Farmer Jack
I recently hit the big 5-0. In light of that milestone and in a desperate attempt to distance myself from the current market environment (đ), I thought I would go a different route with this monthâs article. I read a book recently by Josh Brown (of CNBC fame) entitled âHow I Invest My Moneyâ. The title and some of the content revolved around how various professional money managers invested their own money. What struck a nerve with me about the book was the more subtle topic which I summarize as âWhat shaped my views on moneyâ. Each money manager took a trip down memory lane and discussed the things that gave them their perspective on money. So, without further ado, thatâs what I will do.
I was born in Cleveland in 1972. We were poor. Dad left the seminary and was working in the Cuyahoga Hills Boys School (a prison school) and pumping gas. If you are reading this dad, Happy Birthday â dad turned 88 on June 21!!!!. Mom also worked at the Boys School. We moved to Napoleon in 1976. Dad took a job as the school psychologist for the county school system and mom worked at the local Campbell Soup plant. We didnât have a lot, but we made it.
How did we make it? My recollection is that we scrounged and saved. I thought I would tell a story to illustrateâŚ. It was common on a Saturday afternoon for us to make the trek to Toledo to Farmer Jack. Farmer Jack was a grocery store chain based in Detroit with a couple stores in Toledo. We went there because they had TRIPLE COUPON! This was our chance to save on everything we bought. In the weeks prior, mom would give me stacks of coupon pages and I got ½ a penny for each coupon I cut. When we went to Farmer Jack, we would make a beeline for all the products for which we had coupons. Itâs ironic that I later spent nearly 25 years at a branded product company (P&G) because we were the most brand disloyal consumer one could imagine. If Post Raisin Bran was on sale, we certainly werenât buying Kelloggâs version! And if Farmer Jack had a limit of 2 on the product, mom would go through one checkout line with 2 and I would go through a different checkout line with 2 more.
As you can probably guess, I learned a lot of valuable lessons from our trips to Farmer Jack. I learned the value of saving money. It became a game to see how much we could save. And while we were saving as a family, I even earned a little bit as I cut the coupons. Finally, we practiced a harmless way to beat the system by skirting the 2 product limit. To this day, the Jared Kline household cuts coupons for Meijer, Kroger and P&G products. And you better believe my wife and I will go through the line separately at Costco if they limit how many packs of toilet paper we can buy, especially considering we donât brand swap between Charmin and the lower-end brands.
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Thoughts on the market â Inflation continues unabated. The May inflation reading was through the roof at 8.6% up from last year. This is the highest reading in 40 years. We all know that gas costs $~5/gallon and the price of groceries is up dramatically. The Klineâs host a 4th of July party every year. We usually spend $600 and gets 10 boxes of fireworks. On Saturday, my daughter Marin did the shopping at Rozziâs fireworks and came home with 6 boxes!
The Federal Reserve is reacting by raising interest rates. Mortgage rates have gone from the upper 2âs to the upper 5âs on a 30 year fixed rate. Anecdotally, I am starting to see housing slow. Iâve seen the first âopen houseâ signs in Madeira in 2 years and several âprice reductionâ signs.
Thereâs an old saying: âdonât fight the Fedâ. Which means, as interest rates rise, economic activity and market valuations will go down. As weâve talked on these pages, the market is down significantly this year as a result. The S&P 500 is -19%, Dow Jones -14%, Russell 2000 -22% and NASDAQ -22% year to date. None of us can predict where the market is going in the short-term, but there are some interesting charts floating around Twitter including this one that shows how the S&P 500 usually tracks consumer sentiment.
This suggests there could be more downside to the markets. We continue to focus in the short-term on US Treasuries, dividend paying stocks and cash. Overall, we view the lower valuations as a healthy cleanse after easy monetary policy and over-stimulus drove prices well above historical trends. If the Fed is able to get inflation under control, which we suspect will require interest rates of at least 4-5% and a more balanced energy approach from the administration, stocks will continue their long-term uptrend. In the meantime, cut those coupons before you head to Kroger. Even if they donât have triple coupons, you will still save some of your hard-earned cash!
Jared
Brian Kellett, brian@kellettschaffner.com. Phone 513-312-6067
Dave Bodnar, david@kellettschaffner.com. Phone 513-258-6973
Jared Kline, jared@kellettschaffner.com. Phone 513-768-2238
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