Monthly Archives: July 2016

Donald Trump and Hillary Clinton

The Economy: Economic numbers have surprised to the downside this week. Oil is off 20% from its high of a few weeks ago. Home ownership is at its lowest since 1965. GDP came in 50% below expectations. Some are saying the U.S. economy is stalling. Central bank activity has likewise been muted. The Bank of England and the Bank of Japan were both supposed to initiate massive stimulus programs. It didn’t happen. The Fed met this week and did nothing. Ennui, exhaustion or summertime blues, no matter. Financial markets took the poor numbers as confirmation that slowing economies would keep interest rates lower for longer. Poor economic numbers should keep the monetary printing presses running full-out.

Food for Thought: Thank you Talking Heads, Supreme Court Justices, former Mayors and other professional blowhards. We get it. The Donald is dangerous and The Hillary is a criminal. The Donald is the most dangerous man in the history of the planet. Worse than Cain, worse than Attila, worse than Stalin. The Hillary is the worst criminal in the history of the planet. Worse than Jezebel, worse than Bloody Mary Queen of Scots, worse than Bonnie Parker. That’s why as Americans we’ve selected them to be our Champions. Because warts and all, they are Our Champions. Now, let’s get on with it.

Music of the Week: The Essential Etta James.

Donald Trump on Fire

The Economy: Benign economic numbers continue to support the view that the U.S. economy is expanding at a moderate pace of about 2% annually. In the past this would be the cause of recession concerns. In today’s world 2% growth is cause for celebration. As we’ve said before, your personal experience, in this economy, remains your best indicator for how the economy is doing. Part of the difficulty in seeing consistency in the economic numbers, is that the numbers were designed decades ago to measure capital intensive industries like automobile manufacturing. It’s difficult to evaluate the information economy using tools designed for a different age. For example, despite the huge sums pouring into San Diego County from Pentagon and tourism spending, a recent survey found that the San Diego economy has contracted for the first time in years. Another sign of a possible slowdown is that Venture Capital spending appears to have peaked. … but June Gloom is gone and the sun sparkled surf is calling. So to quote Scarlett O’Hara, “I’ll think about it tomorrow.”

Food for Thought: No ho-hum dog days of summer this year. Brexit, Terrorism, Turkish Coups and the U.S. Presidential Conventions are providing a roller coaster of uncertainty. The uncertainty translates into more global monetary stimulus for longer. The tsunami of loose money flows into global stock markets. TINA is the new black. TINA (There Is No Alternative) makes the world go round. With interest rates at unprecedented lows, investors are chasing yield by jumping into stocks … because There Is No Alternative. As an investment philosophy, TINA is second only to Buy the Dip as the opiate of the masses. But, hey! … while you’re in the stratosphere swilling Cristal the ride is exhilarating. The sky is not falling, but we remain cautious about buying this market.

Music of The Week: Dave Brubeck’s “Time Out”

We Quarterback Money®.

Helicopter Money

The Economy: The U.S. economy is continuing on its path of sluggish growth. Once you dial-out the incessant noise you find that there’s been little change in trajectory. The End-of-The-World spasm that we saw with Brexit has been replaced with the usual complacency that central banks will provide additional trillions in debt to keep the global economy moving forward. Yet the Central Bank Follies are dwarfed by the global political circus. It’s May Day in Great Britain as the first woman PM since The Iron Lady, takes the helm. The Chinese claim to the South China Sea was slapped down by The Hague; a first step to internationally sanctioned military action. Our apolitical Supreme Court has jumped into Presidential Politics with one Justice proclaiming that The Donald is unfit to be President. In short, it’s business as usual.

Food for Thought: We continue to advise you to trust your personal experience as a guide to the direction of the economy. From a top-down perspective, the global economy appears to be slowing. Global stock markets are rallying in anticipation of increased central bank stimulus. To us, this is akin to giving a heroin addict more heroin. Though some indices have rallied to new highs, we find it noteworthy that many individual stocks and mutual funds have not participated in the party. For example: Citigroup is down 28% from its 2015 high; Boeing down 18%; Walmart down 19%. We remain cautious and advise taking profits. Restructuring your portfolio may be a prudent move.

Brexit Volatility

1981_09_15 Official Navy Lt Photo Guam

GO NAVY! BEAT ARMY!

The Economy: BREXIT!?! … or did it? Our poor Cousins across The Pond continue to spasm in the wake of last week’s vote. The end of the world scenario has been replaced by confusion, second guessing and dismissal by the Brits themselves. Talking heads are reveling in mindless chatter. The EU’s reaction has gone from “OMG No!!” to “Ok, if this is what you want, then get out now. We don’t want you hanging around.” Nature abhors a vacuum so the vacuous nonsense we’re hearing will eventually end. The consensus is that Brexit is an additional headwind for a global economy that’s already struggling with deflation. As with all things in life, there will be winners and losers. Because of this, we continue to emphasize that your personal experience is paramount. If Brexit is another headwind, then you must ask yourself which side of these headwinds am I on … With the Wind or Against the Wind?

Food for Thought: Preserving capital should now be your primary concern at this point in the economic cycle. Stock market indices are mixed as we end the first half of 2016; some up some down … and despite all the noise, multiple attempts to move to new highs have repeatedly failed. Investors should be leery of this repeated failure to move above year-old highs. Ask yourself, “What do I hope to achieve in a 7-year old, long-in-the-tooth, bull market. Clint Eastwood famously asked, “ … you’ve gotta ask yourself one question: “Do I feel lucky?”

God Bless America. Land of the Free; Home of the Brave! We have the best and brightest future at the dawn of the American Century. Have a Great 4th of July!