Daisy Jane—America. Flowers are sprouting out of the ground yet old man winter continues to flex his muscles as cold Siberian air continues to wrap around from Northern Canada to the Ohio Valley. Erstwhile, the western US is experiencing record warm levels as Denver, Colorado has experienced warmer temperatures than Nashville. Our weather is a great symbol for current stock market conditions as interest rates reflect dysfunction within the financial system. If our financial markets were behaving more normal, then rates would be higher on a short term and long term basis. Stated monetary goals by the U.S. Federal Reserve system desire low unemployment at or below 6% and a targeted inflation rate exceeding 2%. The recent collapse of oil and commodity prices is forecasting lower inflation for the foreseeable future which may keep a stranglehold on Fed policy preventing any chance of raising interest rates and/or tightening monetary policy. The Fed is literally on the ledge of a Great Deflation if commodity prices do not reverse.
Run for the Roses–Dan Fogelberg. Eighteen months from the 2016 Presidential election, candidates are posturing for position spending time in Iowa and New Hampshire courting fat cats for campaign donations. Never before has the political landscape been so difficult to navigate as geopolitical forces shifted over the past several years. The growing Cold War between Russia and the West continues to be the most challenging issue in the world. At the same time, a war-torn Middle East makes it difficult to decide who our allies are as we said good bye to Mubarak in Egypt, Qaddafi in Libya, and give Netanyahu in Israel a cold shoulder. At the same time, we are now negotiating with Iran like they were our best friends! Then there are reports of Russian fighter jets making flyovers in Northern England, Sweden and the Panhandle of Florida.
Bed of Roses—BonJovi. China and Japan now own upwards of $4 trillion of U.S. Treasury bonds. All the while, the Federal Reserve has matched the Chinese and Japanese with its own $4 trillion in Treasury debt on their balance sheet producing unprecedented money supply levels as measured by M- 1 and M-2. We believe that interest rates are unduly low and any cracks in the purchase programs at home or abroad should lead to a great interest rate spike we have not experienced since 1979-1980. The Great Disintermediation is coming. We have no idea when?
Orange Blossom Special—Johnny Cash. Since 2009, the Federal Reserve has taken extraordinary measures causing many leading economists to express great warnings that the monetary policies of QE I, QE II, and QE III would come with consequences. Artificial price increases in all asset classes have been the direct impact of the aggressive Federal Reserve stimulus. Alongside, the unilateral +$1 trillion budget deficits being implement by the Obama Administration with no budgets being presented to the Congress, nor approved by Congress have contributed to collateral damage as State governments become accustomed to many of these spending programs building bridges and highways to nowhere. Keynesian economics bankrupted Germany in the 1930’s which led to aggressive military action by a desperate Adolf Hitler.
Roses are Red, My Love—Bobby Vinton. Mysteriously, Russian President Vladimir Putin is doing a re-enactment of Hitler as he has already invaded the Ukraine taking the Crimean port city which is the largest natural gas terminal in Europe supplying significant fuel supplies to Europe. We believe that had Saudi Arabia not increased its crude supplies to the market along with Iraqi and Libya that oil would be $200 a barrel. We now have upwards of 80 million barrels of oil in excess of normal levels of ten years ago. At $45-$50, the U.S. domestic oil service companies are capping wells and parking rigs in the Gulf of Mexico. We still believe that oil holds $38 a barrel for the coming months, making the fracking community less profitable.
Marigold—Nirvana. The recent run-up in the U.S. dollar value will bring down corporate earnings for the first two quarters of 2015. In the coming three to six weeks, we expect all the multinational corporations to take ten to fifteen percent earnings reductions due to foreign currency changes. We believe this will put a ceiling on stock prices and short term see weakness in the overall market.
Tiptoe through the Tulips—Tiny Tim. Stock selection becomes very difficult as market forces make high price and high expectation companies more attractive on the media outlets than lower valued, less attractive companies. Many of the leading investment firms are predicting higher interest rates and higher stock prices. We believe this is very contradictory and caution our clients to high pressure sales tactics from Wall Street investment firms. Additionally, we strongly advise against insurance annuity contracts that offer high income yields. Rising interest rates will hurt the high price stocks and crush annuity companies.
Build Me Up Buttercup—The Foundations. If you were ever inclined to travel to Europe, now is the time. The Euro has dropped 40% in the last nine months and should make travel to Europe more affordable. As far as that goes, the Canadian and Australian dollars have fallen making it cheaper to travel there as well. In fact, the 50% drop in gasoline prices, you can drive to places now for much lower tank prices.
Wallflower—Bob Dylan. Finally, we believe that the U.S. consumer will unleash the gas savings in the form of retail spending, casual dining, airline travel, hotel bookings, and even consumer durable goods that have been on hold for several years. We remain positive on the markets but warn of the challenges that overpriced companies present for future investment
We consider it an honor to serve as your investment manager. We look forward to hearing from you in the future.
Russell L. Robinson
Robinson Investment Group
5301 Virginia Way, Suite 150
Brentwood, Tennessee 37027
Titles from: http://www.songfacts.com/category-songs_with_flowers_in_the_title.php