ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION
October 17, 2021 | Logistical Sandpiles
At the risk of overusing a favorite metaphor, today we’ll talk about sandpiles. My past sandpile stories focused on financial crises. The same principle holds in any complex system, though. Everything works until suddenly it doesn’t. As Minsky said, stability breeds instability. Then one additional grain of sand triggers a collapse. Today’s financial system is […]
October 10, 2021 | China’s Gilded Age Is Over
Historical comparisons are always risky. This is particularly so when comparing different eras in vastly different countries like the US and China. Similarities can actually obscure more important differences. Nevertheless, familiar knowledge can help build a framework for understanding. Obviously, present-day China is radically unlike any point in US history. But with that caveat, it […]
October 3, 2021 | Xi’s Changing Plan
Six months ago, few Americans had heard of Evergrande. Now many worry this Chinese property developer’s downfall will start an economically devastating chain reaction. They’re right about the chain reaction part, but I don’t think it will “devastate” anyone outside China (unless they have business there). Nonetheless, this episode exposes some other China issues worth […]
September 26, 2021 | What Could Go Wrong?
I have written several letters on the theme that the best investment posture is cautious optimism. Pessimism and bearishness never get you in the game, while untamed optimism means that at some point, you’ll have a serious setback. The cautiously optimistic investor asks both, “What could go wrong?” and “What could go right?” Dave Portnoy […]
September 19, 2021 | Inflation: More Transitory than Expected
If the inflation numbers leave you scratching your head, join the club. The August data was especially perplexing. The Producer Price Index came in hot, up 8.3% in the last year, inviting 1970s comparisons. Obviously, our current situation is different in many ways. But so were the 1970s, at first. That was last Friday. On […]
September 12, 2021 | The Return of Stagflation
I have been writing this letter for 22 years. Sometimes I look into the future and other times merely try to explain the present. Today I’m going to look at several possible futures. There are forces at work in both Congress and the Federal Reserve that could take us down radically different paths. There are […]
September 5, 2021 | Human Capital Losses
Remember math class? Let me give you a quick refresher. In the equation 3 x 5 = 15, the 3 and 5 are factors, and 15 is the product. You can’t have a product without factors. In economics we talk about “factors of production.” If you want to produce something, you need certain factors of […]
August 29, 2021 | Perfect Storms
Having been Puerto Rico residents for almost three years now, Shane and I have learned a few things about living in the tropics. In Dallas, we didn’t often think about hurricanes, though we did have tornadoes and severe thunderstorms. Ditto for earthquakes. North Texas is pretty stable, geologically speaking. Now hurricanes and earthquakes are part […]
August 22, 2021 | Buy Businesses, Not Stocks
I write this letter on my way home from Steamboat Springs, Colorado, where I spoke to the fascinating “GoBundance” group of mostly young, successful, enthusiastic entrepreneurs. Before that I was in Grand Lake Stream, Maine, for the Camp Kotok economics/fishing retreat. I’ll have some details for you later. Today we will look back a few […]
August 15, 2021 | Ubiquity, Complexity, and Sandpiles
Change happens quickly and, often, unpredictably. And as we will see, the unpredictable part is actually a mathematical principle. As in the Hemingway quote above, not just bankruptcy but change also happens slowly and then, seemingly, all at once. It’s time passing without change that causes the worst problems, including some historic economic catastrophes. It turns out […]
August 8, 2021 | COVID Consumer Headache
If you look just at 2021, it seems the US economy is tearing higher. Real GDP grew an annualized +6.5% in the second quarter, the Commerce Department estimated last week. This follows a similar +6.3% first quarter, and a pandemic-interrupted 2020 that turned out not so bad in the end. The July unemployment report showed […]
August 1, 2021 | Policy Errors Have Consequences
“T.S. Eliot once wrote, ‘Only those who risk going too far can possibly find out how far one can go.’ It seems the US financial system is bound and determined to find out.” —John Hussman, July 29, 2021 “If I was Darth Vader and I wanted to destroy the US economy, I would do aggressive […]
July 25, 2021 | Federal Reserve Folly
Great news: The US economy is officially out of recession. We know this because the National Bureau of Economic Research’s official recession-calling committee said so this week. The economy has been in an expansion phase since last April, making this the shortest recession on record at only two months. The NBER committee always makes these […]
July 18, 2021 | Xi’s Big Mistake
I have mixed feelings about China. On the plus side, I think the country’s massive economic transformation may be one of the most impressive events in human history. Bringing hundreds of millions from primitive rural lives into relatively prosperous cities within a few years was awe-inspiring. I greatly admire the millions of Chinese entrepreneurs worldwide […]
July 11, 2021 | TINA Is Stupid
In the 1980s, British Prime Minister Margaret Thatcher liked to say, “There is no alternative” to her market-driven economic reform ideas. She said it so much people began abbreviating it as “TINA.” Whatever you think of Lady Thatcher’s policies, the slogan was certainly effective politics. If victory is inevitable, you can either cooperate or be […]
July 4, 2021 | The New Inquisition
It is as essential to democracy that the minority should voluntarily submit to the measures adopted as it is that the majority should voluntarily approve them. Democratic government rests upon the principle that it is better to count heads than it is to break them. The principle is a good one, but unfortunately, men will […]
June 27, 2021 | Long Humanity
“At the end of the day” is a trite figure of speech, but it sometimes fits. It signals you’ve used all your time, and now you’ll wrap up and begin thinking about tomorrow. I like to say designing the Strategic Investment Conference agenda is my personal art form. There’s more to it than just picking […]
June 13, 2021 | Politics with No Labels
You can’t always get what you want But if you try sometime you find You get what you need —by Mick Jagger and Keith Richards, 1969 There’s no way around it: Investing in public companies is always political. Corporations exist because governments charter these artificial entities and legally shield the owners (shareholders) from personal liability. […]
June 6, 2021 | Technology Rules
Macroeconomic forecasting is too politicized. I don’t mean that in a partisan sense, though it may be so. The bigger problem is that forecasters spend most of their time thinking about central bank decisions and government policies. In the long run, those aren’t the most important factors. Not even close. What really drives economic progress […]