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Excerpts From a Letter to Clients


This is an excerpt from a letter we sent out to our mailing list last week, and since then the market has continued to be tumultuous. Check out what we had to say, and if you like it, you can sign up for our mailing list at this link:

Politics and Economics. Both drive the market; one short-term and often irrational, and the other long-term and fundamentally accurate. Right now, politics is “trumping” economics. We are probably smarter to ignore politics, but that is difficult in tumultuous times like these. Nonetheless, cooler heads will always prevail, but when that will start is anyone’s guess.

Let’s look at today’s politics, which include:

  • Partial government shutdown
  • Impending re-implementation of divided government
  • Troops apparently leaving Syria
  • Ongoing “Trump Derangement Syndrome”

What about our economics?

  • Record low unemployment rate
  • Wages and Personal Income rising at fastest pace in over a decade
  • Fastest GDP growth in a decade or more
  • The USMCA replacement for NAFTA
  • Corporate profits at record highs
  • Unsold home inventories at historic lows
  • Record Holiday travel and spending
  • Gold prices low and steady (no panic buying)
  • Leading Economic Indicators strongly positive
  • Business and individual Confidence Levels near record highs

We continually ask ourselves the operative question, “What changed?” One thing we know for certain is that this market will reverse, and most likely when we least expect it to happen. Every day brings us closer to that recovery. Will it start today, this week, next week, or sometime in the near future? We are forced to wait and see. Selling equities in a period such as this will guarantee that paper losses become real. Further, human nature renders us timid to re-enter a rising market. Leaving a couple thousand DOW points “on the table” is never profitable.

We continually ask ourselves the operative question, “What changed?” The simple answer for these past few days is a resounding, “Nothing.” In response, our suggestion is to respond logically by doing no harm (the Investor’s Hippocratic Oath?). It isn’t easy, and it isn’t fun, but it is logical. Economics will emerge triumphant; it always does.

Better news is on the way. Meanwhile, enjoy the Holidays with family and friends. This, too, will pass.

Steve and Adam