2019

Goldilocks

Goldilocks and the Three Bulls

My monthly commentary for Fairway mentions three uncertainties: the trade conflict with China, Brexit, and the Fed.  One way to look at it is through the lens of the beloved children’s tale of Goldilocks.  I am breaking one of my rules by assigning human personality to the market, but if pressed I’ll just say Goldilocks doesn’t represent the market so much as market sentiment.  This is a total cop out and market sentiment is such a hazy metric that it can mean anything.  Whether the sentiment indicators are positive or negative, they fit any narrative as you can say it agrees with your thesis or you can say it’s a contra-indicator – like when your dentist starts talking about pot stocks.  Anyways, let’s not overthink this.  It’s the weekend. Goldilocks The market has led a charmed decade (granted this is following a crash) despite experts’ best efforts at predicting the…


Fear

Putting a Name to the Fear

Putting a Name to the Fear “I’m afraid there will be a recession soon.”  No, you’re not. “I’m afraid the stock market will go down.”  No, you’re not. “I’m afraid I will lose my money.”  Close, but no. What does losing money mean? Money is not the thing we want or need.  It is the standard of exchange we use to obtain these things.  I’m not afraid I’ll lose my money.  I’m afraid I won’t be able to feed myself or my family.  I’m afraid I won’t be able to manage my own time.  I’m afraid of losing control over my future. Studies show that the more steps there are between ourselves and a payoff, the more likely we are to cheat.  Let’s say you take a test and get paid based on the number of answers you say get right.  If you are directly paid ($1 per answer, or…


iPhones, IPOs, Interest Rates

iPhones, IPOs, and Interest Rates – The I’s Have It

iPhones, IPOs, Interest Rates Lots of random news today, none of which warrants a full post from me due to either lack of opinion or lack of expertise.  However, here are some places that have worthwhile views on each of these subjects.  Also, don’t forget about the Northeast Ohio PKD Walk on September 21st.  Donate to my team so I can hold bragging rights in my house for the next year.  My son William has his own fundraising page this year, too! The WeWork IPO It’s been hard to avoid news about WeWork.  First as a tech disruptor darling.  Now as fodder for gossip as their IPO plans look shaky.  Personally, I think the founder’s actions and the structuring of the firm tell you all you need to know, but I’m not a stock picking expert.  Professor Damodaran is, however, and he breaks down his view here along with some damning parallels…


PKD Walk

A Gift That Makes a Difference

2019 Northeast Ohio PKD Walk It’s that time of year again!  The 2019 Northeast Ohio PKD Walk is on September 21st.  As usual, Team William will have its walking shoes on.  We’ll trek through the Bedford Reservation and then head back to the Garrott house for hotdogs, burgers, and maybe a beverage or two!  Gotta keep those kidneys hydrated! Our Story My son William was born with a genetic condition called Autosomal Recessive Polycystic Kidney Disease, or ARPKD.  He had both kidneys removed before he was a year old and relied on a special kind of dialysis until he received a donor kidney shortly after his second birthday.  Those first few years were difficult, but I’m happy to report that Will is a happy and healthy fourth grader today.  He plays soccer and takes swimming lessons.  He is the only member of the household looking forward to his playing the…


Smoking

Why Don’t More People Smoke?

Another prominent figure in the world of finance has declared passive investing a bubble.  Josh Brown has a good take on this here, saying that active investing is the true bubble.  I don’t think you can declare a decades-long phenomenon (as both active and passive investing have achieved) a bubble, but we can recognize that passive investing has changed the way people build wealth.  Passive investing has clear advantages over active management.  I won’t rehash it in this post, but if you’re curious I covered it here, here, and here.  It seems to me that the advent of passive investing is like the rise of health consciousness.  As we learned more about what we should (exercising) and shouldn’t (smoking) be doing, we have changed our habits.  The same is true about investing. Why Don’t More People Smoke? I recently went to the doctor and she asked me if I smoke.  My family…


No Picture

Fun with TINA

I’ve heard today’s investing environment described as TINA.  There Is No Alternative.  I don’t necessarily agree that this is the case, but the argument goes something like this: US Treasurys yield around 1.50% The rest of the world is yielding zero (or less!) US stocks yield 2% and the US economy is strong Equities outside of the US have sucked for a decade and their central banks have weak hands Through this incredibly limited view (that no one should use to invest actual dollars), there is no alternative to owning US equities, especially if you are investing for income.  This did get me thinking, though… Ten Years Ago Just for fun, let’s take a look at the 10-year Treasury and the S&P 500 as though they are the only two investment choices.  Ten years ago, the 10-year yielded 3.85% and the S&P yield was about 2%.  So $100,000 invested in…


No Picture

What Happened to the Recession?

Last week was recession week as the brief yield curve inversion launched a thousand headlines promising economic destruction.  Every newspaper had a recession headline or story above the fold.  Although there were several days of decent market swings, the recession story seems to have run out of gas as people looked at the actual numbers.  The minutes from the latest Federal Reserve meeting further cooled the rhetoric.  Journalists may have expected the last Fed meeting was Thunderdome as there was some disagreement among Fed members on whether to hike or not.  Instead, the minutes painted a much different view. So what do the minutes from the last Federal Reserve meeting say? Labor is strong and inflation is under control.  The rest of the world is struggling a bit, but it hasn’t made a huge impact on the US economy.  Trade policy uncertainty seems to be here to stay in the…


No Picture

When the Recovery Will End, Emotion, Controversy

When Will the Recovery End? (Spoiler Alert: It’s Already Over) After 10 years, surely the end of the recovery is near?  I still see investment products pitched with this kind of wording.  It turns out that the recovery ended 84 freaking months ago.  Since then, we’ve been in expansion.  84 months sounds like a long time (7 years!), but in the context of previous expansions, it’s not remarkable in either length nor size (there’s a joke here, somewhere).  The expansion following recovery from the tech crash was just 12 months, with a gain of 14.6% on the S&P 500.  However, the two prior expansions were 135 and 134 months long and gained over 400 and 500% (see graphic).  Should we be worried about the current expansion?  Let’s break 100 months first, then three years after that let’s start worrying.  In the meantime, stick to your financial plan. Taking the Emotion…


student loans

Student Loans

$1.6 trillion of student loan debt is spread among 44 million Americans.  More than even avocado toast or a daily latte, student loans are being blamed for Millennials not being able to afford housing (even though they are the largest home-buying cohort).  Some Presidential hopefuls say they’ve got the answer in just erasing the whole thing.  This is a case of finding a gullible voting bloc and riding them as hard as possible in the hopes of building a warchest to retire on, securing a book deal, and hitting the speaking circuit.  It is a proposal along the lines of the Green New Deal – not so much a serious piece of legislation as it is something to garner mentions in the media. Cynicism aside, I’d love to see student loans wiped out.  “But isn’t this unfair to people who took out loans and paid them off?”  Maybe, but it…


Zombie Apocalypse?

The bull market is (take your pick): in the late stages of the market cycle in the late innings long in the tooth Let’s get another cliche out of the way and say that bull markets don’t die of old age.  Are we headed for a recession or a bear market?  Yes. This is like asking if we’re headed for Christmas.  We’re headed for Christmas whether it’s December 24th or December 26th. It’s impossible to prove that we’re not and I’ve been around long enough to know not to put a deadline on predictions.  It’s one thing to say there will be a recession in the future and another thing to say there will be a recession next year #timestamp. So yes, there’s a bear market or recession on the horizon, but that doesn’t mean the current bull is over any time soon.  Even if you think the market is over-valued…