Debbie and I have traveled up the East Coast countless times over the last many decades. On every trip, we take inventory of the health of America’s small-town Main Streets, pedestrian activity in towns, and truck activity on the highways, among many other inference reading signals.

Last Friday we were traveling again. That day, news dropped of the record-setting job gains in May. The stock market soared, with the Dow Jones Industrial Average closing up 829.16 points.

While liberal economists like Paul Krugman wrote the report off as a conspiracy theory, the evidence of America’s jobs resurgence was right in front of Debbie and me. As we drove on the highway, we witnessed far more truck traffic than on any trip we had ever taken. It was the Trump cavalcade, driving America back to business. Especially noticeable was the vast number of trucks carrying lumber to mills and job sites.

The pictures below represent a fraction of the trucking activity we witnessed through Pennsylvania and beyond.

 

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Kate Andrews reported on the record-breaking numbers for Spectator USA, writing:

The US economy created 2.5 million jobs last month — the biggest monthly jobs gain since records began a century ago, albeit only a partial recovery from 22 million jobs lost during lockdown. These figures have blown expectations out of the water. Economists were expecting yet more unemployment: the consensus was an 8.3 million rise in unemployment hitting 20 percent in May, up from 14.7 percent in April. Defying the odds, unemployment actually fell to 13 percent, signaling an unexpectedly early start of the rebound of the US economy. The biggest winners were workers in hospitality, who made up almost half of the new jobs, followed by construction. ‘This is a mind-blowing number and shows that the economy is improving,’ said Naeem Aslam, chief market strategist at AvaTrade.

US unemployment still stands at 13 percent, but a recovery of this scale had not been expected. ‘It seems the damage to the nationwide lockdown was not as severe or as lasting as we feared a month ago,’ said Scott Clemons, chief investment strategist at Brown Brothers Harriman. For some time now, the stock market has looked as if it was expecting a V-shaped recovery, the likes of which started today with the FTSE100 up 100 points. Its future looks brighter still, as the new jobs data has indicated an ‘open of nearly 600 points higher for the Dow Jones Industrial Average’. It seems in America, the jobs recovery could be V-shaped too.

For more on the COVID-19 economic crisis and recovery, read here:

• Dividend “Suspensions” Not Dividend Cuts Coming Fast
• Working Seven Days a Week in Sunny Key West

Tiny remote Sweden, partially sitting in the polar region, is home to only a little over 10 million souls. China, meanwhile, is a massive country, home to nearly 1.4 billion. You may not think Sweden would have the wherewithal to defeat China in any theater of competition, but in one growing industry, Sweden is prepared to dominate its Chinese rival.

In the race for 5G technology leadership, Sweden’s Ericsson may be about to best China’s Huawei. Or, more accurately, Huawei’s ties to China’s Communist Party government are about to blow the technology company’s chances of a worldwide 5G expansion.

Stu Woo reports for the Wall Street Journal:

The Trump administration’s increasingly aggressive effort to cripple China’s Huawei Technologies Co. has presented Ericsson AB the opportunity to lead the rollout of 5G technology around the world.

The Swedish company is emerging as the steadiest player in the $80-billion-a-year cellular-equipment industry, telecommunications executives and analysts say, because it makes a technically advanced product that one rival, Nokia Corp., was late to develop and that Huawei may not be able to make in the future because of recent U.S. measures.

While its competitors try to recover, Ericsson is moving forward after a costly years-long restructuring has returned it to profitability. “The first step is for sure accomplished,” Chief Executive Börje Ekholm said. “The next step is to find longer-term growth for the company.”

The question for Ericsson is figuring out which technologies of tomorrow to bet on. Ericsson is testing equipment in several fields that 5G’s superfast wireless speeds promise to unlock, such as driverless cars and remote-control mining machinery.

Washington is lobbying foreign countries to ban Huawei, saying Beijing could direct the company to spy on or sabotage communications. 

I have followed Ericsson on and off for decades. I wrote in late 2011:

Sweden is a global telecommunications giant. EWD owns shares of Ericsson and TeliaSonera, both telecom powerhouses in their own right. Ericsson’s networks are the conduit for 40% of the world’s mobile traffic, serving over two billion subscriptions. Ericsson has built a technology portfolio of over 27,000 patents.

Today Ericsson has the largest portfolio of patents in the industry, with 54,000 granted patents. It is a global 5G competitor with or without sanctions on Huawei. But with the U.S. campaign against Huawei, Ericsson is set for much easier expansion.

I’m not suggesting you invest in Ericsson today, but I am suggesting that you pay attention to the geopolitical risks an investment in a company like Huawei might produce. Companies wrapped up in the affairs of their country’s government are often affected by the political dramas surrounding them. That’s why, in this case, Ericsson, from tiny, mostly neutral Sweden, can compete with Huawei, which hails from the world’s most populous and second-largest economy.

At Richard C. Young & Co., Ltd., my family-run investment counseling firm, preference is given to investments in companies from countries with free markets and governments that help business by getting out of the way, not by trying to control it.

If you would like to learn more about our investment philosophy, please sign up for our monthly client letter by clicking here or schedule a free no-obligation appointment with an investment specialist by clicking here. We look forward to speaking with you.

Debbie and I have put over 100,000 miles on our Harleys riding across the United States and Canada. My riding days are behind me, but as a devotee, I keep an eye on Harley’s business, as I have for years. If you’re one of my long-time readers, you know Harley was Young Research’s stock of the decade in the 1990s.

In June 1998, I and millions of Harley-Davidson fans celebrated the company’s 95th^t anniversary. I wrote then:

For about $18,000, you can be astride a classic American cruiser, the Harley-Davidson Road King—if you can get one. This summer Debbie and I will ride our Harleys from Key West to Nova Scotia before our trip to Glacier National Park and back to Sturgis, South Dakota, for the world’s biggest annual gathering of the Harley faithful. At Milwaukee’s Summerfest grounds on June 13, Harley-Davidson (NYSE: HDI) will have its 95th anniversary celebration reunion. Once again, there is a lot to celebrate. Over the last year, Harley’s stock has nearly doubled. Over the last five years, as my most recommended stock, Harley-Davidson has provided an average annual total return of nearly 30% per year.

As both an investor and rider, I have a long history with Harley-Davidson. Harley’s core market peaked years ago, and so did bike shipments, but management continued to chase the prospect of growth.

That strategy failed.

Harley is now scaling back production and focusing on its bestselling models.

 The WSJ reports:

On an earnings call last month, Mr. Zeitz said expanding the motorcycle lineup and chasing new markets diverted attention from Harley’s more profitable models and made factories too complex. He said the production revamp is warranted by deteriorating demand for motorcycles. New models that would have made their debut this summer will roll out early next year instead, he said, on a new schedule of releases before the peak spring buying season begins.

By having fewer motorcycles in the market, Harley said it is trying to appeal to customers of premium-priced brands with limited availability. That approach is common among makers of sports cars and some luxury products that keep manufacturing volumes well below demand for them.

“Our strategy to limit motorcycle product in the showroom is purposefully designed to drive exclusivity,” Ms. Truett said in her memo.

Harley is reopening its plants in Wisconsin and Pennsylvania this week and said it would accelerate production in phases. The motorcycles that Harley will start making again this month will be limited to bestselling models in a limited palette of colors and without customizable features for the remainder of the year, Ms. Truett wrote.

The future for Harley is as a niche player with a shrinking but dedicated consumer base. That strategy may work in the public markets, but would be much more suited as a subsidiary of another firm. Polaris seems like a natural fit.

Much like the terrorist attacks of September 11, 2001, the coronavirus has revealed an overvalued market to investors. The blame for this overvaluation lies with a Federal Reserve that has so distorted interest rates, the view of risk has become clouded. A few years ago, I wrote:

In End the Fed, Ron Paul writes, “The essence of the Federal Reserve Act was largely unchanged from when it was first hatched years earlier. With a vote by Congress, the government would confer legal legitimacy on a cartel of the largest bankers and permit them to inflate the money supply at will, providing for themselves and the financial system liquidity in times of need, while insulating themselves against the consequences of bad loans and overextension of credit.”

Congress’ Most Tragic Blunder

Paul continues, “Hans Sennholz [Money and Freedom] has called the creation of the Fed ‘the most tragic blunder ever committed by Congress. The day it was passed, old America died and a new era began. A new institution was born that was to cause, or greatly contribute to, the unprecedented economic instability in the decades to come.’…

“In 1912, Ludwig von Mises wrote a book called The Theory of Money and Credit that was widely acclaimed all over Europe. In it he warned that the creation of central banks would worsen and spread business cycles rather than eliminate them.”

The Fed Has a 100% Error Rate

John A. Allison is president and CEO of the Cato Institute and former chairman and CEO of BB&T. During his BB&T tenure, John was the longest-serving CEO of a top-25 financial institution. In The Financial Crisis and the Free Market Cure, John explains that the primary sources of the massive misallocations of resources regarding the recent financial crisis are (1) the Federal Reserve, (2) FDIC, (3) Government housing policy, and (4) the SEC. As John points out, “In 1913, the monetary system of the United States was nationalized. The federal government owns the monetary system. We do not have a private monetary system in the United States.” John Allison continues, “In my career, the Fed has a 100% error rate in predicting and reacting to important economic turns.”

My friend John Allison’s words carry a special urgency today. The Fed has a “100% error rate.” It’s true. Every time the Fed sees a problem, it ladles out more monetary stimulus, driving asset prices upward and exaggerating the next meltdown.

The Fed’s wild responses to the slightest declines in stock market prices have become a real risk for which investors must account.

My family-run investment counsel firm has developed its own strategy for responding to the Federal Reserve’s recent actions. To read about them in detail, click here for the latest monthly client letter written by my son Matt, President and CEO of Richard C. Young & Co., Ltd.

Each month, Matt covers the strategies we employ at Richard C. Young & Co., Ltd. If you would like to be alerted each time a new letter is released, please click here to sign up. The letter is free, even for non-clients.

Do you consider yourself well-prepared? There’s no predicting some scenarios— the so-called Black Swans. Below is a troubling illustration I wrote some time ago of just how bad facing the unexpected can feel:

Knock, Knock

It’s 1:30 a.m.—pitch black on your suburban porch. A woman whom you do not recognize is at your front door, while an unfamiliar car idles in your driveway. Peeking out, you talk through a side window to the interloper, who explains that you had called her, and here she is.

Your 1911 Handgun

You, of course, had not called her, and, as a phone call goes into the police, you—somewhat dazed and alarmed—consider the feasibility of reaching for your 1911 handgun. Not long back, in broad daylight and only a couple of miles from your house, there had been a raft of break-ins featuring families immobilized withduct tape (while robbers searched through belongings). Residents of the general area are on heightened alert.

Sweaty Palms

I don’t know about you, and I consider myself well-prepared and well-defended, but this type of “awakened out of a sound sleep” early a.m. door-knocking scenario makes my palms sweat. This is a true story relayed to me just days ago.

Is This Your Blueprint?

So we are looking at risk preparation here—no advance prep, no handy 1911, no nothing. Kids asleep upstairs, a terrified wife nearby, and you, with a blank stare, have a big goose egg on your preparation ledger. Is this the blueprint for you and your family? I know for a fact that this condition exists for a lot more families than not.

Black Swans

I write to you about financial and personal security, with the emphasis on risk analysis for both. For any given scenario, the first step is a complete understanding of all the elements of risk. Unfortunately, the game breakers are all Black Swan events that you cannot time accurately in advance. Nonetheless, preparation is warranted to cover the unexpected.

A home invasion is one of the most frightening and surprising events a family can endure. Also on the list of the terrifying and unexpected is the current global pandemic.

Few, if any, could have predicted today’s coronavirus and the economic turmoil it would cause.  But that doesn’t mean nothing could be done to prepare.

Investors especially had the chance to prepare themselves for the unexpected. Minimizing risk in portfolios with diversification is the best way to prepare your investments for uncertain times.

Each month at my family-run investment counseling firm, Richard C. Young & Co., Ltd., my son Matt explains our strategies for diversification and minimizing investment risk in our client letter. If you want to understand the methods used by one of America’s top-ranked investment advisors to address risk, sign up for a monthly alert for the client letter by clicking here. It’s free, even for non-clients, and loaded with information you can use to help achieve your investing goals.

Prepare, even for those crises you can’t predict.

For the past ten years, the stock market has been an elevator that has only gone up. Now the cord has snapped. What floor are you falling from? Here’s how I explained what I call “elevator investing” some years back. I wrote:

Elevator Investing

Where do you want to be when the cord snaps? I often think of risk management with a simple elevator analogy. In the investment process, I quantify risk first. Then I evaluate potential gains. Just envision, if you were in an elevator and the cord snapped, where would you be better off? Dropping from the second floor or the 10th floor? Makes your palms sweat. You sure would not fare well plummeting from floor 10. Today’s level of risk in the financial markets is at the 10th floor, moving ever higher. Many investors will not survive the coming collapse. Collapse? Is this appropriate wording? Sure is. America is now in the late stages of the business cycle. The government is out of control. And the Fed continues to manipulate interest rates in favor of Wall Street and against American savers. I lay out the late business cycle details for you later. When you read the evidence, you’ll agree that the potential for game-changing, black-swan-initiated losses accelerates monthly.

The rapid pace of recent declines in market indices is neck-snapping for anyone. For investors who ignored risk, they are positively devastating.

If you want to understand how a top-ranked investment advisor attempts to minimize risk in clients’ portfolios, please sign up for the monthly client letter from my family-run firm, Richard C. Young Co., Ltd. by clicking here (free even for non-clients).