Broker Check


August 09, 2021





A financial commentator I listened to this morning was expressing his optimism that this Memorial Day weekend was bringing with it a sense of our “re-birth, a sense of restored freedom, liberation from the “constraints” of the virus, the shut-downs,” etc.  I felt some of that enthusiasm also as I got to watch my grandson compete in a little league playoff game last night in San Diego, and as our family is preparing to go to Disneyland this Sunday!


As most of you likely know, I am a Disney “fan”, our family has had season passes for many years now, so participating in the “re-opening”, one would think, would be seen as my grand-kids see it:  “Grandpa, I can’t believe we are going to Disneyland!”  But for us “adults”, this enthusiasm also brings with it some “hesitancy” or sense of impending disappointment if you will.  My daughter, who follows the various bloggers who write about their Disney experiences, of course conveys to us the advantage of only 25% attendance in the ride lines, and other positive reactions to the current Disney conditions and tends to gloss over the pretty significant closures or very limited menus in my favorite eating venues, the need to make electronic orders for food in a critically timely manner before all food “waiting lines” fill up for the day.  But I have tried to remain optimistic that as Sunday approaches Disney will be progressively enhancing those features.


I suppose this may have some parallels to the current investment “promotions”:  the “old” investment rules have been “shut down”, rendered irrelevant, and never to rise again while the “new” generation of assets attracting large sums of money 


Although we have had other “frightening” years in the more recent past that some of you will recall:   


The Corona-Virus event followed prior declared pandemic events: 

Pandemic 1957, H2N2, Asian “Hong Kong” Flu, 116,000 US deaths

Pandemic 1968, H3N2, 100,000 US deaths

Pandemic 2009, H1N1, Swine Flu, 18,448 US death


There were several other infectious viruses that popped up in the world from time to time but the others were not characterized as “pandemics”, they were limited in scope geographically.  Many of the vaccines/treatments developed at the time to treat the various forms of virus are still used today, often combined with others designed each year before flu season starts.


So while the current virus statistics suggest we are rapidly approaching a level of immunity, we will be living with the lingering existence of various forms of the Corona-Virus itself around the world, and its presence will likely manifest itself as an enhancement to our annual vaccination program.  I tend to think of it as having the likelihood of “booster” shots at some frequency.


If you would like to see an interesting timeline for Influenza since the 1930’s go to the link below:

(if you have difficulty getting the link, a printed version is at the end of this blog entry)


In reading related materials that summarized the lessons of the above “timeline” the “experts” came up with two guiding factors when attempting to control a serious virus outbreak such as the pandemics listed.  The two “lessons learned” were (1) QUARANTINE THE SICK and (2) BE AWARE OF THE “BALANCE” REQUIRED FOR ADDRESSING THOSE WHO ARE NOT SICK.  NO BROAD-BASED ‘LOCKDOWNS’ WERE EVER ADDRESSED SINCE THAT WOULD HAVE ELIMINATED THAT “BALANCE” CONCLUSION. 


It is interesting that nearly 100 years of virus study and science monitored by the NIH, CDC, and world-wide health authorities NEVER drew a conclusion for even global pandemics that “lockdowns” were appropriate.  I tend to believe that the scientific guidance of the past was simply that, a product of objective scientific study.  The WHO, CDC, and NIH today are pretty openly also driven by a host of “political” pressures that overwhelm the actual scientific evidence.


That is my observation from reading the research I have done.  Some of the “facts” that no-one is disputing, such as the numerical similarity of the virus statistics between California and Florida, also suggest that political decisions (if only to demonstrate the contrast between political efforts to exercise a level of control over the public) have resulted in the glaring lifestyle, health, education experience and freedom of choice difference between providing “balance” for those who do not need to be quarantined and treating everyone as if they were infected and need to be “locked down”.   There is still NO data that suggests opening schools fosters spread of the virus anywhere in the world, with full history now of tens of thousands of students having been IN school for nearly a year.  Universally, psychologists are preaching the “ills” of the lockdown conditions affecting the entire demographic age range, children to seniors.

          It won’t take long for books to be written about how “politics” and social bias led to the selective acceptance and denial of well-founded scientific conclusions.  Of course, we may never be able to read them if they are prohibited on the social media and other tech platforms that would like to control what we read using their ability to censor what they choose.

          Just today I was happy to hear the CDC announce that those who are already vaccinated are not going to pass on the virus and that the vaccines we have are 100% effective in the one range of young people ages.


I have been highlighting some of the prior virus information in my “blog” entries that are posted under the “Commentary” tab on our website:




Believe it or not, state tax revenues were actually UP in 2020 even though apparently California is one state that claims to need “emergency funds”.  The legislature is proposing a 12% increase in spending for the coming budget.  The state continues to see tech firms move out to “greener” pastures (Texas, Arizona, Nevada, Florida, etc.) which could begin to create state revenue short falls.  While Californians already experience one of the highest income tax rates in the country, the apparent trend toward growing the Federal government to take more direct actions in areas such as education, the environment, social equality, etc. may well flow down to the aspirations of state level politicians and would likely cause us to see even higher state taxes here.


I will remind you that the lower Federal tax rates we currently have are due to expire in 2026 absent any intervention by Congress in the meantime.  Current proposals call for a “wealth tax” which would cause very wealthy people to annually contribute 2-3% of their total net worth to help fund the anticipated rising Federal deficit. 


In 2010, according to a USA Today report, the “debts and obligations taken on in 2010 by the US government, when allocated on a per “solvent” household basis, reached 109% of the total income of the median family.”  This was based on the fact that the “US federal deficit grew by $1.5 trillion and total US Treasury bonds outstanding reached $14.5 trillion” which meant the total debt nearly matched the size of the total US annual economy.  The Congressional Budget Office (CBO) has estimated the $14.5 trillion has now grown to $22 trillion for FY 2021.  The current National Debt Clock indicates the total national debt today is nearly $28 trillion or $84,681 for every single person in America!  There are three main contributors to the mismatch between spending and revenues: demographics (lots of seniors getting Social Security, Medicare and Medicaid), high health care costs, and inadequate REVENUES (i.e. taxes need to go up).  The interest on the debt (with interest rates being very LOW) is nearly $1 billion per DAY, the fastest growing part of the federal budget.


Only ECONOMIC GROWTH or increased tax revenues can offset the rising debt or at least slow it down.  The US is the world’s largest economy BUT the average growth rate in the 50’s and 60’s was above 4%, in the 70’s and 80’s it dropped to about 3% and in the last 10 years the average growth rate of the economy was less than 2%.  GROWTH may be hard to come by.  The auto, appliance, construction, etc. booms so prominent in the 50’s, 60’s and 70’s were very significant.  But maybe the seniors spending on health care (and video streaming and model trains) and millennials (the other huge segment of the population) driving growth by spending on (…..hmmm, I wonder what that is?) whatever, might present the US with continued slow growth, rising expenses, low income while a significant segment of our “electorate” seems to believe the debt is irrelevant.  Raise taxes and print more money is the new norm.  Some prominent economists support that theory and at least they claim they can’t be wrong (even though it has never been sustained anywhere in the world in the past).  You can probably track those theories to the economic “peak” of some once dominant powerful “global entities” such as the Roman Empire, the Austro-Hungarian Empire, and the once globally dominated British Empire, among others.


Interest Rates…


I do not see a return to the high interest rates of the l980s as some fear.  Mortgage rates of 16.625% on my house in 1989 are not likely to be repeated.  Last fall I refinanced into a fixed 30 year mortgage rate of 2.5%.  Interest rates have fallen since their peak back in the late 70’s and early 80’s and remain very low historically.  We had not seen rates as high as those in the 1980s anytime prior to then.  Yes, rates will cycle but in all likelihood within a much narrower band than the highs of 20+% of 1982 and the lows of nearly 0% of today.




Simple:  Impossible to explain.  Defy logic.  Looks like gambling to “me.”


I do think that today’s “markets” are NOT the markets of the past.  For one thing, when experienced investors (less than 50 years old) say they want “growth” in their stock strategy because they want to be in the companies that will be around and continue to dominate their field for years to come it smacks of stock buying into the “nifty fifty” in the 60s and 70s, those “solid buy and hold growth stocks” that could maintain valuations well above all the rest.  When the bear market of the 70s began (1973-74) and lasted through 1982, the sole surviving “nifty” stock trading above the rest of the market was Walmart.  (Look up “nifty fifty” on Wikipedia)


My philosophy, based on wanting to “buy low and sell high” and earn positive rates of return to outpace inflation along the way, has kept me out of serious trouble and I recommend it as a core philosophy for just about everyone.


The last year has reintroduced “volatility” into discussions about the trends in the stock AND bond markets.  And I also find myself questioning the definition of “growth” being applied to big tech stocks.  I ask you:  How does Google get growth?  They offer free services to you, collect and sell your information to companies who want you to “buy” what they sell.  For high levels of growth to be sustained they need more and more “you”s to “sign up” or they need you to participate in an increasing fashion that can cause more advertisers to grow their funding to Google.  An endless cycle it seems to me.  When will the weak link of that cycle fail?  You find a “better” search tool, you don’t give up your privacy, don’t want to be censored, you don’t want advertisers to fill your screen with ads for their products, and so on.  This pattern is pretty true for Facebook, Twitter, Amazon, etc.  Technology has already progressed beyond the basic construction of the Google “search” process, the Facebook “sharing”, the Twitter “ego boosting”, etc.


We will likely be focused on inflation compensating assets:  real estate, commodities, etc. to complement stock and bond “mixes”.  We started that a few years ago and investing options turned out to be very limited.  The limited choices we made have worked very well against the declining interest rate conditions of the last several years.  We are seeing more options begin to show up and have been looking to include some of them in investment portfolios in the next few months.


I had intended to get this blog post out by the end of March but circumstances just did not allow.  I hope you all had a blessed Easter and wonderful start of Spring!