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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 […]

December 2, 2018 | Pyramids of Crisis

In an increasingly divided world, we all share one great desire: self-preservation. Not just humans, either. The survival instinct exists in almost every living thing. Humans simply have greater ability to do something about it. In fact, we have been doing something about it for many thousands of years. An inverted pyramid of geniuses and […]

November 25, 2018 | Double Debt Problem

The selloff in GE is not an isolated event. More investment grade credits to follow. The slide and collapse in investment grade debt has begun… (and later) Don’t be fooled by bond prices holding up, because trading volumes are down. There are fewer bids in the market, and the dispersion of bids is wider. It […]

November 18, 2018 | Seventh-Inning Debt Stretch

Science tells us energy can neither be created nor destroyed within a closed system. Whatever amount is there will stay the same, though it might change form. If only the same were true for debt. Within the closed system called Earth, we are much better at creating debt than eliminating it. But when we have […]

November 4, 2018 | Economic Brake Lights

But, like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are […]

October 28, 2018 | Debt Alarm Ringing

Is debt good or bad? The answer is “Yes.” Debt is future spending pulled forward in time. It lets you buy something now for which you otherwise don’t have cash available yet. Whether it’s wise or not depends on what you buy. Debt to educate yourself so you can get a better job may be […]

October 21, 2018 | The Real Cost of Low-Fee Funds

Today, rather than tackle some big macroeconomic issue, we’ll go back to this letter’s roots and look at market timing and portfolio construction issues. I expect this will get both enthusiastic support and at the same time, make a number of readers uncomfortable—if not annoyed. Why? Because I am going to take on a number […]

October 14, 2018 | Red Hot China Mailbag

An odd aspect of being a writer is you never know in advance what will excite readers. I’ve written letters I thought very provocative only to draw mostly yawns. Last week’s trade deficit letter lit some fireworks. The response was immediate and, in many cases, quite passionate in both directions. I got emails from old […]

October 7, 2018 | The Trade Deficit Isn’t the Boogeyman

  I have to confess something: I run a huge trade deficit. It’s not with China or Mexico, but with Amazon. I buy all sorts of goods from them and Jeff Bezos has yet to spend a penny with me. It’s just not fair. Sound ridiculous? That’s exactly what it is. Totally absurd. I like […]

September 29, 2018 | The Trump Trade War Recession?

“A conservative is someone who stands athwart history, yelling stop, at a time when no one is inclined to do so, or to have much patience with those who so urge it.” —William F. Buckley, Jr., 1955 I will never compare myself to Bill Buckley, as a writer or anything else. He was one-of-a-kind and […]

September 23, 2018 | China for the Trade Win?

With all the trade war talk, we all ask the obvious question: Who will win? President Trump says the US will win. Chinese business leaders say no, we will win. Free-traders on both sides say no one will win. Few stop to ask, “What does a ‘win’ look like?” This makes discussion difficult. People are […]

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