A key phenomenon of bureaucratic organizations is that, over time, nearly every organization will shift its focus away from the purpose for which it was created and to the presumably superior goal of its own survival. This seems to be especially true of governmental organizations.

Adjunct to this is the perverse feature that virtually guarantees that all such entities will grow ever-larger: in scope, staff and budget. History continues to show that, when left to their own devices, government agencies cannot be counted on to ever improve their productivity or efficiency. So, what usually happens is that agencies grow to the point of calcification and are then replaced by a new agency…which starts the process over. But, since calcification takes years, in the meantime the newly formed agency may actually perform its assigned mission.

So, now you must be thinking; ‘Interesting stuff Ron, but what’s your point?’  Here it is…

Back in May of 2017, President Trump tasked the Office of Management and Budgets to work with all government agencies to do some honest internal soul searching and come forward with suggestions on how to improve that big machine we call the Federal government. The goal was to make it more efficient, effective, and accountable to all Americans — not just the ones receiving services but also those Americans who get the invoice…and pay it.

In the last few days, there has been some hint of progress. In fact, some of the ideas are pretty revolutionary. Reportedly, the White House is set to propose merging the departments of labor and education. We think that’s a great idea — to actually have some coordinating of policies that affect both the nation’s work to be done and the educating of those citizens who will be needed to do the work. There are other plans of consolidation and agency replacements as well. OMB director Mike Mulvaney illustrated a few examples of the wasteful and often over-lapping oddities that can result from agencies determining their own areas of responsibility. Here’s Mike:

“If you make a cheese pizza, it’s governed by the Food and Drug Administration. If you put a pepperoni on it, that’s governed by the USDA.”
“If you have a chicken, it’s governed by the USDA. If that chicken lays an egg, it’s covered by the FDA, but if you break the egg and make it into an omelet, that is now covered again by the USDA.”

“If you have an open-faced roast beef sandwich, that’s one or the other, but you put the bread on top of it, it’s the other one, a hot dog, the hot dog meat is governed by one, you put it in a bun, it’s covered by another.”

“One of my favorites: If you have a salt water fish, you have a salmon, and it’s in the ocean, it’s governed by the Department of Commerce. Once it swims up river, it’s governed by the Department of the Interior, and to get there, it has to go up a fish ladder governed by the U.S. Army Corps of Engineers.”

“This is stupid … this makes no sense,”

Who would disagree?

On an unrelated, and somewhat sad, note. After more than a hundred years General Electric has been removed as one of the elite Dow 30 stocks. The once mighty multinational conglomerate was originally selected in 1896. It seems not that many years ago (although it probably was) that a popular axiom on Wall Street identified a pair of stocks as bellwethers for the economy at large: ‘How GM and GE go, so goes the country’.) Well, perhaps it was time for GE to go. Its share price has fallen some 80% since the year 2000 and it recently accounted for less than 1% of the Dow’s total weight. On the other hand, we’re not sure how we feel about the former stalwart’s slot on the Dow 30 to be taken by a drugstore. That’s not intended to be a slight against Walgreen’s, but still…

Market Minute 6-22-2018 – Emerging Markets are Great, (Not!)

This is hopefully one of those ‘pictures that’s worth 1000 words’ illustrations. The first chart shows the investment performance of emerging markets (shown as the red line) in 2017. Up 37% – WOW!  Compared to the US market (shown as the green line) in 2017. Up 21% – not quite as WOW, but pretty darned good.

And that’s why everyone wanted to own emerging markets at the beginning of 2018. 

See the second chart. Something (obviously) changed! The red line is again the emerging markets return – in this chart showing 2018. Down 5.8%.  Not Wow. Compared with the US markets – again the green line. Up 4.3%. Maybe not wow, but not as ugly as emerging markets.

And the moral of the story is that markets are constantly changing. It is my belief that one cannot presume that last year’s winners will again be the winners this year. And that’s what keeps us busy – checking on the strength of the different parts of the world markets and directing our clients’ funds to the stronger areas.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at lindaw(at)denkinvest.com. If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

The Update provides information of a general nature regarding legislative or other developments. None of the information contained herein is intended as legal advice or opinions relative to specific matters, facts, situations or issues. Additional facts, information or future developments may affect the subjects addressed in this document. You should consult with an attorney, accountant or DSWP planner about your particular circumstances before acting on any of this information because it may not be applicable to your situation.

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*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.