The April Fools of the US equity market in the Year of our Lord, 2025

 I don't give investment advice to friends. I don't care about the outcome enough to stay engaged, the personal payoff structure is asymmetrical. Family is different. Them, I try to keep out of the ditch, if they ask. 

The market fell off sharply as our President has become enamored with a tax called a tariff. Markets will tolerate a modest hike in taxes, but not on the scale he is proposing. 

To paraphrase Winston Churchill, badly. Never sell out of US stocks. Never. Never. Never. 

Buy when the market is rising, buy when it is falling, buy when it is flat. Never, never sell. Buy when a President is healthy, buy when one is assassinated. Buy when oil is plentiful, buy when there is a shortage. Buy when there is no cure for a terrible virus. Buy when a vaccine is developed. Buy when you love the President, buy when you don't. Buy when you're sober, buy when you're not. Buy when there is war, when there is rumor of war, when there is peace. Buy when your dog dies, when your cat dies (especially), when your Uncle Wayne dies.

Granted there are times when one should sell everything, go to cash, wait for clarity. Ask CNBC or Fox Business they see it all the time. Having been born in 1956 I have yet to see such a day. 

What so many people fail to realize is our emotions act in an opposite fashion of real things. 

When the market falls we percieve (feel) that risks are going up, we feel this is bad. In reality the risks are going down. The opposite is true when stocks are rising. 

This was true in 1929 and will still be true in 2029. True in 1974, will be true in 2074. 

In case I am all wrong. Keep a few cartons of Marlboros and some bottles of Jack Daniels in your basement. I think I have about four of each. When the social order completely breaks down, when the gas pumps are dry and the shelves are bare at Food Lion, these two things will always have value and can be exchanged for passage across the border into Canada or Mexico. 

College Football. Weekend Two

 It feels odd. Watching employees of the State of Michigan play football against employees of the State of  Texas. Doesn't sound much fun does it? The day is early but all the lead-up to this seems out of place, out of time. 

The old conference structure is gone. Replaced by one that will not last nearly as long as the one it replaced. 

Money has a way of pushing things around. It disrupts, in both good ways and bad. The employees will make demands. The marketplace will make demands. The state will make concessions, for a time. 

Will we still be able to pretend this is "best for the student-athelete"? Probably not. 

Then it will blow up. 

Retail Revisited

Fourteen years ago I wrote a post about places I liked to shop. It's interesting how things, tastes and places changed. 

The 2010 list

Gander Mountain         Costco

Macy's                          Dunn Brothers Coffee

Amazon.com                QT

Bachman's                    Fleet Farm

Tim Horton's                Cracker Barrel 

Valley Park Hardware  Ted Drewe's Frozen Custard

The 2024 List

Costco                         Amazon.com

Nordstrom                   Filson

Aldi                             Cracker Barrel    

Ace Hardware             Ted Drewe's Frozen Custard

QT

Walmartian Astrology

 I like Walmart. Great selection at very good prices. Especially their honey cured hams. Amazing. 

In many cases the goods are made in places where the cost of materials and labor is less than in my home state. Good for me, good for my fellow Minnesotans, and most importantly, good for Walmart shareholders. Win Win Win. 

But, every once in a while they get weird. 

Today I was enrolling in WalMart Pharmacy. I didn't want to  but it was the only way to check a price. 

They wanted to confirm my identity. They asked me questions about my life. First, "Which of these cities did you live in?" Second "Which of these companies did you work for?" 

Quiet now children....Third "Which of these is your zodiac sign?" What is going on here? Walmart promoting astrology? Not likely. But weird nonetheless. Most likely the person who came up with the questions is in a cubicle in Rogers, AR just trying to come up with one more unique question before heading over to Captain D's for supper.  

I didn't answer it, but they still let me in. Too late. I found their feedback form and in the 100 characters I was alloted I manage to ask them to stop doing this. I bet they do.  

Charlotte Airport. Three sales reps sitting talking thinking posturing laughing

• making good choices at the highest level
• Do we fight the fight right now, or wait until next week
• Because it makes sense
• You started it
• I think it needs to be like a deep deep dive. Based on the questions he asks we bring in the resources behind
• the piece of the puzzle that's not defined
• You should be having this conversation with your clients now
• leverage the platform
• you've got to tell the whole package
• body of knowledge. whole story. shiny object on the shelf. 
• easy street
• that could be a harvest blah blah

the lingo changes over time, but not much else

I am Covid

 In December 2019 I was teaching a series on suffering in my parish. I attended a performance of Handel's Messiah at St. Olaf's Catholic Church. I went to breakfast a couple of mornings with friends. I did all the usual Christmas stuff. 

Unknown to me, during that month a virus left Wuhan, China and started looking for me. It took 30 months, but he found me. Took me out when I had my guard down. Could have been in the grocery store, or at church, or just bumping into a fellow redneck at the C-store. 

My thanks to all of you who wore masks, got vaccinated, and paid attention to science. My thanks to all who listened to and trusted the CDC. My thanks to all who listened to their doctor and ignored the static. 

You kept this away from me for quite a while. You made it harder to find me. You bought time for the inventors. By the time it caught me, I was so well protected by the inventions of the pharmaceutical industry that I only had one day of mild nausea. So far. Thank you President Trump. Thank you President Biden.  

How often should I change my Wells Fargo password?

 According to the company the password should be changed at least once every 17 YEARS and SIX MONTHS !!

I opened a checking account at Wells Fargo in May of 2003. 

Two days ago they asked me to change my password, in order to protect my security. 

For the first time. 

I changed the password, which was very unique, to one that is easy to remember. 

14164 and 14254

The DJIA closed today at 14254, an all time high, finally taking out the 14164 set on October 9, 2007. On that day I was in Philadelphia for a client meeting. I took the train that afternoon to DC and had dinner with a friend and his wife. He also happened to be a member of Congress. It was a good day. I spent the rest of the week in DC at an investment industry conference.

I don't recall discussing the new high that day with anyone, though I may have. We might have had a sense that it was a false high, an undeserved one, for we were in the early days of the housing market collapse. At that point we were probably just calling it a normal downturn. Don't remember.

This one will get a lot of attention, as it should. We've waited a long time. A bit of a victory for capitalism, though one that could have come much sooner had it not been for interference by the United States.

One group will be glad and think the credit is theirs for keeping the government at bay. Wrong. Another group will try and use it to justify giving some of that wealth to an imagined class of victims. Also wrong.

Anyway, most of the time the stock market should be near its all time high. That is the normal condition. We've been off track for a few years. Still, the market is twenty times the level it was when I first started in this business in the early 80s. Lot of wealth created, a lot of it destroyed. Creative destruction. Many more winners than losers.

Today is an uneventful day. No meetings, just catching up on previous projects. Like last time, if there is anything bad just around the corner, it is not on my mind. Later, i will think it was.  

Brand Loyalty

A recent post by my daughter got me thinking about brand loyalty and brand aversion. I realized there are only a few brands that I am really loyal too. Price and convenience drive a lot of my purchases. So far I have only thought of three companies that I am so loyal to you will never see me using a competing product. Asics running shoes, Weber charcoal grills, Rain-X.

There are a few I go out of my way to avoid. You will never see me patronizing products or services of  Dr. Pepper, Holiday Inn, Dillards, Arby's, the NBA.

Retail

I don't like to shop, though I love for others to do so. Perhaps it goes back to my first "real" job, as a management trainee for JCPenney at McCain Mall in North Little Rock, Arkansas (another story for another time).

Anyway, as an orthodox capitalist, I like to watch the exchange of goods and services unfold and witness the way it all plays out to create jobs and wealth. How people find new ways to innovate and get a better product to me at a better price and then convince me to change my buying habits in their favour. This is the big stuff of commerce that people do very well, both on a small scale and a massive one, particularly when left to their own devices to figure it out. It's also something that governments by their very nature cannot do well, on either a small scale or a large one.

These are a few of the places I like to shop, when I have to. Most are big, because they're really good at what they do. A few have chosen to stay small.

Gander Mountain          Costco
Macy's                          Dunn Brothers Coffee
Amazon.com                 QT
Bachman's                     Fleet Farm
Tim Horton's                 Cracker Barrel
Valley Park Hardware   Ted Drewes Frozen Custard

A small thought on the changing value of things

When I was in college I worked one summer at a gas station. The 11pm to 7am shift at Drakes Shell Station in St. Petersburg, Florida. It was a long time ago and in an era when all night gas stations were fairly rare. In the suburbs of St. Pete, near the Snell Isle and Pinellas Park areas, this was the only place to get gas after midnight.

It was quite an adventure, a big part of growing up. From midnight to dawn I was one of the lords of the strip, 4th street. I knew the regular lineup of night people, cops, liquor store owners, motorcycle gang members, dj's, newspaper delivery people. I also served a regular string of folks who found themselves low on gas and low on cash after a late night adventure in Tampa. I handled a lot of requests for small sales of a gallon or two, enough to get them home.

One night a guy pulled up and begged for gas. He was broke. He promised to pay me back if I would just give him a couple of dollars worth. I'd learned the hard way not to do that and told him no. So he opened his trunk, which was full of tools. He offered me any tool in his trunk in exchange for $2 worth of gas. The deal was sealed.

I pointed to the lug wrench you see here. I could tell he was hoping I wouldn't see it, but he reluctantly handed it over. It was worth ten or fifteen dollars at the time, perhaps a little more today.

I realized then, and now, how emotion and circumstances can change our view of the value of things. Put a guy in desperate circumstances and he'll let possessions go for a fraction of their worth. Had he stopped and thought for a few minutes there might have been a better way out of his situation. When I saw the look on his face I knew that I never wanted to be in his situation. Here he was, a grown man face to face with a teenage kid at 3am, humiliated and knowing the kid holds all the cards. Of course I only have my side of the story and in fairness I don't know what difference that gas made in his life. He didn't dicker. He needed it bad. If it kept him from getting fired, or missing some important meeting, maybe he had the better end of the deal.

I have kept the lug wrench and carried it with me from city to city. At least once a month I see it as I piddle around the garage. It reminds me in a little way of the mistakes that come from panic and the opportunities that can come to those on the flip side of the trade. Over the past year during the market meltdown, I thought about this episode often. Particularly as people who bought GE at 30 a couple of years ago dumped it when it fell below 10. Same thing with US Steel, which fell from 190 to 19, and so on with almost every publicly traded US company. Happens all the time, almost every day, to someone, somewhere. Common stocks, homes, a racehorse, a rare coin, a fine tool. One day we are thinking clearly and rationally. The next we are making decisions any normal teenager would know to avoid. I remembered the lug wrench as markets collapsed earlier this year and determined I would again be the kid with 2 bucks, not the man who was scared and desperate for cash.

One of these days I suppose I'll pass the lug wrench on to one of my kids, or grandkids, along with more details on this story. The man who traded for the lugwrench has been on my mind a fair amount over the years. He's in his 70's or 80's now, if still alive. He taught me an important lesson, I hope I taught him one.

Odd travel, odd governments, odd people

On road trips, a meal is often a Little Debbie oatmeal creme cookie, cheese crackers and a Coke. Not so last night when I ate at Obrigado Restaurant in Louisa, Virginia, a town 60 miles or so west of Richmond. Service was slow and the locals were more welcome than strangers, but in a small town that's as it should be. The food was so good I didn't care. My order of noodles and vegetables, aka pasta primavera, was superior to any dish i'd ever had by that name.

The week began with a meeting in NY on issues facing the finance industry. Some worry that acts of the United States to stem the panic of the fall and winter may become policy and erode capitalism in my native country. Not impossible, but difficult, as capitalism is so closely aligned with human nature. Governments will always impair the flourishing of capitalist systems. It is their nature to meddle and overestimate their ability to influence outcomes. It's not the death of capitalism, but certainly a nasty case of the flu. A free market winter. It looks dead, but deep under the snow there is a flurry of activity, an invisible hand waiting for the moment.

The day also included lunch with a friend who blames me for his current career troubles, as does his wife. He is wrong and knows it, she does not. We discussed it, dealt with it, and now move on.

The next few days included a nice long train ride from Penn station to other meetings, other folk.
The weekend brought me back to the Cities and a cookout, featuring a different friend on an intense rant. He could not understand how those of his religion support a different political party than he does. His religion and his political party are linked in a way that gets more difficult for me to grasp, the older I get. I soon left the "guy table" and sat with the women and their discussion of husbands, high school events, summer plans. A buddy from Canada soon joined me.

Imagine no possessions - but remember John Lennon always made money for his partners

Are there any long term good things that will come of the current economic unpleasantness? Is this suffering for naught, or will something be learned, a wrong course corrected?

Perhaps. The Congress seems to be making the point quite clearly that one does not want the United States as a business partner. There is a real dark and twisted side to being in league with a government to run a business. My industry knew this and is teaching a hard lesson to the rest of the country as one company after another scrambles to return government "help" that came last fall.

The roots of this problem are many but the seeds were planted decades ago in various forms of government intervention in the economy. The government decided that it was important for people to be homeowners. This certainly sounds good and for years I thought it made sense. The United States created government agencies to either offer homes loans or guarantee them so that private businesses would extend loans to those they would have otherwise rejected, or charged a premium rate.

I do not believe anymore that home ownership has much to do with living a good life. Certainly a very smug comment from a homeowner. I realize millions of non-homeowners would be glad to trade places with me. While it is certainly very pleasing there are many other possession that can bring equal satisfaction, though material possessions have their limits. I realize in hindsight that I own my home in part because the United States encouraged me to. Left to my own devices I might have chosen a different way to spend my money.

You don't find the American dream in the signing of mortgage papers. You find it most clearly in the heart of a teenager and that true independence they long for as no one else does. They cry out to make their own decisions, decide their future for themselves, not be told what to do, and follow their own desires. This pure independence gets watered down as you get older but in the teenager it is a God-given rage against intervention in ones life by others. Encouragement or gentle pressure to make a particular decision can be as bad as forcing one.

Owning a home is great, but so is owning a rare piece of art, a silver plated hookah, a first edition of Les Miserables, a 1965 Mustang, or a new John Deere combine.

Shouldn't it be people who decide what is important to them? Why use tax dollars to favor one industry over another, whether it's home builders, colleges or windmill makers? What did we get from decades of pro home-ownership policies? What happened when government tax policy diverted dollars from what people might have pursued on their own? What businesses were not started and what books were not written?

When government picks the winners and losers in economic competition, it is rarely correct. It is swayed by the moment. It has no soul, no passion, no creativity. It doesn't know what is best. It only knows how to survive. Which explains why it is usually at its best when under actual physical attack, wartime. Only then, when its survival is threatened, does it come closest to making decisions clearly and in the best interests of all.

Who is John Galt?

A bill passed Congress this past week that, if it becomes law, will tax a portion of my pay at 100%. Pay I have already recieved and put to good use for the benefit of my family, my friends, my church, myself. Oops. What was I thinking?

I have a friend who is a member of the united states congress. He puts it this way, “To continually reward executives of failing companies with million-dollar bonuses is bad enough, but to do so while receiving taxpayer dollars is criminal,”. What Congress knows, that the public does not, is the bill is not aimed toward one company but toward the compensation structure of millions of citizens.

So i'll add failed executive to the list of things i've been called. I'm one of the bad guys, lock me up. It's March. I'll watch basketball while Atlas shrugs.

Freer Trade

It's a worn out cliche, we don't learn much from history. Perhaps because we do not stop to think that issues we are dealing may not be modern, but ancient. It's not that we don't learn from history, we just don't think about it. We are no smarter than our forbears. I would be challenged to think of a truly new, truly unique, world problem.

A version of the following idiocy could have come from our current or recent houses of congress, or presidents, of the United States....

"In A.D. 22 the emperor Tiberius lectured the Senate that the habit of luxury and the appetite for Eastern exotica had provoked a hemorrage of Rome's money "to alien or hostile countries". Buying imported goods was nothing less than "subversion of the state" "

Spice - Jack Turner

The President of the United States

Saving Bedford Falls

I watched "It's a wonderful life" last week. As much as I like the show I believe the character Mr. Potter is at least a little bit misunderstood.

Granted Potter is a bad guy. He's evil and selfish and seeks to use illegal means to destroy his enemies. But many of the points he makes about business and financial management are valid. He is, for example, correct in his criticism of George Bailey for having no personal savings or investments despite having a decent job and a family counting on him.

"What are you but a warped, frustrated young man? A miserable little clerk crawling in here on your hands and knees and begging for help. No securities, no stocks, no bonds. Nothin' but a miserable little $500 equity in a life insurance policy. "

We are never told what George did with all of his salary but the implication of the movie is that he is a kind soul who could not say no to a friend in need. Admirable, at first but in reality George puts the needs of strangers and friends ahead of his family.

Potter is probably correct in his view that George is managing the building and loan improperly by lending to several people whose credit worthiness is questionable. The Bailey building and loan specialized in subprime loans, with a key difference from firms of the real estate boom was that this lender knew the customers quite well, such as the Martini family. George's main criteria for lending is that his customer be a friend and have a job, any job will do.

One thing Potter misses about Bailey is that George's effort are providing a meager stimulus to the Bedford Falls economy and strengthening the working class. By doing so George is making the town more attractive to industrialists such as Sam Wainright who moves a plant to the town at his urging.

Potter provides an overlooked benefit to the community via a means of escape for those caught in a run on the bank. Yes, and by agreeing to buy shares in the bank at half the previous market price. As the buyer in a panicked market, he is speculating that the mass is wrong and providing liquidity for their shares. The masses on the other hand are speculating that Potter is wrong and they will take advantage of his greed by dumping what they think is soon to be worthless stock in his lap. "Better half than nothing" one character says.

Absent Potter, there likely would have been no market for the shares at all. Once he established this floor price, George Bailey was able to convince others that there was value in the institution based on the actions of Potter. Even though acting on his own greed, Potter's offer combined with Bailey's appeal restored a modest level of confidence in the Building and Loan. In shattered markets it is often the speculator who steps in and begins to restore confidence by causing those panicking to slow down just a bit and rethink a rash exit from the market.

Note: it is possible Potter actually started the run on the bank. This would change him from a market speculator, a good guy, to a market manipulator, or bad guy.

Like the story "Wicked", a good tale could be told re-examining these characters, their history, and impact on Bedford Falls.

7997

I did not expect a close this low. I should have.