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The Best of What They Said and I Read Week Ending 9/22/2019

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 – September 20, 2019 – The Dow Falls as Markets Try to Figure Out What Really Matters -  Ben Levisohn

  •  “If you guessed that an aborted trip to Montana would be the event that moved the stock market this past week, give yourself a prize.  The Dow Jones Industrial Average dropped 284.45 points, or 1%, to 26,935.07, while the S&P 500 declined 0.5%, to 2992.07, and the Nasdaq Composite fell 0.7%, to 8117.67. The S&P 500 would have finished flat for the week—except it decided to drop 0.5% after reports that China had canceled a visit to Montana hit the newswires. Yes, it was that kind of week.”
  • “That’s not what we would have expected, given all of the week’s excitement. Saudi Arabia’s oil infrastructure was attacked. The Federal Reserve cut interest rates by a quarter-point. U.S. money markets went crazy and forced the Fed to intervene, setting off comparisons to the collapse of Lehman Brothers in 2008. And yet a Montana junket was the ultimate determinant of whether the market finished up or down.”

The Wall Street Journal – September 21, 2019 – Three Market Shocks and Investors Say “No Problem” – James Mackintosh 

  •  “On Monday, oil futures jumped the most ever. On Tuesday, the Federal Reserve lost control of overnight interest rates and made emergency cash injections for the first time since the financial crisis. Unnerving things come in threes: The biggest swing out of stocks with momentum and into value since the financial crash happened the week before.   Yet, stocks, bonds and the dollar are having a perfectly normal couple of weeks. The S&P 500 is less than 1% below July’s high. Are investors resilient enough to recognize these as unconnected events each with its own explanation? Or is everyone so somnolent that they’re ignoring troubles deep in the system?”
  • “…I lived through 2007, and watched aghast as investors ignored three sets of problems that eventually brought down the financial system. The subprime blowup, followed by the freezing of money markets and the crash in quantitative hedge funds, did lead to a 10% summer correction in the S&P, but stocks made it all back and only woke up to reality months later, peaking in October.  Problems in the financial system can quickly gum up the workings of the real economy. If big overleveraged funds or brokers fail because of bad bets on oil or momentum stocks it could matter a lot.  My inclination, however, is to think that this time the market and economy are showing their strength, not ignoring risks. The financial system is rolling with the punches. Each event has its own explanation, and there’s no sign of damage spreading.”

The Kiplinger Letter – September 20, 2019  

  • “…The freight industry is in a funk right now because of weaker demand, stemming from a slide in manufacturing and the trade war with China. But the longer-term picture is brighter, thanks to innovations in how cargo gets moved.” 
  • “…But rail shipping speeds are up, the result of less congestion on the rails. Freight carriers are looking to technology to cut costs and boost efficiency. The future of shipping is precise tracking of trucks and cargoes at all times, via wireless sensors that pinpoint a container’s whereabouts across the supply chain. Trucking firms are already going in this direction, which promises to increase profits by letting them optimize routes to save fuel, avoid congestion, and minimize idle time.”
  • “Eventually, such enhancements are expected to save the industry $30 billion annually. Railroads are relying on advanced scheduling techniques to reduce costs. So-called precision railroading uses carefully crafted schedules to move trains faster with less downtime, pressuring their shippers to keep up. But those lean operations could lead to bottlenecks when demand picks up again. Rail customers, take note.” 
  • “The long-run goal for freight carriers: Fully automated trucks and trains. They’re still a way off. But closer than you might imagine. Some companies are already busy testing nearly autonomous trucks on public roads. TuSimple, for instance, has been transporting mail between Phoenix and Dallas with trucks that mostly drive themselves (though a human driver is standing by to take the wheel). Starsky Robotics is operating robotic trucks in Fla. and Texas via remote control. A driver remotely pilots the trucks onto and off of highways. The truck does the rest. Does automation spell the end for human truck drivers? Not necessarily. Even as the industry transitions to driverless trucks, it’ll need experienced operators to guide them from control rooms. Totally eliminating human control will take decades.”

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