"Consumer saving, spending belie predictions of recession" by: John Sample

   We have just about put another month in the books and the tech sector has moved up 25% in value.
   If that is supposed to be a recession, I missed something getting my masters in economics. Of course mine came in the agricultural school where you had to understand and use calculus to determine projections through regression analysis.
   I just don’t understand how anyone can project a recession when consumers are actually saving money while still spending.
   The U.S. economy is basically in two sectors of manufacturers and consumers.
   The first cannot compete with the second sector.
   Earnings reports this week in the restaurant sent those stocks north. All these positive earnings reports are coming with the Federal Reserve meeting and discussing whether to cut interest rates.
   I see little or no reason to lower rates. I am sure the President would have a text meltdown to explain what a mistake such a thought could be.
   I see little or no inflation and economic growth that will be better than most people are projecting. The vaunted trade war is having a minimal impact of earnings and we are moving forward even with the impact of a strong dollar.
   Speaking of earnings season, Tesla didn’t fare that well nor did Beyond Meat.
   In the first case, you have a company with a great product that never meets projections and continues to burn money.
   Sooner than later you have to make a profit. This is not Amazon.
   In the second case, you had a company that was up over 800% since the IPO and it finally ran out of gas and it may give all of that up much sooner than later. Does this remind you of Bitcoin?
A poor earnings report is just one hazard that can send a stock south.
   In the case of Capital One, a data breech was met with nothing but sellers.
   This is somewhat analogous to Boeing’s problems.
   I would say though that it was interesting to note this week from earnings reports how changes in management can be rewarding. 
   You only have to look at McDonalds, Microsoft, Starbucks and Chipolte.
   In the last case you had a company reeling from couple of incidents of food poisoning.
   In McDonald’s case you had a complete makeover in the marketing concept.
   Microsoft morphed from being an operating system provider to a service company relying on the cloud.
   Starbucks continues to find new and interesting products and new markets.
   As always, tie your investment wagon to great management.
As for recommendations, I would certainly suggest that any equity that you possess that has not performed to date should be eliminated while we are at these record high levels.
   Quality stocks may not sound exciting but they can weather the storm and you will have time later in the year to sell and offset any losses to date.

 

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