Sunday, September 26, 2021

THINK STRATEGICALLY: You Will Be As Big as Your Thoughts

By on July 1, 2021

The Marriner S. Eccles Federal Reserve building in Washington (Photo credit: LunchboxLarry on Visualhunt)

Our mind is a mighty thing, and most humans take it for granted. Most people believe that our thoughts are out of our control, when in fact, we are in control of our thoughts. As you become keenly aware, you nurture your mind and read up on growth and development topics. John Maxwell often says people are the “size of their thinking”; don’t allow yourself to fail. This special kernel of truth is the secret power of our mind.

I am never impressed with initiatives or goals. I am only impressed with results and achievements. To reach our ultimate goals, the requirement for us is a higher level of performance that requires constant change, adjustments and sacrifices. The changes necessary will be complex and seem almost unreachable, and if it does not feel uncomfortable, you are not striving hard enough. 

Human beings have become animals of habits; it usually takes 66 days for an action to become a daily routine. Before the pandemic, no one in the U.S. and Puerto Rico wore masks, most did not carry hand sanitizer or alcohol nor socially distance. Some even decided not to venture outside their homes due to an abundance of caution. After 469 days since March 15, 2020, these new habits have become a daily routine in our lives. These measures that we took due to the pandemic were necessary to preserve the human race, saved millions of lives and prevented millions from getting COVID-19 before working vaccines became available.

These are choices out of a million options we have to decide every day.

Our thoughts and actions motivate us to enact the cycles that push us to obtain our goals, achievements and explorations. 

The human mind is so powerful that all our thoughts influence how we feel, behave, talk and develop our unique personalities. Let us use an example.Suppose you lose a well-paying job that you loved, you have two options:

1. Get another job with similar or better conditions

2. Begin a business of your own and become an entrepreneur. 

We have acquaintances who lost their coveted jobs, and in their mind, their job was their life, and without it, they view themselves as a failure, and if you think you are a failure, you will feel like one and, soon enough, will consequently end up a failure. 

It is sad to see this cycle play out often, and it consumes lives and families. 

On the other hand, if you lose your job and decide to tell yourself, “This will be the last time I ever work for someone other than myself,” and you take the leap of faith and become an entrepreneur, the risks may be high, but the rewards are immense.

Almost six years ago, I decided that my last job would be my last working for someone other than myself. My wife and family supported me with my decision, and I have never looked back. The chains that bound me were substituted by the freedom to develop, create, build, experiment and ultimately develop two successful businesses. 

As an entrepreneur, you have to motivate yourself every single day. You are also responsible for all those you hire and their families. You must provide them with health insurance and a safe working environment. You must challenge them to be better and foster their creativity, allowing them to reach their own goals. 

One of the greatest entrepreneurs we all have seen in our lifetimes, Steve Jobs, during a commencement speech at Stanford University, said, “You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something—your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.” 

What Jobs meant is that your beliefs are the force that drives you, and they will get reinforced along your journey. 

In conclusion, think big, go for the fences; prepare yourself emotionally, physically and financially to reach your most desired goals and exceed them.

Week in Markets: Record gains; investors absorb inflation concerns

The U.S. stock markets registered a record-breaking week. We saw all indices deliver substantial gains, with the Dow Jones rising 1,143.76 points and the S&P 500 climbing 114.25 points to close at a record level. This week was a stark contrast to the previous week due to inflation concerns and the Federal Reserve’s economic outlook.

In our view, the current market development is a direct response to all the positive economic data that demonstrate a strong economic recovery. 

We continue to view the market’s fluctuations as the result of investors rotating their stocks to enhance their portfolios and prepare them for the current market. This week’s market performance and the economic data reported shed further evidence that the conditions and market fundamentals are there for a continued bull market. 

Key economic indicators reported:

  • — U.S. Real GDP rose to 6.40 percent, compared to 4.30 percent last quarter.
  • — U.S. Durable Goods New Orders rose to 2.32 percent, compared to -0.72 percent last month.
  • — U.S. Durable Goods New Orders Year-over-Year fell to 31.71 percent, compared to 45.60 percent last month.
  • — U.S. Personal Savings Rate rose to 21.50 percent, compared to 13.60 percent last quarter.
  • — U.S. Personal consumption expenditures rose to 3.4 percent for May.
  • — June’s preliminary Purchasing Managers’ Index (PMI) showed output expanding at a historically elevated rate.

All the data we have analyzed show that most companies struggle to meet demand and continue to be impacted by shortages of raw materials, computer chips and workers. The global supply disruptions and the excess demand is causing temporary price increases, but we expect that once supply meets demand, the pressures will begin to ease. 

When viewed from another angle, we predict that S&P 500 companies will grow their earnings north of 35 percent for the entire 2021, up from 20 percent at the beginning of the year. 

Banks Pass Stress Tests

The Federal Reserve provided the results of its annual stress test for bank holding companies and banks. These tests were designed to gauge the resilience of large financial institutions under severe recessionary conditions globally. 

The 23 banks tested remained well above their risk-based minimum capital requirements. Also, the additional restrictions implemented during the COVID-19 pandemic will end. 

The stress capital buffer, or SCB, which is determined from the stress test results sets the amount of capital the banks must hold to survive a severe recession. If any bank does not stay above its capital requirements, it is subject to automatic restrictions on capital distributions and discretionary bonus payments.

This year’s hypothetical scenario includes a severe global recession with substantial stress in commercial real estate and corporate debt markets. The theoretical scenario also had:

  • — Unemployment rising to 10.75 percent. 
  • — Gross domestic product falling 4 percent from the fourth quarter of 2020 to 2022’s third quarter.
  • — Asset prices declining sharply, with a 55 percent decline in equity prices.

Under that scenario, the 23 large banks would collectively lose more than $470 billion, with nearly $160 billion lost in commercial real estate and corporate loans. However, their capital ratios would drop to only 10.6 percent, or double their minimum requirements.

Our advice is to always own a diversified portfolio with the correct balance of stocks, bonds, mutual funds and other tools consistent with your financial goals, risk tolerance and investment horizon. 

Weekly Wall Street Summary June 25, 2021:

  • The Dow Jones Industrial Average closed at 34,433.84, up 1,143.76 points, or 3.44 percent, for a year-to-date (YTD) return of 12.51 percent. 
  • The Standard & Poor’s 500 closed at 4,280.70, up 114.25 points, or 2.74 percent, for a YTD return of 13.97 percent.
  • The Nasdaq Composite Index closed at 14,360.39, up 330.01 points, or 2.35 percent, for a YTD return of 11.42 percent.
  • The Birling Capital Puerto Rico Stock Index closed at 2,555.81, up 139.13 points, or 5.76 percent, for a YTD return of 24.98 percent.
  • The U.S. Treasury 10-year note closed at 1.54 percent, up 6.21 percent, for a YTD return of 0.60 percent.
  • The U.S. Treasury 2-year note closed at 0.28 percent, up 7.69, for a YTD return of 0.65 percent.

The Final Word: Biden reaches infrastructure agreement with 21 GOP senators

Momentum is building for approval of a bipartisan $1.2 trillion infrastructure deal, following the agreement announced by President Joe Biden and a group of 21 senators. The in-principle agreement does not contain broad tax increases on corporations and wealthier individuals. However, Democrats in Congress may attempt to add a second infrastructure bill focused on social spending. 

The plan includes $579 billion in new spending to rebuild roads and bridges, and improve public transit systems. It would also expand passenger rail, upgrade ports and airports, invest in broadband infrastructure, fix water systems, modernize the power sector, and improve climate resilience.

The plan is expected to be paid by closing tax gaps, redirecting unspent emergency relief funds, and other offsets.

 The allocations for the $579 billion in spending. All figures in billions.

  • — Transportation: $312 billion 
  • — Roads, bridges, major projects: $109 billion 
  • — Safety: $11 billion 
  • — Public transit: $49 billion 
  • — Passenger and freight rail: $66 billion 
  • — EV infrastructure: $7.5 billion 
  • — Electric buses / transit: $7.5 billion 
  • — Reconnecting communities: $1 billion 
  • — Airports: $25 billion 
  • — Ports and waterways: $16 billion 
  • — Infrastructure financing: $20 billion 
  • — Other infrastructure: $266 billion 
  • — Water infrastructure: $55 billion 
  • — Broadband infrastructure: $65 billion 
  • — Environmental remediation: $21 billion 
  • — Power infrastructure incl. grid authority: $73 billion 
  • — Western water storage: $5 billion 
  • — Resilience: $47 billion 

We expect lawmakers to continue negotiating, raising concerns over revenue items to pay for the spending, and the administration will have to flesh out the plan’s details in the coming week to finalize the agreement. 

—Francisco Rodríguez-Castro is president and CEO of Birling Capital LLC. Think Strategically is a publication by Birling Capital LLC that summarizes recent geopolitical, economic, market and other developments This report is intended for general information purposes only and does not represent investment, legal, regulatory, or tax advice. Recipients are cautioned to seek appropriate professional counsel regarding any of the matters discussed.

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