Quote of the Week

 “I have long believed that the true worth of a person is measured by how faithfully we serve a cause greater than our self-interest that encompasses us but is not defined by our existence alone.”

– U.S. Sen. John McCain, May 2005 University of Arizona Commencement Address

Technical Corner

Stocks were up impressively last week based on progress in U.S.-Mexico bilateral trade talks which eventually is designed to replace NAFTA. It is important to understand that an agreement with Canada has not been reached.

Mr. Trump and Mr. Trudeau of Canada have what I would call a less than friendly or respectful relationship with each other. The talks with Canada are continuing with a supposed deadline of September 30th. Mr. Trump has said that if Canada does not acquiesce, the U.S. would “go it alone” with just Mexico. What Mr. Trump doesn’t understand is that all trade agreements have to go through Congress. The NAFTA agreement has been an economic boon to all three countries and I don’t think Congress would approve of us “going it alone” with just Mexico.

On top of that there were reports that Mr. Trump is considering taking further steps to implement new tariffs on $200 billion of Chinese goods. This action will surely be met with a reciprocal response by the Chinese government and will be another escalation of the trade war between the two countries. What Mr. Trump doesn’t seem to understand is that this trade war will possibly irreparably disrupt supply chains that have taken years to establish. Even if there were to be “trade war peace” sometime in the future, those supply chains could take years to re-establish, especially in agriculture which would really hurt our farming industry which has had an extremely tough time making any profits. We can say “goodbye” to the small farmers.

This week also provided another glimpse into key economic data. A revised look at the second quarter data confirmed that the GDP actually went up from 4.1% to 4.2%. It should be remembered that approximately 1% of that growth was due to people “buying ahead” of the tariffs. The rest of the World is in an economic slowdown which should affect U.S. growth going forward. A service that I subscribe to is projecting third quarter GDP grow for the third quarter at 2.3% to 2.7% and further slowing into the fourth quarter.

Last week the Dow was up 0.7%, the S&P 500 was up 0.9%, the MSCI EAFE was up 0.3%, and the Nasdaq was up 2.1%. For the year the Dow is up 5.0%, the S&P 500 is up 8.5%, the MSCI EAFE is down 4.3%, and the Nasdaq is up 17.5%.

Larry’s Thoughts

As most of you know John McCain was buried on Saturday. I feel a special kinship with John McCain even though I never knew him. We were both Naval Officers and we both served in Vietnam.

I am fortunate to be a member of Tucson Sunrise Rotary. One of my fellow members in Rotary is Myron Donald. He was a fighter pilot in Vietnam and was also shot down and imprisoned as was John McCain. He sent the following letter to all my fellow Rotary members. He has given me permission to re-print it in this week’s Larry’s Thoughts.

From:  Myron Donald

I imagine that you know that Senator John McCain died Saturday afternoon from brain cancer.  Brain cancer also killed Sunrise Rotarian Clark Miller who had that same up-beat, “Let’s get it done!” kind of spirit.

John’s A-4 Skyhawk went wildly out of control after he was hit over Hanoi in October, 1967.  John broke both arms and a leg when he ejected.  Unfortunately, he came down in a lake in the center of Hanoi and was farther injured by the irate citizens.

Most badly injured American pilots did not survive because they were not where the North Vietnamese chose to use their scarce resources.  But, when they learned that his father was Admiral McCain who was in command of the US Navy in the Pacific, they did take John to a hospital where he received minimal treatment.

Two other POWs were then put in a cell with him to feed him and take care of him as best they could.

Four months after John, I was shot down and taken to the Hanoi Hilton, the center for inprocessing new POWs.  After several months, I was moved to another camp in Hanoi that we called “The Plantation”.  I was in solitary across from the main row of cells where John was in a small cell by himself.

I drilled a hole in the door of my cell with a nail to watch the goings-on in the camp so I usually saw him twice a day though I didn’t know who he was.

We had to step just outside our cells twice a day to get our bowl of the kerosene weed soup, but, even though it was clear from his hobble and mis-aligned arms that he had been badly injured, he always had a smile as if he had something really good going on back in his cell.

A few months later I was moved to Son Tay for a couple of years, only to be moved to another camp a month or so before the raid so I did not see John again until after our release 45 years ago this year.

John’s grandfather was a four-star admiral commanding a carrier task force during WWII.  His father was a four-star admiral commanding the US Pacific Command while John was a POW.

John himself was a Navy Captain and, in my opinion, would have become an admiral too if he had not retired to enter politics.  John’s son, John S. McCain IV, is, as far as I know, on active duty in the N

The USS John S. McCain (DDG-56) is an Arleigh Burke-class destroyer.  The destroyer was named for John’s grandfather and father, but recently the ship was re-dedicated to include John.  All three McCains were John Sidney McCain.  I know of no other US Navy ship named after three people.

A year ago, the USS McCain hit a merchant ship near Singapore killing 10 sailors and injuring five.  The ship is now in Japan for repairs.

John, early in his naval flying career, barely escaped drowning in an early crash into water.  In July, 1967, he was on the USS Forrestal when an electrical malfunction fired a Zuni rocket that hit the fuel tank.  That started a fire that set off explosives that killed 134 sailors and injured 161, but John escaped with some shrapnel in his legs.  He was flying from the USS Oriskany when he was hit a few months later.

John dared a lot, risked a lot and did a lot for our nation, but he also did a lot to further relationships with people all over the world, including re-establishing diplomatic relations with Viet Nam.

By the Numbers

“RECORD HIGH – Following the NASDAQ Composite’s close of 5049 on 3/10/00, the next 2 ½ years resulted in a painful 78% fall to 1114 on 10/09/02.  The technology-oriented index didn’t close back above 5049 until 4/24/15.  The new record close for the NASDAQ Composite is 8110 that was set last week on Wednesday 8/29/18.  The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system (source: NASDAQ).”  –  Michael A. Higley, BTN 09-03-2018

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These are the opinions of Larry Lof and Stephanie Mayoral and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.The S&P 500 is an index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly.Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.

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