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The Best of What They Said and I Read Week Ending 2/23/2020

Short excerpts from articles I found interesting.  I may not agree with the author and the following material is not intended as investment advice


 Barron’s – February 21, 2020 – Stocks Drop on the Week but Still Look Bubbly.  Time to Prepare for a Correction – Al Root

  • “A stock-market meltup is happening right under our noses. And though we don’t quite have a definite sign that a bubble in equities is forming, several market statistics are concerning. They suggest it might be best to prepare for a post-bubble correction of 10% or more.”
  •  “…We aren’t calling the end of the bull market in U.S. stocks. Yet. But the market is overbought, in Wall Street parlance. That means bullish sentiment is high and a correction is due. A 10% drop to 3000 in the S&P 500—near the index’s 200-day moving average—wouldn’t surprise seasoned traders. In fact, the market is as far away from its 200-day moving average as it has been since late 2017. (That was followed by—wait for it—a correction.)  Bull markets don’t die of old age, as they say on the Street. Something has to happen to derail global growth. It could be the coronavirus outbreak in China. It could be slowing commercial construction activity in the U. S.—something Deere hinted at during its conference call on Friday.”

 U.S. Global Investors - Investor Alert – February 21, 2020 – Frank Holmes 

  • “…The major market indices finished down this week. The Dow Jones Industrial Average lost 1.38 percent. The S&P 500 Stock Index fell 1.31 percent, while the Nasdaq Composite fell 1.59 percent. The Russell 2000 small capitalization index lost 0.52 percent this week…The 10-year Treasury bond yield fell 12 basis points to 1.47 percent.”
  •  “…U.S. business activity shrank in February for the first time since 2013 as the coronavirus hit supply chains and made firms hesitant to place orders, a warning sign that the outbreak is starting to dent the world’s largest economy. The IHS Manufacturing PMI, which measures composite output at factories and service providers, fell by 3.7 points to 49.6, the lowest level since October 2013, when the U.S. government shut down, according to preliminary figures released Friday. Readings below 50 indicate contraction.”
  • “U.S. 10-year yields fell below 1.5 percent this week to the lowest since September. The gap between two and 20-year yields has also compressed to within 11 basis points of inversion. This is concerning for the Federal Reserve, signaling that current monetary policy isn’t sufficient to boost longer-term growth and inflation.  Long-term U.S. inflation expectations have fallen to the lowest since 2016, as per five-year five-year forward breakeven rates. This is concerning for the economy’s growth outlook.”
  • “…This week the White House acknowledged that President Trump’s trade stance depressed economic growth and business investments, reports Bloomberg. Chief economist Tomas Philipson told reporters in a briefing on the annual Economic Report of the President that “uncertainty generated by trade negotiations dampened investment.” The U.S. economy grew by 2.3 percent in 2019, versus growth of 2.9 percent in 2018.”

 Bloomberg – February 22, 2020 – Warren Buffet Flashes “Urgent” – Tara Lachapelle

  • “…Warren Buffett says he’s in the “urgent zone.” It’s the folksy billionaire’s way of calling himself old. But even as Buffett approaches 90, the spotlight-loving chairman and CEO of Berkshire Hathaway Inc. isn’t ready just yet to talk about who will run his giant company when he’s gone. He still has more to say, and more to do — and that could make for an interesting year ahead.”
  • “…As mentioned, Buffett will turn 90 this summer, and his right-hand man Charlie Munger is 96. His letter contained an anecdote about a friend from his past who, at the relatively ripe age of 80-something, kept receiving requests from a local newspaper for biographical data so that it could prep the man’s obituary. The request was marked “URGENT.” “Charlie and I long ago entered the urgent zone,” Buffett wrote, assuring shareholders that their company is “100% prepared” for the sad day of their departure and even sharing some details about his will. In my decade covering Berkshire, it’s the most I can remember Buffett discussing what will happen when he’s gone.”

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