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April 5, 2020 | Notes from Lockdown

  In times of change learners inherit the earth; while the learned find themselves beautifully equipped to deal with a world that no longer exists. —Eric Hoffer Greetings from Puerto Rico, where this frequent traveler is evidently home for an unusually long time. I want to start today by thanking everyone for your kind wishes […]

March 29, 2020 | Postcards from the Frontline

Unprecedented events are happening so fast, I barely know where to start. But let’s begin with a small one, noticeable perhaps only to me. Over the years I’ve received thousands of reader emails responding to my letters. I read and appreciate them all, even the critical ones. Often the readers mention where they were when […]

March 22, 2020 | The Beacons Are Lit

In the film version of Tolkien’s Lord of the Rings: Return of the King, there’s a three-minute scene you should watch or re-watch. It is relevant to our situation today. Gondor needed to light the beacons for aid. Click here for video. At the other end of the beacons, no one is sure whether the […]

March 20, 2020 | Coronavirus Is Not an Emergency. It’s a War.

This is a short midweek note, something I haven’t done for years. But as we all know, these are very special and difficult times. Below, I’ll give you two links. They describe the nature of the new coronavirus pandemic and its potential consequences. I have run this past the best medical professionals I know, and […]

March 15, 2020 | Coronavirus Helicopter Money

I write this letter early Friday morning after a week in New York visiting with many fellow market participants. And lots of phone calls, both to analysts and medical experts. I had originally planned a completely different letter but circumstances changed. Humility is a good thing to have when you’re forecasting the economy or markets. […]

March 8, 2020 | Chinese Coronavirus Changeup

In baseball, there is a kind of pitch called the “changeup,” designed to look like a fastball while actually going slower. The deceived batter swings too soon and misses. Strike, you’re out. The world has thrown a wicked biological changeup at the global economy. This is kind of how coronavirus fear is spreading from China […]

March 1, 2020 | COVID-19: A Crisis the Fed Can’t Fix

For the last 3+ years, I have maintained it would take an “exogenous” event to send the United States into recession. Historically suboptimal growth? Sure, but sub-3% growth isn’t a recession. The coronavirus obviously qualifies as an exogenous event. But that doesn’t mean a textbook two-quarter recession, although it certainly may. Financial markets aren’t waiting […]

February 23, 2020 | Why Americans Want Socialism

As I write this, a self-proclaimed “democratic socialist” is leading the race for one of our major parties’ presidential nomination. The fact that so many Americans (especially young Americans) support Bernie Sanders ought to tell us something. A Quinnipiac poll out this week showed Senator Sanders with 54% support among Democrats age 18–34. Meanwhile, 50% […]

February 16, 2020 | Depending on the Undependable

The welfare of a nation can scarcely be inferred from a measure of [GDP].” —Simon Kuznets (who developed GDP), 1934 At the risk of restating the obvious, production should result in a product the producer can recognize. That’s the case even for intangible products. Artists know their songs even if hearing a pirate copy. This […]

February 9, 2020 | The Hits to GDP

Economists and investors are rightly obsessed with growth. We always want more of it. We worry it won’t come or, worse, might turn into contraction. Economists of all stripes, from Paul Krugman to Lacy Hunt, recognize economic growth cures all manner of ills. Yet, exactly what is growth? We think we know, but in reality, […]

February 2, 2020 | Dismissing the Experts

Regular readers know I often criticize so-called “experts,” usually economists or central bankers whose flawed decisions are punishing the rest of us. I find their expertise is not nearly as reliable as they seem to think. At the same time, I rely on experts whose judgment I respect. I know they aren’t perfect—usually because they […]

January 26, 2020 | Nose Blind to Inflation

The human brain excels at taking shortcuts. Processing all the information our senses collect takes a lot of energy, so repetitive data gets lower priority. Things we see often fade into the background so we can notice new stuff. This is where we get phenomena like “nose blindness.” We stop perceiving familiar smells like our […]

January 19, 2020 | Looking on the Bright Side

We haven’t had a lot of good news lately. Or, more precisely, we haven’t seen a lot of good news lately, though it does exist. We don’t see it because both regular media and social media usually focus on the bad. That’s not entirely wrong. The survival imperative makes humans watch for threats, and sometimes […]

January 12, 2020 | Decade of Living Dangerously, Part 2

If living dangerously is your goal, just keep adding reasonable, manageable, prudent risks. Eventually they’ll add up to serious danger. Hyman Minsky showed how stability leads to instability. Humans have a way of reinterpreting stable periods that seemingly redefines words like reasonable, manageable, and prudent. That’s why we continue chasing yield and risk until we […]

January 5, 2020 | Decade of Living Dangerously, Part 1

Welcome to the 2020s. Some weren’t sure we would make it this far, but we did. Now we face a new decade and new challenges. How we handle them will determine what kind of conversation we have in 2030. This concern for the future is one of the things that separates humans from animals. Dogs […]

December 22, 2019 | Prelude to Crisis

Ignoring problems rarely solves them. You need to deal with them—not just the effects, but the underlying causes, or else they usually get worse. The older you get, the more you know that is true in almost every area of life. In the developed world and especially the US, and even in China, our economic […]

December 15, 2019 | Time to Do the Hard Thing

We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are […]

December 8, 2019 | Inflationary Angst

According to the dictionary, the word angst refers to “a feeling of deep anxiety or dread, typically an unfocused one about the human condition or the state of the world in general.” It comes from a German word for “fear.”

December 1, 2019 | Advice Worth Taking

We’ve reached the Thanksgiving weekend, and as always, I’m thankful for loyal readers like you. I hope you are enjoying some quality time with family and friends. And because of the holiday, this week’s letter will be shorter than usual, but I think it will offer real value. Year-end is rapidly approaching, which means time […]

November 24, 2019 | Muddling for Solutions

Those who experienced the 1930s as adults are mostly gone now, but they left notes. We have a pretty good record of what that period was like. It wasn’t fun to begin with—then it got worse. This year, I’ve written several times about the 1930s parallels that Ray Dalio and others see with our situation […]

November 17, 2019 | The Road to Default

Nothing is forever, not even debt. Every borrower eventually either repays what they owe, or defaults. Lenders may or may not have remedies. But one way or another, the debt goes away. One of Western civilization’s largest problems is we’ve convinced ourselves debt can be permanent. We don’t use that specific word, of course, but […]

November 10, 2019 | Slowing but Not Stopping (Yet)

If you are a computer (other than the newest experimental quantum ones), your world is entirely binary. Everything is some combination of zeroes and ones. The machines can do marvelous things with those two digits but they have limits. We humans don’t have to think in either/or terms, yet we often do. I see it […]

November 3, 2019 | Chinese Chess Game

Every investment decision should have an exit strategy. What will you do if your idea doesn’t work? Ideally, you make that decision before you invest. Mistakes are inevitable but survivable if you recognize them quickly and act to minimize their costs. The same is true in business, international relations… or even a chess game. Great […]

October 27, 2019 | China’s Disturbing Vision

And once you see it, you cannot unsee it. I’m not alone. Here is what we are observing at macro scale: That it has been common knowledge—something we all knew that we all knew—since the Nixon years that by simply exporting capitalism and free enterprise, we would unshackle the forces of freedom in China. That […]

October 20, 2019 | Decoding the Fed

“In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them. There is only one difference […]

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