ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION
May 15, 2022 | A Little Harder
The Strategic Investment Conference wrapped up this week with another wave of strong, fascinating speakers and panels. I gave you some highlights in last week’s Soft Now, Hard Later letter. Today I have more to share and, as you’ll see, the plot thickened considerably. After 16 years I’ve learned how this goes. You begin with […]
May 8, 2022 | Soft Now, Hard Later
The Strategic Investment Conference is in full swing. This is our 18th consecutive year and the third in an all-online virtual format. In 2020 we had to make that transition quickly, yet somehow the team pulled it off. Now we are getting the hang of it—though I do firmly intend to have an in-person event […]
May 1, 2022 | The Fed Is NGMI
We found out this week that the first quarter was recessionary: GDP down 1.4% when the expectation was that the quarter would be up 1%. Rather large miss! Even so, the quarter-over-quarter comparisons were difficult so I believe the Fed will look past it and a 50-basis-point hike in May is still on. Even if […]
April 24, 2022 | Into the Fire
If you haven’t noticed—perhaps because you live on Mars—inflation is here. Not just in the US but almost everywhere. Prices for everyday goods and services, including necessities like food, are climbing rapidly. The US Consumer Price Index rose 8.5% in the 12 months through March… and we know it understates categories like housing. These year-over-year […]
April 17, 2022 | More on the Yield Curve and Helping Ukraine
It’s Easter weekend, so we are going to revisit a 2018 letter about the yield curve. The yield curve is much misunderstood and misused by many analysts. This letter will give you the tools to understand the correct importance and relevance of the yield curve. And then, a few comments about Ukraine. First, a reminder […]
April 10, 2022 | Other Possibilities
An old Danish proverb, later attributed to everyone from Mark Twain to Nostradamus to Yogi Berra, says, “Predictions are difficult, especially about the future.” I would refine it a little: Predictions are actually pretty easy. Accurate predictions are very difficult. We can never know the future because it’s not here yet. We can only make educated forecasts […]
March 20, 2022 | Brace for (Recession) Impact
The Strange Recession we are now entering is strange for another reason beside those I described last week. The last “normal” recession ended in 2009, almost 13 years ago. As with most unpleasant experiences, we don’t put a lot of energy into remembering what it was like. The problem is we need to remember it […]
February 27, 2022 | The Three-Act Recovery, Plus Your Questions
This week’s news is seemingly all about Ukraine and Russia. It is a terrible situation. But as an economic matter, we still have serious economic challenges no matter how it develops. I’ll have some thoughts on the Ukraine effects at the end of this letter. First I want to tell you about an economic analysis […]
February 20, 2022 | Inflation Thoughts
But mouse-friend, you are not alone In proving foresight may be vain: The best-laid schemes of Mice and Men Go oft awry, And leave us only grief and pain, For promised joy! —Robert Burns, “To a Mouse,” English translation How much inflation is okay? People have different answers. I think it should be very low, […]
February 13, 2022 | Financialized Everything
Interest rates—the “price of money”—have been unusually low for most of this century, particularly since the 2008 crisis but going back to Greenspan’s era. The wisest people I know differ on exactly why. Was it purely a policy choice, or the result of larger, less-controllable economic forces? I believe the answer is some of both. […]
February 6, 2022 | Time to Rethink the Fed
“In many important ways, the financial crash of 2008 had never ended. It was a long crash that crippled the economy for years. The problems that caused it went almost entirely unsolved. And this financial crash was compounded by a long crash in the strength of America’s democratic institutions. When America relied on the Federal […]
January 30, 2022 | So Goes the Year?
You’ve heard the old stock market adage, “As goes January, so goes the year.” If so, 2022 will be a wild ride. Of course, in this context “wild” doesn’t necessarily mean a loss. But it could, and given the well-documented human tendency to buy high and sell low, actual investors could easily lag behind even […]
January 23, 2022 | Beijing’s Dilemmas
Ranked by population, the United States is the world’s third largest country, behind China and India. But the gap is greater than the ranking implies. According to Worldometer, as of 2020 China had 1.44 billion people, India 1.38 billion, and the US 331 million. In other words, by population China is more than four times […]
January 16, 2022 | Year of the Bookends
If you are a booklover like me, you probably have many shelves. On some of those shelves you probably have bookends holding the books in place. They come in opposing pairs—similar but reversed. What if the COVID-era economy has bookends? I think that may be what’s happening. If you think of 2020 as the left […]
January 9, 2022 | A Path-Dependent Year—WWJD
Twenty-two years of tradition dictate I begin the new year by forecasting what lies ahead. Unfortunately, the future is never really knowable. “Forecast” is a polite synonym for “guess.” The better ones are informed guesses, but still inherently uncertain. The coming year is particularly uncertain. The economy could be wildly different based on how certain […]
December 25, 2021 | Coming to America
This week is a little bit different than your usual Thoughts from the Frontline. It is Christmas Day as this is sent out, so not the time to ramble on about inflation and the markets. Instead I’ll share a story from my good friend Vitaliy Katsenelson. He immigrated to the US with his family from […]
December 19, 2021 | Inflation by the Numbers
Milton Friedman famously said inflation is “always and everywhere a monetary phenomenon.” He was right but that short statement doesn’t fully explain how inflation works. It has other causes, too. The period in which he did his most famous research showed inflation was clearly a monetary phenomenon, but I’m not sure he would make the […]
December 12, 2021 | What Really Caused Inflation
You won’t be surprised to know I disagree with recent Federal Reserve policy choices. The Fed’s future choices are more important, though. Debating what they should do is one thing. Anticipating what they will do is critical. Today we’ll “war game” what the Fed is facing as it wrestles with inflation, growth, employment, and political […]
December 5, 2021 | Capital Excess
Why do we invest? Everyone has their reasons, but funding retirement may be the most common one. Whenever the time comes, we want to relax in comfort and security. Yet this whole “retirement” idea is really quite new. For most of human history, almost everyone worked as long as they physically could, then expired soon […]
November 28, 2021 | Worth a Thousand Words
Happy Thanksgiving! I hope everyone had a good holiday. I’m writing this issue early in the week while enroute to join family in Dallas. Today will be different and I hope you like it. The charts and comments below are drawn from the “Clips That Matter” feature of our Over My Shoulder service. Because […]
November 21, 2021 | Shortages Are Relative
n some simplistic economic theories, shortages never happen. Supply and demand for any particular good are always perfectly balanced in a given time and place. If you can’t get what you demand at that moment, you pay a higher price or you demand something else. But that’s theory. The real world doesn’t respond instantly, so […]
November 14, 2021 | Live from New York, Etc.
I am writing in the middle of a whirlwind week in New York. We are going to discuss what I’m learning, some takeaways from the conversations I’ve had, changes in my personal portfolio, and thoughts around the topic of the day: inflation. As well as a few random things that I have read this week. […]
November 7, 2021 | Energy Complexity
If I had to describe my last 500 letters in one word, it would be “complexity.” The older I get, the more I realize problems I once thought had reasonably straightforward solutions are, in fact, hideously complicated. That doesn’t make them unsolvable but it reduces the odds they will be. Often we start with […]
October 31, 2021 | Trick or Treat Economy
To Jerome Powell and the Fed: It’s a lesson too late for the learning, Made of sand, made of sand. In the wink of an eye, prices are rising In your hand, by your hand. Are you going away with no word of farewell, Will you leave your inflation behind? You should have tightened sooner, […]
October 24, 2021 | When Tools Stop Working
Because I believe in the division of labor, I rarely use hand tools today. In the ‘80s and ‘90s, I had two 4 x 8 pegboards on my garage wall full of tools along with my large Craftsman toolbox. I had the right tool for every job around the car, house, and yard. I worked […]