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January 29, 2023 | Growth Pains

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 […]

January 22, 2023 | Slow Change Speeds Up

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 […]

January 15, 2023 | The Punchbowl Is Gone

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 […]

December 18, 2022 | Higher for Longer

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 […]

December 4, 2022 | The Economy Is a-Changin’

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 […]

November 27, 2022 | An Interview with Keith Fitz-Gerald

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 […]

November 20, 2022 | Digital Shiny Objects

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 […]

November 13, 2022 | Recession Thoughts

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 […]

November 6, 2022 | Dangerous Assumptions

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, […]

October 30, 2022 | Turning Bullish on Energy

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 […]

October 16, 2022 | Pension Sandpile

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 […]

October 9, 2022 | Where Are the Workers?

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 […]

October 2, 2022 | Currency Crescendo

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 […]

September 25, 2022 | Notes on Inflation

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 […]

September 18, 2022 | Inflation Sinks In

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 […]

September 11, 2022 | Labor Mysteries

Politicians talk about “jobs, jobs, jobs” because a steady income keeps people happy and (mostly) voting for incumbents. Carville once told us, “It’s the economy, stupid,” and it always has been. Economies in recession are usually bad for those in power. Economists care about jobs for a different reason. Labor is a factor of production—part […]

August 27, 2022 | Your Inflation May Vary

People who think about the economy are a non-random subset of the population. Most folks aren’t like us. Worse, we aren’t always like us. Hence the endless arguments. Currently our subset is debating whether we face inflation or recession. In my view, it’s not an either/or question: We can have inflation and recession. That’s why I keep talking about […]

August 14, 2022 | Curving Toward Stagflation

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. At the same time, we’ve seen declining GDP growth the last two quarters. Some people raise measurement issues. Fine. Grant that […]

August 7, 2022 | Weirdness Factors

It’s a recession! No, not yet! I see these arguments everywhere and I’m already tired of them. For those who believe it is not yet a recession, I will make a deal with you. The third quarter is likely to be negative. When we have three quarters of a recession in a row, just give […]

July 31, 2022 | A Weird Recession

Professional economists, perhaps tired of being asked, years ago formed a committee to officially mark the beginning and end of recessions, the NBER (Nation Bureau of Economic Research) committee considers a variety of data, but its final decision is subjective. Many of those who pay attention prefer a more objective rule, such as “two consecutive […]

July 24, 2022 | Hubris at the Fed

Finding just the right word brings great pleasure to writers like me. As I think and write about the Federal Reserve, the word “hubris” keeps coming to mind. The Merriam-Webster dictionary defines hubris as “exaggerated pride or self-confidence.” The entry notes the concept originated in ancient theater. “In classical Greek tragedy, hubris was often a […]

July 17, 2022 | Forgotten Lessons

“Those who cannot remember the past are condemned to repeat it” is a well-known quote that’s also incomplete. You can remember the past vividly and still have to repeat it. This happens when, for instance, powerful people forget (or ignore) important lessons that affect everyone. In politics, we can often limit the damage by voting […]

July 10, 2022 | John Bull and Two Percent

The economics profession has long had a vigorous academic argument over “natural” interest rates. What would rates be if we could somehow remove all the subjective actors—central banks, commercial lenders, government agencies—that conspire to set them? What would nature do if we left it alone? It’s an academic argument because, in the real world, we […]

July 3, 2022 | Time Has a Price

One benefit of human progress is the way we gain “common knowledge” that was once anything but common. We observe basic facts—for example, water boils if placed over a flame—and then build on them. Boiling water took us to steam engines and then much more. But that path wasn’t always obvious. We see a similar […]

June 26, 2022 | Inflation Reaches Unicorns

Government has three primary functions. It should provide for military defense of the nation. It should enforce contracts between individuals. It should protect citizens from crimes against themselves or their property. When government—in pursuit of good intentions—tries to rearrange the economy, legislate morality, or help special interests, the cost comes in inefficiency, lack of motivation, […]

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