Basically I took last week off. While I pride myself in posting weekly, there was little new to reflect on in the business world. Some earnings were good and when they weren’t the trade war was the culprit. The Fed cut rates but the White House wanted more, ostensibly because Europe’s were lower relatively. So now Trump’s self-proclaimed “greatest economy in the history of our country” wants to compete with others in a race to the bottom? There are plenty of signals indicating troubles ahead, yet for every one I find problematic another exists with a contrarian view. Then when all else fails to divert attention away from the clouds forming on the economic horizon, the President amps up his racist banter to ensure the focus is on antics over reality.
So I took a week off from posting to revitalize. To clear my head of the endless back and forth. To dig a little deeper into my research on some of the oddities that appear regardless of the political view that one ascribes to. One example being the workplace raids in Mississippi rounding up undocumented individuals. Once I got past the fact that all these plants were not publicly traded my business interest waned as there is minimal direct impact to investors such as ourselves. The question that continues to be asked by left of center media is, “Which employers will be charged?”. The answer is probably NONE. The reasons are twofold, 1) HR functions (in at least 6 of the seven) were outsourced to a third party, and 2) the Government’s E-Verify system was used. Plausible deniability is the buzzword of the day unless documented attempts to circumvent the process occurred. The real question should be, “What is Homeland Security doing to improve the verification system?”
The one item that left me scratching my head was if the impact of the underlying consequences was identified – or even considered. With low unemployment, these are the types of jobs that are typically shunned by most legal workers. Higher wages may make the difference which would result in higher consumer prices. The second consideration is according to the Mississippi Poultry Association, the feed used for the birds is a mix of corn and soybean. The state may be licking their wounds as well since their Development Authority contributed $1.5 million in federal community development money to improve a building that Pearl River Foods leases from Leake County. The county also provided $170,000 for infrastructure improvements. As I see it, a campaign promise kept may impact the CPI, reduce soybean demand even further (following the loss of the Chinese market) and embarrass a Trump-allied governor by highlighting poor oversight of “corporate welfare”. But my dividend stream should be unimpeded.
However, as the dog days of summer are upon us, this is the time I like to reflect on the portfolio progress thus far and identify any adjustments necessary as we move towards year end. This continues to be difficult as during this presidency the only certainty has been volatility usually caused by tweet or inconsistent positions. During times of uncertainty, my fallback view traditionally has been transportation. But for every analysis like Wolf Street reflecting on the production backlog decreasing, there are other – not so dire measures – such as port utilization. I will say one of holdings (Volvo) has reflected some weakness in North America. Perhaps some of the answer lies in tariff front running and taxes or perhaps this time has no historical parallel. So I continue to be cautious while playing some of the dips – all the while remaining on the strategy that has not let me down over the years.
I may decide to take another week off unless the market gets even crazier!