Good afternoon,
The WMR is taking a bit of heat for last week’s message. Some are claiming that we violated that old rule about not mentioning politics or religion in a public place. Like Will Rogers once said “I’m not a comedian, I just watch the government and report the facts.” We said that we listened to Bernie Sanders on a podcast, and that’s true. We said that we disagree with pretty much every policy idea that Mr. Sanders espouses, and that’s true. We argue that none of them ever have or ever will work in reality and we steadfastly stand by our belief that capitalism, while not always perfect, is the single biggest wealth creation system the world has ever seen. It makes everyone, yes everyone, wealthier and better off, and that’s so true as to be indisputable. We have also said over the years that we do have some respect for Mr. Sanders because he is genuine, and that’s true. He is what he says and that’s what you get.
Before we’re accused of being some right wing conservative shill, we do admit to leaning that way, we have some observations about that side as well. For example, we’ve written, and we steadfastly stand by this belief as well, tariffs and taxes are bad. So we don’t like them. We don’t like to see them mentioned or threatened and especially not imposed. Ultimately, we the consumer end up paying them, so that’s not good. Similarly, we don’t particularly like that our POTUS tweets about economic policy or interest rates and insults members of his cabinet via social media. One of his tweets last week was something about possibly buying Greenland. Wait, what? Unless we missed it, we haven’t seen Greenland listed on realtor.com. So you can always count on the WMR to call them as we see them. We may get some wrong, but we believe those will be far less than what we get right.
This week’s thorn in our craw is that the press seems to be trying to talk the economy into a recession. Sure the market dropped a few hundred points a few different times, sure the yield curve inverted for a minute (more on that shortly) and sure some sectors are doing better than others, but each of those things is par for the course. Markets move, rates move and some businesses do better than others at certain times. That’s why we own many different and diversified holdings and also why we pay only scant attention to business TV sound bites. Various sources, investment companies, money managers and the like, have said that we have anywhere from a 20% to 40% chance of a recession before the 2020 election. Whenever they say it, the press takes that ball and runs, extrapolating to the next end of the world. Let’s assume for a moment that those estimates are correct, doesn’t that mean that we have a much higher probability of NOT having a recession and the world not ending? Review the data, unemployment is down, productivity is up, markets are strong, balance sheets are solid. We just don’t see a recession the horizon in the near future and we wish that the media would stop trying to manufacture one. Don’t just take our word for it, here is Brian Wesbury; Chief Economist of First Trust Portfolios with a similar opinion. https://www.ftportfolios.com/Commentary/EconomicResearch/2019/8/19/this-is-not-2008
Back to “inverted yield curve,” what is that exactly? While it sounds like a specialty pitch from some overpowering left handed MLB pitcher, all it really means is that short term interest rates are higher than longer term interest rates. And when it happens, it usually only stays that way briefly. We doubt that it signals a looming Armageddon, more likely it signals that bond traders have some uncertainty about near term rates. Low rates are good and bad. Low is good if you’re borrowing, like for a mortgage or to build your business. Low is bad if you’re an investor or saver as you get less interest on your savings. In your day to day life, inverted yield or non inverted yield or whatever really doesn’t matter. There’s our finance lesson for this week.
File this story under “Uh Oh…”
Harry Markopolos published a report last week stating that GE, yes General Electric, accounting is not accurate. More specifically, he writes that “it’s a bigger fraud than Enron…”
If Mr. Markopolos’ name sounds familiar, it’s because he’s the guy who sounded the warnings on Bernie Madoff twenty years before the Madoff scheme was uncovered. He had written about Madoff, he had warned about Madoff, he approached the SEC about Madoff, and nothing was ever done until Madoff collapsed. So while we hate to think that something fishy could be going on at one of the most iconic companies in the history of the world, we’d guess that Mr. Markopolos should be taken seriously and his claims further investigated. We have not read the 175 page report, we might try to, but GE and GE investors had better read it.
Here is GE’s most current response.
https://www.cnbc.com/2019/08/19/ge-stock-issues-more-detailed-response-to-fraud-investigator.html
No doubt they’ll continue to refute the claims in the report.
The WMR website, www.weeklymarketreview.com has a section about financial planning, naturally, but it also has a section about diet, exercise and nutrition, which is an important area of interest. In that section, we discuss diet and food. Why do we bring this up? Because we like food and we like to cook. We’ve become much more cautious about our diet in recent years as we deal with some gastrointestinal issues, but that doesn’t stop us from preparing meals for the family. We pay attention to the food we prepare and eat, but we think this example might be going a bit too far. There is a university in London which is removing all beef products from sale in an effort to tackle the “climate emergency.”
https://dailycaller.com/2019/08/12/london-university-bans-beef-climate/
We’re not really sure what to say about this. We think that might be a bit of an overreaction, but universities often do things or establish policies which attempt to mollify anyone and everyone. Political correctness is the name of the academic game.
In other food news, there has been a discovery of a machine which turns plants into delicious tasting meat. It’s very efficient and has been around for a very long time. Grass and plants go in the front, there is some processing which takes place over several months and delicious meat is the result. That machine is called a Cow. And during the conversion process, there is a side benefit of providing protein and calcium rich milk.
In teenage girl job news, our 16 y/o is slowly finding out that earning your own money and having an account of your own may not be such a bad idea. She received a paycheck the other day in excess of $300. Nice work! We said. What are you going to do with the money?
Use it for a concert ticket.
Excellent. Which concert?
Florida Georgia Line.
Nice. Have fun.
In slightly younger teenage girl news, our 13 y/o is on the high school dance team. They’re already practicing nearly every day and school hasn’t even started yet. Dance team emails are arriving almost as frequently for dues, or uniforms, or shoes, or competitions, or pictures, or sponsorships or some other slow drain on parent money. Performances will be at every JV football and basketball game this upcoming season.
“Are you going to come watch all the performances?” We were asked.
All of them?
“Of course, don’t you want to see me perform?”
Sure I do, but do I have to come to every single game?
“Yes.”
But you only perform for few minutes at halftime, right?
“Yes. So?”
Ok, lemme check my calendar…
LF25 – “Economists have predicted 9 of the last 5 recessions.” – Paul Samuelson.
Have a great week.
Michael J. Acho, MBA, CFP®
Private Wealth Advisor
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Lincoln Financial Advisors/Sagemark Consulting
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