Can You Hear Me Now?

Aug 24, 2018   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

It was a pretty momentous week with the S&P 500 having broken the longest bull market in U.S. history.  At more than 3,500 days, the market has risen more than 320% since March 9, 2009.  It is a record few would have predicted when stocks struggled to find their footing after a 50% plunge during the financial crisis.  Yet here we are.  While there is no shortage of warnings as analysts debate the impact of a trade war vs the benefit of tax cuts, many investors instead choose to focus on what they experience daily.  To quote then candidate Bill Clinton, “It’s the economy, stupid.”

Before I touch on some of the more interesting things we learned this week, I’d like to close a chapter we first started talking about in 2009 and continued talking about until 2016.  This week was a historic one for Greece as nearly a decade of being on the verge of bankruptcy and three national bailouts comes to an end.  Athens will now be able to tap financial markets to fund its activities, marking the closure of the European sovereign debt crisis which also included Portugal, Ireland, and Spain. Opa!

In company news, Verizon acknowledged it erred in throttling wireless connections used by firefighters battling the California wildfires.  Firefighters repeatedly attempted to lift the throttle on their “unlimited” data connections as they battled the fires.  It seems the fire department chose a plan that throttled speeds beyond certain data usage, but regardless Verizon has a policy to remove data speed restrictions when contacted in emergency situations.  Santa Clara County’s fire chief said that when he contacted Verizon about the emergency, the company indicated it would only remove the throttling if the department would switch to a new data plan.  I believe I’ve heard that line before.  How about you?  Perhaps a better story is that Kroger aims to stop using plastic bags by 2025.  As the largest supermarket chain, this decision will have a large impact on both consumers and the environment.  If you’re anything like me, you probably have a cabinet in your home where there is a plastic shopping bag stuffed full of plastic shopping bags.  It is the reverse problem of the missing sock in the dryer.  Government studies indicate there are between 500 billion and 1 trillion plastic bags used each year worldwide.

In local news, Procter and Gamble is going after millennials in a new and innovative way.  This week we learned the company filed trademark applications in April with the U.S. Patent & Trade Office (USPTO) for the use of common acronyms such as “LOL”, “NBD”, “FML” and “WTF” to be used for marketing soap, detergent, and air fresheners.  As tech savvy millennials are an important potential consumer group for P&G, it seems the firm believes that under thirty-fives can be persuaded to buy its products branded with slang, LOL!

On a more serious note, there is a rather large debate brewing at the Federal Reserve about just how far to go in raising interest rates.  President Trump made known this week that he is disappointed Fed Chair Powell is moving forward with additional rate hike(s) this year.  The more dovish members of the board believe that inflation has not yet become a problem given its return to a more normal level this year.  Others, however, believe that by the time inflation becomes a problem the Fed’s ability to fight it will be too late.  Their approach is to attack the potential problem before it becomes a problem.  It is as much an intellectual battle as it is a political battle.  Higher rates will slow the economy and the President is rightly concerned for that prospect just in time for the next election.  On the other hand, the Fed needs some ammunition for when the economy does eventually enter a recession (remember we’ve just experienced the longest expansion in U.S. history).

In closing, it should be noted that Melbourne is no longer the world’s most livable city.  The top honor now goes to Vienna, the birthplace of the miniature sausage also known as the Frankfurter or Wiener (true story, look it up!).  It seems the two cities have been neck and neck in the annual survey for years, with Melbourne clinching the title for the past seven.  In case you were wondering where not to live, Damascus retained last place on the list, followed by the Bangladeshi capital Dhaka.  Now you know.

August 24, 2018

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