The Financial Focus
June
2014
SC Conners
Wealth
Management
An office of MetLife
9170 E. Bahia Drive,
Suite 103 C
Scottsdale, AZ 85260
PHONE:
(480) 603-1941
TOLL FREE:
(888) 777-1914
FAX:
(480) 603-1942
E-MAIL:
sconners@metlife.com
We’re on the Web!
See us at:
www.connersweatlh
management.com
Individual
Highlights:
Innovation or
Commoditization 1
Stock Market –
Short Term
2
The Winner is: Innovation or Commoditization?
A global marketplace
where goods and services
are traded between
countries without tariffs
(and absent of trade
restrictions for the most
part) price as we once we
knew it as a consumer are
forever altered.
Compounding global
trade in an internet
centric world is
omnipresent,
accompanied by
complete transparency.
Internet commerce in
aggregate each day is
significant! Consider the
following: “E-commerce
statistics confirm the
explosive pace at which
this industry has
developed as worldwide
B2C e-commerce sales
amounted to more than
1.2 trillion US dollars in
2013.1
As time has evolved U.S.
consumers (and Western
Europe consumers alike)
are demanding price
levels that have been in a
disinflationary stage for
over 20 years. How low
of a price is enough to
satisfy the “price
conditioned” consumer?
1 “Statista,”
2
And if one adds the
impact of the Internet, it
only exacerbates the
pricing problem for
corporations and
consumers alike.
to the commoditization
trend will certainly
maintain pricing power.
Healthcare cannot be
administered over the
Internet obviously.
Is there a solution to the
elimination of all
intermediaries? Prices of
goods and services have
an endless supply.
Genetically based drug
developers or
Biotechnology companies
experienced dramatic
share price increases last
year as the FDA continues
to approve at an ever
increasing pace, Phase III
compounds. Clearly,
globalization and the
maturing Internet are not
having an effect on
certain industries.
The late Milton Friedman
believed that demand
and supply would always
find equilibrium. True in
his time frame, however,
not at this juncture or
time period. The Internet
allows for cost and price
comparison that has it so
a company(s) can often
be found offering an
item(s) just to gain
market share; price is
arguably too transparent.
The consumer has
become too price
sensitive as a result,
where value and quality
are no longer the key
motivation in my view.
Innovation in the end is
the only real solution.
Industries that are new,
novel, and otherwise, that
cannot easily be exposed
So in the final analysis,
the answer is innovation,
perhaps a revamp of the
patent system and other
potential solutions. My
late grandfather, Murry
Conners, made an
interesting point during
his lifespan, “This is the
space age, and if we are
going to keep growing,
we have to be creative,
original and fastmoving.”2
<http://www.statista.com/chart/1223/global-e-commerce-sales-2013/> (May 30, 2014).
“On-The-Job-Training,” Ocala Star-Banner (Ocala, Florida), 19 November 1969, 10B.
SC Conners
Wealth
Management
An office of MetLife
9170 E. Bahia Drive,
Suite 103 C
Scottsdale, AZ 85260
PHONE:
(480) 603-1941
TOLL FREE:
(888) 777-1914
FAX:
(480) 603-1942
E-MAIL:
sconners@metlife.com
We’re on the Web!
See us at:
www.connersweatlh
management.com
Written by:
Steven C. Conners
Investment Advisor
Representative
Financial Services
Representative
The Financial Focus
Page 2 of 2
The Stock Market in the Short-Term
The stock market in the
short run is up, down, or
gyrating sideways. More
often than not, it can be
based on emotion. The
market is reactive as
opposed to responsive.
Reaction to news and the
subsequent stock price
movement is enough to
make one sea-sick! At
least leave your seat belt
on when investing in the
equity market.
To be sure, the equity
market often does create
trends which may last a
long while, whether it is a
bullish or upward trend,
or a bearish, downward
trend. There is typically
rational reasoning behind
the trend.
A reactionary market
example is the aftermath
of the housing crash and
the ensuing credit crisis.
Many panicked and sold. I
sold for clients, but
perhaps too soon as there
was still a year left of
gains. But, as far as
stocks were concerned;
panic set in, and dumping
of a company’s stock was
in turn the reaction.
Contrast this to the
Federal Reserve’s recent
quantitative easing
program. Quantitative
easing went into a stagelike process that
ultimately had investors
respond in kind, with
share prices increasing in
value, as confidence
levels increased.
The bottom line, as I
provide you with advice,
it will be based (as
always) as a response to a
multitude of factors that
are predicated on facts to
accurately reflect not only
opportunity but the riskadjusted return.
Reactionary investing can
be costly.
Moreover, contrasting the
speed of change in the
stock market versus the
Treasury markets, and
accompanying credit
markets, can be quite
revealing. Bond prices
generally are not as
fickle. It is more of a
reflection of price levels
in aggregate and levels of
economic activity. The
bond market is not a
great place for the quick
buck on that hot stock tip
you heard about at the
cocktail party. Thus, it is a
more intelligent market,
and is generally one that
is characterized by the
target audience that
invests in it, which more
or less is for those seeking
income and the potential
for growth. This has it so
many investors in the
bond market(s) can be
more complacent and are
perhaps more settled in
their respective holdings.
Pricing is more reflective
and “responsive”; serving
as a thermostat on
economic activity and
general pricing levels on
a macro-basis. This
indeed can serve as an
example of a responsive
market as opposed to the
above reactionary market
distinction. The exception
is of course the high-yield
corporate bond market
that does fluctuate more
frequently in response to
changes in the category of
companies that carry low
credit ratings.
Furthermore, the highyield, corporate bond
market, or (junk bonds)
correlate to stocks, rather
than the Treasury bond
market. Lastly, highgrade and Treasury bonds
can be more stable and
more predictable as a
result.
The Financial Focus is a publication created by Steven C. Conners. The statements and opinions expressed in this article are those of Steven C. Conners and do not in any way reflect
the views of MetLife. This material is for informational purposes only, and should not be construed as an offer to sell or solicitation of an offer to buy any security. MetLife makes no
representation or warranty relating to the facts presented or that all material facts necessary to make an investment decision are presented. The information in this material is not
intended to be personalized investment advice and should not be solely relied on for making investment decisions. MetLife and its representatives do not provide tax or legal advice.
Please consult your tax or legal advisor for such guidance. Metropolitan Life Insurance Company (MLIC), New York, NY 10166. Securities and investment advisory services offered by
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