TGIF – What’s in Your Wallet?

Bedell Frazier Investment CounsellingTGIF!

Bedell Frazier Investment CounsellingTGIF!

Currencies are always Market moving, but what happened this week was particularly noteworthy.

Currencies are always Market moving, but what happened this week was particularly noteworthy.

Currencies are always Market moving, but what happened this week was particularly noteworthy.

Bitcoin is all the rage.  The value surged in price, crossing $2,000 for the first time.  One bitcoin was worth nearly $2,800 on Wednesday.  It was worth $1,000 just a month ago.  Some of you might be wondering what exactly is Bitcoin and where did it come from?  Bitcoin is what’s called a cryptocurrency.  You don’t carry them in your pocket.  It’s completely digital.  Bitcoin was created in Japan in 2009.  The actual creator is unknown, but believed to be a group of software programmers under the name “Satoshi Nakamoto”.

Most retailers do not accept bitcoin for purchase, but you might be surprised who does.  Bitcoin is accepted at the Gap, Subway and Whole Foods.  It can also be used on Expedia and Virgin Airlines.  There’s a Bitcoin ATM at a North Beach Market in San Francisco and a gas station in Concord, California.

Bitcoin runs through a digital network known as a blockchain.  It keeps a secure record of each transaction all in one place. Every time anyone buys or sells bitcoin, the transaction is logged.  No one controls these blocks, because blockchains are decentralized across every computer that has a bitcoin wallet, which you only get if you buy bitcoins.  It’s a very efficient system.  Competition in the digital currency space has been fierce.  Bitcoin used to account for over 85% of the Market in February, but is now just 45%.  One of its competitors, Zcash, is up over 200% since it cut a deal with JP Morgan Chase.  You can see why tech savvy consumers love it and government  regulators do not.

Bitcoin’s anonymity also lends itself to crime.  Bad guys use them too.  In fact the recent WannaCry ransomware demanded payment in Bitcoin.  It was reported that Disney was a victim and the new Pirates of the Caribbean film was being held for ransom.

Despite the rapid growth of cryptocurrencies, cash is still king.  Cash is convenient. Cash is private. Cash is intuitive. Cash does not require transactions costs.  But cash really only works with direct handoff and can be clunky to carry and easy to be stolen or lost.  In this digital age, there absolutely is a pressing need for a digital currency that works.  Cryptocurrencies serve that purpose.  It’s still very early in this trend.  Despite many attempts, nothing rivals the US Dollar.

Today, over 1/3 of consumer transactions in the United States are paid with cash.  It is still the single largest source of payment.  But, if you combine debit and credit cards, they account for nearly half of consumer spending habits.  Roughly 10% of all purchases are made online today, and it’s certainly growing.  Bitcoin is included in this.  Checks and other electronic payments are less frequent but tend to account for the larger transactions.  No surprise, cash is more popular for smaller purchases.  But outside the United States, over 80% of transactions are paid in cash.  Cryptocurrencies will likely play a much bigger role overseas over time as new consumers enter global markets.

The world still loves Dollars.  It’s probably not a surprise that the $1 Bill is the most common note in circulation.  George Washington’s face is on just over 30% of the $1.1 Trillion Federal notes in circulation.  What might be a surprise is the $100 Bill is in greater circulation than the $20 Bill.  It’s close (26% vs 23% of total), but Ben Franklin wins out over Old Hickory.  There are more $100 Bills overseas than in the United States.  Have you ever wondered why our money is green?  It was hard to copy, which helped prevent counterfeiting.  In 1861, money was first printed with green ink on the back, which quickly earned the name the “Greenback”.  Knowledge is power.

These Markets move fast, but we’re all over it.  Have a fantastic Memorial Day weekend.  We’ll be back, dark and early on Tuesday.

Mike Frazier & Alice Scarlett Baker

 

TGIF! May 19, 2017

Bedell Frazier Investment CounsellingTGIF!

Bedell Frazier Investment CounsellingTGIF!

TGIF - The Bull is Still Alive and Kicking

TGIF – The Bull is Still Alive and Kicking

“Has Trump killed the Bull Market?” That was a headline from one of our research sources this week. The title is certainly an attention getter, and many investors have been no doubt thinking this was possible, if not probable. But remember, Politics rarely drive Markets. Earnings and economic activity take that role. To be sure, Politics absolutely influence Market activity. Government policies can both help and hurt investment as it applies to tax treatment and regulation among others. But earnings and economic cycles are much more powerful and natural. They’re demand driven. Politics feed on emotion, which can be enhancers and detractors from progress. These are indeed emotional times in which we live. We do not think the Bull Market is coming to an end quite yet. We have however prepared for increased volatility.

The Market finally got rattled this week as the issues at the White House continued to escalate and the severity of the situation grew by the minute. For most of the 7 months since President Trump was elected, the Market has taken his controversial and unconventional behavior in stride. The focus has been on earnings and economic acceleration. Both have been better than expected. That is a really good thing. But it feels a little different now, and the controversy surrounding classified intelligence and Russia is catching up to the President. The prospects for tax reform and other pro-growth policies are seemingly slipping away while the White House scrambles to maintain composure. The Market doesn’t like it and has begun repricing those expectations. Wednesday brought the biggest selloff on the year. But keep in mind the S&P 500 hit a fresh, all-time high on Monday. The week ended on a high note for stocks, but the weekend no doubt will be full of more news and events.

Things still look ok under the hood, no cause for panic yet
The credit markets are functioning properly. That wasn’t the case in previous corrections. The yield curve has flattened a bit, but mostly because the front end has increased, which is normal with expected Fed rate hikes. The Dollar is weak, and has been for a while. After hitting 15 year highs, the Dollar has erased all its gains for the year, and is back at the level it was ahead of the election. This is important because it suggests that the Market believes there is risk to a strengthening US economy and the stability and predictability of the US government is actually in question. But a weak Dollar is good for American products overseas. The only problem is, global markets are still mired in the debate about free trade and fair trade. That will likely continue. Our sense is the Fed will be a little more careful with their interest rate hike campaign now, in light of the Washington turmoil. A rate hike in June is still likely, but beyond is very much in question. For the first time in years, money has been flowing out of US assets into international stocks. Gold has also been a recipient of money leaving the Dollar. We like our exposure in both these areas, which we began building last year.

It was a big week for Oil, which broke above $50 again. Russia and Saudi Arabia, the 2 largest oil producers, agreed to extend production cuts for the rest of the year in an attempt to drive the price higher. They’re also combatting the continued production acceleration in Texas. But global demand is increasing, largely driven by India and China. The global economy is showing signs of acceleration. Energy stocks have had a tough go this year, but we believe higher levels are ahead.

Earnings Season is basically over, and was very solid, with the S&P growing earnings over 13% in Q1. It was the best quarter in years. But the focus has turned towards Geopolitics, which brought more volatile price action to the mix. So many investors haven’t trusted this rally and are shocked that the Market has gone up as much as it has this year. This Bull Market is definitely in the latter stages of its life. Low rates and slow growth are unique characteristics that could make it the longest in history. Right now it’s second only to the Dot.comrally in the 90’s. As famed investor John Templeton eloquently said, “Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria”. There is no euphoria today, a dominant characteristic from the 2 prior Bull Markets that ended very poorly. But Bull Markets don’t move in straight-lines  either. We are not getting overly aggressive to protect the downside, as we still think there is more life in this Bull yet. But we did raise cash and initiate a hedge for a reason last week. A healthy correction is coming; the only question is when. Tighten those belts and hang on for the ride. We’re all over it.

Have a nice weekend.

Mike

 

 

TGIF! America’s Got Energy

Bedell Frazier Investment CounsellingTGIF!

Bedell Frazier Investment CounsellingTGIF!

Gas prices are falling ahead of Memorial Day, which is the official start to the Summer driving season. Usually, gas prices start rising.

TGIF – America’s Got Energy

Gas prices are falling ahead of Memorial Day, which is the official start to the Summer driving season. Usually, gas prices start rising. It’s not due to demand. With the US economy accelerating and unemployment low, cars are expected to be on the road en masse this Summer. Low gas prices have also triggered more purchases of large SUV’s, which consume more fuel.

The US economy is far less dependent on oil now than in year’s past, but we still consume a lot. Americans consume roughly 20 Million barrels per day, the most in the world. China is second at 12 Million. Demand has been growing, which is a really good sign for the global economy.
Russia is the largest producer, recently overtaking the Saudi’s. Both produce over 10 Million barrels per day. Someone else is right on their tail.
America’s shale boom has brought unwanted competition to OPEC, and less demand for foreign oil. The US is now producing 9.3 Million barrels a day. It is back near all-time highs. We produced 5 Million barrels per day just 6 years ago.
I was in Texas this week for my annual trip meeting with clients and visiting rig sites. 40% of US oil production comes from Texas.  Most of the new production is coming from the Permian Basin in West Texas. Midland is booming! Drilling rigs and pumps were everywhere and active. Hotels and restaurants were packed and real estate prices have surged. It is the complete opposite from what I encountered there 2 years ago when the region was depressed from collapsing oil prices.
Technological innovation has made oil production much more cost effective. The US has led the charge and have completely disrupted the Energy industry and is driving OPEC nuts. The Middle East and Russia don’t know how to deal with the US producers because they’ve never had such nimble and strong competition.
The US has become the swing trader in global oil and that’s a powerful place to be. The Market enjoys this situation because the growing US Energy production adds stability and predictability to the global equation.
If you’re surprised that the DOW and S&P are holding up so well with the alarming issues in Washington and around the world, look no further than earnings growth and stable energy supplies. The credit markets are acting well too. 6 years ago the Market would have been rattled by these events. The Russians know it. The Chinese know it. Outside the drama of DC, big things are happening across the country. We are still believers in the future for renewables. But for now, in these challenging times, the world still runs on crude.
Happy Mother’s Day!
We will be back, dark and early on Monday.
Mike

 

TGIF! Numbers Tell the Story

Bedell Frazier Investment CounsellingTGIF!

Bedell Frazier Investment CounsellingTGIF!

TGIF! May 5, 2017

TGIF! May 5, 2017

Keeping score is an important thing.  I did learn early on that it was minimized with Kindergarten sports, though many kids as well as parents still keep track.  When it comes to Sports and Politics, keeping score is a must.  Publicity and propaganda can artificially influence people’s thinking, but numbers don’t lie.  It’s the same thing with the Market.

With all of the political and geopolitical issues that have been tugging at emotions and plaguing the Market, it’s really Earnings that drive stock prices.  So far, Earnings have been very solid.  Earnings Season is the period which happens 4 times per year where companies report facts.  They report how they’re doing and provide insight as to where things are headed. It’s like a Corporate Report Card.  Most CEO’s are measured by their stock price which is how it should be because they work for shareholders.

We are self-proclaimed Market geeks at this firm.  We love what we do.  We live within numbers.  We also understand that not everyone does.  I’m about to throw a bunch of numbers your way, but they’re important.  For those of you that get a headache when you see a lot of numbers, I am very sorry, but thank you in advance for staying with me.  I hope you actually find it helpful.

Earnings Scorecard

So far, roughly 80% of the S&P 500 companies have reported Q1-2017 results.  Both earnings and revenues have been stronger than expected.  Of the 400 companies in the S&P 500 that have reported, 76% have beaten earnings estimates.  Equally, if not more important, revenues are growing faster than expected.  Revenue is the purest form of measuring demand.  We pay very close attention to revenues.  Make no mistake, the Market loves profits.  But Earnings can be engineered a bit with stock buybacks and cost controlling.  Revenues are all about how much stuff is being sold.  A lot of stuff was sold in Q1, and demand continues to increase.   78% of the companies grew revenues in the quarter and 63% of them beat the Street’s expectations.  Just last quarter, less than 50% of the companies beat sales forecasts.  This is no small deal, and very supportive of this Bull Market.  After 2 years of absence, Growth has returned.

For the year, the S&P 500 is slated to grow earnings by 11%.  Revenues are expected to grow 5.5%.  This is a significant improvement from the Earnings recession from last year.  The US economy is growing and the American Consumer is spending again.  You may recall, 70% of the US economy is consumer spending.  Corporate America reflects this accelerating activity.  The Consumer sector represents nearly 30% of S&P revenues.  That includes companies like Disney, Starbucks and Amazon.  However,  Consumer companies account for just 19% of S&P profits.  Tech is the most profitable sector by far, accounting for 22% of S&P 500 earnings but just 11% of S&P revenues.  Companies like Apple, Google and Facebook are very profitable.  The Banks can be very profitable as well, and the combination of rising interest rates and a growing economy is fuel to Financial stocks.

Today, the 5 largest companies in the S&P 500 are Technology companies based on the West Coast.  They are Apple, Google, Microsoft, Facebook and Amazon.  3 of them didn’t even exist 25 years ago.  These are the disruptors.  Disruptive technology has been a game changer.  An important factor in this digital age we live in is the fact that not everyone is benefitting.   That means adapt or die for companies and industries.  Competition is fierce.  I’m sure you’re aware the impact that Uber has had in the transportation industry.  It’s been a big win for consumers, but it has been a nightmare for taxi cabs.  A New York City taxi medallion recently sold for $241,000.  Out of context, that might seem like a really big number.  But when you consider that medallions sold for more than $1 Million in 2013, it really puts things into perspective.  Darwin had it right.  Ultimately, only the fittest survive.   We evolve.  We innovate.  We execute.  We learn.  We fail.  We succeed.  We keep trying.  And numbers tell the story best.

Have a nice weekend.

Mike

TGIF! The Drama of Taxes

Bedell Frazier Investment CounsellingTGIF!

Bedell Frazier Investment CounsellingTGIF!

TGIF! April 28, 2017

TGIF! April 28, 2017

“In this world nothing can be said to be certain, except death and taxes.”

-Benjamin Franklin

Though a necessity to keep our government running, few, if any, enjoy paying taxes.  To many Americans, TAX is a 4-letter word.  The roots run deep in our nation’s history, in dramatic fashion.  On a December evening in 1773, a group of Patriots disguised as members of the Mohawk tribe, dumped over 300 chests of British tea into Boston Harbor.  It was a coordinated revolt against British taxes, with a rallying cry, “No taxation without representation.”  Two years later, Patrick Henry made his impassioned speech for freedom, urging the famous words, “Give me liberty, or give me death!” Political theater has been around forever, and it often involves the subject of taxes.

The White House announced it is preparing what is being called the biggest tax cut in U.S. History.  The goal is to cut taxes and simplify the overly complex US tax code.  That sure sounds good on the surface, but like most complex issues, what matters comes below the surface.  We’re still digging into the limited details.  The Wall Street Journal described the tax plan as heavy on ambition, light on technical detail and likely to drive up budget deficits.  Treasury Secretary Steve Mnuchin announced the new corporate tax rate will be at 15%, a sharp cut from the current 35% Federal rate.  The proposal reduces the number of brackets from 7 to 3.  The top tax rate for individuals would be 35%, down from today’s 39.6% top rate.  Lower brackets would be set at 10% and 25%. Individuals would no longer be able to deduct the state and local taxes from their reportable Federal income. That would significantly impact residents of high-tax states like New York, New Jersey and California.  The controversial Border Adjustment Tax was not in the proposal.

As mentioned on numerous occasions, we believe tax-reform would be very positive for investors.  The Market has gone a long way to price a deal in.  We don’t think it has priced this current plan in, partly because it is void of many details.  We also don’t think Congress will pass a 15% corporate tax rate.  Something in the 22-28% range is more likely.  But deficits matter.  Officials argue that the $4 Trillion over a decade that would be lost will be made up for by greater economic growth, which will bring in more taxes, even at lower rates.  Secretary Mnuchin said that eliminating various deductions, such as state and local taxes, along with stimulating economic growth and closing loopholes will help the tax plan pay for itself.  The Bond Market does not like the bloated US budget deficit, and will sniff out the merits and costs very quickly.

Without skipping a beat, fans and critics alike, seized the opportunity to offer an opinion on the new tax plan.  The curtain is wide open for the dramatic performances on Capitol Hill.  Congress will be debating the merits of tax-reform while they argue about keeping our government open for business.  In case you were wondering, Saturday’s deadline was extended another week.

TGIF! Tax & Drama

TGIF! Tax & Drama

Drama has become a growth industry in the US.  Cable news and social media are certainly enablers.  There’s good drama, and the not-so-good variety.  Of course, it’s all very subjective.  Hamilton took Broadway and the rest of the country by storm and reminds us about our Founding Fathers’ commitment and the power of the American dream.  Drama can touch us all, intellectually and emotionally.  It’s real, it’s human.  My 3 little girls were in their school musical last night and will be again tonight.  Seeing a cast of 1st thru 5th graders on stage warms your heart and makes you smile.  Unfortunately, political drama doesn’t always share the same authenticity.  I would argue the word “drama” also belongs to Mr. Franklin’s list of certainties, with death and taxes.

Bottomline, this is merely a start to the process of tax-reform.  The political theater in Washington will be heated and extensive.  The fact that tax-reform’s officially on the table is an important thing.  The Market likes it.  Now it’s all about execution.

We’re here and we’re on it.  Have a great weekend.  We’ll be back, dark and early on Monday.

Mike

 

 

TGIF! The DOW, Earnings and Nervous Investors

Bedell Frazier Investment CounsellingTGIF!

Bedell Frazier Investment CounsellingTGIF!

TGIF! April 21, 2017

TGIF! April 21, 2017

The rollercoaster ride on Wall Street continues.  It’s actually quite impressive how well things have held up considering the issues faced.  The whipsaw price action has brought back fears.  This week, Investor sentiment fell back to the lowest level on the year, back to the lows around the election.  This is generally a good sign as a contrarian indicator.  This 2 month sideways action has helped correct the massive move higher from November.  The correction has come mostly in time, not in price.  You may recall, the DOW led the charge to new, all-time highs.  Trading this week certainly showed why the S&P 500 is the US Stock Market benchmark, not the price-weighted DOW.  The S&P is just 2% below its all-time high reached in February.
Let’s face it, most people are DOW watchers.  But the Dow Jones Industrial Average does not properly reflect the US Stock Market.  That role goes to the S&P 500.  The DOW is an index of just 30 stocks and is price-weighted.  That means higher priced stocks have greater influence in performance.  The S&P is market cap weighted, so the largest of the 500 companies have the greatest influence on performance.  There’s a big difference.
For perspective, Apple is in both the DOW and S&P.  With a $750 Billion Market Capitalization, Apple is by far the largest publicly traded American company, and the largest component in the S&P 500.  Google and Microsoft are next, both above $500 Billion in value.  Despite its size, Apple is not the largest influence on the DOW.  That honor goes to Goldman Sachs.  The reason is simple, Goldman’s stock price is over $200 while Apple is $140.  In fact, there are 6 stocks in the DOW that have greater influence on the index performance than Apple.  Companies don’t split their stocks like they used to.  Being price weighted, every $1 movement for a DOW stock equates to a 7 point movement in the Dow Jones Industrial Average.  On Wednesday, the DOW declined 120 points.  Half of the declines came from just 1 stock: IBM.  Many other DOW stocks were actually higher that day, but were masked by Big Blue.
We pay very close attention under the hood of the Market.  Small Caps had a great week, up 3%.  The Tech-heavy Nasdaq is back near all-time highs.  While attention is directed at North Korea and France, Corporate America keeps pressing on.  Earnings season is showing some pretty encouraging signs for the rest of the year.  Expectations are for earnings to grow 8% in the first quarter.  Early indications suggest it could be closer to 10%.   Earnings are the primary driver of stock prices, and earnings growth has accelerated this week. That is significant.  When earnings lead, stocks have gone higher.  When Geopolitics lead, they’ve generally gone lower.  The terror attack in Paris ahead of the French election is quite concerning.  With so much activity around the world, this turbulent price action is only natural.   In the face of so much uncertainty and geopolitical concerns, this Market has had every reason to sell-off.  So far it hasn’t.  Stocks aren’t cheap, but they’re not excessively expensive either.  Tax-reform would be a nice additive.  Accelerating earnings growth and nervous investors have historically proven to be a very Bullish combo.  We’re pretty impressed with this price action.  The set up is there for another move higher into Summer.  That’s still our call.  We’re all over it.
Have a nice weekend.  We’ll be back, dark and early on Monday.
Mike

 

TGI-Thursday! April 13, 2017

Things just got more complicated. As if they weren’t already complicated enough.  Geopolitics captured Market attention this week, with the primary focus around Syria and North Korea. The response from the White House has created an interesting and significant development on the global landscape. In a complete reversal from last year, relations are chilling with Russia while they seem to have thawed substantially with China. As the Presidential candidate, Donald Trump slammed the Chinese for unfair trade and called them currency manipulators. Conversely, he embraced the prospects of a stronger American-Russian relationship. Investigations are ongoing as to how close they were and aimed to be. This will no doubt play a major role in how the rest of the year unfolds.
Something important is happening.  Even though the headlines and consequences are highly concerning, the Market is taking everything in stride.  There has not been a massive selloff like one might have thought.  There has been tremendous movement under the surface, but the broad index as measured by the S&P has basically traded sideways near its all-time high.  The Stock Market was due for a breather.
However, the Market implications are significant with the diplomatic reversal between China and Russia.  China is much more important to the global economy than Russia.  China is the second largest economy behind the US.  China is our second largest trading partner, representing 15% of total US trade.  It’s about to replace Canada at the top.   Russia isn’t even in the top 25, with a struggling economy heavily tied to fossil fuel.  Improved relations with China will seemingly enhance our mutual economic activity, stimulate the global economy, cool the rising tensions on the Korean peninsula, and forge a path to a smoother and more prosperous Pacific Rim for this young, 21st century.
Make no mistake, things are far from certain for a warmer US-China alliance.  We agree to disagree on many issues, largely political and social.  But this new trend is definitely a positive development.  China has its own transition of power coming later in the year.  President Xi wants to ensure a strong political standing with a healthy economic outlook.  Its economy seems to be accelerating again.  He wants that to continue.  President Xi knows he’s on center stage and the world is watching.  It gets magnified even sharper when a leader is with the American President.  The US and China need each other.  Who needs who more is debatable and both countries are trying to strategically navigate that.
Despite the knee-jerk emotional investor reaction, which saw money flow into Bonds and Gold, the underlying health of this Market hasn’t really changed.  Trading has been very orderly.  The Credit Market is showing few signs of stress in the system.  Economic data continues to show growth both at home and overseas.  In fact, most International Markets behaved quite well this week.  They are much cheaper than our Market is and many are far from all-time highs.  Our thesis of a global catch-up is still playing out while our Market corrects.  If earnings season continues with more solid reports like we saw this week, this Market could reignite higher into Summer.
Enjoy the weekend.  The Market will be closed tomorrow in observance of Good Friday.  Our office will be closed too.  We’ll be back, dark and early on Monday.
Happy Easter!
Mike

TGIF! News Events and Market Influence

Bedell Frazier Investment CounsellingTGIF!

Bedell Frazier Investment CounsellingTGIF!

Bedell Frazier Investment Counselling - TGIF! April 7, 2017

Bedell Frazier Investment Counselling – TGIF! April 7, 2017

We live in a massively complex world.  Our world has proven to be much flatter as information and events travel much faster and reach further and easier than ever.  Look no further than last night’s actions taken in Syria.  A geo-political conflict with missiles launched.  Within seconds the news broke and spread like wildfire across the globe.  This news instantly took the futures on the S&P 500 down 10 points and caused Gold and Silver to rally.  The major difference today vs. 20 or 30 years ago is the speed of information flow and algorithmic trading.

Today, news breaks instantly and some trading algorithms are programed to find key words like “Missile”, “US bombs” etc.  Those algorithms immediately trigger large-scale sell orders on the S&P 500 futures market and buy orders in the Metals Market.  Makes sense on the surface, bad news event is bad for markets right?   But other than very short-term fluctuations, seemingly large-scale negative news events or headlines are not worth anything more than exactly that, short-term fluctuations.  If you look back over the past 60 years of Market data and plot out large scale “negative” and “positive” events and then compare what short-term, medium and longer-term implications those events actually had, you actually find statistically that those “events” are NOT positively correlated to what you think the market should do.  In other words, as an investor these news events should not be driving factors when making investment decisions.

Using a great example given by Robert Prechter in his recent book “The Socionomic Theory of Finance”; what investment decision would you make if you where to get the newspaper the day before the awful 1963 day when JFK was shot? A US president being assassinated ranks pretty high as far as a negative news event, so selling stocks if invested on the long side, or selling short stocks if a speculator would be the normal decisions based on that preconceived bad news.  Well 1 trading day after JFK was assassinated a short seller would be underwater losing money, and an Investor who sold all their stocks, would be forced to begin buying them all back at higher levels!

There are dozens if not hundreds of examples like this where the Market does not do what seems natural based on the “news”.  We know this goes against human nature, we have all made a knee-jerk decision based on ‘fear’ and that decision has ultimately been the wrong one.  Sometimes this even happens on the positive side right?  The news flow is so positive that the ‘fear of missing out’ can be very detrimental.   Tulip Mania was built on just that.

Nothing above dismisses the emotional or human or political feeling and component all of us have had regarding last night’s bombing in Syria.  Together, we are going to go through more of these moments this year and for the years to come.  It is our job to strip-out the emotional, human, and political feelings and remain vigilant in our research and analytical investment discipline.  This is what has successfully driven our investment strategies in your portfolio, not the “news”.

All attention has been directed at the geopolitical event, all while they snuck the monthly jobs report for March in this morning:  an addition of 98,000 jobs.  In our work, that is not what we would like to see, and really this was the first bad report dating back to May of 2016.  Now just like last May, one report does not make a trend, but we will absolutely be watching this closely.

Have a great weekend!

By, Mike Harris

 

TGIF! March 31, 2017 – Bedell Frazier Spring Newsletter

Bedell Frazier Investment Counselling - Quarterly Newsletters

Bedell Frazier Investment Counselling – Quarterly Newsletters

Bedell Frazier Investment Counselling - 2017 Spring Newsletter

Bedell Frazier Investment Counselling – 2017 Spring Newsletter

We are officially one-quarter through the year 2017, and it’s certainly been eventful.  Time has flown by.  The DOW hit 20,000 then 21,000 for the first time ever.  Importantly, earnings growth and an accelerating global economy have been the primary drivers of this rally.  The anticipation of pro-growth policies like Tax reform and looser regulation are the sweeteners.  Business cycles are the biggest drivers of Markets not politics.  The foundation for this Market remains strong.

To download the complete Bedell Frazier Spring Newsletter, please click here.

 

TGIF! March 24, 2017

Bedell Frazier Investment CounsellingTGIF!

Bedell Frazier Investment CounsellingTGIF!

Bedell Frazier Investment Counselling - TGIF! March 24, 2017

Bedell Frazier Investment Counselling – TGIF! March 24, 2017

The Market got rattled a bit this week. It is certainly used to Republicans and Democrats disagreeing. But the internal discord within the Republican Party on Health Care is raising questions again about anything getting done in Washington.

The thinking is that if the bill failed, the likelihood for tax reform would decline, which could also drag down the chances for financial reform. Since the bill was pulled in the final hour, who knows where this goes. Health Care is such a complicated issue with no easy solution. Unfortunately, Congressional divide also increases the chances of a government shutdown in April and a messy fight over raising the debt ceiling in the Fall. This was a big test. It’s no wonder Congress began the year with just a 19% approval rating.

The rally since November has been driven by the strengthening US economy and the acceleration of Corporate earnings, both of which are still firmly in place. Tax reform is a key ingredient here though, so the Market stall makes sense. Stocks have been digesting the big move and we see that continuing a little longer before running to new highs again. As stated at our Outlook events in January, we felt the Market was going to give the new administration roughly 4 months to implement the pro-growth policies. It’s clearly paying very close attention.

An important factor this week: international markets barely budged. The catch-up play continues and many foreign indexes are holding their highs for the year while our Markets consolidate. That’s a material positive and part of the reason that we rotated money back into international markets for the first time in years.  The Bond Market is functioning well too. There’s a strong foundation under this Market. But we expect more choppy price action ahead.

Like the Energizer bunny, the Bedell Frazier traveling hat keeps going and going. The hat recently went to the Panama Canal, Iceland, Egypt, Israel and Jordan. Below is a picture from Petra and Mr. Indiana Johnson. This is so cool!

Bedell Frazier Traveling Hat Header

Bedell Frazier Traveling Hat Header

Bedell Frazier Investment Counselling - Bedell Frazier Traveling Hat - Petra

Bedell Frazier Investment Counselling – Bedell Frazier Traveling Hat – Petra

Have a nice weekend. We’ll be back, dark and early on Monday.

Mike

 

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