Category Archives: Economy

Lumber Prices Show How Supply Can Catch Up to Demand – Supply Clearing High Prices

There’s an old saying in many commodity complexes … “What will drive high prices down? High Prices … What will drive low prices up?   Low prices” – the basic gist of this is that when prices get too high, demand slows and when prices are low demand picks up.

We first heard this saying in the oil patch but it fits across almost any commodity or other variable pricing asset.

Spot Futures Lumber Prices – Now thats a Clearing Price

For those of you that have not heard there are supply shortages in all parts of the economy. On a funny personal note …recently I had my golf clubs re-gripped and there were only a few options to have a complete set of the same grip ….all the other were back ordered to mid to late 2022. Part of the increased prices of used automobiles is a reflection of new automobiles being unable to be complete by shortage of semis.

We thought you would find this interesting and a great example of higher prices slowing demand. At one point in the most recent quarter, several publicly traded companies were completely shutting down certain aspects of their operations due to extreme high prices.

Trailing Three Year Spot Prices

Trailing Three Year Spot with Percentage Change – Up 530% Followed By Down 70%

Certainly tons of factors going into this move. BUT, if you are wondering how higher prices can in your commodity of choice (Bread, Wheat, Lumber, Semi’s….) look like when it eventually clears…. Here is a playbook!

Have a Great “Commodity Price Clearing” 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

Q 2 2021 Review – Return to Normal, Inflation Here to Stay or Transitory

Slowly Returning to Normal, or Some Similarities

With hindsight available as our measuring stick, it appears that sometime between March and April earlier this year things across the country really began to return to some type of normal.

As noted in our blog at street-cents.com and in the prior newsletter TSA throughput a measurement of airport travel looks to possibly eclipse 2019 highs later this year.

Restaurants began opening, some earlier and some much later, depending on the geographic location with patrons welcoming their reopening.

Uncertainty remains on the remote versus office environment. Most think the new normal will not be a complete office environment, but some blend of remote since it is readily acceptable and well tested.

Inflation, Here to Stay or Transitory?

As discussed in detail in our latest Q 3 2021 Newsletter, the most prevalent debate at this moment among market participants is the topic of inflation and it’s staying power, or just transitioning through. The importance of this subject is directly related to the FOMC, chaired by Jerome Powell and the timing of his reduced stimulus.  All eyes are on the inflation debate and the timing of the decrease in stimulus and will be sensitive to timing changes.

Not surprisingly economic numbers roared as they met favorable comparisons from last year, but in very recent days, have given the appearance of a return to normalcy already, decreasing concerns of longer-term inflation.

Capital Markets being forward looking are now trying to see what is around the next corner. As earnings continue to return to normal, valuations are finally beginning to be decreased from extremely stretched proportions and as long as earnings outpace returns a continuation of this should occur.

Time is really our friend, and once again the good news is, this will all play out in quarters rather than years. Things can certainly change quickly, and it is not a time to swing for the fences, which we never do!

Have a terrific summer and talk to you at the beginning of fall.

John A. Kvale CFA, CFP

Market Valuation Update … How are we doing? Forward PE Ratio Review

As mentioned multiple times … with recent examples here and here by almost any metric Capital Market valuations have been and are stretched.

As a reminder this does not mean that markets have to come tumbling down to earth … just that heightened risks of sharper declines may be possible. Also as a reminder, just like our teenager with oversized clothes grows into them … as earnings increase faster than Capital Markets rise, valuations can come back in line! YAY

Updated Valuation Metric from our Friends at JPMorgan

And while still stretched take note of the very far right of the graph as it has smartly turned over as earnings outpaced Capital Market Growth



This is why the Graph is moving in a better direction – huge expected earnings in view….

Nice….

Still no time to swing for the fences, which we never do- but good progress…

Have a Great “Better Valuations” 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

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

Hello and Welcome to our June 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!

BREAK IN – HOLIDAY PARTY NOVEMBER 20 FROM 3-5 AT DALLAS ATHLETIC CLUB

Hope you enjoy!

June 2021 Video

YouTube

Financial Planning Tip(s)

Why Not to Overfund a Retirement Plan

In this updated post from a few years ago, we remind how easily it is to overfund a 401k plan and why, while it is not the end of the world, it is not a good tax situation….

Should you accidentally over fund your retirement plan … what occurs is a double taxation!

  1. You do not get the deduction for the contribution
  2. You will likely pay taxes on the eventual distribution

Job change is the most likely reason for overfunding!

Pesky Late Arriving Tax Form Reminder – Form 5498

In this mid month post we remind those of an extra late arriving tax form….

Murphy’s law being applied, the form just arrived last week….about two weeks after our post…..

Reason for receipt:

  • Rollover of a 401k or the like to an IRA – Most frequent
  • Contribution to an IRA
  • Contribution to a SEP

One of the most confusing parts of this form is that even though you may have made a qualified contribution for a prior year i.e. 2020, if you made that contribution in 2021, depending on the type of contribution the Form 5498 MAY show your contribution in year 2021.

Capital Market Comments

Inflation or No Inflation

In this part two post, “The Smartest Guys in the Room” post we discussed via interest rate futures graphs the movement after FOMC dot plot adjustments and the interest rate markets….

This is an updated Graph of the 2 year US Treasury, which is holding lower, (higher yield) possibly due to faster expected rate increases!

This is the ultra long 30 Year Treasury, which continues to trend higher (lower Yield) possible pricing less inflation from the above mentioned expected shorter term rate increases!

Ok…that’s a wrap for the June review…. Hello July!

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

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

The Smartest Guys in the Room, The Bond Markets and Participants – Part 2 of FOMC Dot Plot Update

Part 2 of our overzealous post started Monday that was a bit too long- Enjoy!

There’s an old saying that the smartest guys in the room are the Bond Market or Bond Market Participants.

Bond market participants have way less to think about than their brotherin equity market participants, Basically bond participants only think of the economy, the credit worthiness and length of their investment.

Using the USA as your proxy and with the United States being the most credit worthy bond in the world, there is one less thing bond market participants have to worry about. Taking a peek at the 10-year US treasury yield which would reflect mostly economic expectation or possibly the future growth, of course there could be outside investors rushing to the US treasury market in search of higher yields boring the matter a bit, but all other things set aside under the surface post speech bond market investors are expecting greater controlled economic growth, sooner (2 year Movement.)

Dramatic Movement in the 2 Year Treasury

In order to get a most up to date chart, we needed to use futures contracts, so bear with us, as the chart goes down the yield is rising… bond guys are pricing higher rates now!

Here is a close up of the latest few days, again on the 2 Year

Not surprisingly a bit of a come back (higher prices lower yield) in the chart after such a large move.

30 Year Movement

Same use of futures contract here…

Higher chart price is lower yield? The initial drop is in the February March 2021 time frame as the Economy began to open, but take note of the move UP – lower yields in the last few weeks!

This may seem counter intuitive, but the eventual increase in rates would thwart inflation and is being expressed by lower long term rates…

We’ve talked at length on inflation versus deflation, so will leave it alone at this time but it might be noted that’s the smartest guys in the room thank future economic growth is at least higher and longer term inflation is not their concern, at least for now!

Have a Great “FOMC – Smartest Guys In the Room Review” 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

FOMC Updated Thoughts From Press Release, Dot Plots and Post Release Interview of Jerome Powell (Part 1 of 2)

As mentioned Friday in our preview post, Jerome Powell chair of the FOMC and the rest of the voting members released their updated public press Economic Review and analysis mid-week last week. This  release also included 30 minutes post Q and A along with a prepared discussion by Powell that lasted about 15 minutes.

Just by chance finding myself on the road for a slightly unusual 90 minute journey that occurred exactly during the time Jerome Powell was speaking, I was able to listen to the entire speech live, while I’m not sure if it was the subject matter, or a minor dental procedure the day before, no matter … I found it extremely difficult to stay awake while driving – digressing here, but if you weren’t on the edge of your seat listening to the speech and reading the press release … you’re likely in good company as we usually find this material extremely interesting – still digressing.

Jerome Powell is most open to reveal something either by accident or on purpose during the Q&A as the prepared press release and the prepared remarks have so many eyes and advisers reviewing he’s certainly to say only what we are supposed to hear.

Wall Street and much of the media outlets took much of his comments to be more Hawkish (less friendly and more likely to raise rates sooner.)  For the record, this is why we enjoy listening to these types of events ourselves, as we did not find anything more than doing what he and the rest of the FOMC had promised to do, all along.

The dot plot which as a quick reminder, is an estimate of all board members including non-voting members timing and amount of where interest rates and where they expect economy to be was also released.

The following… Shows that multiple board members are more eager to raise rates sooner than they had been in recent quarters. In our minds this is good news as we would rather the FOMC not stay too low to long encouraging reckless behavior in the form of leverage and over leverage. Also encouraging for more conservative and cash investment such as our checking accounts an increase in rate will give us collectively some income on those reserves.

The Dot Plot Thickens

6-16-21 Dot Plot

Two Members Now Expecting two increases in 2022 with five members also expecting one move for a total of seven members expecting moves in 2022!

3-17-2021

Expectation by three Members of One interest rate increase and one member expecting two moves in 2022

Again, we think higher rates sooner is a return to normal and sets us back on course for continued economic recovery… just keeping to their word!

With continued compliments for keeping my material short and to the point, a late viewing of the US Open Golf Tournament, thanks to a West Coast Venue and a desire to see what the so called Smartest Guys in the Room – Bond Guys do this week, this post is officially Part 1 … Will only be one more Part, Promise!

Have a Great “Dot Plot Analysis” 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

Reminder of Seemingly Odd Late Tax Statement – Form 5498 … FOMC Dot Plot Preview … Newsletter Update … Summer Friday YAY!

Just when we happily said goodbye to a very long tax season due to the various extensions provided by the IRS, in comes a seemingly odd late tax form.

Form 5498 Reminder

Form 5498 is headed to some of our mailboxes over the next two to four weeks, again due to various extensions in the IRS filing due date, here are some of the reasons why:

  • Rollover of a 401k or the like to an IRA – Most frequent
  • Contribution to an IRA
  • Contribution to a SEP

One of the most confusing parts of this form is that even though you may have made a qualified contribution for a prior year i.e. 2020, if you made that contribution in 2021, depending on the type of contribution the Form 5498 MAY show your contribution in year 2021.

Not to worry, the IRS knows there are frequently a seemingly miss match of years and accounts for this.

Here is the IRS information if you need further clarity.

FOMC Statement and Dot Plot Preview

Earlier this week the FOMC (Federal Open Market Committee) led by Jerome Powell, released their Economic analysis update along with a interview after a pre-prepared reading by Powell himself.  The release, which also included the “dot plot”, which is an anonymous estimate by all the reserve members, voting and non voting on where they think the economy, is carefully scrutinized by all in the investment community.

We will take a deeper dive next week as there were some interesting cross currents post announcement and interview .. even with summer doldrums dragging along!

Newsletter Update

We are happily putting the final touches on the Newsletter, some of which partial pieces have been reviewed here, on our Blog, but with a longer Newsletter form we go into greater detail in our subject matters that we hope you will enjoy reading as much as we enjoyed creating.

Friday

Ahhhh…. But today is a Friday, for those that have been following… the rain has left us, the steam is subsiding from an abnormally fast early summer, the heat wave is reminding us why there is a saying in Texas:

“If you don’t like the weather, just wait a few it certainly will change!”

Have a great weekend, don’t forget to spend time with those special in your life and we will talk to you next week!

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 Fleet (Boat) Monitoring Site MarineTraffic.com – The Worlds Water Transportation

We continue to find very neat websites that are great for monitoring various types of population and transit….

First it was the TSA its self….

Then a VP seeing our research showed us her company website that has fancy enhanced features at Fligence.com

Then we stumbled upon the Kastle back to work monitor

Then Indeed job openings indexes

Now another new tracker… but this time boats!

Marine Traffic – Marinetraffic.com

Last week on an Institutional Investor conference call, one of the presenters mentioned watching Marinetraffic.com

Music to our ears…. another cool way to review the Economy and world transit.

The following is from the website, but there is also a very neat downloadable cell app, that has most of the same features.

With a monthly subscription (certainly a Naval person’s must) you can slice and dice the worlds naval transit in almost any way one would want….

Without a subscription, our situation, there is still a TON of neat information— on the live site you can hover over each boat and get more information!

All Ships

Cargo Ships

Pattern is very interesting, looks like close to shore for protection?

Tankers – Oil, LNG and other similar commodity transportation

More direct and less shore line hugging- interesting – maybe they are bigger?

Fishing Boats – How neat is that!

Satellite tracks these guys …certainly in areas that would be expected- warm!

USA Coasts– Wow – Gulf of Mexico

Look for us to review this in the future….

Sure wished we would have known of this before, but better late than never!

Have a Great “Marine Traffic” Day!

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Extended Tax Season Finish Line, New Neat Tracking Site Found … Friday

With an original Mid-March Corporate Tax Deadline, a regular estimated tax (ES 2021) April deadline … a most states extend 1040 to May deadline and then a June Taxes deadline for Texas and a few other states this could have been the longest tax season ever!

Next week marks the final full finish line of this most confusing and marathon like tax filing year. Thank you very much for your collective patience as it was very confusing to all across the country.

Possible New Economic Tracker

Next week we hope to preview another newly found very cool website that can monitor indirectly the economy, this one … unlike our TSA tracker… does not involving airplanes but boats! With a little luck we will get copyright privileges and can show you directly.

Ahhh … but that is next week, today is a Friday heading into an almost summer weekend. As mentioned near Memorial Day, a hope for an Ark …the rain has stopped …it’s still very wet here but slowly drying …some monster mosquitos that can carry small pets away …. But all good!

Have a great Friday a Super Weekend and talk to you next week!

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

Indeed Job Openings Country and Global Review- Stunning Improvements

A while back, we reviewed the JOLTS – Job Opening Statistics here . We noted at that time, the index was at an all time high, putting pressure on Employers to find workers….

Indeed Job Openings

With copyright permission granted a while back, lets take a look with greater precision at different areas of the country and world for that matter…. Data from Indeed Lab Solutions

Big US States – Wow – Florida pushing almost 40% increase in job listings versus 1-2020! Maybe not surprising after hearing all of the traffic heading to the State from other areas of the country.

Texas and Big Texas Cities

All between 20-30% higher ! Wow again!

Around the Globe

Very interesting to see the listings adjust so dramatically close to the openings and closings of countries…

All in all, very stunning improvements across the Globe!

Have a Great “Indeed Job Openings Review” 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