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Not So Silent Battles

Good Morning,

 

First - let's clear the air.

 

The last 8 weeks have been normal.  Let's just get that out there so we don't ruffle any more feathers than completely necessary.  Yes, the chop, the anxiety, the two steps forward, 1.5 steps back - the "uh-oh, what about xyz..." syndrome is all part of a perfectly normal investing landscape. 

 

So get a grip - we can always be confident of this: more is coming. 

 

The point?  It's a long way up to the top of Mt. Everest. 

 

It is perfectly normal to hit patches which cause a pause - and stark-raving mad fear.  

 

"Sure Things..."

 

Uhhh - right.  By the way, there are none.  

 

It is an over-used and expensive term. 

 

Sort of like, "It's Never Been This Bad..." 

 

The longer one resides in this business, the more you begin to see the repetitive cycles - pricing, psychology, perspectives, fear, greed, politics, media, etc., etc. 

 

Some of the obvious sure things: 

 

"If Trump wins, the world as we know it ends." 

 

Hey, it may be true - but it (the world) still keeps ticking.  While many want to talk politics, I suggest we think about another word instead: "results"

 

Why?  Politics completely aside, pretend Trump was the CEO and not the President.  If he ruffled the feathers of a few other CEO's - and in doing so, got what the Company needed done for its own success in the long run - he would be deemed a great CEO.  Shareholders would fawn over him and praise his "hard-line, tough minded, battle ready" approach.  

 

Call me nutty but in the world of media today - it seems we have been so softened up that we now think it's "bad" to play hard ball with Dictators, Communist countries and leaders of other countries who have, for years, taken advantage of the US on many fronts.   

 

Hilarious right?

 

There is a fine line between being nice and being a patsy. 

 

We all learned it the hard way in grade school.

 

Do we seriously think that "being nice and professional" at all times is how the world ticks - at any level? 

 

It's called a "public face" for a reason. 

 

No one wants to be perceived as a complete ass - so sometimes we see a different view "in front of the camera" as they say.  

 

The lesson? 

 

Like it or not - the things that Trump has been accused of as being "un-Presidential" may indeed be getting lost in the media cycle.  It MAY be getting mis-represented to a world here in the US which just took the previous Administration's "politically-correct" process as, well, being correct.  

 

Really?  In case some may have forgotten, that had many stages that did not work out very well either. 

 

Can you just imagine today's 24-hour-a-day, multi-faceted attack on the President of the United States (unfolding non-stop since election night when the results were in) having been poured over our previous President?  Can you, for a second, just speculate on the torrid accusations which would fill the air? 

 

Good Lord - what a chaotic and nearly hysterical thought when looking through the prism of hypocrisy so many define as something else when they are stuck in the middle of it. 

 

Hey, and get this down deep - we are all guilty of it at one time or another.  

 

What's the real difference?

 

Perception...and results. 

 

There's that sneaky word again that forces one to face facts.  It's all about results.  I heard it best stated by a partner I deeply respect who once looked at me and said,

 

"Mike - don't confuse activity with accomplishment."

 

Wow - did that hit like a ton of bricks. 

 

The same process is unfolding today.  Just weeks ago, the mere mention of N. Korea sent jitters down our collective spine.  Hawaii was placed on an incoming nuclear bomb warning.  People were fired over the mistakes.  Every whisper, movement, facial expression and millions of gigs of video were used to create opinions of the "sure thing" that was next. 

 

Gallons of "ink" were spilled on stories about nuclear war, the loss of the Korean Peninsula, military steps underway, how many thousands would be killed, war-room planning antics and the re-hashing of age-old waves of hatred.  

 

So what really happened?  He caved. 

 

Not because of anything "politically correct."  Surely, as far to the opposite side of that realm many even care to articulate.  It was just good, old-fashioned, boardroom brawling.  Straight-out, hard ball "negotiating" tactics. 

 

Processes which have long since been kept behind closed-doors and away from the spotlight....as they just weren't "Presidential."  <---Note the definition of that term tends to shift based on for whom one votes.  It has since vote number 1 - it will 'til the end of times.  

 

Tariffs? 

 

Right - sure things again - all with bad results. 

 

The guys wearing the dark hats will tell you it is the end of all things trade-related.  Get a grip Part XXVII.  It is not the end of anything - other than maybe a few bad deals we entered into years ago - which indeed can be made better.

 

My hunch? 

 

A few months from now, we will likely see that NAFTA will have been repaired, upgraded and better fashioned - for the US.  In return, the "stick", sorry, I meant tariffs announced will have softened and in some cases - disappeared altogether.  Fashioned only as a ploy to get a better deal.

 

And like it or not - politics is ALL about deals. 

 

Indeed, I will place a bet with anyone as to how perceptions of "tariffs" will change over time as the rest of the world "gets back in order..."    

 

Here is the dirty little secret:  once one cleanses the mind of this feeling that somehow there really is "political-correctness" and a soft, polite, nice way to get things done all the time, one arrives in the real-world...and is then no longer fearful of it.

 

Don't fret - it is nothing new.  It has happened that way since the beginning of time - some are just better at hiding it from you. 

 

Sadly, we are in a business where "political correctness" has no spot in the game.  There is very little grey over time.  Trying to keep it grey is what gets very poor results - usually.    

 

So, For Now, Let's Forget Politics...

 

And let's instead focus on other "sure things" related to markets and the economy. 

 

It's a sure thing that we are to fear inflation and high interest rates if growth continues, right?  One hundred days ago, that was not the case. 

 

But the experts now suggest we cower under the weight of a 3.00% bond yield.  Umm, well - maybe not such a sure thing at all.

 

These are the same experts who told us, again as an example, that gasoline below $2.00 a gallon at the pump was bad for us.

 

In fact - the bond market has done almost precisly what we covered in that video sent along back in January as fears began to erupt. (the password is BondReview0118 in case you missed it)

 

This 5-year bond chart was prepped for you yesterday.  The market has "paused" almost precisely where we suggested it would in your video update.

 

This morning, these two snapshots below awaited the nervous nellies on bond rates.  I had to chuckle when I saw the "expert reason" in print:

 

 

The point?  Rates have fallen 4bps in about 24-hours given the inflation data is not supportive of all the fears engendered in recent weeks.  More sure things dashed against the rocks.

 

A Reality Check

 

Look, let us not forget that we have had a couple solid years in markets.  The 2014 - 2015 "record long trade range" readers were greeted with for many quarters back then indeed followed the pathway suggested: 

 

"Trade ranges don't break down - they break up.  Markets don't take time to go down - they just go down.  They hit trade ranges because they are digesting, pausing, pushing back from the table so sot speak - in order to gain the energy needed for the next leg up the mountain."

 

Let's make sure we have our mindset correct here: 

 

The markets this first quarter of 2018 has been far choppier than the previous nearly 2 years.  One should expect that - not fear it. 

 

Long-range planning is why wealth management plans tend to work well when followed and updated as the road-map of time endures.

 

In a perfect world - I'd hope for some more time in the churn cycle - to wash away all the cobwebs, bullishness and good feelings. 

 

Walls of worry are good things - not bad. 

 

In a crazy, nutty way, we all greatly misunderstand this set of ugly fact on markets, opportunity and upside:

 

When everything gets to the perfect stage, when all problems are solved, when all business hum along smoothly and need no new processes, when every need has been met, when terrible things are totally in the past, when all illnesses are cured, technology has edged out all issues of stress and the world is resting in the knowledge that every human being alive has all that they want....well, it's over. 

 

Done.  Finished.  Why?

 

Because that's Heaven - and I suspect they don't need markets or investing there. : )    

 

Faith and Fear

 

They are two uncannily, like-minded emotions.  They call on the same part of the brain to engage.  They each flood our systems with chemicals leading us to react, almost robotically, in entirely different ways.

 

But they are the same in this one circumstance:

 

Both Fear and Faith ask us to believe in something we cannot see.

 

Remember that friends....our best days are ahead of us. 

 

Our best opportunities are right over the hill ahead and just beyond the horizon. 

 

We just have to keep going.

Closing

 

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

 

A patient and disciplined view of the larger forces defining the future will help clearly define for you a more productive philosophy...no matter who resigns from or resides in the White House.

 

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