My Blog

Quite a Ride!

Q2 2022 Commentary…

As expected, it was a very choppy first quarter for the stock market. As we turned the calendar over to 2022, the market gave us that stomach-churning feeling you get when you realize you are at the apex of the rollercoaster climb and now see what’s in front of you. From January 1, it was a swift ride down to a low point in early March before climbing about halfway back up by the end of March.

All of the same economic headwinds from the second half of 2021 have carried over into 2022 with a couple of new ones to boot. Rising gas and food prices, supply chain backlogs, increasing mortgage rates, and slowing economic growth have continued to stymie some of the excitement investors had previously held for the “Post-COVID re-opening” economy. The major differences between 2022 and the last half of 2021 is that some of the largest mega-cap growth stocks began to show cracks in their armor. When heavyweight stocks fare poorly, the index performance usually reflects it. That’s been the case so far in 2022.

Future BrightQuite a Ride!
read more

“2021” Was a Strange Year!

Q1 2022 Commentary…

Happy New Year! It’s only fitting that our quarterly newsletter would be affected by supply chain issues. If you didn’t notice the difference, we can only credit the capabilities of today’s laser printer technology. Unfortunately, ordering official letterhead in late November did not allow for a lengthy enough window to receive a fresh stock by January 1.

2021 was a strange year in so many respects. Here’s a reminder of some oddities we experienced…
• American workers were incentivized to not return to work
• COVID variants ran amok
• Inflation reached its highest level in 40 years (CNBC.com)
• 2/3 of stocks that make up the S&P 500 Index hit 52-week lows while the S&P 500 index set all-time highs (Leon Tuey, Financial Post)
• 93% of companies on the S&P 500 saw their shares slide 10 percent or more at some point in 2021 (Taylor Telford/Rachel Siegel – Washington Post 12/31/21)
• Crude oil prices roared back into the mid-80’s in October due to reduced supply (Yahoo Finance – historical prices)
• Krispy Kreme became publicly traded again (let’s call this one a blessing and a curse)
• Dogecoin advanced 3,400%, and most people don’t even know what it is

Future Bright“2021” Was a Strange Year!
read more

What is the U.S. Debt Ceiling?

Q4 2021 Market Commentary…

What is the U.S. debt ceiling? It’s simply a dollar cap limit that the US Government places on its own authority to raise money by issuing government bonds to continue to meet its obligations like social security payments, tax refunds, interest payments on existing debt, government employee salaries, military salaries, just to name a few. Since 1917, Congress has raised the debt limit 78 times (See Citation 1).

The U.S. government hit the debt limit of $28.4 Trillion (yes, with a T) in July 2 (See Citation 2). In fact, the debt load is a few billion over that as I write this newsletter, and the U.S. Treasury is pushing to get it raised by October 18. Since the U.S. Treasury debt is over the limit, something needs to get done, lest they are forced to default on the payments. Of course, members of congress rarely let that happen. They typical play hard ball with each other and then usually get it done in the 11th hour.

Raising the debt ceiling is not a healthy thing. It’s a necessary evil. With each dollar the government borrows, it steals purchasing power from future generations, and it makes all of us poorer for it. Unfortunately, the alternative is that the government defaults on their obligations. We each know hundreds of people who count on government payments, and no one wants those recipients to be adversely affected by a problem they didn’t create. Beyond the debt, we have other concerns…

Future BrightWhat is the U.S. Debt Ceiling?
read more

Has inflation fully kicked-in yet?

2021 Q3 Commentary…

In last quarter’s commentary, we addressed inflation as an increasing headwind on the stock market. Just how much inflation is in the offing and whether it is transitory (i.e. – temporary and manageable) has been the hot public debate in financial circles during the second quarter. Anecdotally, I’ve heard from many of you about the rising cost of 2 x 4’s, tires, used cars, gasoline, and even Burger King chicken sandwiches. I paid $4.09 for an order of large fries at McDonald’s in Moorhead this week! Perhaps the only real takeaway there for me is that by making better diet choices, I could help stave off inflation.

Has inflation fully kicked-in yet? That’s what investors want to know. The uncertainty makes for a Jekyll and Hyde market. Admittedly, there have been days this quarter in which the markets have made our reflationary investment thesis (aka – Silo 2) look foolish and other days it has made us look genius, but we must stick to our guns on the data we have in hand. The alternative is to become like the dog who chases its tail, and that doesn’t end well when investing.

Future BrightHas inflation fully kicked-in yet?
read more

What happens when interest rates rise?

2021 Q2 Commentary…
Can stocks and interest rates go up at the same time? Yes, they can, and they often do. Right now, we are in a period of recovery from economic shutdowns across the globe. As companies are forced to raise prices in 2021 and meet a return in consumer demand, we are watching inflation like a hawk. Specifically, we pay very close attention to the 10-year treasury note yield as our sentiment barometer.

First, a quick education on why the 10-year treasury yield matters…
▪ Treasury securities are loans to the federal government. Maturities range from weeks to as many as 30 years.
▪ Because they are backed by the U.S. government, Treasury securities are seen as a safer investment relative to stocks.
▪ Bond prices and yields move in opposite directions—falling prices boost yields, while rising prices lower yields.
▪ The 10-year yield is used as a proxy for mortgage rates. It’s also seen as a sign of investor sentiment about the economy.

How high can the 10-year treasury yield go before we do see it adversely affect the performance of the stock market? Some economists predict it’s 3%. Others say it’s 2.5%. The truth is that their predictions don’t really matter. What matters to us is the rate of change in inflation data that typically drives the change in interest rates. If the rate of change of inflation is increasing quarter over quarter, it signals a robust recovery is afoot, assuming job growth and GDP are accelerating, as well.

Future BrightWhat happens when interest rates rise?
read more

Using Data to Position Assets Favorably!

Q1 2021 Commentary…
2020 was a year full of alarming statistics. One you maybe didn’t hear was that over 10 million new brokerage accounts were opened by first-time investors in just the United States alone! This influx was the result of three things: stimulus checks, a pandemic-induced market selloff, and the elimination of trading commissions at brokerage firms such as Schwab, TD Ameritrade, and Robinhood.

2020 created a perfect storm to attract more individuals to invest, which is a great thing for market efficiency and liquidity. The dangerous part of this perfect storm is that many younger, new investors have not yet experienced a significant market crash, as most of this new money came into the stock market during its recovery. Significant gains were created by and for investors who were willing to take on the risk of buying assets some maybe didn’t even fully understand. New money was piling into SPACs, Bitcoin, LIDAR stocks, to name a few. (If these terms don’t ring a bell, it’s okay. We got you covered.)

In client accounts that could afford to take the risk, we benefited from the irrational exuberance of many of these first-time investors. In fact, we rode some of the waves they created. However, we know the tide can go out just as fast as it comes in, and as asset managers, we have to have a game plan in place for when markets aren’t turning up all roses. Discipline is often what marks the difference between casual, DIY investors and those of us who do this for a living in times like these.

Future BrightUsing Data to Position Assets Favorably!
read more

Goodbye to “2020”

Phew! We soon will be able to put 2020 behind us. The financial markets have been just as abnormal as most other facets of our lives this year. All the relevant U.S. stock indices endured the fastest bear market declines in history…just 16 days! It was swift and severe, yet short-lived, as the markets repaired most of the damage in the form of a V-shape pattern despite most Wall Street “experts” predicting an L-shaped recovery.

Future BrightGoodbye to “2020”
read more

Recovery

Hello friends, Social distancing affords a person a lot of time to reflect on life, doesn’t it? This time spent at home with family has been a great blessing. Life’s pace has slowed down, and that’s the solace I didn’t know I needed. I hope you’ve found your own moments of solace amidst this abnormal reality, as well.

Ross AlmlieRecovery
read more

“Landlines” Have Gone Away for Us!

No more landlines for us! We have eliminated our landline phones at the Future Bright office. They were used too sparingly to justify paying for them anymore. As such, the (218) 359-2305 number no longer exists. Most of you have my cell number, but in case you do not, please write this number down or add it into your contacts: Ross Almlie Cell 701-306-7631
Feel free to contact me by text or phone call at this number. If I don’t answer when you call, please know that I will make best efforts to return your call or text as soon as I can.

Ross Almlie“Landlines” Have Gone Away for Us!
read more