Tuesday, January 31, 2017

Equity market takes a necessary pause --- outlook uncertain

Given the strength of the U.S. equity market over the last two months, the decline on Monday and the continued pause today is necessary.  Investors should take a break and assess what's happening.  If markets get too far ahead of themselves, a fall can be more uncontrollable if it eventually comes, and it will.  A correction would be normal, a collapse would be damaging.

It is realized that the potential for corporate tax cuts, regulatory relief for certain industries, benefits for companies that have been hurt by foreign imports, and a more business oriented administration is credited for the ongoing creep up of the stock market after the election.  That may be, but it is also due to the fact that corporate earnings have stayed on track, credit issues in the financial system are minimal, and employment tightening indicates that small business is beginning to have a long awaited revival after the recessionary years.  All of that is due to Obama policies coming to fruition.

The hope that many investors have for the Trump administration is beginning to be tempered by a realization that there will likely be a negative incremental impact in the global markets if the Trump commentary on trade, protectionism, tariffs, currency manipulation, border taxes, and immigration all come to fruition.  Trump boasts about delivering on his promises, and he has got his hand on the throttle of turning his campaign words into action.  This is beginning to unfold in an incoherent way was no seeming overarching vision.  If it continues in this manner,  uncertainty will lead to a slow down in cross border activity and communication, a higher cost of capital in the U.S., and perceived higher degree of risk in international investment.

Both Trump and Bannon's unpredictable rants that have undertones of militarism and can be bellicose, and the "America first" refrain continues to reflect a nationalist throwback.  All of this is counter to what has led to a global economy that has over time led to global growth.  Global growth has led to a growing middle class in many countries, and that is good for world stability and trade.

When this uncertainty gets reflected in the equity market is not known, but if the pace of  incendiary Trump commentary continues it surely will.  Trump's tendency to insult other countries willy nilly as if his words can be taken back the next day with no consequences is bizarre, but we should expect no change.  He is uncontrollable and careless.

This is all being assessed by financial markets now.  The outlook is uncertain.  As difficult as it is to time markets, waiting to make new equity investments may be prudent now.

"Becoming Warren Buffett"

This program on HBO last night was an exceptional documentary.  It was a candid look at the famous investor's business and personal life.  It gives a picture of a driven and focused investor who has a self-deprecating sense of humor and an intellect's enjoyment of life.  It's a film that has personal lessons for all if they want to hear them.  His dedication to philanthropy as he got older and after his wife's death is a key part of his persona now that is covered.

It can be expected that the program will be aired frequently in the coming weeks and give more viewers the opportunity to see an interesting life lived with relentless but low key passion.

Saturday, January 28, 2017

The diplomacy of the new U.N. ambassador?

Nikki Haley made her debut at the U.N. yesterday with a splash, or a belly flop.  Speaking to reporters there, standing in her knee high black boots with stiletto heels, she threatened the world in American vernacular saying that the U.S. is "taking names" of anyone that does not "have the back" of the United States.  Nice start Nikki.  Did you go back to the playbook of your last home state extremist superstar Lee Atwater to come up with that?

Friday, January 27, 2017

Just the first week...

As the first week of the new presidency comes to a close, what can be said.  Was one day more cringeworthy or appalling than the next.  It seemed to evolved in half days.  There is no need to comment on the specifics.

Broadly speaking, Donald Trump and Steve Bannon seem to be laying the groundwork for an assault on the basic tenets of our democracy, already.  Freedom of the press and voting rights for all are the two clear targets now.  One could go on and on talking about Trump as a buffoon, narcissist, chronic liar, or megalomaniac, but that was well known.  That Bannon is a crude right wing nationalist and racist was obvious as well.  That said, honing in on their targets so soon, so obviously, and so aggressively was not expected.

One could almost think that Trump is becoming unhinged.  He is so accustomed to doing absolutely anything that he wants.  Walk  a half block down 56th street from Trump Tower to a fine steak house, spend a few days playing golf at one of his properties in Florida or Scotland,  fly to Kazakhstan or Chicago or wherever to look at a possible new investment, or just loll around in his gilded 80 foot long living room.  He has lived with few constraints.

Unlike in the campaign, he can no longer tell the press corps to go home and then slip out to a private room at 21.  He is living at the White House without Melania and his young son and likely without the servants who are most familiar with his every need.  Maybe Ivanka and Jared stop in from time to time, but apparently they have a life.  So is he just left to his non-stop television news watching and twitter sending for the night, trapped, and getting more wound up and paranoid.

This feels dangerous.

Saturday, January 07, 2017

Snow today

The expectation was that we would have from one to three inches of snow today, which would have been immaterial.  There must be at least a solid three or more for our driveway plow guy to show up. He will surely be here early tomorrow morning as it's likely that there are at least six inches on the ground tonight.  That's the perfect amount of snow.  It is not disabling but it is the real thing.  Winter wonderland arrives.

It is perfect for driving, something that has always been enjoyed.  Driving in the snow is a challenge and an adventure.  They say it's the other guy that needs to be watched out for and that is surely the case, and worth the risk.  Getting things done, doing errands, or visiting someone seems like an accomplishment, the routine becomes a reason to smile.

Tomorrow will be in the low to mid 20's all day so the snow will stay, children will be out sledding, and roads will take care. Monday it begins to warm up and by Wednesday it is expected to be in the 50's.  Enjoy while it lasts, and be glad that it wasn't a huge storm that created real problems.

Thursday, January 05, 2017

"Hold Still", a memoir by Sally Mann

This memoir is filled with photographs.  Born in Lexington, Virginia and firmly rooted there for much of her life, this widely known photographer reveals more than most would about her life, her family history, and husband and children.  It is an engaging book, and her family history was not at all as expected of someone growing up in a Shenandoah Valley town of 7,000 people, daughter of a country doctor.

As one part of the book, it as expected deals with the provocative photographs of her children on their farm in the late 1980's that drew praise as photographs from many in the arts but derision from many observers for the nudity that was shown.  Major publications like the New York Times and the Wall Street Journal drew attention to this and opined about the morality or immorality of it all.  The name Sally Mann became well known, but the bulk of her photographic work was not.

She meticulously details her work process, other focuses of her work, the allure of the South and its mythology and culture, and the network of artists that she cultivated.  Cy Twombly was a Lexington native that visited each year, a collaborator and supporter.  Other artists were in residence at Washington and Lee University in Lexington from time to time.  She regularly traveled to meet with others in New York and abroad.  Her commitment to her farm and family was pervasive, but she was not isolated.  The Southern nature of her writing definitely leads her to a fixation on tradition, nature, destiny, and death.  Her education at the prep school Putney in Vermont may seem to belie her southern roots, but, as sometime happens, it may have only made them stronger.

This is an exceptional family history.  In particular, her father and his family history could be a book on its own.  For a local doctor available at all times for all people, his experience in culture, art, and literature was broad.  His acquisitions of artwork that began the late 1930's were prescient and no doubt financially rewarding to someone, maybe someday.  They were certainly their own reward on the walls of country houses.

A connection was felt here simply because she lived in and participated in the same times, she and her husband were traveling in Europe and staying in hostels in 1971(same year for me and my friends), she was nurtured in the same state, she lived along the now I-81 valley corridor in Virginia that connects my paternal grandparent's family hometowns in Tom's Brook and Lebanon, and a photographer from my hometown, Emmet Gowin, was clearly an early influence on her work.  He was born in 1941 and not personally known to me.

Opinion here is that the writing is well done with interesting detail and humor when it works, but it occasionally borders on being a bit overreaching in more flowery moments.  The same could be said for some of the photos, but knowledge of photography as an art form is not a specialty here.  The many photographs in the book, both hers and many family treasures from the past, help make this book special.

This book was published in 2015, was a finalist for the National Book Award, and a winner of a Carnegie medal for excellence in non-fiction.  That recognition must have been rewarding, but in researching Mann for this comment it was learned that her oldest son Emmett took his own life at age 36 in June 2016 after years of struggling with mental illness.  Apparently she rarely leaves the farm now, and that is a sad end to this book comment.

Tuesday, January 03, 2017

"401(K) Pioneers Lament..."

A front page article in the WSJ today discusses 401(K) plans and how they have weakened retirement security for many since their genesis.  The much lauded 401K began in the 1980's as an enlightened method of saving for retirement.  Partially matching contributions by many companies enhanced the attraction.  The result was that they supplanted the traditional defined benefit plan in much of corporate America, something the corporates wanted as a cost saver.  That has led to more uncertainty for many retirees, and a feeling of less security.

There are several problems with 401K products, or maybe the word should just be "issues".  First, they must be capably managed by someone.  Second, the costs associated with that must be restrained. For many savers, investment management is not a skill that was required in their work life. As a saver ages, managing the increasing value of a 401K can become treacherous.  One downturn in the market at the wrong time could cripple a long thought through retirement plan.  Generally that leads savers to be too conservative and forego growth of one their primary nest eggs.

Another issue is that all distributions are taxable, as the money directed into a 401K is not taxed going in.  That can lead to a false sense of security, especially in states with high tax rates.  As at certain income levels Social Security distributions are also taxable, that can be a double whammy that limits the realization of a "comfortable retirement" contemplated by the middle class.  That's again especially true in areas with a high cost of living.

For those who have a defined benefit pension, which now is predominantly public sector retirees, it has become something more dear.  No need to worry about management of investment choices or economic downturns as long as the distributor is solvent.  Many boomers may share a similar experience of having a defined benefit commitment from the early years of their corporate work life when they had modest earnings to now having a much larger 401K value with the associated uncertainty.  With the general rise in life expectancy over time, the defined benefit now feels like a gem.  If inflation returns it could be seriously diminished.  Some seniors joke that by the time they are in their eighties their defined benefit payments could be just enough to buy a turkey sandwich with fries for lunch every day.

There is much to think about here, and for many it is the last thing that they want to confront.  Given the limited savings of many, this eventually(five to ten years out) could lead to a broad crisis that will make student loans look like a zit on an elephant and rival the 2008/2009 mortgage debacle.  Whether this will be primarily an economic event or turn into a significant political event is open to speculation.

This is one of the intuitively felt fears that led to the voters' choice in 2016.

Sunday, January 01, 2017

The holidays must be over

If only life were like that great William Bell song "Every day will be like a holiday...".  That was soul music at its best and love was the theme as almost always.  This holiday season, based on the calendar, is done.  Love can still be a theme.

Cards came in as usual, nothing surprising but all enjoyed.  The full story is often not told by a card, as the whole point is a positive wish and a pleasant greeting.  It's always nice when a card has a written note but few do these days. Photos of children are wonderful, and there are less of those now. This year most of the ones that we sent were without notes of consequence. Getting the carefully chosen cards out and mailed on time was the overriding goal.

Christmas visits from adult children were pleasant and enjoyed, but too short of course.  They are accomplished in their own unique ways and stay busy as we understand.  What we do have still here is enough sweet food and spicy snack food to last us a few weeks at least, some purchased to make sure we had enough for visitors and some sent to us as gifts.  In that way the holiday season will linger.

Some of the remaining special dinner food will be turned into a fine meal in a few minutes, as soon as the typing stops...