Profit margins above 20% are indeed at multi-degree highs. It’s a combination of operating leverage and efficiency from technology, a strong economic backdrop and the shift in the sector weighting of the market itself. The composition of the S&P 500 is fundamentally different today than 50 years ago. Asset-light technology businesses have more operational scale and higher margins than the energy and industrial businesses that represented a larger wallet share of profits back then. Now, that is far from saying there won’t be any reversion to the mean and this time is different, but all three of those elements will play a part in it. While I believe that the pendulum has swung too dramatically in favor of one sector over others and skewed the average, the timing as to when that apex is reached and it begins to swing the other way, or even how much, is unknowable. Rather than trying to predict the unpredictable, focusing on reasonable valuations, healthy free cash flows, and growing dividends is a way to not have to worry about it.

It is tough to do an apples-to-apples comparison because China has so many state-owned enterprises that have debt in their quasi-market crony] economy.  Their pure government debt-to-GDP is slightly less than ours.  That said, they do not let capital leave the country, which all at once makes it impossible for anyone else to ever want to own their currency, but also force domestic savings to stay in the country.  The high savings rate of their households ensures easy buyers of their debt (you may have heard, the U.S. citizenry is not known for its savings habits).  But I suppose nothing is more significant than the fact that China holds $4 trillion of foreign exchange reserves, and the U.S. holds, well, something that is tens of trillions negative.

They actually are quite different from one another, but it is a fair question. Companies in the Materials sector extract, gather, process, and prepare raw materials whereas the Industrials sector uses raw resources in the building of their products. It essentially deals with the phases of the supply chain – Materials being at the very beginning of the process and Industrials being near the end. The raw commodities of the supply chain (whether it be copper, iron ore, steel, lumber, etc.) are vital in the Materials sector. Commercialization is vital in the Industrials sector. It is much more complicated than this, but the more expensive materials are after being extracted, the better profits may be in that space; whereas the more expensive materials are (input costs), the less profitable many Industrials may be.

It’s a thoughtful question and one that we pondered when we were considering whether to launch an ETF or not. If someone can just buy it or look up its holdings, does that diminish the value proposition of TBG in some way? Mentioning a few names on TV that we are passionate about is in that same vein; why give away the store, so to speak? The answer is several-fold.

For starters, the true value proposition of TBG is light-years beyond just the dividend growth portfolio we manage. It may represent one of our deepest passions about investing these in capital markets, and it’s certainly something we obsess over every single minute of every hour of every day. However, the true value we provide to clients lies within the relationship we are privileged to forge with them. That’s not cliché, it's God’s honest truth. Serving them day in and day out, solving complex estate issues, or financial planning needs, or supporting them in times of dramatic life shift or change – these are the things that get us out of bed and where that ‘value’ secret sauce lies. I also believe that mentioning a few stocks we love on TV is far from giving away the entire store.

Sure, viewers can copy these ideas and potentially profit from them over time without paying a dime for the hundreds of hours of research and blood, sweat and tears of work our Investment Committee dedicated to forming those opinions, but that is small ball to what we are after. We believe in preaching what we believe, whether it be individual stock selection, thoughts on the economy, markets or anything else, and it will either resonate with listeners, or it won’t. Some may want to become clients, and others won’t. The motivation, though, doesn’t lie in either of those outcomes. We simply say what we believe because we feel it’s important, and we have a calling to share it.