For years I’ve used a sandpile metaphor to describe complex systems like banking. Keep dropping grains of sand long enough and you will eventually trigger an avalanche.
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.
Federal Reserve Chairman Jerome Powell said the Fed could hike rates more and more often.
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.
Last week, I spoke at the Mississippi CFA Society’s annual forecasting event.
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 payments are manageable because you’re also getting something else of value.
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.”
Assumptions can be wise or unwise. They can be unduly optimistic or excessively pessimistic. Slightly different assumptions can produce giant changes in predicted outcomes. Assumptions are necessary but we shouldn’t make them lightly, nor forget we are making them.
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.
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.
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.
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.
Welcome to 2023. It’s Forecast Season on Wall Street, the time when everyone tells us what to expect for the new year. Do they really know? Of course not. Forecasters don’t know, investors know they don’t know, yet we all go through this exercise anyway.
This is my least favorite time of the year.
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 start at home with the Federal Reserve meeting this week.
There’s a lot of chatter out there about recession…
Economic news—and market reactions to it—increasingly resemble a tennis game. Spectators follow the ball back and forth, thinking something will happen but usually it doesn’t.
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 to inflationary, emerging to developing, etc. That’s different from changes in the economy’s actual structure.
There’s a big “open secret” in Silicon Valley that’s spreading, one that has already reached three-fourths of FANG. But the market has yet to recognize its impact on one remaining company.
This week, around my trip to a far-too-cold Denver, then to Dallas, and ultimately Tulsa to spend the Thanksgiving holiday with family, Keith and I did a 45-minute "interview" via Zoom. Less an interview, perhaps, than the two old friends catching up. I was surprised how many topics Keith and I aligned on perfectly, though our few disagreements about what comes next made for a great debate.
Believe it or not, 2022 is almost over. That means it’s time to start thinking about end-of-year tax planning strategies…
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.
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.
Since starting The 10th Man in 2014, I’ve written about gold maybe a dozen times.
Historically speaking, this phase of life we call “retirement” is a new concept.
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 eventually sold to an Illinois utility. This was in the 1950s and ‘60s.
In this Global Macro Update, we discuss the trifecta of trends that caused the current inflationary environment… why an economic slowdown won’t cure inflation... the three sectors every investor should own today… and much more.
Investors love easy-to-follow “rules.” The simpler, the better.
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.
What I want to talk about today is this moral panic we’re having about inflation.
Today I want to talk about why the labor market is so out of balance. Some of this is new and some has been brewing for many years. We will end with some commentary on yesterday’s unemployment report.
We are in the middle of a giant short squeeze, and it is going to get even bigger.
Every time I cruise around Raleigh, it’s like Tesla drivers have multiplied.
This dark symphony was never going to end without sparking a currency crisis, one which allows countries to blame other countries as the source of their own internal problems. We will see that it’s not always the case.
“Invest in what you know.” You’ve likely heard this advice before.
The world will be going from an era of zero rates and loose monetary policy to higher rates and likely slower growth, except in certain sectors. Adjusting to this change will be both problematic and also full of potential opportunities.
Investors are running scared.
Remember when inflation was going to be transitory? Good times. I was in that camp myself early on, as were some serious analysts I greatly respect (and still do). Then the data began to show core inflation would be stickier than expected, and I turned in my Team Transitory T-shirt. I appreciate people who admit their mistakes. We all make them.
I had dinner with a local friend of mine last week.
Many ask if Jerome Powell can emulate Volcker. We will certainly find out. But much has changed in 42 years. Does Powell even need to emulate Volcker? Here, some prominent economists disagree. Today we’ll talk about the issues.
A few weeks ago, I said the bear market was over. What if it isn’t? Don’t interpret this as cold feet—it’s good to understand the other side of the argument.
Market veterans will tell you there are no shortcuts in investing
The world does not need another take on Jackson Hole. But here we go.
Everyone’s inflation experience is unique. We all have our particular spending patterns, so our experience will feel worse if inflation is more severe in the goods and services we normally buy. Or we might not notice it as much as others do.
19% off the lows, and people are still bearish.
Our own government cannot afford a short end of the curve much higher than it is now, and our own fiscal and monetary decisions have held down the long end of the curve in what I believe is a multi-decade period ahead that is best referred to as “Japanification”
It is my belief that the bear market is over.
The latest data shows inflation is still with us at an 8.5% annual rate. That means we can expect the Fed to keep tightening, trying to reduce demand and relieve pressure on consumer prices.
Twenty years ago, people on trading floors at investment banks worked in silos.
Mania. It’s hard to recognize when you’re in it.
