Some Common Cents for December 23rd, 2016

Since the election, I have had more than one person ask me a variant of: “how are we going to pay for everything Trump says he is going to do?” This is ordinarily more rhetorical than an actual desire to know the answer, which is understandable. There has been no shortage of so-called experts predicting fiscal rack & ruin over the next 4 years. It always seems to go something like this: “Based on what we know of Trump’s fiscal and economic plans, our model forecasts an $X increase in the accumulated debt over Y number of years.”

It all sounds very complicated, sophisticated, and intelligent. I mean these are folks with advanced degrees from some of the most prestigious universities in the world. Further, they are on national television, which lends a certain air of gravitas or even validation (for some reason). Surely, they most know better than we; this is what they do for a living for goodness sakes! Well, perhaps, but, then again, perhaps not.

So, whenever I get the question/statement about Trump exploding our debt ceiling (debt ceiling, ha!), I usually counter with one or both of the following, and in no particular order: …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees. 

Some Common Cents for December 16th, 2016

My wife had her office Christmas party last night, and came home with an Amazon Echo Dot she received as a gift from one of her co-workers. I was a little torn on this, as I had planned on getting her one, although largely just for the speaker aspect. So, I decided to proceed forth, and see what I could now buy to make the most of the thing. You know, wall adapters, and things of that sort, to make at least one room of the house a truly ‘smart’ room.

I will cut to the quick: I will not be making those purchases for the big day. Oh, I might pick some of the necessary accoutrements after December, assuming they go on significant discount, and I mean significant. While really neat technology, I am just not prepared to spend upwards of $40 per electrical outlet, from what I can tell, just so I can order Beth’s electronic device to dim the lights. That sort of thing.

You can call me a Luddite all you want. However, it isn’t that I don’t see desirability of such technology. It is just the estimated, current expense of adapting my house is greater than my perceived benefit. That will certainly change as I age and the cost goes down, both in absolute and relative terms.

Regardless, the Pandora’s box is open, and I fully anticipate ALL new homes in the near future will be fully ‘smart,’ not just the super pricey ones. This will, or should, cut down on per capita energy usage in the United States, maybe. After all, it will be, or is, much easier to turn off all the lights in the house with a simple voice command than it is physically doing it. Trust me, I have no idea how many times I have told my wife I turned off ‘all the lights’ before climbing into bed, knowing full and darn well I hadn’t.

Now, consider the following chart/picture/table from the Energy Information Administration: …Read More…

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Some Common Cents for December 9th, 2016

emerging-markets-signIf every year in the future flies by as quickly as 2016 has for me, I am going to go buy a burial plot and cheap suit for Christmas. Outside of 2008, it has been one of the craziest years I can remember in my career. I suppose I can blame a somewhat bizarre Presidential campaign for part of it. The mealy mouthed Federal Reserve also gets some blame. Finally, I have two teenagers, and I will leave it at that.

However, where the rubber meets the road, from a pure investment standpoint, the emerging markets have been the biggest surprise for me, or least the returns in emerging market stocks. After all, there has historically been a very strong positive correlation between developed and emerging market returns. Certainly, the emerging markets are more volatile, but the return direction is ordinarily the same.

Now, the emerging markets had something really going against them in 2015, namely a surging US dollar. This means money is flowing out of other markets and into ours, making foreign currency denominated securities less attractive in relative terms. Further, a strong dollar usually leads to lower commodity returns. Since many emerging economies are heavily reliant on natural resources, 2015 was a disastrous year, just disastrous. Throw in a slowing grower China, and, it was a recipe for disaster. But, that was 2015.

What about this year? …Read More…

Some Common Cents for December 2nd, 2016

movieI am not sure it is because I have been doing this for as long as I have or because it really is the case, but the data is starting to look the same to me. I say this, because after reading this morning’s Employment Situation report for November, I had to wonder: is that all you got? It was as if the Bureau of Labor Statistics (BLS) had somehow ‘phoned it in.’

In fact, it reminded me of a scene in a somewhat obscure movie entitled “The Year of Living Dangerously.” Granted, it isn’t for all tastes, unless those tastes include giving a care about an aborted communist coup in 1960’s Indonesia. However, if you have seen the movie, you might remember a scene when the Mel Gibson character phoned in his report about Indonesian strongman Sukarno to his bosses back in Australia. It goes something like this:

“In short, Jakarta is a city where the questions outnumber the answers, but one thing is certain: that Sukarno’s tightrope shuffle between the Communist P.K.I and the right-wing military is looking more precarious as the hours tick by. This is Guy Hamilton in Jakarta for A.B.S. News.

Is that all?

What do you mean?

You could have written that from here.

What about the tightrope image? Everyone else thinks Sukarno is in control.

Guy, that wasn’t news. It was travelogue. Sydney out.”

While this morning’s report might not have been actual travelogue, I feel as though we have all been down the same road many times. In case you were wondering, I am not going to quote Robert Frost at this time. After all, he took the road not taken. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees. 

Some Common Cents for November 18th, 2016

A couple of months ago, I wrote about an exchange I had with a CPA at a conference where I was the presenter. This person was very much against any potential reduction in the corporate tax rate, apparently due to his personal perception of fairness, as opposed to professional misgivings. Let’s just say we agreed to disagree.

Now, I don’t believe we should eliminate corporate taxes, even if I were to benefit from it. Corporations avail themselves to the protection of laws, as well as the use of the nation’s infrastructure. Simply put, you should chip in if you are using it, whatever it is. Don’t bother arguing with me about double and triple taxation of the same dollar; I am not going to change my mind, even though I completely understand your argument.

Currently, the corporate tax rate in the United States is 35%. That is at the Federal levels, as the various states have their own. For instance, the top marginal corporate tax rate in California is 8.84%. That means a company headquartered in California could ultimately pay up to 43.84% tax on the profit it realizes in that state. Obviously, that is a lot of money, and I am more than certain plenty of companies out there go to great extremes to actually conduct business in various subsidiaries which are HQ’d or domiciled elsewhere.

But how does that compare? …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees. 

Some Common Cents for November 4th, 2016

This week, a client told me my recent newsletters have taken the tone of a frustrated poet. I laughed and told them there was an element of truth to that. After all, the markets seem to be paying attention to only two things at present: 1) the Federal Reserve, and; 2) the Presidential election. How much more insight can any one individual provide over the reams of paper commentators, including yours truly, have already devoted to the subjects? At some point, you start repeating yourself, let alone others, by beating those dead horses.

To that end, many of the columnists and analysts I particularly like have also delved into the arcane, waxed philosophic, and opined on abstracts more than usual. In so many ways, ‘we’ in the investment/economic industry have become arty worrywarts. Let me attempt to dispel that today:

First, here are my thoughts on the Presidential election:

…Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees. 

Some Common Cents for October 28th, 2016

jimmy-buffetYears ago, I was a pretty big Jimmy Buffet fan. I went to concerts, I bought albums, and I knew every word on “Songs You Know By Heart.” While I am no longer a pseudo-Parrothead, that album is still a pretty good choice for a sunset happy hour during warm weather months, if not the best. For my money, its only real competition is the Bob Marley & The Wailers compilation “Legend.”

One afternoon during my junior year in college, a group of us were playing spades and listening to music on our patio. Someone suggested we listen to Buffet, and put in the, then, relatively recent “Floridays.” I had yet to hear this particular album, even though it was a couple of years old, and was excited to do so.

After Side 1, the guy whose cassette tape it was asked me if I liked it. I answered him truthfully: “It’s okay. It sounds like Jimmy Buffet is trying really hard to be Jimmy Buffet.” To this day, I haven’t purchased another new release from the man, and haven’t been to a concert since the Off to See the Lizard tour in 1989. In truth, he doesn’t come here every year any longer, and tickets were astronomical the last time he did so.

You might think it weird I remember my reaction to a Jimmy Buffet album from 28 years ago, and I guess it is. However, the reason why it still stands out is I was disappointed to realize my favorite musician wasn’t really a musician, at least not in truest sense. He was a brand, and a massive money making one at that. I had reached my saturation point, and was tired of making him rich.

While bully for him, it was kind of like finding out about Santa Claus. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees. 

Some Common Cents for October 21st, 2016

This past Sunday, my wife and I drank coffee and watched the morning news programs. At some point, the noise from the TV, histrionics actually, became ambient. To be sure, I am certain the commentators thought they were being terribly insightful, but I didn’t think so. It was so much Newspeak, a la 1984, to me, and I ultimately tuned it out.

Perhaps there was something subliminal happening, because a feeling on unease came over me. I would stop way short of calling it foreboding. It was just a sneaking suspicion things weren’t exactly quite right, but I couldn’t have told you what it was. It was weird, but eventually passed.

Laughingly, you could counter the reason for my discontent was I should have been getting ready for church instead of watching television, but I had made plans to go to our afternoon service.

On Wednesday, I watched the Presidential debate, and stayed tuned on CNN afterwards for its analysis. Better put, I stayed tuned to watch what CNN considers analysis, because its panel basically consisted of 7 left wingers beating down on 2 presumably right wingers. More importantly, despite all the weighty issues at hand in a Presidential campaign, the topics for the most discussion, seemingly at the exclusion of all else, were: 1) whether Donald Trump will accept the election results if he loses, and; 2) Trump’s incredibly poor judgement in using the phrase ‘bad hombres’ when discussing his plans to deport undocumented felons.

Admittedly, I am not a political expert, and maybe those things are more important than I would think at first blush. However, if the Secretaries of State of the various states declare their voting results to be valid, does it really matter what Donald Trump thinks about it? He isn’t in a position to stop the transference of power in the White House from Barack Obama to Hillary Clinton. As for ‘bad hombres,’ it was a stupid choice of words, plain and simple. There should have been no reason for argument, debate, or heated discussion. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees. 

Some Common Cents for October 7th, 2016

The American public goes through the same spectacle every four years; actually, some would argue it is every two years. Suffice it to say, we go through it a lot. ‘It’ meaning campaign promises and ranting & raving about how the ‘other party’ is wrong or evil. This year seems to be just like every other election year, but on anabolic steroids.

Personally, I don’t think either party is mean spirited or wants to destroy America. Nor do I think America has to become ‘great again,’ because we already are. We are in an enviable position where the only real example we have is, well, ourselves. Some of us want the government to ‘do more,’ and others want it to ‘do less.’ I will let you decide just what that means for you.

What if both groups are right? That the government can do both more and less at the same time? Truly, that would be fantastic. Wouldn’t it?

I have run the data. I took overall Federal government receipts for every calendar year going back to 1949 (through 2015)and compared it to the nominal GDP number for that year. Care to guess what I found? That’s right; government revenue goes up in lock step with GDP. In fact, my handy dandy Excel add-in function suggests there is a +0.995278 correlation between these two data points. For all intents and purposes, that is perfect correlation.

You know what else? We have had any number of different tax rates, policies, and schemes over the years, and they all shrink to irrelevance when staring at the data in the spreadsheet. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees. 

Some Common Cents for September 30th, 2016

aolIt has always been prudent to choose your words wisely and avoid inflammatory issues when writing newsletters and newspaper columns. However, in the past, it was more difficult for readers to reach out to you with their opinions. This disconnect, if you will, between the writer and the reader probably engendered a more constructive flow of actual information and opinion.

I started writing the precursor of Common Cents in 2001, I believe, and a weekly column for the Montgomery Advertiser in 2005, or was it 2006? Regardless, I have been writing for a wider audience for over a decade, and one thing has definitely changed: I no longer receive actual letters in the US mail from people who have an opinion, usually strong and opposite, on something I have put forth. And why would I?

According to the US Census, an estimated 51% of US households had a computer in 2000, and slightly less than 42% had access to the Internet. This is important, as you obviously have to have a computer and Internet access to send an email. To that end, UC Berkley estimated global users hit send on roughly 31 billion emails per day in 2001. In 2015, the most commonly accepted estimate for daily global email volume appears to be north of 205 billion. That number doesn’t include texts, tweets, or posts, and, if my email inboxes are any indication of normal, it seems a little low.

As an aside, AOL used to have a little voice announcing “You’ve Got Mail” whenever you received an email. If our business email or my Gmail account did the same thing today, it would drive me nuts. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.