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The Best of What They Said and I Read Week Ending 8/9/2020

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 – August 8, 2020 – Gold, Apple Stock and Just About Everything Else Are Flying.  There’s a Reason for That. – Ben Levisohn

  • “The Nasdaq Composite cracked 11,000 this past week—and all anyone wants to talk about is negative real rates.  You see, it’s not good enough for the Nasdaq to gain 2.5% for the week—and break a big round number in the process. Nor is it good enough that the Dow Jones Industrial Average rose 1005.16 points, or 3.8%, and the S&P 500 gained 2.5% to finish the week just 1% off its all-time high.”  
  • “The rise can’t be because of better-than-expected earnings, even if 82% of companies have topped analyst forecasts…demonstrating that corporate America has held up far better than anyone expected…So the market found a new reason—negative real interest rates. Real rates are simply what an investor earns after factoring in inflation, and usually they’re positive. No longer. They turned negative at the end of January, briefly spiked back into positive territory in mid-March, and have been going downhill ever since. During the past two months, the real rate of a 10-year Treasury note has dropped from minus 0.36% to minus 1.05%, the lowest in at least 17½ years.”
  • “…The only problem now is that everyone appears to get the game—and that could be a sign the trade is ready to shift. “When we get used to a scenario, that’s usually time for it to reverse,” says Quincy Krosby, chief market strategist at Prudential Financial.  That doesn’t mean that what’s working can’t continue to work for a bit longer. The markets have a mind of their own, but a setback could be in the works.” 

 

The Wall Street Journal – August 7, 2020 – Do You Know the Difference Between Being Rich and Being Wealthy – Jason Zweig

  • “It isn’t often that I receive a new book I feel I have to read, but I couldn’t wait to dig into “The Psychology of Money.”   To be published next month, this 242-page, easy-to-read book by Morgan Housel isn’t about investing. It’s about how to think about investing, and it’s one of the best and most original finance books in years.  Mr. Housel, 36 years old, is a blogger and venture capitalist who writes beautifully and wisely about a central truth: Money isn’t primarily a store of value. Money is a conduit of emotion and ego, carrying hopes and fears, dreams and heartbreak, confidence and surprise, envy and regret.”
  •  “…Many rich people aren’t wealthy, Mr. Housel argues, because they feel the need to spend a lot of money to show others how rich they are. He defines the optimal savings level as “the gap between your ego and your income.” Wealth consists in caring less about what others think about you and more about using your money to control how you spend your time.  He writes: “The ability to do what you want, when you want, with who[m] you want, for as long as you want to, pays the highest dividend that exists in finance.”

 U.S. Global Investors – August 7, 2020 – Frank Holmes

  • “…The number of commercial air passengers on U.S. carriers rose to a post-pandemic high of just under 800,000 on August 2, according to the Transportation Security Administration (TSA). That’s a ninefold increase in passenger volume from the low set on April 14, when screenings totaled only 87,500. A year earlier, the number stood at 2.7 million passengers per day, so we still have a long way to go.”
  • “…Airlines aren’t the only industry that had a positive week. Spot gold rose 3 percent after crossing above $2,000 an ounce for the first time ever on Tuesday. This was the precious metal’s ninth straight week of gains, driven by historic money-printing, a falling U.S. dollar and negative real government bond yields.  Gold producers, as measured by the NYSE Arca Gold Miners Index, also ended the week up for the ninth consecutive week. The group has returned 107 percent since the pandemic low on March 20.”
  • “…According to the Census Bureau, an estimated 27 percent of adults missed their rent or mortgage payment for July. The federal moratorium on evictions expired on July 31, as did the end of the $600 per week boost to unemployment benefits…Mortgage rates have found another record low, reports Bloomberg, potentially boosting a housing market that has been a bright spot for a shaky U.S. economy. The average for a 30-year fixed loan fell to 2.88 percent, the lowest in nearly 50 years of record keeping by Freddie Mac.”
  • …As many as 231,000 of the nation’s roughly 660,000 eateries will likely shut down this year, according to an estimate from restaurant consultancy Aaron Allen & Associates provided to Bloomberg News. This will bring the industry’s steady growth to a halt and mark the first time in two decades that U.S. restaurant counts don’t climb.”

 


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