We have always liked the clip from the movie Animal House where in the “Deltas on Trial” scene the smooth talking Eric “Otter” Stratton get up and says, “Point of parliamentary procedure.” From there Otter goes on a diatribe ending with the comment, “Isn’t this an indictment of our entire American society?
Economists view the growth in labor productivity, or output per worker, as the single most important variable in an economy. It’s what lifts the standard of living, helps keep prices low, reduces government budget strains, and drives corporate profits. Over the next few decades, achieving faster productivity growth will be key as labor force growth slows. The outlook is encouraging, but uncertain.
As expected, nonfarm payrolls rebounded from hurricane-related effects. The unemployment rate edged lower, but that may have been noise. Leisure and hospitality was the sector most affected by Hurricane Irma, which might explain the choppiness in average hourly earnings (up 0.5% in September, flat in October).
So I am sittin’ on a dock of the bay here in Boca Raton Florida watchin’ the tide roll away as I wait to speak at a conference of insurance CEOs and CFOs. I have spoken at this annual event for the past 10 years, and it is always a “gas” because the attendees are terrific people.
We have used the aforementioned quote many times over our nearly 50 years in this business, but surprisingly, it is just as relevant now as it was when first written. Bet it surprised you that the quote is dated 1935! Read it a few times away from the maddening crowd and reflect on it, because certain phrases will grab you with their wisdom.
The economy grew at a 3.0% annual rate in the advance estimate for the third quarter, as the hurricanes appeared to have both positive and negative effects. The figures will be revised, but the story is unlikely to change much.
The Bureau of Economic Analysis will report its advance estimate of 3Q17 GDP growth on Friday. The figures will be revised, but investors should be aware that hurricane effects are likely to distort many of the GDP components.
Money is a vital life enhancer. If you have it, you can enjoy life incomparably more than if you don’t. The great storehouses of travel, leisure, rest, refinement, appearance, health, above all, peace of mind – all of these are open to you if you have money.
Beyond all the twists, turns, and quirks in the economic data reports, the overall picture appears largely the same. Growth remains on a moderate track, somewhat beyond a long-term sustainable rate (as the job market continues to tighten).
I first became aware of Frederick “Shad” Rowe, captain of Dallas-based Greenbrier Partners, by reading his brilliant comments in Forbes magazine decades ago. While Shade no longer writes for Forbes, his stock market insights are available via his monthly letter to the clients in his investment partnership.
Shakes off bad news and listens to good news! That’s how the past two weeks have been since the “melt up” began.
As expected, hurricanes Harvey and Irma had a significant impact on the nonfarm payroll data. However, it’s impossible to say exactly how much. The distorted September payroll figures were never going to be a factor in the Fed policy outlook. There will be two more employment reports before the mid-December policy meeting and we can expect a recovery from hurricane effects.
We recalled these sage words from GMO’s (Grantham, Mayo & Van Otterloo) Jeremy Grantham as we watched the end of the quarter performance gaming and portfolio restructuring late last week. His comments are particularly cogent now that we have entered the month of October, since many money management firms close their fiscal year “books” at the end of this month.
Investors don’t pay much attention to the monthly report in personal income and spending. We already have a good handle on income from the employment report. Unit auto sales and the retail sales data tell us a lot about consumer spending.
As expected, the Federal Open Market Committee left the federal funds target range unchanged (at 1.00-1.25%) after its September 19-20 policy meeting. The FOMC also announced the beginning of balance sheet reduction. The Fed had outlined how this would work in mid-June, and officials did a good job of telegraphing when it would start.
“Managing risk,” what a novel concept, but regrettably many investors fail to do just that. My father taught me to manage risk, a trait emphasized in the sentinel book by Benjamin Graham, The Intelligent Investor, which Warren Buffett has deemed, “The best book ever written on investing” and where the aforementioned quote resides.
Reflecting on the months of travel as we wing our way back to Tampa at 38,000 feet, one of the more interesting encounters in those travels was spending time with Steve Forbes (Forbes Magazine). Although Steve is a staunch Republican, he suggested that Republicans worship at the altar of the CBO (Congressional Budget Office).
In her post-FOMC press conference, Federal Reserve Chair Janet Yellen is expected to provide a concise evaluation of the current economic situation. That includes a discussion about the recent trend in low inflation and the economic impact of hurricanes Harvey and Irma. She is not expected to signal what the Fed will do with short-term interest rates in the months ahead.
So, I am sitting here in downtown Saint Petersburg, Florida at 7:30 a.m. Sunday morning awaiting the “great flood.” It was just a few days ago the computer models had hurricane Irma heading up the east coast of Florida, but Irma changed her mind.
Summer is normally a pleasant time, but most Americans are likely to be happy to have August 2017 in the rear view mirror. Civil unrest, tensions abroad, devastation and destruction – yet, the stock market continues to improve.
As many of you know, we have been on holiday in South Africa for the past three weeks. The trip began with a long plane ride to Cape Town where we were gathered up and taken to the five star rated Ellerman House (Ellerman).
I have written before how fantasy football is one of my favorite hobbies. For an analytical, data-obsessed sports fan like myself, it doesn’t really get any better than diving into statistics to try to draft a team of players that will beat my friends and win the trophy at the end of the season (and yes, we do have a real trophy).
The development of a personal trading or investing philosophy is usually an evolutionary and highly personal process. Through a combination of experience, trial-and-error, and the attainment of knowledge, successful market participants hone their skills until they find a strategy that works for them and that is consistent with their general mindset.
The exodus of CEO support following President Trump’s response to Charlottesville shook the foundations, but the stock market outlook has remained constructive. Every administration has its share of difficulties early on, many self-inflicted, before settling down.
Right now, we don’t know if we can put this North Korea news in the same category of past market shocks, but looking back at history, major market collapses generally occur because of economic and financial deterioration, not geopolitics.
The July CPI data were a bit softer than anticipated, due partly to a drop in the price index for lodging away from home. Granted, if you exclude everything that went down, the CPI always looks higher, but the underlying trend is not far from the Fed’s earlier expectations (of a gradual move toward the 2% goal).
Ladies and gentlemen, investing is a lot like whaling. Investors are constantly searching for that whale of a stock with the “right stuff” . . . aka the “ambergris factor.” Indeed, there have been many such “whales” on the Street of Dreams since the Royal Bank of Scotland’s “sell everything” advice at the January/February of 2016 stock market lows.
There’s a fair amount of noise in the monthly employment data, but July figures remained consistent with expectations of moderately strong growth in the near term. One glaring weakness remained.
One hour after beginning a new job which involved moving a pile of bricks from the top of a two story house to the ground, a construction worker in Peterborough, Ontario suffered an accident which hospitalized him. He was instructed by his employer to fill out an accident report.
The advance GDP report for 2Q17 contained few surprises. Growth was largely in line with expectations, leaving growth for the first half of the year at a 1.9% annual rate. Recent reports suggest some loss of momentum for the consumer, but rising real wages ought to provide support.
Psychologists have uncovered a surprising number of idiosyncrasies from making the soundest choice in many situations. These lapses explain some of the mysterious up and downdrafts that can lift and lower stock prices. Understanding them can make successful investing easier. The most important findings arise from answers to a pair of questions.
Samuel Blodget was an early American merchant, amateur architect, and economist. He wrote Economica: A Statistical Manual for the United States, considered to be the first American book on economics.
Fed Chair Janet Yellen covered no new ground in her monetary policy testimony to Congress, but that didn’t stop financial market participants from trying. While the CPI report drew a closer focus, past inflation figures don’t tell us a lot about future inflation.
I am not quite sure how I met Leon Tuey, but meet him I did a few years ago, much to my benefit. My guess it was through either a mutual friend or a Canadian reporter that we both speak to.
The June Employment Report was about as much as stock market participants could have hoped for. Nonfarm payrolls rose more than expected, helping to offset fears that the economy is weakening.
We first published this in 2014, but decided to republish it today given the cover story of Barron’s that reads “The Machine Driven Market,” which intuitively means the era of those machine driven models is nigh. I like this story.
Recent economic data reports have helped to fill in the picture of the economy in the first half of the year. However, investors should be more concerned with the prospects for the second half of the year.
Heading into the second half of the year, there are a number of key policy uncertainties in Washington. For the Fed, a clear near-term picture is a contrast to the longer-term outlook where views of the market and the Fed have diverged.
“Active funds are now 71% overweight in the FANG companies after making the biggest move from value to growth since 2008.". . . Bank of America
The June 14 Fed policy decision was expected to overshadow the mid-month economic figures. Instead, the soft data reports contrasted with the relatively more upbeat central bank. Did the Fed make a mistake? Or are the financial markets placing too much emphasis on the short-term data?
Recently the word “they” has surfaced with the media; THEY are influencing elections, THEY colluded with the Russians, THEY are selling U.S. dollars, THEY are manipulating markets, THEY are buying bonds, and a week and a half ago THEY sold the tech stocks causing sort of a minicrash as whispers of a “bubble” careened down the canyons of Wall Street.
The market odds of a June 14 Fed rate hike have risen in recent weeks. Another 25-basis-point increase in short-term interest rates is seen as a near lock.
One of the good things about traveling is one gets the chance to read, think, and reflect on events that have taken place. To that point, while traveling last week I had the chance to read the transcript of ex-FBI director Comey’s testimony to the Senate intel committee.
Currently, we believe a trading high is due here with a subsequent 'hover' around the recent highs in the offing over the next few weeks. Following that, if correct, there should be another whole new leg to the upside.
In today’s Morning Tack, however, we are referring to “Better Call Shad,” not Saul, meaning Frederick “Shad” Rowe, the founder of Dallas-based Greenbrier Partners and also a “fixer of sticky situations.” The current short-term “sticky situation” would be the stock market flat-lining for a few weeks and in the process frustrating both bulls and bears alike. After our talk, I went back and re-read Shad’s April letter to shareholders. There were a few lines that really resonated with me.
On a craps table, if a 7 or 11 rolls on the first throw of the dice, you are an automatic winner if you are betting the “pass line.” But, if you roll a 2, 3, or 12 on the first roll, you lose.
Following the election, stock market participants gained optimism on the view that the new administration would push through a reduction in regulations, sharply boost infrastructure spending, and achieve broad tax reform.
Some inflation numbers were reported last week. They read: April PPI jumped 0.5% month/month, +2.5% year/year; +2.2% year/year was expected. Meanwhile, core PPI increased by 0.4% month/month, +1.9% year/year; +0.2% month/month and +1.6% year/year were expected.
Growth in nonfarm payrolls rebounded in April, following a soft increase in March, consistent with a longer-term downward trend. The unemployment rate fell to 4.4%, the lowest level in over a decade.
