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AARP, surely you have the wrong fellow


Apparently, any notion that I am still a young person is eroding alongside summer's rapid retreat. Time for back-to-school shopping! Time to join AARP! Hold on! Fifty is the new . . . Well. I don't know what it is, but it can't possibly be the dawning of my journey among the American Association of Retired Persons. Alas. Here we are. The invitation to join AARP arrived in the mail this weekend, just a couple months ahead of my 50th birthday. Deep breaths. I did some research. Did you know AARP supports Americans over the age of 50, but that anyone can join regardless of their age? And I'm not exactly sure what I expected, but AARP is simply akin to AAA. Being a member entitles you to a handful of discounts. Our family has long had AAA for the roadside assistance. So at first blush, I don't think we also need AARP. But I'm not above asking for a senior discount! If you have a strong opinion on the matter, I'd love to hear it. Please reply in large font, but not all caps.

The S&P 500: A(pple) to Z(ions Bank)

You may have known that the S&P 500 is an index of the 500 largest publicly traded companies in the U.S. But did you know that it is a weighted index? That means that the largest company, Apple, has the largest influence on the performance of the index overall. Zions Bancorp, by contrast, is 500th on the list. Because its a much smaller company, its stock price has a very small influence on the way the index performs.


The chart below uses data from July 6, 2023 and highlights how tech heavy the S&P 500 index is these days. The top 8 stocks are all tech giants and represent 28% of the index overall! By contrast the cumulative weight of the bottom 100 stocks is only 2.5%. If the 8 smallest companies in the index disappeared tomorrow, your index fund would barely twitch. Goings on at Microsoft, or any of the top 8, however will certainly impact performance.


So what, you ask? Well, I simply think it's good to know what you own. At the moment, the S&P is up roughly 19% year to date. But this rally has not included all members of the S&P 500 equally. Tech names, fueled by AI excitement, have run out ahead. Generally speaking, I'm a guy who preaches on the virtues of investing for dividends. Stocks among the boring dividend payers are up about 5% on the year. That's to say that if you feel a little left in the dust by this year's rally, I get it. These moments of euphoria create a fear of missing out. If it has you wondering about your allocation, let's discuss it.

Where I've Found Wisdom

Chip War by Chris Miller opened my eyes to the importance and sophistication of the computer chip. The book begins with a fascinating history of computing. Some of the earliest computers, for example, relied on large rooms of lightbulbs flashing on and off to generate 1s and 0s. Even though they were effective overall, they would bog down due to all the moths they collected. Machines needed to be shut down for maintenance while technicians would "de-bug" the computers.


It goes on to describe how the chip industry grew up in the wake of World War II. Demand from the U.S. Government gave Silicon Valley an early demand for its products. Eager businesses and governments in Asia and Europe developed complex networks to provide inexpensive labor and technical machinery to aid in manufacturing. The result is a global and interdependent economy. Right now you're reading this on a device with chips designed in the United States and manufactured in Singapore or Taiwan using unbelievably sophisticated lasers from The Netherlands.


Why is it called Chip War? Miller explains that "in 2018, China spent more money importing computer chips ($300 billion) than it spent importing oil ($260 billion). This was a staggering figure, and it highlighted China's growing dependence on imported technology." China wants desperately to reduce its reliance on others for chips. Where all this is going is unclear. U.S. businesses want the lucrative Chinese contracts, but need to be wary of their intellectual property. Taiwan Semiconductor is the world's largest chip manufacturer. It lies just across the Taiwan Strait on land China believes is Chinese. The military, business and political implications are complex and fascinating. The fact that chip manufacturing is a sophisticated and complex web with several centers of power across the globe gives me some reassurance that most of these battles will be fought among attorneys, business leaders and diplomats. Time will tell. But this is a book I will return to for its wisdom an insight about this critical resource.

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Thank you for reading. If you liked this content, please share with a friend. You can always reach me by replying to this email or at 704-323-6872.

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