In The Lonely Bull

A slowdown in Chinese manufacturing is the latest metric to rattle markets.  Some other Asian countries are also showing signs of slowing.  This may not be as bad as it looks.  The prospect of increasing tariffs on a wide range of goods encouraged many companies to advance orders to beat these.  In fact, many companies have so much inventory today that they are renting long-haul trailers simply to store it.

Certainly, these companies have little need to put in more orders for goods today and will not until the current inventory is worked off.  That may take a little time.  Inventory corrections used to create business cycles.  They have been more uncommon since the advent of modern inventory control systems.  However, the prospect of tariffs may have created an unusual amount of preordering and stocking.

Expect the markets to wake up to this fact sometime in the first quarter.  Then investors can sort out the true underlying economic run-rate.  We believe it will still be good.  We do not expect any fall-off in corporate profitability or recession.  In short, while expectations for market returns are low for 2019, we expect the opposite; they should be quite good.  Stay steady, my friends.

El Solo Toro


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