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Be careful out there!

| April 08, 2024

I hope this blog post reaches you safely. It’s possible the Western Hemisphere doesn’t survive the event thrust upon us. A threat so real that many states have imposed a ‘State of Emergency.’ Of course, here on the West Coast, cooler heads prevail, and the impact of this dangerous event will be minimized.

In fact, this event is so unusual that scientists have only seen this event 2,380 times in the last 1,000 years. Wait, hold on a minute…Isn’t that 2.38 times per year on average? Doesn’t that equate to about once every 5 months? Do the math to make sure I’m correct.

In case you thought I was kidding about the state of emergencies, here is a link to the Forbes article detailing the different state actions. In case you still don’t know what I’m referring to, there is going to be a total eclipse that crosses the United States for the first time in seven years. Probably happened by the time you read this. And if you were able to read this, it probably means the world is still standing!

In case you don’t want to read the Forbes article, let me tell you that the State of New York thinks it’s such a danger that it is imposing the ‘State of Emergency’ from two days before the event to two days after the event. The State of Indiana has had an emergency declared since March 26th. You had no idea you were living in such dangerous times, huh?

This for an event that will take how long? A few minutes! Yep, Indiana had to declare a state of emergency from March 26th (almost 2 weeks before the event) and here’s the duration…

Not that it’s not a cool event, but what has the good state of Indiana been doing since March 26? Seems like the bigger event should be that the Purdue Boilermakers are in the Championship game tonight. Maybe that’s why the state of emergency is in effect through tomorrow. Do they know something the odds makers don’t? It appears that U Conn is favored by 6.5 points on FanDuel.

Ok, enough with the nonsense.

Have you noticed the breakup of what used to be arguably one of the greatest companies in the world. So great, that books have been written about it. Management techniques have spread to other companies and even has a cool name, Six Sigma. It even made Jack Welch a rock star CEO. That company is General Electric.

It has since fallen from grace. Removed from the Dow Jones Industrial index, of which it was an original member back in 1896. And now, the once great conglomerate is no longer. Split into three companies, and other pieces sold for salvage. Maybe Larry Culp should be the current ‘Larry the Liquidator.’ If you’re unfamiliar with the reference, watch the movie ‘Other People’s Money’ with Danny DeVito.

All kidding aside, Larry Culp is one of those few CEOs that are worth their pay. He has turned GE around and has led the company through the valley and come out the other side in very good shape. It’s kind of funny that history has shown the companies pulled out of the Dow do better than the ones replacing it. For fun, is it true this time? The company that replaced GE was Walgreens Boots Alliance. Here’s the chart of WBA since it was put in the Dow.

In case you wanted to do the math, the stock is down almost 75% since June 2018.

Meanwhile, here is the main GE stock (remember it’s now three companies).

Here is GE Healthcare since it spun off.

And not that we have much history on this spin off (only happened at the end of March). It’s GE Vernova, which is their energy business.

I’m not really good with math, but I think GE has outperformed Walgreens since 2018. And what’s funny about that, is Amazon JUST replaced Walgreens in the Dow after a not quite six year run in the index. Question is, which stock will do better over the next 6 years, Walgreens or Amazon?

Only time will tell…though I hope for the sake of the local economy and many other reasons that historical trends don’t repeat themselves in this case!

This week will be a big week for economic releases. CPI will be the big one on Wednesday, but we will also get the FED minutes from March.

Shifting gears, let’s get a quick update on the recently launched Bitcoin ETF. It was approved by the SEC on January 11th. Through March 28th, there have been over $12 billion in Net inflows to the 11 funds. The big loser was the Grayscale Bitcoin Trust which lost almost $15 Billion in assets. Those assets likely found their way into other cheaper ETFs. Here’s the list of flows.

Meanwhile, here is what Bitcoin’s price has done since the approval.

Of course, there are still some who have a vested interest in holding this new technology down. Here is a quote from Minneapolis FED President Neil Kashkari.

I suppose there is no use case for any “limited” supply asset…or is there? Did you see this over the weekend?  A copy of the first appearance of Superman in Action Comics sold for a cool $6 million.

Don’t get me wrong, I don’t think our entire monetary system should be based on comic books or baseball cards. But is there an investment case to be made for an asset class that is finite and valuable to a certain population? You may not agree. One analogy – I don’t really get the crazy prices for some works of art, but I can appreciate that there is only a limited amount of them, and they are worth whatever a buyer will pay for them.

And relative to an ever-depreciating US dollar, you’ve got to own something that will preserve or grow your purchasing power. Those are typically real estate, stocks, collectibles (cars, art, comics) and maybe a new asset class called digital assets.

Have a good week, stay safe for the 3 or 4 minutes the sun will disappear and please do reach out with questions, comments, or you want to persuade me that Neil Kashkari is right. I’m open to it.

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