Market Perspective

The Race Continues: Economic Growth vs. An Economic Tantrum – Week 3

Posted by on Jun 6, 2017 in Ned Massie, Perspective | 0 comments

Leading Indicator Flashing Yellow: In graduate school I learned that auto sales and home sales were two very good leading indicators of the American economy. Therefore, I have paid particular attention to the last several months of reported auto sales, both new and used. They clearly indicate a slow-down in the auto industry. It appears that the peak of auto sales was last year and while 2017 will be a “good” year by historical standards it will be softer than 2016. Our analysis is that the economy in this economic cycle peaked in 2014. So we are not surprised by the slow-down in auto sales as much as we are of the delay in it happening. In these uncertain times, it is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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The Race Continues: Economic Growth vs. An Economic Tantrum-Week 2

Posted by on Jun 1, 2017 in Ned Massie, Perspective | 0 comments

Chinese Bond Market On May 31, 2017 the Wall Street Journal reported that Chinese five-year bonds traded at an interest rate higher than the Chinese 30-year bonds. In the financial world, this is called an inverted yield curve and is a forecast of a recession WHEN the increase in short-term rates is being driven by that country’s central bank. That usually means the central bank is attempting to slow down that economy. However, in the current situation, the fact that the five-year bond interest rates are higher than the 30-year bond interest rates reflects that investors are dumping the five-year bonds in an effort to raise cash. There are several reasons for that happening in China currently, including a new bank regulator that is attempting to gain control over the Chinese shadow banking industry which has more than nine trillion dollars in questionable assets. That amount is almost equal to China’s GDP and three times their foreign reserves. The last time a major global economy had an inversion of the yield curve because of investors selling bonds (as opposed to the central banks raising the rate) was the USA in 2007. You will recall that 2008 and 2009 were “historic years” in both the U.S. and global economy. Prudent investors should contemplate the significant ripple effects of a regulation driven investment yield curve in China. Those ripple effects will be felt in both the USA and the global economy. In these uncertain times, it is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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The Race Continues: Economic Growth vs. An Economic Tantrum

Posted by on May 24, 2017 in Ned Massie, Perspective | 0 comments

Our Summary of the Current Economy: Since November 2016 the world economy has been in a race between two major forces: Economic Growth – Will the Trump administration succeed in replacing Obamacare and greatly reducing the tax burden on both the American consumers and corporations, to spur the American and world economy, or Economic Tantrum – Will a lack of activity on those two items above combined with any one of numerous potential “Black Swan” events create chaos in the global economy? The U.S. Congress is grinding forward extremely slowly. Of course, it is refreshing to see the legislative process actually working again although the Democrats oppose everything regardless of the dire consequences to the average American. The global economy has recently shown some signs of recovery but below the surface there are very negative forces which could result in a “Black Swan” event. The proverbial bottom line is that the outcome of this race is unpredictable at this point. My hope and prayer is that the American economy will “muddle through” like we usually do. In these uncertain times, it is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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2017 – A Year of Turbulence But “The Good Times Are Coming” – Week 16

Posted by on May 15, 2017 in Ned Massie, Perspective | 0 comments

Bond Market Rising interest rates are not good for the bond market. As interest rates rise, the value of lower interest rate bonds go down. Bond investors that purchased at the trough of interest rates in the summer of 2015 have seen the value of their bonds decrease. The important thing to note is that the interest rates on US Treasuries in January of 2015 versus January of 2016 are almost the same. What we probably witnessed in 2016 was the bottom of the bond market, especially now that the Fed is once again raising interest rates and there are political leaders in Washington that want to see the economy grow. The ripple effect of the bottoming of the interest rate market and the decline in prices of the existing bonds, are multi-fold. Some investors will have to sell other assets to cover losses if they have leveraged bond portfolios. These ripple effects will impact real estate values because the rate of return on real estate is compared to the returns on...

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2017 – A Year Of Turbulence “But The Good Times Are Coming” – Week 15

Posted by on May 10, 2017 in Ned Massie, Perspective | 0 comments

Timber Land When most people think of timber land they think of the timber only being used for construction purposes. There are a number of uses of products that come from timber, some of which even include processed foods. However, fiber for construction is a major part of the use of timber that is grown in the United States. Environmental regulations under the Clinton administration took most of the northwestern United States timber out of use. That shifted the burden so that today the southeastern United States and Canada are the main sources of fiber used in construction. We anticipate in 2017 the new home construction market will remain relatively stable compared to 2016. However, we see growth in new construction in 2018 and into 2019. At that time we expect to see the demand for lumber increase which will impact the value of timber and timber...

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2017 – A Year of Turbulence “But The Good Times Are Coming” – Week 14

Posted by on May 4, 2017 in Ned Massie, Perspective | 0 comments

Commodities The fact that most commodities traded in this world are priced in Dollars is a strategic advantage for the United States of America. It also means that as the Dollar strengthens, commodity prices around the world are lowered. This puts a severe burden on those countries that export commodities to us and also makes USA exports more costly. We expect the Dollar to continue to strengthen in 2017 due to The Fed raising interest rates when most other central banks in the world are still playing games with QE, (Quantitative Easing). A stronger Dollar means fewer foreign buyers of our agricultural commodities. Because their income will be reduced and their expenses will remain stable or increase, the net result of that shift puts more pressure on farmers and all the ag related businesses that supply them. It also has an impact on the value of crop land. Here in Virginia we did not see over the last six years the dramatic run up in crop land price increases experienced in the Midwest. Therefore, we do not expect to see a decrease in cropland prices in...

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