NetWorth Radio Advance Report - June 3, 2019

In this NetWorth Radio Advance Report, Spencer McGowan, President of McGowanGroup Asset Management, delivers financial news and intelligence with insights you can act on for June 3, 2019.

Advance Report

Radio Show

The “inversion” of the longer U.S. Treasury Bond yields BELOW the short term T-Bill yields does not make sense because of the Duration Risk unless yields are actually expected to FALL from current levels over time.
The condition has, many times, preceded Recessions as The Federal Reserve Board (The Fed) policy lags economic conditions as it arguably did in 2007 after The Fed likely over-tightened short rates.
If …Then..?
An article from the NY Times this week echoed the premise, of course, the predictive value of the counter intuitive condition of the Bond Markets. But, not necessarily:
7.5 million jobs waiting to be filled.
Economic growth reported at 3.2% Q1 2019.
Clearly, not a Recession yet.
WHY would longer Treasury maturities be attractive to buyers at below the 2.3% 90 day T-Bill rate? Over $8 Trillion in Bonds, primarily in Japan and Europe, trade at negative yields. You get back LESS than you put in. Call this the price of parking in relative safety.
Forced allocation buying rules for pensions and banks using government bonds is part of the reason. Global excess liquidity is part of the reason which, by definition, indicates current prosperity and solvency along with Central Bank’s “money printing.” Globally, the U.S. Treasury is extremely attractive in quality and RELATIVE yield explaining the recent money flows, in part.
Global GDP, at the most recent IMF estimates, contracts by about .3% and accelerates to higher levels in 2020 in contrast to the dire predictions of a Recession currently and the clearly false predictions during the 2018 mini panic which we used to secure bargains.
Yes, there will be a recession, an economic nap, eventually. It has not shown signs of arriving yet.
The Range Bound Market conclusion we made early in 2018: The Dow between 27000 and 23000 for an extended period. Our strategy is to get paid to wait, harvest cash at high points, buy bargains during sell off conditions and then repeat.
Neil Irwin wraps up his article:
It is premature to assume that a recession or a geopolitical crisis is imminent.
There are times that we would raise significant cash. One potential centers on the narcissistic desires of XI and Trump for a summit press conference announcing the world has been saved likely marking a high point in overall pricing for 2019.
In the meantime, getting paid 7% in great assets, that are still discounted, potentially produces 35% over the next 5 years as compensation for downdrafts.

 

Dow Jones Industrial Average Index (2 Years)

– Courtesy of Bloomberg

Standard & Poor’s 500 Index (Approx. 30 Years)

– Courtesy of Bloomberg

EIA – U.S. primary energy supply and disposition (1950-2018) & U.S. primary energy production by source (1950-2018)

EIA 1of2 05312019
– U.S. Energy Information Administration

EIA – U.S. primary energy exports by source (1950-2018) & U.S. primary energy net trade by source (1950-2018)

EIA 2of2 05312019
– U.S. Energy Information Administration

Headline Round Up!

*Inversion Mania!
*GDP Revised Down Q1 2019 from 3.2% to 3.1%. What about current quarter?
*”You’re Gonna Be in a World O’Hurt!” Declares China Daily! Rare Earth Embargo?
*Will China Sell a $1 Trillion in U.S. Treasuries Fast? Money Flow and Carnegie Say No They Won’t.
*Big Losses in Retailers Again? $2.7 Billion Gone in a Day!
*Johnson and Johnson Gets Sued by The State of OK and American Indian Nations Over Opiates. Tort Attorney’s Latest Craze.
*Cash Strapped Illinois Inhales Cannabis Revenue to Control Budget Pain?
*Bidding War on Superior Cows! DNA Moneyball for Heifers.
*Beyond Meat: Short Squeeze Over 50%! Alex, can you explain what a Short Squeeze is, please?
*WeWork Moves Towards an IPO and Needs 2.7 Billion!
*Global Payments Buys Total Systems! What About Square?

Texas Black Gold Rush!


*The Real Story on U.S. Petroleum Exports and Production Dominance! Latest charts and meaning for investors.
*Texans Up in Canada to Secure Heavy Crude. Heavy Oil Shortage? Why?
*China Pulls US LNG Orders. US Export Terminal Boom – 2025 to 2029.
*StonePeak Private Equity Funding Billions in Pipelines and LNG Export Facility.
*LNG Branding: “Freedom Gas.”
*Big Oil Missing the Boat!

 

Profit Report!

The Real Estate Revolution: Uptown Ed’s Question? What does this mean for the potential outcomes? Could this create a buying frenzy and then a pullback? Plus the Price of Your House! Mortgage rates below 4%.
1/4th of working Americans have zero savings? 40% say they don’t have $400?
What is truly wealthy in the U.S.?
This Week’s Salacious Metaphor Contest Right Here in Dallas!
Your Estate plan and what happens after you’re gone?

2025 and 2030! Summer Planning Season Arrives

To bring substantial importance to examining this week’s market activity, we begin by discussing setting 5 year and 10 year objectives.
Too often investors are sidetracked with current events instead of the foundations of clear objectives.
This week’s Profit Report answers a key question, from one of our valued clients, where the key variable actually resides in Tax Planning.
After the pouring the concrete of clear objectives, the maze of decisions can more easily be answered:
  • What is most important over the next 5 years? 10 years?
  • Set the CPA appointment for the summer while your tax planner has time to brainstorm!
  • Set the appointment to review your Estate plan and update the Financial plan.
  • Once the key outcomes are clear, this week’s batch of important headlines and money flows can be examined with purpose!

 

Research Round Up!

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*U.S. China Trade War: Understanding the New Long March!
*Energy Infrastructure Discounts!

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