Good News Eclipsed by Sensational Headlines

It's a fitting day to write this newsletter - day of the lunar eclipse. I have vague memories of this back in the 1980's, when I was around the age of my youngest son. We used crude cardboard cutout contraptions to sneak a peek.

Why is it fitting? I often think our vision of events (the sun) is covered over by the sensational headline noise (the moon).

It's much easier to identify problems than it is to believe in possible positive outcomes. I'm not a psychologist, so I caution to provide the logic behind the phenomenon. It seems daily there are news articles convincing that another stock market collapse is acutely imminent. In reality, over my 45 year lifetime, only a handful of corrections are history worthy - 1973, 1987, 2000 and 2008.

They were big crashes, and really tough to deal with during their era (especially if you were retired). But they also created massive opportunities for people that were properly positioned through it.

I was in the business for the 2000 and 2008 corrections. Both had signs that in retrospect seemed obvious, and both taught the industry big lessons about investing. Both also left massive scars on investors' psyche.

Good marketers know these scars and open the wounds with attention grabbing headlines. Throw a few high profiles names in the title and you have a real "click" winner. Hello ad money!

I titled this newsletter "Good News Eclipsed by Sensational Headlines". Through our Constant Contact program, I can see the percentage of people that open and read a newsletter. What if I called it "Warren Buffet Dumps Stock and as a Financial Advisor - I'm Telling You to Sell Now!" I'll bet the latter would have a higher open rate.

Well, earlier this year Buffett sold some Walmart stock, and if you are still hanging on to Sears you might want to cut your losses, but who knows...

My information doesn't come from headlines. Each quarter I download the latest Federal Reserve Flow of Funds report and pull out data to add to my excel tracking spreadsheets. There is something in the report that I really like - household debt relative to employee compensation is tracking strong.

Household Debt Gap Ratio

I developed a ratio that measures household debt in relation to employee compensation, I call it the Household Debt Gap Ratio. The ratio got to levels in 2006 and 2007 that showed households were in dangerous territory, and our country went through difficult times to correct that problem. In 2009 I warned that it would take around a decade for these problems to be fixed. Here we are, not quite 10 years since the crisis, and sure enough some people are still recovering. There is a positive story here. Not only has our Household Debt Gap Ratio remained in pre-2003 levels, but household debt service payments as a percentage of disposable personal income has plummeted in the past decade and remains well below the historical levels since 1980 as illustrated in this chart on FRED.

A slow economy doesn't surprise me nor does it scare me. We aren't going to have robust economic growth during an era where households are strengthening their balance sheets and making up for years of neglected savings. That we've grown modestly and it appears possible that we may have increased growth later this year is a positive sign in my view.

Of course, there are lots of things going on constantly that rattle everything and it's always possible that developing events will alter our trajectory. Just remember this, shaking the pot is much more profitable in the advertising business than writing an article about sustained progress.

Michigan Wolf Pups!!!
Michigan Wolf Pups!!!
While hiking in the UP last month I came across some wolves. I took a quick video and then backed out the way I came. I could have titled the video, "Hikers Life Threatened by a Pack of Michigan Wolves" and I would have gained tons of attention from it. But the reality is it was a pack of pups and, while they were certainly curious about me, it was the opposite of a threatening experience.

If the market does dip and you are pre-retired, buy into it. If you are retired and don't have sufficient assets in "fixed" positions to draw income from, then you're exposed to lots of volatility risk. You have an element of control in either situation, so take that control and enjoy your day.

Puppies are still wolves, but they aren't going to hurt you. That said, you'd be foolish to assume mom isn't around somewhere, so act accordingly. Likewise don't ignore the news, but be aware of what you are reading and the angle in which it is written, before you change your investment strategy.

Hope you enjoyed the eclipse! I'm sure my boys will remember the day as I have after all those years from the 80's!    

James Studinger


When in Doubt, Call Us -

Clients sometimes get correspondence from our Broker Dealer Kestra Investment Services, LLC (Kestra IS), or directly from other financial institutions related to their account. It can be confusing and dangerous to make a mistake in today's environment of cybersecurity, identify theft and other fraud. If you have any doubt about any correspondence please give us a call. We use Docusign to open many of our accounts electronically. If you have an email request to sign for a new account, you should have already heard from us about it and are awaiting the email. If you aren't sure about something, don't ignore it, just shoot us an email or phone call and we'll look into it.

The other day my wife got an email from PayPal saying that we bought some shirts in California. We didn't buy any shirts in California, and the email didn't come from PayPal. I get emails on a regular basis that look like they are coming from a legitimate source (FedEx, UPS, Amazon) but the email source isn't normal. I always look at the email source, but more than that, I NEVER access the link in the email. Instead, I log directly into Amazon from a separate browser and check my account.

Sometimes your response to a request is necessary and actually vital to your account/performance. So again, don't ignore things that you aren't sure about, just get in touch with us and we'll help you out.

You may receive an email from Mollie, yes, she does work with us, and she's awesome! About a month ago we hired Mollie Proctor (first name is actually Mary, goes by Mollie). We did an exhaustive search for the right complement to our company which started with me asking all of you for recommendations. Sure enough, after all the interviews, we ended up hiring the very first name we received from a friend on our email distribution list. Thanks Jud!
Mollie Proctor

I am thrilled to be the newest member of the JPStudinger Group.  I look forward to working with James and Kris, providing the highest level of service to our clients as they navigate their financial future.

The financial services industry has encompassed my entire career beginning in retail banking, moving on to bank consulting and corporate finance then, most recently, wealth management and financial planning.  All of these positions have had a premier focus:  the client.  Needless to say, that focus and being able to provide the highest level of care and professional service to the client has brought me the most joy and satisfaction on any given day.

Coming from a long line of Detroiters, I am proud to call Michigan my home with all of the "Pure Michigan" activities at our fingertips.  My favorite place is on the south branch of the AuSable River where I enjoy fly fishing, grouse hunting or just spending time with family and friends.  I have been an active volunteer in the community, always willing to take a leadership role or simply organize a project/event for a favorite non-profit.

I received my B.S. degree from Denison University and my MBA in Finance from Michigan State University.  I currently hold FINRA Series 7 General Securities Representative, Series 66 Uniform Combined State Law, Life, Health & Accident and Variable Annuity licenses.

James Studinger
JPStudinger Group LLC
100 W. Long Lake, Suite 120
Bloomfield Hills, MI  48304
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. JP Studinger Group, LLC is not affiliated with Kestra IS or Kestra AS

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

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