September 2021 Newsletter

American flags in autumn grass

Welcome to the September 2021 Newsletter. This month, we’re discussing the economy, employment, COVID-19 vaccine updates, and more.


The Cleveland Federal Reserve Bank’s inflation gauge, “Median CPI,” provides a more accurate signal of underlying inflation. Currently, the reading is 2.3% – suggesting the relatively high CPI and PCE inflation readings are indeed transitory. Meanwhile, payroll growth is outstanding and unemployment claims are diminishing. The yield curve has a very positive slope (a good thing) and the leading economic indicators increased 0.9% in July.

A fair question: Why has the stock market done so well this year? The answers include:

  • Economic growth has been substantial.
  • Reported corporate profits have consistently exceeded analyst estimates.
  • Corporations are reporting higher earnings & margin growth for the rest of the year.
  • National employment numbers have continued to improve.
  • Wage growth has increased 4% annualized.
  • The consumer has been strong and eager to spend.
  • Manufacturing companies have been producing at high rates to satisfy both current demand and to increase inventories.
  • Companies have demonstrated pricing power.
  • The Federal Reserve has continued to keep interest rates low.
  • So far there has been a stalemate in Congress to massive spending increases.

Employees should therefore continue to make their weekly, biweekly, or monthly contributions to their employer’s retirement plan, and personal and spousal IRAs. At this time, additional money can be added to an investor’s stock market allocation, but only on a dollar-cost-average basis spread over 12 months. All portfolios remain fully invested.

Quote of the Day

Admiral Hyman Rickover

“There are two types of ships in the Navy: submarines and targets.”

Admiral Hyman Rickover (1900 – 1986), served in the Navy from 1918 to 1982. Rickover is known as the “Father of the Nuclear Navy” as he directed the development of nuclear propulsion systems for submarines and aircraft carriers. He was hyperactive, blunt, confrontational, insulting, and a workaholic. He had little tolerance for mediocrity and none for stupidity. His abrasive personality caused him to be passed over twice for promotion to Admiral. Eventually, the White House and Congress intervened, and he was promoted to Rear Admiral in 1953. Today Admiral Rickover is viewed as one of the Navy’s most important and influential officers.

Rickover, a four-star admiral when he retired, is only one of four people who have been awarded two Congressional Gold Medals. He was also twice awarded the Legion of Merit. Admiral Rickover’s 63 years of active-duty service makes him the longest-serving member of the U.S. armed forces in history.

Pop Quiz

Mark is from Missouri. The state has a great nickname: “The Show-Me State!”

Question: What are the names of the rivers that form portions of the Missouri state boundary?

The answer is at the bottom of the newsletter.

The Economy

coins in soil with sprouts


Total U.S. nonfarm payroll employment rose by 943,000 in July, and the unemployment rate dropped to 5.4% from last month’s 5.9%. The Job Openings & Labor Turnover Survey said there were 10.1 million open jobs in the U.S. as of the last business day of June, compared to 9.2 million openings the last day of May.

The seasonally adjusted, all-encompassing unemployment rate, U-6, declined in July to 9.2% from 9.8% last month. It was 16.5% in July 2020 (A-15). There are 9.2 million people unemployed in the U.S., ages 16 and older, compared to 9.9 million last month. Those people not working and not seeking work are not considered to be in the labor force.

July Unemployment Rate

Unemployment Rates by Education Level, May 2021

Less Than High School Diploma9.5%
High School Graduate, No College6.3%
Some College or Associate’s Degree5.0%
Bachelor’s Degree or Higher3.1%

The rolling three-month average payroll employment increased to 832,000 this month from 567,000 last month. Even with COVID remaining out-of-control in many parts of the country, employment is ripping higher.

Gross Domestic Product (GDP)

The Bureau of Economic Analysis said the second estimate of the 2021 second-quarter GDP increased by 6.6%, compared to a revised 6.3% increase in the first quarter.

2021 Q2 Real GDP


Annual inflation rose to 4.2% in July as measured by the Personal Consumption Expenditures (PCE) index. The core PCE index, which excludes food and energy, remained steady in July at 3.6%, compared to the same level in June.

The nationwide S&P/Case-Shiller Home Price index rose 18.6% for June 2021 vs. one year ago. This is the highest annual increase in 30 years. This compares to an annual increase of 16.8% in May 2021. Expect each city and county to have a higher or lower percentage change than the nationwide average.

Long-term inflation expectations can be determined by measuring the differences between Treasury bond yields & TIPS real yields of the same maturities. Results are:

Bond MaturitiesAnnual Inflation Expectations
5 Year2.48%
10 Year2.33%
30 Year2.22%

This month’s estimated annual inflation numbers are six basis points on average lower than last month (one basis point is 0.01%).

Important Dates in September

September 6 – Labor Day

September 6, 1901- William McKinley, the 25th U.S. President, was assassinated in Buffalo, New York. McKinley was the third U.S. President to be assassinated in office. On September 14, 1901, VP Theodore Roosevelt was sworn into office. Roosevelt finished McKinley’s term as President and then won re-election in 1904.

September 11 – Patriots’ Day

Stock Market

stock market concept


David Kostin, Goldman Sachs Chief U.S. Equity Strategist, wrote on August 5, “We are raising our S&P 500 Index target from 4300 to 4700 for year-end 2021 and raising our 2022 year-end target from 4600 to 4900.” This says there is 7% more to go in 2021 as of August 5, but we should only expect the stock market to be up 4% in all of 2022!

Chris Harvey, Head of Equity Strategy at Wells Fargo, said on August 24 he is raising their target for the S&P 500 Index to 4825 for this year. But says due to compression of the market PE Ratio in 2022, his S&P 500 Index target drops to 4715, or down 2.3% for the year.

Stephanie Link, portfolio manager at Hightower, said on August 24, “I lean towards a barbell approach with a portfolio today. Broadly this includes tech and cyclicals. In the cyclical arena, I like the financial, industrial, material, and energy sectors because they have pulled back so much from the May highs.”

After the stock market bear-market during February and March 2020 due to the pandemic, the rest of 2020 was a momentum-driven rising stock market. Now in mid- to late 2021, we have entered an earnings-driven market. It’s all about future corporate earnings. The better future corporate earnings, the better the stock market.

The following stock market idioms are still true today:

“The trend is your friend.”

“Don’t fight the Fed.”

But some individual stocks have been hit hard recently including those companies that can’t hire enough workers (restaurants), or whose sales are down again due to COVID-19 fears (airlines, casino stocks), or a continuation of the semiconductor chip shortages (auto companies). They have all seen their stocks drop in the past few weeks. But this is a very short-term phenomenon. We continue to encourage all investors to ignore the mania that frequently spews from the business and financial media and instead be long-term investors. Today, we are definitely in a secular bull market and a cyclical bull market. What does that mean exactly?

Longer-Term Secular Markets move between secular bull (up) markets and secular bear (down) markets. Each secular market tends to last 10 to 25 years. There will be both short-term cyclical bull markets and short-term cyclical bear markets within the same long-term secular market. The current long-term secular bull market began in the middle of March 2009 (at the end of the ’08 and ’09 financial crises) and continues today without interruption. The only thing that will end a secular bull market is a secular bear market, which is not on the horizon.

Shorter-Term Cyclical Markets move between cyclical bull markets and cyclical bear markets, which all happen inside a secular market. Each cyclical market tends to last one to five years. We had an unusually long cyclical bull market from March 2009 until the pandemic of March 2020. For those two months, we had an extremely short, cyclical bear market. In late March 2020, another cyclical bull market began which continues today.

Today, we are in a shorter-term cyclical bull market that began in late March 2020 that is also within a longer-term secular bull market that began in March 2009.

Next month we will begin a new category, Vocabulary of Financial Markets.

Stock Market Valuations

We are a little more conservative than David Kostin above. Based on our forecast of strong economic growth in 2021 and inflation eventually returning to the Fed’s 2% target, we estimate S&P 500 operating earnings will increase to $207 this year and as high as $220 next year. We assume there will be a higher corporate income tax rate in 2022. With a price/earnings ratio of 22.5 times, the S&P 500 Index has the potential to reach 4,660 this year. If the PE ratio drops only to 22.0 next year due to higher interest rates, the S&P 500 Index has the potential to reach 4,840 next year.

The S&P 500 Index closed Tuesday, August 31, at 4522.68. That is up 2.9% since the close on Friday, July 30.

Recommended Action for Your Stock Portfolio

This month, it’s more about what you don’t own rather than what you do own. If an investor can avoid big losses, each investor will more likely be a winner over the long term. Just like a baseball player who seldom strikes out, his career batting average is likely to be higher.

For several years, various Chinese stocks have been all the rage in the U.S. But more recently, the Chinese government is undergoing a campaign to crack down on excesses in Chinese tech companies. Paraphrasing the Chinese government’s recent announcements, reporters in China have said, “The Chinese government doesn’t like Chinese companies offering stock in the U.S. as it creates too many Chinese billionaires.”

Large tech-oriented Chinese companies that have their stocks listed in the U.S. have had their stock prices crash recently. See how much the following Chinese companies’ stocks have dropped from their 2021 high to their recent lows in August.

Chinese flag
  • Alibaba Group (BABA) down 41.7%
  • Inc (JD) down 41.8%
  • Tencent Holdings (TCEHY) down 45.8%
  • Baidu Inc. BIDU) down 59.6%
  • And DiDi Global (DIDI) which started trading in the U.S. on June 30 at $14.00 dropped all the way to $7.20 or down 48.6%.

Fortunately, Lorenz Financial has never recommended any individual Chinese stocks, or any ETF or mutual fund that trades only in Chinese companies.

Americans continue to be on the move!

Some of the results of the 2020 National Census have been released. The results show several states have lost population and several have gained. Specifically, Texas has gained two U.S. House seats – and two Electoral College votes in 2024 – and five states have gained one each: Colorado, Florida, Montana, North Carolina, and Oregon. Seven states have lost one each: California, Illinois, Michigan, New York, Ohio, Pennsylvania, and West Virginia.

Our Corporate Bad Boy This Month

The University of Miami School of Law

Source: Page A1, The Wall Street Journal, August 4, 2021

Recent graduates of the University of Miami School of Law who used federal loans borrowed a median of $163,000. Two years later, half were earning $59,000 a year or less. That is the biggest gap between debt and earnings among the top 100 law schools. Just 15% of recent University of Miami Law graduates had begun repaying their student loans after two years. When Miami Law School students asked for financial assistance, some graduates told the Journal, school officials often offered this solution: “Take out more loans.” 

Starting lawyer salaries generally fall into two clusters: $45,000 to $75,000 for public service and new attorneys at small firms, and around $190,000 for large firms who recruit only from the most elite law schools.

A law professor at the University of Miami, Anthony Alfieri said, “law schools foster this kind of cruel optimism” in students, letting them think six-figure salaries are obtainable. In reality, those high-paying jobs are largely reserved only for students who graduate from the top 20 or so law schools in the country.”

Zigan Danklou, a 2018 Miami Law graduate, estimates about two dozen law students met with the Law School Dean, Patricia White, to voice financial concerns. Mr. Danklou said the dean was very nice and gave the students pizza, but noted: “…apart from that, I don’t recall any help being offered.”

Over the past decade, Miami has increased law-school tuition and fees by 43% to $57,000 for the coming school year. That’s more than double the rate of inflation. Jacqueline Menendez, a University of Miami spokeswoman, said in a written statement: “Reducing student debt is of primary importance at each of the university’s schools and colleges, including Miami Law.”

Vaccine Deployment

staying healthy with face masks and hand sanitizer

U.S. Data by the CDC – August 31, 2021

Percent of the Total U.S. Population Fully Vaccinated52.4%
July’s Fully Vaccinated Percentage49.5%
June’s Fully Vaccinated Percentage46.7%
May’s Fully Vaccinated Percentage40.7%
April’s Fully Vaccinated Percentage30.5%
March’s Fully Vaccinated Percentage15.0%

Why is there hesitancy with COVID-19 vaccines?

This month, we are continuing our three-month series with statements from some who express a hesitancy to get the COVID-19 vaccine and supporting facts as to why the vaccine should still be obtained.

The COVID-19 vaccine has too many serious side effects.

According to the Mayo Clinic, serious side effects of the COVIDCovid-19 vaccine from Moderna or Pfizer are very rare. Mild side effects after the first or second dose of those vaccinated have included:

  • Pain, redness, or swelling at the injection site
  • Fever
  • Fatigue
  • Headache
  • Muscle pain
  • Chills
  • Joint pain
  • Nausea and vomiting
  • Swollen lymph nodes

During the Phase 3 clinical trials in 2020, the reporting level of these symptoms ranged from 20% to 60% of those who received the vaccines. Those volunteers who received the placebo reported the same symptoms with frequencies of 10% to 30%.

I’ve heard some theories that the COVID-19 vaccine will change my DNA, that it contains a mercury-based preservative known as thimerosal, and the vaccine can cause autism.

No vaccines, except some formulations of the flu vaccine, contain thimerosal, and the type of mercury it uses is ethyl mercury, which is cleared from the body quickly and harmlessly. Vaccines do not cause and have never been associated with autism. And most importantly, the COVID-19 vaccine CAN NOT change a person’s DNA.

I have already had COVID-19 so I have the antibodies. Therefore, I don’t need the vaccine.

Not true! Some people have already caught COVID-19 twice just in 2020. Obviously, the antibodies their immune systems produced during the first infection rapidly faded, and before the year was out, they caught COVID-19 again. The antibodies developed by our human immune system following the two-shot mRNA vaccines are much more robust and more durable than the antibodies produced during an actual COVID-19 infection.

I don’t have any good access to get the vaccine.

Vaccines are offered almost everywhere. Below is a partial list of retail locations across the country that offer COVID-19 vaccines:

  • Albertsons Companies
  • Costco
  • CVS Pharmacy
  • Food Lion
  • Jewel-Osco
  • Kroger
  • Meijer
  • Osco
  • Payless
  • Publix Super Markets
  • Rite Aid
  • Sam’s Club
  • Safeway
  • The Medicine Shoppe Pharmacy
  • Walgreens
  • Walmart
  • Winn-Dixie

For more information, check out this website:

Pfizer-BioNTech Receives Full FDA Approval

The Food & Drug Administration announced they have fully approved the mRNA Pfizer-BioNTech vaccine to prevent COVID-19 for ages 16 and older. Chairman and CEO of Pfizer, Albert Bourla said, “I am hopeful this approval will help increase confidence in our vaccine as hundreds of millions of doses have already been administered in the U.S. since emergency use authorization was granted in December 2020.” The Pfizer vaccine continues to have emergency use authorization for those 12 to 15 years of age.

Moderna Seeks Full FDA Approval

Moderna announced on August 25 they have completed their submission for full FDA approval for their mRNA COVID-19 vaccine for those 18 and older. Moderna CEO, Stephane Bancel, said, “We are pleased that our COVID-19 vaccine is showing durable efficacy of 93% through six months after the second dose.” The FDA submission includes data from the Moderna Phase 3 clinical trials of more than 30,000 participants in the U.S. The company has requested a Priority Review by the FDA. Even though such a review is allowed to take six months, it is more reasonable to assume the vaccine will be fully approved in the next two to three months.

Moderna has also filed for emergency use authorization for their vaccine for those 12 to 17 years of age.

COVID-19 Booster Shots

On August 18, White House officials said they are seeing “a slight reduction in vaccine effectiveness against mild to moderate COVID infections over time.” The data shows a slightly higher rate of infection. It does not show an increase in severe disease, hospitalization, or death among the fully vaccinated. The data comes from the New York Health Department, the Mayo Clinic, the CDC’s Reporting System, and the Israeli Ministry of Health.

Now, on August 31, the Director and Deputy Director of the FDA’s Office of Vaccine Research & Review have announced they are resigning from the agency due to the White House announcing COVID booster shots without any FDA input, review, or approval.

A Special Note on Multi-Shot Vaccines

Vaccines with a two-shot regimen generally have included a much longer wait time between shots than Pfizer’s three-week or Moderna’s four-week window. A longer wait time tends to increase the long-term effectiveness of all vaccines. But the pandemic put everyone in a crisis mode, so the vaccine’s Phase 3 trials were set up with shorter windows. This third shot with a six- to eight-month wait time is likely to produce significant long-term effectiveness against even mild to moderate COVID infections, assuming the third3rd shot is eventually FDA approved.

Bond Market

bond market and pen


Real GDP grew at a 6.3% annual rate in the first quarter and 6.6% in the second quarter. The Atlanta Fed estimates the third quarter will be 5.1%.

We expect the economic recovery to continue into 2022. All of the real-time economic indicators we monitor point to ongoing economic growth. The labor market is extremely strong, and we expect it will remain robust for some time.

Federal Reserve

The next Federal Open Market Committee (FOMC) meeting is September 21-22. We do not anticipate any change to the federal funds rate currently in the range of 0.0% to 0.25%. We expect a taper announcement to come soon. Currently, the FOMC is purchasing $120 billion in bonds every month in order to keep long-term interest rates low. We hope the taper amounts to a $15 billion reduction per month spread over eight months.

We are still waiting for the administration to announce a replacement for the open position on the Fed’s Board of Governors. This position has been open since Judy Shelton’s nomination was declined by the Senate in November 2020.

U.S. Treasury

A new higher debt ceiling has not yet been passed by the U.S. Congress. The new fiscal year begins October 1. So far, neither the $1 trillion infrastructure bill nor the Bernie Sanders $5 trillion spending package has been passed by Congress. The budget deficit was $2.5 trillion during the first ten months of the fiscal year 2021.

Recommended Action for Your Bond Portfolio

Most bonds are not appropriate today because it is expected that, in the mid- to long-term, interest rates will rise significantly above today’s levels. As bond yields increase, existing bond prices decline. Our bond market mutual fund recommendations have been reduced to the short list below:

  • Ultra-short-term U.S. investment-grade bond funds
  • Short-term U.S. investment-grade bond funds
  • U.S. savings I bonds

The most important aspect in selecting a bond fund in this market is to keep the bond fund’s average duration low. Lorenz Financial suggests keeping a bond fund’s duration under 2.5 years. The higher the bond fund’s duration, the faster the fund’s price will decline as interest rates rise.

U.S. savings I bonds have no credit risk, no interest rate risk, and income taxes are deferred until the bonds are sold or mature. I bonds purchased now are yielding 3.54%.

**Please note: Everyone should maintain a safe, liquid emergency fund of at least nine to 12 months of family expenses in an FDIC-insured or Credit Union NCUA-insured checking account or money market account before investing in a stock or bond portfolio.**


What are the names of the rivers that form portions of the Missouri state boundary?

Answer: The Mississippi River, The Missouri River, The St. Francis River (western edge of the boot heel), and the Des Moines River (northeast corner of the state).