Current Investment Perspectives.
“Courage is being scared to death, and saddling up anyway!” The financial markets continue to be resilient as much turmoil is swirling all around the world. Money Supply growth has most recently accelerated during the second and third quarter providing much needed liquidity to sustain reasonable economic growth for the next twelve to eighteen months. Inflation remains tame despite efforts by the Federal Reserve to attain a 2% inflation rate. Recent movement in U.S. Treasury yields have reversed rather dramatically since June 30 with the 30 year bond yielding 2.13%, the lowest level in fifty years!
“A Man Deserves a Second Chance, but Keep Your Eye on Him.” Trade negotiations between the White House and the Chinese government continue to dominate headlines while another level of trade tariffs have been invoked on Chinese goods coming to the USA Labor Day Weekend. The financial markets have responded as retailers have been hit the hardest as prices have risen in imported goods from China. No evidence appears the Chinese are willing to change their ways. Four US Presidents have turned a blind eye from addressing unfair trade practices through the past 30 years. Japan, South Korea, and other countries have been guilty of flooding the markets and driving prices down in steel, aluminum and other raw materials into the US. Chinese products are all subsidized by the Chinese National Government and are lower in price and quality compared to similar US made products.
“A Man has to have a Code, A Creed to Live By.” Reflecting other past volatile markets, we can say that over the long term investors who are patient are patiently rewarded. Many of our clients took that dive into our investment process in the early 1990’s and received ample reward as the markets recovered from impossible real estate recessions. As the Federal Reserve continues to make more money every year, stock prices have continued to rise. The stock market rises and corrects through different business cycles. Similar to 1998-2000, the market rose, yet it was confined to a limited group of industries. The overall market is up over the past nine months but limited to a few large cap growth names.
“Tomorrow Hopes we have Learned Something from Yesterday.” The market challenges today include the growth in exchange traded funds, index funds and alternative investment strategies. The proliferation of private equity funds has privatized many good common stocks leaving many bad companies. The exploitation of technological advances has served as a major deflationary force as productivity has increased, efficiencies realized and product obsolescence resulted in lower profit margins in many traditional industrial companies. Retail companies have experienced a double whammy with the rise in Amazon sales and the recent Chinese tariffs.
“Talk Low, Talk Slow, and Don’t Say Too Much!” The current low interest rate environment is a very bad sign for the economy and may impair the financial quality of all financial institutions. If the current European Union interest rate structure is a predictor of our interest rates to come, then banks will be less profitable in the future. More recent actions by the Federal Reserve injecting $75 billion a day in reserves at this stage indicates that interest rate increases last year were premature and now Chairman Powell maybe pressing the finance damage control button. Who does Chairman Powell receive advice from? With two years under his belt, he appears to be an amateur at managing the Federal Reserve.
“A Man’s Got to do What a Man’s Got to do!” We remain positive on stocks for the election year 2020. The valuations are not underpriced. Yet, the current 7% money supply growth should be enough fire power for stock prices to rise in the next 18 to 24 months. We would stay invested. The recent positive move in the US Bond move also points to higher stock prices in the coming months.
“All I’m For is the Liberty of the Individual.” We continue to favor telecom, pharmaceutical, chemicals, energy, semi-conductors, industrials, and health care stocks. We believe that dividend paying stocks are attractive. We view retail, finance, utilities and transportation stocks less attractive at this juncture.
“All Battles are Fought by Scared Men Who’d Rather be Somewhere Else.” We are concerned that record corporate insider selling is occurring. We are concerned that Berkshire Hathaway has $175 billion in cash within its portfolio. We are concerned that nothing constructive may come out of trade negotiations with China. Ultimately, we are concerned that the U.S Treasury is issuing $1 trillion in debt on an annual basis.
We still consider it a privilege to manage your assets. We look forward to hearing from you in face to face meetings to evaluate your current investment objectives.
Russell L. Robinson
Robinson Investment Group
5301 Virginia Way, Suite 150
Brentwood, TN 37027
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