Thanks to all our clients for exercising patience as we navigate the stormy waters of the stock and bond markets. It has been more difficult because of conflicting information coming from the media where we often see data selectively manipulated to influence the public. At our last Executive meeting, one of our team members made a comment about the problem he observed when in college. He took a class where the textbook was titled, “How To Lie With Statistics” which discussed how statistical data can be manipulated. One example would be reporting the infection rate of new Corona virus cases. If one focuses just on the number of new cases being reported, that might sound alarming – unless we add that 2 million people a week are being tested and are being found to have the virus but are not sick. There is a clear effort underway to portray the virus as more lethal than it apparently is using terms like “unnecessary deaths”, warranting more government control and tracking. This does not diminish the fact that there have been people whose lives have been impacted by COVID 19 or have lost loved ones because of it. Evidently, Americans do not want to be treated like “dumb sheep” and want to address the greater issue of opening the economy and getting back to work. As we watch the economy reopen slowly, the real data from the deliberate shutting down of the economy is still terrible – unemployment approaching 20%, GDP for the quarter down 10%, etc., etc. But the markets have continued to rally on the strength of the Federal Reserve and Congress’s policy, creating trillions of new money to fill the economic hole. For now, we are riding the wave of that new money in the system, much of it related to cash payments ($2400+) for every low and middle-class family, plus the unemployment benefits and bonuses ($600/week) to many of those same families, resulting in a remarkable new statistic – a jump in the savings rate by 30%! What many “smart analysts” that speak of dooms-day scenarios do not recognize is that middle-class America is becoming more financially stable thanks to the Fed. The new money supply has, in turn, triggered a new round of dooms-day talk: the threat of hyperinflation. Surrounded by a world in the grips of massive deflation, it will be hard if not impossible for us to achieve even the Fed’s inflation target of 2%. As we look forward to investment strategy in the coming weeks, we feel comfortable with our current policy of carefully adding to client portfolios by looking for bargains among the rubble of beat-up blue-chip stocks that we expect to rebound when economic data improves. Many of you have called to discuss your personal situation and our investment strategy relative to personal goals. That is the way it should be. We want our relationship to be interactive, so we are always “on the same page”. We invite you, once again, to check out our new website which we will use regularly to communicate important information, including performance reporting and strategy updates. Remember, we are always available to answer your questions about using the website and can even screenshare with you to make it easy. We thank you all for your loyalty and for giving us the opportunity to serve you.
Conflicting Information from the Media & the Power of the Federal Reserve
