Good Afternoon!


Hey, Happy Friday.  Fantastic.


The point of today’s title?  Too many make the grave error of allowing political views to interfere with their financial facts.


Like it or not, our demographic make-up is set for the next 50 years.  This will encompass many different administrations.  The demography issues will have substantially more productive impact on your thinking versus any amount of time spent in turmoil over the latest political event(s).


We can ignore that simplicity if we choose – but there is little we can do to stop it from unfolding.


Facts about numbers of people are real.  Human nature is real.  Striving for the best they can accomplish is the goal of most humans.  Throw a hurdle in their way?  Well, that is what has marked almost every major surge of accomplishment in our history.


As investors, we must learn to welcome discomfort, welcome problems, welcome things we must fix.




Think about it.


You can be assured if we run out of things we need to fix, create, build or replace…the picture gets pretty dim after that : )


The Biggest Element…


Outside of the demographic issues which are driving a significant shift for the next 20-25 years +, the sentiment picture is something I want to leave with you today.


Yes, I know I am a broken record.  But emotion drives money.


Let’s make sure we have a strong grasp of the back-drop first:  We are just moving into the summer haze.  This period is normally marked by very slow movement.  Kind of like maybe walking in quicksand.  We can expect some movement up – and some movement down.  We can assuredly expect slower volumes – and even slower on Monday’s and Friday’s.


The pace will slacken further in July and come almost to a complete stop (at least it feels that way sometimes) in August.


This is ALL normal.   So don’t sweat – in fact, welcome it.


Now I set all that up in your mind so you can feel the real value created by the fact that sentiment already stinks!  And, it stinks across the board – all the way to the Wall Street sell-side groups.


I have provided below a few snapshots to drive home the point:


First, the latest BAML Wall Street sell-side sentiment data – a real shocker after a 15,000 point run from the March 2009 lows (it is just returning to levels seen back in March 2009 – and in 1985 – wow).


Next, the latest weekly AAII sentiment graph you are accustom to seeing (lots of noise in it).  Only 1 in 4 like the market.


After that – the next three are the 8-week moving averages for the last 5 years, 10 years and then the entire history of all bullish sentiment data from AAII going back to 1986!


Why the 8-week average?  It tends to permit you to see just how low we are historically over long periods of time – without all the one-week changes which makes the data a bit more choppy and confusing for some.


Key take-away?   Sentiment stinks…fear remains very strong under the surface.


And all of that is great news for the long-term, contrary investor.

It would be helpful to let this repeating message sink in.  The purple lines I have added to the 5 year, 10 year and all data charts is designed to show you just how few bullish feelings there are out there – at record highs.


Let’s be clear – historically, you saw low bullish readings after a market has gone down – not up.


Just take a look at the last chart – take it all in and then note this:


Look at the very small number of times sentiment has been worse than now – each and every time was a valuable time to own stocks.


And – never – was it at a high in the markets.


Lesson from this?  Melt up is what we saw in the 80’s and 90’s during the Boomer push. Melt up is most likely while we witness the very early stages of the Gen Y push.


In plain english?  Pray for a correction.


In Closing


I want to share with you comments from the latest manufacturing data.  First you will see the ISM data below – following that, note the comments from front offices across many industries.  Does the tone sound bad?


The lesson from that?  Ignore Politics – Focus on People.

Reading between the lines, I remind you of what we noted early in the year.


We called it our “Fedexed Economy”.  It went something like this:


“We have spent so long making sure we do not suffer a repeat of 2008-2009, that we have not planned for one thing – increasing demand in all areas.”  We went on to note: “We have squeezed our pipeline down for so long and erased inventory for years.  No one keeps any inventory around anymore – if you need something extra, you simply Fedex it. Industry chose to work in the extra shipping costs over risking too much inventory costs. The result?  Soon we can expect that we will see longer wait times in many industries – and for some – we will simply run out of stuff.”


The Bottom Line


Have a great weekend – it is the first of summer 2017….data slowdowns are ahead because everyone will be at the beach and spending time with kids.


Expect it – don’t fear it.


If we are lucky enough to get a “summer swoon” be ready.


Why?  Simple:  Take a look at every other summer swoon in history.  They were all at lower prices than where we are now.


Pray for a correction – even if it hurts in the short-run.


Dead ahead is the dreaded Summer Haze and often, hidden in the noise, opportunity arises.


Enjoy the beach plans ahead and time with loved ones and friends – be well and please travel safe!


Until we see you again, may your journey be grand and your legacy significant.