Category Archives: Market Comments

Q 1 2021 Review – Three V’s: Vaccine, Volume of Money, Valuation

Vaccines, Volume of Money, Valuations 

With the continued increase of the number of people getting the vaccine a much-welcomed sigh of relief is being felt across the country and most of the globe. Thankfully thus far the variance seems not to pose a terrible threat and most continue even post vaccine to take the appropriate precautions. This is leading to a slow Opening of the country and a light at the end of the tunnel heading back to some type of normalcy. 

Volume of Money 

The Federal Reserve (FOMC) led by Chairman Jerome Powell continue to buy assets at the rate of $120 billion a month. With a main goal of lowering the Unemployment rate, these funds of course are giving a boost to Capital Markets and providing massive volume liquidity. 

Additionally, the Fed has short term rates at zero and has stated they intend to keep them there for some time. This is also a stimulus for certain parts of the economy, but also a boosting effect on Asset Prices. 

With Fed controlled short interest rates being held low, longer term rates, notably on the 10-year US Treasury have been moving up in minor protest by bond vigilantes that economic stimulus may be too much, fortunately at this time there seems to be no effect. 

With the FED on record saying that short term rates are deemed to stay low, their first move back to normalcy maybe to pair back the purchases.  Our interest will be, when, and if this occurs, and more importantly, capital market participants reactions.  

Valuations 

As mentioned, multiple times in our blog at www.street-cents.com and again our Q2 2021 Newsletter, valuations by almost any metric are stretched. 

While valuations may be a more somber note, the re-opening and vaccine completion rates should dribble into corporate earnings, the ultimate driver of capital markets and possibly provide a wonderful “Grow into our Valuation” affect. 

If you asked us for our candid opinion, we would like capital markets to trend sideways while we grow into our valuations. Continued rise in capital markets could lead to a bumpier ride once the Fed adjust their policy. 

We of course will be watching carefully!  �

Sincerely,

John A. Kvale CFA, CFP

March 2021 Financial Planning and Capital Market Review – By John Kvale

Hello and Welcome to our March 2021 Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!

Newbies –

We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets and current events!

Hope you enjoy!

March 2021 Video

YouTube

Financial Planning Tips

Two Handy Reminder Posts – Credit Report and Social Security Earnings Credits

We had not one but two really good reminder posts over the last four weeks, on which is featured in the Newsletter in great detail and one that is a handy annual reminder – hat tip DK!

Here in this post we highlight why and how you can check your credit report. This is a really good thing to do at least annually to see if there are any barnacles attached to your credit, thereby lowering it and possibly causing other costs in your life to increase i.e. as mentioned in the insurance.

Here in this second post and again also featured in the Newsletter, why you should check to make sure you are getting credit for those hard earned tax dollars being sent to the Social Security Administration AND very importantly a reminder to look for missing credits in your history!

Stimulus Check Update

In this post, we detailed the planning techniques associated with the third round of $1400 stimulus checks and what to watch out for as well as the new cliff thresholds of phase outs… further detailed with the following chart:

March 2020 Review, Annual Reminders Credit Report and Social Security Eearn

Capital Market Comments

Maximum Macro Economics Coming Soon

Not every trying to be a trend setter or first into the pool – we accidentally beat most of the regular commentators here in this post to the fact that there are likely some VERY HOT ECONOMIC numbers coming our way.

These will occur due to easy comparisons associated with the drop in Economic activity about a year ago as well as continued lift off as we open up for business once again.

There will be interesting dialogue in the Headlines – Be for warned much of this may be skewed by the afore mentioned!

Have a Great Day, Talk to You at the End of April!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Get Ready for Some Possibly Very Positive Macro Economic Reports …. The Year Over Year Comparison

In some ways it seems like an eternity…. in others it seems like a weird dream …. and in others it seems like only yesterday we started with a shutdown of the US Economy to thwart the spread of Covid….

Fast forward to today and we are almost exactly one year to the day when direct Economic Effects began ….

Get Ready For Some Crazy Macro Reports

Many, but not all Economic reports are Year over Year comparisons…

Imagine as we compare reports to an almost shut down economy, especially just in the very near term… to a much more robust, but of course not at full capacity Economy?

Here is the GDP from Fred (Federal Reserve St. Louis) – A rather slower moving Economic Measurement

Today, the United States Bureau of Labor Statistics Reported the most recent CPI number… here

This is February 2020 to February 2021 – likely to look much different next month!

Over the next few quarters many Economic numbers may have some really jaw dropping changes… just be aware it is likely better to use month over month comparisons if possible for a better measure.

We bet we will all see some pretty interesting Headline Reported numbers though!

Have a Great “Crazy Economic Report Watch” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Interesting Research From a Podcast – Food Price Correlation to Inflation, Assets and Other Linkage

Over the weekend while on an extended walk with the 16 year old’s dog, a new Podcast Series from Grant Williams had an interesting guest with an even more interesting theory…

The theory from the guest was that food prices and the increase and decrease there of acts as and inflationary or deflationary force on economies.

His logic was that we must all eat and if you watch food prices around the world you can see a big correlation to not only the afore mentioned economic forces but also government interaction to help offset bad side effects of these movements….

Hmmmmm….

Meet the USDA Economic Research Department

Being HUGE fans of government research sites, (no copyright problems) the USDA Economic Research Department of Agriculture is a new one on our radar…not only that, but this huge page of Interactive Graphs will be watched more closely with important ones likely finding a place here for all of our collective review….

Our favorite starting point graphs to follow … note food is third on the expenditure list … lending credence to Grants podcast guest view:

How about food price movement as it relates to Economic Cycles?

There were certainly spikes prior to these three recessions….

Here is a more detailed chart of expenditures of food at the personal level:

On the margin, food has cost less out of pocket over time.

Ya, ya we are nerds, but this is very interesting stuff to us, especially such a new and interesting Theory worth watching!

Have a Great “Watching Food Price” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

All Eyes on Interest Rates … Rate Run

We have been watching interest rates closely as well as a local born inflation gauge called the Trimmed Mean put out by our Own Dallas Federal Reserve….

Interest rate movement can be a predictor of better times ahead… Think reopening and also of future inflationary waves…

Here is a shorter termed graph of the 10 Year Treasury Yield….

Purposely a shorter term graph to exaggerate the recent movement…

Next up, we fly much higher to the ten thousand foot level to show you while rates are moving, they are far from sky high….

Higher rates can be a headwind to markets… fast moving higher rates would have a high probability of disruption…

Watching Rates and Inflation

Slower, gradual, less jittery rates may be just what the Dr. ordered… not too hot, not too cold…

We will be watching!

Have a Great “Watching Rates” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

FactSet Earnings Estimates and Ratio Review – Part II in Market Valuation Series

John Butters our friend at FactSet, (a treasure of information resource) released a 37 page report in timely fashion for our Valuation Series. We are especially fond of Butters who takes the time to personally email us the “ok” to reproduce portions of his report…thanks again John!

Recall our first in Valuation Series here, where we reviewed the Buffett back of the Napkin Valuation of GDP to S&P 500 Market Capitalization…. While maybe not flashing Bright Red, it was in never seen before high valuation territory…

FactSet Valuation Analysis

Here we are again showing a likely never before seen high chart value … Flashing bright Yellow or maybe Light Red. Way up high as printed is overvalued…

Unlike the prior charts, this one is GREAT going up…

This Chart is the Q1 2021 Earnings Expectations. In September of 2020 expectations were for a negative yes -13% year over year earnings… today barely positive, but positive!

Now here is the REAL GOOD news, Q 1 2020 was mostly unscathed by the lockdowns… meaning this is a very aggressive comparable to a more normal year, also meaning the following quarters will likely print huge positive growth numbers due to easier comparisons…

With a little luck, maybe we can grow into our larger than fitting/high valuation clothes over the year!

Lemonade out of Lemons … MAYBE, but bad things do not always have to happen…

Lots of risk, lot’s of things that could go bad, but again they do not HAVE to!

No time to swing for the fences — We NEVER do!

Have a Great “FactSet High Valuations but a Safe Way Out” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

January 2021 Financial Planning and Capital Market Review – By John Kvale

Hello and Welcome to our January 2021 (First Monthly Review of the New Year) Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!

Newbies –

We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets and current events!

Hope you enjoy!

January 2021 Video – First of Year

YouTube

Financial Planning Tips

Required Minimum Distributions Now 72

As mentioned here in our post, do not feel bad if you lost track of changes, as in just over 12 months there were THREE – yes three major laws implemented.

Late December of 2019, the SECURE act (Setting Every Community Up for Retirement) among other things, upped the first mandatory RMD (Required Minimum Distributions) from Qualified/IRA/401k type plans to 72!

The Covid 19 related Cares Act passed in late March of 2020 nullified RMD’s for all of 2020, making for some confusion.

Second Stimulus Check Update

In this post, we review the new Stimulus check amounts, and where you can CAREFULLY go to check the status of your check…. here are the highlights…

Generally, U.S. citizens and resident aliens who are not eligible to be claimed as a dependent on someone else’s income tax return are eligible for this second payment. Eligible individuals will automatically receive an Economic Impact Payment of up to $600 for individuals or $1,200 for married couples and up to $600 for each qualifying child. Generally, if you have adjusted gross income for 2019 up to $75,000 for individuals and up to $150,000 for married couples filing joint returns and surviving spouses, you will receive the full amount of the second payment.

Here is the link to the US Government tracking site:

https://www.irs.gov/coronavirus/get-my-payment

Once open need to Click on “Get My Payment” Tab

Be very careful when opening this site to NOT allow your browser to jump to any other site than that associated with the IRS as you will be asked for confidential information!

Capital Market Comments

Buffett Back Of Napkin Valuation Metric

After happily receiving an “OK” to reprint graphs directly from the CEO of this industry publication – Look Out, there are tons of Great Articles that we look forward to bringing you!

Up first, a great broad Buffett “Back of the Napkin” Market Value Metric- This is the Market Capitalization of the S&P 500 divided by the US Gross Domestic Production…. This measure has never been this high before- sending a warning signal for Current Valuations.

“Price is what you pay, value is what you get!”

Chart Via Jill Mislinski 1-5-21 (Advisor Perspectives)

Happy Start to the New Year!

Have a Great Day and Super Start to the New Year!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Warren Buffett, Back of the Napkin Market Valuation Tracker … Part 1 in Market Valuation Review Series

With on-line investment animal spirits accelerating in some of their antic spirits, we thought it a good time for a calmer, longer term view of some high level market valuation views.

Oh … have not heard of the animal spirits? …. Let me digress for just a minute. A collective group of folks are ganging up on companies that have large short interest. Short Interest? This means company’s who’s stocks have large amounts of investors betting the company will go bankrupt or at least eventually lose value. As we say often, when everyone is on one side of the trade/theory/belief, this can cause vulnerability on the opposite side. When a group gets together and buys in mass, a largely shorted company stock, it can cause a short squeeze, similar to the afore mentioned Tesla…

You may say “So What” and that is fair, but this can cause other areas of the market to become frothy (which we have been speaking of before) and it also speaks to the recklessness of a investor behaviors and their disregard for any type of safety.

Buffett VERY High Level Market Indicator Flashing Caution

Warren Buffett aka the Oracle of Omaha due to his investing prowess, rarely gives any of his broad market comments and always qualifies that he has no idea where the markets will go… as do we!

BUT,

Price is what you pay, Value is what we get!

Chart Via Jill Mislinski 1-5-21 (Advisor Perspectives)

That’s an all time high/expensive aka NOT CHEAP- just saying!

Let’s be careful out there! Anyone remember what cop show this quote was from?

Have a Great “Buffett Indicator Flashing Red” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

An Interesting Look at Airbnb …

This neat chart here from our friends at Visual Capitalist shows interesting facts of a family favorite Airbnb..

The third chart is most interesting to us…. the huge number of listed rooms, which is not surprising upon further thought of the business model… individuals homes or second homes.

Have a Great “Airbnb Reviewed” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Another Robert Kaplan Townhall Update – Some Breaking Comments … Slowing Purchases this Year

Back in the fall last year, here we commented on a terrific Robert Kaplan Townhall. Good news, this time we were able to listen to this Townhall which occurred Monday January 11, 2021 without accidentally becoming a participant!

Robert Kaplan is the Dallas Federal Reserve President and is a voting member of the FOMC (Federal Open Market Committee) in 2020 – has a lot of eyes on him, especially during FOMC statements … but – see next

We like to listen to these “Quaint” discussions as more open comments and nuggets of information can be discovered and we are big fans of Kaplan as well…

Kaplan Latest Townhall Comments

Kaplan reiterated an expectation of US Economic growth – if all goes well – of 5% Wow. US Economic growth certainly has easy comparables due to a bad 2020, but a 5% growth rate is really strong and if occurs would help with our Capital Markets growing into their clothes thesis.

Biggest breaking comment, Kaplan believes the FED will at minimum speak of easing on asset purchases and again if all goes well is interested in higher rates later this year – Wow, another big news comment. Recall our concerns if rates get ahead of the Fed and they are forced to chase them down, could be strong headwinds… From our perch this is good news.

Oddly, most major Financial Firms are saying the likely stimulus coming soon will help, but when that runs out a slowing may occur …. someone is wrong !

We will be watching!

Kaplan firmly stated that continued stimulus through asset purchase AND low rates will do more harm than good if continued too long …. We agree, inflated asset prices and excessive risk taking does not work out well.

Best Question – What is Biggest Risk to Economy in 2021?

This question was by far the best and Kaplan’s comment that too slow of Vaccine rollout were both elegantly stated.

Kaplan expressed some concerns with the speed of the current rollout but expected/hoped for acceleration in short order, as we all do.

Kaplan, as a firm believer in higher education, our resident state of Texas is not at the top of the rung on this one, he mentioned several times improving the education system especially as it relates to technology will likely increase productivity in the decades to come.

There you have it, some Breaking News and some Good News!

Have a Great “Kaplan Townhall Update” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents