Carty Capital Management
Carty Capital Management



In Plain Sight

Good Morning,


What a week.  Wow.  Pretty crazy.  Alas, it is just what the doctor ordered.  In fact, it might even be a tad bit better than what the doctor ordered.  


Many will miss this because it is just - well - too simple, too boring, too obvious.  In plain sight for sure.  What?


Overnight, China announced it will indeed retaliate against the announcement yesterday of US trade tariffs against them.  Yes, we sent a shot over the bow for about $60B in trade tariffs and Trump's demand was to see China reduce the trade deficit by $100B. 


Their response?  You bet - tariffs of their, of roughly $3B.  Yes, that is a 3 with no 0 after it.  Let's see, $3B huh? 


Sounds like a big fight alright. 


I am pretty sure we erased that off the US market during panicky selling in the last, oh, 90 seconds or so of trade yesterday.


My Point?  Three billion dollars was it?  Mighty China - the country that seemingly causes everyone to quake in their boots responded with $3 Billion?  But see, that's not the point.  That's the attention-getter.  That's the "uh-oh" moment.  But the really important part, the part that this was all about is being missed - and yes, it's in plain sight:


There it is - "if it cannot reach an agreement with Washington."  Meaning it really, really does not want to start a "trade tiff" - believe me, it's no "war" but the media just loves the angst. 


Indeed, as much as the media wants to tell you how big and bad China is - their economy tanks far faster and farther than ours in this game - and they want no part of it.  I did kind of like the reference of going "to the WTO."  Sort of like, "I am going to tell the teacher if you take my pencil again."


I hope we can all see that this was the reason for all the theatre, right?  Trump was not being a complete moron.  Sure, style can be questioned all day long - but the purpose is far more difficult to focus on in all the media hype and now seemingly, automatic, Pavlov-like, apoplectic responses from the masses.


The purpose was to force, in broad daylight, the world to recognize that theft has been underway for years - and now it's time to pay the bill.  Now, they will strike a deal.  It will improve things for the US....and the stick will have worked.  Just as we will see when the new NAFTA deal has been completed. 


What Now?


Well now, the good news is we get to listen to quite a few "experts" tell us how bad this will be and how long it will take to fix.  Much of the expertise will be as moronic as some previous catastrophes we have tried to make larger than they really ever were.


Peak oil, no oil, deflation, inflation, sky-rocketing rates, rates that are too low, high gas costs, low gas costs, Greece is done, Greece isn't done, Eurozone is finished, the eurozone is fine, the Chinese yuan is too high, but now it's too low.  You get the drift, right?


No wonder Valium prescriptions have a steady YOY rise. 


Not for me though - just my extra large bottle of fruit-flavored TUMS always on hand and some spiced rum with one of those small umbrellas for a Friday afternoon.


Speaking of Friday


Good Lord, can you just imagine how twitchy the nervous-nellies will be as we get into the last hour.  Well, with the threat of a budget bill veto and "the clock running out" added to the buckets of red ink for the week, don't be surprised if you see a weak close. 


Here's what else was missed...



Scary right?  Nope - the bulls are clearing out again - all good folks.  Set your course for the long-term horizon.


Bad Attitude


Well, like it or not - we get to pick how we interpret all this junk. 


That's why markets are markets.  Free will is a good or bad thing. 


But know this - the process of doom has been around for a very, very long time.  It sells very well in any kind of weather.  Let's take a quick review:


Many don't recall that a NYTimes Bestseller for almost 2 years in the early 90's was a book titled "Bankruptcy 1995" - and of course, it was about the US.  It goes back further:


Check the date!  So, no, scare-mongering and telling you how bad the future is set to be is not a new business.  


William & Paul Paddock's scribble, "Famine 1975," said it was "impossible for food production to keep up with population growth" and we would soon starve.  As a pairing to that terrible outcome, also written in '68, Paul Ehrlich took on "The Population Bomb," which he opened with: "The battle to feed humanity is over. In the 1970s and 1980s, hundreds of millions of people will starve to death."


Today - in modern times, thanks to supreme technologies only set to get more productive each year, we grow enough food to feed twice the world's population - but, alas, dictators, warlords and pirates steal much of it from those in need in many parts of the world. 


Instead of starving against our will, millions of us now need to try starving voluntarily - by dieting.  Today, food is far cheaper relative to the overall growth in the cost of living than in the 1960s, '70's or 80's but know this:  we believed those best-selling prophets of doom in 1968...just as strongly as we believe those doom-sellers of today.




Have a nice weekend with family and friend.


Be aware that first-quarter earnings are right around the corner.  In the past, as stated often - a rally into earnings season has often been met with a lot of "buy the rumor, sell the news" weakness.  


This time, the stage is set differently - begging for the opposite.  Since we have seen quite a bit of air taken out of the averages, do not be too surprised if you see some, "gosh, that's not as bad as we feared" emotions roll in once the "season" is underway.


And do let this settle in the back of your mind as the fears and angst of today's headlines wash over your senses:


It is the spirit of innovation and demographic powers in place which are driving the Barbell Economy in the directions we speak of often. 


This does not mean every day, week, month or quarter is without pause or setback.


A patient and disciplined view of the larger forces defining the future will help clearly define for you a more productive philosophy...


Over wide spans of time, people make markets. 


The Barbell Economy is real. 


You can ignore it, you can disagree - but the two largest generations of our time are set to drive U.S. economic growth for the next 40 years. 


In time, innovative and well-run companies standing in that Barbell structure will be set to generate long-term profits, and the shareholders (owners) who patiently invest for the long-term will hopefully participate in the value creation that takes place as a result.


As such - panics like the one the markets are currently (still) finding their way through tend to be good for the long-run.  They reset values and perspectives and provide the long-term investor new opportunity to be patient and disciplined.  


No one ever stated it would be easy.


Be assured of this: if it were easy, the returns available would be insignificant.


For long-term investors, hunting season is open...time to start looking.


Be grateful for the latest bouts of panic.  


The wall of worry has been rebuilt nicely...though chop and churn as aftershocks are always likely - and normal.  


Demogronomics keeps you on the leading edge of change but there is a cost:  it requires a much larger, more patient and disciplined view of the elements at work.


It's the long-term currents we need to invest upon - not the short-term waves which will assuredly always roll ashore to block the horizon - just as they are now, causing doubt in the minds of millions once again. 


Those waves are the noise too many will likely continue to be lost in...and the reason the long-term game is so hard to win based on fearful activities.  


In the end, like it or not, long-term investors have learned this: 


Demographics Rule The Long-Term Game


Until we see you again - may your journey be grand and your legacy significant.

InvestingMike Williams