Womack Investment Advisers

  Mark Twain is reputed to have said that history doesn’t repeat itself, but it often rhymes.  A situation is now emerging in the market that is a potential rhyme with 1999: highly overvalued growth stocks vs shunned, overlooked and otherwise ignored small-cap value stocks. As in 1999, growth stocks have outperformed value generally and small-cap value specifically for years – about a decade.  As in 1999, growth stocks have reached stratospheric – and probably unsustainable - levels of valuation.  Warren Buffet shunned growth stocks in 1999 because his favorite indicator – market capitalization vs GDP – had reached the then-unheard-of level of 140%.  Today it is over 180%! This has led to small cap value stocks falling to the lowest relative level vs large cap growth stocks since - you guessed it - 1999.   The years between the dot-com crash and the financial crisis were a disaster for large cap growth, but small cap value did just fine: The S&P Sm...

    No matter what holiday you celebrate, we hope it’s filled with joy, laughter, and heartfelt happiness. That said, we know holiday cheer can be overwhelmed by the pursuit of perfection and opinions of relatives. Just in case your goodwill falters, we offer some wise, and not-so-wise, words to help restore your equilibrium and good humor.   “A candle is a small thing. But one candle can light another. And, see how its own light increases, as a candle gives its flame to the other. You are such a light.” --Moshe Davis 1     “Once again, we come to the Holiday Season, a deeply religious time that each of us observes, in his own way, by going to the mall of his choice.” --Dave Barry 2     “The best and most beautiful things in the world cannot be seen or even touched. They must be felt with the heart.” --Helen Keller 3     “If you have a purpose in which you can believe, ther...

    Eat healthier. Get more exercise. Save more money. Those were the top New Year’s resolutions for 2020, according to Statista . 1   Few people achieved them. One of the reasons so few resolutions become reality is because people tend to think too big. For resolutions to succeed they must be small and easily managed, according to Susan Weinschenk in Psychology Today . 1, 2   For instance: ·      If your goal is to eat healthier, commit to having a piece of fruit or a fruit smoothie for breakfast in the morning. Then make it a habit. ·      If your goal is to get more exercise, commit to walking for 20 minutes every morning. (You can do it while drinking your smoothie!) ·      ...

Tis the season when everyone assesses where we’ve been and where we might be going. Last week, a lot of research companies and publications explored investor confidence and expectations. Here is a brief review of the commentary being offered:   “The Great Reflation Trade of 2021: Most Optimistic Survey in its Six-Year History.” Absolute Strategy Research published its survey of probabilities, which asked chief investment officers, asset allocators, economists, and multi-asset strategists to describe their 12-month outlook for financial markets. The results the most optimistic result in six years with 81 percent of those participating saying they were bullish.   “ Froth or fundamentals? What explains investors’ enthusiasm for risky assets? ” The Economist wrote, “…equities have become more attractive than bonds – at first probably because bond yields fell so quickly, boosting the relative appeal of stocks, but lately thanks to the vaccine heralding the return of growth an...

Congress is at $900 billion, will they hear $1.4 trillion, $1.4 trillion, governments at $900 billion, who’ll go $1.4 trillion, $1.4 trillion… The stimulus auction continued last week. Early on Sunday, The New York Times reported, “Lawmakers are on the brink of agreement on a $900 billion compromise relief bill after breaking through an impasse late Saturday night, with votes on final legislation expected to unfold as early as Sunday afternoon and very likely just hours before the government is set to run out of funding.” A mong other items, policymakers’ plan to deliver new stimulus and fund the government is expected to include: ·          $600 relief checks ·          $300/week of enhanced jobless benefits through early spring ·          $15 billion for airlines ·          $14 billion for public transit systems ·  ...

As potential President-elect Joe Biden prepares to take his place in the White House, calls for cancelling all or at least a portion of U.S. student loans have risen to a fever pitch.    With data from the U.S. Department of Education, analysts at Bank of America (BofA) found that only a relatively small group of borrowers owe the biggest chunks of debt—just 3.5 million borrowers owe more than $300 billion.  Each borrower in that group owes between $100,000 and $200,000.    However, the biggest number of borrowers is found among those who owe less than $10,000.  So the largest number of borrowers, by far, could be helped by a forgiveness of, say, the first $10,000 of student debt.  This might also avoid some of the “moral hazard” that would accompany outright forgiveness of larger debts. (Chart from Bank of America, Data from Department of Education)     Best regards, Womack Investment Advisers, Inc.   WOMACK INVESTMENT ADVISERS, INC...

When it comes to beverages, frothy can be delicious. In what may be the least inspiring description of fizzy drinks ever written, a group of food engineers explained, “Aeration in beverages, which is manifested as foam or bubbles, increases the sensory preference among consumers.” Stock markets can fizz up, too. Share prices bubble, enthusiastic investors invest, and prices go even higher. In a frothy market, share prices often rise above estimates of underlying value. The terms that describe this financial market phenomenon include irrational exuberance, animal spirits, and overconfidence. Last week, there was speculation about whether some parts of the U.S. stock market have gotten frothy. Eric Platt, David Carnevali, and Michael Mackenzie of Financial Times wrote about an initial public offering (IPO) of stock by a hospitality company. They reported:  “ …[the share price] more than doubled in value on Thursday in a return to the kind of mammoth pops that came to define ...

The coronavirus, which The Economist estimates has infected one-in-five Americans, is reshaping holiday traditions this year. “COVID-19 is playing on shoppers’ psyches as they weigh its impact on their health and finances. But, as we’ve seen with previous periods of recession, as well as those of growth, consumers are resilient and will adjust their habits to adapt,” reported Deloitte’s 2020 holiday retail sales consumer survey report: 3 3 percent of survey participants were in a worse financial position than last year, especially those in lower income groups. 40 percent planned to spend less on the holidays than they did last year because they are concerned about the economy. 51 percent were anxious about shopping in stores because of COVID-19. Deloitte estimated shoppers would spend about $390 of their holiday budgets in stores and $892 online. The Deloitte survey identified four types of holiday shoppers: The Festive Shopper: “These shoppers are all about buying gifts for oth...

Almost all major U.S. stock indexes have hit all-time highs recently, prompting the question “how much longer can this go on?”    Analysts at LPL Financial addressed this question in its latest 2021 market outlook and it is good news for market bulls.  LPL analysts write. “Reviewing some of the previous major bear market lows—most recently in March 2009—reveals that stocks tended to add gains well after the initial surge.”  As seen in the chart below, the 2 nd year gains (shown in light blue) following a decline of 30% or more continue to be strong, averaging an additional 24%, and none were negative going back to 1970.  (Data from FactSet, chart from LPL Research) Best regards, Womack Investment Advisers, Inc.   WOMACK INVESTMENT ADVISERS, INC.   Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK  73013  California Office: 4660 La Jolla Village Dr., Ste. 100 - San Diego, CA 92122 Phone (405) 340-1717 - Toll Free (877) 340-1...

  The not-so-simple answer is it depends on how you define ‘middle class.’ In a 2018 report, Pew Research Center defined middle class as middle income. “In our analysis, “middle-income” Americans are adults whose annual household income is two-thirds to double the national median, after incomes have been adjusted for household size. In 2016, the national middle-income range was about $45,200 to $135,600 annually for a household of three.” In November, USA Today shared an analysis by Michael Sauter that adopted a different standard. It considered U.S. family income from “…the lower boundary of the second quintile and the upper boundary of the fourth quintile [of the U.S. Census Bureau’s 2018 American Community Survey], representing in total 60 percent of American families…The analysis made some cost-of-living adjustments and found, “…the range of income that could be considered middle class in a given state.” In the states with the highest median (the number in the mi...