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The Best of What They Said and I Read Week Ending 7/22/2018

 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  – July 21, 2018 – Stocks at a Standstill as Earnings Offset Tariffs – by Ben Levisohn

“…It’s a heavyweight battle between global concerns and local fundamentals—and the result so far is a draw. But judging by the cheers emanating from Wall Street, you’d think the fundamentals had scored a knockout.  The Dow Jones Industrial Average rose 38.71 points, or 0.2%, to 25,058.12 last week, while the Nasdaq Composite dipped 0.1%, to 7820.20. The S&P 500 rose 0.52 point, to 2801.83, which is pretty much as close to flat as you can possibly get without being, well, flat.”

“…“Those surprises do have a way of coming, though, and we can probably expect more of them in the weeks ahead regarding trade, the Fed, and a whole lot more. Still, selloffs caused by tweets or quotes should be seen as buying opportunities, argues Tom Lee, head of research at Fundstrat Global Advisors. Trump, he says, is one of just three political novices to lead the U.S. in this century—Herbert Hoover and Dwight Eisenhower being the other two—and that means mistakes will be made because of inexperience. “The markets can overreact, treating missteps as serious policy errors,” Lee explains. “Hence, we are ‘buying’ the negative headlines.”  At least until one side is flat on the mat.

 U.S Global Investors – July 21, 2018 – by Frank Holmes

“…Three men who played a pivotal role in navigating the U.S. through the 2008 financial crisis are concerned we're forgetting the lessons learned. Former Treasury Secretaries Henry Paulson and Timothy Geithner, as well as former Fed Chairman Ben Bernanke, warned at a round-table discussion marking the 10th anniversary of the financial crisis that the rising U.S. budget debt, which they called a "dysfunctional" political system, coupled with a drive to loosen rules put in place after 2008 could together endanger the economy.

“…China is still the largest foreign holder of U.S. debt, despite rising trade tensions between the world’s two biggest economies. The Asian nation’s stockpile of Treasury bonds, bills and notes held steady at $1.18 trillion in May, after dropping the previous month. Escalating trade tensions could cause China to retaliate against the U.S. by dumping its Treasury holdings, pushing U.S. interest rates higher.”

 The Wall Street Journal  – July 20, 2018 – Trump Breaks Tradition, Raps Fed -  by Nick Timiraos

“President Donald Trump delivered a rare presidential critique of the Federal Reserve, saying he hoped the central bank would stop raising interest rates…His comments departed from a convention in which presidents have refrained from speaking specifically on monetary policy…The Fed raised its benchmark rate twice this year, in March and in June, to a range between 1.75% and 2%...Fed Chairman Jerome Powell was tapped by Mr. Trump last November to succeed Janet Yellen, and he took his post in February.”

“…Analysts said Mr. Trump’s comments were unlikely to sway the Fed’s rate-setting decisions, and if anything, they could backfire by forcing the central bank to affirm its independence. Marc Sumerlin, managing partner at economic consulting firm Evenflow Macro, said the already-high likelihood of a rate increase in September had climbed higher after Mr. Trump’s remarks”

Central bankers have long argued for independence from political pressure…Political pressure on former Fed chairmen William McChesney Martin by the Johnson administration and on Arthur Burns by the Nixon administration to follow easy-money policies is widely blamed for the inflation surges of the 1970s.

“…With the economy expanding solidly and the unemployment rate falling to its lowest levels in decades, the central bank has been gradually raising rates from historically very low levels to keep growth on an even keel…Both of the Fed’s rate increases this year have been approved unanimously.”


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