The Andresen & Associates 2018 Annual Review

2018 started nicely enough. But then it turned stormy. Almost all of our major indices were down in 2018. Most of the chaos happened in the last few months. Paradoxically the US economy, and most of the global economy, continued to boom in 2018. U.S.  corporations delivered astonishing growth, with earnings up some 20.5% according to FactSet. This was fueled in part by deregulation and 2017 tax changes. Job growth was similarly nothing short of...

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2019 will be a wild card.

If we stay focused on our long term investment plan, as we should, then 2019 is yet another year to be invested. In the short run, if we consider the year 2019 by itself, it’s scary. We will face the potential for big surprises, lots of volatility, and perhaps financial market declines. It’s also entirely possible that once again, we’ll all muddle by, and 2019 will be very profitable. The reality is that nobody really...

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What the bond market just told us.

When the interest rates for short term Treasuries is higher than that of long term Treasuries, that’s “an inversion of the yield curve”. All inversions do NOT lead to recessions but all recessions are signaled by inversions. It took about 28 months before the recession predicted by a 2005 inversion emerged in 2008. What’s important: we are in the late stages of a delightfully long economic upturn. A normal, natural, and temporary recession is out...

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Somehow we all muddle by…

One of my mantras in my investing career has been “Somehow we all muddle by”. In other words, the millions of people in the financial markets usually (but not always) make markets repair themselves, recover, and eventually reach new highs. This last week has been a classic example: last week the chairman of the Federal Reserve boosted stock markets in 30 seconds by hinting that interest rates might not continue to rise. Yesterday President Trump...

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A recession is out there somewhere, just probably not yet.

In the midst of what may or may not be a more substantial downturn in global stock markets, there’s a lot of fluff in the financial media. Most of it is just plain guessing. My take, for what it’s worth, is that a cautious approach is warranted but we don’t really know what will happen. The current downturn hasn’t become large enough to convince most investors to be afraid, and remember there’s always (unfortunately) the...

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Are higher interest rates becoming a long term trend?

This study suggests that rates could go higher. That’s tough on real estate, hard on bonds and perhaps, short term, tough on stock markets as well. To put it in context, we’ve had historically absurd low interest rates for years now. To quote this well-written essay: “Bottom Line: Incoming data continues to support the Fed’s basic forecast that rates need to climb higher. I think the data increasingly supports the case that rates need to...

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Just take a moment to savor the good times.

Let’s just sit here, breathe deeply, and savor this economic miracle. Of course the economy and the financial markets have good and bad times. But we’ll worry about that later. For the moment, let’s just savor these astonishingly rich times. https://www.marketwatch.com/story/dow-could-carve-out-record-as-italy-fears-fade-2018-10-03?siteid=bigcharts&dist=bigcharts

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Time to be cautious! Oh, wait, we’re already cautious…

As the accompanying article by Mark Hulburt points out, the emotional consequences of downside losses in a bear stock market are often greater than investors predict. As a result, these investors are usually reluctant to “buy cheap’ in the midst of a chaotic downturn. An even greater motivation is that bear market losses are..well, losses! Nobody enjoys that. With stock markets currently at all time highs, it’s time to be extra careful, even though we...

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Celebrate! Economically, half the world is now middle class or more!

Wonderful wonderful news! “In the world today, about one person escapes extreme poverty every second; but five people a second are entering the middle class. The rich are growing too, but at a far smaller rate (1 person every 2 seconds).” There is much yet to accomplish but the system is working.https://www.brookings.edu/blog/future-development/2018/09/27/a-global-tipping-point-half-the-world-is-now-middle-class-or-wealthier/

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Caution, yes. Fear, no. Predictions of financial doom are seldom worth the worry.

“The end is nigh!” I’ve heard this lots over the years. So far it hasn’t been true. Although there have been hard times, we’ve always come back. Yes, there IS an awesome amount of debt out there. Yes, a downturn is inevitable, although the statistics aren’t saying that it’s imminent. And, yes, we’ll almost certainly recover from that downturn. So why do experts make such predictions? Because they are very successful at attracting attention. In...

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