“I have been investing for 80 years — more than onethird of our country’s lifetime. Despite our citizens’ penchant — almost enthusiasm — for self-criticism and self-doubt, I have yet to see a time when it made sense to make a long-term bet against America. And I doubt very much that any reader of this letter will have a different experience in the future.”
The continued strength of the US economy has many experts confused and has caught a lot of investors flat-footed as the stock market has moved higher thus far in 2023.
This past July, an event rarer than a solar eclipse took place in our industry. Michael Wilson, the US chief equity strategist for Morgan Stanley, wrote a letter to clients admitting that the firm’s dire forecast for the economy and markets in 2023 was, in fact, wrong. Brian Wesbury of First Trust, an economist we greatly admire, issued a similar bleak forecast at the beginning of this year. Mr. Wesbury continues to defend his position, but the numbers speak for themselves. When I tell you the egos in our industry are massive, I’m not exaggerating. This is one reason Mark and I remain humble and are never too enamored with any one firm or individuals’ forecasts.
In fairness to Mr. Wilson and Westbury, they were far from alone in their negative outlooks, and the year is far from over. The bigger question for me is: how did so many experts get at least the first half of 2023 so wrong? Maybe we have all been so beaten up over the past couple of years when everything economically went wrong (inflation, interest rates, wars, and pandemics) that we forgot that things can go right.
One area of the economy that experts seem to consistently underestimate is the strength of the US consumer. Mark and I spent a considerable amount of time sharing data and information about the condition of US consumers at our Mid-Year Economic and Market Outlook last month. As of June 30th of this year total consumer assets reached an all time high of $168.5 trillion, while consumer liabilities (debt) rose only slightly to $19.6 trillion. (Source: JP Morgan). The distribution of this wealth is a topic for a future newsletter.
The strength of our country’s aggregate consumer balance sheet stands in stark contrast to the Federal government. It’s important to remember that consumer spending makes up roughly 70% of our Gross Domestic Product (GDP). We are keenly aware of how fast this can change, and Americans are now saving less and spending excess cash reserves built up during the pandemic. However, given the strong job market and low unemployment, it shouldn’t be a surprise to anyone that the US economy has continued to grow.
In the depths of the stock market’s steep decline during the early stages of the pandemic shutdowns, I wrote to you about the possibility of that period eventually leading to a
wave of productivity and growth. This was not a forecast, but it wasn’t just a guess. History suggests that the greatest drivers for inventions and innovations were in times of war, famine, and other kinds of severe societal disruptions. Why should this be any different?
During the pandemic, the media succeeded at painting a picture of the entire global population in basements and bedrooms binging Netflix while waiting for the government to run to their rescue. This is yet another false narrative spun by a media industry obsessed with advertising dollars over truth. In the real world, a lot of smart people rolled up their sleeves and got to work solving problems and figuring out ways to improve products, supply chains, and their businesses. Necessity is still the mother of invention, and also innovation.
This phenomenon took place over multiple industries, countries, and companies — both small and large. I can’t support this with hard facts (yet), but it’s possible that the resiliency of the US economy and strength of the stock market is in some way reflecting a wave of productivity and innovation brought on by the 2020 pandemic. For example, does it seem a coincidence that Artificial Intelligence (AI) was
March 18, 2019
a blackboard concept for many years, but is now suddenly being applied in virtually every industry and sector?
Martin & Marsha Lynch
43347 Nebel Trl Clinton Twp MI 48038-2465
Everyone talks a lot about the government’s response to the pandemic, but I don’t hear much about the response of businesses and, particularly, entrepreneurs. Please permit me to be optimistic for a moment — what if we are in the early stages of an economic expansion driven by new inventions and innovations in multiple industries? The mainstream media and our politicians are loathe to say anything positive about our economy, but I will end my section of the newsletter with a question: Who has been right more often about the US economy and stock market over the past 80 years — politicians and media pundits or Warren Buffett? (Hint: Mr. Buffett’s net worth is approximately $120 billion).
Dear Martin & Marsha: I love sending WorthWhile magazine mix of cultural, financial and latest edition of Raymond James’
The Spring edition takes us guide for surviving in just about planning.
Many of my friends tell me they everyone, and I believe there thoughts when you can. I always
Sincerely,
Mark and I are in Warren Buffett’s corner. We continue to want you to own the stock of great companies because we have confidence in their ability to solve problems and increase value over time.
Jeffrey Brayton Financial Advisor Branch ManagerQuote of the Quarter
From “How Innovation Works”
by Matt RidleyBook Recommendation
“Destiny of the Republic: A Tale of Madness, Medicine and the Murder of a President”
By Candice Millard
I didn’t know much about James Garfield until I found this book. It reveals him to be one of the most extraordinary men ever elected president. His story also reminded me that our current contentious political climate is nothing new.
“History shows that innovation is a delicate and vulnerable flower, easily crushed underfoot, but quick to regrow if conditions allow.”
It’s understandable if money conversations weren’t top of mind as the kids move from diapers into their elementary years. But then things start to shift right around the middle school years and especially into high school, at least I know they did for me. The world your kids see gets bigger and bigger, and we all know, money is a big part of it. I’m living though this timeframe now with my three kids. Especially with my oldest, Emma, who just got her license a few months ago and started her first job this week!
At its most basic level, money is no more than a tool or utility to make ends meet as we go through life. If you’re lucky enough to have more of it, (yes, I know my audience) money turns into an amplifier. Think of it as turning up the volume on your family values. Our role as parents or grandparents who have influence on the younger generation is to foster a healthy relationship as it relates to money and help them understand the privilege and responsibility that comes with it. A lack of transparency could mean your kids will be ill-prepared to handle money, and especially wealth, when money comes their way.
How can you share your values? Tell them stories of the past — financial habits and lessons you noticed while growing up, money-related events that influenced your view of it, and fiscal decisions you’ve made
throughout life? Also consider bringing them into certain situations (at an age-appropriate level) like buying a car, renovating your home, or deciding we don’t “need” to go to the Taylor Swift concert last month (yes, that last one hit home). I believe one of the biggest shortfalls in our education system today is the void of a basic money course in college. Call it Money Basics 101. Simple concepts like smart ways to use debt, understanding a credit score and how interest rates work. This is why Dave Ramsey and the Money Guy podcast have become so popular. This generation is craving financial knowledge because they never learned it. You might be saying right now, “Well, I never learned it either.” If you don’t think you have much to share yourself, you can opt to steer your kids in the right direction. Side note: if you want to listen to sound money advice, go with the Money Guy podcast. Because I’m so cool, I find myself listening to it often.
It’s also important to establish early on what you’re willing to provide. Financial support to your kids can be an incredible blessing as well as an incredible curse, if parameters are not set. Will you buy them a car? Pay for insurance and gas? Pay for college? Pay for grad school? At what age will you expect them to be financially independent? Many wealthy families set aside money for a number of these items. Communication with your kids is the key. Parents may also subconsciously use
“Families that share and learn together tend to work well together, growing their financial, intellectual and social capital.”
- James Hughes
financial support as a means of controlling them well into adulthood. Please don’t. It’s difficult to watch your kids struggle when you have the means to help, but it doesn’t mean you should. (One of the most important lessons I learned from my parents, thank you mom and dad!) I’ll finish with this thought.
Money is woven through the fabric of our society, whether we like it or not. But I would argue that money is not the most important “capital” our kids can gain. To me, Human Capital wins the day. What I mean here is the knowledge, skills, and work ethic we instill in our kids. Money can be taken away from us very quickly in a number of different ways. What cannot be taken
away from your kids is Human Capital. The investment you make in them by encouraging a pursuit of knowledge, skills, and work ethic will carry them into adulthood. It will also get them off your payroll a little quicker!
A favorite book of Jeff and mine is “The Millionaire Next Door” by Thomas Stanley. Chapter 5 of the book is titled: Economic Outpatient Care and includes this spot-on quote, “In general, the more dollars adult children receive, the fewer they accumulate, while those who are given fewer dollars accumulate more.”
We wanted to extend a special thank you to everyone who attended our 2023 Mid-Year Economic & Market Update. Mark and I had the opportunity to implement past attendees’ feedback to provide an even better experience, including a shorter presentation and a focus on specific issues directly impacting your portfolio and our investment management strategies.
Our annual shredding event continues to gain popularity. (We suspect this may be related to having the Pink Elephant Cupcake truck on site.) This year we were fortunate to have Nephus (pictured here with Tina) from Shred-it to help carry boxes and documents to the shredding truck.
Finally, we were happy to welcome Sarah Rangstrom to our team last month. Sarah is our Client Operations Associate, and she brings with her a strong background in project and relationship management. Sarah has a passion for hard work which goes way back to her time working as a restaurant busser at the age of 14. She was born and raised in upstate New York and came to Michigan to attend Northwood University, where she graduated with a focus in business and creative design. Fortunately for us, Sarah decided to settle here in St. Clair Shores where she spends time on the water, tends to her garden, and spoils her pup, Marco. She lives on the belief that kindness and compassion will take you far in life.
Thank you for taking the time to read our newsletter and for your continued trust and confidence.
Jeff and MarkTEAM UPDATES
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