Wednesday, July 12, 2017

Stormin


Picture Credit: taxjusticeblog.org
Congress appears to be stuck in its attempts to make changes to the Affordable Care Act, as well as its attempts to make significant changes to the income tax code.  In spite of that, the public markets, both at home and abroad, turned in a very solid first half.  In fact, some investment sectors turned in their best first half performance since 2013, and in a couple of cases, since 2009.

Picture Credit: imgarcade.com
Looking at representative domestic stock indices for the first half of 2017, we find the S&P 500 up 9.34%, the S&P MidCap 400 up 5.99%, the Russell 2000, a broad small company index, up 4.99%, the Dow Jones Industrials up 9.35%, and the NASDAQ Composite up 14.07%.

Exploring subsets of these numbers, we find that growth stocks materially outperformed value stocks, regardless of market capitalization.  Domestic large growth was up 15.78%, domestic large value was up 2.98%.  In MidCaps, growth was up 13.13%, while value was up 3.46%, and on the small cap front, growth was up 11.64%, while value was down 0.52%. Evaluating sectors, we find that healthcare and technology led the first half, up 16.61% and 16.94% respectively, while energy was off, down 13.68%.

Picture Credit: en.wikipedia.org
On the international front, the MSCI EAFE (Europe, Australia, Far East) Index was up 13.81%, while the MSCI Emerging Markets Index (ex-Japan) was up 21.83% for the first six months.  Malaysia, Hong Kong, and India’s Sensex had especially good runs, with each of them up between 16% and 20%.

Turning our attention to bonds, we find that U.S. short term corporate bonds were up 1.68%, intermediate bonds were up 3.23%, and long bonds were up 5.76%.  Government issues also had a good first half, with short term bonds up 0.61%, intermediate bonds up 1.68%, and long bonds up 4.43%.

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Turning to economic data, we see that GDP growth for the first quarter, according to the Bureau of Economic Analysis (BEA), was 1.4%.  Consumer spending was off sharply during the first quarter, and the personal savings rate increased to 5.1% of disposable income.  Consumer confidence remains high, causing consternation among some economists, who assume a high correlation between consumer confidence and consumer spending.

It’s our thought that consumer confidence remaining high is a reflection of household preparedness for economic change.  Households are preparing for economic upheaval by continuing to increase savings, continuing to reduce debt, and choosing to make solid choices when it comes to discretionary spending.  We certainly hope that’s what’s going on.  That’s what we see, though we do live in something of a bubble.

The Federal Reserve announced that all 34 of the banks it checks annually for financial soundness passed its “stress test”.  The report also noted that the ten largest American banks hold 80% of all banking assets.

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As we move into the second half of 2017, remember that the only certainty we have is uncertainty, and that we are more than eight years into a bull market.  We have found that disciplined financial behavior gives each of us the freedom to ignore market swings and volatility.  That disciplined behavior shows up in the habits of spending less than we make, always having a reserve, avoiding debt, making and executing on long term plans, and being generous with our time, talent, and treasure.

Last week, we celebrated Independence Day, what is often referred to as July 4th.  This is the day we celebrate the signing of the Declaration of Independence.  With the celebration almost a week behind us, let me encourage you to remember that independence calls for self-governance, and that the price of the freedom, embedded in the concept of independence, is very high.

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There are men and women, from Valley Forge to the Delaware River, from Tripoli to Tunis, from Gettysburg to Antietam, from the Battle of the Somme to the Western Front, from Pearl Harbor to Auschwitz to Iwo Jima, from the DMZ to Inchon, from Hamburger Hill to Saigon to the Tet Offensive, from Stormin Norman to Desert Storm, who have willingly put themselves in harm’s way, so we can enjoy our independence, and celebrate these precious freedoms.

Quote of the week:

“America was not built on fear.  America was built on courage, on imagination, on an unbeatable determination to do the job at hand.”
                 
                           Harry S. Truman


Thursday, June 29, 2017

LIBERTY


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Health care funding continues to dominate the political conversation, with the Senate introducing its version of a new health care financing arrangement.  Stay tuned for more on this, as the House and Senate attempt to develop a bill that will pass both houses of Congress.  And whatever legislation is passed, look for it to be challenged in court.  Finally, keep in mind that in the U.S., we have the finest health care on the planet.  It’s the paying for it which remains the challenge.
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In economic news, new home sales rose 2.9% in May, to an annualized rate of 610,000 units.  The Fed rate increase last week took the Fed Funds rate to a range of 1% to 1.25%.  Before the economic implosion of 2008-09, this rate was almost five times as much.  Those attempting to live on interest income have experienced this first hand.  And, this inordinately low interest rate environment has been one of the drivers in the outperformance of dividend paying stocks over the last five years.
Picture Credit: Fahrenheit-212.com
On the business front, Coke has announced the layoff of 400 Atlanta based employees.  This news follows an announcement from earlier in the year that Coke is reducing staff by 1200 worldwide, in order to create a leaner organization. 

And Fulton County Commissioners decided to freeze property tax assessments at 2016 levels.  Smart move on their part.  Jurisdictions with taxing authority are finding that they can’t simply continue to raise taxes, in order to fund whatever they have agreed to pay for.  At some point, taxpayers resist, many voting with their feet that they simply won’t stay and pay, indefinitely.  Just ask Illinois.

According to Automotive News Europe, the U.K. government plans to invest more than 800 million
pounds, or more than $1 billion, in new driverless and zero-emission vehicle technology, as it seeks to become a leader in such technologies.  You can read the entire article at http://europe.autonews.com/article/20170622/ANE/170629935/uk-seeks-to-be-world-leader-in-autonomous-and-electric-vehicles. 
Picture Credit: greencharge.net

In mid-May, a cyberattack hit Microsoft Windows-based computers through a malware known as ransomware.  While ransomware attacks are becoming increasingly common, this attack, known as WannaCry, was noted for its speed of transmission. 

Ransomware is generally spread via email messages that contain infected attachments.  When a user opens the attachment, a program runs that encrypts the user’s computer and demands a ransom be paid, typically in bitcoin, for a key that will unencrypt the files.

Internally, we teach our team some basic security protocol, as a means of protecting technology
tools and data.
  First, we have tight filters on what emails actually get through.  We review all emails caught by the spam filter, and whitelist only those we recognize, and want to receive.  Second, we don’t open any attachments from anyone, including clients and trusted vendors, unless we were expecting the attachments. 

Third, we don’t forward “cute” emails, regardless of the heart touching story, or cute butterfly/kitten/baby picture.  These are often forwards themselves, and could have picked up any number of viruses in transmission. 

Fourth, we don’t automatically send money to a client, simply because we get an email from them saying “send money”.  Those emails are currently the primary means and source of financial fraud, by the schmucks who specialize in this type of behavior.  When we do receive a request for funds, we evaluate the email, to confirm the email address, and the type and amount of content, to determine that it is consistent with the communication style of this particular client.  We also confirm by phone call.  This is simple to do, preserves capital, and avoids grief for all parties involved.

Picture Credit: imgarcade.com
Next week, we celebrate Independence Day, in honor of the signing and adoption of the Declaration of Independence, in July 1776.  It was during the summer of 1776 that the thirteen colonies declared themselves a new and free nation, independent of England and King George.

In thinking about our heritage as a country, and the concept of independence and freedom, several things come to mind.  First is that it takes very few to make a difference.  Those few though, must be resolute in their conviction.  The signers of the Declaration of Independence pledged their lives, their fortunes, and their sacred honor.  A number of them did give their lives and fortunes to the cause of liberty.
Picture Credit: quotesgram.com

Another thought is that there are differing kinds of freedom.  Freedom can encompass the personal freedom of self-determination, and economic freedom, to pursue whatever we choose as a way to engage with work and life.  It can also encompass emotional, mental, and spiritual freedom, though these are in the realm of personal choice.  If you are bound in some way, will you choose to be free?

Quote of the week:

“Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery?  Forbid it, Almighty God!  I know not what course others may take; but as for me, give me liberty, or give me death.”

                                                     Patrick Henry, St. Johns Church, Richmond, Virginia, March 23, 1775

Thursday, June 22, 2017

LIVE

Picture Credit: en.wikipedia.org
Jeff Bezos has announced his intent to buy Whole Foods, in a deal valued at $13.7 billion, or $42 per share for Whole Foods.  Stock prices of Whole Foods, WFM, and Amazon, AMZN, were up on Friday, with stock prices on most other grocery retailers down.  This isn’t the end of the story.  Look for both regulatory scrutiny, but more particularly, competing bids by other grocers, or a consortium of such.  And, look for Bezos, in the next ten years, to announce that he’s buying all the companies in the S&P 500.

Tech stocks sold off last week, with the NASDAQ closing at 6151, down 2.7% since its high of 6321 on June 8th.  The NASDAQ Composite Index is still up 768 points, or more than 14.2%, since the first of the year.  Unless 100% of your portfolio is in tech stocks, I wouldn’t let this little hiccup keep me up at night.

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The FOMC announced an interest rate increase of 0.25% in its Fed Funds rate, when it met this last week.  Chair Janet Yellen made the announcement on Wednesday afternoon, after the 8-1 vote to raise rates.  Minneapolis Fed President Kashkari was the lone dissenting voice.  Yellen also said the Fed plans to reduce its $4.5 trillion balance sheet this year.  Most observers anticipate one more interest rate increase this year, which rate increase has already been factored into bond prices.

Attorney General Jeff Sessions has asked Congress to allow the Justice Department to prosecute businesses and individuals in the 29 states that have medical marijuana laws.  In response, Senators Rand Paul, Corey Booker, and Kirsten Gillibrand introduced a bill which would end federal prohibition of medical marijuana, and take steps to improve research.  This whole marijuana conversation is interesting, and certainly different than it was in the ‘70’s.  My only observation is that Cheech and Chong movies were just funny.
Picture Credit: tumblr.com

Hodgkinson taking a gun to congressmen playing baseball is just the latest in all sorts of very uncivil and violent discourse, both stateside, and around the world.  Seems far too many feel comfortable with personal attacks, meanness, and even physical violence, against those who are different than they are, or with those who they disagree.  And the tension isn’t limited to politics.  It appears to include religion, lifestyle choices, skin color, and every imaginable sort of difference.  Whatever happened to concepts such as “quick to listen, slow to speak”, “a soft answer turns away anger”, or “come now and let us reason together”?  All of us as humans have much more in common, than we do that separates us.

Picture Credit: army.mil
Charlie Maupin and Jim Wooters, both in their mid-90’s, were interviewed recently by the Columbus Ledger-Enquirer.  They were on board different ships in the English Channel, on the morning of June 6, 1944.  The interview is more than interesting, and you can find it at http://www.ledger-enquirer.com/news/local/article154467324.html.  One quote stands out.  Wooters said “when you know you are going to die, you are no longer afraid”. 

Yes.  So, what’s stopping you?  And me?  We know we are going to die.  Why not then, fully live?

Quote of the week:

“The only thing we have to fear is fear itself.”
                                        FDR Inaugural Address, March 4, 1933

P.S.  You can find the entire Inaugural Address, in either text or audio, at http://historymatters.gmu.edu/d/5057






Wednesday, June 7, 2017

Understood

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U.S. stock markets closed the 100th trading day of 2017 on May 25th, with the S&P 500 having risen 7.9% over that period.  This continues the bull market that began in early March of 2009, with this bull into its 9th year.


There have been 23 years since 1950, not including 2017, where the S&P 500 has risen 7.5% or more during the first 100 trading days.  In all those instances, the S&P 500 closed higher for the year, with an average gain of 23.4%.  If 2017 performs at the average, and we have no reason to believe it will, the S&P 500 would finish the year at 2760.

While the domestic bull continues to run, we find much the opposite story internationally.  International Developed Markets,  primarily Europe, remains below 2007 highs, and Emerging Markets have performed more poorly than International Developed.  Year to date, both International Developed and Emerging Markets have outperformed the S&P 500, though they have a long way to go before they get back to their long term mean return.

The DOL fiduciary rule, which was to have gone into effect on April 10th, and whose start date was delayed until June 9th, with full implementation by January 2018, has become a political football.  The short version is that the rule would impose on those advisors who manage IRAs for clients, the same fiduciary standard which the DOL uses for those offering advice to retirement plans.

Needless to say, this rule is being heavily opposed by sellers of annuities, as it is difficult, if not impossible, to serve as a fiduciary and sell a variable annuity at the same time.  Our recommendation for consumers is to work only with a financial professional who will choose to be a fiduciary.

Picture Credit: wikipedia.com
Turning to economic news, the Bureau of Economic Analysis revised the Q1 GDP numbers, showing a gain of 1.2%, compared to previous estimates of 0.7%.  During Q1 2017, consumer spending increased 0.44%, compared to a 2.40% increase in Q4 2016.  And, fixed investment jumped to an increase of 1.85%, compared to a 0.46% increase in Q4 2016.  The bulk of this fixed investment was non-residential.

The Census Bureau reported 138,000 new jobs were created in May, less than the expected 185,000 new jobs.  Private sector gains were 147,000, meaning there was a decrease in government jobs by 9000.  A decrease in government payroll is a positive, as far as we are concerned.  And, the Census Bureau reported the official unemployment rate at 4.3%.

The FOMC meets next week, on the 13th and 14th.  Expect some announcement regarding interest rates, even if the announcement is that there will be no change.

Picture Credit: Nevadacounty.com
The U.S. Federal Reserve holds about $4.2 trillion in Treasury and mortgage backed securities, up from about $800 billion in 2007.  The Fed plans to begin reducing this position later this year, though by as little as $10 billion to $15 billion per month.

Many of us are invited into conversations from time to time, where our best approach is to listen, and seek to understand.  This could be with a child, spouse, business partner, employee, client or customer, or other situations.  Over the years, we have learned several things which help, when we are in these conversations.  Since we are still learning, we invite you to share what you have learned.  Here is what I have learned so far.

Be engaged with my eyes and your posture.  Look at the person, and choose not to be distracted.  As one author said, lean into the conversation.  A slouched position, or folded arms, communicates unavailability and disinterest.

Do not interrupt when someone else is talking.  Interrupting when someone else is talking diminishes the other person, and communicates that who they are, and what they have to say, doesn’t matter to me. 

And, give the person who is talking the time to finish.  Just because someone stops talking doesn’t mean they are finished talking.  It may mean they are organizing their thoughts, or deciding how much to share.  Or they may be deciding if they can trust me enough to really share their heart.  If I jump into the conversation, as soon as someone takes a breath, I may miss the thing I needed to hear most, and will almost always miss an opportunity to build trust and confidence. 
Picture Credit: Clipart Panda

My friend Cheryl teaches her team the nine second rule.  That is, she teaches her team to allow nine seconds of silence to pass, once someone finishes talking, before someone else speaks.

Don’t attempt to top their stories.  If someone shares an experience in this context, attempting to share one of my own experiences which was better/more exciting both diminishes the person, and speaks to my insecurities.

Ask questions, for the sake of clarity.  It is true that I see and hear the world as I am, not as it is.  Therefore, as I hear someone share, what I’m understanding, and what they are meaning, may well be two different things.  I’ve learned, if I am unsure of what I’m hearing, to simply say “Here is what I heard.  Is that what you meant?”

Seek, and listen, to understand, not to reply.  Developing a reply while someone is talking distracts me from the conversation, and increases the likelihood that I will miss important information.  It also communicates that I am not actually listening.  Often, the greatest thing we can do for someone else is to allow them to be and feel known, heard, and understood.

What can you add to this list, in the interest of helping all of us improve?

Quote of the week:

“Every time you make a choice, you are turning the central part of you into something a little different than it was before.”
                                                                                                                                                                                                                                                    C.S. Lewis

             

Thursday, May 25, 2017

Tiger

According to the World Federation of Exchanges database, there were about 15,000 publicly traded companies worldwide, in 1975.  This count grew to just over 43,000 by 2015.  What’s interesting is the change across these 40 years. 
Picture Credit: www.businesswire.com

In 1975, according to WFE data, Australia, Canada, and Japan each had about 1400 publicly traded companies, with Germany, France and Spain coming in at between 500 and 1000 companies.  Over the next 40 years, the Australia count grew by 44%, while Japan and Canada more than doubled.  Germany grew by just 13%, while the France public company count dropped.  The winner in headcount growth though, is Spain, which went from 940 to 3480 publicly traded companies, a multiple of almost four over these years.

We haven’t audited the WFE data, as posted at worldbank.org, and we question some of the information.  However, the trends can be instructive.  According to this dataset, South Korea, Malaysia, Poland, Singapore, and Thailand had no or few public companies in 1975.  In 2015, they each had from 650 to more than 2000 companies whose stock was available for purchase on exchanges.

Picture Credit: www.visualcapitalist.com
The story in the U.S. is also instructive.  In 1975, there were about 4500 publicly traded companies.  This number grew to almost 9000 by 1997, and stands today at about 4500.  With a generally healthy (though slow growing) economy, why has the number of publicly traded companies stalled?

Most observers, of which we are one, offer three compelling reasons.  First, the cost of going public is substantial, with underwriting and regulatory costs absorbing as much as 14% of funds raised.  So on a $500 million offering, investment banks and attorneys could absorb as much as $70 million.  And, there is significant ongoing regulatory and administrative expense with a public company.

Second is market volatility.  The underlying or intrinsic value of a company is just one of the components that can drive stock price.  The others include, but certainly aren’t limited to, interest rates and investor sentiment.  If I as company founder don’t need the liquidity, why go through the pain of the price volatility, when the price on so many days may poorly represent underlying value.

Third is ease of access of funds.  With private equity available to fund growth or owner exits, options other than a public offering are attractive. 

It would seem that to foster a healthy public market for stocks, the regulatory and underwriting costs need to make sense, the ongoing reporting requirements need to work from a cost standpoint, and the overall costs of maintaining the stock in a public environment need to compete well with other options available to ownership.  In too many cases, in the U.S., this isn’t the case.

Looking at the economy across the world, the Eurozone is hoping for economic growth of 1% annually, while the U.S. is growing at 2%, and many of us think we can move toward 3% annual growth.  Stateside, unemployment is less than 5%, which means employers are scraping the bottom of the barrel looking for those who are employable.  Meanwhile, the Eurozone features unemployment at or near 12%.
Picture Credit: wikipedia.com

As a result, foreigners are investing heavily in the U.S.  This week, the Treasury reported net long-
term inflows, of international funds, of $59.8 billion in March, and this on top of $53.1 billion in inflows in February.  Just $1 billion went to equities, with the large majority of these funds going to Treasury and corporate bonds.

Canada and Mexico were the largest sellers of Treasury bonds, Russia the largest buyer.

Always Dreaming won the Run for the Roses this year, paying $11.40 on a $2 bet, and landing his owners a $1,635,800 purse.  Always Dreaming got the glory and the roses, though it wasn’t a one horse show.  Also involved were owners Tony Bonomo and Vince Viola, trainer Todd Pletcher, and jockey John Velazquez.  And of course, the generous U.S. tax code.

Code Section 183, which contains the “hobby loss” rules, says you can deduct business losses against your other income but…you can’t deduct losses from your hobby against other income.  The basic rule that distinguishes business activity from hobby activity is that you have to enter the activity with an intent to make a profit.  A helpful rule of thumb is that for most activities, if you make a profit in three out of five years, you are presumed to be engaging with the intent to make a profit.

Picture Credit: TestCountry.org
But, one kind of business gets a special pass.  That business is the one “which consists in major part of the breeding, training, showing, and racing of horses”.  For these businesses, the rule of thumb for profitability is two years out of seven.  In addition to this relaxed standard, racehorses are depreciated over three years, compared to a seven year depreciation for other horses, such as service animals.

Keep in mind that horse racing is generally a very expensive hobby for those with very large wallets, so we wouldn’t suggest adding racehorses to your list of alternative investments.  

However, a good race can be fun to watch, and for the owners, those losses can offset what for many is significant income.

Quote of the week:

“Some people regard private enterprise as a predatory tiger to be shot.  Others look on it as a cow they can milk.  Not enough people see it as a healthy horse, pulling a sturdy wagon.”   
                                                                                 
                                                                               Winston Churchill

“I’ve often said there’s nothing better for the inside of a man than the outside of a horse.”
                                                                              
                                                                               Ronald Reagan

         





Wednesday, May 17, 2017

Healthcare

Last week, we spoke briefly of the American Health Care Act, which has been passed by the House.  Following are additional details about the AHCA, as passed by the House.  The legislation would:

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     1.   Do away with both the individual and employer mandate, and their associated taxes,
     2.   Do away with the Medicine Cabinet Tax, which places a tax on medical devices, drug companies, and health insurers,
    3. Do away with the 40% tax on high-cost employer-sponsored group plans, known as the Cadillac tax,
     4. Shift Medicaid funding to a fixed amount per year per Medicaid enrollee,
    5. Give states the option of receiving Medicaid funding in block grants, rather than per capita, for certain populations,
     6.  Waive the Essential Health Benefits requirement, thereby giving states much more latitude, and control over, what each state considers “required” coverage and benefits,
      7.   Waive the “community rating” and “mandatory age rating” rules, giving states and insurers much        more flexibility regarding pricing,
     8.  Eliminate income based subsidies, and replace them with age-based tax credits, ranging from $2000    to $4000 per individual, 
      9.     Eliminate the tax on FSAs, HSA withdrawals, and the 3.8% surtax on investment income, and the        0.9% tax for certain high income households.

Overall, this restructuring is a major step in the right direction, in terms of returning control of health care financing decisions to the individual, household, and state level where, in our opinion, they rightfully belong.  And, it returns dollars to the pockets of taxpayers, again, where those dollars rightfully belong.

Picture Credit: www.accountingdetails.com
For most households, there is a 100% correlation between earned income and cash flow.  Cash flow though, can come from several sources, including earned income, business income, pension income, and portfolio income.  Business income is a fairly broad category, and can include rents, royalties, and distribution of profits, among other things. 

Cash flow can also come from reimbursed expenses, or funded by corporate expense accounts, in specific situations, or from debt or equity financing.  Note that financing, whether debt or equity, comes with its own set of costs and other considerations.

The business marketplace has an interesting array of participants.  Traditional business or company owners tend to focus on developing several types of tax efficient cash flow.  The focus is on cash flow diversification and revenue quality.  These provide some level of safety and security.  And done well, there should be sufficient cash flow, after taxes and lifestyle expenses, to redeploy into building additional cash flow.  Cash flow from operations, and return on equity, or net dollars invested, are two key metrics we like to keep an eye on.

Tax efficiency matters.  Tax efficiency though, is not just income taxes.  It also includes personal and real property taxes, and can includes sales and use taxes.

Picture Credit: www.bc-llp.com
Another group of participants in the business marketplace are what we can call shareholders.  We
typically find these in startup companies, or in disruptive sectors.  Over the last 20 to 30 years, the large majority of these shareholders have been in the technology arena. 

The goal with shareholders is not to maximize sources and efficiency of cash flow.  The goal of shareholders is to ramp revenue into eight or nine figures within a short time frame, such as three to seven years.  The purpose of the quick ramp up in revenue is to achieve a liquidity event, as an exit strategy for shareholders, and especially founding shareholders. 

This sale could be to a larger company, or through the public markets with an IPO.  Whether one or the other is one of several considerations in preparing for the liquidity event.

Shareholders who experience a liquidity event can be surprised by the tax implications of the event.  And many times, founding shareholders will take some of the proceeds and repeat the process, building another company.  Like all of us though, at some point they will be looking for cash flow.

Picture Credit: wordiki.net
Quote of the week:

“From birth to age 18, a girl needs good parents.  From 18 to 35 a girl needs good looks.  From 35 to 55 a girl needs a good personality.  From 55 on, a girl needs good cash.”
                                                                                                                                                                Sophie Tucker








Tuesday, May 9, 2017

Essential

Let's talk about something other than taxation of retirement plan distributions, and what constitutes a fiduciary, since those topics have been the focus of the last few weeks of commentaries.
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The public markets have had a fine year, through Friday's close, whether you are investing stateside or elsewhere.  The S&P 500 is up 7.2% from the first of the year through Friday May 5th, not including dividends, while the NASDAQ Composite is up 13.3%.  The international markets, whether developed or emerging markets, have also done well, up between 12% and 14%.
 
Even bonds have held their own, with long bonds (BLV) up 1.6% and short bonds (BSV) up 0.35%, not including interest paid.
 
As we have discussed at other times, it is time for international markets to have a good year, and for this we are grateful.  Domestic equity markets appear to be driven by lack of other opportunity, corporate earnings, and anticipation of good things to come, in the way of tax and health care reform.
 
Overall, earnings reports have been good during this quarterly reporting season, though there have been a few challenges.  Just ask IBM.
 
Picture Credit: forbes.com
IBM created Watson, one of the early AI developments.  Unfortunately for Big Blue, they have yet to fully capitalize on this achievement, with revenue continuing to decline, as they fight for AI and cloud dominance against one-time (and now fully established) upstarts such as Alphabet and Amazon, among others.
 
IBM continues its attempts to turn the ship and rebuild revenue, which has dropped from $105 billion in 2011, when Watson won Jeopardy, to $89 billion in 2016.  In the meantime, Moody's downgraded IBM's debt on Wednesday, to A1 from Aa3.  And, at the Omaha business lovefest, known as the Berkshire Hathaway annual meeting, Buffet said he'd made a bad call on IBM and announced he'd sold 30 million shares since the first of the year, roughly one third of his position.
 
Speaking of health care reform, an amended version of the American Health Care Act has passed the House of Representatives.  Given the need to get this legislation through the Senate, we won't spend much time on it here.  The short version is that the legislation, which made it through the House, would eliminate the current mix of "essential health benefits", handing back to the states the responsibility of determining "mandated" benefits.  This would apply to both group and individual coverage.
 
The current version would also do away with "community" premium rates, once again permitting individual underwriting.  It would also allow a multiple of 5 instead of 3, in the premium price spread between the younger and older insureds.  The proposed legislation would also do away with the 3.8% surcharge on net investment income, and the 0.9% surcharge on earned income, for certain high income tax payers. 
 
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On the economic front, the Bureau of Labor Statistics has announced 211,000 new additions to non-farm payroll for April, with the official unemployment rate holding steady at 4.4%.  The employment gains were in leisure and hospitality, health care and social services, financial activities, and mining.  You can read the full release at https://www.bls.gov/news.release/empsit.nr0.htm.
 
It's easy to find bad news.  Turn on any "news" channel, or logon to any "news" site, and you can get your fill of what's wrong with anything.
 
Some good news?  Check out the charts at https://ourworldindata.org/.  Max Roser has done a yeoman's job compiling some fascinating information, for our edification.  Some highlights include:  In 1820, 84% of the world population lived in extreme poverty.  Today, that number is less than 10%.  In 1800, only about 10% of the world population could read.  Today, more than 84% can read.  Today, more than half the world population lives in a democratic society, where the individual gets a vote, up from nearly zero 200 years ago.  Currently, virtually no one lives in colonies, and closed autocracies are becoming scarce.
Graph Credit: ourworldindata.org
 
So that concept articulated as natural law, the freedom of the individual to control his/her own person, and thinking?  And that those who govern do so only with the express consent of the governed? It has worked, and spread.  Not perfectly, but for vast majorities of the world population, this world is a much better place than it was for their parents, grandparents, and the generations before them.  Hats off to those who have fought and died for these ideals.
 
"Those who can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety."
                                      Benjamin Franklin