Industry Professional Comments

Barron's - 7/29/19 

"The S&P 500 index rose 1.7% to 3025.86—a record close—while the Nasdaq Composite gained 2.3% to 8330.21, also a record. The Dow Jones Industrial Average advanced just 38.25 points, or 0.1%, to 27,192.45, but only because Boeing (ticker: BA) slumped 8.6% after the grounding of the 737 MAX showed up in its earnings."

"But who are we kidding? It’s really all about the Federal Reserve. The central bank is set to lower interest rates at the end of its July meeting on Wednesday, and it would be a massive shock if it didn’t. Hopes for lower rates, which have already knocked the U.S. 10-year Treasury yield down to 2.08% from 2.68% at the start of the year, have helped propel stocks up 21%, leaving them trading at 19.8 times trailing earnings."

Barron's - 7/22/19

"The market is certain that the Federal Reserve will cut interest rates at the end of the month, with the only remaining debate over whether it will be 0.25 or 0.50 of a percentage point from the current target range of 2.25% to 2.50%. (Federal-funds futures pricing currently implies a 19% probability of a double cut at the Federal Open Market Committee’s July 30 and 31 rate-setting meeting.):"

"On the U.S.-China trade war front, companies and investors seem to be settling in for the long haul. The post-G20 meeting truce remains in place, and neither country appears incentivized to escalate matters further—or to quickly compromise."

"President Donald Trump’s remark on Tuesday that the two sides remained “a long way” from a deal was met by a shrug from the market, and a Wall Street Journal report on Wednesday that restrictions on China’s Huawei Technologies presented a sticking point for both sides likewise didn’t make a splash. Just last month, a few positive or negative words from either side were enough to determine the market’s direction for an entire session."

"The S&P 500 index has returned 20% this year, after declining 1% in the past week. The index finished at 2976, below the record set last Monday of 3014."

“The ideal environment for stocks is low economic growth, low inflation, and low interest rates, and we have all three now,” says Charles Lieberman, chief investment officer at Advisors Capital Management in Ridgewood, N.J."

"The S&P 500 isn’t cheap, at 18 times projected earnings and a 1.9% dividend yield, but the 10-year economic expansion shows few signs of slackening and bonds offer little competition for stocks, with the 10-year Treasury note yielding 2.05%."

"There is frustration building among some normally patient Berkshire Hathaway investors as CEO Warren Buffett sits on more than $100 billion in cash in a fruitless hunt for a major acquisition, while buying back only a modest amount of stock."

"Berkshire’s class A shares (BRK.A), at $309,000, are up 1% this year. That’s the worst showing for Berkshire in a decade relative to the S&P 500. The stock has underperformed the S&P in the past five years and matched it over the past 10 and 15 years—a disappointment given Buffett’s reputation and Berkshire’s many advantages."

"With Buffett turning 89 in August, the prospect of a Buffett-less Berkshire is also unsettling investors."

Barron's - 7/15/19

"A curious dynamic has taken hold in the market, one where good news is bad news and bad news is good news. Starting with July 5's June job report, stocks have dropped on days with releases of better than expected economic data and rallied when Federal Reserve officials warned of uncertainties and trouble ahead."

"The driving force has been the promise of lower interest rates that could boost economic growth and keep stocks climbing higher.

"Unemployment remains close to a half- century low at 3.7%, the Atlanta Fed's GDPNow model estimates 1.4% real gross-domestic product growth in a second quarter, and,manufacturing surveys, through weaker, remain in expansion territory. "

"The stock market responds to two factors: fundamentals and policy. On fundamentals, our strategy team thinks the U.S market is roughly at fair value- maybe a little bit below where it should be - on a 12-month basis. However, there isn't much room for mistakes. If trade concerns continue, that will be problematic because of the psychological aspect and the dampening effect on capex (capital expenditures). Investors are so focused on trade that they aren't really looking at the budget issue."

"Fed chairman, all byt confirmed in congressional testimony that the central bank will e lowering its key federal-funds target at its next policy meeting at the end of the month."

"Lower rates would help offset the uncertainties resulting from slower global growth, Powell said"

"The Fed has completely changed tack since last December; when stocks skirted an "official" bear market of a 20% drop from its high as it raised rates. Since then, Powell has gone from professing "patience" about further rate boosts to signaling preemptive reductions, and the S&P 500 is up to 28% from its Christmas Eve low."

Barron's - 7/8/19

"There is little value in the bond market, where the 10-year Treasury yields 2%, high-grade corporate bonds under 3% and top -grade 10-year munis just 1.6%. U.S bonds are likely to produce little for investors in the coming decade after inflation and taxes. But at least they offer something."

Barron's - 7/1/19

"The first half of 2019 was terrific for financial markets, regardless of whether you were a stock or bond investor" 

"the SDR S&P 500 ETF, the tracker for the big-stock benchmark, rose 17.72% since the begging of the year through Thursday, according to Morningstar. But taking into account the horrid last half of 2018, the 12-month return was a less impressive 10.38%

"Bonds also did well, as the iShares Core U.S. Aggregate Bond ETF (AGG), which tracks the investment-grade taxable debt market, returned 5.89% in the half and 7.85% over the past year."

"Fed-finds futures are anticipating three quarter- point cuts by year-end, based on the expectation that the Fed and other central banks will seek to offset the apparent decline in global economic activity. "

Barron's - 6/24/19

"Like our major political parties, the stock and bond markets seem to live in two different worlds these days. The former sits at record levels, suggesting we live in the best of all possible worlds. The latter sees things as bad and only getting worse. Who's right? As in so many things in life, the truth lies between the extremes"

"The Federal Reserve this past week signaled its willingness to lower short-term interest rates, with the "overarching" goal if sustaining the economic expansion"

"That has sent Treasury yields tumbling. The yield on the benchmark 10-year note-which surpassed 3% last year amid warnings from the nation's  pre-eminent banker that it was headed to 4%, if not as high as 5%- slid briefly under 2%, its lowest level since 2016. The two year note, the coupon maturity most sensitive to Fed expectations, ended on Thursday at 1.73%, the lowest since November 2017"

"Yet the S&P 500 index closed at a record on Thursday up over 25% from its Christmas Eve nadir."

"The bond market is, in fact, telling us the Fed's fear of an economic slowdown will push into aggresive preemptive action," bolstering stock investors' confidence that the centeral bank will do whatever is needed to sustain the expansion at its 10th anniversary. "

"Another possibility, according to Nancy lazar's Cornerstone Marco, is that the recessionary signal from the inverted yield curve is simply wrong. After all, the yield curve inverted in 1995, 1998, and 2000, with federal funds above the 10 year yield. But the only recession that occurred came in 2001, after the dot co, bubble burst."

Barron's - 6/10/19

"Jan Hatzius, wrote in a note this past week. Inflation data don't warrant a cut, and if the Fed eases up based on flimsy financial evidence, it would "look overly political in light of President Trump's vocal demands for easier policy."

"The reason for holding cash isn't the trivial rate of interest you're earning," he says. "It's the flexibility that cash affords you when Mr. Market puts things on sale and opportunity  knock. "

"Markets are now betting that interest rates are about to fall for the first time since December 2008"

"The so called yield curve has also flattened and inverted: short term Treasuries are yielding more than 10- year bonds, and there is scant difference between the yield of a one-year T-Bill (2.04%) and a 10 year not (2.12%). Historically, that has often indicated a recession is coming, implying that a rescue plan form the Federal Reserve may be in the Horizon."

"trade issues complicate the economic calculations. And the Fed is under a political cudgel: policy makers want to preserve the Fed's political independence and credibility, and they want to maintain some dry power in the event of an external shock like a geopolitical or financial crisis."

"Some strategists and bond managers are skeptical that the Fed will follow through with rate cuts."

Barron's - 6/3/19

"While Trump famously views the stock market as the report card for his presidency, he's not gaining much now politically from the tariffs, according to an analysis by Goldman Sachs' economic team."

"Signs of economic worry sent bond yields plunging globally, with the 10- year Treasury yield sliding to 2.139& the lowest since September 2017 and down more than a full percentage since its recent high last October. JPMorgan economists think such easing  moves to offset the tariff drag would "make abysmal growth attainable" (MAGA, in case you didn't get it)."

"The Treasury yield curve's so called inversion - with the benchmark 10-year note's yield (2.15%) trading below that of the three month bill (2.35%) - has spooked the stock market because this flip from the typical configuration historically has been a portent of recession. Indeed, every recession has been proceeded by a negatively sloped yield. And as longer term Treasury yields have have declined in recent weeks, the disquieting question of "What does the bond market know" has rattled the stock market, leaving the Dow Jones Industrial Average lower for the sixth straight week."

"..when the signals from the real economy are positive and diverge from the dour ones sent by the bond market, it's typically bullish- not bearish- "

"Looking back at the history since 1967, he constructed a model to compare consumer confidence with the 10-year Treasury yield. When this 'confidence gap" has been in the highest quartile for the period, the subsequent six month return from S&P 500 index averaged 14.34%, with a 20.36%probably of decline. When the gap between consumer confidence and the change in the Treasury yield has been in the lowest quartile, the S&P return has averaged has averaged less than half as much, 6.76%, with a much higher chance of decline, some 38.06%. Paulson's model now is 93% higher than a;; other six-month time frames since, 1967, which suggests stronger returns ahead."

Barron's - 5/27/19

"Visa and Mastercard take an average of just 15 basis points, or 0.15%, per card transaction, he estimates. Merchants take 98% of the total card purchases, and most of the balance, or roughly 1.5%, goes to the bank that issues the card networks' low take rate decreases the incentive to displace Visa and Mastercard. The small fee works for them only because of the enormous volumes that flow through the networks."

"Cryptocurrencies have also not gained traction in consumer payments because of relatively slow transaction times and the lack of recourse for fraud or stolen funds."

"The U.S. economy hit bottom in June 2009 and has been growing slowly but surely ever since, according to the National Bureau of Economic Research's Business Cycle Dating Committee. In just a few months, the current expansion could soon become the longest in America history, beating the previous record from March 1991 to March 2001."

"That's not necessarily good news. The risk of recession tends to rise over time because prolonged periods of growth encourage risky behaviors. People who have forgotten the fear of joblessness and the pain of falling asset prices are more willing to take out big debts and are less willing to maintain an adequate buffer of emergency savings. Business used to steadily rising sales will keep investing in additional capacity until they end up with excess inventories they can't sell."

"Eventually, growth becomes dependent on unsustainable patterns of spending based on perpetually rising asset prices, dissaving, and over-investment. It doesn't take much for the entire process to swing into reverse."

"Fortunately, a downturn is not inevitable. In fact, there are good reasons to think the current expansion could last at least another 10 years - under the right circumstances. Somewhat perversely, the best reason for optimism is the depth of the scars of the global financial crisis. Saving rates are higher and indebtedness is lower than at any point since mid-1990s. Americans are far less willing to boost their sending in response to rising asset prices than in the past. The job market also has plenty of room for improvement, with the employment rate of working-age adults well below its level in the 1990s."

""Ask me a question, and I'll give you the answer," he'd say. "Usually, it's 'I don't know.' " But his colleagues didn't even know where to start. So, save regularly, he told them. Stay in the market through thick and thin- it will reward you. "Focus on things you have control over: Your costs. Your behavior." They asked Tony to look at their statements."

"There has never been a 20-year period in the stock market's history when it has lost value."  

Barron's - 5/6/19

"Retirement is really about understanding three things: One, the value of diversification; two, the value of saving early, including an escalation of savings as you get older; and three, the value of guaranteed income once you get to retirement, or whats technically called the de-accumulation phase."

"We're awaiting House floor action on the Secure Act, which has some helpful components. One, it creates an annuity safe harbor, so that plan sponsors can be comfortable when they put an annuity into the plan. We're really pushing for this notion of annuitization to become more of a standard choice, and have it be an in-plan annuity, which is simpler and has lower fees. Two, it requires a disclosure on how much income will likely be produced by your savings, which will remind people of what they need to do in order to actually get that retirement check. It also raises the age fro taking required minimum distributions to 72 from 70 1/2. That's important to consider with increased life expectancies."

Barron's - 4/22/19

"Being called boring is almost never a compliment. For investors, though it is a dream come true."

"excitement leads to big market swings, one way or another"

"All for good reason. If market volatility is a reflection of uncertainty- good or bad- there's very little either right now. Consider recent economic data. Jobless claims remain at their lowest levels since 1969 and retail sales bounced back in March, but neither were good enough to suggest that the economy is overheating. In fact, the Conference Board's index of leading economic indicators increased 0.4% in March, a rise that indicates that the U.S. economy should grow by about 2% in 2019, the research group said."

""Boring is good because boring means no uncertainties that are unmanageable," he explains. "This backdrop of no recession and stable growth and low inflation and low rates is bullish for risky assets, in particular equities."" 

Barron's - 4/8/19

""What changed in 2010 was quantitative easing and its impact on the yield curve," he says, explaining that when the yield curve flattens, it gives cash-rich growth companies an even bigger advantaged over value stocks, which tend to carry out more debt. An inverted yield curve - like we saw in late March - only amplifies that dynamic. "Value will come back, but not until we see a persistent steepening of the yield curve," he says."

"Value tends to be very, very good early cycle trade," says Nicholas Colas, co-founder of Data Trek Research. "That's exactly what we've seen. It's just that this cycle has gone on forever." Value-style investing tends to cluster in a couple of industries, he says, namely financials and energy, which together account for a third of the assets in the Russell 1000 Growth index. Tech accounts for less than 10% of the value index and a third of the growth index."

"One popular explanation for value's chronic under performance is that as tech shakes up virtually every industry, it drives an even greater wedge between innovative growth companies and old school value ones."

"We've heard it said many times before, but it is worth repeating: Bull markets do not die of old age. Since 1949, the average one has lasted five years and four months, according to Yardeni Research data. The longest ran from 1987 through the dot-com peak in 2000 and lasted more than 12 years; the shortest ran from 1966 to 1968 and lasted a little more than two years."

Barron's - 3/11/19

"Dollar strength encourages imports while inhibiting exports by making U.S. dollars-based goods and services less competitive. Net goods exports tend to follow the oath of the dollar with six-month lag. This means that unless the dollar reverses course and weakens quickly, the U.S. trade deficit will probably worsen."

"The S&P 500 index finished at 676.53 on March 9th, 2009, marking the bottom for its crisis-era sell-off. The index has returned 400% since then, including reinvested dividends. Ten years, however, is a long time for a bull market to run, and skeptics have latched onto it as one more reason to predict its imminent demise."

"Those past returns haven't been too shabby. Since 1900, U.S large-cap  stocks have averaged a total return of 6.4% annualized after inflation, according to the Credit Suisse Global Returns Yearbook. That's 1.4 percentage points better than the 5% average from world stocks. Paul Marsh, a professor at the London Business School and one of the yearbooks authors, expects real returns to settle around 4% for the U.S. over the next couple of decades- but even that is better than what the investors would get from bonds. Investors "would be foolish not to be looking at equities," Marsh says. Whether you're a short-term investor or in it for the long term, stay the course."

Barron's - 2/11/19

"Demand for currency rises when investors need it to buy local assets - like stocks in the S&P 500 - and when local bonds offer higher yields. The dollar's recent  strength coincided with the Fed hiking interest rates and slowdowns in the Chinese and European economies, which made the dollar relatively more attractive."

"If the dollar weakens, then the foreign exchange headwind affecting corporate revenues dissipates, but that relief might take longer to develop than some analysts except."

Barron's - 2/4/19

"With the new jobs getting all the attention, the unemployment rate got short shrift. On first glance, there didn't seem to be much to look at, as it rose to 4% in January from 3.9% in December."

"Nothing particularly worrisome there, expect for the fact that it's the year-over-year change that really matters. Michael Darda, chief markets strategists at MKM partners, calls the change in the unemployment rate one of the most reliable recession indicators, if not a leading one. Since World War II, a 0.5- percentage- point climb year over year in the unemployment rate had meant the U.S is either in a recession or about to fall into one."

"People should not be punished for being paid lots of money, provided they deliver. In America, you've got many people running corporations making lots of money but not doing a very good job - without naming names. That's where the system is flawed."

"He was 49, and he took a chance on a start-up. Its called risk/ reward. He could be extremely successful for taking risks and chances. If your right, you win. If your wrong, guess what? I've been on the wrong side of a lot of deals."

"But income inequality is only unequal when two people do the same thing and one person gets paid less. We don't want to destroy incentives. We don't want to destroy incentives. We don't want to destroy a system that encourgages people to do more, because if they do more they will do better."

"When you feel certain that's the way it id, you take action and make sure it stops, that's what you do. Because, guess what, a business that's run on that basis will not have a successful future. Listen, the lady who runs all 2,300 Home Depot stores is a black woman. She started with us as a part time cashier; her family's from Jamaica, and shes not good, shes spectacular. We're a better company because Ann- Marie (Campbell) had that job, and i'm a richer man because she has that job. That's capitalism!

Barron's - 2/4/19

"There are a lot of people, Franklin, who don't want to make the effort. I'm not talking about guys starting companies; I'm talking about the number of people who if they could get away with not having a job, they'd do it."

"When rates were near zero, investors used the acronym TINA to describe the sentiment that "there is no alternative" to stocks. Today, it's more like TASS- the alternatives still stink."

"But there are a few credible reasons to think earnings growth might indeed pick up as the year goes on. One is that the recent government shutdown, which has ended for the moment, sapped an estimates, some also nudges their second-quarter forecasts higher."

"Investors worried about a slowdown might want to favor companies whose growth inst overly tied to the economy. Traditionally, that has meant defensive groups like food, drugs, and has electric utilities, but grocery spending has shifted toward fresh and away from packages food, drug makers are facing pricing pressures, and electricity demand isn't growing as it used to."

"taxes wiped out the out performance; the fund returned 12.8% after taxes on distributions, trailing the index."

"ETFs, however, don't typically buy or sell their holdings - instead, they swap the underlying securities with large trading partners in whats called an inkind transaction, which does not incur capital gains and, therefore, shields investors from almost any tax hit."

"Actively managed ETFs are far more tax-efficient than virtually identical mutual fund portfolios. Consider what transpired at Davis selected Advisers, a firm that shells both actively managed mutual funds and active ETFs."

Barron's - 1/28/2019

"Of course, the market has already made back a big chunk of its December losses. The S&P 500 has gained 13.3% from the Dec. 24 low-and the size and speed of the rally appears to have startled investors. That gain means that the easy money has been made, but valuations suggest more upside, Citi's Levkovich says. Historical, when the S&P 500 trades at a trailing price/earnings ratio between 16 and 18, as it does now, it gains a median 9% over the next 12 months. "If the concerns moderate, stocks could and should move higher."

"Panelists said that 8 million metric tons of plastic waste- out of some 300 million metric tons of plastic produced worldwide each year- ends up in the earths ocean. Another surprising statistic: by 2050, all the plastic in the ocean will outweigh all the fish in the ocean."

Barron's - 1/7/19

"Last summer, when Apple (ticker; AAPL) shares soared, analysts kept raising their price targets to higher and higher levels. This week after the company dropped a guidance bombshell, many of the same analysts slashes their forecasts. The street's reactive stance does little to help retail investors who watched Apple lose $75 billion in market value on Thursday before they could even think of hitting the sell button."

Barron's - 1/7/2019

"Annual predictions are so yesterday. A higher- than-expected December payrolls number helped push the market up 3.4% on Friday. Yet stocks had their worst first two days of the year since 2000. Where the market will be in a year had little to do with where it is now. Twelve months ago, stocks were coming off 22% return in 2017 and feeling fine, thank you very much- until September. Then, the wheels just fell off."

"The best thing about sitting at the low end of a historical range is that mean reversion should start to kick in, Colas says, and the next 10 to 20 years from here will likely be pretty good. Happy now? As for 2019, tell me if there will be a recession, and ill tell you where the market is going."

Barron's - 12/3/2018

"Global markets are going through s difficult phase, to put it charitably. Excess liquidity is gradually draining out of financial markets as the Federal Reserve reins in monetary policy, raising interest rates off crisis-era lows. Steeper rates have led to a stronger dollar, which is pressuring emerging markets. Prices for oil, steel, and other raw materials are slumping as investors anticipate slower global economic growth in 2019. And markets are taking more cues from fiscal, regulatory, and trade polices, notably the tariff war between the U.S and China."

"Phillip Orlando, chief equity strategist at Federated Investors, says equities could keep climbing with a nudge from positive outcomes in trade and monetary polices: a ceasefire over tariffs with China and a more benign rate climate. "The consensus has been that both of these things end badly," he says . "We're on the other side of that trade." He likes value-oriented dividend stocks for their resilience in a down market. he also favors cyclical sectors like energy financials, and industrials, arguing they offer "more bang for the buck.""

"If there's values in stocks, it's in foreign markets, Ramsey maintains. If the S&P 500 were to fall 25%, it would merely be at its median valuation over the past 30 years, based on a variety of long term valuation metrics. But foreign markets such as those in the MSCI EAFE index could gain 10% just to get back to median valuations."

"Trennert also likes emerging markets. If the Fed eases up a bit, it would  take some wind out of the dollar. relieving pressure on their currencies. Sometimes, he says, "you make more money from things going from terrible to bad, than from good to great." 

Barron's - 10/29/2018

"What about the other market concerns: trade wars, elections, which companies are beating or missing earnings estimates, the price of oil, natural disasters, gross domestic product, and weather the latest iPhone is a must-upgrade? Pay attention to them, but don't look to them for guidance on how much to put in stocks, because none is as important as the starting point for valuations and the returns available on other investments."

"Accurately predicting what the stock market will do next year is impossible. Inaccurately predicting it is easy: It will rise. That's what it tends to do, on average. But the margin of error on that prediction is wider than a canned ham. Investors can be more confident guessing about average returns over the next decade."

Barron's - 9/17/2018

"October begins a new fiscal year for the U.S government- and a faster ballooning of how much it owes. Barring a behavioral miracle in Congress, trillion dollar yearly budget shortfalls will return, perhaps as soon as the coming year. And unlike the ones brought by the financial crisis and Great Recession f 2007-09, these will starts during a period of relative plenty, and wont end."

"Those estimates, provided by the Congressional Budget Office, are based on reasonable assumptions about economic growth, inflation, employment, and interest rates, but they leave out some important things. They assume that the nations need for increased infrastructure investment, estimated by the American Society of Civil Engineers at $1.4 trillion through 2025, goes unmet. They don't account for the possibly of another financial crisis, or war, or a rise in the frequency or severity of natural disasters, and they assume that some trump tax cuts will expire in 2025."

"Just holding the line at 78% of GDP over the next three decades would require finding massive, immediate savings in the budget- $400 billion over the coming year, rising gradually to $690 billion by 2048, using 2019 dollars. In comparison, America spent $590 billion in fiscal 2017 on defense, and $610 billion on all other discretionary items. (The rest of the $4 trillion in spending went for mandatory programs, such as Social Security and Medicare, and for interest on the debt.)"

"When Deficits are large, money tends to be spent on "stupid things," says Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. "If you don't have too constraints, you don't  think about how to spend wisely." MacGuineas calls debt "The most predictable crisis we've ever faced," but says spotting the tipping point will be difficult, because much depends on other countries , and their appetite for our debt. "We can borrow a lot more if were still the best-looking horse in the glue factory," she says." 

"Not at all deficits are bad. The $1 trillion-plus deficits America ran for four years ending in 2012 helped shore up its financial system and prevent a deep recession from turning into a prolonged depression. Keynesian economics calls for deficit spending and lower taxes during economic slumps to stimulate demand, with the money recouped through surpluses during good years. That last part isn't happening, however. "Now Keynesian seems to mean you stimulate all the time," says Gundlach." 

Barron's - 3/19/2018

"The market is so discombobulated right now that it cant even decide what its afraid of. What do we mean? When the Standard & poor's 500 index suffered its first correlation since the beginning of 2016 last month, the cause was easily identified- a good old fashioned inflation scare caused by a larger-than-expected increase in wages and a rapidly rising 10- year Treasury yield which almost hit 3%."

Barron's - 3/12/2018

"some of the best periods for stocks have come when interest rates have risen from low-levels"

"But it's important not to lose sight of the defensive protection these sticks can provide. "I'm a big believer in reversion to the mean and in seasonality, especially when it comes to the midterm elections," says Sam Stovall, chief investment strategist at CFRA Research."