“Individuals who cannot master their emotions are
ill-suited to profit from the investment process.”
~ Benjamin Graham

 

Good Morning,

Another week – another failed Armageddon.

An idea to share today:  stop watching the garbage called “financial news.”

Seriously.  During the summer haze, it is a great time to learn what helps and what does not help.  Ask yourself this question.  Which “it’s the end of the financial and economic world as we know it” story has been correct over, say, the last 40 years?  And when I say “correct”, I mean which thing that we were told – for certain, by a parade of experts – was indeed the end of the world, with no recovery and new highs ahead.

The answer is – none.  Not a single one was correct for more than a short window of time.  That is a pretty bad record.  As such, why in the world would we keep reacting to it?

Cash is – well, you tell me…

The latest Fed reports at end of Q2 showed $19 Trillion sitting in bank accounts, checking, money markets, timed-deposits and CDs.  Corporate balance sheets had $5.2 Trillion in cash to boot.  Expect a massive capex spending wave ahead as every company – in every sector – becomes a “tech” company.  In other words, as the quarters unfold and companies show massive margin gains, we can expect that investing in their own efficiencies and better ways to continue that expansion will broaden out.

The dominos just fall that – it is not rocket science.  People Make Markets® and there are more of them driving the economy forward than ever before.  Wait until you see Gen Y and Gen Z operating in unison.  Ouch – the acceleration will be mind-numbing.

By the way – all that capex data to flow leaves out the additional impact of infrastructure spending.  With manufacturing set to see huge gains in the coming decades here on US soil, capital flows into the long-term benefit of our economy are set to surge.

Benefits for long-term, patient investors over the next 20 years are set to dwarf those of the last 50.

The Latest Stats

Over the next three weeks, the lion’s share of the market will report.  As we have noted multiple times – each week brings more surprises.  The growth rates have not yet been caught up with by analysts.  The snapshots below are what is staged as the Big Tech names all announce this week.

Expect a significant number of “beats”…and even bigger numbers

 

We suspect the Q2 column (in billions) will surpass the Q1 shocker.  Look how far ahead it already is when compared to the Q2 2019 number – long before the pandemic

 

And recall when we started the Q2 parade 10 days ago – the expected growth rate was a bit over 60%.  The image above shows you we are already closing in on 75%.  Given how strong earnings surprises turned out to be in the preceding reporting cycle (Q1 2021) and the numbers out already for Q2, the final earnings growth tally for 2021 Q2 could easily end up north of +80% – a number never contemplated before.

The Bottom Line

Scared investors are betting against America.  That has never – and I repeat – never – been a good bet over the long-term.  We are in the early stages of change that will shock the senses.  Be most assured that it will not always be a walk in the park.

For certain – treacherous periods await.  And none of them will feel good at all – while all of them may temporarily convince you that all the morning note missives are moronic.  Emotions cause strange reactions indeed.

Our job?  Keep you focused on your pathway – and embrace the idea that risk is not a 4-letter work.

Wall Street has done a great job of “helping you” learn that risk is bad for you.  Let me give you the cold hard facts – in a very simple reality check:

Without risk – none of your financial goals will be met.  You are paid for risk.   You are not paid to keep “risk” out of your portfolio.  The new notion of the press now categorizing market action as “risk on” and “risk off” days is completely nutty.  To this writer, it is scary that any investor buys into the notion – even remotely so.

Risk must be embraced – not feared.  Without it, no goals will be met.

Finally…

It is summer – the haze will thicken and the chop should always be expected.  Volumes will fall further in August and it truly will feel like watching paint dry.  It is the same every summer, so don’t fret – no matter the headlines.

Cinch that belt tight.  The ride is just beginning.

Until we see you again, may your journey be grand

and your legacy significant.