Carty Capital Management
Carty Capital Management



Stop Me If You've...

Good Morning,


Guess what?  Things are getting better.  Mind you, that does not mean everyday, week, month, quarter or year is "better."  Long-term trends include bad windows within them - sometimes several. 


Stop Me If You've Heard This One...


I cannot believe it but this headline awaits readers on financial sites today:


"Traders Skittish as Government Shutdown Looms"


The pictures and images are grim - eliciting that type of cringe from readers that media producers look for today in their click-revenue-producing stats.  That's what it is about right?  You do know that yes?  Clicks.  Ads.  Links.  Money.


Here's one for you:  CBS Evening News content:


16 minutes of commercials 

14 minutes of "news"


What do you think it's for now?  Yes, correct.


My Point?


How many times do we need to hear the "OMG we might have a government shutdown crisis" call before we know it's all fake.  It's a gimmick, an attention-getter.  Just another needle in a stack of needles designed to get you to react with emotion - often ending with investors being separated from their future money.


Future money?  Oh, well that is a little tag I put on the likely value of your capital had you never had all those emotional responses in the past.  Man were they expensive.  Don't fret, we all do it.  We are all human.  Our collective goal in 2018?


Learn who our biggest enemy in wealth-building is and what to do with them.  HINT:  (you need to turn your computer upside down to read the answer) The answer is staring back at you every morning when you brush your teeth. 


Yes indeed, there will be a correction.  No doubt.  It will happen.  It will hurt for a bit.  It will erase value for a bit.  It will make you mad at everyone on your financial team - for a bit.


"It" can unfold from strange extremes.  The far ends of these extremes probably look something like this:


Starting 5 minutes from now...or


Starting 5 years from now, from, say, DOW 55,000, with a drop of 14,850 points - all in one trading session.  


My other point?  If the latter were the extreme which unfolds ahead, be assured of this fact:  when it was over, and the Dow was settled in at 40,150 (after the one-day crash of nearly 30%) one on Earth would want to touch the stock market again.  Perfect.


The kicker?  If anyone tells you they know which one of those extremes (or anywhere in between for that matter) is going to unfold and when, the other way.  Fast.  Leave your TUMS and Bourbon at the table. 


The one thing we can be almost certain of?  After 12 verses of the same song - the reason for the next market correction will not be the government shutting down this weekend.


Crystal Ball?


If I had one that worked, here's my guess (by the way, this is the way it has unfolded 7 out of the last 8 times crap like this has riddled the headlines): 


Somewhere as we head into the weekend, the headlines will light up with stern sounding warnings of shutdown fears, 11th hour stresses and wide differences amongst our Senate and Congressional "leaders" in DC.  By the way, these guys could not lead themselves out of a wet paper-bag with five sticks of dynamite.


Be that as it may, they will take it further - passing the "deadline" and lurching headlines will wail across the land.  You can almost see the lantern piercing the dark night and hear the the horse hooves thundering down the road.  You get my drift.


Then, in the early morning hours, that "Breaking News" banner will flash across the screens of your favorite financial channel and cut quickly to DC.  The picture will be the usual - a large of very old, stuffy men dressed in blue suits, white shirts and red or blue ties with solemn faces, crowded behind a tiny podium on a red carpet - all waaay past their prime and unable to get real jobs. 


The oldest - and the one who is often the culprit who held off his vote until he cut all the back deals he wanted and had the most leverage - steps to the microphone and tells the American audience how they worked hard to cross the aisle and bring together something for us - the American People... 


Uh, right.  Excuse me while I gag. 


Anyway, don't fall for it.  There is not a single person who will stop a single financial transaction today with this question:  "Honey, should we wait to see if the US Government shuts down, folds in on itself and the country ceases to exist next week before we buy this new car, house, remodel, dishwasher, etc. etc. etc.?"


Not one. 


Good News


In our continued effort to use all theirs up first, oil imports for US needs are still a thing - even as we are on the cusp of becoming the king of oil:


Yes - I was just the summer of 2008 when the world was "running out of oil."  Now, we find it everywhere we poke a hole in the ground.  Thank tech - and the kids.  There are over 5,000 wells capped in the US shale world. 


Recall our comment back when the world was ending in the first 6 weeks of 2016 as oil "crashed" to $26 a barrel and $1.90 gasoline was utter hell on Earth according to experts.  The oil companies were the real estate crash Part 2.  It was assured.  Lights out...sell the furniture and the server farm. 


Anyway, we said, look for oil "to have a new range of $40 to $80 over the next few years..."  We added at the time - "and on each new rally, more wells will open and supply will expand.  Soon technology will allow drillers to find even more, cheaper and easier - making money at lower and lower levels.  Those supply surges will catch up with the price bounces and work to cap them by nature."


It's unfolding now. 


Bond Watch Continues


This weekend, I am prepping a bond market review video which will help you to see the long-term effect of what we always cover in the bond comments.  Fear has been the major player - far more so than QE - which ended years ago.  


Now, after 18,000 points up in the DOW, headlines are starting to slowly pierce that fear bubble and the air is seeping out.  How does one know?  Watch bond yields creep up:


That's quite a jump...and it indeed has created a headwind against allowing some of the dividend paying sectors of the market to ride as high as the growth sectors have to start the year.  This tends to be a leap-frog type process though.  There will be a spot where the pause comes, higher rates create the incorrect fear of "slowing economy pressures", the growth stocks correct for a breather and everyone runs to the steadier dividend stocks.  And, then, the clouds part and things move on.


The bigger issue is this - the 5-year picture on yields (in the weekend piece I will prep and send on Monday, we will show 10, 15 and 30 year periods as well so you see the rhythm I speak of):


Yep - big move when looking at the lows in late 2016.  But the bond market has been falling for awhile now - it's not some new event.  Remember the reference to the frog yesterday. 


We have a wide range over the last 5 years - from about 3.65% down to about 1.45%.  We suspect 2.40% to about 4.00% is the range for the foreseeable future - all within the realms of a steady, growing economy.


So patience friends...but bonds are not set up to be friendly and comfy as they have been for decades.  At best they will be set for a very flat/choppy range as the process of growth continues steadily ahead.


It's The Weekend


Only 11 months and a week til Christmas. 


Enjoy...stay warm, spend time with friends and family - and if you get a moment...pray for that correction. 


It would be a great thing long-term.  Then, I could stop eating all these TUMS. 


In Closing....a reminder...


Expand Your Mind - and soon. 




The world we live in is going to change - by miles and miles - and the pace will pick up.


In market terms, we are not too many years away from a normal day's move in our markets having 4 digits in it. 


If that makes you nervous - buy more TUMS.


In Closing


The undercurrents have not changed friends. 


We must remain focused on the long-term horizon and the powerful forces driving the US economy forward. 


They are strong and steady. 


Better yet for long-term investors able to remain patient and disciplined?


They are still grandly and profoundly misunderstood.


Yes - earnings seasons always stink.  They are supposed to stink. 


They are choppy, short-term minded and they do things (good and bad) that they really shouldn't do.  Or should I say they cause investors to do things they shouldn't do. 


Alas, that makes markets for the long-term investor. 


The rare US Barbell Economy is set to unfold for the next 30+ years.  I like to joke with people who chatter about us being in the 9th inning.  Not.


This is tough to wrap one's mind around - as tough as it was in the very early dawn of the 80's - the game has not even begun. 


Far from the 9th inning, picture yourself arriving at the stadium early, walking in and the stands are still mostly empty.  You hear the crack of batting practice echoing in the seats and see the net still covering the home plate area. 


Players are stretching in the outfield and the managers are in the dugout playing with the line-up cards.


The pitchers are still warming up in the bullpen.


Strap in folks....the ride is still ahead of us.  Of course, there will be lots of stops, rests and short-term setbacks along the way - all the way up this mountain - where it will feel like the world is ending.




Patience and discipline.  


Long-term thinking always wins out over short-term trading.  Worrying about the next setback sells lots of ads but makes almost no money for you.  History proves it.  Hope for it is healthy.


Forget economics - think demographics.


It's the big picture.  It's the current under the emotionally-driven, short-term waves.


Demogronomics keeps us on the leading edge of that long-term direction - but it also demands a much larger, far more patient view of the economic elements at work....including this upcoming earnings season.


Have a nice weekend.


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

InvestingMike Williams