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We all have an opportunity to vote. We may feel our vote doesn’t matter or we can’t make a difference, but even that feeling may change, seemingly overnight. The feelings are there, the economic reality is there, and at some point people decide they’ve had enough.

We’re Not Going To Take It….Anymore

July 21st, 2016 by Kurt L. Smith
  • Britain decided it no longer wanted to be a member of the European Union. Britain had enough of Europe or precisely 52% of British voters had enough. The reasons why they had enough was not an issue. The result however is clear: Britain will no longer be a member of one organization bigger than itself: The EU.

    Soon Britain may not be a part of another larger organization, the one that makes it Great. So blow the winds of change, especially when the issues that trouble many are seemingly ignored by those who hold the power.

    How many Brits voted for an exit because of fear of immigration and the fear of more, seemingly out of control, immigration? We don’t know. We do know that immigration has been an issue longer than a European Union has been a dream. If times are good and spirits rising odds are we can ignore the issue or simply praise the benefits of immigration. Times are not that good now, the mood has changed and leadership needs to change with the times.

    How many Brits voted for exit because of the stagnant economy? Again, we do not know. The economy is not growing, wages are not growing and even prices are not going up- they are going down. Not for everyone, to be sure, but it does not matter. What matters is 52% voted for something different (leave) and not for the status quo (stay).

    We can leave the historical significance of Brexit to the historians. In the meantime we have an investment portfolio to manage. Uncertainty this and uncertainty that is what we hear most regarding Brexit. Confidence is the word they should be using. When there is strong confidence the market for Stocks and Bonds will be rising in price, there is little uncertainty. Evidently uncertainty must mean Stocks and Bonds will be falling in price.

    You know my position: after thirty-plus years of rising prices both Stocks and Bonds will reverse trend. Sure, I don’t know what day they will reverse trend and it doesn’t even mean we won’t enjoy nice rallies along the way until the reversal happens. We’ve enjoyed a nice municipal bond rally for the past couple of years now and it hasn’t been too bad for Stocks and Bonds in general.

    Despite the rallies and despite the seemingly inordinate passage of time, I continue to believe the downside risk to Stock and Bond prices to tremendously outweigh the slim upside potential remaining. Since calling the end of the Bond Bull Market in 2012, the results of these asset classes continue to bear (pun intended) this out.

    Brexit was a referendum held on one particular day. I do believe that whatever decision making process Brits took into account that day were many, many, many days in the making. Their issues (the economy, immigration, fear) are our issues as well. Sure they are different; they are different for each and every individual. BUT, left unaddressed or even the feeling that one’s country is not going in the right direction, then change may occur…seemingly overnight even.

    None of us are naïve enough to believe that the U.S. doesn’t have issues. We listen to the Federal Reserve Chair Janet Yellen’s testimony before Congress and wonder if she ever goes outside to talk with a constituent…oh, I’m sorry, what constituents? People are hurting, people have been hurt and people do see others who seemingly act as if everything is going great. We all have an opportunity to vote. We may feel our vote doesn’t matter or we can’t make a difference, but even that feeling may change, seemingly overnight. The feelings are there, the economic reality is there, and at some point people decide they’ve had enough.

    Slow-to-no growth, low-to-negative bond yields, unwieldy immigration issues, underemployment, crushing debt levels, lower prices and deflation: these are the issues that are continuing and continuing to get worse. None of these is conducive to continuing the thirty-plus year trend of higher Stock and Bond prices, therefore I believe in preparing now because we will never know the day of the turn, but we do know these things have continued for years.

    Brexit is a reminder that people won’t wait forever for change; sometimes they will vote for change for change’s sake. While change might not be good for your balance sheet it is also a reminder that many others don’t even have a balance sheet or the one they once had.

    When times are good we can only hope that a rising tide lifts all boats.  After decades of rising Stock & Bond prices we also know that stagnant wages and staggering debt is a stark reality for millions of Americans.  To continue to hope these millions will continue to support the status quo policies is just that, hope.  Mix in a little more time and we might just follow the Brits in a call for something different.

    Coppell Independent School District, Texas

    S&P AAA (AA+ Under), Fitch AAA (AA+ Under)

    Permanent School Fund Guaranteed

    Due 8/15 Dated 7/15/16 Maturity: 8/15/2046

    Sale Amount: $136,572,836

    1 2017 3.00% 0.58%
    2 2018 4.00% 0.69%
    3 2019 4.00% 0.79%
    4 2020 2.00% 0.91%
    5 2021 2.00% 1.06%
    6 2022 5.00% 1.19%
    7 2023 2.00% 1.31%
    8 2024 2.00% 1.39%
    9 2025 2.00% 1.47%
    10 2026** 5.00% 1.54%
    11 2027** 4.00% 1.77%
    12 2028** 4.00% 1.86%
    13 2029** 4.00% 1.96%
    14 2030** 4.00% 2.06%
    15 2031** 4.00% 2.10%
    16 2032** 4.00% 2.15%
    17 2033** 4.00% 2.23%
    18 2034** 4.00% 2.28%
    19 2035** 4.00% 2.32%
    20 2036** 4.00% 2.36%
    21 2037** 4.00% 2.39%
    23 2038** 4.00% 2.41%
    25 2041** 4.00% 2.42%
    30 2046** 4.00% 2.46%

      *Yield to Worst (Call or Maturity) **Par Call: 8/15/2025

    Source: Bloomberg

    This is an example of a new issue priced the week of 7/4/16

    Prices, yields and availability subject to change



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