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We hope the extended Holiday Week closing out the year of 2020 has been safe, healthy, blessed and enjoyable for you and yours!

We will keep the notes light this week as good things are brewing for the New Year – and are set to be much better than most currently perceive.

First – make sure you take time to watch the recording of our Year-End call done just before Christmas. If you were not able to attend, you can watch the recording here!

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Good Morning,

I am going to veer off the normal course of discussion for just a moment – I hope you do not mind. To tell you about my hero – we need to go back to a cold winter day in Chicago in 2012. It was ice cold – and outside the window of our condo, there was a basketball court across the street. Rusted rim, no net, even more rusted backboard – all facing into the cold winter wind blowing in steadily off icy Lake Michigan. No sun – just gray clouds.

Max said to me, “Dad, can we go shoot some basketball?” Mind you, those words had never been spoken by Max so you can imagine my surprise, especially when I checked my fancy iPhone weather app and it said “11 degrees.”

As fate would have it, we all headed down to the basketball court. For the next hour or so, Max shot baskets from every angle possible – ending with a long stretch at the foul line. His Mom held the camera and I did the rebounding. What a workout. I am pretty sure that he made maybe one or two shots. As the cold air grew and our faces were burning from the wind, the first trip to the court ended in tears and frustration for Max.

That was the day he started his journey. I sensed it when we got back in the elevator. His mind was set. His eyes had dried up and his stare into the distance was that stare you get when you have made a decision – and you are not going to backdown.

Years of work were ahead. Heck, we still had middle school and high school to attend. But the work did not stop him. It fueled him. Setbacks, disappointments, lost games, missed shots, bad calls, second places in tournaments, long rides to any number of places that AAU Basketball went – all of them were part of the grand lesson being taught.

I recall one weekend camp where an NBA Executive spoke halfway through the sessions. There were 250-300 young men in the camp and it was normal to have them all sit on the center court while the speaker delivered their message at the half-time break of the camp. I recall this person’s message – it was stark but likely honest:

“Guys, basketball is an ugly business. I have been watching you all play today. I know everyone dreams of getting to D-1. I have seen it my whole career. Millions of kids start playing from all over the country – all with one goal: playing on a D-1 College Basketball Team. They see themselves on that TV and they know they can get there.”

He paused and spoke more: “What they do not realize early on but sadly learn over time is that those odds are so small, so tiny as a part of the whole, that most of them become meat in the meat-grinder process of this business. I am here to tell you – make basketball work for you.” He went on to give his view of the crowd – without naming names and the percentages were tiny:

“I see maybe 2 or 3 of you here that possibly, with a few more years of very hard work, might make a D-1 squad – and that may be generous.”

The messages through the years were constant. The pain of disappointments along the way were just as constant. My hero never gave up, he never gave in, he never paused in his goal. He kept moving forward. I watched him get broken several times. I watched many of his teammates along the way cave under the constant strain and move on to other interests.

Throughout the non-stop, year-round effort to be his best and always improve, he also kept nearly straight A’s in school and was awarded the top academic scholarship to DePaul University, a Big East Conference, D-1 Basketball program.

This past week, two days before Christmas, 8 years, almost to the day, from that cold Saturday morning at that rusty rim taking shots for the first time, our Max got called into the first game of the season – after a month of delays related to Covid.

It was on Fox Sports – and I wanted to share the call with you.

Way to go Mr. Max (number 30)…proud just doesn’t say enough:

VIDEO IN HERE

The journey never stops. He has miles and miles to go – but man is it fun to watch him grow.

It would take me weeks to type all of the thanks you’s we owe for all those who helped Max along the way…but all the Coaches were the most important and we send a special prayer of thanks to each:

Coach Anderson and Coach Leitao

Coach Shane and Coach Hsu

Coach Matt and Coach Mike

Coach J.O.

Basel and Choi as mentors and trainers

Coach Quinn

Coach Snider

Coach Chris

Coach Nash

Coach Vandermeulen

One more thing. I am pretty sure Max would not want me to leave out the poster shot from the pre-game shootaround:

..and now—to the world we usually cover for you!

“Opportunities are like trains. There is always another one coming.”

We are working on a broader overview for the roadmap of 2021 and will send that out later in the week. Recall a few things:

This week is again Holiday shortened.

This week is known for very low volumes.

This haze tends to not completely wear off until then end of the first week of the New Year.

This week is often flooded with all the Wall Street firms suggesting their predictions and best picks.

This week also sets the new Dogs of the Dow.

This week is one week…a short time – and insignificant to the larger events unfolding.

Enjoy time with family…relax, re-energize.

For Next Year?

There will be very ugly parts – like there are every year. Those windows of time will cause you to be frustrated. They will trigger concerns, emotions and fears. They will throw many off of their pathway – just like every year.

Our purpose here is to keep you on your path. We are here to help you control those emotional reactions and help diffuse the “fight or flight” syndrome which hampers so many investors along the pathway ahead.

Themes which will continue onward:

Technology, medicine and science are not only defeating Covid, they are also forming the platform for future battles ahead. Quicker responses, less harm – faster comebacks against the next monster.

The rising tide of Gen Y is not stopping. On a daily basis you won’t “see” it. It is there, it is rising and it is relentless. All businesses will be redefined, changed or overrun.

Margins are increasing. Earnings are increasing. One small note – Tesla is now officially a part of the S&P 500. As such, that will ding the overall earnings weighting by about $1.25. Over the next week or so, the quarter will rollover and we will see a bump-up for the 2021 year from Refintiv. We will have that data for you overt this next weekend break.

For now – on earnings: Look for 2021 to start at around $167 for the year and slowly rise as the year unfolds and margin impact falls to the bottom line as more and more technology takes over.

By mid-summer, all that will be focused upon is 2022 earnings, already targeting $200/share and likely still timid on the number. Possibly very timid – meaning closer to $205-$210 by the time we get a year out from here and are peering into the fog of 2022.

Closing Out With Two Thoughts

…one good – one bad.

The bad first: Sadly, when this monster is taken care of – and it will be, there will be a bigger monster. The media process will not end – and may indeed get more intrusive and divisive in nature. We must learn to overlook that and keep thinking forward.

It is never about what’s now – it is always about what’s next.

Think roaring 20’s after the last pandemic if you must.

The good – there is plenty of that if you look and our best years are ahead. This, of course, does not mean no problems, no setbacks and no turmoil. Those are all as much a requirement of the road ahead for investors as you breathing to get to tomorrow.

I think I’d like to close though with these two pieces of good news which have arrived at our doorsteps – even as the pandemic has unfolded:

The two snapshots above are from the latest Fed Quarterly data release. They tell us all two things:

a) we have never been richer on a per household basis.

b) the household leverage as a percent is back to 1982 levels.

Add this to the “cushion” of the $18 TRILLION “Rainy Decade Fund” consumers here in the US have socked away in recent years of panic – and you get a very sizable shock absorber to take on any of the new monsters awaiting us ahead in 2021.

Enjoy Your Holiday Week.

May it be Safe, Healthy, Blessed and Happy.

Until we see you again, may your journey be grand – and your legacy significant.