Thursday, September 29, 2016

Reflection Reveals Economic Truth

Our nation’s dialogue is drumming red, white, and blue as we continue to draw closer to November 8th. Our upcoming election has prompted plenty of debate across several avenues, including how the outcome might affect our investments. It seems that even during family dinner, it is hard to break away from the clatter of opinions. So, how are we supposed to find solace in the middle of a heated presidential campaign?

Answer: Pause and consider . . . because your investment return is not determined by whether we have a Democrat or Republican in the White House. Sure, this is easier said than done! While there is cJanita thisonstant rhetoric around elections, it is important to ask yourself two things:

  • Do you remember the past elections affecting the performance of your investments over the long run?
  • Does your experience reflect an investment return that was different whether a Democratic or Republican president was in office? 
This is not the first time our economy has adjusted to a new president and it certainly won't be the last. We encourage you to please let your goals determine your actions, not the current president's political affiliation. However, if you are struggling to make sense of this in regards to your investments, please know that we are here for you. Just reach out to our trained specialists at

In times like these, it helps to recall there have always been times like these.”
- Paul Harvey 

Six truths that won't be affected by the election's outcome.

It is a common perception that the stock market will fare better when a Republican is in the White House because the Grand Old Party tends to be pro-business. A related perception is that Democrats hinder economic and market growth with higher taxes and increased regulation. The historical evidence just doesn't support either notion.

In truth, investors who stay the course are likely to fare much better than those who invest only when one of the two major political parties controls the White House. In fact, if you look at the returns of the Dow Jones Industrial Average since its invention in 1897, it's clear the stock market does not favor either party.
Everything Investors Need to Know—and Should IgnoreAbout the Upcoming Election
  • Gridlock doesn’t mean nothing gets done.
  • Changes in Washington don’t typically come all at once but in increments.
  • Campaign rhetoric doesn’t always influence what happens during a president’s tenure.
  • Consumers and businesses have a far greater impact on the economy than the government.
  • The state of the economy influences who is president, not vice versa.
  • The stock market doesn’t care if the public is happy with who is president. 
The U.S. election will, as always, give us sufficient reasons for both optimism and despair but as an investor, your long-term goals, plan and behavior should shape your investment decisions, not your reaction to who wins the presidential election. However, if you have needs or concerns that you would like to discuss with us in person, please give us a call at 281.990.7100 or email!

"Well-positioned, well-led companies will create investment value regardless of who sits in the White House."

Jerry Webman, Ph.D., CFA Chief Economist for OppenheimerFunds

Bad news always gets more attention

It's easy to focus on the doom and gloom reported in our 24/7 news world. Simply put, bad news always gets more attention!

The focus on bad news seems even worse in an election year when candidates can't stop speaking about the country's problems. Of course this is followed closely by all the reasons the candidate is the man/woman for the job!

According to Warren Buffett in his annual shareholder letter released this spring, it is because of this constant negative drumbeat that many Americans now believe their children will not live as well as they themselves do.

"That view is dead wrong: The babies being born in America today are the luckiest crop in history," said Buffett.

He goes on to claim that the American GDP (Gross Domestic Product) per capita is a staggering six times the amount it was in 1930.Moreover, Buffett doesn't believe that Americans are smarter or work harder now than they did then. They just work more efficiently, allowing for more production. 

"This all-powerful trend is certain to continue: America's economic magic remains alive and well. For 240 years, it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did," said Buffett. 

"Every pessimist who ever lived has been buried in an unmarked grave. Tomorrow has always been better than today, and it always will be."
- Paul Harvey

Will driverless cars be common by 2035?

Remember as a kid watching old Sci-fi movies where there were cars that drove themselves and drivers could coast with auto-pilot? It all seemed far off, as if pertaining to a futuristic society. Well, some of those "futuristic" ideas may actually be on the verge of becoming a reality - and they might be doing so a lot sooner than you think!

Today, automakers around the globe are currently working on various different technologies that not only include cars without drivers, but they're taking it one step further by putting these vehicles on the road.
For example, Audi recently obtained a permit from the state of California to test drive vehicles on public streets. Other auto makers aren't far behind as Volvo and Mercedes Benz are in the process of testing out different vehicles.

You may be surprised to learn that some non-auto manufacturers are also racking up miles with driverless cars as well. Google, for instance, currently has about 700,000 test miles on its own version of cars without drivers. IBM, Intel, and Cisco Systems are also in the game. With so many driverless explorations happening, it seems as though the future is now.

So what are the implications of all this? In terms of investment, it could be substantial. According to Morgan Stanley, the benefit of autonomous cars alone for the United States economy could be somewhere in the range of between $700 billion to $2.2 trillion per year. In any case, driverless vehicles are certain to transform the auto industry - and our lives - in many ways, likely by the end of this decade.

Source: Chris Bryant and Andy Charman, “Race Is on to Build World’s First Driverless Car,” October 13, 2014.

"Some Google employees have their self driving vehicles take them to work. These cars are a bunch of sensors, wires, and software. This technology 'works'." - Tyler Cowen

Energy Independence: The Dream is Becoming a Reality.

Energy Independence: The Dream is Becoming a Reality.

For many years, the argument has raged on regarding how the United States should go about obtaining and paying for its oil reserves. This debate has been the subject of many heated discussions - and it may be for many years to come. However, the concept of U.S. energy independence is becoming a reality much sooner than many people realize, halting the argument in its tracks.

Back in early 2007, many Americans believed that the future of the United States energy industry appeared to be bleak. Since then, however, a major transformation has taken place - primarily in the country's three largest oil fields - in terms of key oil production figures.

The Bakken, the Eagle Ford, and the Permian Basin, have all increased their oil production from 1 million barrels per day to an estimated 4.6 million barrels per day (as of year-end 2014). In fact, the oil production in Texas alone was more than 3.1 million barrels per day, the most in more than 33 years, according to the Energy Information Administration.

Given this steep increase in U.S. oil production of late, a longer-term trend towards energy independence could actually become a reality, lessening our future dependency on foreign oil producers.

There are still some questions with regard to long-term sustainability of U.S. oil production going into the future. However, it could be a positive opportunity and dream come true not just for U. S. oil producers, but also for consumers and investors alike.

Source: U.S. Energy Information Administration. Data represent thousands of barrels per day (bpd) for the month of July 2014.

"As long as the United States - and the world - gets its oil from the Middle East, we will be drawn into the endless crises that seem endemic to the region. American energy independence would not only liberate us, it would also drive down the worldwide price of oil." - Kathleen Trola McFarland

Income is growing faster than any time in history.

In many parts of the world today, money is continuing to set new speed records. No, these records can’t be measured in miles per hour, but rather in terms of Gross Domestic Product (GDP) in various areas of the globe. And, as time marches forward, the speed with which money is moving continues to increase.

As an example, in the past, it took approximately 150 years from the beginning of Britain's industrial revolution for Gross Domestic Product per person (measured as purchasing power) to double. Roughly 120 years later, in America, this was accomplished in roughly one-third the time. But even more recently, though, in China, it has doubled in only 12 years and with 100 times fewer people.

In addition to the rise in GDP, the average incomes in developing countries are also growing faster than they ever have in the past. While China and Asia are responsible for a great deal of this new wealth, South Korea, Mexico, and Nigeria are also following suit.

Around the world, there are millions of people who are moving quickly into the "middle class." This means more discretionary income is available and ready to be spent on goods and services. This speedy transition has, in turn, provided a golden opportunity for businesses - and investors - as consumers continue to spend.

"By increasing productivity and becoming more competitive, we will be able to offer better opportunities and improve the standard of living for all Mexicans." - Enrique Pena Nieto

Source: Urban World:Cities and the Rise of the Consuming Class, June 2012, McKinsey Global Institute

The digital revolution is lifting the world to a new level.

The digital revolution is lifting the world to a new level.

While many people understand that the Internet and smartphones are changing the way that we live and work today, what most may not realize is that this modern "digital revolution" of today actually got its start more than two and a half centuries ago.

What we now refer to as the Digital Revolution - inclusive of laptop computers, cell phones, tablets, e-readers, and other modern electronics - was actually begun 250 years ago. The first and second Industrial Revolutions preceded the Digital Revolution, opening a pathway for the evolution of technology and modernization. Over time, our global economy has shifted from relying on people for operations to relying on technology for efficiency.

When you think about it, though, it all makes a lot of sense. This is because as our needs change, new devices are constantly being developed in order to replace the old ones. For example, the water mill was replaced by the steam engine, the computer replaced the transistor, etc. In fact, each new wave of technology brings about new surges in productivity - and because of that, new businesses are able to consistently emerge.

Many of these technologies have led to substantial advances that have improved the overall standard of living across the globe. And, some of our biggest businesses today are providing opportunity for both commerce - and investment - that people did not even imagine just a decade ago. Some examples include the Apple iPhone, tablets, and the Go-Pro. With easy access to endless technology, we could be in the midst of the next level of the digital revolution.

"The number one benefit of information technology is that it empowers people to do what they want to do. It lets people be creative. It lets people be productive. It lets people learn things they didn't think they could learn before, and so in a sense it is all about potential."

- Steve Ballmer

The Future Looks Bright.

Today, we are living through an era that is just as significant as the Industrial Revolution was so many years ago. In these modern times, change is being created almost at the speed of light - and, with these changes, there are both big challenges and opportunities that are presenting themselves for long-term investors.

While some of these changes may be slow to develop, they are having profound implications for the entire world economy. One example is the evolution of a middle class in developing countries. Many of these individuals have gone from lacking opportunity to creating opportunity, by establishing their own businesses and moving forward financially. Literally hundreds of millions of people are being affected - and it is likely that the effect will continue to build. 

Other changes have burst onto the scene quite rapidly, such as smart phones and the Internet. Today, people from all corners of the globe have more access to information than ever before - and that is powerful. This is something that was unimaginable even just a decade ago, but today is common.

While we may not see inventions like hover boards or flying cars any time in the near future, the inventions that we do have such as the Internet and instant communication have created significant opportunities - for people and for investment - worldwide, for both the short- and the long-term horizon.

"Knowledge is power. Information is liberating. Education is the premise of progress, in every society, in every family" - Kofi Annan