Saturday, July 16, 2016

TLH Weekly Review

Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.  - Sir John Templeton

Well it seems everything has taken a refreshing breather after Brexit's woes.. Except for the Dow Jones and S&P 500 hitting all time highs this week. I bet if you asked many people in June we'd see new highs in July they'd have laughed. The only exception is the Nasdaq which has lagged the last year, and still a couple hundred points from it's high reached last summer. It is always interesting to see how each index acts. Time will tell what it's trying to say right now. 

Now let's take a look at some economic numbers. The initial jobless claims continues to come in low at 254k new unemployment claims. When we look at the 4 week continuing claims average we can see that this number is actually below pre-recession levels.  Let us not forget the strong 287k non-farm payroll number we received last week. Hiring is alive and well. 

Obviously this on its own does not mean the economy is firing on all cylinders. It does however note a shift in the trend of the labor market.  At this point in time it's rather obvious to me that structural unemployment is the cause for a lot of labor market angst. Yet we can see that less people are on unemployment than they were before the recession. How is that not a good thing? I'll admit I was worried the economy was heading into a recession at some points in 2015. Yet the strength has seemed to prevail.  Of course an eye is always open for signals to the next downturn.

But back to some economic data. We received a slew of releases Friday. They include CPI, Retail Sales, Capacity Utilization, Industrial Production,  and Consumer Sentiment. All closely watched indicators by the Fed. The Fed also released their Beige Book this week. 

The Fed Beige Book and comments basically stated that economic activity continued albeit at a modest pace.  So all in same story. Economic activity is expanding, but at a slower than liked pace. 

CPI is frequently mentioned by the Fed, as they watch it quite regularly. Headline inflation came in at 0.2%. A positive number, but not as strong as I think the Fed is looking for from a historical basis. 
The problem with inflation is it's still coming in positive, but it's not coming in at the same rate "normally" required to raise rates if you listen to the Fed. I think inflation is low for a few reasons. One is the strong dollar causing price deflation in a few areas, and the velocity of money. I'll visit this area in a future post with more detail. But make no mistake, prices have been rising. 

Retailer Sales(ex-auto) came in strong at .6% higher than May, and 2.4% from June 2015. You can read the full report here.  Spending is still heading in the right direction, and savings have held up pretty well. 

Let's look at Industrial Production and Capacity Utilization.  Industrial Production has really slowed from its headier days in 2014 & 2015. Still this country is manufacturing quite a bit, and really not slowing major signs of a recession. CU on the other has rebounded for awhile, although it's sad to see the long term decline it's been in since the 1970's. 

So all in not bad. Not overly strong where I'd expect 4% GDP growth, but the economy just isn't in terrible shape.

Now onto the portfolio. The week was quiet overall. No company has reported earnings this week. Although the next few weeks will see the majority of the portfolio report results. 

I was tempted to add PYPL when it was around $35. It wasn't exactly on my radar to add, but I think I missed a good opportunity there. I'll look to see if I can get another shot around $37.  IBM has moved up nicely too. Big Blue has take awhile to turn around, and I think these next two quarters will be pivotal to see where they are in this transition.

Besides the recent additions of EMR, and VGR there is not a lot going on.  Things will really get exciting soon so I'm not worried. There have been of course a few upgrades and downgrades that have crossed my screen. What has it meant? Absolutely nothing. The stocks continue to perform, and make us money each and everyday. 

Enjoy the weekend. Don't get to complacent. You never know when a little volatility will be right around the corner!

The Long Haul Investor.

No comments :

Post a Comment