The Empire Strikes Back

W are going to discuss going forward some of our broader investment themes.  One of those themes is the economic advantages that accrues to us by the United States being able to exercise power or "Imperium" in many dimensions all around the globe.  How we act may not be considered imperial  in the classical sense or in the way you learned about it in history books with countries having colonies and such.  Also,  I'll not wade into the debate on whether we are an "Empire" as most would define it,.  However, it is difficult to deny that American hard, soft and economic power is far reaching.  If you accept  Stratfor's historic definition of our power as "the United States {being by} far the largest economic power, with complete control of the sea, bases around the world and a dynamic trade and investment system that {benefits} countries that were strategically critical to the United States or at least able to take advantage of it," then it becomes easier to understand how that power is welded.  

The United States is often called the "global police".  Yesterday that cop busted down the door on   FIFA, the world football {soccer}organization.  Bloomberg View covered that extensively here, here and here.    The amounts involved are staggering, alleged to run in the hundreds of millions of dollars  and goes back decades.  It is also likely the tip of the iceberg.  The Americans only went after targets where they believe they have jurisdiction.  The case will have legs, not only because soccer is globally the most popular sport.  It will have legs because the global cop has said enough is enough and it's time for somebody to force FIFa to clean up its act.  

There's no money to be made on this today by either you or me.  FIFA doesn't trade on any exchange. But it is an example of the power and global colossus that America has become and there is money to be made off of that theme both now and in the future.

Back early next week.

Link:  Stratfor Enterprises, LLC:  "Coming to Terms With the American Empire".

Go Read:

Go Read over at Bloombergview.com, "What's Really Drive Income Inequality".    The key quote:

"From 1978 to 2012, effectively all of the increase in wage inequality nationally has been due to increasing disparities from company to company. As the researchers note, “the wage gap between the most highly paid employees within these firms (CEOs and high level executives) and the average employee has increased only by a small amount, refuting oft-made claims that such widening gaps account for a large fraction of rising inequality in the population.” The researchers also found, by the way, that the male-female wage gap within companies has shrunk noticeably.

If we want to understand trends in inequality, we have to ask why some companies are outpacing others. "

My takeaway:  It probably doesn't take a lot of analysis to understand that the average pay of a worker at a big software company is going to make more on average then somebody working at your local fast food place.  We probably should call these places factories because that is in essence what they are.  I'm told that your average auto-worker in the 1950-60 period earned the equivalent today of $50 per hour in wages and benefits.  Those days are no more.  Sadly I don't see a trend or industrial equivalent on the horizon that changes this equation.  Anything that comes along is likely to be gobbled up by mechanization and globalization.  

My grandfather worked for nearly 30 years for Studebaker making cars.  His salary along with my grandmother working for Robertson's department store in South Bend and later Notre Dame meant there was enough money to send my father to college, support a middle-class lifestyle and save for retirement.  I'm not sure they'd be able to do that today.  

Thoughts {05.26.2015}

Thoughts from Memorial Day Weekend and three weeks traveling back and forth to Indianapolis.

Chic-fil-A is where it's at!  My son put it the best when he said that he could never eat another chicken sandwich after eating there because his was so good.  Stores are mobbed at any time.  According to their website sales totaled in excess of 6 billion in 2014.  Mind you that's with ALL OF THEIR STORES BEING CLOSED ON SUNDAYS!  I put into one of these at noon on a Monday driving back from Indianapolis and was amazed at how mobbed it was.  Lots of families with young kids.  I'm sure Millennial moms see it as healthier than McDonalds.

One of the more entertaining Indianapolis 500's occurred this weekend.  Juan Pablo Montoya who last won the race 15 years ago came back from 30th position to win the race in the final 10 laps.  Montoya seems to be a nice comeback story.  The star that once was the Greatest Spectacle in Auto Racing has noticeably dimmed in recent years, but I'm wondering if were not seeing a comeback of open wheeled racing given how exciting this race was.  Time will tell.  This old Indiana boy would surely like to see the race restored to its former glory.

ISIS takes Ramadi.  Iraqi's called out by US Secretary of Defense for "failing to Fight".  At some point we're going to need a better strategy in that part of the world than the one we have now.  I've long felt that the world is trying to get to some new place as the old Cold War era order has long since frayed.  This part of the globe is becoming more alarming and darker.  

Stocks like a meandering river have mostly trended higher this year, although the gains have not been spectacular.  S&P 500 is up something like 3.5%.  I'm sure the average investor hasn't even noticed.  One month we're up then the next we're going down.  All, however, happens in a channel of higher highs and higher lows.  Volatility has collapsed and it's been something like 3.5 years since the last 10% correction.  People try to conjure up all sorts of meaning to this.  Some look for bears hiding behind every tree and bubbles that must soon be pricked.  Others see things as different and that nothing will derail this bull.  I have for the past several years thought we are OK as long as from an economic standpoint things continue to get better.  All of the evidence suggests that is what's happening.  In terms of a correction, I mean a real one {a decline taking stocks down 10-15% or more) it will come at some point.  Most likely when nobody is looking for one.  That's how these things start.  You usually need an event or series of events to occur that catches the crowd leaning the wrong way.  That's what starts the cascade of selling that often leads to more sales.  That doesn't necessarily mean the end of this bull market when it occurs.  It often is the signal that a period of speculative excess is coming to an end and setting the table for what will likely be a continuation of the advance at some point.  To kill the secular bull market I believe we are in, you need real economic contraction, unemployment spiking higher, collapsing sales, earnings adjusted significantly lower etc.  You're just not seeing any of that right now.  As to when the next correction will come, I like everybody else has no idea.  We'll let our indicators be our guide in regards to what we see when the time comes.  

*Long ETFs related to the S&P 500 in client and personal accounts.  Please note these positions can change at any time.

Memorial day

Happy Memorial Day!

In our town of River Forest one of the highlights of our year is the Memorial Day parade which runs right down our street passing in front of Global HQ.  To honor this day we fly two American flags between now and the 4th of July.

The flag you see off to the side of Global HQ was carried by my brother-in-law who flew Harrier jets for the Marines in Afghanistan. We honor his service as well as the services of all prior family members and all others who are serving or who have served in our armed forces.   

This year we want to honor these folks, both past and present on both sides of our families, for their service to our country.  I have tried to include both immediate and extended family members, but will apologize in advance for any inaccuracies or exclusions.  Please note that any mistakes were inadvertent:

The Honor Roll  includes:

Cornelius Murray {Revolutionary War-Pennsylvania}
James Gignilliat {Revolutionary War-South Carolina}

Capt. {Brevet} William H. Murray {Civil War-Co. K. 19th Indiana Volunteer Regiment}

Col. William Orr {Civil War-19th Indiana Volunteer Regiment}

Donn P. Murray, MD {WWI}

Brig. Gen. Leigh R. Gignilliat {WWI, Supt. Culver Military Academy, 1910-1939}

Fredrick R. Hazard Jr. {WWI & WWII}
Paul C. Gignilliat {U.S. Navy}

C.M. Hazard {U.S Army}

Richard J. English {U.S. Army-Reserve}

Lt. Col.  Michael Franzak {USMC (Ret.)-Afghanistan-Distinguished Flying Cross}

God Speed and God Bless to you all!

Happy Memorial Day everybody!

Millennials & Your Social Security

"10,000 Baby Boomers Retire Each Day!  You can easily find headlines like this.   The Washington Post found out when they looked into the analysis behind those numbers, that the numbers are basically true.   From there it's pretty easy to extrapolate something like 76 million Baby Boomers collecting social security for 30 years and figure out that the program and other programs like medicare will run out of money. 

I say to that bunk.  Probably 95% of the sites on the web and the same amount of TV or radio adds you see or hear that points out a picture of looming bankruptcy for these programs has an agenda, usually to sell you something.  Before blindly taking these numbers as faith stop to consider the facts behind the headlines.  

First it is true that these programs have some short term demographic problems owing to the size of the "Boomer" cohort that is beginning to receive benefits.  However, these problems are more short term in nature and can likely be fixed {raise taxes, borrow, means test benefits, etc}.  The reason is the "Millennial Generation"- kids that in 2015 are between 18 and 35 years of age.  These cohort is beginning to enter the workplace.  I know because I have three  children of this generation.  One's already working and the other is about to go teach special education.   There's also over 75 million of these "Millennials" which currently makes them larger than the Baby Boomers-who up till now were the largest demographic cohort in the country.

Studies performed by the Pew Research Center and others show that the "Millennial Generation" is on the verge of becoming a major demographic force.  They're a cohort that folks ignore at their peril.  Perhaps I'm more in tune with this group owing to the nature of my own kids, but they're going to have an impact on the economy in the coming years and by their force will impact investing.  They are becoming a major theme of ours and one you can expect to hear more about in the coming months.  

Now back to their impact on social programs for senior citizens.  The majority of Millennials are just now entering their family building stages.  Assuming they simply reproduce themselves there will be between 75-150 million of them 20 to 30 years down the pike.  You have to add into that mix the 55 million "Gen. Xers" that are ahead of them and whatever percentage of the 61 million group dubbed by Pew as the Post-Millennial generation thats already in nursery school and there's probably enough there to finance the "Boomers" retirement needs.  Also factor in that a certain amount of Seniors also leave this "mortal coil" each day and stop receiving benefits.  

Remember that the next time somebody tells you that you're not going to receive your social security. 

Next major post will be either next Tuesday or Wednesday although we may break in if events warrant or we see something of interest before then.

Source:  Pew Research Center:  "This Year, Millennials Will Overtake Baby Boomers." 

Go Read

Go read over at Doctor Ed's Blog, "Valuation and the Fed Model".

I think this is the key quote:

"At 2%, the 10-year Treasury bond yield has an effective forward P/E of 50, implying that stocks trading at a forward earnings yield of 5.9% and a multiple of 17 are grossly undervalued by as much as 62%. Of course, this 'Fed Model,' as I first named it back in July 1997, has been showing that stocks are undervalued since the Tech bubble burst."

Valuation {05.19.15}

The S&P 500 closed yesterday at 2,127.97 which is a gain of 3.53% from 2,127.97 when we last reviewed these numbers back on March 16, 2015.   Below is our current analysis.  We are leaving our 2015 earnings estimates unchanged at this point.  We are using a range of $118-121 for 2015 with a $119.50 midpoint.   We also use a simple color code to give you some reference for these numbers.  Green will indicate that the valuation on the index on a strictly historical basis has become more attractive from the last time we did this review.  Red will indicate the opposite. 

Our Midpoint S&P 500 Earnings Estimate of $119.50 {Year End 2015}

Current PE:                     17.81

Earnings Yield:                 5.61%

Dividend Yield:               1.89% {Estimated.} 

Current Expected Price Cone of Probability {COP}:   1,750-2,250.  While energy price and the dollar have been headwinds for earnings other economic data is supportive of evidence showing that the economy is still growing.  As such we will leave the COP unchanged.  

Rolling Four Quarter Estimate for the S&P 500, Our Estimate $122.75*, {Thomson Reuters $122.05}:

Current PE:                     17.33

Earnings Yield:                 5.76%

*We are using our current estimate as we believe that earnings from the energy sector will be better than the market expects and the dollar is becoming less of a headwind for corporations.  The change in our view is not material to earnings analysis.  

The current yield on the 10 year US Treasury is 2.29% and has gained 20 basis points since the last time we did this analysis.    

The Cone of Probability {COP} is our current assessment of the trading range within which we think stocks have the potential to trade during the described time period.  It is a probabilistic assessment based on a many factors.  Some of these inputs are: Earnings estimates, also are those estimates rising or falling, dividend yield, earnings yield and the current yield on the US 10 year treasury.  This is not an exhaustive list of all of the variables that are used in creating the cone.  The Cone of Probability is used solely for analytical purposes.  It will fluctuate with market conditions and changes to the data inputs.  Index prices can and have traded outside of the range of the cone.  The data supplied when we discuss the cone is for informational use only.  There should be no expectation that this price range will be accurate and there are no guarantees that this information is correct.

*Long ETFs related to the S&P 500 in client accounts, although positions can change at any time. 

Smidiríní: Chicago's Debt Woes

Articles I think you should read.

Zero Hedge:  "Why Chicago's Bonds Are Junk, in 7 Charts".

Video from CNBC:  "What's Next For Chicago's Debt Crisis."

Why I Don't Talk Much About Individual Securities {Also Scaling Back A Bit Over The Summer}

I get asked why I don't talk a lot about individual stocks or ETFs on the blog.  In fact, I've been told by experts in the field that one of the ways I could drive up traffic here would be to discuss more investment opportunities.  I'm not likely to do much of that.  I'll discuss that more at the end of this piece but first the attorney in me feels the need to step up if we're talking about some of our general principles when we write.  .

Here's the legal statement {I originally called this "stuff" but that didn't sound lawyerly enough!}:  Without getting into the specifics of this, I think there's a higher probability of legal and compliance issues if I decide to discuss certain investment recommendations or what we may be doing for clients in some of our investment strategies.  That's why we're not likely to get into  specifics in terms of investment names or recommendations regarding what we might be doing on the blog.  I can't say we don't or won't ever change our minds on this, but it will likely be a rare event.  When we do discuss themes that interest us, we'll disclose our ownership in both a personal and in client accounts if applicable.  We are also not obligated to let you know when our thinking on these themes changes or when positions in client or personal accounts changes.  Also when discussing any of our themes or strategies, you should note that while we will endeavor to give proper disclosure of positions, most of the time we will be discussing investment thoughts or themes that may have already been implemented or are in the process of being implemented for our clients.  Also, we have different investment strategies and it is possible some of the more aggressive strategies could be investing completely opposite from what we are discussing on line.  

We place quite a lot of emphasis on past behavior of markets, sectors or individual securities.  We have developed a probabilistic analysis as part of our investment philosophy that stresses reviewing how these have reacted in the past in order to make some assessment of what they might do in the future.  This is particularly important when it comes to discussing money flows.  When we discuss the overall markets and/or specific themes or ETFs we in general will discuss this in terms of probability-that is the likelihood of an event occurring.  We will usually discuss this in a manner such as this: "Probability suggests that....."  There is no guarantee that such an outcome will materialize in the near future or ever.

Also you should be clear that anything we write about here or elsewhere is purely for informational purposes.  Some of what we write is our opinion on certain events or themes and may prove over the course of time to change or be inaccurate. We make no guarantees that anything we discuss here related to the stock market will be profitable to you.  Also while we strive to check our facts as much as possible and reasonably believe that information to be correct or dependable if based more on opinion, you should know and understand the possibility that such information may prove to be inaccurate.  Where we publish inaccurate information such as regarding a fact or statistic, we will upon its discovery attempt to correct what we have posted.  We will not necessarily review older posts though unless we become aware of an inaccuracy.   We may or may not let you know when something based on opinion or thesis is proven to be incorrect.  Finally in regards to what you read here, you should do your own research, talk with your own advisor or better yet hire us before acting on anything we post online.  You assume all risk if you make an investment or a decision based on what you read at our blog.  

One last thing {Can you tell in another life I was an attorney?}.  We have given you the general outlines of how we write, how we monitor what we write, as well as what and when we will make disclosures.  Nothing written above abridges any other protections we may regarding what we post online.  Meaning, anything we may not have specifically mentioned above does not preclude us from using it as a defense should we need to.   While we would likely do so, we will also not be obligated to inform you should we change any  these procedures. Again we provide what are basically our thoughts on certain events either related to the markets, investing or grander themes as a courtesy to the reading public.  You read and/or act on these postings at your own risk.  You may quote us as long as you provide proper credit and links to this site and the specific post. 

Now for more practical matters:  I don't write an investment newsletter that compensates me.  That is, I don't charge a subscription to folks who want to read what I put up here.  You can get it for free.  My clients, however, pay me to invest their money.  As such I''ll save the ideas for the people that have trusted me with their investments.

I prefer to focus on larger themes and articles that I think my clients might have an interest in reading.  That's one of the reason we discuss here quite a bit an overview of the markets.  My clients have told me that's what interests them.  I'm going to continue writing what they tell me interests them.  In that vein over the summer we're going to scale this back a bit.  I've found as the business has grown that it is becoming increasingly difficult to post on a daily basis in a manner and to the standards I believe readers and especially my clients deserve.   Therefore I'm going to try to spend some time writing about larger themes in investing, discussing a bit more about how we invest money for clients and taking a longer view at some of the themes I see that may impact investors going forward.  Some weeks we may publish 3-4 times, others maybe only once, if at all.  We may also break in with a few blurbs during the day or a few links we think are interesting.  We'll also break in if there's something important that I see and I may be a bit more proactive in just offering up links.  We'll also let you know when the next expected post will be put on line if there's going to be a break, although we may post sometimes sooner then that.

I'm hoping this maybe makes this a bit more interesting to read over time.  Expect the next post here unless something comes over the transom next Wednesday.

Retail Sales.

Retail sales reported today for the month of April disappointed.  Bloomberg.com covers it and you can read all about it here.  Economists have been puzzled about consumer behavior since the collapse in the price of oil last year.  Many expected the savings at the pump to translate to better retail sales.  After all consumer spending is something like 70% of the US economy.  That hasn't materialized in the expected way.  Bloomberg from the same report linked above notes that, "consumers have been using the windfall from cheap gasoline to boost savings as wages have been slow to pick up, which may temper the projected rebound in U.S. growth this quarter".  

First, let's acknowledge that the drop in gasoline prices has been substantial.  I saved over $40.00 driving to and from Indianapolis last weekend for my daughter's graduation.  I do think there's something to the fact that some of that savings is going to pay down debt and build up savings.  Mentally, there are many Americans who are as scarred from the last recession as my grandparents were from the Great Depression.  That generation never could quite shake the fear that whatever they had could be taken from them without much warning.  Hence they were frugal with money and didn't trust institutions like banks or the stock market.  Many of what is called the "Millennial" generation seem to exhibit those traits as the period between 9.11.01 and the last recession represents for many the formative years of their lives.  But I don't think that quite tells the whole story.  Here's a brief list of why  I think the party line may be wrong.  

Folks shop differently today.  They shop online at outlet sites or they buy 2nd hand.   

They spend money differently.  Retail sales have been punk but restaurants are seeing strong sales growth.

People may not be spending just to spend.  Instead of owning four or five pair of designer blue jeans, one or two {perhaps bought on line or on sale} may be all a person needs.  

The rise of 2nd hand sits like Etsy.com and discount superstores like Costco.

Access to information about products and where to buy them cheap from the internet.

Also I think the Millennial's are going to be a force for change and shake things up in a way we haven't seen since the "Baby-boomers" started their long march through America's demographic profile.  I may be biased with three children from that generation but it is a theme I'm going to revisit a lot going forward.

*Costco and perhaps Etsy.com are components of various ETFs owned in client and personal accounts.

The Revolution Is Televised

With apologies to the 1960s, the revolution is televised.  

Case in point was my daughter's graduation from Butler University this weekend.  Our family was well represented but there were many that couldn't attend. My mother-in-law was unable to attend, as well as my younger daughter who is studying in Spain and various other members who live scattered around the country.  That was no problem as Butler streamed the entire thing on line.  Both were able to watch in real time and probably had a better view than we did.  I know they weren't as uncomfortable.  Butler's graduation is held in historic Hinkle Fieldhouse.  Hinkle may by a shrine to Indiana Basketball, but it was built in 1928 and has no air conditioning.  Saturday was one of those humid, sticky days that start visiting the middle parts of the country about this time of year.  

Streaming is not a new technology, but the fact that my daughter could watch in real time half way around the world is just another example of how the world is changing.  Students texted and photo-bombed each other during the two hour ceremony while, the professor who gave the faculty speech took a "Selfie" of himself with the student body as the backdrop.  I also noticed there were many parents, myself included, that ditched the camera for their cell phone.  

The next day, when we were able to get into my daughter's new apartment in Indianapolis I was able to take a video of the place and send it to my wife who had to return to Chicago earlier than me.  She has a better idea of what the place looks like than if she had to rely on my description of it.

One thing that probably never changes though is parent's emotions to watching their children walk across the stage and receiving their college degrees.  I'll also end with this.  My daughter may have been ready to graduation but I'm not sure her father was prepared for the day!

Closing The Butler Branch

In August of 2011 we opened a branch of the firm on the campus of Butler University.  That "employee" went off to college as a beanpole and emerged as a remarkable young woman!  She will graduate this weekend with a degree in Education.  As such we'll be closing the "Butler Branch" this weekend and I'm going to be out of pocket between now and early next week.  We'll pick up right back here Tuesday morning. 

"Don't adventures ever have an end? I suppose not. Someone else always has to carry on the story.....There was only one Road; that it was like a great river: its springs were at every doorstep, and every path was its tributary. "It's a dangerous business, going out of your door. You step into the Road, and if you don't keep your feet, there is no knowing where you might be swept off to."  Bilbo Baggins.  "The Fellowship of the Ring."


Her boss is going to try real hard not to shed any tears!    

"I will not say: do not weep; for not all tears are an evil."  Gandalf-"The Return of the King." 

Go raibh grásta Dé leat, mo chuisle mo stór!

*Long Kleenex and Memories!  

Asset Classes

Performance charts of various asset classes as represented by their ETFs that we follow.  Instead of looking at this on a year to date basis, I've expanded the data base out to a year.  {ETFs up less than 5% are highlighted in red so we can illustrate themes.}

Chart above from left to right shows ETF performance representing, the S&P 500, Nasdaq, Vanguard Total Market ETF, Vanguard Euro Pacific ETF, iShares Global High Yield ex US Dollar ETF, Vanguard Global ex-US Real Estate ETF,  Barclay's High Yield ETF, Vanguard REIT, PowerShares International Corporate Bond ETF and Vanguard Emerging Markets ETF.  Yield and international have underperformed.  Overseas, however, has been better this year.

Above are the various sectors of the S&P 500 and performance relative to the index.  Energy, Materials, Industrials and Consumer Staples have underperformed.  Utilities are a play on yield and so it's not surprising that they have not done better.  Financials have the inverse problem of low interest rates and the regulatory and scrutiny from Washington.  Financials have also been acting better of late.  

*We are long various sectors depicted above via ETFs or via ETFs related to the S&P 500 in client and or personal accounts.  Positions can vary in accounts depending on account strategy and the unique risk/reward characteristics of our clients.

"Errel" {Oil}

The title is a play on pronunciation.  I grew up in central Indiana, hard next to the Ohio state border.  I mean that literally.  My hometown of Union City was bisected by the Indiana/Ohio State lines.  Ohio was three blocks east of my house or about a third of a mile.  Many people back in the day, especially older folks, pronounced "oil" with something that sounded like "errel".  

But enough of the trivia.  Business Insider in a column today notes that crude oil prices are back above $60 a barrel for the first time since December.  Here's a chart of the oil futures from them with my money flow additions.

Chart is from FINVIZ.com.

I'd note that oil is currently at resistance and a bit overbought by our work so probability suggests that a little back in forth price action might be in the offing for awhile.  I'd also note that the time to buy oil and oil service stocks was back at the end of the year and during the first quarter.  Many of these have performed very well in 2015.  In fact the energy sector of the market has so far outperformed the overall S&P 500 in 2015 after getting crushed last year.

Expect to see the prices at the gas pump start to expand, perhaps dramatically, if this trend continues.  Gas in Chicago is already from my estimate about 20 cents higher than it was in the dead of winter.  Some of that up till now is likely the switch to a summer blend of gasoline around here that we are told is more expensive to produce.  If that continues though expect to see some of the energy related savings that economist have talked about start to disappear.

*Long ETFs related to energy and oil service in client and personal accounts.  Long ETFs related to the S&P 500 in client and personal accounts.  Please note that these positions can change at any time without notice.

Link:  Business Insider.com:  "Crude Oil Spike".

an tSionna {05.04.15}

The US stock market as represented here by the S&P 500's ETF SPY has been in rally mode for the better part of three years.  The period has been defined by a more or less steadily advancing market and short term corrections, none of which have represented more than a 10% decline.  {Chart is from FINVIZ.com.}

The rally in 2015 seems to have lessened with the index up less than 3%.  One of the reason is valuations which are at the higher end of their normal trading range thanks to this long term rally.  Warren Buffet was on CNBC this morning and asked about the market.  He seems to have said that where stocks go will depend on what direction interest rates take.  Here's CNBC's synopsis of what he said:

"Billionaire Warren Buffett said Monday the stock market would be viewed as "cheap" now if interest rates continued to remain low. 

"If these interest rates were to continue for 10 years, stocks would be extremely cheap now," the chairman and CEO of Berkshire Hathaway said Monday on CNBC's "Squawk Box," two days after Berkshire's annual shareholder meeting. 

If rates normalize, stocks would be on the high side on a valuation basis, he said."

It's also interesting what he said about bonds in relation to stocks,  Buffet seems to be in the growing bond bandwagon that bonds are highly overvalued.

"Stocks are cheaper than bonds, which are "very overvalued," he said. "If I had an easy way, and a nonrisk way, of shorting a lot of 20-year or 30-year bonds, I would do it. But that's not my game. It can't be done in the quantity that would make sense for us."

It's worth noting that the consensus on bonds has been around for awhile but seems to have picked up stream lately.  However, I'd note again that I think it's going to be hard for the Fed to raise interest rates beyond some token amount given what's going on in the world, unless economic growth picks up more than expected.   If markets will do what they need to do to prove the most amount of people wrong, then in this regard I think the direction of the most pain in bonds would be for them to do nothing.

Link:  CNBC:  Warren Buffet:THIS is the Key to Valuing Stocks.

*Long ETFs related to the S&P 500 in both client and personal accounts although positions can change at any time without notice.

Summer Hours

The weather's warming up {Finally!!! Although as I'm writing this the heat has kicked on in the office!} and thoughts turn to the great outdoors. We're starting "summer hours" on the blog after today. Technically summer isn't here yet but I have enough outstanding commitments on Fridays for the foreseeable future to make it necessary to start the "season" early.  We'll still post Monday through Thursday until the fall but we'll reserve the weekends for family. Rest assured we'll be first on line if events this summer make it necessary to do so.  

Things Are Getting Better {05.01.15 edition-Jobless Claims}

Yesterday we received some very positive economic news regarding the job market.  Here from Bloomberg News is their review of the numbers.  Go read, "Jobless Claims in US Decrease to Lowest Levels in Fifteen Years."  Here is my synopsis of the article {My emphasis}:

First-time filings for unemployment insurance fell by 34,000 to 262,000 in the week ended April 25, the lowest since April 15, 2000, a Labor Department report showed Thursday in Washington. 

With job openings at a 14-year high and prospects for stronger growth after the first-quarter setback, companies are intent on maintaining headcounts. The level of firings is consistent the Federal Reserve’s view of sustained progress in the job market.

The four-week average of claims, a less-volatile measure than the weekly figure, declined to 283,750 from 285,000 in the prior week.

The number of people continuing to receive jobless benefits dropped by 74,000 to 2.25 million in the week ended April 18, the lowest level since December 2000. The unemployment rate among people eligible for benefits held at 1.7 percent. These data are reported with a one-week lag.

Claims since the beginning of March have held below the 300,000 level that economists say is consistent with an improving labor market.

The number of available positions at employers portends stronger hiring. Job openings climbed to 5.13 million in February, the most since January 2001, Labor Department data showed earlier this month. There are about 1.7 unemployed Americans per opening, matching the lowest level since November 2007.

The broader economy took a hit in the first quarter, as the stronger dollar combined with more transitory effects of bad winter weather and a labor dispute at West Coast ports to weigh on growth.  Gross domestic product, the volume of all goods and services produced, rose at a 0.2 percent annualized rate in the first three months of the year after advancing 2.2 percent the prior quarter, 

Fed officials said Wednesday after a policy meeting that the economy weakened partly for reasons that will be short-lived. “Economic growth slowed during the winter months, in part reflecting transitory factors,” the Federal Open Market Committee said in a statement. “The pace of job gains moderated,” it said, and “underutilization of labor resources was little changed.”