Wednesday, November 16, 2022

Do you believe Powell will eliminate 10 million American jobs? I don’t!

From the Desk of Joe Rollins

I have been overwhelmed with questions regarding the economy and what has been going on with the stock market over the last month and I am beginning to believe that the public is being overwhelmed with fake news. I read an article the other day that said the vast majority of Americans believe we are already in recession; they fear for their jobs and the ability to support their families. However, the evidence is so far removed from those statements that it must be bewildering to someone who actually reads the facts.

I hope I can give you some information in this posting regarding the excellent month of October we enjoyed, but more importantly, explain to you why the economy is not in recession. If you believe the lines they give you on TV, you need to do your own homework. I also want to explain employment which seems to have gotten confused with the economy since people do not understand that layoffs do not necessarily create a recession. Lastly, I want to go through my reflections on meeting with Elon Musk in New York and hearing his coherent statements regarding virtually anything as compared to politicians. Of course, I will touch on the elections and the reasons why they were important for further stock market increases.

Ava Rollins and her friends having a roaring good time on Halloween

If anybody tells you they can forecast a bottom to the stock market, they are just born liars. No one has ever been able to do so, and if anyone could do so, they would certainly keep it to themselves. What we do know, historically speaking, every sizable stock market decline has represented a sure-fire buying opportunity for long-term investors. I know it is hard, you just have to hold your nose and buy on the dips. Did you realize that over the last 70 years the stock market has declined by over 10% on 39 separate occasions? You probably did not realize that market corrections were as common as those facts tell you. Yet, in every one of those 39 declines of 10% or more (except for the current one) a bull market rally eventually recoups all that was lost. Given that it is a 100% recuperation of all losses indicates this too at some point will pass. A really good time to invest.

Before I cover all those interesting topics, I need to report on the very excellent month we had in October. The Standard and Poor's Index of 500 Stocks was up 8.1% for the month of October, but yet is still down 17.7% for the year 2022. Once again, I point out the 10-year returns on this index, even with this very down year, average 12.8%. The Dow Jones Industrial Average was up 14.1% for the month of October yet is still down -8.4% for the year 2022. The 10-year average on this index is 12.2%. The NASDAQ Composite was up 4% for the month of October but is still down significantly at 29.3% for the year 2022. The 10-year average on this index, due to its more volatile nature, is also the highest at 15.2%.

Ava out for a graceful spin around Central Park

For the month of October, the Bloomberg Barclays Aggregate Bond Index was down 1.4%. For the year, bonds are down 15.6% and for the 10-year they average at 0.7%. This is the first time on record that bonds have taken such a large decline and the combination of both stocks and bonds being down is almost unheard of in American finance. Maybe this leads to some of the conspiracy theories I will discuss later in this posting.

As mentioned in the prologue, I find it incredible that most Americans believe that we are already in recession. If you recall back in January and February all these so-called experts were beating the table and explaining that recession was unavoidable in 2022, and that in 2023 we would likely see bread lines, foreclosures, and huge bad debts by the banks. I am not sure exactly where those Pundits get their information from, but it is certainly not supported by the facts. You must wonder whether there is a broad conspiracy going around that is convincing the public of something very negative, when in fact, we are in just a normal slowdown in the economy.

Shelley Fietsam’s son, Cameron, dressed to impress for HOCO 2022

I guess the Pundits were shocked when the government reported that the GDP for the third quarter was at 2.6%. While it is true that during the first and second quarters of 2022, the GDP was marginally negative. So, the increase of 2.6% for the third quarter must have been a sure shock to those Pundits that were beating the table and explaining how recession was just around the corner. However, if you want really shocking news, check out the website for the Atlanta Federal Reserve. As I have pointed out on numerous postings before, these preliminary calls on GDP by the Atlanta Federal Reserve have been closer than any other projections. If we were going to have a recession in 2022, the fourth quarter would have to be a large negative number to wipe out the 2.6% earned in the third quarter. However, as strange as it may seem, the Atlanta Federal Reserve is forecasting fourth quarter GDP at a stunning 4% increase. If in fact they are close to that percentage increase for the fourth quarter of 2022, the entire 2022 will be quite satisfactorily higher on a GDP basis.

What confuses me, and I guess most investors, is why these so-called experts are forecasting severe recession when the government itself is forecasting real growth in the current quarter.

I have been on a lot of airplanes lately and I can tell you from personal observation that every seat is full and there is a standby line on every flight I have boarded. Airports are completely run over with people; and as everyone knows, it is almost impossible to get reservations at a good restaurant. I was in New York City over the weekend and most of the hotel rooms were sold out and the city was covered up with tourists. In fact, I began to believe that no one spoke English in New York after the few days there since there were so many tourists from foreign countries. That fact alone should convince you that the world is not in recession, given that whole families were willing to travel from Italy, France, and the Far East to come to New York on vacation.

Client Chris Barg with Braves’ Dansby Swanson
at the Gold Glove Awards in NYC
I have a hard time convincing my own clients to read the facts. I get client telling me that when Facebook starts laying off employees, it must mean we have recession. In recent news, all the major tech companies reported that they would slow down hiring or start laying off people in the coming months. Unlike the explanation of the upcoming recession, this more properly reflects that corporate America is downsizing to a slower economy. That is only good common sense and exactly what they should do if they thought their business would be slower going forward. Absolutely nothing in those statements would be an indication of an upcoming recession.

Also recall, that if you lay off a couple thousand employees by a major employer, as of today, there are still 10.7 million job openings in the U.S. that are not filled. So, if these newly laid-off employees desire to find new employment, they have vast opportunity to do so. As I said often said before, for anybody in America that wants a job, there are plenty available. If someone is without a job, it is most likely that they do not desire to work again.

This gets me back to the title of this posting. If the U.S. is really going to go into recession, the Federal Reserve will have to orchestrate laying off and eliminating over 10 million American jobs. Take that into perspective when you consider employers today cannot find enough workers and especially low-paying jobs that are going unfilled because no one is willing to work for those wages. Will the government now take that situation and aggravate the economy by laying off 10 million additional workers to reduce inflation and slow the economy. I am betting there is no chance in the world that any governmental agency in an election year would eliminate that many jobs and endanger that many families' livelihoods over something as obscure as the inflation rate.

Ken Higgins finished his 38th Peachtree Road Race – Way to Go, Ken!

So maybe the Pundits are saying that we are going to see severe recession in 2023 due to the actions of the Federal Reserve and we have just not felt the effects of higher interest rates. There is no question that higher interest rates have slowed the housing industry by pushing long-term housing mortgage rates up above 7%. I do not know if you have noticed but those rates are falling and are now below 7%. Truth be told, most people really do not care what houses cost, they only care what the monthly payments are. With the huge increase in interest rates over the last six months, many young buyers are suffering “sticker shock” with new home pricing. However, I have many clients on the other side of the housing industry, and I can tell you that housing prices are not going to fall if commodity prices for those houses continue to rise. Sure, there will be a slowdown in housing but frankly, there needs to be.

We got a little bit ahead of ourselves in the spring when lumber prices doubled, and supply chain issues made building houses come almost to a standstill. Now that lumber prices are back to normal and the supply chains have opened; efficiency in home building will improve, but it will take some time. So, it is perfectly fine that the economy slowed down some to allow housing to catch up with current demand. The people who write for the financial news and talk about “crashing” home prices and the desperation felt in home building obviously have no clue as to what they are reporting. While last month housing prices declined by 1.5%, given that they have increased by 20% over the last year seems to be a most normal reflection of softer pricing.

Bob and Margaret Cash preparing for a bike ride
through Burgundy, France – À tout à l’heure!

The difference that so many of the people writing the financial blogs cannot seem to understand is that we do not have an undersupply of product, we have an oversupply of demand. Coming out of the Covid shutdown for several years, suddenly people wanted to use the money that they had accumulated since they had not been able to do anything in two years and they began to travel and spend money on capital items. We had too few new cars to buy, we had too few used cars to sell, lumber was at exorbitant prices and every airline seat was filled. That is what happens when you have demand in excess of supply. But all of that is slowly receding and supply and demand are more closely aligned today than they were several months ago.

So, when we have more aligned supply and demand, we will start to control inflation. For the month of October inflation was down to 7.7% year over year from 8.2% in September. Remember that I explained that inflation is valuated based on an annual increase this month over same month last year. As we go into the end of the year, we will have much more favorable months to compare, and I fully expect inflation to continue to fall as previously mentioned.

Long-time client Claude Hoopes shares the beauty of Maine!

At the very first sign of a significant reduction in inflation, you will see that the Federal Reserve will have to back off this desire to increase interest rates in this economy. It is a fine line to increase interest rates to slow the economy, but under no circumstances would you want to do so to the point where interest rates throw the economy into severe recession. I think the Federal Reserve is very cognizant of this fact and that when they meet in December, the increases in interest rates will be less than the 0.75 that they have been increasing for most of 2022.
So, I talked about the economy, and I talked about what I think the Federal Reserve is going to do, but what really affects stock prices are earnings. With all the talk about the potential of recession, most people have failed to see the reality of what is going on in corporate America. It is amazing to me that bank stocks are not rallying significantly with these higher interest rates. As you know, every time they increase interest rates, the banks make more money, yet bank stocks have been down virtually all year and even flat lately. The Pundits have convinced the public that the reason why bank stocks cannot rise is because with the upcoming recession, the banks will have overwhelming debts and companies that cannot pay their loans. I find that position so preposterous it is even hard to repeat. The banks today are in the most healthy and well capitalized position they have ever been in American finance.

If the Pundits were so correct regarding their projections of inflation and recession in 2022, you would have expected that earnings would fall dramatically. It now looks like that for 2022 in corporate America, net income will go up by 7.5% for the year 2022. What is incredibly coincidental is that is the exact same percentage that they went up in 2021. So, we have no declining employment and no declining earnings by major corporations. Why are the most major stock funds in the world down 30%-40% in the year 2022 and the S&P 500 down 18%?

Proud moment - Randy and Kathy Wittman
introducing their 3rd grandchild!

While I was in New York I had the opportunity to talk to a lot of the fund managers and their reflection on this year was quite surprising. They all indicated that nothing had really changed and that they were evaluating stocks as they had always done. The exclamations seen in the financial press of recession, depression and hyperinflation were to be ignored given that there was no financial support for those positions. While we all recognize and appreciate the slowdown in the economy, there is no indication of a major fallout from corporate America. Therefore, even though their performance this year has been uncharacteristically bad, their position is that you still value stocks the same way and all this hyper talk in the press is probably designed to support a position that the traders have that the invested public does not.

People ask me all the time what my reflection of the recent election was and my thoughts about it going forward. I am quite pleased that the elections appeared to be an even split between the two major parties. I am also very glad that neither party won substantial positions in any of the major house and senate races. I am a firm believer that government works best when it does nothing. It is the old joke Ronald Reagan used to paraphrase all the time, “I am from the government, and I am here to help.” As Ronald Reagan said, anytime the government shows up to help you may rest assured that industry will be worse for that help. Therefore, virtually an even split in Congress and in the Senate should lead to two really good years of the government doing absolutely nothing. As long as the government continues to debate, argue and make excuses and not pass any substantial legislation, we as investors will be much better off.

Ava and Dakota Rollins in the Big Apple

One of the principal speakers at the seminar I attended was Elon Musk, President of Tesla Motors and various other companies. It was very enlightening to hear his comments. I found this guy brilliant beyond belief. Not only did he start PayPal from scratch, but he also started the very first fully electric car manufacturer, Tesla, SpaceX, Solar City, and Starlink. No one in the history of world had been successful in the building of electric cars before Elon Musk came along. When I listened to him speak, I was so impressed by his intellect. I just wish we had politicians that had above-average intelligence.

One of the things that he said seemed to make a lot of sense. He said that while studying space geography as part of SpaceX, he discovered that there might be as many as one million planets with the same atmospheric conditions as Earth. The difference is that those planets do not have people on them. Maybe at one-point, multiple generations ago they actually had people but they either killed each other in war, a virus wiped out the whole planet or environmental effects got to them. What was interesting about his comments is that he related them to the same effect on the Earth. Here you have one madman in Russia attacking a neighboring country for no good reason and wiping out hundreds of thousands young men. What if someone like him could start a nuclear war and basically eliminate all the people on earth? At least we now know that Elon Musk is certainly thinking about it.

One last pit stop before heading home...

What was fascinating about this conversation was that the very next day when I picked up my phone and looked on the internet, every other article I read was a negative article written about Elon Musk. You would think that if there were anyone to be the darling of the progressives, it would be him. No one before him was able to build an electric car cutting car emissions. Many have tried, but all have failed. Even today, the major car manufacturers are so far behind Tesla that the race is not even fair. Yet the progressives for some reason hate Elon Musk beyond belief. Maybe it is because he is the richest man in the world, or he has become remarkably successful.

Another thing he said that impressed me was that he indicated that the President of the United States should never be more than 15 years older than the average American. If the average American is 38.1 years old, that will make the President’s age around 53. Think about that just for a second when you have Biden and Trump running for political office again at age 80. They are so far removed from the average American’s beliefs and daily activities; I am not sure how they can properly govern a country. Hopefully, in this next Presidential election, we will have some young people willing to run.

If you have an interest in coming down to visit with us, we look forward to seeing you. We are moving into a slower period for our Firm and will have the time to sit down and review your portfolio, taxes, or anything else you might be interested in.

As always, the foregoing includes my opinions, assumptions, and forecasts. It is perfectly possible that I am wrong.

Best Regards,
Joe Rollins

All investments carry a risk of loss, including the possible loss of principal.  There is no assurance that any investment will be profitable.

This commentary contains forward-looking statements, which are provided to allow clients and potential clients the opportunity to understand our beliefs and opinions in respect of the future.  These statements are not guarantees, and undue reliance should not be placed on them.  Forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual results in future periods to differ materially from our expectations.  There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.

Wednesday, October 19, 2022

The Weirdest Diversions of Economic Reality vs. Market Performance of All Time

From the Desk of Joe Rollins

I know it is unbearably painful to watch the stock market negatively perform most days. However, for the 50 years that I have been invested, you can always rely on the fact that earnings and the economic environment will eventually return to the performance of the markets. That is where I feel we are today, and I want to point out some of those facts to you. In addition, I want to better explain the role of the Federal Reserve and the effect it is having on the current market. Lastly, I want to explain the extraordinary market performance we have had over the last 20 years and why pessimism at this level is certainly not warranted.

Before I go on to those more interesting subjects, I must report the performance of the markets for the month of September. It is unbelievable how bad the stock market performance was during that month. Not only were stocks down, but so were bonds, internationals, real estate, and virtually every other asset class you can name. What was interesting was that Fidelity’s lineup of sixty equity funds, which included some conservative funds, some midcap funds, and some aggressive funds, on average were down 9.2% for the month of September. By any standards, in any definition, it was an extraordinarily difficult move down for any one month. What was even worse for that quarter was all these funds were down 4.3% and the sixty equity funds were down 23.8% year-to-date. It just goes to show that there is nowhere to hide in this relentless selloff which is not supported by economic data.

The Standard and Poor’s Index of 500 Stocks was down 9.2% for the month of September and for the year down 23.9%. The 10-year performance on this index, including this down year, is 11.7%. The NASDAQ Composite Index was down 10.4% for September, down 32% for the 2022 year, and its 10-year performance is 14.2%. The Dow Jones Industrial Average was down 8.8% for the month of September and year-to-date is down 19.7%, but its 10-year performance is 10.4% annually. Just as a comparison, Bloomberg Barclays Aggregate Bond Index was down a stunning 4.3% for the month of September, is down 14.6% for the 2022 year, and its 10-year performance is 0.9% per year.

JRR sitting in JFK’s rocking chair

It is extraordinarily unusual when both stocks and bonds go down at the same time. If you had employed the 60/40 asset allocation, you would have suffered heavy losses so far in 2022. I am not trying to make a commentary on general performance, but it is quite unusual when virtually every asset class and every type of stock fund are all down during the same month. I am just not a believer that the millions of people that invest money suddenly decided that cash was better for the month of September.

The Federal Reserve was established to accomplish two major goals in the U.S. economy. The first was to maintain a stable economy which, by their definition, means inflation should be 2% not 8.5% as it is today. Their second mandate was to maintain full employment during good times and bad times. Neither of those mandates are more important than the other. Even though you have full employment and outrageous inflation, you are going to have an unstable economy. At 3.5% unemployment, we are in a very strong labor market. However, with 8.5% inflation, the Federal Reserve feels that it needs to take precautionary actions to reduce inflation.

The Federal Reserve of Atlanta has done a particularly good job in forecasting GDP going back over time. After reading all the negative commentaries in the news, you would assume that GDP would be a huge negative number for the third quarter of 2022. In reading the Yahoo headlines, virtually every other article was negative on the U.S. economy and how bad things are and how people cannot meet their monthly debts. The general sentiment from reading most of the editorial comments on the finances of Americans assumes that millions are out of work and underpaid and cannot meet their monthly household budget. Bread lines are surely next.

37-year client Allen Davidson & friends enjoying that
fresh NC mountain air

However, if you actually read the data, nothing like that exists. The Federal Reserve of Atlanta is now forecasting GDP growth for the third quarter at 2.8%. Remember that the first two quarters of 2022 were marginally negative. This forecast assumes a major positive turn in the economy. Do you remember all the so-called experts forecasting recession in 2022? I guess they will have to wait another year.

Basically, if these estimates are correct, the U.S. is growing 2.8% in the third quarter with a 3.5% unemployment rate. Any country in the world would do handstands to have such excellent financial numbers, and yet we are facing a market that is down 23.9% year-to-date.

As for the unemployed, currently there are still two job openings for every one person that is unemployed in this country. There is absolutely no reason why anyone cannot get a job if they want one, since there are massive job openings. In addition, those workers that do have jobs have enjoyed a 5% increase in pay over the last year which, of course, adds to the inflation problem but allows those employees to meet their monthly obligations more easily.

Client Janis Whitehead out on the town with husband John Jergel

The major question now confronting the Federal Reserve is whether they have gone up too far too fast and have not given the economy an opportunity to absorb the rate increases. There is no question that the higher interest rates will start to affect housing prices at some point. However, let’s not put it out of context. In most housing markets in the United States, house values have gone up between 20% and 30% in the last few years. If these housing costs incurred a decline of a couple of percentage points, that hardly seems unreasonable given the sharp upturn. Higher interest rates obviously affect credit cards, car loans, and other types of financing vehicles. Once again, the incurring of credit card debt, new car loans, and other financing is optional to the average citizen and certainly avoidable if they desire to reduce spending.

The major obstacle in bringing down inflation will be reducing the cost of oil. Any number of rate increases will not reduce the price of oil but rather move the political needle more than interest rates. The formation of these large inflation increases began with the current Administration’s pledge to reduce oil production in the United States.

During the prior Administration, we enjoyed energy independence, but we are currently dependent on foreign oil which, in my opinion, is a huge mistake. By reducing drilling in the United States and regulatory overburden to the industry, basically the ripples of higher inflation were created at the beginning of 2021. At this point, overregulation and lack of permits has reduced drilling over the last couple of years, and exportation has taken a back seat. At the current time, there is absolutely no way to reduce the price of oil short of a change in regulatory authority out of Washington.

Cecilia Cmeyla calling out of work from Disney World

You can see the effect that it is having on the rest of the world. Recently, the Administration tried to lobby Saudi Arabia and the Middle Eastern countries not to cut production of current oil supplies. It was reported that they decided to cut production by one million barrels a day to increase prices. After strong arm negotiations by the United States Administration, Saudi Arabia, Kuwait, and the United Arab Emirates decided not to cut the production of one million barrels a day, but rather cut two million barrels a day. Oh well – so much for U.S. influence.

The Administration warned the Saudis that a decrease in production would impact the long-term future of the United States and the Middle Eastern countries. Clearly, their decision proves that the United States has less influence over the Middle East than Russia does. Obviously, the higher prices will allow Russia to sell oil at a higher price and therefore support their ongoing atrocious war.

The sad part about all this pain that we are suffering with inflation and higher interest rates all could be reversed tomorrow by the signing of a new bill. If the White House would call off this political and regulatory campaign against American oil and oil production, the price of oil would start to fall immediately. We would see an explosion in the exportation and production of oil, which would get us back to the energy independence we saw only 18 months ago.

“Ava Rollins, do you have any homework?”

It is difficult to explain why the equity markets have been so decimated in 2022 given the strong economic numbers that we have enjoyed. Plus, we have an extraordinarily long record of positive performance, and we now know that every single bear market has grown into a bull market in every downturn. Ever since 1928, the S&P 500 has fallen 20% or more on 21 separate occasions. That does not include the 2022 performance since it is not over yet. That means that on average, there is a bear market every 4.5 years. Yet, it has not only recovered from every single one of those slumps, but it has gone on to see positive returns and more.

Think about this for a second. In the last 19 years of the stock market performance, there have only been two negative years. Of course, we had the extraordinarily big loss in 2008 and the other loss was only marginally negative. If you were a gambling person and I gave you money to go to Las Vegas and I told you that if you bet 19 times, you would win 17 of those times, you would take that chance every single time. The odds of a major correction going forward seem absolutely and totally remote.

Let us look at the current performance. Based on the information we currently have available to us now and the forecast by the Federal Reserve of Atlanta, the GDP for the quarter ending September 30th should be pretty positive.

Ziming Yu – Don’t make him angry!

We know that there are more people working now than ever, and therefore, there are more people to spend in the economy and make it stronger. Think about this for a second; going into this quarter it is projected that the earnings will be 2.9% higher than the previous years' earnings. In my way of thinking, that makes these companies 2.9% more valuable than they were on January 1, 2022. If the companies are more valuable because the earnings are higher, why is the performance down 23.9%? Once again, I focus on the fact that there seems to be a coalition of traders who are determined not to allow this market to trade up. I have noticed that over the last 60 days that the last trade of the day, on any given day, is a highly negative one. Therefore, if the market does trade up a few percentage points during the day, those gains are essentially wiped out by one large block trade making it negative.

An example of an extreme swing in the market was when they announced the Consumer Price Index for the month of September on October 12, 2022. At 8:30 in the morning, the inflation report was published and was one-tenth of one percent higher than expected. Immediately the futures went from 300 up to 500 down. The market opened down 500 or 600 points almost immediately, but throughout the course of the day those losses turned into huge gains. The Dow Jones Industrial Average Index ended up over 800 points that day when it started out negative 500. So basically, the S&P 500 Index on that day fell 2.4% before finishing up 2.6%, a five-point percentage swing. This type of inner-day action has only happened nine times since 1983, according to Bespoke Investment Group data. Do you really think that the average investor is sitting there by their computer, trading a market with wild fluctuations on a given Wednesday? Do you understand how much money it would take to move the market by 1,500 points? Of course, as you would expect, later in the week, the market sold off, basically to neutralize that large swing. This type of trading is not for investors.

Mia and her dad Muzzie (95) spending some
father-daughter time at the game!

Everyone is raising the question of whether the Federal Reserve is moving too quickly. I am a strong believer that the people in charge of the Federal Reserve are very well-educated and do see all the data. It has always been believed that if you have a rate increase, it will take as long as six to nine months before that rate increase takes effect in the economy. During 2022 alone, the Federal Reserve has already raised rates five times. The last three raises were more punishing increases of 75 basis points each. It is also forecasted now that they will increase interest rates by .75% in November and .5% in December. All of this is designed to get the Federal Funds Rate above 4% prior to the end of the year. The real mystery is that with all these increases within the last six months, have they been too much for the economy to absorb all at the same time?

I am one that would recommend that the Federal Reserve slow down and actually see whether these increases have actually done their work. I am in the camp of economist Dr. Jeremy Siegel who is now pronouncing that “the Federal Reserve has slammed the brakes way too far.” He is of the opinion that already the components leading to major inflation have been put in place. He is afraid, as am I, that the Federal Reserve is moving too quickly and not giving time to evaluate those increases. As he says, “most of the inflation is behind us, and the biggest threat is a recession, not inflation today.” He is arguing that the Federal Reserve might be doing more damage to the economy than good by raising rates and potentially forcing the economy into recession. No one knows exactly what the answer to that question is, but it certainly raises a legitimate concern.

Patiently waiting for the market to rally…

I often think to myself, is it the work of the government to destroy a strong economy? If we had this great economy back in 2019 prior to the Covid-19 downturn, all of us would feel good and happy and the Federal Reserve would be content on allowing the good times to continue. However, today, with an extraordinarily good economy and virtually full employment, there is a really bad attitude among American populists. I suspect more so than ever that this sentiment is leading to many of the strong negative feelings on Wall Street. Assuming that the Federal Reserve carries out its tasks and truly moves the economy from a 2.8% increase to a negative GDP, the net effect can only be that they will have to put 10 million people in America out of work. The only way we are going to get inflation under control is to reduce employment and reduce the profitability of businesses. Is it fair for the government to say to these families that they will no longer get a wage or health insurance or be able to meet their monthly bills? At the end of the day, which is worse, having some inflation or having 10 million people out of work in the U.S.?

My opinion is that we certainly want to reduce inflation going forward, but it is not as devastating to the economy as politicians seem to be making it. What would be devastating to me would be to force all these people out of work for no reason. Therefore, I join Dr. Siegel in saying that maybe it is time for the Federal Reserve to back off and slow down their increases until we have time to see how those increases will actually affect the economy.

Joe, Drew, Mia and Shelley enjoying the Braves’ one win of the series!

So, all the above was written under the full understanding that so far, the downturn in the stock market has been extraordinarily bad given the positive economic evidence. I cannot explain that downturn based on any reasonable market valuation. As previously mentioned, we have more people working in America than ever today. Do you think for a second that they will cut back on their iPhone usage? Do you think that going forward we will have less use of the internet and therefore affect Google’s earnings? If you own Microsoft, Microsoft is basically a monopoly around the world. Everything you touch has Microsoft’s name on it.

With more people working than ever and a 5% increase in salaries over the last year, do you really think fewer people will be using Microsoft? All of those assumptions are ridiculous. Could in fact the Ukrainian War get more out of hand and create harm to the American economy? Of course, that possibility exists. However, it looks like Ukraine is well along the way to shutting down the Russian military and negotiating a settlement to the war before the end of December 2022. The question is, are we going into a recession in 2023 due to the actions of the Federal Reserve?

I don’t believe that the Federal Reserve would ever purposely destroy the economy in an effort to reduce inflation. Remember, we are also in a political environment where the next Presidential election is only two years away. There is a high likelihood that Washington will turn over during the midterm elections, which I think would be a positive for the markets going forward. The markets seem to do best when the government does less.

Long-time client Sookie Mitchem looking trés chic!

So, my projection of the increase in stock prices depends on the actions of the Federal Reserve and the traders. If the Federal Reserve would announce some sort of cutback or slow down on interest rate increases, you would see remarkably increased stock prices. We now know from all economic evidence, there is no reasonable reason that the market has fallen 23.9% year-to-date. But I also know that all these numbers could turn on a dime if the Federal Reserve were to indicate a moderation. What we know from prior bear markets are that they can all literally change overnight without any warning. If you are not invested, you will not enjoy that increase.

We also know from prior experience that this is the buying opportunity of a lifetime for people not needing the money for 10 years or so. Stocks are trading at huge discounts and if you are a young investor not needing your money for 20 to 30 years, you should take this opportunity to up your investment for the future. For people near retirement, the biggest misconception is that they believe they will need all of their money on day one. As an example, if you retire at age 65 and you have a life expectancy of 25 years, why do you want 100% of your investment money to be conservative? If in 19 years you will only have two negative years, and if you keep a couple of years of cash reserves to pay distributions, the rest of the money should be invested. I am not sure when exactly the traders will change their minds.

Drew Malone and his brother, Brock, lending a hand at the Falcons game!

You may have recently noticed that the major brokerage houses were fined close to $1.8 billion for traders using their own personal phones during working hours. As you well know, the SEC closely scrutinizes phone calls and emails regarding investing. They have no authority over text messages. It came out that all the major brokerage houses were allowing their traders to text during working hours. I rather suspect that is just the first start of this coalition of traders trying to manipulate the market. They all move in one direction at a time. But that one direction can change immediately with communication. There will be a day shortly where those traders decide that it is time to buy and the move up will be significant and rapid. I do not know when that day is, but I do know that if you are not invested, you will not participate.

I fully recognize that this has been a difficult year and selling to cash would be the easiest thing that I could do. It would take 100% of the stress off of me and 100% of the stress off of you. The problem with that action is that as every financial book will tell you, you never try to time the market. If we go to cash, which is a simple action, to get reinvested is a difficult reaction. I would rather take the risk that we suffer some short-term losses in order to participate in long-term opportunities. I know it has been difficult, but you have to believe that the economics overrides the performance of the traders, and this year will eventually work out fine.

If you have an interest in coming down to visit with us, we look forward to seeing you. We are moving into a slower period for our Firm and will have the time to sit down and review your portfolio, taxes, or anything else you might be interested in.

As always, the foregoing includes my opinions, assumptions, and forecasts. It is perfectly possible that I am wrong.

Best Regards,
Joe Rollins

All investments carry a risk of loss, including the possible loss of principal.  There is no assurance that any investment will be profitable.

This commentary contains forward-looking statements, which are provided to allow clients and potential clients the opportunity to understand our beliefs and opinions in respect of the future.  These statements are not guarantees, and undue reliance should not be placed on them.  Forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual results in future periods to differ materially from our expectations.  There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.

Friday, September 9, 2022

The market continues to trend down While the economy trends up… “It’s a conundrum.” With apologies to Dr. Alan Greenspan

From the Desk of Joe Rollins

I know it is very frustrating for you as an investor to sit back and watch the market trend down week after week and get nothing but more bad news from the financial press. This is not my first “rodeo” as I have been through many of these downturns in the past. You really have to separate an investing period created by a bad economy from one created by overzealous traders and hedge funds. Today we have that exact situation where investors are losing money and oftentimes making bad investment decisions just because the market is acting in a manner that does not reflect its economic underpinnings. I will try to explain all of this throughout the post.

I also want to look into what is happening in the international markets with China taking a hard line on Covid-19 and the serious problems affecting Europe and their energy crisis. Finally, I want to express my opinion on the phrase you read everywhere in the financial press nowadays, which is “demand for goods and services is slowing throughout the economy.” Hopefully, I can explain that phrase better.
Long-time family client, Anand Nallathambi and his beautiful bride Sara Kate Somers – congratulations!
After a very excellent month of July which was up 9.2%, once again all the indexes were down during the month of August. It has been a whiplash one-up, one-down month for almost a year. However, we must accept the volatility in order to be positioned in a way to benefit when the upturn occurs.

For the month of August, the Standard and Poor’s 500 Index was down 4.1%. For the year, it is down 16.1%, but on a brighter note, over the ten years, this index has averaged a gain of 13.1% per year. During the month of August, the NASDAQ Composite Index was down 4.5% and continues to be down 24.1% for the year 2022. The 10-year average on this index is positive 15.7% per year. The Dow Jones Industrial Average was down 3.7% during the month of August and is down 12% for the year 2022. The 10-year average on this index is positive 11.8% annually.

If you thought you would be more conservative and invest in bonds, you certainly got hurt during August. For the month of August, the Bloomberg Aggregate Bond Index was down 2.8% and is now down 10.7% for the 2022 year. As a comparison to all the indexes above, which have had double-digit gains over the years, the bond index only has a positive return of 1.3% for the 10-year average.

Over 30-year client Jennie Woodlee with her adorable new housemate
I often get calls or emails from clients after a huge drop in the market. I thought I would give you an illustration of why this occurs and why you should ignore it for most investing purposes. On August 26, 2022, the Chairman of the Federal Reserve, Jerome Powell, was to give a speech at the Economic Conference in Montana. The market had just reported excellent labor news and there was a certain amount of euphoria when trading started. However, after Chairman Powell gave his 10-minute speech, where he reemphasized again that the Federal Reserve would have to work hard to keep inflation down, the market immediately turned negative and finished the day with the Dow down over 1,000 points.

Clients really do not seem to understand why these types of trading events occur since they are not in tune with the day-to-day volatility that comes with trading. I wonder how many investors were actually sitting in front of their computers at 10:00 a.m. on Friday, August 26th, to punch the sell button on their securities. As this clearly demonstrates, this selloff occurred because the traders took a negative position due to Chairman Powell’s comments about more interest rate increases.

Size matters – Cici showing Josie how it’s done. 2 pounds vs 80 pounds
Another way you can always spot this type of irrelevant trading is to look at the percentage downturn on each of the indexes. You will note that on a day like this, all the major market indexes were down almost the same percentage. What could have possibly been so wrong that major stocks such as Apple, Microsoft, Amazon, and Google were all down multiple percentages for the day? When you short the market indexes, you must short the good stocks along with the bad stocks. You are not picking a specific stock to short, but you are shorting the entire index in one trade. When you short an index that means you are placing a sell position on the index, whether you own the index or not, the brokerage house will allow you to bet that the index will go down rather than up.

Even though those stocks mentioned above have excellent records and continue to report record profits, they are trending down because they are also the largest component of each of the indexes. So, when you see an index selloff with such a sharp inter-day reversal, you can rest assured that it is not investors who are taking those losses, but traders and hedge funds.

Partner Eddie Wilcox enjoying time with wife Jennifer and daughters Harper + Lucy in Bellevue, Iowa
The same thing happened on September 2, 2022. The unemployment report came out, which was excellent and strong for the economy, and the market, as it should, rallied with the news. Around lunchtime, the Dow Jones was up close to 300 points and there seemed to be a strong buying effort on the part of investors. However, right after lunch, Russia announced that they would no longer provide natural gas to Germany, and they would shut down the pipeline until further notice. Immediately the markets turned around from up 300 points to down 300 points in a matter of minutes. Who exactly was sitting at their terminal watching the markets that day that could move the market more than 600 points in a relatively short amount of time? The traders of course.

Another reality that must be remembered during this time of year is that there are very few traders actually working during this vacation time of year. The volume on the markets have been low recently and it is much easier for a trader to manipulate the market when there is such low volume. Once again, the average investors look down at their portfolio that is losing percentages, meanwhile, this is all artificial trading to benefit traders and hedge funds to the detriment of the average investor.

All these swings in the market should not be construed to believe that the market is bad. The underlying strength of the market continues to be high employment and high corporate earnings. Neither of those appear to me to be winning over the hedge funds and traders. On Friday, September 2nd the Labor Department reported that 315,000 new employees were hired for the month of August. While certainly, this was an excellent number and a great many employees went back to work, it was less than the 526,000 jobs that were reported during the month of July. Maybe this is showing a sign of a decrease in employment, but I highly doubt it.

Aw, they grow up so fast… Ava Rollins at age 2 and age 11
The evidence is everywhere that businesses are seeking employees for all positions. There have been some reported high-profile situations where employers are laying off employees for various corporate reasons, but the Labor Department is reporting that these people who are losing their jobs are quickly finding new ones. Once again, during the month of August, we had an increase in employment in the U.S. and we continue to have twice as many job openings as we have unemployed people in America. If there is an unemployed person today with over 11 million job openings in the U.S., you may rest assured that they are not employed due to their own will. It should not be long before they will run out of money and seek employment.

People are also confused as to why the jobless rate rose to 3.7% in August from the 3.5% low in the previous month. These are statistical numbers that confuse people when they do not read all the details. Even though there was an increase in employment of 315,000, there was a marked increase in the number of people that are in the job market. Market participation is extraordinarily important. Since the pandemic, many people have elected not to work, and the participation rate has only been 60% of the workforce in a given month. This month we saw a rush of new employees back into the employment market, which is an extraordinarily good thing for future employers. With this increase in the number of people willing to work, the percentage of unemployment goes up since the number of people employed divided by the available number of employees creates this average. For all practical purposes, this employment report was a “goldilocks” report. It shows that the economy continues to expand with new employees, but not so hot that it needed immediate reaction by the Federal Reserve in the way of higher rates.

They sure do! Josh Rollins at age 3 (not “fore”) and age 27
Everyone seems to be unsure if inflation is continuing to go up or starting to fall off. A true indicator of the potential for rising inflation is the M2 Money Supply. The M2 Money Supply measures all of the financial assets of households such as savings accounts, time deposits, and balances in retail and money market funds. Basically, it represents the overall savings of American households. This money supply grew dramatically during the pandemic due to the excess government money given to each household. However, recently this index has stalled and has not been growing. With the money supply in excess of $21 trillion, which is still quite high but not growing, many believe this indicates that inflation is slowing. Many economists now believe that inflation has already peaked and is falling and by the first of the year, this so-called fear of inflation should be roughly in line with the Federal Reserve’s target rate of 2% in early 2023.

What is interesting to me is that all of these so-called inflation indicators have not properly forecasted inflation. At one time we were led to believe that gold was the ultimate representation and protection against inflation. However, for the year 2022, gold is down roughly 6.8% – so no help there from gold.

During the peak of the selloffs in 2022, I received many calls from clients that wanted to buy inflation-protected bonds. At that time, the bonds were paying a rate equal to the inflation rate and many thought that this rate was only going to go up. However, if you look at the inflation-protected index represented by Fidelity Investments, you will note that it is down 7.6% for the year and is actually down 6.1% for the 12 months ending August 31, 2022. These very well-known indicators of inflation have not supported the case of higher costs into the future. All of this I believe to be very encouraging information for stock investors. If in fact we have a shift in inflation over the next two or three months, maybe this long grueling selloff will finally turn around.

CPA Erik Kramschuster with wife Carly – cheers!
I rarely get into the details of economic forecasting, but sometimes it’s necessary to make sense of what is going on. One of the most quoted and most important indexes for analyzing the U.S. economy is GDP. Basically, GDP defines the gross sales in an economy. However, there is another important aspect to be considered. For every dollar an individual spends to buy some goods or service (a restaurant meal, a car, a doctor’s visit, or another individual dollar of income for someone to deliver the goods and services), GDP captures the spending size of these transactions. Gross Domestic Income is the other side of the transaction where some earn an income when one spends a dollar. It is the payment for goods and services.

In theory, Gross Domestic Income should equal Gross Domestic Product. That is just common sense. If someone is spending a dollar, someone should be earning a dollar. However, in recent months there has been a wide divergence between Gross Domestic Product and Gross Domestic Income. During the first half of the year, GDP contracted at a 1.1% annual rate that was adjusted for inflation. At the same time, GDI, made up of a measure of corporate profits, wages and benefits, self-employment income, and interest in rent, expanded at a 1.6% annual rate. Maybe, as I have emphasized repeatedly, the economy may not be contracting as much as you are led to believe in the financial press. The traders and hedge funds want you to believe that everything is bad for their benefit.

Alexis Chambers with boyfriend Evan Bentley - Let’s go Braves!
This month we were advised that the GDP had been changed from the second quarter reporting at 0.9% negative to 0.6% negative. So, it could be said that the average in these two quarters was only marginally negative. As I reported in the previous posting, a large amount of this was due to the undercounting of inventory, which clearly had a major effect on GDP in the first quarter of 2022. Now we get the news that the Federal Reserve of Atlanta has posted its projection for the third quarter of GDP at 1.4% (September 7, 2022). If the Atlanta Federal Reserve is correct, they are expecting a major turnaround in GDP in the third quarter from basically a breakeven level in the second quarter to a hearty increase of 1.4% in the third quarter. If the Federal Reserve is forecasting such a large increase and their historic record for predicting these GDP levels has been excellent, why is the financial press so negative? You know for their benefit.

One of the major reasons why people misunderstand the Inflation Index is that they do not understand how it is calculated. Let us assume that on January 1st a product cost $2, but on January 1st of the following year, that product has gone up to $4. Easy arithmetic would allow you to calculate that the inflation rate is 100%. But let us just say for instance that on the following first day of the year that product continues to be priced at $4. In this case the inflation rate is zero given that year over year it has not increased. You as a consumer still feel this price is elevated, but from an economic standpoint it is the same.

DeNay Gonzales not only believes, she knows!
That is the situation that we are now coming into as we roll into the Fall. Much of the increase in inflation was realized at the end of 2021 where the M2 money supply grew dramatically due to government handouts. As we get into the Fall in 2022, we will be comparing inflation reports against each other that do not reflect such a large increase. Therefore, my prediction is that at the beginning of 2023 you should see dramatic declines in inflation, but much of that is due to comparisons with a period of time where inflation was out of control.

We all realize that a large portion of inflation is due to the higher gas prices. But even that is starting to wane. In the West, gas prices remain elevated, but in the South, gas prices have started to decline. In fact, gas prices have declined over the last three months, although only marginally. However, as prices declined, it is noticed by all consumers using energy. All facets of the U.S. economy are driven by gasoline prices. You have farmers using gasoline, and trucks delivering products to the grocery stores and therefore this price is built into the cost of food. As prices of gasoline decline do not expect the price of food to decline, but rather stay constant. The one thing that affects consumers is when they buy an item one day and come back a month later and the price is higher. If we had stable food prices then you would not have the high volatility associated with going up on a monthly basis. We are getting closer to that day.

Big smiles from Dr. Willie Cochran and his lovely wife Rebecca
Clients for over 15 years
I promised I would make reference to the energy shortage going on in Europe. It is a very interesting time for them since the German economy decided that they would stop all forms of energy production in their country and rely solely on the environmentally friendly natural gas. They made a plan to shut down and close all of their coal-generated electric plants. In addition, they phased out all of their nuclear energy producing plants in the county. Their solution to this issue was very simple. They would buy virtually all of their energy needs from Russia.

They entered an agreement with Russia to build an extraordinarily expensive gas pipeline so natural gas could be easily transferred from Russia, where it is in oversupply to Germany which has no supply. It is now believed that at the first of this year, Germany was buying over 80% of their fuel needs directly from Russia. What is interesting is that other countries in the European Union went in the other direction. Virtually all the energy in France is powered by nuclear plants. It was somewhat confusing to investors to watch Germany deactivate all their nuclear plants while France continued to build theirs throughout the countryside. The European Union is not a very tight union.

Power couple Dr. Seenu Gorjala and Dr. Pramoda Gorjala
Clients for 25 years
Now we have come to a time where Russia is using the natural gas as a political weapon against Germany. As of Friday, they announced that the pipeline would be shut for an indefinite time for maintenance. Germany is facing a huge burden in order to provide energy for their upcoming winter. How will a country like Germany get enough natural gas and other forms of energy to keep the country warm during the winter? Most importantly, many industries in Germany use natural gas to provide for their manufacturing facilities. Obviously, these companies will be phased back or deprived of any natural gas, hurting the GDP of Germany.

I vividly remember when then President Donald Trump told Chancellor Angela Merkel that she was endangering their country for relying on Russia for her country’s natural gas, and it seems that prediction has clearly come true. While other countries are trying to fill this void, it would be virtually impossible to provide the amount of natural gas that was being purchased from Russia. In the United States, natural gas is about $7.8 per thousand cubic feet, while natural gas in Germany and Europe is roughly 10 times that amount. The U.S. cannot help this time.

Partner Robby Schultz at Sea Island with a
“baby shark doo doo doo doo doo doo…”
The U.S. is quickly trying to increase its exportation of liquified natural gas. However, the U.S. just does not have enough facilities or capacity to export the amount needed in Germany. Almost assuredly the energy crisis in Europe will reduce the GDP of the countries involved and will almost assuredly create economic hardship for the people that live there.

China is undergoing some major changes that have certainly affected their economy. First, their shut down for COVID seems to be grossly overdone. It was recently announced that they would shut down a city in China with over 21 million residents. You would think based on the news release that this would constitute a severe outbreak of the Covid-19 virus. Come to find out that this shutdown was a result of only 700 known Covid-19 cases. What is interesting about China is that they never adopted the vaccines from the West and due to the massive shutdowns, there are not as many people in China, percentagewise, that have had Covid-19 as in the U.S. The odd thinking on this is that if you shut down a city of 21 million people, whatever virus is there is not likely to spread but the loss of productivity and GDP because of the shutdown would be economically devastating.

Glen and Anita Butler - Clients of 35 years – lookin’ good!
While the U.S. now continues to struggle through and put workers back to work due to the reduction in COVID cases, the Chinese have a zero COVID policy and are willing to shut down productivity and manufacturing in many of their cities. This leads to the conclusion that China is taking a step back from growth in its GDP. If they are willing to suffer a major shutdown in productivity due to such few cases, you must think that their GDP will be greatly reduced for several years to come.

Every day I am asked whether it is good time to invest. As a long-term investor, it really does not bother me what is happening on a day-to-day or week-to-week basis. The only reason I would be concerned is if the economy was falling off a cliff towards a major recession. The traders and hedge funds have a theory that the U.S. could not avoid recession at this point as the Federal Reserve increases interest rates. I think they might just be wrong. Take as an example, we have now more workers than ever in the U.S. earning salaries. Each of those salaries allows for them to go to the grocery store, buy a new car, pay a mortgage on a house, etc. But it is also true that we need to slow the economy.

Lauren Lukowicz, new to our Client Support Team, with Mac – say cheese!
During 2021, we allowed the economy to get out of hand and grow too fast without any direction. Now the economy has slowed in the first two quarters of 2022, but if the Atlanta Federal Reserve is right, it may begin to grow in the third quarter. Certainly, after reflecting on the corporate earnings for the second quarter, Corporate America is really doing very nicely. However, stocks have still been crushed. Right now, 20% of the companies within the S&P 500 have a P/E ratio of less than 10. Given that the historic percentage of price earnings is roughly 17, the fact that so many of them are selling for less than 10 reflects how cheap the market really is. What is even further interesting is that 5% of the S&P 500 have a price earnings ratio of less than 10 and a dividend rate in excess of treasuries. There are many stocks now that are selling at historic low levels without explanation.

For years we have talked about the shortage of computer chips to manufacture cars, computers, televisions, and everything else. Most chip manufacturers today have already sold out of next year’s supply of chips. In fact, I am reading that some major chip manufacturers are selling against 2024 inventories rather than even 2023 inventories. If that were the case, that a manufacturer can sell everything they can possibly make, why are chip stocks down 30%–40% so far in 2022?

People ask me all the time where I get my confidence that the market will come roaring back. First and most importantly, it has never not come back from a downturn. There is a 100% success rate in the market recovering all its losses.

Client Sheryl Matton celebrating her birthday with
daughter Caroline in Florida
What gives me the most confidence is that the best fund managers anywhere in the world are actually performing at a level below what the S&P 500 Index is performing. These are the very best stock pickers in the world and these guys make millions and millions of dollars a year managing stock funds. However, if you look at their portfolios, they are actually losing at a level greater than what the S&P 500 Index is losing. If you analyze their portfolios, you will notice that they are holding the same stocks that everyone on the financial news deems to be toxic. If we are aligned with the best stock pickers in the world, how could we not be in line with a rebound sooner rather than later?

Everywhere around you see economic prosperity. Just go to the airport and wait in line and see if you can get on a flight. I fly often and every seat in every airline is full. I even had to reflect on the future of U.S. citizens as I noted a line all the way down the terminal waiting to get into a Popeye’s Chicken. Americans have money and they want to spend it. With each new employment report, we put more people to work which will generate GDP for the economy. While it is true that higher interest rates will slow various segments of the economy, those segments needed to slow down anyway. Certainly, housing needs to slow down so that we can bring the supply chain back in line with the demand.

I am so amused when I talk to prospective homebuyers, and they quote a 5% rate for a current mortgage. A 5% rate when I was buying my first house would be considered a bargain. The 2% rate that we had for a while was unheard of ever in the history of American finance. What I predict will still happen is that people wanting homes will buy them anyway.

Clients Patty & Jim Radney - A day without laughter is a day wasted!
It is clear the economy has slowed down from 2021, but that is a good thing. It looks to me that the Federal Reserve is taking all the right actions. They are slowing the economy, but they are not dumping it into recession. The unfortunate part of killing inflation is that a large portion of inflation is wages. The only way to dramatically reduce wages is unemployment. I do not think that there is a chance in this world that this government or the Federal Reserve would enjoy seeing fewer people working just to reduce inflation. Therefore, it is my projection that we will see tamer inflation going forward and we will see higher interest rates by the Federal Reserve, but not raises so much as to damage employment. As I have said often in these postings, I still believe we will make money in 2022 and all the volatility and wild moves by the traders and hedge fund managers will be only a bad memory come early 2023.

Almost every day you hear on the financial news that the demand for goods and services is slowing down, but that is actually a good thing because it will slow down the economy. The economy needs to slow down before inflation can be under control. I think this may be one of those phrases that The President uses all the time that lack support. I believe in his mind that if he says it often enough and stern enough people will start to believe that it is the truth. We all know we cannot build enough cars quickly enough and we do not have the microchips to assemble the cars with chip manufacturing backed up for at least two years. The demand for employees creates the problem that the companies cannot produce enough since they do not have enough employees to deliver the services. The problem is not demand; the problem is supply. If we had the capacity to supply the economy with all of the goods and services that it wants, there would not be an excess demand issue. There, of course, would not have been an excess demand issue if consumers did not have excess money. If we were in recession the consumers would not have excess money.

If you have an interest in coming down to visit with us, we look forward to seeing you. We are moving into a slower period for our Firm and will have the time to sit down and review your portfolio, taxes or anything else you might be interested in.

As always, the foregoing includes my opinions, assumptions, and forecasts. It is perfectly possible that I am wrong.

Best Regards,
Joe Rollins

All investments carry a risk of loss, including the possible loss of principal.  There is no assurance that any investment will be profitable.

This commentary contains forward-looking statements, which are provided to allow clients and potential clients the opportunity to understand our beliefs and opinions in respect of the future.  These statements are not guarantees, and undue reliance should not be placed on them.  Forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual results in future periods to differ materially from our expectations.  There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.