July 2017 Market Letter

“How you going to keep them down on the farm after they’ve seen Par-ee?”

This month’s music rolls back almost a century to a popular song from 1919 that questioned the ability of rural soldiers following World War I to return to rural life after they’d seen the big city of Paris. The appropriateness for this missive is that it hasn’t been easy for me to get back into the swing of things after returning from Europe Sunday night. Many of you liked my last travelogue from Greece and Israel last fall, so I thought that I’d share some memories of the past ten days.

Lynne and I flew into Amsterdam, and headed immediately to our hotel to sleep for a few hours. Flying overnight is difficult at any age, let alone ours. Once semi-refreshed, we wandered around the city for a few hours before dinner. Amsterdam is a bustling metropolis, but the population is only 850,000. The funny thing is that there are roughly 900,000 bicycles in the city. Everybody rides them because many of the canals’ bridges are only made for bikes and foot traffic. Amsterdam is laid-back, possibly because of the omnipresent availability of cannabis. Virtually every coffee shop is also a place where anyone can purchase marijuana or hashish and smoke it on the premises. The blue haze emanating from these spots can provide a contact high if you stand there for a while.

The highlight of Amsterdam, though, was a tour of the Anne Frank house. It was an incredibly powerful experience. It’s a little different than, say, visiting the Holocaust Museum, because you get the physical sense of what it was like for Anne and her family to live in close quarters without making any noise for fear of being detected by the Nazis. It was also moving to more fully learn about the people who hid them. I think that almost everyone who spent the hour there had to ask themselves if such an atrocity could ever occur again, and, if it did, how they would react.

In Amsterdam, we boarded a boat for a seven day cruise up the Rhine. Lynne and I have done several ocean cruises on larger boats, and traveling by river is quite a different journey. The boat only held 160 passengers, and motored at a speed of roughly eight knots. Because the Rhine is not a wide river, there was plenty of scenery and locks to traverse every step of the way.

Our first stop was Cologne, or Koln, as it’s known on the continent. Cologne reminded me a bit of Columbus in the sense that it’s a decent sized city with a very inclusive population. As Amsterdam is to dope, Cologne is to beer. Germans drink more beer per capita than any other country. A brewery tour was inevitable. I must say, however, that the quality of the German offerings was underwhelming. There’s very little semblance of a craft movement, and the larger breweries’ products range from mild pilsners to average wheat beers.

We headed next to Rudisheim in Alsace, where the focus moved from beer to wine. I realize that much of this letter has been about intoxicants, but we were on a vacation cruise after all! Alsace is a region noted for its Rieslings, and every one that we tried was quite good. They don’t pair too well with primarily heavy German food, but in and of themselves, they’re excellent.

Our final stop in Germany was Heidelberg. On the way there, though, was the most spectacular scenery of the journey. In the gorge of the Rhine, there are more than two dozen castles, most of which were built in the 13th and 14th centuries. Many have interesting histories, and virtually all are architectural masterpieces. Like most ancient and medieval structures, you can’t help but to marvel at how the engineering and construction was accomplished. Heidelberg itself is reminiscent of a Madison, Boulder, or Gainesville… in other words, a smallish town dominated by a large college campus.

We moved out of Germany to Strasbourg, a charming city noted again for fine white wine. We decided to take a side trip to Paris since we could get there in less than two hours via bullet train. The rail system in Western Europe is marvelous – punctual, accessible, quick, and comfortable. Other than Amtrak on the I-95 corridor in the Northeast, the US has nothing comparable, and it’s a shame. Europe overall has fewer and smaller cars, simply because the price of gasoline is $6-7/gallon.

The weather during the entire trip was brutally hot. Our day in Paris was the warmest day there in well over a century – 97 degrees with a heat index over 105. There’s very little air conditioning, but we made the best of it. Paris is much like New York City. It’s a sprawling metropolis with much to see. The famed Champs Elysees looks like Fifth Avenue, and both food and shopping are legendary. We visited the Eiffel Tower and The Arc D’Triomphe, and spent some time in the incredible Cathedral of Notre Dame. The highlight, however, was the Louvre. We were fortunate to have a very learned guide, and we saw the Mona Lisa, Venus de Milo, Winged Victory, and masterpieces by Delacroix, David, Botticelli, and countless others. Unfortunately, the Flemish section was closed due to remodeling, and so we couldn’t enjoy Rembrandt, Vermeer, Rubens, or Van Dyck. All in all, though, an awesome day.

Getting back to the ship from Paris was interesting, to say the least. Given many recent terrorist attacks in Europe, a traveler possesses a dormant sense of foreboding. That feeling came to fruition via a vandalism attack (French euphemism if there ever was one) that night on the French rail system. By the time repairs were made to an electrical junction box in an important station, we were three and a half hours behind schedule. Fortunately, the ship remained in Strasbourg, so all was fine in the end. The amazing thing about the incident was how calm everybody was. Our travel group performed admirably, and the French passengers acted with quiet aplomb. I can only imagine what the scene would have been like in an American airport.

The terminus for the cruise was Basel. From there, we took a train to Zurich. Like the French system, Swiss rail travel is fast and efficient. Zurich itself is extremely cosmopolitan, with a well-educated, diverse population. Its only drawback is that it’s unbelievably expensive. A large coffee at Starbucks runs just under ten bucks, and it’s almost impossible to get a meal for less than fifteen. After an enjoyable evening there, we flew home the next day.

Observations from the trip (since I’m not hesitant to chat up anyone who speaks either English or French):

  1. There was honestly very little talk or inquisitiveness about America. Euros are much more concerned with their own issues, and are more sympathetic with Britain’s terrorism woes than anything else on the world stage.
  2. There is far less angst than in America. Paris, Amsterdam, and Zurich are all traffic nightmares, but you never hear a car horn honk. An occasional bell from a bicycle is about all the road noise that exists.
  3. We were appalled by the amount of graffiti everywhere. It seems as though the Eurozone is about twenty years behind the US in terms of addressing and cleaning up the problem.
  4. Tobacco is still very much in vogue.
  5. The police presence in travel areas and major cities far exceeds our own levels.
  6. The pride of inhabitants is quite local in nature rather than nationwide. People are enthusiastic about hometown products and cuisine. Switzerland takes on the character of France, Italy, and Germany depending on which canton, or district, one lives in.
  7. The level of service and attention to detail far exceeds that of the US.
  8. Euros aren’t constantly on their cellphones. I only saw one instance of texting while driving, and with foot and bicycle traffic being so heavy, you had better keep your head up while walking.
  9. The European sense of preserving history and culture lies in stark contrast to the constant modernism of the US.

The bottom line is that it’s easy to fall in love with an exotic place, and things can temporarily outshine normal everyday existence. I will say, though, that Europeans in general understand the importance of trying to live a good life without being self-absorbed by every minute of it. Although I have utterly no desire to live anywhere else, there are a few lessons that we can learn from overseas.

Let’s now move to the markets. Although June looks to be ending on a declining note, the month and quarter were still positive. Both bonds and stocks did decently. According to Standard & Poor’s, the first half of 2017 was the calmest in terms of volatility since 1995. The VIX remains around the 10-12 level, signifying a large amount of complacency. We’ve had very few days of +/- 1% movement in the major averages. Shallow equities dips have been rapidly bought up. The trajectory has been slowly but surely lower left to upper right.

What will the second half of the year bring? As I mentioned last month, it’s quite unusual for both stocks and bonds to rise in tandem. Generally, they tend to move in more opposite directions. It’s particularly noteworthy that Treasury yields have remained stubbornly low in the face of two 2017 interest rate hikes. My feeling is that at some point, either the equities or fixed income market will be wrong. Stocks are forecasting increasing economic growth and generally pricing in tax reform. The bond pits are intimating sluggishness, perhaps because those pundits are of the belief that any major legislative accomplishments this year won’t happen.

It promises to be a tug of war that we’ll be watching closely. Momentum has been almost exclusively positive this year, and portfolios are shining as a result. That being said, disappointment from Washington could play a major role over the next few months. The health care repeal and replace bills designed by the House and Senate don’t seem to be on any solid footing. Since passage of some alternative to Obamacare is a cornerstone to subsequent and substantial tax reform, that market aphrodisiac might be losing its potency. As I write this missive, the Senate has delayed the vote on their health care bill until after the Independence Day recess. There will only be 16 working days from their return until they break again for five more weeks. That seems to be a pretty tight window.

In conclusion, thanks as always for your trust and support. Let’s not forget that we live in the greatest country in the world, and celebrate the 4th of July accordingly. I look forward to hearing from you soon.




Bill Schiffman

Registered Representative




The opinions expressed in this letter are those of William Schiffman and should not be construed as specific investment advice. All information is believed to be from reliable sources; however, no representation is made to its completeness or accuracy. All economic and performance information is historical and not indicative of future results.

Diversification cannot assure a profit or guarantee against a loss.