First, Mark Your Calendars

We are having our mid-year Conference Call Update

Feel free to dial-in – invite a friend if you like!

Here is the data you will need:

August 12 – 4:00 EST

Dial-in Number: 1-712-770-5367

PIN Code: 455101 #

Good Morning,

They say there’s only one thing to focus on when you are walking through hell – and that is: “keep walking…”

As we stare into the slowest month of the year and close out the 7th month of this historical monster, I am reminded of many perils in the past. Many may forget that when I started in this business, the DOW was 970, the S&P was just two digits long.

So, forgive me if I struggle (very much) when the latest cast of today’s characters – um – excuse me – “experts” is what I meant to type – try to tell us all how we will never get over “this.”

We will. It’s like sharpening a sword in the heat of the flame. Diamonds come out of the ground covered in dark rock and mud. They do not get their brilliance until – under searing heat – they are cut at angles to release their most brilliant light. Imagine that – all that pain to look brilliant.

The Rearview Mirror

I’d like you to picture us in a car, racing away quickly from a disaster. No map, no GPS – but frantically moving away from whatever has been painful. Each crisis causes one’s mind to race. Mentally, they are in that car, racing away from the catastrophe.

The problem is that they keep looking in the rearview mirror – terrified of what they are already leaving. Each mile on the odometer takes them farther away from what terrified them. Yet, they remain mired in the ghostly damage – thanks to that damn rearview mirror.

Throw away yours – stop looking in it. And forget about yesterday. The normal of yesterday is not coming back. Every major shift in life teaches us all this – trying to hold onto it causes one to miss the new, enhanced – very often – better normal ahead.

Tame Impala says it well in their lyrics:

‘Cause it might’ve been something, who’s to say?

Does it help to get lost in yesterday?

And you might’ve missed something, don’t say

‘Cause it has to be lost in yesterday

And you’re gonna have to let it go someday

You’ve been diggin’ it up like Groundhog Day

‘Cause it might’ve been something, don’t say

‘Cause it has to be lost in yesterday

Like it or Not…

We are leaving ground zero – virus and all – racing into the new future. Lessons learned, costs calculating, rebuilding underway. We are walking through hell for sure – so just keep walking.

The biggest surprise so far? How, far easier than expected, the business world is adapting to the new things ahead. We all get to pick:

Participate in and potentially be blinded by the fear? …or

Pull the rip cord, take the leap, say goodbye to the ghosts and land in the future?

Just throw away the rearview mirror.

Speaking of that concept, I have an odd, out of left field question for you? There is almost nothing about the ingredients of the S&P 500 today which compares to say, the S&P 500 of 1982, when I started in this business. Almost nothing.

Why then do we constantly measure, rate, create stats and stress out over every comparison to “the past” S&P 500? When you get time to consider that during the doldrums of August – it might pay to consider this too: Why is ANYTHING today compared to 20 years ago? 30 years ago? The Great Depression? The Great Recession?

There is only ONE thing that is the same as all those other times today: the cost of human emotions. Plain and simple. Fight it if you will. Make it more confusing if you must. But, in the end, the long-term investor learns this lesson – or fails.

Speaking of Earnings…

Uh, how do you spell “knocking the lights out…?” Where are my TUMS?

Anyway, here is the latest data on earnings – more this weekend as well:

With half of the S&P reporting,about 80% of companies have beaten the estimates, well above the historic norm of about 70%.

More importantly you might be wondering? They are beating by vastly wider margins than usual.

The average earnings beat so far? A record-shattering 13.2% above the consensus, way, way above the historic norm of 3.3% – this according to Refinitiv.

That beat rate is even higher thanthe rates seen in 2010, when many companies rapidly surprised Wall Street as we were coming out of the Great Recession.

I’d say that hits right on the chord we noted earlier in April : expect a whole bunch of “that’s better than expected” in the months ahead. Why did we say it then?

Because America does recovery, rebuilding and moving forward – significantly better than anyone on the planet.

Most importantly on the earnings front is this: forward estimates — which are what matter now — are rising, albeit modestly, underpinning the idea that the second quarter was the bottom. It also makes one look to this better view as well: that the reopening while very rocky and unsettling, things are slowly improving (short of another shutdown), even as certain industries, such as aerospace travel and leisure, will take longer to recover and adapt.

More signs of improvement:

The Richmond Fed manufacturing index continued to improve, rising 10 points in July, indicating the first expansion in the region since March and the highest reading for the index since January.

The only areas that remain on the weak side for both present and future conditions are for expenditures. But do notice that the latest read is right in the center of readings over the last – 25 years:

ISM’s are slowing improving as well. I said slowly – not overnight – but back at or above 50 is always a solid sign. Steady hands at the wheel are best as we work through the lightest winds of the summer.

The Chicago PMI’s just came out as well – good news – up and in expansion mode:

I have included a few of the latest high-frequency data points showing more improvement. Many miles still to travel up the mountain of recovery – but improvement nonetheless:



Note each reading in the data – and let your eye wander back to the first of the year as a comp. Might help to explain why many parts of the economy are surprising so substantially to the upside.

Closing out for the week…

Just in case you missed it yesterday, I have kept in the sentiment data because it is such a positive indicator for the future – and it helps if you get completely bored over the weekend.

…read ’em and reap:

The last time we were within earshot of a 20% bullish sentiment reading was a seeming lifetime ago. Indeed, after the last 11 years, it is a time cloaked in foggy memories for most.

It was early 2009 – the end of the world as most knew it. Foreclosures, losses, bank shutterings, stock price collapses, media carnage making it difficult to come out of the bubble of fear. They call it the GFC now – the Great Financial Crisis.

Back to the Bulls

In March of 2009 – after 6 months of devastating price action, the bears were prowling in every shadow, the future was bleak, no confidence remained. The crowd was beaten and had raised the white flag to life as we knew it.

Things were going to change – it was forced upon us.

The DOW was a gut-shattering 6,700.

The S&P collapse stopped right at the Devil’s doorstep – 666.

The reading on the same weekly data we posted for you then – for bullish sentiment, was 19.7%. At the time, the lowest in 20 years. The lower period – by a half point? March 2003 – the end of the Tech bubble collapse.

Notice a trend here?

You should.

…and trust me on this: Two, three, five, ten years from now, you will pray you did.

Why?

I’ll keep this simple: forget what you are seeing in your rearview mirror. It’s ugly. Accept that – becauseit always isafter a crisis. That’s why they call it a crisis – and not “fun.”

It’s that rearview mirror focus that gets the crowd in trouble every time…and I do mean every time.

Here is the simple why:

NEVER in the history of sentiment data – has a reading this low – or even within this range – signaled that a long-term downfall was ahead.

Instead – and here is the biggie – it has ALWAYS meant that a long-term upward swing – always very surprising to most – was being formed. Each and EVERY time, those beginnings were terrifying, bone-chilling, numbing and very scary places.

That’s the deal. Plain and simple.

Those who can overlook when they feel the most terrified -win in the long run.

Those who can remain patient when most will run, and worse, react in fear -win in the long run.

Those who can have discipline and a calm confidence in the history of this nation, in its people, in all of us as one big family – and our collective ability to adapt, learn, overcome and build over, through, around – anything -win in the long run.

One can call this a rose-colored glasses viewpoint. One can say or think, “Well, Mike – I am not sure you understand how bad this really is…”

But one thing you cannot fight – is the consistency of humans.

No matter the circumstance – never forget this: our emotions, especially during times of stress – are our weakest link. Lack of emotional control in the world of money, wealth – and the pathway of building it over the long haul – is akin to actively inviting the grim reaper to stand on your doorstep to the future.

Yea – But What Now?

Take a very deep breath. Count to a million if you need too. Turn off the news.

America will win. We will overcome. This bat out of hell will be defeated…and soon, there will be another, bigger, uglier, scarier and more dangerous monster.

So, do yourself a huge favor – think better. See with better eyes. Stand above this storm – as ugly as it is. Do not succumb to the crowd’s emotions noted in the data above.

Why? At these extremes, they – have – NEVER – been – correct.

Last But Not Least

So here is the stake in the heart of the monsters currently trekking through our lives as we close out August:

Pray for an August swoon.

Pray for one more shakeout…pray for some red ink.

Shave off and bury that last inkling of bullish sentiment. Pray that we set records below those referenced from the March 2009 readings.

Whatever you do – stop buying into the constant droning on of experts telling you we will not make it over, through and around this bat out of hell.

We will.

We always have – most importantly – together.

Yes friends – the world has changed -forever.

Every single thing will become new again – until that too needs to change, advance and adapt.

The 80’s and 90’s were the Boomer’s Decades.

The 2020’s and 2030’s ahead are the Generation Y Decades.

The rocket-ship driving that expansion will steadily become “everything tech” – including stuff we have not even dreamed of yet. The good news? The rocket is just fueling up on the launchpad outside.

It’s summer…enjoy with family and friends.

Stay healthy and safe.

We are here to help always, even if is just to talk.