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May 26, 2019 | Why Debt Won’t Spark Inflation

  Modern technology was supposed to make travel less necessary. We can meet by phone, video, and now in virtual reality. But we’re still traveling more than ever. I certainly am. The reason is simple: Technology can’t yet replace face-to-face conversation, and especially group conversations. It is genetically hardwired in our species. We spend more […]

May 19, 2019 | Takeaways from the SIC

There are these two young fish swimming along, and they happen to meet an older fish swimming the other way, who nods at them and says, “Morning, boys, how’s the water?” And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes, “What […]

May 12, 2019 | Your Pension May Be Monetized

One difficulty in analyzing our economic future is the sheer number of potential crises. When so much could go wrong (and really right, when the exponential technologies I foresee get here), it’s hard to isolate, let alone navigate, the real dangers. We are tempted to ignore them all. Ignoring them is usually the right response, […]

May 5, 2019 | Time to Change Strategy

My recent letters described what I think the future will look like. I hasten to add, it isn’t what I think the future should look like or what I want to see. Almost the entire developed world has painted itself into a corner. It won’t necessarily be terrible. I don’t expect another Great Depression or […]

April 28, 2019 | How I Learned to Love the Debt

The US, Europe, and most of the developed world on are the road to Japanification. Like I wrote last week, we will see financial repression, ever increasing deficits, slower growth, etc. Essentially, the rest of us will begin to look like Japan with its astronomical deficits and ultra-dovish monetary policy. I tried to emphasize this […]

April 21, 2019 | The Rules Will Change but That’s (Probably) OK

“But the emperor has nothing at all on!” said a little child. “Listen to the voice of innocence!” exclaimed his father; and what the child had said was whispered from one to another. “But he has nothing at all on!” at last cried out all the people. The emperor was suddenly embarrassed, for he knew […]

April 14, 2019 | Japanified World Ahead

Regular readers may have noticed me slowly losing confidence in the economy. Your impression is correct and there’s a good reason for it, as I will explain today. The facts have changed so my conclusions are changing, too. I still think the economy is okay for now. I still see recession odds rising considerably in […]

April 7, 2019 | Capitalism Gone Wild

Recession is coming. We can debate the timing, but the economy will turn decisively downward at some point. My own analysis, looking at the data available on April 4, says recession isn’t likely this year but unfortunately looks very probable in 2020. In addition to when it will happen, there’s also the question of how […]

March 31, 2019 | Recession Signs Everywhere

This month, the Federal Reserve joined its global peers by turning decisively dovish. Jerome Powell and friends haven’t just stopped tightening. Soon they will begin actively easing by reinvesting the Fed’s maturing mortgage bonds into Treasury securities. It’s not exactly “Quantitative Easing I, II, and III,” but it will have some of the same effects. […]

March 24, 2019 | No Free Lunch, Part 2

Matching the stock market’s long-term average returns sounds like it should be easy, if you’re patient enough. But in fact it is remarkably difficult. In last week’s letter, Ed Easterling and I showed you why it is a longshot bet in almost every market environment. Returns over a decade or two are usually well above […]

March 17, 2019 | No Free Lunch: Valuation Determines Return

Last week, I described the enormous challenges retirees face. One reason for that, aside from insufficient savings, is that markets haven’t delivered the returns many experts said we could plan on. Back in the late 1990s, we were told that the long-term average return (~10%) was a reasonable long-term assumption—even if the market cooled down […]

March 10, 2019 | Retirement Isn’t Happening

I have long said I don’t want to retire. I enjoy my work. It’s not too physical, other than the travel (which is finally beginning to wear on me). Also, my savings are not yet sufficient to sustain the retirement lifestyle Shane and I want. I could retire now but would rather wait. Fortunately, I […]

March 3, 2019 | The Fed Is Playing a Dangerous Game

In an ideal world, we wouldn’t have to read the Federal Reserve’s rabbit entrails to discern the economy. But Since the Fed exists in the real world, and its decisions matter, we have to pay attention. Just so new and perhaps even old readers know my views on the Fed: I believe we need it […]

February 24, 2019 | Recession: Are We There Yet?

An old joke says economists predicted 15 of the last 10 recessions. In other words, they’re frequently wrong and often too pessimistic. I think it’s not so simple. Every recession prediction is eventually correct; some just get the timing wrong. That’s because, so long as we have a business cycle, a recession is always coming. The only […]

February 17, 2019 | Modern Monetary Madness

More than 10 years ago some Australian readers begin regaling me with the ideas of economist Bill Mitchell of the University of Newcastle in New South Wales. He was teaching about something he called (and he coined the term) Modern Monetary Theory. I looked into it and fairly quickly dismissed it as silly. Actually printing […]

February 10, 2019 | Capitalism Without Competition

The Soviet Union’s collapse and spread of semi-free markets through Eastern Europe seemingly ended the socialism vs. capitalism argument. Capitalism had won. Collectivist economies everywhere began turning free. Even communist China adopted a form of free market capitalism although, as they say, with “Chinese characteristics.” The fruits of capitalism: millions of people freed from abject […]

February 3, 2019 | What Should We Then Expect (From Investing)?

“Plans are worthless, but planning is everything.” —US President Dwight D. Eisenhower There are many versions of that Eisenhower quote he learned in the Army. Nixon, who probably heard it from Eisenhower directly, modified it to “… plans are useless, but planning is indispensable.” Both are variations on the theme, “No battle plan survives first […]

January 27, 2019 | How Should We Then Invest?

“To be absolutely certain about something, one must know everything or nothing about it.” —Henry Kissinger, former US Secretary of State This month I’ve discussed some possible pathways for 2019. But beyond that, for the past year or so, I have been talking about what I think may unfold over the next decade. The term […]

January 20, 2019 | Bull in the China Shop

The production of souls is more important than the production of tanks…. And therefore I raise my glass to you, writers, the engineers of the human soul. Joseph Stalin, 1932 [Our purpose is] to ensure that literature and art fit well into the whole revolutionary machine as a component part, that they operate as powerful […]

January 13, 2019 | Something Wicked This Way Comes

For a couple of years now, the economic narrative has shown a comparatively strong US against weakness in Europe and some of Asia (NOT China). The US, we are told, will stay on top. I agree with that, as far as it goes… but I’m not convinced the “top” will be so great. Americans like […]

January 6, 2019 | The Year of Living Dangerously

Double, double, toil and trouble; Fire burn and cauldron bubble. …By the pricking of my thumbs, Something wicked this way comes. – William Shakespeare, Macbeth, Act IV, Scene I, 1606 Remember when it was a January ritual to fill in the new year on your blank checks? If you’re under 50, probably not. That we […]

December 30, 2018 | Bear Markets, Fed Mistakes, and Quick Shots from John

A winters day, In a deep and dark December… “Wait, it doesn’t feel like winter. It’s not deep and dark, and it’s actually warm, and the sun is shining. Toto Shane, I don’t think we’re in Kansas Texas anymore.” Yes, we have actually moved from Texas to a new location. I’ll explain why and where […]

December 23, 2018 | Powell, the Third Mandate, the New Fed and Crawdads

We have reached the best time of year, when we can look to the future with hope. We can stop wondering what will happen in 2018 and look forward to 2019. The investment industry always does this enthusiastically, as you will see in forecasts everywhere the next few weeks. Not wanting to be left out, […]

December 16, 2018 | The Misunderstood Flattening Yield Curve

Everybody is suddenly talking about the inverted yield curve. They’re right to do so, too, but alarm bells may be premature. Inversion is a historically reliable but early recession indicator. The yield curve isn’t saying recession is imminent, even if it were fully inverted, which it is not. What we see now is really more […]

December 9, 2018 | European Threats

Someone asked recently how many times I had “crossed the pond” to Europe. I really don’t know. Certainly dozens of times. It’s been several times a year for as long as I remember. That makes me an extremely unusual American. Most of us never visit Europe, except maybe for a rare dream vacation. And that’s […]

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