Viewpoints

and

Reflections

August 14, 2019

Quarterly Comments: Third Quarter 2019

Heard on Bloomberg radio this morning – “Looking forward, people do not like what they see.” Why is that? Well, we have a host of reasons to be cautious, but here are the top few:

First on that list has to be the fact that the yield curve, the difference in rates on the 2 year Treasury note when compared to the 10 year Treasury bond has inverted. In other words, the two year rate pushed higher than the te...

Trade. Tariffs. Trade. Tariffs and a little bit of Brexit.  And the beat goes on.

            The beat seems to be picking up tempo, however. Tariffs on items manufactured in China have increased from 10% to 25%, and the range of products on which the tariffs are levied had broadened out to include many consumer items. The stock markets are beginning to rethink the “priced in” assumption that a trade deal would be reached soon. So now we see...

Up until very recently the stock markets have been complacent, working under the assumption that the trade war rhetoric would not erupt into a real trade war. As of today, May 13th, however, it seems that traders are not so sure about that “not really” assumption.

 Why does the stock market react negatively both to applied tariffs and to a real threat of more tariffs being imposed on Chinese imports? Because, quite simply, tariffs are a tax....

My father used to say, “In confusion there is profit.” He probably meant you could get away with an awful lot of nonsense while the adults were looking the other way. But I think there is some wisdom here – Let’s consider this: We are confused. Global growth is slowing, the earnings growth of companies here in the US is slowing by more than half this year, even the Federal Reserve is slowing its forecast of interest rate increases. And yet,...

February 22, 2019

What is the difference between "slowing" and "slow"? I think we need to clarify this distinction to understand our outlook for 2019. The economy here in the US is slowing, as is the Global economy. Peak economic growth may be behind us, but this does not mean that we are facing an imminent recession. We expect to see more of an earnings decline in 2019. Whereas corporate earnings grew at 20% or more in 2018, we expect that to decline to arou...

January 7, 2019

If you are a “first timer” experiencing a major market correction for the very first time or even someone who lived through the market crisis of 2008 but was less effected then, the horror of opening a statement and seeing a seriously lower number than last month can be unnerving, unsettling, even panic inducing. How can we make sense of a bear market? What are the best ways to cope with what feels like a drumbeat of bad news?

As one who has...

October 11, 2018

Dollar Tree customers are feeling the effects of tariffs imposed last month. Steel and aluminum tariffs imposed earlier in the year touched primarily industrial goods, but the new round of tariffs imposed on Chinese products are now touching everyday consumer items. The article in USA Today notes Dollar Tree imports 42% of its products (USA Today 10-8-18), mostly from China. Management remedies will be pulling items off shelves, higher price...

Here we are at the mid-point of the third quarter and I think it’s safe to say that despite some headwinds and uncertainty the economy remains in good shape. A good economy generally goes hand in hand with a good stock market. Market trends follow companies’ earnings, and the most recent round of reporting showed a strong double-digit year over year growth. The effects of tax cuts should be seen in continued profits, particularly in the smal...

I was recently at a gathering of friends and the discussion turned to the new tax law. Several of them admitted they may not be able to deduct annual contributions to their favorite charities due to these recent changes. While I don’t know if this fact will alter their commitment to support their church, school or important cause, I know the realization of the loss of deductibility for charitable donations came as a shock to them, and may al...

The news flow this quarter seems focused on two areas: rising interest rates and the looming deadlines for tariff negotiations. As you probably know “news” is often another way of expressing “things we are watching for negative effects on our portfolios.”

            Let’s start with what is worrisome. The US ten year Treasury bond interest rate now hovers around 3%. Why is this significant? For starters, this rate has not been this high sinc...

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