Month: August 2021

Seasons and Cycles: Things Grow and Things Rest
photo shows four leaves at different point of their life (dark brown, light brown, yellow, and green)

Even in the heat of summer, I can’t help thinking about the cycles of nature—such a useful way to think about the cycles in the economy and the markets.

Winter, the fallow season, is a time for regeneration and recharging, getting ready for future growth. In spring seeds are planted and the first green shoots hint at better days ahead. Then a season of growth produces crops in a cornucopia of kinds and colors, to be harvested in the fall. Then it is time for rest and rejuvenation again.

Likewise, the economy grows and rests in turns. In recessions, excesses get corrected. Overall business activity shrinks. Resources used by businesses generally decline in price. Ultimately, a new growth cycle is spurred by the impulse to make a dollar by meeting the needs of others. Producers of goods and services prosper, until excesses create the conditions for recession again.

Unlike nature, however, the economy has a less-set schedule. The last recession was a just a two-month affair; some are two years long. Growth cycles may also be long or short. And further complicating things, some investments do well when others do poorly.

So we look for companies that have seasons of growth ahead, the best bargains we can find. For some holdings, it pays to own over extended periods, firms that dominate their sectors and will emerge from slowdowns in better a position to prosper in the future.

And when the slowdowns occur across the whole economy, we trust that, just as winter gives way to spring, the economy will find new growth after the recession. It always has, every single time in American history, although there are no guarantees about the future.

Clients, if you would like to get your portfolios in closer alignment with the seasons in the market, please email us or call.

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Seasons and Cycles: Things Grow and Things Rest – 228Main.com Presents: The Best of Leibman Financial Services

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Value Will Out: Living with the Streaky In-Between
photo shows a pair of glasses aimed looking out an office window

The ever-changing mosaic of the market holds my attention like few things do. It seems that a million factors bear on daily outcomes, mediated by human emotions such as fear and greed.

As fundamental investors, we believe that value ultimately comes out. Fads and fears may drive prices to irrational levels, but sooner or later the bottom line, the intrinsic worth makes itself known. This is why we are sometimes content to invest or hold onto unpopular companies: we’re waiting patiently.

Recently the broad stock market averages had their worst day in many months—followed the next day by the best day in many months. One day the global economy is supposedly going off a cliff; the next, all is well in the world. During such turmoil, we are happy to do our research, make decisions, and hang on.

The crosscurrents have been strong. When some of our larger holdings gain or lose 5% in a day, it has an impact on your account balances. But we pick our spots, thinking about the long term, and judge our results over the longest possible time horizon.

Streakiness in the short run, we can tolerate. It may just be the price of getting to the long-term results we desire.

For you, that means we are interested in your cumulative results: how much have you put in, and how much do you have now? This is generally a more useful, and gratifying, way to look at your portfolios. The day-to-day action can appear random, by comparison. (It goes up and down, this we know.)

In the meantime, we read and study, assessing our holdings and looking for new possibilities. Having the best clients in the world helps: we spend no time apologizing or explaining short-term volatility, for we know it will always be with us.

Clients, if you would like to talk about this or anything else, please email us or call.

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Value Will Out: Living With the Streaky In-Between – 228Main.com Presents: The Best of Leibman Financial Services

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“Fed” Up With Inflation
photo shows a $1 bill inflated like a pillow

Recent weeks and months have been tumultuous in the stock market, and if you listen to market commentary, you will see one word come up over and over: inflation.

The funny thing is, market commentators cannot seem to decide whether we have too much or not enough. Many commodities started dropping a few months ago, driven by fears that inflationary prices would lead to a recession. When it looked like inflation was starting to level off, the same commodities dropped more. And then the Federal Reserve said it was satisfied with the way inflation was leveling off. Investors started worrying that the Fed was too complacent about the possibility of further inflation.

So guess what happened? Commodities dropped further still.

The moral of the story seems to be that the markets will do what they want in the short run and that market commentators will find excuses for it.

But we do believe that inflation will have a noticeable impact in the long run, and this poses many risks and opportunities for all of us.

With all the government stimulus money floating around, it might seem like inflation is inevitable. But the supply of money is only one side of the equation: money’s value depends on the supply of money versus the supply of all the things we want to spend it on.

For now the supply of money is up (due to the stimulus), and the supply of stuff we want is down (due largely to last year’s shutdowns and disruptions). The government’s hope is that as the next normal arrives, the supply of stuff will catch up to the supply of money—and inflation will settle back down.

Maybe that happens, maybe not. But we are less interested in what inflation does in the next year or two than we are in what it does in the decades ahead.

Everyone wants to build a bigger, brighter future. We are seeing an unprecedented demand for raw materials to make that happen, on top of the equipment and expertise to transform those materials into useful products. Whether we have a little inflation or a lot of inflation, this position strikes us as a good time to be in business for the companies producing raw materials and the ones manufacturing finished goods from them.

We do not know with certainty when or if this will play out. It may take years or decades. Even then, it may not come to pass the way we’re imagining.

But we think these big-picture trends will be more important in the long term than what the Fed announces this week or the next.

Clients, would you like to talk about this or anything else? Write or call.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

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"Fed" Up With Inflation – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.