Thoughts from the Front Line - Spotting trend changes is the key to economic forecasting. They don’t happen often. Most of the time, this year will be similar to last year. The pace varies but the overall trend continues… until it doesn’t. Those who lived through the painful 1970s inflation developed a certain mindset. Similarly, the 2008‒2020 disinflation/low inflation period, accompanied […]

Thoughts from the Front Line - “Thinking the Unthinkable.” What does that phrase bring to mind? To me it suggests a situation that has become so stressed you are forced to consider undesirable solutions. Yet the opposite is possible, too. Thinking differently may reveal an immensely profitable and beneficial solution. I have been in and around markets now for well over […]

Thoughts from the Front Line - Remember when banks were small? Those old enough to have a bank account in the 1970s should. Back then, most people did their banking with a locally owned institution, often the First National Bank of (Your Town). These were fully independent banks, not branches of bigger ones. You could walk in and see the bank […]

Thoughts from the Front Line - Recently I saw someone share a clip from their weather app. It said, “Rain expected at 3 pm,” right above a little graphic showing a 30% chance of rain at 3 pm. What’s wrong with that picture? Well, if the calculated odds of rain were only 30%, then “expected” wasn’t the right word. The odds […]

Thoughts from the Front Line - “There’s an old saying: Whenever the Fed hits the brakes, someone goes through the windshield,” said Michael Feroli, chief economist at J.P. Morgan. “You just never know who it’s going to be.” (The New York Times, March 16, 2023) For years I’ve used a sandpile metaphor to describe complex systems like banking. Keep dropping grains […]

Thoughts from the Front Line - If a picture is worth a thousand words, this will be the “longest” letter I’ve sent you in a while, as there are quite a few pictures. It may also be the most wide-ranging. Every Wednesday my Over My Shoulder members get a PDF file with some of the week’s most interesting charts, all selected […]

Thoughts from the Front Line - If you read and pay attention to the world, you probably know the recent past pretty well. And if you’re a history buff like me, you also know something about the more distant past. In between, however, we often have a memory gap. Events from 5, 10, even 20 years ago slip out of mind […]

Thoughts from the Front Line - “Diamonds are forever,” according to the jewelry industry. That may be a slight exaggeration, yet diamonds will certainly outlive you and whomever you give them to. Debt isn’t forever but can definitely seem like it. That feeling is a clue you have too much debt. Wisely used, debt helps build income-generating assets that pay for themselves. The […]

Thoughts from the Front Line - Federal Reserve officials like to call their decisions “data dependent.” Business leaders say it a little differently, often “data driven.” The point, in both cases, is something like: “We consider relevant data when making important decisions.” All well and good but does anyone really say otherwise? “I prefer seat-of-the-pants guesswork” doesn’t typically impress investors. So […]

Thoughts from the Front Line - Remember National Lampoon’s Vacation? It was a 1983 comedy film in which suburban dad Clark Griswold (Chevy Chase) takes his family on a cross-country road trip to the fabled Walley World amusement park. Clark made one critical mistake, though. He assumed Walley World would be open and waiting for them. This was to be the family’s reward for […]

Thoughts from the Front Line - These weekly letters, of which I’ve now written well over 1,000 (plus 7 books and multiple papers and articles), are generally about two broad topics: the economy and the financial markets. While related, these aren’t the same. Good news for one can be (and often is) bad news for the other. I explained my economic […]

Thoughts from the Front Line - In stock investing there’s a management style called “growth at a reasonable price” or GARP. It seeks to achieve steadier results by avoiding both expensive growth stocks and beaten-down value stocks. We can apply a similar idea to economic growth. Everyone wants the benefits of higher GDP. How much inflation, unemployment, and market losses are […]

Thoughts from the Front Line - The world’s leading CEOs, politicians, and various do-gooders were in Davos, Switzerland, this week, discussing ways to solve our collective problems and create opportunities for their own companies. The most important conversations were off the record and many of the public speeches were simply performance art. (Sadly, I wasn’t invited even though I have a […]

Thoughts from the Front Line - The Federal Open Market Committee’s 12 voting members differ on where they think interest rates should go this year. But we know they’re unanimously against cutting rates until at least 2024—or at least they were as of December, according to that meeting’s minutes. That means one of the three possible directions (up, down, sideways) is currently […]

Thoughts from the Front Line - This will be my last letter of 2022. I want to use this letter as a set-up for my annual forecast issue the first week of January. That means we will touch on a variety of topics, kind of a snapshot into where my mind is today. Get ready to travel the world but let’s […]

Thoughts from the Front Line - When you better start swimmin’ Or you’ll sink like a stone For the times they are a-changin’ —Bob Dylan, “The Times They Are A-Changin’” Change is constant, in the economy and everything else. We talk about it often. Yet when we talk about the economy changing, we usually mean the economy’s condition is changing—from expansion to recession, deflationary […]

Thoughts from the Front Line - Last week, I introduced you to my friend of 20+ years, Keith Fitz-Gerald of Keith Fitz-Gerald Research. As I mentioned, I recently signed up for his Morning! 5 With Fitz free research email, and I’m enjoying it immensely. This week, around my trip to a far-too-cold Denver, then to Dallas, and ultimately Tulsa to spend the Thanksgiving holiday […]

Thoughts from the Front Line - Financial crises are really about trust. They tend to occur when people lose trust in assets, institutions, or people they had thought trustworthy. Whether the lost trust was a consequence of the crisis, or its cause is a different question. But they do seem to go together. Sometimes trust is misplaced from the beginning. No […]

Thoughts from the Front Line - Early this week, with the severe inverted yield curve and other signals flashing recession, I planned to use this letter to delve into the data. Then Thursday’s CPI data convinced markets to blow the all-clear whistle. Lack of any “green shoots” would have been out of historical character and frankly quite alarming. We got at […]

Thoughts from the Front Line - Historically speaking, this phase of life we call “retirement” is a new concept. The idea you could stop working at a certain age was unknown until quite recently. People worked as long as they physically could, then died quickly unless they had family or servants to care for them. That was normal and accepted. Now, […]

Thoughts from the Front Line - I literally grew up in the oil patch: Wise County, Texas, 60 or 70 miles northwest of Fort Worth in a little town called Bridgeport. The two first-generation Greek immigrant brothers who became Mitchell Energy talked old man Christie into funding Christie, Mitchell and Mitchell and they drilled (hundreds?) of natural gas wells which they […]

Thoughts from the Front Line - Sandpiles can be fun. Nothing beats taking kids to the beach (or being a kid!) and watching their creativity blossom into all kinds of magical shapes. The problem with sand construction is it doesn’t last. I have it on good authority that building your house on the sand probably won’t end well. The same holds for financial […]

Thoughts from the Front Line - By now it should be clear Federal Reserve leaders intend to keep hiking until the economy breaks. Their recent speeches and interviews all underline this. Specifically, they want to reduce the strong consumer demand that has been keeping goods and service prices elevated. Interest rate hikes are merely a tool they have to that end—and […]

Thoughts from the Front Line - Big problems usually begin as small problems. We see that in nature, where small disturbances become hurricanes, and we see it in the economy, too. So, it shouldn’t surprise us if the economic disturbances of the last years compound into something bigger. Going into 2020, we already had over a decade of global monetary and […]

Thoughts from the Front Line - We were a bit preoccupied here in Puerto Rico this week. Hurricane Fiona decided to camp out over the island, bringing mind-boggling amounts of rain. I am sure you have seen the flooding pictures. The entire island lost power and much of it is still down. Our oversized diesel generator, which I thought quite expensive […]