Do you ever wonder why when the battery in your smoke detector goes dead and starts to chirp, it’s between the hours of 2:00 am and 3:00 am?  There has never been a time during my life that it chirped during normal waking hours.  In my house, my entire family could sleep through a thunderstorm, except for me, I can hear the slightest noise.  Once I hear the first chirp of the alarm, I head out in search of the culprit.  I head to the hall, that has to be the one. I stand, look up and stare, waiting for the chirp…nope not that one.  I go from room to room, then downstairs, looking and staring.  Finally, after about 5 tries, I have find the offender.  Now, I have a decision to make, do I go outside and grab the ladder or risk it with one of the swiveling bar chairs.  It is 2:30 in the morning, so I risk it and pull down the smoke detector while trying to balance on a swiveling chair.  Removal completed, it’s off to the junk drawer to find a 9-volt battery.  I am sure my junk drawer is like most of yours and the batteries are floating around not in their package.  I try to find the battery by feel as I do not want to turn on the lights for fear that I will totally wake up.  Battery found, but does it work?   We all know how we test a 9-volt, so on to the tongue it goes.   Back on the swiveling chair to reinstall the detector.  Detector installed and I ease myself off of the chair.  Just as I start to move the chair back to the bar…chirp.  How is this possible, I changed the battery and even tested the new one?   There is only one way I can go back to sleep, time to disconnect the wires.  I pull down the detector, stuff it in a drawer in the guest room and shut the door, because who knows how long it will continue to chirp.

Are the batteries fading on some parts of the market, maybe?  Consumer staples are moving off their May lows as tech stocks are starting to show some fatigue.  It is concerning when you read the Wall Street Journal and analysts are talking about different metrics to value tech stocks.  The metrics changed before the fall back in 1999, not a good thing.  We love technology and all these companies have to offer, but chasing these could lead to a late-night wake-up.  Looking below, you will see that it took over 15 years for the market to recover from the 1999 sell-off in tech stocks…may be time to check the batteries as a 2:30 chirp is very undesirable.

Turkey

How does a tweet send a country into a tailspin?  The doubling of tariffs on Turkish steel and aluminum sounds harsh, except that they only sell about $1.4 billion of those metals to the US, which will reduce their GDP by roughly 0.04 percent.  Conditions for a crisis in Turkey were present, it just took a spark to set it off.  Turkish business borrowed heavily in US dollars, now that their currency has lost about half of its value, payback’s a witch.

Markets are concerned the issues with Turkey could be contagious.  Where will the problem spread?  They owe the Spanish, the French and the US.  Looking at the chart below, there is a lot of emerging market debt denominated in US dollars.  In fact, the Wall Street Journal reported that Governments, financial firms and other companies in the emerging markets have $2.7 trillion in US dollar-denominated debt coming due between now and 2025.  Time will tell if other emerging market currencies will react like they have in Turkey, but we may hear a chirp.

Humidity or smoke

The Kidde Fire alarm company reported on their website that high humidity, steam, and condensation may cause false alarms.  Are we looking at smoke in the air or just humidity?  Equities have found support as US earnings had solid increases during the second quarter.  Profit margins have increased with help of the corporate tax cuts.  There are geopolitical, trade/tariff risk and many investors have become complacent after years of low-interest rates and low volatility.  Being a light sleeper and having a deep concern for our firm’s clients, our intentions are to not have a late night chirp.  One area of our portfolios, although it is a small part, we are looking to reduce is our exposure to emerging market debt.  We will stay ever vigilant so that you are able to sleep at night.

New Spinnaker Team Member

We are happy to announce that Seth Gruber has joined Spinnaker Investment Group, LLC as a Marketing Representative.  His role is to assist businesses and individuals with solutions for their financial well-being.

Seth began his career with Image 2000, the largest Kyocera distributor in the country, where he was named rookie of the year in 2017.  To better align his passion for people with his career, he made the (correct) decision to join our team.

Seth enjoys running, cycling, surfing, backpacking, and spending time with his growing family.

Sincerely,

Morgan R. Christen, CFA, CFP^®, MBA, CDFA
Chief Executive Officer

Disclosures

* Past performance is not a guarantee of future results. Stock is the capital raised by a corporation through the issue of shares entitling holders to an ownership interest of the corporation. Treasury securities are negotiable debt issued by the United States Department of the Treasury. They are backed by the government’s full faith and credit and are exempt from state and local taxes. Past performance is no guarantee of future results, and there is always the risk that an investor may lose money. Diversification neither assures a profit nor guarantees against loss in a declining market. The information contained herein is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the securities mentioned. The information contained herein, while not guaranteed as to the accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions expressed herein are subject to change without notice. https://fred.stlouisfed.org/series/NASDAQCOM   Wall Street Journal source for Emerging Market debt data