Posts tagged ‘turkey’

Hammering Heads with Circular Conversations

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This article is an excerpt from a previously released Sidoxia Capital Management complementary newsletter (July 1, 2013). Subscribe on the right side of the page for a complete monthly update.

Deciphering what is driving the markets on a day-to-day, week-to-week, or month-to-month basis can feel like repeatedly hammering your head. In order to grasp the reasons why financial markets go up and down, one must have a conversation with your brain explaining that good news can be bad for asset prices, and bad news can be good for asset prices. Huh…how can that be? These circular conversations are what keep newspapers, magazines, media commentators, and bloggers in business… and what baffle many investors.

For example, headlines often reflect sentiments such as these:

  • “Unemployment Figures Disappoint…Dow Jones Rallies +200 Points on QE3 Continuation Hopes”
  • “Unemployment Figures Delight…Dow Jones Tanks -200 Points on QE3 Discontinuation Fears”
  • “Economic Figures Revised Lower by -0.2%…Dow Jones Skyrockets +200 Points as Lower Interest Rates Propel Stock Prices.”
  • “Economic Figures Revised Higher by +0.2%…Dow Jones Plummets -200 Points as Higher Interest Rates Deflate Stock Prices.”

On rare occasions these headlines make sense, but often online media outlets are frantically changing the headlines as the markets whip back and forth from positive to negative. News-producing editors are continually forced to create ludicrous and absurd explanations that usually make no sense to informed long-term investors.

It’s important to recognize that if the financial markets made common sense, then investing for retirement would be simple and everyone would be billionaires. Unfortunately, financial markets frequently make no sense in the short-run. Stocks are volatile (often times for no rational reason), which is why stocks offer higher returns over the long-run relative to more stable asset classes.

Explaining the latest spike in stock/bond price volatility has been exacerbated in recent weeks as a result of the nation’s banker (the Federal Reserve) and its boss, Ben Bernanke, attempting to explain their future monetary policy plans. In theory, bringing light to a traditionally mysterious, closed-door Washington process should be a good thing…right?

Well, ever since a few weeks ago when Ben Bernanke and the FOMC (Federal Open Market Committee) disclosed that the stimulative bond buying program (QE3) could be slowed in 2013 and halted in 2014, financial markets globally experienced a sharp jolt of volatility – stock prices dropped and interest rates spiked. Counter-intuitively, Bernanke’s belief that the economy is on a sustained recovery path (expected GDP growth of +3.25% in both 2014 & 2015) spooked investors. More specifically, in the month of June, the S&P 500 index declined -1.5% in June; Dow Jones Industrial Index -1.4%; and the 10-year Treasury note’s yield jumped +0.3% to 2.5%. Greedy investors, however, should not forget that the stock market just posted its 2nd best quarter since 2009 – the S&P 500 climbed +2.4%. What’s more, the S&P 500 is up +13% and the Dow up +14% in the first half of 2013.

Bernanke Threatening to Take Away Investor Lollipops

Another way of looking at the recent volatility is by equating investors to kids and stimulative QE bond buying programs (Quantitative Easing) to lollipops. If the economy continues on this improvement trajectory (i.e., unemployment falls to 7% by next year) and inflation remains benign (below 2.5%), then Bernanke said he will take away investors’ QE lollipops. But like a pushover dad being pressured by kids at the candy store, Bernanke acknowledged that he could continue supplying investors QE lollipops, if the economic data doesn’t improve at the forecasted pace. At face value, receiving a specific timeline given by the Fed should be appreciated and normally people are happy to hear the Chairman speak rosily about the economy’s future. However, the mere thought of QE lollipops being taken away next year was enough to push investors into a “taper tantrum” (see also Investing Caffeine – Fed Fatigue article).

With scary headlines constantly circulating, a large proportion of investors are sitting on their hands (and cash) while staring like deer in headlights at these developments. Rather than a distracted driver texting, investors should be watching the road and mapping out their future investment destinations – not paying attention to irrelevant diversions. Astute investors realize that uncertainty surrounding Greece, Cyprus, fiscal cliff, sequestration, presidential elections, Iran, N. Korea, Syria, Turkey, taxes, QE3, etc., etc., etc., have been a constant. Regrettably the fear mongers paying attention to these useless headlines have witnessed their cash, gold, and Treasuries get trounced by equity returns since early 2009 (the S&P 500 index is up about +150%, including dividends). Optimists and realists, on the other hand, have seen their investment plans thrive. While the aforementioned list of concerns has dangled in front of our noses over the last year, we will have a complete new list of concerns to decipher over the coming weeks, months, and years. That’s the price a long-term investor pays if they want to earn higher returns in the volatile equity markets.

As strategist Don Hays points out, “Nothing is certain. Good investors love uncertainty.” Rather than getting consumed by fear with the endless number of changing uncertainties, the real risk for investors is outliving your savings. Paychecks are being stretched by inflationary pressures across all categories (e.g., healthcare, gasoline, utilities, food, movies, travel, etc.) and entitlements like Social Security and Medicare will likely not mean the same thing to us as it did for our parents. Unless investors plan on working into their 80s as greeters at Wal-Mart, and/or enjoy clipping Top Ramen coupons in a crammed apartment, then they should do themselves a favor by taking a deep breath and turning off the television, so they can be insulated from the constant doom and gloom. 

So as intimidating, circular conversations about good news being bad news, and bad news being good news continue to swirl around, focus instead on building a diversified investment plan that can adjust and adapt to the never-ending list of uncertainties. Your head will feel a lot better than it would after repetitive hammer strikes.

www.Sidoxia.com

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs) and WMT,  but at the time of publishing, SCM had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.

July 1, 2013 at 8:31 am 2 comments

Turkey Day Tidbits

Well, I have managed to pull away from my turkey, mash potatoes, and pumpkin pie to scribble down some Cliff Clavin-like trivia as it relates to Thanksgiving.

Did you know?

  • Origin of Thanksgiving: The genesis of Thanksgiving dates back to the fall of 1621 when only half of the pilgrims who sailed on the Mayflower survived. The survivors were thankful to be alive and therefore decided to have a thanksgiving feast. In 1863 President Abraham Lincoln declared the last Thursday of November as a national day of thanksgiving before Franklin Roosevelt (in office from 1933-1945) changed it to the fourth Thursday of the month to encourage holiday shopping (in case there was a fifth Thursday). As you can see, our infatuation with consumer spending existed all the way back to the first half of last century.
  • Turkey Chasing Trivia: For a plump delicious item consumed with gravy from my plate at a leisurely pace, I was surprised to discover wild turkeys can run up to 20 miles per hour and burst into flight speeds of approximately 50-55 miles per hour in a matter of seconds. Glad my fork and knife can contain this fast fowl from escaping its destiny into my belly.
  • Turkey Eating Trivia: The number of turkeys raised in the U.S. is estimated at 250 million in 2009, down about 8% from the $4.5 billion and 7.9 billion pounds produced in 2008. Minnesota, the “Gopher State,” is expected to be the top turkey producing state, registering in at 45.5 million gobblers. The annual turkey consumption of an American averaged 13.8 pounds in 2007 – with a healthy portion of that consumed during the Thanksgiving holiday period.
  • Other Fixins: You can’t have Thanksgiving turkey without cranberries, which explains the 709 million pounds of production expected in 2009 (more than half coming from Wisconsin). Cranberries are considered one of three native fruits to North America (the others are Concord grapes and blueberries).  There were about 3 billion pounds of sweet potatoes and pumpkins produced in 2008 (North Carolina and Illinois were the leading producers, respectively.).
  • Wishbone History: Back in the days of the Etruscans (about 1200 BC–550 BC), chickens were used for fortune-telling and the dried wishbones of the dead fowl were stroked for good luck. The tradition evolved through Roman times and the wishbone practice was modified to include the breaking of the bone. Eventually the custom made it to England, and the English took it to the New World.
  • Holiday Football: Ever since the league was created, the National Football League (NFL) has played games on Thanksgiving. The Detroit Lions have hosted a game every Thanksgiving Day since 1934, with the exception of World War II (1939–1944).

More than all the trivia, I enjoy this holiday as a time for contemplation. The daily rat race hits us all to some degree and can distort our views of reality. On days like today, it’s nice to suppress the craziness (albeit temporarily) to reflect on those issues important to us, thereby reshaping our lives back into proper perspective.

And oh yeah, squeezing in some football on the boob-tube and stuffing my face with pie and ice cream makes it all the more enjoyable.

A happy and healthy Thanksgiving to all,

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper. 

DISCLOSURE: No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

November 26, 2009 at 2:00 am Leave a comment

Turkey Stuffing, Wall Street Style

There will be no shortage of turkey stuffing this year, thanks to a story from Joshua Brown’s The Reformed Broker site (Wall Street Turkeys…Full of Stuffing).

In the spirit of Thanksgiving, which turkeys did journalist Terry Keenan roast?

Timothy Geithner: A fledgling economy and aggressive fiscal measures have painted a big target on Geithner’s back. I don’t fall into the “let’s lynch Geithner” camp, but Keenan feels “It’s a fair bet President Obama’s least-popular appointed official won’t be around to roast next Thanksgiving. “

John Thain: The former Merrill Lynch CEO and Bank of America executive who spent $1.2 million redecorating his Manhattan office made the list too. The man referred to as “I-Robot” may be difficult to cook, but regardless the article claims he is seeking to find employment running a different public company in the mean time.

Larry Summers: As the Director of President Obama’s National Economic Council, Mr. Summers has done a respectable job of flying below the radar, but not low enough to escape his past as Harvard University’s President (and the associate poor performing endowment).

Jeffrey Immelt: GE is no weakling, weighing in around $170 billion in market cap, but Keenan highlights the fledgling performance of NBC over the last two decades as reason to stuff this turkey.

Vikrim Pandit: The CEO of Citigroup survived a tumultuous period in 2009. Keenan however underscores how:

“His image suffered a big blow at the hands of Andrew Ross Sorkin, who paints an unflattering portrait of Pandit in his best-selling book, Too Big to Fail. If Pandit can’t play the “source game” to his advantage, it’s hard to see how he’s up to the much tougher task of reviving Citi’s fortunes.”

Now that we’re done with the turkey, could you please pass the stuffing.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper. 

DISCLOSURE: Sidoxia Capital Management (SCM) and its clients own certain exchange traded funds (including VFH), but currently have no direct positions in BAC, GE, or C. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

November 25, 2009 at 2:08 am Leave a comment


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