Quote of the Week
“What do you plan to do with the rest of your wild and precious life? It is never a waste spending time with someone you love.” – Unknown
Technical Corner
Stocks extended their recent gains, finishing higher for the fifth straight week. Treasury yields climbed to their highest level in three months. This rise in yields has hurt our portfolios since our great month in August, where yields hit their low. Remember yields often times trend higher when the stock market is trending higher. I will say that a portfolio manager we use and I respect says that yields should drop substantially next year which would be good for the way we are positioned.
The make up of our portfolios is mostly bonds, so we have been giving back some of the August gains. When yields decline, bond prices rise, and when yields increase bond prices decline.
We have moved from Quadrant 4 to Quadrant 3 for the economy recently. Quadrant 4 is when growth is slowing and inflation is declining. This is the worst quadrant for the stock market and the best for bonds. Quadrant 3 is growth declining and inflation increasing or in other words, Stagflation. History has shown that the stock market usually tops during Quadrant 3.
We have gotten a buy signal on the Energy sector due to increasing inflation, so we will be lightening up somewhat on bonds and adding Energy this week to the portfolios.
Hedgeye, our main source of investment information, is predicting a 1% growth rate for the GDP in the fourth quarter of this year, which is down from 1.9% growth for the third quarter of this year. The prediction is that we will remain in Quadrant 3 for the final quarter of this year and the first quarter in 2020. Then according to their data driven algorithms we will slip back into Quadrant 4 in the second quarter of 2020 and possibly move to a negative GDP.
A lot can happen between now and then, but we are remaining conservative as stock market valuations are stretched to the upside. I don’t want to chase the stock market and put your assets at risk of a sell-off. There are just too many things that could go wrong over the next year or so. When we get a green light that the economy is starting to bottom and expand, we will move back into the stock market.
Larry’s Thoughts
Recently I read an article in the Arizona Daily Star by Bill Nordbrock, who is the vice president of community relations or SCORE Southern Arizona, a nonprofit that offers free small business counseling and mentoring by appointment.
I have always felt that successful people have a strong sense of curiosity. I hope you enjoy his opinions. I think he is “right on” with his thoughts. The following appeared in the October 28, 2019 edition of the Arizona Daily Star as the Biz Tip of the week.
BY SPECIAL TO THE ARIZONA DAILY STAR
Most children are inquisitive and they ask a lot of questions. For some reason, as people mature they begin to accept things. They neglect the sense of wonder they once had. Maintaining a sense of curiosity as an adult can be beneficial in many ways.
The most brilliant minds in history had one thing in common. They were curious people with an insatiable appetite to know more. Certainly the quest for knowledge will make you smarter. In addition, curious people are always thinking and their minds are active. The more you use your brain, the stronger it becomes. Over time, curious people tend to be better problem solvers. They see solutions that most people do not.
Curious people do not accept how things appear on the surface. They are always looking for better ways. Sometimes this quest for improvement leads to improved productivity. Sometimes it exposes amazing new opportunities and innovations.
Curious people tend to be better listeners, too. They have a genuine interest in learning from the people around them. This interest is noticeable and it is appreciated. They also ask interesting questions, which spark engaging discussions.
As a result, curious people tend to have stronger relationships. What physiological effects does curiosity have on the human body? Several studies have shown small amounts of dopamine are released in the brain when curios people solve a problem or discover something new. Dopamine has been shown to reduce the risk of Alzheimer’s, Parkinson’s and depression. Healthy levels of dopamine are vital for concentration, motivation, productivity and confidence. As a result, curious people tend to be happier and healthier. How do you increase your curiosity level?
Become interested in people around you. Ask questions, listen and learn from them. Make a conscious effort to explore things you are not interested in. Find something you take for granted and ask yourself ‘why?’
