Stocks rose last week. Soaring Friday, as odds improved for tax reform’s pre-Christmas delivery. Telecoms led the way, on the wings of the FCC’s decision to drop the Net Neutrality rules.
In a 3-2 vote, the FCC approved the Restoring Internet Freedom Order. The order reverses a decision made by the Obama administration to regulate internet service providers (ISPs) under the Telecommunications Act of 1934 — a law intended to establish rules for phone and local electric companies enacted decades before development of the internet.
While the internet operated effectively and efficiently before net neutrality, the FCC in 2015 inexplicably determined that a radical transformation was required to “save” it. Last week’s FCC’s decision frees ISPs from burdensome and oft-politicized government control. We believe the consequences will be positive. Because beyond all the talking points about government ensuring our freedoms to protect us from each other, history reveals that a citizenry requires certain measures of independence from its government. Perhaps, that is the philosophical underpinning that — unlike those systems that came before it — might ultimately permit capitalist democracy a permanent place within global society. Especially as it alone, among other political systems, has been willing to cede control of some societal aspects. Yesterday, it was the Internet. Today, it’s Bitcoin. Who knows what tomorrow will bring?
A recent piece in The Wall Street Journal reminded me of the timeless maxim, “There’s always a bull market somewhere.” Often among the unlikeliest sources.
Harken back to the chaos of 2008. There were seemingly no bastions of strength. With most asset classes — save for a few alternative and fixed-income investments — dragging investor capital down to epochal lows. The S&P 500 fell nearly 39 percent. Real estate stocks lost 43 percent. World stocks dropped 42 percent. Even corporate bonds clanked across the basement floor.
Yet from the darkness, light.
I recall surveying portfolio positions, as sell stops were triggered. Volatility skyrocketed. And seeing some unlikely heroes. Foremost was a discount retailer. One used as the butt of poorly heeled jokes as frequently as it is in portfolios. But Dollar Tree returned 61 percent to investors. Even as the world seemingly collapsed around it. In fact, Dollar Tree, and some of its deep-discounter peers, rank among the retail world’s true success stories.
Stocks finished mixed last week. With Thursday’s gains snapping a four-day losing streak. And a stronger-than-expected jump in U.S. hiring lifting the Dow Jones Industrials and S&P 500 indices on Friday. Both managed to eke out small gains for the week.
Equities remain in their upward trendlines. On the wings of improved earnings, a growing economy, low inflation and swelling growth overseas. Stocks sit in the upper end of the long-term uptrend. And valuations may be stretched. But with no signs of recession on the horizon, attempts to fight the tape could prove quixotic.
Still, two indicators bring us pause.
First, SentimenTrader reports that U.S. households have — as a percentage of financial assets and as a share of economic output — the most exposure to stocks (outside of the 2000 bubble) in 65 years. Moreover, pension and mutual funds are all in. This strikes us as an adverse contrarian indicator. Yet, the uptrend can continue so long as new money keeps rolling in from the retirement accounts of all the new job holders, as well as foreign pension and hedge funds seeking to allocate capital. Continue reading
With the holidays upon us, we will inevitably hear pundits discussing the “death of retail.” Even us retail stocks have perked up, of late.
Regardless, retail isn’t dying so much as consumers have engaged in a wholesale rethinking of the way we shop. The convenience alone of shopping online makes the trend toward more online shopping inevitable. And perhaps nobody on earth more encapsulates the online retail revolution than Amazon founder Jeff Bezos. A fascinating figure who is revolutionizing several industries. And represents one of the seminal innovators of our era.
Bezos recently sat for an interview with Michael Beckerman, the CEO of The Internet Association. During the 37-minutes discussion, Bezos shared the principles behind how Amazon’s success. And how the company dominates markets. Principles that have inspired many of the company’s winning products, programs and services.
Stocks have been lethargic. Having paused their frenetic rush higher. Though volatility was lower this week. Showing that institutional investors have few concerns about the recent pullback. Some of which has been driven by sector rotation. As investors lock in gains and reallocate into concerns that have not fared as well.
Perhaps markets are preparing for a breather. And if tax reform does get down, it would not shock us to see stocks move briefly lower. A classic “buy the rumor, sell the news” development.
Of course, what should one expect after the record run-up? The S&P 500 remains in its second-longest bull market. Having lasted 3,188 days and gained 284 percent since March 9, 2009. The longest bull market in history? December 4, 1987 to March 24, 2000. That Roan Toro ran 1,306 days further than has the current bull. Equating to an additional 3.7 years. Posting a gain of 528 percent. So, even with pauses, breathers, head fakes and corrections, one can imagine, if not dream of, the possibilities.
Thanksgiving? Among the most rarified of holidays. Unencumbered, as it is, by issues of religion or commercialism. A time during which men and women, regardless of race, religion or socioeconomic stead, can express gratitude for that with which they’ve been blessed.
The idea of a holiday to give thanks for our bounties arose in the early 17th century, long before these United States were more than a gleam in the Founding Fathers’ eyes. Scholars have traced such observances to Florida, Virginia, New England, and Canada. It wasn’t always on a Thursday, and it wasn’t always in November.
The original Thanksgiving dinner occurred in 1621, within the initial autumn the Mayflower’s Pilgrims laid up their stores for the winter. William Bradford and Edward Winslow left behind written evidence of a three-day feast shared by the immigrants and some 90 Wampanoag Indians accompanied by “their greatest king Massasoit.” There were many turkeys eaten. Along with venison. As the Wampanoag brought five deer they had killed.
Stocks posted their second consecutive weekly loss following a two-month stretch of gains boosted by strong corporate earnings and solid global economic growth.
We believe this bull market has room to run. But evidence reveals we’re much closer to the end than the beginning. Consider the following anecdote.
History shows that major market peaks are usually preceded by ridiculous behavior among the ultra-wealthy. When you see that luxury assets — like high-end property, boats, planes, artwork, and collectibles — begin trading hands at absurd new records? Rest assured we’re closer to the end than the beginning. Continue reading
Sigmund Freud, devotee of the human psyche, wrote, “One day, in retrospect, the years of struggle will strike you as the most beautiful.”
Human nature dictates that we often reminisce with a fervor quite different from what appeared to be the sentiment of the times. Consider the psyche of today’s investor class. Though the S&P 500 has delivered better-than-14-percent returns for eight years, many investors have yet to dip their toes back into the deep end of the equity pool. So concerned, as they are, that the market will swerve harrowingly back into its 2008 form.
Even as we may end up looking back on this era as one of history’s great investment opportunities. Continue reading