Boom Boom’s Life Lessons #7.

By request from not one, but two readers, we share the previously published article again for your perusal.  It must be sales meeting time for some.  We hope you’ll enjoy it.

 

One of the many gifts that Boom Boom gave us was the torrent of quips about how one leads one’s life.   He could say so much by saying so little.   A statement at just the right moment resonated in my young, eager eardrums.  How I interpreted or applied it was up to me.  No more words were spoken because no more words were needed.

Boom Boom bought a new car when, and only when, the need arose.  He bought American.  And, he bought Oldsmobiles.  Mom would get the new car and hand Boom Boom the keys to the old one.   He included me in the conversations with the car salesmen and management from a very young age.

In the mid-sixties an on and off again negotiation with the local dealership involved us walking out twice and resuming the deal-making the next day and then the day after.  Finally, exhaustively, the terms were agreed to on a new Jetstar 88.  “We’ll clean it up for you and you can pick it up tomorrow Mr. Johnston,” said the exasperated car salesman.

After his work and our dinner the next evening we drove in the old trade-in Olds to pick up the new Olds.  After the final paperwork was signed we joyfully opened the doors to get into the new shiny ride.  One problem.  There were no floor mats.  “Where are the floor mats,” Boom Boom inquired.  “Mr. Johnston, there were none in the car as it was offered to you.  Floor mats will be an extra $36, said the soon-to-be more exasperated car salesman.”  “Keep the car,”  Boom Boom evenly retorted.   “Let’s go,” he said to mom and I.   Silence abounded.  And, off we drove in the old Jetstar 88 back home.  The silence was still plentiful well into the evening.

The next evening our phone rang.  Boom Boom answered.  Boom Boom listened.  Then, Boom Boom spoke.   We could only hear his side of the conversation.   “So, now you want to include the floor mats?”  Pause.  “Ok, well, tell your manager that I now need another $150 off of the car for my inconvenience in addition to the floor mats.”  Long pause.  “Tell him thank you.”

“Let’s get the car,” he said.  Mom decided to drop him and me off and head back home.  She may have had a wee bit of buyer’s fatigue.  As dad and I waited for them to bring the car around to the front he looked at me(all of six or seven years old) and said, “Never be afraid to walk away from a negotiation.  Never.”

The new car smell filled my nostrils on the ride home.  The lesson learned fills my mind to this day.

 

Ho, Ho, No

Yes DC, there is a Santa Claus.

“With holidays coming up, you might be wondering if the gifts you plan to buy will arrive on time,” President Biden said from the White House yesterday. “Today we have some good news: We’re going to help speed up the delivery of goods all across America.”

And ole Joe, one of Kris Kringle’s older elves is here to help.  The White House responded to the roughly 66 container ship backlog by finalizing an agreement for the Port of Los Angeles/Long Beach to become a 24-hour, seven-days-a-week operation just like the hours that Santa’s helpers keep this time of the year.

The hope is that nighttime operations will help to break the logjam and get that temporary inflation, which isn’t so temporary, under control.

Want to know a Santa’s secret?  The port has been operating 24/7 for the last 21 days.  Want to know another?   Consumer prices climbed 5.4% from a year ago, the Bureau of Labor Statistics reported Wednesday, way above the Federal Reserve’s 2% target.

Higher energy, food, and shelter costs were prime drivers of price increases in September.   There isn’t too much energy coming into LA’s ports.  And, it accounts for zero shelter cost increases.

Ah, but it’s been said before, and savvy politicians will say it again.  And, again.   Never, ever let a good crisis go to waste.  Alas, the president is trying to use the predicament as a selling point for his policy plans that are undergoing congressional scrutiny.

“We need to take a longer view and invest in building greater resiliency to withstand the kinds of shocks we’ve seen over and over, year in and year out, the risk of a pandemic, extreme weather, climate change, cyberattacks, weather disruptions,” he said.  That’s a mouthful of leftist cookies and milk if we’ve ever heard it.

What’s so weird about this is that Santa and his elves work in the harshest climate of all, the North Pole.  And, we’ve seen over and over, year in and year out that jolly ole Nick guy and his reindeer get to millions of homes, up and down chimneys, and deliver on promises all in one 24 hour window.  That’s a supply chain logistics model to emulate if ever there was one.  And, yet, it doesn’t work this year.  Hmm.

And, lost in all of this is that the ports are but one small piece of the puzzle.  Up and down the supply chain- wages, raw material shortages, manufacturing shortfalls, lack of truck drivers, lack of retail workers, etc all have a role.  Oh, and the government is stuffing money in the stockings hung on the mantle without care.

Rudolph’s red inflation nose is flashing so bright, that the Fed might need to deliver an interest rate lump of coal increase sooner than later.   That, of course, assumes coal is still an allowable fuel source should the Democrats pass the Reconciliation Bill, but we digress.

University of Michigan economist Betsey Stevenson noted on Twitter the “economy is in a very fragile and unprecedented place.”  “No one really knows what’s going to happen,” wrote Stevenson, a former member of the White House Council of Economic Advisers under President Barack Obama.

Maybe Santa could trade in his old, old sleigh. We hear used vehicles are commanding top trade-in dollars these days.

The problem with that is he’d need to buy a pricey new one.

And, those come from China, through the LA port, and are back-ordered until mid-2022 we heard.

10 Bagger

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With the S&P 500 getting very close to the 4000 level, I saw a note today that remembered that the first time the S&P closed above 400 was in December of 1991. That’s a 10 bagger as we say in the biz, over a 30 year period. It’s another great illustration as to how wealth is created in the stock market. If an investor simply would have bought “the market” 30 years ago, she would be up 10 fold today. That is how wealth is created. Not jumping in and out and buying Gamestop after it’s gone up 1000%. Ok, I sound like the “get off my lawn” guy now, don’t I?

 

Let’s briefly review the last 30 years. We’ve had 2 evil Democrat Presidents (Clinton and Obama if you’re a Republican) and 2 evil Republican Presidents (Bush and Trump if you’re a Democrat). Of course, now we have a 3rd evil Democrat President in Mr. Biden. In the late 90’s we saw the collapse of Long Term Capital Management and the Asian currency crisis in subsequent years. Then in early 2000 we saw the bursting of the dot-com bubble and Nasdaq drop 80%, followed by the horrific 9/11 attacks. Of course we saw fraud rear its ugly head with the collapse of Enron, Stanford Financial and of course good ole Bernie Madoff.  Just about when we had recovered from that we saw the housing crisis and the near collapse of the developed world financial system. In recent years we’ve seen budget battles, Brexits, Flash Crashes and heightened trading volatility fueled by easy money, technology and leverage. But, when all is said and done, the S&P 500 is up 10 fold. $50,000 invested in the S&P 500 30 years ago would now be worth approximately $500,000. Your honor, I rest my case.

 

As for today’s action, by the close the Dow Jones Industrial Average was down 85 points to finish the day at 32,981. The S&P 500 was up 14 points to close at 3,972. The Nasdaq Composite Index was up 201 points to close at 13,246. Gold was up $23 to trade at $1,709 per ounce, while oil was down $1.35 to trade at $59.20 per barrel WTI.

 

The bulls were able to deliver another good quarter for stocks. Not all stocks were created equal though this quarter. Value soared while growth lingered. Nevertheless we enter the second quarter of 2021 with the bulls holding the high ground.

 

Have a nice evening everyone.

Jim

Stocks Stumble

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If you want to understand why the financial markets are difficult to oversee and why Congress has such a difficult time designing legislation to do so, today’s Committee on Financial Services zoom testimony with the GameStop situation players was essential to that education. Simply put, very few of the folks asking questions have a clue as to the workings, much less the purposes of financial markets. But I digress.

 

Stocks slumped mightily in early trading but did recover some of those losses as the trading session wore on. By the close, the Dow Jones Industrial Average was down 119 points to finish the day at 31,493. The S&P 500 was down 17 points to close at 3,913. The Nasdaq Composite Index was down 100 points to close at 13,865. Gold was up $1 to trade at $1,773 per ounce, while oil was down $1.15 to trade at $59.99 per barrel WTI.

 

I know it’s been a difficult week for us here in Houston and in Texas in general. Hopefully you have your power back by now and your water is running. We have all been in this together and after tonight it looks like we will start to thaw out. Stay strong, the week is almost over.

 

Have a nice evening everyone.

Jim

When the Game Stops

The get rich quick crowd gathered on Reddit and was having quite the party.  There was no stopping the game that they were playing with stock in GameStop.

But, like at the stroke of midnight, if you don’t pay the band the music stops.  And, yesterday it got quiet.  Quiet like the inside of GameStop stores during this pandemic.

Just last Thursday shares in GameStop were bought for as high as they were sold-it always takes two to dance.  And the price to get on the floor was $483.  The stock was a much cheaper date in mid-summer at $4.  That’s no typo.  And, yesterday the stock retreated to $84 just four trading days after the $483.  That’s again no typo.

If you’re a retail investor and you wanted to show old school Wall St. that there was a new kid in town, you did.  Briefly.  The short-selling hedge funds got squeezed a bit.

If you wanted to get rich quick, hopefully you bought low and sold high.  Because as it was quickly learned again, value never goes out of style. Stock is always only worth what someone will pay for it.

However, if you bought high and sold low maybe it’s time to get off of Reddit.  If you did so with margin money you might need to see a bankruptcy attorney.  If you did so with your stay at home stimulus money, as many on Reddit bragged, maybe you should go get a job.

But, if you live in Long Beach, CA, and want to get into the grocery business you’re looking in the wrong place.  Yesterday, Kroger announced that it was closing its two stores at the end of this month in response to the mayor’s mandated “hero” pay of minimally $15 an hour for those “workers on the front lines.”

And, we are reminded again, value never goes out of style.  People are always only worth what someone will pay for them.  And jobs are valued for what people will accept them for unless you are the government and want to cause some market disruption.

Government has its eye on this stock market disruption.  They’ll start hearings next week on what we can learn from it.   That should be good for a few laughs.  Do you notice how the government always reacts, it never acts?

Political opposites Rep Alexandria Ocasio Cortez and Senator Ted Cruz were in full agreement that the bad guys in this were the old Wall Streeters who were trying to blame the up and comers for making the market rattle.

In other words, “let the free market decide what a stock is worth.”  Hmm.  That seems like the polar opposite of what the government is trying to do with wages.

Reddit user benaffleks (really) says “This is a big moment.  Hedge fund managers live in the past.  They believe that average retail investors don’t know anything about the market(which may be true) and we’re just gambling our money away.  This was the past.”

One never really knows when the game stops.

But, when it does fair market value is always the winner.

Always.

 

 

Stressful Moment For Stocks

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Despite some good earnings reports, such as the one delivered by Microsoft after the close yesterday, stocks just could not overcome the wave of disturbing news concerning the coronavirus continuing to blow up in the U.S. and Europe. Add to that, that this week saw the possibility of a stimulus deal before the election go out the window, and of course concerns over the election and possible political instability and stocks are really facing some headwinds.

 

For the day the Dow Jones Industrial Average was down 943 points to close at 26,519. The S&P 500 was down 119 points to finish the day at 3,271. The Nasdaq Composite Index was down 426 points to close at 11,004. Gold was down $33 to trade at $1,878 per ounce, while oil was down $2.28 to trade at $37.29 per barrel WTI.

 

Tomorrow, before the open we’ll get a look at 3rd quarter GDP and it’s expected to be a big number (30% plus). Then after the close we get earnings from the likes of Apple and Amazon. We are in a volatile moment for the markets, but it comes as no surprise. It’s part of process and we are prepared. Stay tuned.

 

Have a nice evening everyone.

Jim

Nasdaq Steals The Show

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Despite more encouraging news on the vaccine front, stocks were struggling through the early part of the trading session. But, as the day wore on, the bulls got a little more interested and by the close stocks had posted decent gains. The big move was in the big growth names which had been left behind last week. Back on top, were the usual suspects, Microsoft, Apple, Google, Tesla and Amazon, as they pushed the Nasdaq up nearly 3% at one point.

By the close, the Dow Jones Industrial Average was up 8 points to finish the day at 26,680. The S&P 500 was up 27 points to close at 3,251. Gold was up $8 to trade at $1,818 per ounce, while oil was up $.16 to trade at $40.75 per barrel WTI.

Earnings season swings into full gear this week and next, so we’ll be keeping an eye on what companies have to say about the coming months. This week we’ll hear from IBM, Coca-Cola, AT&T, Verizon, Intel, Union Pacific, Amazon, Microsoft, Tesla, Lockheed Martin, and the beleaguered Schlumberger- just to mention a few.  Stay tuned for a busy week. We’ll keep you up to date of all proceedings.

Have a nice evening everyone.

Jim

Stocks Collapse

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Well, it appears that the old worrier indeed had something to worry about. Stocks collapsed today, perhaps on fears that the Covid-19 pandemic still is anything but in the past, or as a continuation of yesterday’s concerns over Fed Chair Powell’s less than encouraging outlook of the economy. Now, remember, we have seen a two month advance in stocks that was reaching historic proportions, so to give some back is certainly not something that we normally would be concerned about. What does get our attention these days is the speed at which things happen. You know the old adage that the stock market takes the escalator up and then takes the elevator down. Many of the moves we’ve seen in 2020 have been breathtaking. Today’s was no exception.

By the close, the Dow Jones Industrial Average was down 1,861 points to finish the day at 25,128. The S&P 500 was down 188 points to close at 3,002. Gold was up $13 to trade at $1,734 per ounce, while oil was down $3.92 to trade at $35.68 per barrel WTI.

We had been chalking up one great week after another for stocks, but this week has certainly been a different story. Whether a little bit of economic reality has been introduced into the discussion or just a cooling off period, the pullback is not really unexpected. We had risen nearly 45% off the lows of March 23rd. Even the bulls would agree that would call for a little digestion before strapping on the feed bag again. Let’s catch our breath and see how the week finishes up tomorrow.

Have a nice evening everyone.

Jim

Stocks Take A Breather

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Stocks finally took a little breather today, and that is probably a good thing. The market averages have gotten very extended on a technical basis, so before we set ourselves up for another more drastic downturn, it would be nice if we just cooled down a bit. The Fed is meeting today and tomorrow, but it is not expected that anything particularly new will come out of it, but we’ll let you know what the statement and Mr. Powell have to say.

As for today, by the close the Dow Jones Industrial Average was down 300 points to finish the day at 27,272. The S&P 500 was down 25 points to close at 3,207. Gold was up $15 to trade at $1,720 per ounce, while oil was up $.49 to trade at $38.68 per barrel WTI.

Though Covid-19 cases seem to be on the rise in states like Texas, California, Arizona and Florida, the markets for the time being aren’t taking any notice. It was expected that case counts would rise as states opened up, so for the time being we’ll count it as an expected occurrence, but we will keep an eye on hospitalizations which have risen here in Texas. As mentioned, today’s pause is one that was welcome. It would be good to see the economic data catch up just a little with stock prices. Oh, I’m just on old worrier, aren’t I?

Have a nice evening everyone.

 

 

Jim

All Quiet As Investors Monitor Reopenings

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It was a pretty quiet trading day with mixed results. Nasdaq keeps pushing towards previous highs led by the likes of Microsoft, Apple, Amazon, Google, Netflix and Facebook, but many other areas of the market are struggling. The Dow traded down a couple of hundred points at the open, but recovered by midday, only to drift lower by the close. It appears that market participants are just waiting to see how the reopening of the country goes both medically and economically.
For the day, the Dow Jones Industrial Average was down 109 points to finish the day at 24,221. The S&P 500 was up a fraction to close at 2,930. Gold was down $14 to trade at $1,699 per ounce, while oil was down $.09 to trade at $24.65 per barrel WTI.
As mentioned, we are all curious as to how the big “reopening” will go. Will there be a spike in COVID-19 cases? Will the summer heat help snuff out the virus? How close are therapeutic drugs and vaccines? Are folks comfortable enough to go to restaurants, go shopping, take a flight, go to Vegas, and yes, even take a cruise? The economic and medical scenarios are endless. It truly is a moment when we just have to wait and see.
Have a nice evening everyone.

Jim