August: A Slow Month

August is always a slow month. It is the middle of the summer vacation cycle when many kids summer activities end and people hit the road. It is the lull before the storm of cooler fall weather, school starting, business activity picking up, and Congress coming back into session. All good except the latter about which Mark Twain famously quipped: "No man's life, liberty, or property is safe while the legislature is in session."

Having lived in the Washington D.C. environs several times in my life, I can attest the city is indeed a swamp: hot, muggy, thriving on gossip and constant one-upmanship, and with bugs aplenty. The rest of the world does not seem to be doing much better. Fires are burning in California and throughout the West. There are rumbles underneath the paint pots of the inactive volcano known as Yellowstone Park. Chairman Kim (North Korea) may or may not be starting on a new missile. President Trump (United States) may or may not have said something significant to President Putin (Russia). President Xi (China) is concerned he may have been the subject of what may or may not have been said by President Trump to President Putin.

The market is not much better. The S&P 500 seems to be drifting back to its high of earlier this year, but much of the gains in the S&P 500 this year are due to just three stocks: Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Microsoft (NASDAQ:MSFT), which together are responsible for about 71 percent of S&P 500 returns year to date according to one market commentator on the Seeking Alpha website. Is this the making of a tech bubble or a market bubble? Maybe it is just the irrational exuberance of a bunch infatuated investors naively chasing the “hottest” politically correct stocks all the while thinking “this time is different”.

The 10 Year Treasury plays the fulcrum as the yield curve flattens. The Fed is pushing up short-term rates. At the same time, no one can figure out why longer-term rates are not moving higher. Russia apparently dumped all its one trillion dollars of US Treasury securities and the market hardly noticed. In the background is the recent announcement that for all this market foolishness, GDP (gross domestic product) grew at 4.1% for the quarter – far, far above the 2% and below “new normal” rationalized by the befuddled economic policymakers of the previous administration.

At the moment, the tariffs seem to be a skirmish in a largely political war. Zero tariffs and zero trade restrictions are not bad goals for international trade. I guess I am surprised we were not close to that after all the international agreements the United States has signed over the years. Could the media be that ignorant?

I have been spending the summer reading my usual mix of thrillers and other fiction plus some stand out non-fiction: Shoe Dog by Phil Knight on the founding of Nike (fun and a reminder that anything worth doing takes effort and long-term commitment) and Jorden Peterson’s The 12 Rules of Life (heavy but very thought-provoking).

So I look forward to the investors coming back from vacation and starting to get active in the market. I look forward to classes starting in September, which gives definition and deadlines to my daily and weekly schedule. I look forward to the November midterm election telling us something - not sure what. I went downstairs to get Riley’s thoughts. Riley is my Golden Retriever, who used to share my office. My office is on the second floor. Riley can go upstairs, but her diminished eyesight is causing her real problems going down the stairs.

I found Riley lying on the floor in front of a fan in the family room. When I asked Riley what she thought about August, she got up, turned around and lay back down in front of the same fan. Good thoughts, Riley. Just stay relaxed cool and let August morph into September when the tempo of living will pick up again.

Have a great rest of the summer.

#global #markets #economy

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