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Robinson Investment Group http://www.robinsoninvestment.com Robinson Investment Group Thu, 09 Jan 2020 15:26:36 +0000 en-US hourly 1 https://wordpress.org/?v=5.6 January 8, 2020 http://www.robinsoninvestment.com/2020/01/09/jan-2020/ http://www.robinsoninvestment.com/2020/01/09/jan-2020/#respond Thu, 09 Jan 2020 15:22:56 +0000 http://www.robinsoninvestment.com/?p=706 The Roaring 20’s!

Raging Bull Market. The financial markets turned into a raging bull market in 2019 as Federal Reserve policy reversed in mid-year from tight money to extraordinary easy money since Labor Day, 2019. With most stock indices at or near record highs currently, investors should enjoy the positive returns and stay invested.

The Wall of Worry remains as trade wars, Brexit, European negative interest rates, and rumors of war prevail. The energy market remained tame through the end of 2019 until the recent prospects of Iran causing political unrest in Iraq. Some things never seem to change. 2020 will be marked with higher oil prices and generally higher commodity prices due to Middle East uncertainty.

The accelerated money supply growth will be inflationary. The courage to print money and monetize the $1 trillion U.S. Treasury annual deficit is unsettling to say the least which eventually destabilizes the U.S. dollar. In extraordinary times, extraordinary policy is favored to thwart negative interest rates in the U.S. capital markets. Ultimately, international investors will begin to dump U.S. Treasury debt leading to higher yields.

To Infinity and Beyond–Ten Largest USA Publicly Traded Companies:

Company                                Symbol            Mkt Cp ($Billions)         PE                   DIV

Apple Inc.                                AAPL              $1.322              25.09X             3.08%

Microsoft, Inc.                         MSFT              $1.225              29.86X             1.27%

Alphabet, Inc.                          GOOG            $943.5             39.81X             0

Amazon.com Inc.                    AMZN            $929.6             83.81X             0

Facebook, Inc.                         FB                   $598.2             33.68X             0

Berkshire Hathaway, Inc          BRK.A            $552.9             20.61X             0

JP Morgan Chase & Co.           JPM                 $442.5             13.57X             2.55%

Visa Inc.                                  V                     $412.3             35.38X             0.63%

Johnson & Johnson                 JNJ                  $384.2             27.33X             2.62%

Walmart, Inc.                           WMT               $337.5             23.56X             1.78%

If you are in any growth mutual fund, you already own these. The 20 largest mutual funds all own these positions in some form or fashion. The price earnings multiples are in the nose bleed sections exceeding 30 times in most cases. Arguably Apple is considered a value stock as it borrows money in Europe to pay its quarterly dividend. Alphabet trades at a paltry 39 times 2021 earnings. Needless to say, we believe that growth companies are outrageously overvalued similar to 1999-2000 dot.com bubble.

The growing U.S. Federal Budget Deficit is approximately $22 trillion in outstanding Treasury debt with no end in sight. We will not discuss off-balance sheet guarantees by Treasury in mortgages, and other government agencies that issue bonds which may exceed $75 trillion give or take. Debt has ballooned around the world as issuing bonds is as easy as tick tack toe. The nine largest banks in the USA also issue Credit Derivatives which may exceed $20 quadrillion in size which would trigger should rates rise in any significant way.

The 1978 to 1981 period of time was the last period in which the Federal Reserve inflated our economy. Similar to Germany in the 1930’s, hard assets appreciated in value while financial assets dropped in value. Bond investors saw real market declines in bonds issued beyond five years as inflation rates exceeded bond interest. The misery index exceeded 20 percent in 1979 as Ronald Reagan coined the combination of unemployment and inflation rates.

We believe the housing market remains the best indicator for the direction of the financial markets. Monthly housing starts in the United States that includes residential housing and multi-family housing have recovered from 300,000 to 400,000 in 2008 to 1,320,000 units in more recent data. The strength in housing sends a strong sign the economy is growing along with a 40 year low in unemployment indicates that economic recovery will sustain itself for the next three to five years.

We believe that economically sensitive issues will continue to experience positive revenue and earnings growth for the foreseeable future. Companies with lower price earnings, higher dividend yields, and clean balance sheets should be rewarded in the stock market. We believe that value investments remain attractive for investment.

On February 14, 2020 we will celebrate our 24th year in operation as an investment advisor. The changes in the financial markets continue to be challenging and we continue to be honored to serve as your investment advisor.

Rusty Robinson
President
Robinson Investment Group
5301 Virginia Way, Suite 150
Brentwood, Tennessee 37027
615-242-3447

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October 1, 2019 http://www.robinsoninvestment.com/2019/09/30/october-1-2019/ http://www.robinsoninvestment.com/2019/09/30/october-1-2019/#respond Mon, 30 Sep 2019 21:43:16 +0000 http://www.robinsoninvestment.com/?p=700 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

President

Robinson Investment Group

5301 Virginia Way, Suite 150

Brentwood, TN 37027

615-242-3447

40 Legendary John Wayne Quotes

https://addicted2success.com/quotes/40-legendary-john-wayne-quotes/

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July 1, 2019 http://www.robinsoninvestment.com/2019/06/28/july-1-2019/ http://www.robinsoninvestment.com/2019/06/28/july-1-2019/#respond Fri, 28 Jun 2019 17:42:23 +0000 http://www.robinsoninvestment.com/?p=696 Happy Fourth of July, 2019.

America, the Beautiful! America will celebrate its 243rd Birthday this Thursday. As we enjoy the summer time festivities this week, we should count our blessings of religious freedom and economic freedom to live in the greatest country in the world. George Washington rode his horse into New York City and read aloud the Declaration of Independence on July 4, 1776 that would later be ratified by the First Continental Congress in Philadelphia. The ensuing struggle with the British would last several years as the Colonists received help from the French Navy in bombing strategic British strongholds in New York City to eventually succeed as an independent United States of America. Washington was unequivocally elected President gaining the majority of Electoral Votes and was sworn in as President in 1789.

God Bless America. The financial markets during the current year have seen extraordinary market performance with the S&P 500 rising 17.1% since December 2018. Interest rates have finally dropped across the board as the Federal Reserve reversed its rising rate policy to considering lowering rates in the coming months. Already money supply growth has experienced a modest increase in the past 60 days. The current US Treasury yields are as follows:

Term Yields

180 days 2.093%

1 Year 1.95%

3 Year 1.709%

5 Year 1.775%

10 Year 2.019%

30 Year 2.538%

My Country Tis of Thee. With the recent decline in yields along with Chairman Jerome Powell’s recent comments that the Fed may cut rates in the second half of the year, the U.S. stock market has responded with higher stock prices. The S&P 500 currently trades as 21.89 times earnings and yields 1.87%.

The Star Spangled Banner. The financial markets have muddled through international trade issues between the US and the Europe, China, and Mexico/Canada. In spite all of the negative market sentiment, stock prices have rewarded the patient investor. The move in stocks since January has recouped most of what was lost in 2018.

The Stars and Stripes Forever. The U.S. Commerce Department released its 1st quarter GDP growth rate of +3.1%. The stock market continues to rise in spite of all the negatives which have persisted in the financial press.

This Land is Your Land. The Monteagle Value Fund which we have managed since 1999, currently trades at 14.71 times 2019 earnings and yields 3.6%. The industries favored in the Fund continue to be industrial and materials stocks. The Fund has near market weightings in Energy and Technology. The Fund owns both AT&T and Verizon Communications.

Proud to Be an American. Any lowering of interest rates should propel worldwide stocks higher. Any favorable news from Trade negotiations with China will also be a market positive. The US economy already is humming as employment levels are at 50 year highs. We would be worried that inflation could creep into the financial markets if labor remains tight. More recently the price of gold has risen from 1275 to 1425 as investors have been buying the precious metal since the first of the year.

Anchors Aweigh. The markets have several challenges which include the effects of Britain leaving the European Union and the rising Middle East tensions with Iran threatening to develop nuclear weapons (which has been going on for 20 years!). We certainly hope that the outcome for both will be positive.

The Battle Hymn of the Republic. We do believe that the Presidential election cycle will provide for better market conditions going into 2020. The stock market has already risen significantly in the past 2 and ½ years. Investors need to enjoy the ride.

We continue to consider it an honor to manage your assets and look forward to your feedback in the coming months.

Russell L. Robinson

President

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April 1, 2019 http://www.robinsoninvestment.com/2019/04/01/april-1-2019/ http://www.robinsoninvestment.com/2019/04/01/april-1-2019/#respond Mon, 01 Apr 2019 01:19:06 +0000 http://www.robinsoninvestment.com/?p=693

March Madness is coming to a close.  We have completed a remarkable quarter as the S&P 500 rallied from its December 24, 2018 short term low of 2416 to its present 2828 level recording an approximate 17% gain.  Over the course of the last 30 years we have had only 4 Federal Reserve Chairmen which include Greenspan, Bernanke, Yellen and Powell who was appointed last year.

Normalizing Interest Rates.  Chairman Powell’s initial task was to begin unwinding US Treasury assets purchased in the past 10 years in the Open Market to accommodate economic growth.  Current assets held on the Federal Reserve balance sheet stands at $3.7 trillion which is down from $4.7 trillion two years ago dropping the monetary base by $500 billion.  Much of the easy money has evaporated as a result.

American Economy on a Diet.  Powell has reduced money supply growth from 8-9% to its present 4% level.  In November 2018 after the financial markets tanked after Labor Day, Powell indicated no more asset sales until evidence appeared that the economy was overheating.  Henceforth, the US stock market has rallied over the past 95 days. If money growth does not rebound in a significant percentage, the S&P 500 is approaching levels which are not sustainable.

Bonds Sending Mixed Signals. The US Treasury market has provided some excitement since yields reached a short term peak in November 2018.  Interestingly, the short end of the curve is higher than five year maturities. The mini inverted curve certainly reflects a modest money supply growth with many analysts anticipating a recession.  

Cyclical Crossroad.  We are waiting on some signal from Chairman Powell.  By lowering short-term rates, he would signal that the economy should continue to enjoy prosperity.  If he chooses to either raise rates are stay at status quo, then the financial markets will weaken. Previous new Fed Chairmen have stumbled within the first year taking the job.  Hopefully he will succeed.

Current U.S. Treasury Yields

Maturity Yield

90 days 2.42%

180 days 2.44%

1 Year 2.42%

5 Years 2.25%

10 Years 2.42%

30 Years 2.83%

Is the Stock Market Half Full or Half Empty?  The S&P 500 currently trades at 18.25 times next year earnings with a dividend yield of 1.9%.  Earnings for the S&P 500 are estimated to grow 9% in 2020.  Growth stocks have outperformed value stocks over the past eighteen months.  

One of Our Own.  The Monteagle Value Fund (MVRGX) which we have managed since 1999 currently trades at 15.7 times 2020 earnings and provides a dividend yield of 3.27%.  We believe the time is right for value stocks to perform reasonably well in the current environment as investors left the stock market throughout 2018 running to quality.  For the record, the Fund has risen from $13.25 to $15.13, or 14.18% from December 24, 2018 to March 28, 2019!

Our Current Equity Strategy.  Using the Monteagle Value Fund as an example, our current equity strategy favors market weightings in energy, while we are overweight in industrials and material stocks.  We are underweighted in financial, utility, and information technology stocks. We have held several of the large capitalization telecommunication and pharmaceuticals for well over 15 years.  We have market weightings in health care and consumer stocks.  Additional, the fund has 19% of its holdings domiciled in international markets.  The stock turnover was at 6% for 2018 as we tend to hold investment positions for well over 5 years.

As Goes January, So Goes the Rest of the Year.  Last year, stock mutual funds and exchange traded funds experienced a cash withdrawal from Labor Day to the end of the year of $95 billion.  With the recovery in stock prices during the present quarter indicates that some of the cash returned to stocks. According to the Stock Trader’s Almanac (2019), the January barometer has worked 59 out of 68 years.  Stock market strength in January, implies that the entire year will be strong.  Should inflation numbers remain tame in 2019, the market could have better earnings than what is currently being projected.

We remain in Brentwood, Tennessee.  On February 14, 2019 we celebrated our 23 anniversary as an independent investment advisory firm.  We remain committed to providing investment plans that meet your individual investment needs. We consider it an honor to make investment decisions on your behalf.

Rusty Robinson

President

Robinson Investment Group

5301 Virginia Way, Suite 150

Brentwood, Tennessee  37027

615-242-3447

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January 1, 2019 http://www.robinsoninvestment.com/2019/01/01/january-2019/ http://www.robinsoninvestment.com/2019/01/01/january-2019/#respond Tue, 01 Jan 2019 23:03:10 +0000 http://www.robinsoninvestment.com/?p=686 The New Year greets us with the sobering reality that the financial markets have declined around the world. The Federal Reserve has reduced monetary reserves over the past eighteen months leading to a less accommodative money supply growth. The animal spirits of extraordinary high money supply growth from 2009 through 2016 have disappeared.

All market indices dropped +10% for the month of December, 2018. Short-term interest rates have been raised 7 times since 2016. Fed policy indicates it intends to raise rates twice in 2019, but will base that on economic data. We believe that the Fed has already gone too far and should rest from further tightening.

In 1929, the Fed Chairman Roy A. Young decided to raise rates and drop money supply over 30% in three years as a response to the Great Crash of 1929. With very little experience, the Fed made an error in its policy leading to the Great Depression. Hopefully, Chairman Jerome Powell will reverse course and not raise rates further.

Current U.S. Treasury Bond Yields:

Maturity Yield
1 Year 2.61%
3 Year 2.50%
5 Year 2.55%
10 Year 2.72%
30 Year 3.03%

In response to the U.S. stock market decline, the silver lining for the financial markets is that yields on bonds have actually dropped in the past six weeks. Longer maturity bonds have declined significantly as the 10 year yield dropped below 3% having traded above 3 percent during the first half of 2018. The short end of the curve is inverted which suggests a minor recession is around the corner.

In 1987, the financial markets were tested yet the banks were able to negotiate the market collapse. We did have several investment banks that eventually went out of business including Drexel Burnham, Kidder Peabody and Prudential Bache. In 2008/2009, the fully deregulated banks were all in trouble. Essentially, the financial markets screeched to a halt as banks were caught with no capital. At present, we do not believe that any banks are in trouble. Should the financial markets drop further it will present a clear and present danger to the nine banks that are too big to fail.

All industries in the S&P 500 dropped in December. Previous market declines in 1987 and 2009 were quick and furious. This more recent decline was a steady daily drop essentially that began after Labor Day, 2018. The high-frequency trading platforms employed by private equity firms and hedge funds exacerbated daily volatility in stock prices. The powerful drop in the market suggests that either an economic slow-down or recession will occur in 2019. Great debate is occurring by leading market strategists arguing both sides of the fence. Recessions are defined as two successive GDP growth either being flat or declining. The latest quarterly GDP growth was up 2.7%.

According to the Wall Street Journal, net inflows for U.S. mutual and exchange-traded funds in the first 11 months of the year fell to $237 billion, according to new estimates compiled by research firm Morningstar. That was down 62% from the year-ago period, the steepest decline since 2008. Asset managers attracted a record $629.5 billion in net flows during the same period in 2017, a boom year for the industry. The five largest growth stocks which include Apple Computer, Amazon, Google, Facebook and Microsoft all declined since Labor Day.

Today we believe the decline is a welcomed entry point to buy good companies at a reasonable valuation. Investment positions held on a long term basis remain with good capital gains. More recently the dividend paying stocks have fared better than non-dividend stocks. Reflecting back on the severe market declines in the past, time has rewarded those who remained invested.

We look forward to the New Year. We believe the markets will recover as corporate earnings continue to be reasonably good. We will focus on companies that continue their corporate stock repurchase programs, insider buying, and competitive advantages in the market place.

We welcome the opportunity to meet with you in the coming months and consider it an honor to manage your assets.

Russell L. Robinson
President
Robinson Investment Group
5301 Virginia Way, Suite 150
Brentwood, Tennessee 37027
615-242-3447

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October 1, 2018 http://www.robinsoninvestment.com/2018/09/28/october-1-2018/ http://www.robinsoninvestment.com/2018/09/28/october-1-2018/#respond Fri, 28 Sep 2018 21:35:40 +0000 http://www.robinsoninvestment.com/?p=682 O Say Can You See, By the Dawn’s Early Light. Over the past two years U.S. Treasury bond yields have risen significantly. During this period, the Federal Reserve has been unloading bonds which were purchased in the Open programs affectionately referred to as Quantitative Easing which lasted several years as a result of the Great Recession that began sometime in 2009. During this period, the Fed’s balance sheet grew from $800 billion to $4.7 trillion in 2015.

What So Proudly We Hailed at the Twilight’s Last Gleaming. The massive monetary stimulus did not produce the desired results as GDP growth never exceeded 2% during this period. Since 2017, the reduction in income tax rates and lowering government rules which restricted economic activity has actually jump started an otherwise anemic U.S. economy. The second quarter 2018 GDP growth rose to 4.1% signaling the economy was strong enough to allow the Fed the wiggle room to raise rates to more normal levels.

Whose Broad Stripes and Bright Stars Through the Perilous Fight. Rumors of trade wars have circled the globe as U.S. trade tariffs have been implemented regarding European, Canadian, Mexican and Chinese trading partners. The U.S. Trade Deficit has been massive versus these countries for twenty years or so. Since 1990, estimates that over 10 million jobs were eliminated in American as these countries had significant labor cost advantages.

O’er the Ramparts We Watched. The tax cuts in 2017 have actually encouraged corporate America to commit to bringing some jobs back and raising wages for many Americans. The unemployment rate recently dropped below 4 %, if you want a job, you can find a job! The stock market is the leading indicator for continued good economic growth as the major stock indices have reached historic levels during the current quarter.

Were so Gallantly Streaming? In spite of higher Treasury yields, the current shape of the U.S. Treasury curve is forecasting economic growth. Borrowing costs for corporations remains historically low even as corporate borrowing has been at historic levels over the past five years. Record government spending is also contributing to improving economic activity. Projections for the U.S. budget are forecasting the deficits exceeding $1.0 trillion by 2020. The Consumer Sentiment Index is at a twenty year high as well. We believe the short-term (1-3 years) Treasury bonds to be the sweet spot in the bond market.

Term Yield
90 days 2.19%
180 days 2.29%
1 Year 2.57%
5 Years 2.95%
10 Years 3.06%
30 Years 3.19%

And the Rockets Red Glare. The current valuation the S&P 500 trades at 20.4 times 2018 earnings and yields 1.73%. Earnings for the S&P 500 are projected to rise from $132.25 to $161.10 next year or 21%, which is very optimistic. We still believe that economically sensitive industries should perform reasonably well andfavor industrials, energy, chemicals, materials, technology and consumer discretion stocks.

The Bombs Bursting in Air. As Apple Computer and Amazon’s respective market capitalizations surpassed $1 trillion during the quarter, we believe all kinds of market speculation abounds. Recent data from a leading krypto currency dealer indicates that Bitcoin’s current market valuation is approximately $115 billion. The size of the ten largest krypto currencies combined is approximately $166 billion. We believe this market is the most fictional Tulip bulb craze to ever occur. Mysteriously, one opens an account at one of the several dealers in these accounting entries ad ships money from the credit or debit card like a sports betting parlor. The “investor” has daily or minute by minute updates to the value of the currency. The smart investor gets in early and gets out early. We believe the krypto phenomenon is nothing more than a Grand Ponzi scheme…buyer beware!

Gave Proof through the Night that Our Flag was still there. As the price of gold sits at a 7 year low at $1200 an ounce, another anti-speculative indicator is there is no real inflation. Technological advancements have more to do with lower inflation than anything else. Yet, we believe a day will come when we experience higher inflation. In the Federal Reserve playbook, we know inflation comes when the market is not expecting it. During the last three years of the 1970’s, real assets experienced major appreciation. After living through the painful years of the Watergate era, Americans buried themselves in getting back to normal and never saw the inflation ahead.

O Say Does that Star-Spangled Banner Yet Wave. The Bretton Woods Agreement ended in 1974 allowing currencies to float in value. Gold had been fixed for 40 years at $32 an ounce. No one really knew what it was worth as it rose to $800 an ounce. We believe this sums it up for the current value of commodities. No one knows what they are worth. Should governments continue to issue more debt, finance the debt through Central Bank purchases, and get Venezuelan styled socialists in office, then our currency can collapse. Record levels of debt issuance by the U.S. government, state governments, corporations, and individuals will be the trigger for such a dollar devaluation leading to dramatic inflation.

O’er the Land of the Free and the Home of the Brave. How much is enough? We have lost several large accounts recently after we have compounded returns doubling, tripling and sometimes quadrupling their asset values. The quest for more is ever so great today. As we go into the cooler months in the fall, we believe that any further market appreciation is a good time to take profits off the table. We are more cautious about the next eighteen months as Fed policy is raising rates and reducing money supply growth. We look forward to conversation about your assets and believe that conservative strategies are advisable in the coming months.

We remain diligent to do the very best in making investments on your behalf. We strive to earn your trust and confidence in the investment management process.

Russell L. Robinson
President
Robinson Investment Group
5301 Virginia Way, Suite 150
Brentwood, Tennessee 37027
615-242-3447
Titles from the 1st stanza of the Star Spangled Banner, Francis Scott Key, 1814

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July 1, 2018 http://www.robinsoninvestment.com/2018/07/02/july-2018/ http://www.robinsoninvestment.com/2018/07/02/july-2018/#respond Mon, 02 Jul 2018 02:40:27 +0000 http://www.robinsoninvestment.com/?p=678 Current Investment Themes–De Ja Veux All Over Again!—Yogi Berra.

Apocalypse Now. In evaluating the current market conditions, we believe significant parallels between 2018 and 1979 exist causing a period of extreme volatility for the coming months. During the 1979 to 1981 period, interest rates spiked from 7% to 14.5% on the 30 year US Treasury Bond. Gold rose in price during this period from $35 an ounce to over $800 an ounce. It was in October 1979 when the Hunt Brothers from Fort Worth attempted to corner the market on Silver forcing the Federal Reserve to facilitate its only loan to individuals to avoid the collapse of the US banking system. Many of the geopolitical events in 1979 resemble many of the events that we have witnessed in the last several years. The names have been changed, the circumstances are different. Yet, the turmoil of the late 1970’s distinctly resembles the turmoil we are now experiencing.

The Muppet Movie. In October 1979, Jimmy Carter hired Federal Reserve Chairman G. William Miller to be the U.S. Treasury Secretary even though inflation was accelerating as the misery index exceeded 20% (Inflation plus Interest Rates). The New York Federal Reserve Chairman Paul Volker became Fed Chairman and immediately raised interest rates and began unwinding the Treasury holdings that Miller has accumulated which promoted growth and inflation. Since 2009, the Federal Reserve accumulated $3.8 trillion in U.S. Treasury securities to promote growth, but the inflation remains tame. As rates have risen several times in the past 2 years, some optimism exists that we have normalized interest rates.

Mad Max. Ironically, Iran became the USA’s greatest enemy in 1979 as the Ayatollah Khomeini took over the USA embassy and held over 50 hostages until early 1981. Now we see Iranian issues today as new sanctions have been implemented as nuclear bombs are being developed in Iran.

The Jerk. Just announced this week the US and Russia will have a summit in July. In the 1970’s, the Cold war was in full swing. Russia was still an evil empire as Krushnev and Breshnev were the two leaders that killed Christians and Jews from the 1930’s on as Russian human rights were terrible. Jimmy Carter and Breshnev signed the SALT II agreement which supposedly said that both superpowers would reduce nuclear missile weapons. More recently Russia under Vladmir Putin militarily took the natural gas port of Crimea from the Ukraine in 2014. No one stopped him, neither Europe or the USA. Since 2014, the mini-Cold War has cooled more. Great attention has been given as some believe Russia tampered with our last Presidential election. Who knows.

The Warriors. Interestingly enough, the upstart ESPN in 1979 is now the most profitable segment of Disney Corporation’s empire. ESPN controls college football among other things. It was originally started to basically broadcast old college football games. American Broadcasting Corporation paid $188 million to acquire ESPN. Eventually, Capital Cities/ABC was bought out by Disney for $19 billion in 1995. Several leading investment firms estimate that ESPN could fetch $40 billion today if Disney was so inclined to sell.

Rocky II. Britain, or the UK, elected Teresa May as the second Lady Prime Minister in July 2016. In May, 1979 Margaret Thatcher became the UK’s first Lady Prime Minister. The Iron Lady was Ronald Reagan’s closest friend and ally during the 1980’s. Both were able to promote growth and prosperity for most of the 1980’s as interest rates began the sharp descent from historical high levels in the early 1980’s. Bull Markets in bonds and stocks began in 1981 and 1982 respectively as the inflation induced recession came to an end. Teresa May’s leadership brought the vote for the UK to leave the European Union.

The Amityville Horror. The Dow Jones Industrial Average (DJIA) reached a high above 1,000 in 1969. Three different times, the DJIA traded between $550 to $1053 from 1969 through 1981. In August, 1981 interest rates began its long journey lower as the greatest bull market in bonds started. In April, 1982 the stock market bottomed never to look back.

Kramer vs. Kramer. Peace in the Middle East is a historical oxymoron. To his credit, Jimmy Carter hammered out a peace agreement between Israel and Egypt. Today, Israel remains the target from all over the Middle East as Iran still threatens to blow up Israel on a weekly basis. More recently, the USA recognizes Jerusalem as the Capitol of Israel antagonizing the Muslim world.

Escape From Alcatraz. More recent trade wars between the USA and pretty much the rest of the world has awakened global interests that tariffs can be applied on an equal basis. Ultimately, if tensions escalate between our trade partners then some meaningful damage can be inflicted on all parties involved. Most of the European and Japanese auto companies have a significant number of USA manufacturing facilities. China imposes stiff tariffs on products coming into its country. China is guilty of supporting its own state run businesses and stealing our intellectual properties. China owns approximate $2.5 to $3 trillion of our U.S. Treasury debt. An escalating trade war could lead to the selling of bonds which would weaken bond prices and raise yields.

Alien. Suffice to say, the world was complicated in 1979 as it is now. Between last year’s Total eclipse and the 1979 eclipse, many believe that astronomical events can have effects on the financial markets. We are not sure. But, it is interesting that so many destabilizing events have occurred in the past couple of years that point back to 1979 when inflation rose, interest rates rose and stock prices dropped
We continue to believe that conservative investments will weather the financial storms that may arise. We consider a privilege to serve you as your investment advisor and look forward to hearing from you.

Russell L. Robinson
President
Robinson Investment Group
5301 Virginia Way, Suite 150
Brentwood, Tennessee 37027
615-242-3447
Subtitles from top 10 list of 1979 Movies. https://www.ranker.com/list/best-movies-of-1979-v1/ranker-film

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April 1, 2018 http://www.robinsoninvestment.com/2018/04/01/april-1-2018/ http://www.robinsoninvestment.com/2018/04/01/april-1-2018/#respond Sun, 01 Apr 2018 16:24:20 +0000 http://www.robinsoninvestment.com/?p=674 Spring Fever!

Wicked. Signs of spring are all around as flowers are blooming, fruit trees are blooming and warmer days lie ahead. Jerome Powell became our new Federal Reserve Chairman at the end of January and already the groundwork is being laid for the recession of 2019. Money supply growth has reached a dribble with M-2 growing 1 to 2% over the past six months. The Fed has said it intends to raise rates 2 or 3 more times before year end.

Hamilton. Already, the stock market has begun its adjustment to higher rates and lower money growth. The Dow Jones has fallen 10% since its rise above 27,000 in January. We believe the market should approach the high again by May. Economic data continues to support a reasonably good economy through Labor Day. Fixed income investment finally looks somewhat appealing as short to intermediate yields have risen since the first of the year.

Les Miserables. Facebook (FB) has encountered some difficulty recently as the company is mining data from Facebook and selling to corporate and political entities to direct advertising. We suspect they are not alone as companies including Google, Microsoft, Yahoo, AOL, and others have massive data access to personal accounts online. Mining data is certainly the new buzzword and we have not heard the end to the controversy at Facebook. FB has dropped $24 a share since the story broke. Facebook is not a value stock as it trades 10 times revenues and 21 times earnings.

Phantom of the Opera. The other head of the two headed monster is crypto currencies, especially Bitcoin. The technology behind these non-currencies is called block chain technology which supposedly allows large international companies to facilitate payments between each other without incurring a taxable event. China and other Southeast Asian countries are the primary market for these fictional currencies. The regulatory agencies are behind the eight ball in deciding how to regulate. We are not investing in these. We believe it is the latest Tulip Bulb Craze and will end in a bad way.

West Side Story. In the United States, we have approximately 8700 publicly traded stocks in some form or fashion. We have approximately 7600 mutual funds and 4000 exchange traded funds. The enormous number of fund options makes investing complicated to say the least. In the last year, Value managers have underperformed the overall market significantly. We believe the table will turn soon and Value managers will once again perform better.

Rent. We believe that lower priced stocks which pay higher dividend yields remain the sweet spot in the market. We favor pharmaceutical, telecom’s, oil and gas, chemicals, materials, semiconductors, and agribusiness. We continue to avoid bank stocks. Additionally, believe the utilities will trade up and down with fixed income securities.

Sound of Music. The U.S. Treasury yields have recently risen along with the third interest rate increase in twelve months. Federal Reserve officials have expressed they intend to raise interest rates two more times this year. The Omnibus Spending bill announced in Mid March indicates that deficits will continue to be an estimated $1 trillion in 2018 which will be a flood of new debt to market. We do favor bonds in the 1 to 5 year maturities.

Maturity US UK EURO

1 YEAR 2.11% 0.50% -0.69%
3 YEARS 2.39% 0.86% -0.46%
5 YEARS 2.56% 1.11% -0.10%
10 YEARS 2.75% 1.35% 0.40%
30 YEARS 2.97% 1.71% 1.15%

Into the Woods. In the last ten years, the financial markets have been taken over by high frequency trading platforms that will increase market volatility for the foreseeable future. With the Dow Jones Industrial Average trading in the mid 20,000 level, we can anticipate trading swings which may exceed 1,000 points in any given day. Incidentally, this has happened twice this year and we believe the regulators currently cannot do anything to prevent such wild swings. Investors who remain long term should be the true winners in the stock market.

Newsies. The markets have been resilient as many geopolitical issues have recently come to fruition. Trade negotiations are leading to tariffs for imports on steel and aluminum. We do have complicated issues regarding trade with China, especially the theft of intellectual property. Trade agreements with Canada and Mexico are in the process of being renegotiated. We do not anticipate the severity of trade retaliation to occur as some are predicting.

Top Ten US Exports during 2017:

Machinery $201.7 billion Optical, Tech. Medical dev $82.5 billion
Electrical Machinery $174.2 billion Plastics $61.5 billion
Mineral Fuels (oil) $138 billion Gems, Precious Metals $60.4 billion
Aircraft, Spacecraft $131.2 billion Pharmaceuticals $45.1 billion
Vehicles $130.1 billion Organic Chemicals $36.2 billion

Lion King. We believe it to be an honor to serve as your investment manager and look forward to hearing from you in future.

Russell L. Robinson
President

Titles from: https://www.thetoptens.com/best-broadway-musicals/ top ten Musicals on Broadway.

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January 1, 2018 http://www.robinsoninvestment.com/2018/01/02/january-2016/ http://www.robinsoninvestment.com/2018/01/02/january-2016/#respond Tue, 02 Jan 2018 16:45:26 +0000 http://www.robinsoninvestment.com/?p=665 Happy New Year!

Johnny B. Goode. Over the past eighteen months, the stock market has risen significantly as the lowering of corporate income taxes and individual American tax payers should inherently improve corporate earnings for the immediate future. Price earnings ratios for domestically based companies will drop from low 20’s to upper teens as tax rates drop from 39% to 21%. The powerful upward momentum being staged by the market points to higher long term economic growth for the U.S. economy and lower unemployment through 2020.

Maybellene. In January, Jerome Powell will succeed Janet Yellen as Chairman of the Federal Reserve. We believe that no dramatic policy changes will occur during the first half of 2018. Current policy has erred on the side of tightening monetary policy. Money supply growth has already decelerated from the 8 to 10% growth after 2009 to the current rate of 4.9 to 5%. We believe that any further declines in money growth will translate into the beginning of an economic recession which more likely should begin early 2019.

Roll Over Beethoven. Small talk at Christmas parties this year centered around Bitcoin and crypto currencies. The evolution/revolution of crypto currencies has gained the attraction of the Futures exchanges hoping to take advantage of the fictional currency which is not regulated nor is recognized as legal tender in contract law. We believe the Federal Reserve, the Securities and Exchange Commission, and U.S. Treasury will act and enforce the U.S. Constitution and remind the U.S. Congress that Congress has the sole authority to coin money. All other competitive currencies do not have Legal Tender. Money laundering laws should take precedence on any unreported cash transactions that send money from one side of the world to another vis a vis the block chain technology. We do not recommend investors buying any of the crypto currencies. We are prohibited from buying any crypto currencies.

Sweet Little 16. As we look into our crystal ball, it is difficult to imagine the market rising as much in 2018 as it did in 2017. We do believe that much of the optimism probably will spill over into the first half as alternative fixed income investments look less favorable should interest rates continue to rise. Rising rates create a catch 22 for stock investments eventually. The subtle inflation has hidden itself within the U.S. Commerce Department’s reporting process. Should unemployment continue to drop and it becomes difficult to hire trained workers, then wage-push inflation would be the real inflation that Fed policy had been hoping for the past several years.

Rock and Roll Music. Not to be redundant, but the bond market should enter into a Bear market in 2018. Today, the Treasury bond market is range bound as yields from 2 years out have risen slightly from a year ago. The short term Treasury bills have seen yields rise from near zero to 1.25%.

School Days. Late business cycles usually lead to mounting inflationary pressures. Therefore, we believe that the market will reward industrials, materials, energy, chemicals, and commodities. Already, the retail spending during the holidays has been reported as the best on record. Consumer optimism has surprised the market as consumer discretionary stocks have seen dramatic moves since Black Friday back in November.

You Can Never Tell. The housing industry continues to show improvement as mortgage rates remain low. With the recent cold air moving into the Eastern part of the country, we believe that energy will have demand pressure pushing up prices in natural gas. Already crude oil supplies are dropping from record highs two years ago. We believe that $60 oil will improve the earnings of most energy companies.

No Particular Place to Go. All aspects of the U.S. economy is experiencing a financial renaissance as eight years of massive monetary growth finally has impacted the economy as U.S. fiscal policy joins the party in promoting economy growth.

Too Much Monkey Business. The past twelve months, the market has not had a correction exceeding 5%. Over and over, the financial press has been suggesting investors to buy on dips. Unfortunately, we have not had any! Conventional wisdom points to a stock market correction. Historically, November to May has been the best season to remain invested. Traditional technical analysts would stay invested due to the scope of this move where multiple industries are making new highs.

Around and Around. Currently, the financial market gets more complicated as more investment options are available in the marketplace. With 4,779 ETF’s (exchange trade funds) and 9,511 mutual funds offered in the U.S., we know that investors have multiple avenues to invest their assets. We continue to be honored to manage your assets and look forward to meeting with you during the New Year to discuss your long term investment objectives.

Russell L. Robinson
President
Robinson Investment Group
5301 Virginia Way, Suite 150
Brentwood, Tennessee 37027
615-242-3447

Titles from songs performed by Chuck
Berry. Chuck Berry passed away March 18, 2017.

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October 1, 2017 http://www.robinsoninvestment.com/2017/10/02/october-1-2017/ http://www.robinsoninvestment.com/2017/10/02/october-1-2017/#respond Mon, 02 Oct 2017 18:02:33 +0000 http://www.robinsoninvestment.com/?p=658 October 1, 2017

 

Wichita Lineman.   2017 began with great optimism that the U.S. government was going to reduce income taxes and reduce government regulation.  The reality is that Washington has a new dose of gridlock as both political parties are not cooperating with the new Administration.  Except for executive orders, no major policy changes have occurred this year.

Gentle on My Mind.  We believe the Federal Reserve might quit raising rates for the next twelve months simply because the Treasury market is discounting very little inflation in its current yields.  Over the past twelve months, the Money Supply growth rate has dropped from 9% to its present anemic 5% level.  Historically, inflation occurs when money velocity accelerates.  Velocity has been de-accelerating for several years.  Without rampant money supply growth, we see very little chance for inflation to approach 2%, the targeted inflation rate.  Additionally, we have experienced multiple hurricanes this summer with tens of billions of dollars of damage in Texas, South Florida and Puerto Rico.  We expect extra government spending to address these damages.

U.S. Treasury Yields

90 days                                                1.016%

6 months                                            1.18%

1 Year                                                 1.29%

5 Years                                                1.84%

10 Years                                              2.22%

30 Years                                              2.76%

God Only Knows.   Recently the financial markets discovered Crypto Currencies.  We believe this fad is one more method to sucker “smart” investors into outrageous financially engineered alternative investments offering no economic benefit to society.  Crypto-currencies have exploded into a market attracting billions of dollars in real money to promulgate a market that exceeds $60 billion, estimated.  The best information we have is that these currencies are created by mathematic algorithms and if you are early into them, they fabricate gains.  As far as we can see, no regulatory agency here or abroad regulates these fictional currencies.  Like the Dutch Tulip bulb market in the late 1600’s, only the rich and in-the-know people are making these investments.  Maybe drug dealers, organized crime, and other illegal operations use these currencies.  As a registered investment advisor, we are not allowed to participate in Crypto currencies!

Try a Little Kindness.  The market had risen over the past ten months but the positive returns have been very narrow with the Five Fang stocks leading the parade (Facebook, Apple, Netflix, Amazon and Google.).  We performed a review of the ten largest equity mutual funds and the ten largest ETF equity funds.  Without exception, the findings showed that the largest five holdings were Apple, Microsoft, Google, Facebook and Amazon representing in some cases 20% of the overall portfolios.

Country Boy-You Got Your Feet in LA.  In January 2000, Time Warner purchased American Online at $182 billion and never recovered from this colossal mistake.  By 2001 the tech/internet bubble popped in a big and powerful way.   We believe the conditions are right for another error in judgement by a large tech company to repeat such an error as most of these companies are trading at such high prices.  Buyer Beware!

By the Time I Get to Phoenix.  Other than the Fang stocks, selective industrial stocks and health insurance stocks have performed reasonably well this year.  For much of the stock market, many large cap stocks have been correcting in price since February.  Like 1998-2000, the Y-2-K rally was confined to basically 10 companies that were not value stocks with high price earnings ratios and no dividend yield.  Value has definitely underperformed Growth in 2017.

Southern Nights.  The stock market continues to churn like a hurricane stalled out in the Caribbean.  The market continues to encounter many walls of worry.  The list is long.  War with North Korea is front and center, as its Dictator continues to shoot test missiles toward Japan and Guam.  The multiple wars in the Middle East continue to distract leaders from properly addressing domestic issues.  Somehow, like falling water on a duck’s back, the market continues to absorb the bad news and continues to rise.  Grid lock in Washington D.C. appears to be the norm and not the exception these days and yet the market keeps twisting and turning higher.

Galveston.  More recently OPEC says that its effort to reduce capacity is sticking and actual supplies are dropping which favors higher stock prices for energy stocks.  The active hurricane season should translate into increased revenues for lumber, copper, cement for the foreseeable future.  We see materials, home builders, and tightening commodity prices with total damages approaching $50 billion.

Rhinestone Cowboy.  The Amazon effect on retail appears to be overdone in our view creating excellent value in retail and consumer based companies.  Amazon Prime has become an American pastime as people enjoy “free shipping”.  The glitch is returning the merchandise when it is not what you wanted or needed.  The free shipping is actually subsidized by the U.S. taxpayer to the tune of $1.47 per package.  At some point the competitive advantage of free shipping and no sales tax will be eliminated.  We believe that most people still like to go shopping and that retail companies will blend and enhance shopping with ecommerce as well.

Dreams of the Everyday Housewife.  We still maintain healthy positions in telephone, pharmaceuticals, and large oil companies.  We believe these companies enjoy healthy cash flow to support these attractive dividend yields.

 

Russell L. Robinson

5301 Virginia Way, Suite 150

Brentwood, Tennessee 37027

Titles:  Best Songs of Glen Campbell who passed in August 2017.

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