Bern Factor. Weekly Letters

By Mark Bern, CFA I make this statement based upon a multitude of indicators but I want to focus on one that is irrefutable.   The trucking industry is running at full capacity and adding capacity at a record clip!   Once service I read is ACT Research, a research company that specializes on the trucking industry.   The company reports on the demand and build trends for trucking equipment.   The most recent few reports (excerpted below) show incredible strength. “After a steady June, fleets came roaring back into the market in July. OEMs had their strongest July net order volume in history, breaking a record that was set in 1994. Net orders were 102% better than last July and 45% above June volume. Considering July is, historically, the industry’s weakest order month, this performance is truly exceptional. Year-to-date, net orders of just over 200k trailers are up 30% from 2017,” said Frank Maly, ACT’s Director of CV Transportation Analysis and Research. He a...

By Mark Bern, CFA Early Estimates Five days ago estimates of damage from the hurricane were as high as $170 billion.   Now I am reading estimates that are more in the range of $20 billion in storm related damage.   That figure could go up or down depending on how much rain the storm drops in any given area.   There has already been considerable flooding in North Carolina and more is expected   there and in the western areas of Virginia as the storm moves inland. Much of the damage will be to residential properties and autos.   To put the $20 billion estimate in damage into perspective we need to compare it to the damage done by other major storms.   See the table below:  Source: Business Insider So, unless the damage is much worse than the more recent expectations it should create a significant drag on the economy.   In the ensuing months (and sometimes years) storms may tend to increase economic activity in certain industries such...

The weekend just got away from me once again so I apologize for my tardiness in publishing this week’s letter.   Instead of writing another diatribe on why I think the economy remains strong I thought it might be more instructive to share a link to a video about how strong the technical trend in stocks are. The video is from Chris Ciovacco on You Tube.   He is completely unbiased and always focuses on the probabilities of what could happen.   He keeps it very simple but the message in this week’s video is particularly poingiant.   This is one of my resources that help me keep a pulse on the probably direction of the trend in stocks.   Enjoy! https://www.youtube.com/watch?v=TbUQMbv9Xa8&t=2s Respectfully, Mark Bern, CFA

By Mark Bern, CFA First, let me reiterate that I expect the remainder of 2018 to be stronger than most financial pundits and economists do.   OECD (Organization for Economic Co-operation and Development), an organization of mostly developed countries, projects that GDP will grow at 2.78% for all of 2018.   After the results of quarters 1 & 2, that would require the third and fourth quarter growth to drop to a dismal average of 2.41%.   The folks at The Kiplinger Letter are projecting 2.9% for the full year; not much better.   The Conference Board , which is much more enthusiastic about our nation’s growth potential, forecasts a 3.3% GDP growth for the second half of the year bringing the full year estimate to about 3.2%.   Forecasts are all over the board but most (that I have seen) expect growth below 3%. While I hope the Conference Board is correct, I am not quite as enthusiastic.   My expectation is for growth to drop down to a still respectabl...

By Mark Bern, CFA When we look at charts like the one below it is easy to become nervous about the implications. However, that isn’t the whole story.   The economy has grown since 2007 and household have borrowed at much lower interest rates.   The St Louis Fed has a chart that look more encouraging. As you can see, household debt compared to GDP (gross domestic product) is much lower.   And then, if we drill down some more, we can see that when we measure average interest payments by households relative to income the picture looks even better. So, when you read that next story warning about how debt levels are now above levels in 2007 and trying to spread fear and anxiety of a repeat recession that is imminent, just pull up these charts again, take a deep breath, and relax.   It isn’t nearly as bad as it was then. The same can be said about corporate debt.   Sure, corporations hold more debt today than in 2007, but the interest r...