Making Hay Monday – October 21st, 2024
Making Hay Monday
High-level macro-market insights, actionable economic forecasts, and plenty of friendly candor to give you a fighting chance in the day’s financial fray.
Charts of the Week
It is hard to overemphasize how disturbing the above image is. For any country – particularly an aging one like the U.S. – an adequate savings level is essential to provide the funding for productivity-enhancing capital investments. Relying on the kindness of overseas strangers to provide that is dangerous, if not reckless, especially for a nation like America which is so diligently debasing its currency. That’s not the type of behavior that inspires confidence among offshore investors. The fact that this appalling situation is occurring at a time of low unemployment and, if official statistics are to be believed, healthy economic growth is unprecedented. It also undercuts the constant raving on financial channels like CNBC about the exceptional strength of the U.S. economy. The obvious question is how much of the post-pandemic GDP increases have been driven by $2 trillion annual federal government deficits?
WSJ
Another pertinent question is what the size of U.S. deficits would be today if military spending was running at 9% of GDP as it was when John F. Kennedy was president. Notably, this was before the U.S. entered the Vietnam War. Based on the current state of the world, it’s hard to believe America’s defense spending will remain this subdued. This is particularly unlikely for a country that is the planet’s bulwark against China, Russia, Iran, and North Korea, the Four Horsemen of the potential apocalypse.
Evergreen Compatibility Survey
Champions
The Sector That Truly Stinks
Shutterstock
“Some years ago one oil company bought a fertilizer company, and every other major oil company practically ran out and bought a fertilizer company. And there was no more damned reason for all these oil companies to buy fertilizer companies, but they didn’t know exactly what to do, and if Exxon was doing it, it was good enough for Mobil and vice versa.” -Charlie Munger
“Money doesn’t stink.” -Roman emperor Vespasian, defending his toilet tax
A rational investor would have reasonably assumed that, in the wake of Russia’s vicious attack on Ukraine, fertilizer stocks would have been superior performers. Actually, for a couple of months, that was indeed the case, as you can see below, at least based on the company that is considered to be the premier operator in this space.
Stock chart of the leading U.S. fertilizer producer in early 2022
Bloomberg
A 60% price increase in 60 days or so is nothing to sneeze at, but if you do, we suggest you see your allergist ASAP. (We know, a 375% annualized return isn’t quite as exceptional as it once was in this era of hot stocks doubling almost overnight, but, trust us, these giddy days will not last forever.) …
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IMPORTANT DISCLOSURES
This material has been distributed solely for informational and educational purposes only and is not a solicitation or an offer to buy any security or to participate in any trading strategy. All material presented is compiled from sources believed to be reliable, but accuracy, adequacy, or completeness cannot be guaranteed, and David Hay makes no representation as to its accuracy, adequacy, or completeness.
The information herein is based on David Hay’s beliefs, as well as certain assumptions regarding future events based on information available to David Hay on a formal and informal basis as of the date of this publication. The material may include projections or other forward-looking statements regarding future events, targets or expectations. Past performance is no guarantee of future results. There is no guarantee that any opinions, forecasts, projections, risk assumptions, or commentary discussed herein will be realized or that an investment strategy will be successful. Actual experience may not reflect all of these opinions, forecasts, projections, risk assumptions, or commentary.
David Hay shall have no responsibility for: (i) determining that any opinion, forecast, projection, risk assumption, or commentary discussed herein is suitable for any particular reader; (ii) monitoring whether any opinion, forecast, projection, risk assumption, or commentary discussed herein continues to be suitable for any reader; or (iii) tailoring any opinion, forecast, projection, risk assumption, or commentary discussed herein to any particular reader’s investment objectives, guidelines, or restrictions. Receipt of this material does not, by itself, imply that David Hay has an advisory agreement, oral or otherwise, with any reader.
David Hay serves on the Investment Committee in his capacity as Co-Chief Investment Officer of Evergreen Gavekal (“Evergreen”), registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940. The registration of Evergreen in no way implies a certain level of skill or expertise or that the SEC has endorsed the firm or David Hay. Investment decisions for Evergreen clients are made by the Evergreen Investment Committee. Please note that while David Hay co-manages the investment program on behalf of Evergreen clients, this publication is not affiliated with Evergreen and do not necessarily reflect the views of the Investment Committee. The information herein reflects the personal views of David Hay as a seasoned investor in the financial markets and any recommendations noted may be materially different than the investment strategies that Evergreen manages on behalf of, or recommends to, its clients.
Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this material, will be profitable, equal any corresponding indicated performance level(s), or be suitable for your portfolio. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Investors should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.
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