Happy Birthday America!
Birth of a Nation. On July 4, 1776, the Second Continental Congress issued “The Unanimous Declaration of the thirteen united States of America”. The writers of the Declaration believed that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.
Natural Born Leader. On July 9, 1776, George Washington read the Declaration of Independence in front of the New York City Hall and the world knew that the American Revolution had begun. Citizens moved quickly to topple the statue of King George of England in Manhattan that day.
Signed, Sealed, and Delivered. By August 2, 1776, representatives from the 13 colonies drafted and signed the Declaration of Independence declaring its independence from King George of Great Britain. In the document, the Colonial representatives cited numerous actions by the King which removed freedom and punished the colonists with taxation, obstructing public assembly, worship of God, and essentially impairing the ability to pursue economic freedom from the Throne. The writer(s) of the Declaration essentially listed 28 counts against King George of Great Britain. Over the course of the next twelve years, the American Revolution was fought against better trained soldiers from the British Empire in its quest for Freedom which was reached with the defeat of the British in the New York harbor. Ironically, France came to the rescue by bombing the British fleet in the harbor. The Freedom came from the colonists fighting for the Freedom.
The Virginian. At the end of the American Revolution, the U.S. Constitution was written and adopted to run the U.S. government in 1787. George Washington became our first American President having successfully defeated the British as the Commanding General of the American military. He never sought the job but was drafted into the position. He was the Greatest American President.
Philadelphia Freedom. The freedoms listed in the Bill of Rights of the U.S. Constitution remain the cornerstone of the United States around the world making the experiment known as the United States of America the greatest nation the world has ever known. We enjoy freedom of religion, speech, and the right of assembly. We can buy guns to protect ourselves and secure our house against unreasonable searches. We must be indicted before we can be held in jail. Most important, the powers not delegated by the Constitution are reserved for each of our 50 states!
American Treasure. Ironically, on May 17, 1792 the New York Stock Exchange began its operation with 24 brokers signing what was called the Buttonwood Agreement to trade stocks and U.S. government debt. Prior to that, Alexander Hamilton started the Bank of New York in June 1784 as a private bank. The Bank of New York was one of the original two stocks traded on the NYSE and is the oldest stock traded on the Exchange today. Washington chose Hamilton to become the first U.S. Treasury secretary in 1792. Hamilton was Washington’s attache’ during the American Revolution and Washington relied heavily on Hamilton’s ability to peddle U.S. Treasury bonds to European investors. Hamilton, who happens to be buried on Wall Street, was the architect for our modern day stock exchange, and had pioneered the trading of U.S. Treasury bonds. Hamilton, himself, was a Caribbean refugee from St. Croix who had been orphaned as a young child only to rise to prominence from his experience in trading sugar and other commodities tied to the Caribbean economy.
“I’m Taking My Country Back.” Fast forward to 2016, we are watching a very historic event with Great Britain voting to leave the European Union on June 23. The Brexit supporters no longer believed that the EU was acting on Britain’s best interest regarding trade and immigration. It was the older voters who voted to leave the EU. The growing nationalism around the world makes it understandable that the British voted to take its country back and protect its borders. Ironically, we find it most interesting that England (who we declared our Independence in 1776) has basically issued its own Declaration of Independence from the European Union. One has to believe that the leaders of the EU would have rather Greece, Portugal or Spain to depart, but not England. Maybe, for the first time in 240 years, we can share in the enthusiasm that the British have exhibited in declaring their independence. We are encouraged that the people spoke and that good or bad, the British want to govern independent of Brussels.
The Sun will Come Up Tomorrow. We believe that Britain leaving the EU is not an economic decision, good or bad. People who do business in Europe will continue to do business in Europe. Money will continue to change hands. Foreign currency exchanges are already charging onerous fees to translate currency. We believe the decline in the market to be short-lived and that as long as low interest rates persist, the economy will continue to limp along. We continue to anticipate some form of inflation in the coming months. We see the prolonged stagflation to dominate economic times with very little job growth and/or wage increases while Federal Reserve’s stated policy is to increase inflation.
Hot n Cold. We remain Burrish (Bullish + Bearish). Burrish is a Japanese word which basically means we do not know which way the stock market will go in the coming months. Usually, low interest rates forecast good economic times. Yet, extreme low interest rates indicate that great deflation forces prevail. Commodity prices have fallen over the past five years as the Commodity Research Bureau’s basket of prices tumbled to a 30 year low in January 2016. Subsequently, we believe that interest rates are not rising any time soon.
China Town. As we have previously discussed, we believe the decline in commodity prices was adjusting to an economic decline experienced around the world, particularly in China. Chinese economic growth has slowed down considerably from its 9% rate experienced ten years ago. We have heard of the Chinese and Korean steel companies dumping steel at significantly low prices due to their overcapacity. Economic corrections are normal within the market cycles which ebb and flow with recession and recovery. Commodity prices should rise in the coming months and stock prices should improve with an improving economy through middle 2017.
We continue to consider it an honor to serve you as investment adviser.
Russell L. Robinson
Robinson Investment Group
5301 Virginia Way, Suite 150
Brentwood, Tennessee 37027