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Wednesday, 20 September 2017 00:00

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I Was a Lighthouse

Every time I fly I watch the movie "Miracle" on my iPad.  It’s just under two hours in length, about the time of most of my flights, and it takes my mind off the uncomfortable seat and deplorable leg room.  The free bag of pretzels mid-flight is an interruption, but I deal with it. 

This amazing movie chronicles the U.S. Olympic hockey team's miraculous upset of the Soviet Union at Lake Placid, NY in the 1980 Winter Olympics.  I just love the story, especially the made for Hollywood ending.  But the real beauty of the story, what makes me want to watch the movie over and over again, is Coach Herb Brook's total commitment to his dream of winning the gold medal, and how he got 20 college hockey players to believe in a dream that everyone else insisted was impossible.

Thirty-seven years later what are our dreams?  Today, we seem surrounded by fears.  We fear nuclear war with North Korea, which continues to lob missiles over peaceful neighbors.  We fear the path we are on as a nation driven by our ineffective Congress and dysfunctional administration.  After back to back hurricanes, we fear Mother Nature and its unpredictable destructive power.  

But, as a country, I'm not sure we have any noteworthy dreams.  Can you think of any?  Perhaps our heightened sense of anxiety prevents us from the audacious dreams that make extraordinary accomplishments possible.  America needs dreamers if we are, to borrow a phrase, going to be great again.

Given this backdrop, it seems a bit strange that the stock market keeps trading near all-time highs.  What's driving this surprising performance?  Despite the fact that good news is typically underreported, if not completely ignored, there are plenty of positive factors driving stock prices higher.  First, corporate earnings continue to grow, and are on pace to advance approximately 10% for 2017.  Second, I'm going out on a limb here, but I do believe Congress will pass some form of tax reform.  Lower corporate taxes will allow companies to repatriate cash held in overseas businesses, which should have a positive impact on the domestic economy.  Third, interest rates and inflation remain very low compared to historical norms, both of which support higher stock prices.  Fourth, the continued rollback of onerous regulation has reinvigorated the entrepreneurial spirit within the business community.  This last driver may be the most difficult to quantify, but ultimately it may be the most impactful. 

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Interesting case in point…  According to an article in the Wall Street Journal, “Litigation Funder Longford Raises $500 Million as Industry Surges,” there is apparently a huge appetite to invest in corporate lawsuits.  This is the first I’ve heard of this exciting new investment opportunity.  Actually, I find this disgusting, but it does demonstrate the innovative lifeblood that is inherent in free-market capitalism.  In essence, somebody will eventually find a way to make money from any powerful new trend, even if that trend has its drawbacks.   

Meanwhile, these significant market drivers are routinely pushed off the front page by global events, natural disasters, and political madness.  So, while the stock market is prone to occasional corrections, it just might grind its way higher despite the persistent, heightened-state of anxiety we all find frustrating.   

Last week, Mary Lynn and I spent two days along the shores of Lake Michigan.  The highlight of this trip was our visit to the Big Sable Point Lighthouse near Ludington.  This 112-foot beacon was constructed in 1867 and is still in use today, guiding ships and sailors through turbulent waters.  Gazing out over Lake Michigan from the observation deck, I reflected on what makes a lighthouse so important.  They are dependable at the most challenging moments, unwavering in the face of danger, yet still standing tall when calmness returns.  I closed my eyes and dreamed I was a lighthouse.


Michael Kayes, CFA


  • Comment Link Alicia Meyer Thursday, 21 September 2017 08:18 posted by Alicia Meyer

    Loved the article. You write beautifully and have amazing thoughts. I am so happy to have you taking care of my $$.

  • Comment Link Jim Walker Wednesday, 20 September 2017 13:58 posted by Jim Walker

    Insiteful article as usual. Always look forward to your thoughts.

  • Comment Link Jim Harris Wednesday, 20 September 2017 11:23 posted by Jim Harris

    I would be interested to hear your take on Bitcoin.. As for the above article, changes are coming more rapidly than we have been used to. Healthcare, corporate taxes, tax reform, social unrest, maybe another war are all on center stage. Predicting the future becomes near impossible. What was once a given is no longer.


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