Bide your time.
There’s no time like the present
Forgive and forget.
Revenge is a dish best served cold
Never put off till tomorrow what you can do today.
Don’t cross the bridge until you come to it.
You’re never too old to learn.
You can’t teach an old dog new tricks.
A word to the wise is sufficient.
Talk is cheap.
It’s better to be safe than sorry.
Nothing ventured, nothing gained.
Don’t look a gift horse in the mouth.
Beware of Greeks bearing gifts.
Do unto others as you would have others do unto you.
Nice guys finish last.
Hitch your wagon to a star.
Don’t bite off more that you can chew.
Many hands make light work.
Too many cooks spoil the soup.
Don’t judge a book by its cover.
Clothes make the man.
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 The end of the world scenario has been replaced by confusion, second guessing and dismissal by the Brits themselves.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!
The Economy: Another quiet week highlighted by the release of the Fed Minutes. As usual, the Minutes caused a hissy fit in global financial markets. Why? Well, why not? It was more of the same Elmer Fudd stuttering opacity that financial markets have become addicted to. For the rest of the world it’s much ado about nothing. The Fed emphasized that their decision on interest rates was data dependent. … as it has been since the Fed was founded in 1913. Duh! Economic numbers may move one tenth or one hundredth of a percent. In response, financial markets go haywire. Out of a US population of 320 million, a reported employment change of 15,000 will create massive gyrations in financial markets; over a .0047% change. When was the last time you based a decision on a .0047% change in anything? Recently? Ok you must be a quant or an engineer. For the rest of the planet, it’s statistically insignificant; not even a rounding error. As a result of this, we see the financial markets as being disconnected from the economy. Massive and misguided Central Bank manipulation, global fiscal irresponsibility, political gridlock by elected and appointed Peter Principled Lilliputians has failed to halt US economic growth. It’s a testament to the resilience of the American people. Every day is a holiday; every meal is a banquet.
Food for Thought: We are always conducting informal surveys to keep the mainstream media noise and click-bait in perspective. We continue to find the average Joe (or Josephine) well grounded. The basic American character of “Question Authority” remains intact. The prevailing outlook is local optimism tempered with frustration with the national and international scenes. America remains the clear choice to pursue personal and professional dreams. No other country or culture comes close. So spare us the incessant jabbering about the imminent demise of the American Goliath or the American way of life. The isolationist/interventionist dichotomy of the American political will has been a constant since George Washington warned of the “peril of foreign entanglements” in 1796. Rather than seeing the 20th century as the American Century, we see the 21st century as the true American Century. The 19th was only the prelude. We see the US increasing its global dominance. American innovation technological prowess will continue to reign supreme. In the global community, the US remains the headstrong, determined adolescent that will muscle its way to the head of the line. For Joe and Josephine American, “My Country right or wrong; still My Country” still rings true.
The Economy: Recent economic data has been like the weather in Indianapolis: If you don’t like it, wait a couple of minutes and it’ll change. Conflicting data continues to point to a slowly expanding US economy. 7-years into this same slow motion movie and you have to ask, “What next?” Global Central Banksters have given us more than 600 interest-rate cuts and $12 trillion of asset purchases during the past 7- years. With the latest meetings of the ECB and the Fed, the answer is more of the same. Events
outside of our borders are now dictating the course of Fed policy despite the fact that within our borders the economy has demonstrated that removal of monetary accommodation is overdue. Today it was reported that bonds yields of Sanofi, the French pharmaceutical company, and Royal Dutch Shell have turned negative. This is nonsense.
Food for Thought: We’ve had five years of a bull market in the San Diego commercial real estate rental market. Now it may be over. 2016 has seen office space availability increase dramatically. Year to date, 570,000 square feet of office space has come on the market. This is in addition to the 360,000 square feet of space vacated by Qualcomm in 2015. This supply does not include new construction. Rather, it is due to slowing demand and additional space becoming available in existing buildings. In addition, many start-ups are beginning to struggle and their deaths will add more inventory to the market in 2016. The maturing demand for office space is expected to limit rent increases. While the tenants market of 2009 is still in the future, the landlord’s market we’ve seen for the past 3-years is over. The exception to this scenario is Downtown’s Class A buildings. That market is hot with limited availability. However, the offshoot is that rents in Class B and C buildings, some of which are functionally archaic, are under pressure.
Music of The Week: Susie Arioli’s Album “That’s for Me”
The Economy: Contrary to the gloom and doom that has dominated the mainstream media recently, most economic indicators continue to show a U.S. economy that is expanding. Industrial Production rose more than expected. Capacity rose more than expected. Producer prices rose more than expected. But weakness was seen in housing starts. With the stock market in the tank and many portfolios bleeding, the Devil-May-Care exuberance of the past few years has left the zeitgeist. Mark Twain’s concern about the return of his capital instead of the return on his capital, is in full bloom. Yes Mabel, the stock market can go down despite the arcane mutterings of central bankers. While trillions in QE failed to validate the wealth effect, the global stock market selloff has gotten the full attention of the hoi polloi. The danger will always be that the media drumbeat of stock market doom will scare the U.S. consumer into hibernation, thereby creating an actual recession where one didn’t exit.
Food for Thought: The stock market rally of the past few days has been a welcome break from the kamikaze dive we’ve experienced since mid-December. This is the time for caution. We’ve urged you to have an exit strategy. Now is the time to implement that strategy. The recent strength in the stock market may be a bounce before we head lower. Selling into this rally and raising cash is the prudent move.
The Economy: Fed Chair Yellen appeared before Congress this week. She put on her most patient Grandma Face for the Alfred E. Neuman grandstanding of her inquisitors. Yellen acknowledged that the economic environment had become more uncertain. She mentioned falling stock and commodity prices, tightening credit conditions and uncertainty over China as causes for concern. She observed that weakness in the global economy had made life more challenging for U.S. businesses. In response to questioning she indicated that while an interest rate cut was not in the cards, 4 increases this year was still a possibility. When asked about a possible Fed move to negative interest rates, Yellen said that the Fed hadn’t determined the legality of such a move. In short, specific targets are out and Fed opacity is back in.
Food for Thought: Oil is presenting a rare opportunity. Timing is everything. There are a variety of ways to position for this. Stocks, bonds, mutual funds, exchange traded funds and notes, futures and options are examples of how to participate in the coming price rise. We believe that a pure oil play is the most effective way to capture value. Contact us if you have questions.
Qualcomm (QCOM) was down 15% after reporting earnings this week. If you had $5 million in QCOM, you lost $750,000 overnight. The premier San Diego company which faces changes in the mobile space, has announced massive layoffs and a stock buyback program. Some are calling for the company to be split up. The carnage in QCOM is the perfect example for why employees should diversify out of company stock in their retirement plans. Stories of employees who become instant billionaires dominate the media. Much more common are employees who are impoverished when their company stock heads south. Just as the odds are against you winning the lottery, they are against you being employed by the next Apple, or Tesla or Facebook. Invest with common sense.