Category Archives: Uncategorized

Christoper Walken Dances on The Economy

The Economy: Economic numbers come in two broad categories: 1) Hard data such as trade balances or housing starts and 2) Soft data such as sentiment or confidence surveys. Hard data is based on numbers. Soft data is based on how the respondent is feeling at that moment in time. You can dispute the numbers but the argument will remain grounded in statistics. Surveys based on feelings are completely subjective and should be taken with a dose of skepticism. Numbers this week neatly fell into these two categories. Hard data was mixed with initial jobless claims up, existing home sales and durable goods down. Soft data and surveys were positive with optimism and odds of a December rate hike falling below 50%. Geopolitical concerns have continued to weigh on markets as NOKO, Iran and trade wars remain unresolved. Stocks swooned over the Italians … But it’s officially summertime so don’t worry be happy. Grab the beach toys and head for the water.

Food for Thought: In keeping with the never-ending 73-year old Italian Opera Buffa, check out the Video of the Week link below. Few know that Christopher Walken is an accomplished hoofer. Lighten your day and watch him here or there. Courage! The latest Sign of the Apocalypse is another Italian Meltdown. Financial markets are having a hissy fit. It’s almost as if traders are trying to stay relevant in a world where the only thing that matters is what the Central Banks are doing. … and that remains unchanged . The 2012 ECB vow that they will do “whatever it takes” to keep the punchbowl full of moonshine remains in force. With the exception of the Fed, global central banks remain committed to free-money, for all, forever. How this ultimately plays out is anybody’s guess. Many investors see asset bubbles in both stocks and real estate. Others see compelling bargains. Both have seen years of gains. But while we know that all trends reverse, we don’t see anything to indicate an inflection point. Pick your poison. … onward into the Summer Doldrums.

Music of The Week: Beegie Adair’s “Dancing in the Dark”

Video of The Week: Christopher Walken Dances

We Quarterback Money®

– Ray

China and Caring for Ageing Parents

The Economy: US economic acceleration continues with no recession bells ringing. This gives the Fed leeway to continue with its two pronged tightening action of raising interest rates and shrinking its balance sheet. This double whammy has never happened before so all bets are off as to how this will play out. Will the asset bubble slowly deflate or will it burst? This is the only question that investors need think about. This is the tide that raises or lowers all boats. Understand that we are wildly optimistic and bullish on America. We can make a sound case that this is still the American Century and will continue to be long into the future. The China Supremacy narrative ignores massive challenges. Beyond the glittering new cities are a billion peasants living in abject poverty and farming with medieval hand tools. After decades of the 1-child policy, the population is ageing faster than the economy can handle. With lowest-cost labor now in Southeast Asia, many unemployed Chinese workers are leaving the cities and returning to the already impoverished countryside. As Jordan Peterson is fond of saying, “Never underestimate the Americans. They are the most robust people the world has ever known.”

Food for Thought: Ageing parents are a concern for Boomers. Deteriorating mental and physical health is only the tip of the iceberg. Even the soundest financial plan can be destroyed by unplanned expenses … and they are going to occur. The dark side of extended lifespans is the incredible expense of living incrementally longer. Forewarned is forearmed. Unless you abandon your parents to the street, you are going to be involved. Plan accordingly. Having a plan is based on knowing what is where. Google: “family inventory worksheet” for checklists that will provide guidance. Remember the old Chinese proverb: “The beginning of wisdom is to call things by their right names.” Use the Family Inventory as a basis for helping your parents.

Iran Out; Jerusalem In

The Economy: Continued economic expansion is the order of the day with San Diego benefitting from Pentagon spending, tourism and hi-med tech. Defense/State Departments “Pivot to the Pacific” is in full swing with no slowdown in sight. Air, land, sea and sub-sea drones are expanding at an increasing pace with projections that pilots are the next dinosaurs to face extinction. The Trump administration’s goal of sharpening military readiness plays into this evolution. Trump continues to act on campaign promises and realign years of US policy: Paris climate accord gone. TPP gone. UN under review. Marginal allies re-evaluated. Iran nuke deal gone. Torpedoes be damned; business be damned. Yet, despite cries that armageddon is nigh, the economy continues to expand and stocks continue to hold fast. As we go to press, the major indices have turned positive for the year. … could change any time but the rally of the past week, led by oil, has been impressive. Year over year oil is up 50%. This time around oil is rallying on geopolitical instability and not demand. Think global, act local.

Food for Thought: Long time readers know that we’re not fans of the central banks. But to deny their impact is supreme idiocy. We look askance at market manipulations, chronic bailouts of TBTF banks, central bank crony capitalism and other signs that the Illuminati are hand in glove with the Giant Vampire Squid. However, don’t stand in the open and fruitlessly curse the weather. So we continue to warn that with the Fed on a tightening cycle, investors should have an exit strategy. Signs continue to accumulate that this is a late stage bull market in stocks. The inverse relationship in bond-land is a fact of life. Buy and hold has worked since 2009. We’re cockeyed optimists like only San Diegans can be. But nothing lasts forever.

Proverbs 05:15

The best things in life are free.

There’s no such thing as a free lunch.

Two is company, three is a crowd.

The more, the merrier.

Birds of a feather flock together.

Opposites attract.

Beware Greeks bearing gifts.

Don’t look a gift horse in the mouth.

The squeaky wheel gets the grease.

Silence is golden.

The truth will set you free.

Ignorance is bliss

Proverbs 9:2

Fortune favors the bold.

Truth is one of the highest ideals.

Free will is a key moral concept.

Knowledge is never wasted.

Without a vision you cannot manage your life.

Mental toughness is having an ironic sense of humor free of self-pity.

Embrace miracles.

Swallow your pride.

Expressing doubt may destroys the confidence that others have in you.

There’s nothing that the Irish don’t know about lost causes.

The solution to one problem may create another.

Better late than never.

Reconcile talent, ambition and ego.

Turn a negative experience into a positive one.

Question your habits.

Do not seek acclaim; deserve it.

Some things have to be believed to be seen.

To avoid criticism, do nothing, say nothing and be nothing.

Stay Hungry. Stay Foolish.

Interest Rates

The Economy: Consumers are feeling confident as we enter the Holiday shopping period. Cheap gasoline has fattened wallets for the annual onslaught of present buying. The confidence and sentiment numbers match what we are hearing from people we talk with. Across the spectrum we’re hearing, “Things seem to be getting better.” This outlook from the street was reflected in the Fed’s minutes that were released today. The U.S. economy is now clearly the engine of growth for the planet. The minutes acknowledged that the global slowdown seen in Europe and Asia has limited effect on the U.S. Inflation is not an issue and there is little wage pressure. In fact, deflation remains a concern. The U.S. economy continues to expand at a moderate pace. The elephant in the room continues to be when the Fed will begin to raise interest rates. In the early days of this century, Yellen’s predecessor, Alan Greenspan, discovered the limits of manipulating interest rates to achieve monetary policy objectives. The Yellen Fed is acutely aware of being on the edge of losing credibility as they face this same dilemma. Clearly interest rates will eventually go up … simply because they can’t get much lower. So it’s a matter of when; not if. However, as we look at the U.S. economy within a larger global context, we don’t see a compelling reason for an increase any time soon. Plan accordingly.

Food for Thought: A joke making the rounds is that in the future, Europeans are going to be predominantly used as housemaids for the Chinese. This always gets a laugh. It speaks to the widespread belief that we’re moving to a China-centric world. But this assumes that China is a monolithic juggernaut. History tells us otherwise. Remember Japan in the 1980’s. They had the biggest banks, the best cars, electronics, consumer products, the best labor practices, the best business models. They were buying up U.S. real estate at a prodigious rate. At the peak they bought Pebble Beach and the Rockefeller Center; paying massive premiums because they were invincible. Then it imploded. History may be repeating itself.

America’s Cup

The Economy: Banks and bonds were closed for Veterans Day so the economic calendar has been light this week. Two items of good cheer: First, with the fall in the price of oil, this holiday shopping season could be the best in years. The boost in holiday sales should raise 4th quarter GDP. Second, the U.S. and China have reached a historic deal to end tariffs on high-tech products. It’s estimated that this deal could affect $1 trillion in goods. Approval by the World Trade Organization is expected. The last time this type of technology deal went through was in 1996. At that time, most GPS technology, much of our medical high-tech and smart phone tech didn’t exist. Happy Holidays indeed!

Food for Thought: … you got your problems and I got mine … Warren Buffet lost $2 billion in one day last month. Jack Ma, the owner and newly minted billionaire of Alibaba is complaining that he is tired, and doesn’t like being rich. Larry Ellison, Oracle Big Dog, Winner of the America’s Cup and California’s wealthiest man at $28 billion asks, “Bermuda or San Diego?” Larry has San Diego in his sights for the location of America’s Cup 2017. The other contender is Bermuda. Huh?!? … think I’ll swim there. The decision is expected any day. The San Diego Yacht Club hosted the Cup three times: 1988, 1992 and 1995. The 35th America’s Cup would be held in San Diego Bay instead of several miles off Point Loma as was the case in the past. This is part of the continuing effort to make competitive sailing a spectator sport. The potential television rights have all comers salivating. Perhaps it’ll happen. If you’re a sailor watching sailboat races can be exciting. If not, it can be like watching paint dry.

Election Mayhem

The Economy: Oil and the elections dominated this week. Oil’s persistent decline is a boon for consumers and a curse for producers. Saudi Arabia has responded by cutting prices in an attempt to gain market share. ISIS must be giving the stuff away. Falling oil prices will stimulate the global economy. The U.S. as the largest consumer will see disposable income rise dramatically as folks spend less on gas and heating oil. Airlines and other fuel-intensive industries will benefit from the windfall of lower operating costs. Against this backdrop, employment ticked up while mortgage applications ticked down. Mid-term elections saw Republicans retake the Senate. They now control both houses of Congress. Stand by for gridlock to become a log jam. Now we have a lame duck President facing a Republican majority that is fractured by internal strife between the Old Guard and the Tea Party. Who’s on first?

Food for Thought: Talking heads are calling this a breakthrough election with the largest Republican majority since before the Great Depression. Perhaps political neophytes or fanatics share this view. For the rest of us, the Fools on The Hill, regardless of stripe, have to produce results. Our great country is all too often led by self-serving lemmings with no regard for the damage they inflict on those that put them in office. Lead, Follow or Get Out of The Way!

Stocks Go Wild

The Economy: Europe, China, the Dollar and Oil were headliners this week. The economies in Europe and China continue to show signs of slowing. This week Fed officials said a worldwide economic slowdown may delay interest rate increases. The dollar has rallied with the global slowdown. Though this makes U.S. exports more expensive, 70% of the U.S. economy is consumer/service driven. So the effects on our economy will be limited. It’s another sign that the U.S. economy is the global engine of growth. Oil has fallen to 2-year lows with no bottom in sight. At this point in time, the Saudis have shown no interest in trying to support oil prices. The action in oil prices has the effect of a massive tax cut on American consumers and will further benefit the U.S. economy. Bond-Land was ecstatic over the news with interest rates falling to 2-year lows.

Food for Thought: Stocks plunged this morning. At the lows the DOW was down 460 points. Though the indices came back late in the day, the DOW has turned negative for the year. The S&P and NASDAQ are barely in positive territory. We’re in the midst of earnings reporting season. Disappointments are being met with crushing selloffs. Netflix disappointed and was down $114/share in after hours. We’re beginning to see bargains in anticipation of a move higher into the 4th quarter. But first we have to get through this valley of the shadows. Click here for a market perspective. Now may be the time to talk to your CPA about tax loss selling.

Janet Yellen Speaks

The Economy: The Fed’s  Minutes were released today at 11AM PST. They caused more than the usual rock ‘n roll, roller-coaster effect on the markets. Bond-yields went down dramatically and stocks rocketed out of sight … up nearly 2%. The Bernanke Fed worked hard to establish transparency in their decision-making process. You reap what you sow. The Yellen Fed is now grappling with how to maintain transparency without spooking markets over word changes that would indicate a coming interest rate hike. The point to be taken from the Fed minutes is that interest rates are data dependent more than ever. No action or date is set in stone. The minutes showed that the Fed has an upbeat economic outlook. However risks exist in a weak global economy. Long story short, the Fed may in fact raise interest rates next year but the timing of that action is less transparent than ever.

Food for Thought: Yippee ki-yay! Stocks and bonds strapped on the rocket-pack and continued their bipolar love affair with the Fed. Central Bankers are the new Masters of the Universe. Tuesday there was nothing good in life. Today everything is beautiful. Yesterday’s damage to the stock market was reversed today after the Fed showed their cards. Whether this is a true reversal or a head fake is uncertain. Stocks have been in a down trend since mid-September. Today some of that carnage was mitigated. Stocks usually find a bottom sometime in October. After yesterday and today’s moves, we may be forming that bottom.