The Roaring 2021

In brief:

  • Everything is too hot, thankfully we’re cooling off

  • Inflation is not our main concern (despite the media)

  • The Delta variant will continue to kill due to vaccine hesitancy (Facebook and Fox)

  • Government must do its job, protect us from the virus, media platforms, climate change

  • We have been reducing exposure to the ‘reopening trade’ due to Delta

  • We’ve added to defensive sectors healthcare and utilities which may outperform as the economy cools

  • The global semiconductor shortage likely persists, we bought more

  • When the market corrects, we intend to buy and add to our favorite secular themes

  • A comprehensive financial plan is an effective tool against an uncertain future and inept government

Embrace the Cooldown

Everything is too hot: stocks, oil, real estate, the economy, and the planet. U.S. home prices jumped nearly 17% over the past 12 months, a growth rate not seen in over 30 years! The energy sector is up over 30% in 7 ½ months. The S&P 500 is up 18% this year, after being up 18% last year. This is not sustainable. We should all welcome a slowdown. Fortunately, there are signs of cooling. Lumber, which began the year around $700, skyrocketed to $1,670, has collapsed to under $500 today. Oil has fallen from a high of $75 to $69. Applications to purchase a new home have fallen indicating a potential cooling of a too hot housing market. Before the Delta variant dominated the headlines, the media obsessed over inflation. But we agree with Guggenheim, Pimco, and the Federal Reserve that inflation will be temporary. In fact, inflation may have already peaked because growth has likely peaked. Our economy grew 6.5% in the 2nd quarter, well below expectations of 8.4%. Be glad we missed the mark. I don’t want to see 8% GDP. An overheating economy can lead to bubbles. So, we’re in the early stages of an economic slowdown. Don't panic, this was expected by most in the financial community. The International Monetary Fund (known as the IMF) projects the global economy to grow 6% in 2021, and 4.9% in 2022 (see below).

The Federal Reserve expects the US economy to grow 7% this year and slow to 3.3% in 2022. Don’t buy into a doomsday narrative that we're headed for recession just because our economy is slowing. This post-reopening slowdown was our expectation, and although we moderate next year, most economists expect the US to grow above trend in 2022. Eventually the market will pullback, don’t fear it, expect it. As long as the economy is growing, and interest rates remain low, we intend to add to our favorite secular themes: Global Aging, Digital Revolution, Westernization of Asia and Cash Flow.

Getting Vaccinated

“Delta shows us that the game is not over yet…Delta will hit hard the unvaccinated communities and individuals in the United States.”

-William Moss, MD, MPH Executive Director of the International Vaccine Access Center, John Hopkins Bloomberg School of Public Health (7/15/2021)

Fear Misinformation, Not Inflation

Perhaps we should have called it the ‘al-Qaeda virus.’ Maybe a United States would have defeated our common enemy--one that has killed 618,585 Americans and 4,320,870 globally. We’ve had the equivalent of 200 9/11’s and yet there are an estimated 93 million Americans who refuse to get the lifesaving vaccines. We believe misinformation on Fox and Facebook continues to divide, conquer, and kill. And according to Dr. Poland of the Mayo Clinic, this large cohort of unvaccinated is contributing to the huge surge in Covid cases around the country. Every hospital in America should publicly post the costs incurred to treat the unvaccinated and demand Zuckerberg, Tucker, and Murdoch foot the bill. There has been 4.5 billion doses of Covid vaccines administered and the data is irrefutable. Between December 7th of 2020 and June 7th of 2021, Covid killed 12,234 just in LA county. Of those deaths, only 19 were vaccinated (see below).

I don’t agree with the anti-vaxxers. However, I understand their distrust. How can you not? We the people have been fed so much bullshit over the years from government and media companies, it can be difficult to decipher what is true. We’ve been lied to about climate, tobacco, fossil fuels, immigrants, Vietnam, Afghanistan, Iraq, war, sugar, and of course, Trump. Arguably the government’s primary role is to protect us, and this should extend to the media companies/platforms and misinformation.

Fox and Facebook’s playbook described perfectly: 

“It may not be good for America, but It’s damn good for CBS…this is going to be a very good year for us. Sorry. It’s a terrible thing to say. But, bring it on, Donald (Trump). Keep going.”

-Les Moonves, former CEO of CBS and sexual predator (2/29/2016) 

And not to discount the human toll, but Delta is wreaking havoc on the 'reopening’ stocks. Airlines, hotels & resorts, cruise ships, and anything directly linked to the reopening of our economy has collapsed 20%-30% since countries began imposing new travel restrictions in late June. We have reduced our exposure to the 'reopening trade' as it is impossible to accurately project the negative impact of Delta and future Covid variants. We’ve recently added to our positions in healthcare, utilities, and semiconductors.

“…we humans know many more truths than any other animal, but we also believe in much more nonsense. We are both the smartest and the most gullible inhabitants of planet Earth.”

-Yuval Noah Harari (historian and author of Sapiens)

“…there is general scientific agreement that the most likely manner in which mankind is influencing the global climate is through carbon dioxide release from the burning of fossil fuels…”

– James Black, Senior Exxon scientist, 1977

Plan for the Next Crisis 

When we sent Panic & Pandemics (1/31/2020) last year, we weren’t trying to play epidemiologists, we were trying to protect you. Our message was simple: the Coronavirus may be more severe than what we’re being told by government and the media. At the time we published it, there were just 200 deaths worldwide. Thirty-nine days later, on March 11th, the WHO (World Health Organization) finally declared the outbreak a pandemic, the CDC had yet to call it as such. Sadly, most Covid deaths in America were avoidable.

The next variant, a new pandemic, a recession, war, climate. What are you doing today to better prepare yourself for what may eliminate your income in the future and threaten your way of life? What do you need to sustain you and your family for the coming decade(s)? How long can your current savings or portfolio last in the next crisis? A comprehensive financial plan can be an effective tool against an uncertain future.

Let’s build a plan together to immunize yourself from future government failures. 

Thank you!

 

-randy

The opinions expressed in this newsletter are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult a financial advisor prior to investing. Any past performance discussed during this newsletter is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.

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