It’s a Wonderful Life (1946).  Spring has sprung!  Unseasonably warm weather in February and March has lessened the demand for oil and natural gas this past winter.  Additionally, the world wide supply of petroleum has reached the glut stage.  Corporate earnings continue to improve with S&P 500 companies projected to grow at 10% for 2017.  The markets are reflecting optimism for the next two years as companies have raised estimates and providing guidance that worldwide economic activity is improving.

Rear Window (1954).  Interest rates remain low despite the now two rate increases by the Federal Reserve over the past sixty days.  By any historical measure, interest rate structure should continue to foster capital formation, corporate and personal lending, and continued economic expansion for the foreseeable future.

Treasury Yield Curve Rates:                         3/30/2017                           3/31/2016

1 Year                                                                1.03%                                   0.75%

2 Years                                                              1.28%                                   0.92%

5 Years                                                              1.97%                                   1.25%

10 Years                                                            2.42%                                   1.75%

30 Years                                                            3.03%                                   2.60%

Vertigo (1958).  The 30 Year Treasury yield declined from 14.50% in August, 1981 to 10.38% in 1983  The investment community was unable to think that rates could drop any more.  Stock values had recovered from lows reached in 1981 with the Dow Jones Industrial Average touching 565 three different times from 1969 to 1981.  Fear gripped the financial markets as the late 1970’s produced double digit inflation rates which were followed by double digit Treasury yields.  The shock and awe of the period culminated with another oil crisis and over 50 American hostages held in Iran for well over 400 days in the Tehran American Embassy.  Gold spiked from $32 an ounce in 1974 to over $800 an ounce in 1981.  The end of the meteoric rise in commodities ended when the Hunt Brothers attempted to corner the market in silver only to be on the wrong side of a trade resulting in the Federal Reserve covering their loss to prevent the total meltdown of the U.S. banking system.

Anatomy of a Murder (1959).  Interest rates had in fact peaked in 1981 which began the great Bull Market in Bonds which endured up into the last two years, essentially 33 years.  Fast forward to today, we cannot believe that bond yields can rise.  Federal Reserve policy has been very accommodative since 2008 to the present.  Under Bernanke and now recently Janet Yellen, easy money has been the norm which some would argue saved the financial system.  Others have argued it has devastated normal asset pricing and has distorted normal economic activity.  The heavy lifting is over as more normal Fed policy is being practiced with money growing at 6.5%.

The Shop Around the Corner (1940).   Since the election in November 2016, the stock market has rallied significantly under the promises of lower income taxes, infrastructure spending and policy promoting U.S. job creation.  Populism appears to be sweeping worldwide political thought undermining conservative and liberal political views.  The previous administration followed Keynesian policy and ran budget deficits exceeding $1 trillion a year which effectively stimulated economic growth.  Worries now are mounting that populism carried too far may result in worldwide trade wars which history has proven detrimental to financial markets.

How the West Was Won (1962).  Trade policies may provide some bumps in the road in the coming months as NAFTA, and other trade agreements will be altered under the guise that American workers have lost jobs to foreign manufacturing due to these treaties negotiated by previous Republican and Democratic Presidents.  The promise to resurrect the coal fired steam plants using coal mined in the United States has already been signed by executive order.   The Keystone Pipeline bringing oil into the United States from Canada has already been approved by executive order.  We do anticipate lower energy prices for the foreseeable future and hopefully eliminating future dependence on Middle Eastern oil cartels.

Mr. Smith Goes to Washington (1939).  Much discussion has been paid to the U.S. Federal Budget.  In 2016, the budget totaled $3.586 trillion with a budget deficit of $552 billion and was spent on the following:


Social Security and Unemployment                                $1,306 billion                      36%

Medicare & Health                                                             1,004 billion                      28%

Defense Department                                                           541 billion                       15%

Other Departments                                                            521 billion                       14%

Interest                                                                                 214 billion                       6%


Total                                    $3,586 billion                      100%

The Man Who Knew Too Much (1956).  We do expect that budget priorities in future budgets will increase Defense spending and attempt to lower entitlement spending.  Much discussion  from Washington has been directed toward infrastructure spending in repairing/replacing bridges and building highways.  Additionally, the new administration intends to build a wall between the United States and Mexico with early cost estimates at $15 billion.  The length of the border is approximately 1,950 miles.  Of course, the Chinese built a similar wall in China to prevent enemies from attack.  The Chinese worked on the wall for approximately 400 years and its length was 13,170 miles and averaged 33 miles per year.  Hopefully, the U.S. government can arrive at a more practical solution to immigration issues without wasting tax payer dollars in building a border wall.

The Spirit of St. Louis (1957).  We remain positive on U.S. financial markets as any reduction in corporate taxes should be a positive for higher valuations.  We do admit that at 18 to 20 times 2017 earnings is a bit frothy as markets tend to get ahead of themselves from time to time.  In hindsight the markets were significantly undervalued last year.  We believe further recovery in the housing markets and lower energy prices should be a booster shot for favorable financial markets for the next eighteen months.

Shenandoah (1965).  We continue to consider it an honor to manage you money.  For the immediate future, the Great Inflation has once again been put on hold.  The strength in the U.S. dollar and historical low interest rate environment should be favorable for investment for an extended period of time.

Russell L. Robinson

Robinson Investment Group

5301 Virginia Way, Suite 150

Brentwood, Tennessee  37027


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