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Holly LaFon
Holly LaFon
Articles (9892)  | Author's Website |

Ron Muhlenkamp's May Webcast

During the webcast, Ron and Jeff Muhlenkamp use several economic charts to discuss the trends they see, data that concerns them, and indicators that keep them optimistic

June 21, 2019 | About:

During our webcast, Ron and Jeff Muhlenkamp use several economic charts to discuss the trends they see, data that concerns them, and indicators that keep them optimistic. For example: Delinquencies in auto loans continue to tick up. Credit card debt is now a concern and negative nominal yields on bonds continue in some countries (a historical aberration). Small business optimism and consumer confidence remain high. Watch our webcast to see what else they have to say.

Tony: Good afternoon, ladies and gentlemen. Thank you for joining us. This is Tony Muhlenkamp speaking. I'm delighted to host you and have you here today. There's opportunity to send in questions throughout the webcast and also afterwards if you like, so there should be an opportunity on your screen to send in any questions you have. Before we get started, I just want to introduce the firm's process and philosophy a little bit. When it comes to portfolio management, we like to build the portfolio from the bottom up, and then edit it from the top down. And by that I mean: bottom-up is fundamental analysis looking for value by analyzing and reviewing profits, earnings, sales, balance sheet, income statement—just really driving and getting to know as much as we can about the company, what it's worth today, and what it may or may not be worth in the future. Top-down is then how we edit the portfolio using conditions, current economic/political conditions (because it's hard to separate the two these days), any cycles, trends, areas of weakness, or particular strength. And we're looking for signs (both positive and negative) from both. So if we get a mix of both, maybe there's some conflicting signals, then there's more work to do. When we get both top-down and bottom-up in agreement with one another, that gives us a level of confidence (better than 50/50 anyway). So with that, Jeff and Ron are going to walk us through some of the key questions, the key areas that we are focusing on as part of our top-down process these days and how they impact and perhaps guide our investment decisions. So Jeff, why don't you go ahead, and take it away from here. Thanks, everybody. Jeff: Thanks, Tony. Welcome, everybody.

Jeff: I'm going to start, as I usually do, with this checklist that we use that helps us organize our thoughts and to walk you through what we see going on. As we look at this chart, if it's in black, that hasn't changed since the last time we spoke, which,I guess, was February. If it's in red, then our opinion has changed or our observation has changed. And so from top to bottom, we like to look at consumer spending. We did see a slowdown in home buying (that's still ongoing), but late this winter and early this spring we've seen some indications that perhaps that slowdown is coming to an end, and things are looking a little bit better in the housing market and we'll talk about that. We'll talk about business investment, which had been good, but it's starting to look a little weaker and we'll expand on that a bit. We'll update you on where we're at with kinds of credit defaults. We had said that that was pretty good except for auto loans. Auto loans are still of concern to us, but credit cards are now joining them, so we'll show you that chart and we'll talk about that. Inflation remains in the 2-3% range, and while we're not sure where it's going to go, it's been there for, actually, quite a while now. The Federal Reserve changed what they were doing in January. They had been raising rates. They had been shrinking their balance sheets. They now said they're going to be really patient and are, frankly, unsure whether they'll raise rates again or not; and they're going to end the balance sheet run-off by the end of this year; so that's a big change that they really articulated in January. Now, where they go from there, whether it's continuing to raise rates or they turn around and drop rates, we don't know and don't know the timing for that. Trade, we added about a year and a half ago. That has kind of fallen off a cliff this month, and we'll talk in some detail about that. And Europe has been on our radar screen for quite a while, and there are some interesting things going on in Europe, but mostly, they add uncertainty, not certainty. If you've been reading any of the international news, you know that Prime Minister May has promised to step down, and so now the United Kingdom is looking for a new leader. Until that process completes, I don't think anybody's going to have any idea what Brexit is going to look like and what the timeline might be, so that is completely up in the air now. There's really been no change out of Japan or China. So that's the quick down and dirty.

Continue reading the transcript here.

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

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