Gary Miller

MORE EVIDENCE THAT THE ECONOMY IS COMING BACK

 In an email to clients on May 25, I included a link to some graphs provided by the Value Line Statistical Service, which show that many widely followed financial indicators have been trending upward for months.  Now comes evidence from so-called “below-the-radar” indicators that confirm that a recovery is underway.  Bloomberg Business Week on June 15 reports that a number of oddball indicators show that the economy’s heartbeat is strengthening:

Who to blame for the mess we appear to be in? Greedy Wall Street bankers? Fatuous Europeans who expect to retire at age 55 after a lifetime of loafing? Inept oil drillers fouling America’s southern coastline? When times are tough you can count on politicians to score points by blaming everyone in sight, rarely noticing that many of our problems today are the results of legislation enacted by previous Congresses. No one seems to want to accept individual responsibility-it's always the Other Guy's fault. I'm convinced that this nation's greatest enemy are those who insist on seeing the glass as half empty, whatever their political persuasion.

I love my clients!  Shortly after the market closed, on one of the wackiest days in memory, I shot out a reassuring e mail to my clients (reprinted below). Here is a sample of the responses that came back from some of them:

“Wow!  From my perspective you wrote the following and responded in less than a minute from the time I sent my email to you! “  

“Stay with it! You’re the man!!!”

“I know  you are on the job, and I trust your judgment. I rode out 1987 with you.”

“Thanks for the info you have been sending today Gary.  We have been trying to keep up with everything, but it is great to hear your explanations.  You certainly express yourself extremely well.”



Aren’t I somethin’ !?

But really, it feels good for me to  know I’m needed and respected for the work I do.



Now, for your interest, is my perspective on what is going on in the markets from the above referenced e mail sent to clients earlier today:

What the SEC/Goldman Sachs Tussle Means for You

I've never tolerated arrogant management in companies we own, nor do I care for lack of transparency and the outrageous incomes earned by the stewards of public corporations, bankers, oil companies, insurance companies or industrial companies. I refuse, however to assume that Goldman Sachs is guilty of a crime until the facts are aired and the court decisions are made. Like California Congressman Darrell Issa, I also am suspicious of the timing of this SEC action against Goldman, coming as it does while Congress is contemplating legislation to more strongly regulate Wall Street ( legislation that, in principal, I support ). This being said, I find that an editorial by economic commentator Larry Kudlow on CNBC, Wednesday April 21, 2010 brilliantly sums up the issues. I happen to agree with Kudlow's warning about government overreaching, presenting a threat to one of America's most successful industries. I'm reproducing his commentary below, and urge you to read and consider what he has to say.

“We could see a statistical recovery but a human recession” - Indira Noori, CEO Pepsico, quoting Lawrence Summers, Director, White House Economic Council, on CNBC TV, March 22, 2010

Consider that one year ago, Bailout Nation was gaining speed, with huge subsidies provided to a gasping  banking system, insurance giant AIG accepting its fourth bailout from Uncle Sam and  two of the three remaining US car makers careening toward oblivion.   Every Friday, new bank closures were announced.  Having lost the argument in late 2008 that no bailouts were appropriate, those who believe in less not more government were ringing their hands in dismay, certain that financial and social disaster lay ahead.  On March 3, 2009 an editorial in the Wall street Journal accused the Obama administration of frightening business away from new spending with its threats of health care reform and a carbon tax to curb global warming.  The following graph was offered as proof that the new administration was a disaster for our economy:

I consumed two fat books on the life and investment strategies of Warren Buffet this past year, both of which improved my already considerable knowledge of his approach.  Buffet sniffs at index investing, and especially at trend followers.  His does the challenging work of company-by-company financial analysis. Consider that while the S&P was losing 20% […]

UNEMPLOYMENT TOOK A SURPRISING TURN DOWNWARD WITH LAST MONTH’S REPORT RELEASED ON FRIDAY.  GIVEN THE STATISTICAL MANIPULATION (SEASONAL SMOOTHING) AND REVISIONS THAT HAPPEN REGULARLY, THE REPORT IS TO BE TAKEN WITH SOME GRAINS OF SALT. STILL, WE MAY HAVE SEEN A MEANINGFUL DECELERATION IN THIS IMPORTANT NEGATIVE TREND.  RISING EMPLOYMENT IS THE CORNERSTONE OF A […]

IRA Conversions
If you’re a high-income earner and haven’t been able to contribute to a Roth IRA to date, you’ll soon get your chance. Beginning next year, investors of all income levels will be able to convert a traditional IRA to a Roth, thereby ensuring tax-free withdrawals and no required minimum distributions in retirement. Individuals […]

The Financial Times (ft.com) features a podcast that discusses a unique concept: refunding to clients the trailing commissions paid to brokers. Many investors with traditional brokerage firms may not be aware that their advisor receives Section 12B-1 fees from certain mutual funds.  Should this money be refunded to you, the investor?
Well,apparently in Great Britain, […]

Berkshire Hathaway, Warren Buffet's investment vehicle announced today it would take 100% control of one of the nation's largest railways, Burlington Northern Santa Fe (BNI).Trusted Financial holds, in most client portfolios, a position in Berkshire Hathaway, and this commentator has personally held a position in the company for some 12 years. Today's acquisition, Berkshire's largest is not something I applaud, but it is revealing when one considers the evolution of investment style of the greatest investor of our Age. As a child in Omaha, Nebraska, Warren Buffet commented to a friend who lived on a busy thoroughfare, that he wished they could find a way to erect a toll booth and collect money for every car that passed.  Buffet's desire to own businesses that have an effective monopoly, like a toll bridge, has been chronicled in books like Roger Lowenstein's "Warren Buffet, the Making of an American Capitalist", a 1995 work that I am in the midst of re-reading.  Earlier this year I read the massive "The Snowball" (Alice Schroeder,(C) 2008, Bantam Books).  From what I've learned of this focused capitalist,  I'm not surprised by today's announcement, but as one who tends to subscribe to a purer form of Graham-Dodd value investing, the choice worries me.