Thought of the Week

1. This commentary is not intended as investment advice or an investment recommendation. It is solely the opinion of our investment managers
at the time of writing. Nothing in the commentary should be construed as a solicitation to buy or sell securities. Past performance is no
indication of future performance. Liquid securities, such as those held within DIAS portfolios, can fall in value. Global Financial Private
Capital is an SEC Registered Investment Adviser.
Thought for the Week (290):
Weather Does Not Cause Recessions
Synopsis
 The well-publicized “Polar Vortex” has delivered one of the worst winters in our country’s history, and there appears to be no end in sight to the brutally cold temperatures.
 Market bears are pointing to recent dismal economic data as a sign of a slowing economic recovery, however, we believe that the weather is the culprit.
 Although weather may keep consumers inside and bundled up next to a warm fire, we do not believe that snow and frigid temperatures can permanently derail our economy.
It’s Freezing Outside!
The Global Financial team rang the Opening Bell at the New York Stock Exchange on Tuesday, and many long-time Floridians here at Global were forced to endure the well-publicized “Polar Vortex”, with temperatures in New York City reaching single digits.
The graphic below depicts the impact of this Polar Vortex to the eastern U.S. in January, and this trend appears to be one that continues to cripple consumers across the country.
Source: The National Oceanic and Atmospheric Association (NOAA)

2. This commentary is not intended as investment advice or an investment recommendation. It is solely the opinion of our investment managers
at the time of writing. Nothing in the commentary should be construed as a solicitation to buy or sell securities. Past performance is no
indication of future performance. Liquid securities, such as those held within DIAS portfolios, can fall in value. Global Financial Private
Capital is an SEC Registered Investment Adviser.
NOTE: Global Financial’s headquarters are located in Sarasota, FL, which gives us a unique perspective to the impact of the Polar Vortex. The traffic on our roads feels significantly more congested when compared to years past, and hotels are reaping the benefits of northerners escaping the cold weather.
The real issue with the weather, however, is that temperatures relative to their average for this time of year are way off (as seen above). Now it may not be a big deal for residents of Fargo, ND, to cope with a few additional days of subzero weather, but people who live in Atlanta are not used to mid-teen temperatures and snowy weather for days on end.
Recent Economic Weakness
Over the past several weeks, we have been caught off guard with a number of economic data points that were reported weaker than expected. Although the Investment Committee focuses more on trends than individual data points, we do watch these to be sure that our theses remain intact.
Many bears in the market point to this recent weakness as a sign that our economy is slowing and moving closer to a recession. However, we strongly believe that the weather is the culprit, and we expect to see a return to our slow and steady growth in the coming weeks.
In order to understand why we believe that this is no coincidence, take a look at the graphic below that depicts a geographical breakdown of gross domestic product (GDP), which is a measure of economic activity in our economy.
Source: Reddit.com
This graphic states that 50% of our GDP comes from the orange shaded regions and the other 50% comes from the blue shaded region. Simply put, large cities and congested areas may not take up a lot of

3. This commentary is not intended as investment advice or an investment recommendation. It is solely the opinion of our investment managers
at the time of writing. Nothing in the commentary should be construed as a solicitation to buy or sell securities. Past performance is no
indication of future performance. Liquid securities, such as those held within DIAS portfolios, can fall in value. Global Financial Private
Capital is an SEC Registered Investment Adviser.
space on the map, but they represent a very large amount of economic activity (the corridor from DC to Boston represents about 1/6th of the U.S. population alone).
What makes this winter so unique is that the extreme conditions are impacting geographies that tend to spend the most money. Although New Yorkers must endure cold weather every winter, they are not used to enduring Alaska’s weather.
Simply put, we believe that most people living in these high spending areas are staying inside instead of shopping for discretionary goods, and because they represent such a large percentage of overall spending, our economy is feeling a temporary impact.
NOTE: Take it from someone who spent years living in Manhattan, when it’s colder than 28 degrees Fahrenheit, the last thing on a New Yorker’s mind is brunch and shopping in SoHo on a Sunday.
Expect More Weakness
We will likely see more weak data over the coming months until this weather turns, but we remain long- term focused. Weather will not prevent our country from becoming energy independent, it certainly will not prevent manufacturing jobs from returning back to the U.S., and it likely will not scare consumers away from spending money once the sunshine returns.
The bottom line is that weather cannot cause a recession, and the recent weakness in our economy should reverse as the Polar Vortex returns to the North Pole. Furthermore, we strongly encourage the bears to continue selling equities due to fear and panic fueled by snow and ice because we can then take advantage of stocks that go on sale.