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~ Net worth records.

~ Debt/asset % back to late 80’s levels.

~ Oil draws – supplies still bloated – with more to come.

~ Housing dwindling

~ “The Robots Are Coming”

~ Comedy Break  (Don’t miss the cartoon)

We have passed the feared Fed meeting.  As big a non-event as you can imagine. Amazingly, the same “experts” who were positing a nearly endless stream of fearful statements pre-meeting about a rate hike have awoken this morning with a brand new set of “facts” to scare you in the near-term.

When does the insanity end?  Oddly enough – let’s hope never.  Sentiment stinks, mountains of cash lay idle, fretting over something (anything) is at a record tilt, data points are being dissected beyond any meaning whatsoever – and – get this:  markets keep fighting onward and upward.

As long as you can stomach it – these are great things for those with a long-term focus.

New Stats

A quick summary:

Housing inventory is down to 4 months.  Six months is deemed balanced.

New home sales were down slightly in today’s data.  Why?  Realtors tell us there is not enough supply – causing prices to rise.  Don’t fret – it’s never cost less to own a home.

Midwest business stats steady:  September Kansas City Fed Composite Index: +6 vs. -4 in August.  Manufacturing index +15 vs, -7.  “For the second time in four months we had a positive reading on our composite index. This followed 15 straight months of contraction and suggests regional factory activity may be stabilizing,” said Wilkerson.

Oil inventories continue to creep downward as the bloat wears off.

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Don’t fool yourself. Those oil patch guys are sharp and likely got the hang of this pretty quickly.  You stand idle long enough and the price of oil will rise in the near-term.  Then the spigots turn on again with more force than before thanks to the ever-increasing benefits of technology.  Then you lock in higher prices via futures and pump as much as you can.  Then prices fall again.

Net net – this is a long and winding pathway down in the way we see oil in the future. Already, the cost of energy in the average per capita budget across the land is now at record low percentage levels.

On that point – do not let cheap prices cause your brain to forget what the experts terrified you with back in the summer of 2008:  “$148 crude oil is the end of the world….”

Speaking of the end of the world….

The emotional scare of the Great Recession run deep.  The audience here was impacted greatly and the nearly robotic actions show clearly in present-day data.  We can look to cash, massive bond buying, mountains of flows into bonds and out of equities – and last – the debt levels of households.


These two charts above harken back to the basics.  Debt and assets.  While all the fear-mongering attention getters would lead you to believe all is lost on this front, the facts – as usual – are a bit different.

Household debt as a percent of assets is now back to levels seen in the late 80’s.

Second chart shows you the per capital net worth.  No levels are necessary to focus upon – the pace is the more important item – and trend.  Since the 50’s, per capital net worth has been expanding at around 2.4% per annum.  It is doing so still.

Here is where my quirkiness comes in though:  Note the added red lines in three periods on the chart where growth fell below trend.  Note further those were great years in markets – for lengthy periods of time.  So the “bad news” we get drowned with by media is good news if one is a long-term investor willing to look beyond the garbage.

A Comedy Break

I saw this on an email from Josh Brown.  It is one hilarious cartoon and speaks so well to recent events.  I had to include it for a chuckle:

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You are chuckling right?

I bring your attention to the date it was originally posted by the cartoonist:  1981.

One More Thing – Robots

Much chatter about robots and AI is actually leading many to assume we humans will become the house cat of sorts.

In the long-run, robots are good – much like our note yesterday about how productivity has changed manufacturing and permitted millions of workers to move on to higher education, more productive employment, new training and a better standard of living.  Try finding someone to build a home these days.  National builders say they could build more if they had more workers.  We all know the demand is there.

Robots fill voids – permitting people to do better things.  Robots have been rapidly adopted in Singapore, where restrictions on foreign workers have left employers struggling to fill empty positions.

IBM’s Watson is being used to monitor patients’ vital signs in a hospital’s intensive-care unit, a job that normally would fall to nurses.  A Pizza Hut in Asia will use Pepper the Robot to take some orders and process credit card payments.

Warehouses are next.  As we Fedex more of our economy – storage points become vital for efficiencies.  Symbotic has developed robots that travel through a warehouse untethered to stack and retrieve cases of goods. “Symbotic said its system allows food retailers and wholesalers to cut distribution-center labor costs by 80% and operate warehouses that are 25% to 40% smaller,” as reported in the the 9/20 WSJ.

“Unlike in conventional warehouses, where cases of a given product tend to be stored in the same section so humans can find them, Symbotic’s robots can put any product in any spot on the racks–mayonnaise rubs elbows with peanut butter and coffee–allowing for denser storage,” the article explains. “Each of Symbotic’s autonomous robots can drop off and retrieve one case of products a minute, about five times as fast as a human can on foot. The robots are 28 inches wide and the aisles they travel only slightly wider, compared with the 10-to-12-foot aisles of a conventional warehouse.”

There is somewhat of a limit though until technology advances and price falls:  The equipment for one system can cost $40 million to $80 million.

Now I assure you – tell that to the press and you will hear bears immediately warn you that warehouses are in trouble because robots need less space since the aisles will be smaller.

Rounding out the latest data, more than a third of new robots went to the auto industry, and the next biggest users of robots were electrical and electronics producers.

Don’t fret – the fears we will be flooded with over a glut of humans are probably still 20 or 25 years away : ).

The Final Countdown

Next up?  The first debate.  Boy that should be a doozy.  The criminal versus the nut.  And we have to pick?  The media clearly does not want Trump as they pander to Clinton and write over her past – littered with reasons to have her in jail.

That said, grab your popcorn – it should be interesting.

Let me give you the surprise not mentioned anywhere:  Obama and his policies have divided this country so badly that neither candidate gets the 270 votes needed. If nothing else, it sure will be interesting.

After all that update – we find ourselves back to the boring but stable foundation of the US economy.  The Boomers will explode demand in many sectors while Gen Y will launch massive waves of demand on the other end of the Barbell Economy.   Gen Z is backing them up with more records to come.

It’s all good for the long-term investor.

Like I stated yesterday – we can make it more difficult – but why would we choose more difficult?  And believe me – it is a choice.

Patience, discipline and focus on the proper pathway of growth ahead.

And remember this – the pathway up the mountain toward family wealth goals is always a crooked one.

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

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Written by Michael Williams

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