined with some favorable motion from some second-tier data points isn’t usually enough to cause a solid rally (or at least the most solid one we’ve seen in a few months).  

But there is one ingredient that’s helping to fuel this rally despite the lack of actual fundamental progress: Extreme pessimism.

Yesterday, Bank of America released its monthly fund manager survey, and their conclusion was clear: Investors are so bearish it implies capitulation. Some highlights (or low lights) of the survey include:

  • Recession expectations the highest since the pandemic, and before that the 2008 financial crisis
  • Stock allocations are at their lowest since 2008
  • Cash is at its highest since 2001
  • Growth and profit expectations are at all-time lows
  • The most risk-averse behavior is occurring since October 2008

This extreme pessimism has combined with the hope of the aforementioned peaks to spark the best rally we’ve seen in months — and it raises the question as to whether markets have become so pessimistic that perhaps it will lead to a bottom before we get actual, real improvement in fundamentals (remember inflation keeps getting worse every month, as do Fed hiking expectations and earnings warnings — we haven’t seen an actual “low” in any of them yet).

Certainly, that’s a possibility. But before anyone focuses on the fact that sentiment is so low, I’ll provide this reminder:

  • The S&P 500 kept falling until March 2009  
  • Levels cited in the Bank of America survey implied capitulation was all in 2008
  • The S&P 500 fell from 1,161 on October 1, 2008, to 676 on March 9, 2009  

The point here is that sentiment bottomed out in these indicators in late 2008 because the Fed passed Trouble Asset Relief Program (TARP) and was coming to the rescue, but that didn’t stop the economic or earnings destruction already underway.

Right now, no one is coming to the rescue. The Fed is about to hike rates again by 75-100 basis points and there’s another hike after that is coming in September (and probably more after that).

Markets are rallying on the hope that a big inflection point with the Fed is looking likely in the coming months, but there’s no real proof it’s actually going to happen in the coming months!

To be clear, I’m not a perma-bear and I’m not trying to pooh-pooh the best price action we’ve seen in months. I enjoy watching my personal account on days like yesterday a lot more than most days of late, and I very much hope a bottom is in. Moreover, I very much hope I’m wrong being skeptical.  

I do want to continually point out that, from an economic and earnings standpoint, we have not even really started to feel the impact of the soon-to-be, 200-plus basis points of tightening that’s occurred since March. For reference, over the past two decades it’s taken the Fed years to raise fed funds 200 basis points. This time they’ll do it in essentially 4 1/2 months, and that will combine with quantitative tightening hitting full speed at the end of the summer.  

While I hope markets have bottomed, and I hope extreme pessimism can result in capitulation, it’s my job to point out the underlying factors behind market moves, and the bottom line is neither the economy nor corporate earnings have felt the full brunt of Fed tightening.


So, there you have it, an outstanding explanation of not only why this market’s extreme pessimism might lead to more buying ahead, but also a tempered analysis of the factors that may prevent this latest buying trend from continuing in the near future. 

If you’d like to get analysis like this every trading day, before the market opens, then I invite you to check out the Eagle Eye Opener, today. For just a few dollars a week, you’ll be equipped with the same analysis that Wall Street pros use to make key market decisions. And after reading it, you’ll really know what’s making this market go. 


Discipline Equals Freedom 

“Discipline equals freedom.” 

— Jocko Willink, former Navy SEAL, author, podcaster, motivational speaker 

We all want more freedom. In fact, every year many of us attend FreedomFest, a conference whose central organizing principle is to promote freedom and all of its variants. However, when it comes to increasing personal freedom, one contrarian key is to increase discipline. 

You see, in order to have the freedom and financial means to do the things you want and own the things you want; you have to take the right action. Often, that action is difficult. Yet if you want it, you have to have the discipline to do what’s required to get it. By being disciplined, you increase your chances of success, and that success increases your freedom.  

Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.

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