Death and destruction are not something that anyone wishes for, but all too often, conflict has occurred frequently over the past years. Historical evidence suggests that in regional disputes markets typically recover within a few days or weeks.

 

Does that mean the financial market participants are uncaring or callous? Not at all. In most cases, markets rebounded because the underlying economic cycle, either in the U.S. or worldwide, was expanding. This growth not only supported markets but also helped move them higher despite geopolitical uncertainty. Conversely, during periods when the market struggled to find its footing, it was mainly due to broader market conditions.

 

Morgan Stanley Wealth Management recently conducted a study on key geopolitical events dating back to 1940, starting with Germany's invasion of France and ending with Russia's invasion of Ukraine in 2022. They examined the stock market's performance three, six, and twelve months after each event and compared it to periods without notable geopolitical events.

 

They found that, on average, the markets underperformed over three months, but over six- and twelve-month periods, the returns were identical. It was as if the conflict or crisis had never happened. There were some geopolitical events that had a significant and lasting impact on equity markets, but market conditions also played a part.

 

The 9/11 bombing of the World Trade Center, for example, occurred about the same time as the dot-com boom and bust unfolded, causing the NASDAQ to fall substantially and take the rest of the market with it. In 2022, during Russia's invasion of Ukraine, the Federal Reserve Bank raised interest rates roughly at the same time, sending stocks lower.

 

If we look back through the 20th century, strong bull markets occurred despite World War II, the Vietnam War, and conflicts in the Middle East. Most of the exceptions to this rule centered on energy. The 1973 oil shock disrupted markets for over a year, resulting in a period of stagflation in the United States. The sudden spike in oil prices, occurring at a time when oil was in short supply, disrupted the economy and led to significant inefficiencies. And yet, Russia's invasion of Ukraine, which temporarily caused oil prices to gyrate, came down again rapidly as additional oil supply came onto the market quickly.

 

A critical difference today is that the U.S. is largely energy independent. It is the world's largest producer of oil and gas. U.S. oil production now exceeds 13.3 million barrels per day. That is more than Saudi Arabia, Russia, or any other member of OPEC.

 

That is not to say that geopolitical risks have no impact. On a country-by-country basis, the story may differ significantly. While the U.S. market has barely skipped a beat throughout the Russia/Ukraine war, the European Community had a different experience. After breaking its dependence on Russian energy, the EU economy suffered from a lack of supply and sky-high energy prices.

 

That difference explains the reason why the continuing turmoil and conflicts in the Middle East have not caused more than brief and shallow declines in the stock markets. The present war between Israel and Iran has seen oil prices spike from the mid-sixties to the mid-seventies dollars per barrel and are presently fluctuating by 1-2% per day based on the most recent developments.

 

Fears that Iran, in retaliation for Israel's continued attacks, decides to block the flow of 20% of the world's oil through the Straits of Hormuz has investors on edge. However, there has been little follow-through in the equity markets thus far. This situation could change if the U.S. decides to take a more proactive role in the conflict.

 

No one knows how long this present daily exchange of bombardments will last. Israel has stated that it will take at least two weeks, if not more, to accomplish their objective. They intend to remove the threat of an Iranian development of nuclear weapons. If  U.S. forces become involved, I would expect a deeper market decline. However, if history is any guide, markets will regain their upward momentum in reasonably short order.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Birthdays, anniversaries, holidays, deaths, Valentine's Day, Mother's and Father's Day, graduations, the list goes on and on. The greeting card industry remains a global institution in the gift-giving world despite experiencing slumping sales.

 

Greeting cards have been around for more than 180 years. First inspired by the Japanese art form called "origami," an English artist, Sir Henry Cole, created the first hand-pressed Christmas cards in 1843. These cards were initially used as invitations to his dinner party. The trend caught on, and throughout the nineteenth century, consumers sent greeting cards to friends, family members, and acquaintances for every kind of special occasion. The first American card was produced in 1874. These cards were made with thick paper and printed and colored by hand and were easily affordable for most people. Times have changed.

 

My question is why cards are so expensive. The average cost of a greeting card from the Geeting Card Association is about $4.50. I will believe that when I see it. This weekend, I went shopping for a 25th anniversary card for my wife and paid more than $8. I mean, really. A flashy gold embossed drawing on the front. A mildly sweet but heartfelt message about how much she means to me. A bit of ribbon like a bookmark on the second page, and that's it.

 

As a couple, we must easily spend at least $150 a year if I count the cards we give to friends and relatives. Why do we do it? In this digital era, where most communication lacks depth, taking the time and effort to pick out a card and write something endearing at the bottom, as I often do on a physical card, is a gesture we think is worth it.

 

Somehow, writing with a pen creates a genuine connection, and for us, when displayed over the mantel, it brings a sense of love, happiness, and celebration. And if you are like my wife, a greeting card can be kept forever, becoming a treasured item that holds sentimental value and evokes lasting memories. Evidently, we are not alone in those emotions. 

 

Nine out of ten households buy greeting cards. The average American sends and receives approximately 30 greeting cards or more per year, according to Greeting Card Market Research. U.S. consumers purchase about 6.5 billion cards every year, with retail sales between $6 billion and $8 billion. Worldwide, the industry generates over $16 billion annually, down from $23 billion in 2020. Sales are expected to decline further, with some analysts predicting the industry will shrink to $20.9 billion by 2026.

 

Obtaining data on this industry is challenging since most companies are privately held. There are a handful of large companies, such as Hallmark and American Greetings, which together account for 82% of the market. It is estimated that the profit margin for the entire sector averages about 11%. This lack of competition partially explains the continued high prices for cards. It is a mystery to me why there are not more entrepreneurs entering this market.

 

Anyone with photo editing software can design a greeting card, and there are no barriers to entry for selling cards, such as a license to create and sell them. You can't copyright a quote or saying, so the contents of the card can easily be copied. And it can't be just the convenience at the point of sale because cards sold online are just as expensive.

 

One reason may be that selling items is more expensive than producing them. Getting your product into retail stores, such as grocery, drugstore, or supermarket chain, is extremely difficult. You need to have a variety of designs in multiple categories; simply offering a line of birthday cards won't suffice.

 

 All these outlets have similar overhead costs. Greeting cards occupy a significant amount of display space and often remain on the shelf for an extended period. As such, the rate of turnover is low. "Congratulations on your college degree" card to your grandson comes around infrequently. In the meantime, cards are thumbed through and damaged, and many of the categories may not be high on the shoppers' list of cards.

 

Retailers offer cards to generate incremental revenue. They have found that most customers seldom buy cards because of the lower price, so discounting your card price is not going to siphon customers from elsewhere. Shoppers buy for the convenience, so stores mark the price up to what customers are willing to bear. The retail mark-up is between 50-100 percent.

 

To many, it might seem like Baby Boomers are the last holdouts when it comes to sending Christmas cards or $10 bills in birthday cards, but that is not entirely true. It is true the young do not bother with greeting cards, but neither did I when I was young. Yes, the internet, text messages, and the like are immediate, far cheaper, and less hassle overall — no picking out cards, licking stamps, writing addresses, etc. Facebook walls, for example, are an easy way to keep up with birthdays, but that's about it.

 

However, according to the annual U.S. mail survey, the greeting card category has been increasing for the last three years. Additionally, estimates suggest that 40 percent of greeting cards are not sent through the mail but are instead hand-delivered or tucked into a gift’s wrapping. Social media may actually help the industry since it notifies us of birthdays, deaths, new jobs, and other events that people tend to share on their profiles.

 

 And it is millennials who are the main drivers. They have also contributed to the higher pricing levels of greeting cards, because they are buying the more expensive, embellished, and heavier paper missives with lots of glitter and ribbons. A high-quality greeting card is often crafted by hand, which requires time and effort.

 

Inflation is hitting every industry, and greeting cards are no exception. Prices for paper, especially thicker cardstock, are climbing. The labor to design more intricate cards and add foil, letterpress, and video is also increasing. Yes, cards are much more expensive.   And I will complain, as is my right, but neither my wife nor I will end our love affair with the greeting card anytime soon.

 

 

Home prices have been climbing for years, but the pace of that growth is beginning to cool. That may be good news for some buyers, but relatively few Americans can still find a place they can afford to buy.

 

Redfin, a national real estate brokerage, recently estimated that there are almost half a million more home sellers than buyers in today's housing market. In 2023, buyers outnumbered sellers but last year the trend turned. Sellers outnumbered buyers by 6.5 percent. Today, sellers outnumber buyers by 33.7 percent, which is the most significant gap since 2013.

 

The recent economic uncertainty has sparked a willingness to sell but has also made buyers hesitant. The upcoming threat of tariffs on foreign goods, their potential impact on the economy, and concerns about possible layoffs, such as those affecting federal workers, have combined to reduce demand for housing. 

 

If history is any guide, when the trend reverses, housing prices drop. That appears to be happening in select areas, such as Florida, California, and Texas, but only modestly so far. The combination of high house prices and lofty mortgage rates is taking its toll.

 

Statistics indicate that the housing inventory has increased nationwide. Single-family home construction is expected to grow by 3 percent, while multifamily starts are projected to decline by 4 percent. Theoretically, this means buyers have more options, which can help ease price pressures. However, beneath the surface of the housing market, the supply of houses in the lower and middle price tiers remains subpar and more volatile than at the high end of the market.

 

Buyers are also struggling to find anything they can afford, especially first-time homebuyers. The median price of a home sold in the U.S. during the first quarter of the year was $417,000, 33 percent more than it cost in 2019 before the pandemic. First-time buyers are looking for something cheaper than the average, but even then it's hard to find something they can afford. A typical home will cost a buyer $361,000 in 2025, according to Zillow, compared to $354,000 last year.

 

Thanks to inflation, a tighter Fed policy, and concerns about the country's growing debt and deficit, interest rates have risen significantly in the last several years. Mortgage rates have climbed above 6.92 percent. The average rate on a 30-year fixed mortgage hasn't dipped below 6 percent since 2022, according to Freddie Mac. As such, most consumers who took out new mortgages in recent years have rates above 6 percent.

 

Over the last several years, as interest rates continued to rise, many U.S. homeowners who were lucky or astute enough to lock in a mortgage rate of 3 percent or less in the past, stayed put. Sure, prices were going up for their home, they reasoned, but so were mortgage rates. At current rates, they would be crazy to sell.

 

But the years are passing, and many empty-nester homeowners are getting older. Others are changing jobs or getting divorced. Some are having more children. The pressure to sell is mounting. The sticker shock of paying twice your existing mortgage rate or more is waning, and what's to say that mortgage rates won't go even higher?

 

Home prices declined in 11 of the top 50 most populous metro areas in the last month. The spring buying season has been sluggish, to say the least. To be sure, no one is looking for a market crash or anything remotely like it. However, the higher long-term interest rates climb, the more buyers will disappear.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

The American tradition of firing up the backyard grill for a BBQ among friends and family is upon us. However, this year's record high prices for beef, brought on by generational lows in cattle inventories, make serving up steaks and hamburgers a budget-busting event.

 

A look at cattle futures on the Chicago Mercantile Exchange (CME) reveals what we can expect in terms of price increases this summer. Over the last month, live cattle futures have hit a record high of $2.18 a pound. That is a record high. Prices are up 22 percent from the same time last year. In comparison, pork prices are forecasted to rise by 1.8 percent, while poultry prices are expected to increase by a mere 1 percent

 

Grilling season officially began on Memorial Day and runs through to Labor Day. For whatever reason, the lion's share of grilling is packed into the days between Memorial Day and the Fourth of July. Your local supermarket or grocery store has already stocked its meat counters by buying steak, ribs, ground beef, and other meat selections from wholesalers to lock in supply.

 

But before you blame food companies for gouging, consider that companies such as Tyson Foods have reported a second-quarter loss of $285 million in its meat division, where a $470 million cost increase hit them in their beef-packing operations. What, therefore, is the core problem in the sky-rocketing price of meat?

 

I have said it before, and I will say it again — climate change. The U.S. Department of Agriculture reported that the total cattle herd in the U.S. is 86.7 million head. That is a generational low dating back to 1951. The changing weather has caused drought conditions in grazing and farming lands throughout the nation. That not only limits ranchers' ability to add more animals to the herd but has also increased the cost of feeding them, as feed prices have also risen.

 

That's tough going for the average hard-working rancher, who is now in his sixties. Drought, rising feed prices, water scarcity, the threat of tariffs, and increasing prices for everything from diesel to tools and tractors leave little room for profit.  Many are retiring, and few are taking their places. The cost of starting a farm or ranch requires enormous capital, and few are willing to risk it in this environment.

 

Producers are taking steps to reduce costs, including raising heavier animals, closing inefficient meat-packing facilities, and encouraging growers to replenish their herds. If, by some miracle, this were to occur, it would still require 18-24 months for the calf to grow into a harvestable animal. In the meantime, the trend is not your friend. Unfortunately, since most of the world has given up on addressing climate change, the only real solution to rising meat prices is to accept higher prices.

 

At some point, that steak or hamburger will cost so much that it could cause a massive shift in consumer preferences. When that occurs, is anyone's guess. As for your next BBQ, you have three choices: take out a loan, switch to chicken, pork, or fish, or pray for rain.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

As Pope Leo takes control, the church's financial health will be high on his agenda. The Holy See, which is the governing body of the Vatican, is also the business arm of the Catholic Church.

 

The Vatican is audited by the Office of the Auditor General, which was established in 2014 by Pope Francis. In addition, the Council for the Economy supervises financial operations, and the Secretariat for the Economy (headed by a cardinal) is responsible for financial matters. External auditors, including PricewaterhouseCoopers, review the Vatican's financial statements. In the past, the information on the church's economic health has been murky at best.

 

Through the efforts of Pope Francis and before him, Pope Benedict XVI, the transparency of the church's finances has increased, but in many cases, there is still no evidence that the numbers released are accurate. We do know that last year, the church's worldwide income was around $1.25 billion, with expenses reaching $1.34 billion. In 2023, the church was running a $90 million deficit, according to Crux, an online news organization, and that deficit is presumed to be growing.

 

Part of the problem has been mounting operational expenses, which have outstripped donations, a primary income source. Observers note that much of the church's growth (and expenses) in recent years has been in poorer, less-developed regions. Much of its revenue streams have come from its affluent U.S. and European base.

 

The Vatican reported that its' collections (called Peter's Pence) had yielded 52 million Euros in 2023, with more than 25 percent coming from U.S. parishes, but the expenses were 109 million euros. In addition, Vatican tourism has declined since COVID-19, while increased litigation due to the sexual abuse scandals and the rising cost of supporting an aging clergy has contributed to the deficit.

 

 The church's pension fund is in trouble as well. Officials have expressed concern over its unfunded pension obligations (estimated at over $900 million) and an aging workforce. This shortfall could force both staff reductions and salary cuts unless remedied. Part of the problem, say the critics, has been 30 years of mismanagement by the last three popes, who were all in their mid-70s, without the expertise or financial focus to rectify the situation.

 

The clergy and the faithful will argue that the primary purpose of the Catholic Church is not to make a profit. I agree, but money sure helps spread the word. Over the last 100 years, popes have devoted most of their time, effort, and cash resources to bringing people closer to God while promoting humanitarian causes worldwide.

 

Pope Francis, for example, sought to reorient the church toward the poor around the globe while critiquing the global economy and its leaders for its lack of economic justice, migration, and ecological failures. 

 

Robert Prevost, now Leo XIV, does not have a background in finance, although he was a math major at Villanova University outside of Philadelphia. That skill might help in tackling the Holy See's looming financial issues. He is considered moderately conservative, but his past roles suggest a focus on service rather than savings and financial management.

 

Leo XIV's challenge will be to continue and expand his predecessor's effort to implement structural, procedural, and oversight changes in the bank and other organizations. He must also win over those in the church bureaucracy that maintain and defend the culture of secrecy that hamstrung Pope Francis throughout his term.

 

Managing such a far-flung religious empire creates its own financial challenge. Needs differ, sometimes dramatically, from country to country, as do donors. His message to those in the developed world, especially in the U.S. and parts of Europe, must account for the recent trend towards conservatism among its many members in those regions.

 

How Pope Leo squares that with continued attention to developing markets will require a high degree of sensitivity and finesse. He is on record opposing much of President Trump and Vice President Vance's positions on immigration and other issues. However, a softening of such rhetoric may be required to bolster support within the U.S.

 

Many believe the key to squaring the church's books depends on American donors' willingness to dig deeper into their pockets for Peter's Pence. It may be no coincidence that the Papal Conclave's College of Cardinals voted for an American as the leader of its 1.4 billion-strong congregation. Who better to increase collections in America than an American pope? If so, Pope Leo may already be making progress.

 

Vance led an American delegation, including Secretary of State Marco Rubio, to the pope's inaugural Mass this week in Rome. President Trump has extended an invitation to the pope to visit the White House as well. With less than two weeks in office, Pope Leo has also thrust himself and the church into the middle of geopolitics by his willingness to bring Ukraine and Russia to the peace table.

 

That should come as no surprise. The role of mediator has long been a tradition within the Catholic Church. Over the last century, popes have functioned as mediators to end international conflicts with varying success. Pope Benedict XV attempted to persuade Italy to enter World War I. When that failed, he offered papal peace mediation throughout the war. Pope John Paul, a native Pole, brokered talks between the workers' union Solidarity and the Polish government. Pope Francis attempted to persuade representatives from Palestine and Israel to bring peace to the Middle East and worked in Southern Sudan to end a civil war.

 

By offering to host negotiations between Ukraine and Russia, Pope Leo is following in the footsteps of his predecessors. First reactions indicate that it is something that may be amenable to both sides. It also appears to have the approval of President Trump. To say that Pope Leo has made a strong impression on global leaders and his congregation right out of the gate is an understatement. Let's hope he can do the same with church finances.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.