Archive for argent financial

Deidre Waltz Announced as New Managing Director

Oklahoma City, Oklahoma (February 22, 2017) – Argent Financial Group and its subsidiary Argent Family Wealth Services (AFWS) are pleased to announce the addition of Deidre Waltz, CFP®, CIMA, CPWA as Managing Director.Deidre Pic 3

In her new role, Waltz will continue to develop AFWS’s services and collaborate with other Argent professionals to deliver these services to Argent’s high net worth client families. With over 30 years of experience in trust and investments, Deidre has overseen fiduciary relationships of wealthy multi-generational families and complex family office structures.

Waltz has distinguished herself by becoming a Certified Financial PlannerTM, a Certified Investment Management Analyst and a Certified Private Wealth Advisor. She is a graduate of Oklahoma City University and National Graduate Trust School focusing on trust and estate law and taxation.

“Deidre’s wealth of experience and industry knowledge make her a key addition to Argent Family Wealth Services.  Her hiring shows the firm’s commitment to being a leading services provider. We are very fortunate to add someone of Deidre’s caliber to fulfill this role,” said Mark Hartnett, AFWS President.

“Bringing family office solutions to our clients is a natural evolution for us and a perfect complement to our family wealth consulting practice. Deidre’s deep experience will help us develop a family office model that is pioneering and sustainable, and that meets the unique needs of our clients,” said Bond Payne, Argent’s Vice Chairman, Corporate Development.

“I am grateful Argent is able to continue to attract exceptionally talented individuals. Deidre’s highly specialized skill set and professional leadership enhance Argent’s ability to serve families with effective, long-term solutions.” added Kyle McDonald, CEO of Argent Financial Group.

 

INVESTMENT OUTLOOK- October 2016

Making Sense of Conflicting Signals: Where is the Economy Taking Us?

by Jim McElroy, jmcelroy@argentfinancial.com
635131957688452893_economy
We are living in unusual times. The U.S. economy is now in its eighth year following the “great recession”. Under normal circumstances, we would expect that a recovery lasting eight years might be a little long in the tooth: the average since 1950 has been just over five years. But this has been no ordinary recovery: it’s been the weakest since the end of WWII. Not once in the twenty-nine quarters of this post-recession expansion has GDP grown at an annualized rate in excess of 5% and only twice has it grown in excess of 4%. The average number of greater than 5% quarters for the preceding ten post-war expansions has been seven. During those ten earlier expansions, the average annual GDP growth rate was 4.85% per quarter; the current average through June has been 2.08%. Is slower better and does incremental growth last longer? Or, does the tepid nature of the current expansion serve as a warning that the economy is vulnerable to an unexpected shock? The question we’re asking — the question we’re always asking — is where are we in the economic cycle: are we closer to the beginning, middle or end of an expansion? The answer to that question is obviously critical to the timeliness of investment decisions.

Investment markets are supposed to be semi-reliable predictors of the economy. The stock market, reputed to be the best market harbinger of economic growth or decline, has been in a bull market for over eight years and is near all time highs. On the other hand, fixed income markets, sporting absurdly low yields — below 2% for ten-year U.S. Treasuries and negative for many international debts — suggest anemic prospects for the economy. So, which market are we to believe? And, to further cloud the picture, this is a presidential election year. That and the fact that the two major candidates have distinguished themselves by their unpopularity create a situation fraught with uncertainty.

The continuing strength of equity performance is noteworthy in that earnings for major U.S. corporations (i.e. the S&P 500) have been declining for the last five quarters and are expected by analysts to have declined even further for third quarter, which ended September 30th. Though much of the index’s earnings decline over the past five quarters came from the energy sector and, according to FactSet, earnings would have been mostly positive without its negative impact, this does not, on its own, justify record high prices or an almost 20 multiple on trailing earnings. Either the stock market is extremely forgiving of lackluster earnings — not its reputation — or factors other than earnings are driving stock prices. We need look no further than the fixed income markets and the level of interest rates for at least one explanation of equity strength.

There are at least two ways through which interest rates influence stock prices: through their impact on overall economic activity and through competition. High interest rates obviously discourage borrowing and encourage savings, results that reduce economic activity and limit equity earnings. In addition, high interest rates raise the bar for stock returns, causing investors to require either higher earnings and/or dividends (difficult in a period of reduced economic activity) or lower stock prices. Low interest rates, or in the current case, ludicrously low interest rates, normally produce the mirror image of the above: aggressive borrowing and depletion of savings by investors and consumers and a lowered bar for equity returns. As it happens, the current environment of near zero interest rates has had only a limited impact on economic activity: the consumer is spending more and low mortgage rates are encouraging him to invest in more home ownership, but corporations to date have been unwilling to borrow funds or employ cash savings to invest in new plant and equipment. Consequently, the effect of low interest rates on economic activity has been limited and has had very little impact on stock prices. However, the impact of low interest rates on the competition for returns on risky investments, such as stocks, has been enormous. When cash management funds are yielding less than .25% and ten year Treasuries are yielding below 1.6%, a dividend yield of 2.06% (S&P 500) or higher, with the potential for growth, looks very attractive indeed. It looks so attractive, on a risk return basis, that corporations have been employing excess cash reserves to buy their own stock rather than investing in plant and equipment. Little wonder that all time highs in the stock market are coinciding with all time lows for interest rates. All this begs the question of what happens to the stock market when central banks like the Federal Reserve begin to raise interest rates.

The Federal Reserve raised short term interest rates .25% last December and said that it expected to raise rates four times in 2016. Because of a variety of weak economic news during the first three quarters of 2016, the Fed balked and did nothing. It now is signaling that it will likely raise rates by .25% this December. We believe the Fed will raise rates in December, but will continue their message of caution and patience in bringing interest rates to levels consistent with sustainable growth. As long as the Fed succeeds in conveying this message of patience, there should be no December collapse in asset prices.

It is becoming clear, even to many central bankers, that a low to negative interest rate will not in and of itself create economic growth or inflation. Those effects, like almost everything else in economic and market activity, are driven by the collective psychology of humans behaving as humans or, as John Maynard Keynes called it, “animal spirits”. Among investors it’s called fear and greed. Without the presence of optimism among economic participants, reducing interest rates to extremely low levels in order to produce growth is only so much pushing on a string. And, as many have seen over the last few years, it can also be counterproductive: desperately low rates can produce a degree of pessimism that may discourage investment and the assumption of risk. On the other hand, lifting interest rates from very low levels may not discourage investing and risk taking when in the context of growing consumer and investor optimism. And, at least domestically, consumers and investors appear to be demonstrating an incipient degree of optimism: U.S. consumer confidence has been climbing since May — the latest reading places it at its highest level in nine years (since just before the last recession); and the stock market is hovering within 2% of its all time high, which was set during the current/third quarter.

We’ve already mentioned that the absence of competition from bonds has provided a support to the equity markets. With rates set to increase, this support could slowly disappear, a future well appreciated by stock investors. Since the stock market has the reputation of discounting practically everything, we may assume that the market at current levels is not overly concerned with a .25% increase in overnight rates. However, in order for the stock market to grow from current levels, investors will have to believe that earnings growth will make a long awaited appearance sometime in 2017. In order for that to happen, there needs to be a lift in GDP well above the “muddling through” pace to which we’ve grown accustomed.

It seems to us unlikely that a 2% GDP growth rate will last indefinitely: it will either accelerate or the economy will slip back into a recession. In addition to the increases in consumer confidence mentioned above, there are signs that the U.S. economy is improving: the unemployment rate has declined to 4.8% and payroll employment is holding steady; perhaps more importantly, the labor participation rate, after having declined for most of the last nine years, appears to have bottomed (at 62.8%) and begun to rise; the housing market is steadily improving and new home prices are closing in on levels not seen since before the last recession; and the Federal Reserve, after having modestly lifted short rates from zero last December, now finally sees enough strength in the economy to consider another increase. As long as the Fed raises rates gradually — and they say that they will — then we see no reason why the domestic economy won’t benefit from higher rates. Perversely, there may be nothing like higher capital costs to quicken the animal spirits of corporations and investors. If this is correct, then this long recovery may last even longer and we might actually see significant growth and returns on invested capital.

For more information about the commentary found in this newsletter, please contact a member of the investment committee.

Investment Outlook – JULY

The World, the U.S. and the Markets

Overview

  •   The U.S. economy is in divergence from the economies of Europe and China.
  •   Europe is growing more slowly than the U.S. and now faces the added stress of the   British exit from the EU.
  •   China continues to slow and is now beset by institutionally driven over-capacity.
  •   The U.S. consumer should keep the U.S. economy moving in a positive direction.
  •   The markets were shaken by the news of the “Brexit” vote, but were not crushed.Volatility should continue at a high level.
  •   Stocks are not cheap, but are also not wildly overpriced.
  •   Bond yields are extremely low and long dated fixed income asset prices are particularly vulnerable to potential increases in interest rates.
  •   Cash equivalents provide stable value, but little or no yield.

  The stock market shows resiliency, bouncing back from stressful events like the “Brexit” vote. It may be the most attractive of the investment choices. However, we recommend employing cash and short to intermediate term bonds to dampen volatility.

There once was a time when all we needed to know about the economy occurred within the confines of our national borders. Then, the free world was rebuilding itself from the devastation of World War II and the U.S. was the building supply company, bank, grocery store and general merchandiser to the world. There was no U.S. trade deficit. That was over fifty years ago and the global economy has changed dramatically. The U.S. is no longer the sole driver of economic growth, not because it has stopped growing, but because the rest of the world has recovered from the war, developed and learned how to compete. Today, the three largest world economies are the European Union, the U.S. and China, in that order. Over the last forty or so years, the domestic U.S. economy has become increasingly linked to the economies of its trading partners, both overseas and across borders. Despite the entangling nature of this process and the inevitable economic correlations that occur on a global basis, there are always divergences. The major divergence that exists today is between the U.S. economy and the rest of the world. While the U.S. economy appears to be somewhat healthy (despite a looming debt burden and entitlement liabilities, we do have low unemployment and positive GDP growth), the economies of both China and Europe face serious stress.

The news from Europe that the United Kingdom has voted to leave the European Union is a particularly distressing development in a region that has already experienced its share of challenges. Although GDP in Europe has been increasing for over three years, it has been at a slower pace than that of the U.S. and has required the European Central Bank to maintain interest rates at even lower levels (zero to negative) than has the U.S. Federal Reserve. Most of the growth has come from Germany and France while Greece, Italy and many of the peripheral members of the EU have been languishing in recessions. Terrorism and the flood of migrants from Syria and Africa have strained the budgets of many of the weaker nations, many of whom were already weakened by the raft of austerity measures imposed by budget hawks in Brussels. The news that the U.K. is giving up on the EU has a profound psychological effect on the continent and the world. The actual exit cannot occur for at least two years and there are many negotiations that must occur before anything becomes final. But, since one interpretation of economics is mass psychology expressed through markets, the “Brexit” vote itself may be enough to depress global and European growth.

On the other side of the world, China’s GDP has grown almost eightfold — about 9% a year — over the last twenty-five years. Nevertheless, the People’s Republic of China is now facing some of the paradoxes inherent in that almost oxymoronic state, a planned capitalist economy. In allowing some decentralization in its provinces, the central committee emboldened and monetarily encouraged local bureaucrats to develop infrastructure and products for China’s bright new future. This effectively created thousands of “capitalist roaders” without a market discipline to moderate their acquisitive instincts. The first result of this ill-conceived program was over production of housing, transportation, municipal services, infrastructure, capital goods, consumer products and debt. This, of course, led to the dumping of consumer products and capital goods on international markets. The next result has been high unemployment, intolerable in a worker’s paradise, and a restive population. A rebellion is highly unlikely, but there will continue to be corruption trials and other assignments of blame. In short, China’s growth rate will not return to 9% anytime soon and appears to be headed south of 6%. This retrenchment will continue to place downward pressure on the economies of the developed and developing world.

Unlike the U.S. of yesteryear, the domestic economy is not totally immune to these international stresses. Although the U.S. has run a trade deficit for most of the recent past, close to 50% of S&P 500 earnings come from non U.S. sources. Weakness in foreign demand and the relative strength of the dollar during the current period of international stress have taken a toll on corporate income statements. Though declines in corporate profits have no direct impact on GDP, declines in the international sales of large U.S. corporations do have a negative impact on capital expenditures, a component of GDP, and on hiring. Capital expenditures by non-energy companies have remained weak throughout the current business expansion. And payroll employment has recently slowed to an increase of only 38,000 in May from an average increase of 155,000 in the prior two months. Labor productivity — output per hours worked — is strongly influenced by corporate expenditures on more efficient capital equipment; in the first quarter of 2016 — the most recent report — productivity declined by .6%. It remains to be seen if the decline in payroll employment and productivity is only a statistical blip, a sign of an aging expansion or the result of an absence of capital investment due to corporate timidity. We prefer to believe in the latter explanation, but the current expansion is a little long in the tooth (eight years) and well past the time when corporations normally would ramp up capital expenditures. If the economies of Europe and China deteriorate and drift into recessions, it would increase the odds that the U.S. might experience a similar fate. We don’t believe that this will happen, at least not in 2016, even with the fear-inducing issues in Europe and China. The main reason for our optimism is the consumer.

Despite the benefits to the U.S. of improving foreign trade and the negatives associated with a shrinkage in international transactions, the U.S. is not an export driven economy. More than two-thirds of the U.S. economy comes from consumer spending, and the consumer is doing well: unemployment is below 5%, payroll employment continues to improve (despite a disappointing May number), salaries are finally growing, housing starts are averaging over 1100 per month, gasoline prices are almost 40% below where they were five years ago, interest rates continue to favor the borrower, retail sales remain strong and inflation is still quiescent. In the spirit of “it’s an ill wind that blows no good”, the “Brexit”-induced global angst has created some benefits: the Fed is likely to postpone again an interest rate hike and dollar strength has lowered prices on imported goods. The U.S. has its issues – an aging population, exploding national debt due to out-of-control retirement benefits – and the payroll employment numbers will bear watching, but as long as the consumer remains optimistic, economic troubles overseas should not derail the progress of the domestic economy.

In the financial markets, the news of the British vote hit like a bombshell. Despite warnings that the vote would be close, most investors believed that the British people would never do something so un-British as to jump off a cliff without considering the consequences. The vote was probably prompted by immigration concerns and fears of vanishing British sovereignty, but the result was a clear negative for those who support globalization and the expansion of world trade. On the day the results came in (Friday, 6/24), the S&P 500 dropped 3.6% and yields on U.S. Treasuries dropped to the lower levels of their recent ranges. The damage continued on the second day of trading (Monday, 6/27), but by the third day Tuesday (6/28), the markets began to recover. Despite all the excitement, trading remained orderly and there were few glitches in computerized systems. It was the worst one day decline since last August, but only brought us even with the previous week’s close. It certainly didn’t compare with some of the more horrific declines of the last ten years. And it was definitely not a “crash”. Nevertheless, dramatic market events usually produce aftershocks for days and weeks following the first impact: we expect to see heightened market volatility well into July.

It is difficult to muster great enthusiasm for any investment market as we approach the dog days of summer. Stocks, while not wildly expensive on a valuation basis, certainly aren’t cheap. Price/earnings multiples are high relative to the averages over the last ten years, but not when compared with the averages over the last sixty years. They certainly are discounting more earnings growth than is justified based on recent history: corporate profits have declined for each of the last four reported quarters and analysts’ expectations are for a decline in the quarter just ending (Q2, 2016). Dividend yields look very attractive when compared with the yields on ten year bonds, but most things do.

Bond yields are at absurdly low levels everywhere but in the higher risk categories. Despite our inclination to believe that interest rates will never rise again, we know they will. When they do, bond prices will plummet for even the highest rated bonds. (We should note, however, that if interest rates increase because of quickening economic activity, lower rated credits (junk bonds) may increase, instead of decline, in price.)

And what can we say about cash? As low as yields are on bonds, they’re even lower on cash equivalent securities. Central banks everywhere have pushed yields to zero and beyond in order to curtail savings and stimulate borrowing and spending. American investors can take some comfort in the knowledge that at least dollar denominated cash investments are yielding above zero.

It’s possible to make an argument that stocks, particularly U.S. stocks, are the most attractive investments among the three traditional asset classes. Despite all the clear evidence of stress and weakness across the globe, U.S. equities have generally held onto their somewhat elevated prices. Even the “Brexit” vote was not enough to shatter the optimism of investors, though it did cause many to doubt. There’s an old saying on Wall Street that one shouldn’t fight the tape. If it has any meaning, it is that the market has a better sense of where the future lies than pundits and opinion makers. We would agree that the market is prescient, but we also know that it’s not infallible.

Investors who remain fully invested in stocks will likely be rewarded with higher prices and better returns over the long run, but they will also experience a good bit of volatility and the fear that they might be wrong. Within the allocation guidelines that are appropriate for our clients’ long term goals, we recommend maintaining a meaningful equity position, but we also advocate a healthy dose of volatility dampening investments: cash equivalents and short to intermediate term fixed income securities. The weeks ahead could produce more fireworks than just those on the Fourth of July.

Not Investment Advice or an Offer This information is intended to assist investors. The information does not constitute investment advice or an offer to invest or to provide management services. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future results or expectations. As with all investments, there are associated risks and you could lose money investing.

For more information about the commentary found in this post, please contact a member of the investment committee.

Argent Mineral Management Opens Office in Southlake, TX

We are pleased to announce the opening of our Argent Mineral Management office in Southlake, Texas with Rosie Calvillo and Buffie Campbell.

Postcard_Page_1

Heritage Wealth Management and Argent Financial Group are pleased to announce Buffie Drennan-Campbell, JD, CPL, and Rosie Calvillo, RL, are leading our latest expansion in Southlake, Texas specializing in oil, gas and mineral management.

With over 20 years combined experience, Buffie and Rosie are dedicated to building and maintaining relationships in the D/FW area through proactive communication, creative and unbiased solutions, and dependable, responsive service.

At Argent, we understand that every mineral transaction is distinct. With backgrounds rooted in law, trust and mineral asset management, our Southlake office can provide specialized attention to meet the most unique of needs.

Argent Mineral Management
1256 Main Street, Suite 219
Southlake, TX 76092
817.809.8012

ArgentFinancial.com
HeritageTrust.com