The Trillion Dollar Club.

It's the most exclusive club in the world, with just two members: Apple Computer and Microsoft. But don't underestimate their influence on the stock market.

Without a doubt, this is the most exclusive club in the world. It only has 2 members: Apple Computer and Microsoft.


But, as we're finding out as we review the performance of the stock market last year: these 2 club members exert an influence far beyond their few numbers. The club is the Trillion Dollar Club. Each of these two companies that have a market value that is greater than a trillion dollars.

As of last Friday's close, Apple has a current market capitalization of $1.3 Trillion Dollars, while Microsoft has a current market cap of $1.2 Trillion Dollars.Together these two companies represent about 7 1/2% of the total US Stock Market.

Forget the thousands of other companies listed on the exchanges. if you want to participate in this stock market, you can reduce your portfolio to just 2 names: Apple and Microsoft.

Of course, I'm joking.

But just barely.

And don't tell this to your broker or adviser, this is the last thing that they want to hear. But for 2019, those were the facts. Last year Microsoft was up an incredible 58%, all the more incredible when you consider that this represents about 1/3rd trillion dollars in equity appreciation. While Apple Computer was up an even more phenomenal 89%.

But what was even more noteworthy was that these two stocks represented about 20% of the total market appreciation. And you can see the implication: throw away those index funds, focus on these two companies and you would have a similar return as the entire market, and you wouldn't need to pay those pesky management fees.

Now, please do understand that 2019 was a unique event, and I would not recommend that you take this as an investment strategy. But it does point out just how focused and concentrated the investment universe has become.

What we were watching those last 2 months in 2019 when the markets rocked to 20 new highs. That's just about a new high every other day!

The move was not a market move, as much as it was the move of a particular sector: the Information Technology Sector. Home of the Trillion Dollar Club, plus 2 wannabe's: Google and Amazon. Both of which are closing in on the Trillion Dollar Club. Take these companies out of the mix, and we would have had nowhere near the type of performance that we saw.

And this is not healthy. From an old-line investment point of view, this is a stock market acting entirely without breadth. By breadth, I mean the number of companies that actually participate in the market's appreciation. We don't have that currently.

We are like your car's engine, but it is only operating on a couple of cylinders.It was good for our investment accounts last year, but it does not indicate the strong vibrant economy that we think it does.

For instance, look at the other end of the stick, the energy companies, they were only up about 1/3rd the level of the average technology stock. Good times for technology, but not so good for oil, gas, and coal.

Finally one last word of caution. It's something that I speak a lot about. But powering this move in technology, was the continued stock buyback programs. Those are the programs where the companies repurchase their own stock. Usually doing it by adding to their own debt. Essentially a debt for equity swap.

Whatever you think of the corporate accounting, and I'm no fan, this has provided these companies with a never-ending buyer. One who is constantly driving up the price of these shares, and thus contributing to those outstanding stock market performances.

So as you tear open those year-end statements and toast our good fortune.

A word of caution is in order.

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