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January 10, 2021 | Year of the Gripping Hand

This week’s letter is the first part of my 2021 forecast. There is simply too much to cover in one letter, and today we’ll start with the most important factor, a known unknown, that I think will be the driver for 2021. Before beginning, I want to make two points, one about my personal investment […]

December 20, 2020 | Stock Market Party

The end of 2020 has me looking back. I started writing the letters that later became Thoughts from the Frontline back in the late 1990s. Similar to COVID-19 today, we had a giant macro issue then, too: Y2K. It’s hard to believe now how frightened some people were. But as I expected, the big day […]

December 13, 2020 | Survival of the Biggest

The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process… At the heart of capitalism is creative destruction. …Situations emerge in the process of creative destruction in which many firms may have to perish that nevertheless would be able to live on vigorously and usefully if they […]

December 6, 2020 | Elites on the Edge

Growing income and wealth inequality were on my (and probably your) radar screen long before COVID-19 came along. The pandemic has made them both more obvious and more urgent. The actions by the Federal Reserve have widened the gap. We are now in a situation where society’s upper echelon can easily stay safe and prosperous […]

November 29, 2020 | The Financial Fire Trucks of 2021

A Happy Thanksgiving weekend to all my US friends. This year was different for many of us—sometimes by choice, sometimes not. But there’s one bit of good news I think we can all share: The holiday season means 2020 is almost over. Soon, we’ll be able to turn the page. Each year at this time, […]

November 22, 2020 | The Great Reset vs. The Great Reset

A quick note before I start: Some of you didn’t get last week’s letter because some major internet providers decided it was junk mail. This was maddening but beyond our control. It may be in your “spam” or junk folder. You can help us train the algorithms by marking them as “not spam.” Remember, you […]

November 8, 2020 | Complexity Wins Again

Here in Puerto Rico we are now an hour ahead of Eastern Time, as we don’t do daylight savings time. I stayed up much later than normal on election night to watch the returns. I knew fairly early, when Florida and North Carolina looked so close, we weren’t going to see a “blue wave.” But […]

November 1, 2020 | What Will Not Change

“If I have seen further it is by standing on the shoulders of Giants.” —Sir Isaac Newton, 1675   If you feel a bit overwhelmed, you’re not alone. A lot is happening right now. The US has a big election next week. We’re all on edge about the pandemic, which appears to be getting worse […]

October 25, 2020 | The Green Shoots of 2020

Those who lived through the last financial crisis might may recall the Green Shoots episode. It drew laughs on March 15, 2009, shortly after the Federal Reserve fired its heaviest artillery and, we now know, launched the longest bull market in history. Appearing on 60 Minutes, Fed Chair Ben Bernanke said the recession’s end was […]

October 18, 2020 | Caught in a Debt Trap

We’re caught in a trap I can’t walk out Because I love you too much baby Elvis Presley’s rendition of Suspicious Minds topped the record charts in 1969. The lyrics portray a romance that couldn’t work, but was also impossible to escape. That’s also a good way to describe our relationship with government debt. We […]

October 11, 2020 | Timeline to the New Normal

Like everyone else, I am weary of this pandemic mess. I want to travel freely, enjoy dinner with friends, hug, and shake hands. And, of course, I want everyone who lost jobs and businesses to get them back. I wasn’t thrilled with the economy a year ago, but I’d take it again in a heartbeat. […]

October 4, 2020 | Debt Bugs and Windshields

“There is no means of avoiding the final collapse of a boom brought about by credit expansion.” —Ludwig von Mises Economic recovery is coming, we are told, because the economy has found a new equilibrium. We are supposedly adapting to the new-normal pandemic world, with monetary and (some) fiscal stimulus filling any gaps. Except that’s […]

September 27, 2020 | Great Reset Update: $50 Trillion Debt Coming

Amid all 2020’s new problems, it’s easy to overlook the old ones. Yet they are still there and, like a silently spreading virus, silently getting worse. One such problem is debt, and specifically government debt. All debt shares one common characteristic. A bill comes due at some point and, if the borrower doesn’t pay, the […]

September 20, 2020 | Stall Speed Economy

When Cornwallis surrendered to George Washington at Yorktown in 1781, tradition has it that the British band played an old English children’s folk tune, “The World Turned Upside Down.” Painting by John Trumbull If buttercups buzz’d after the bee, If boats were on land, churches on sea, If ponies rode men and if grass ate […]

September 13, 2020 | On the Question of Current and Future Lockdowns

Simply discussing COVID-19 will undoubtedly make this letter controversial and, in some circles, political. That is not my intent. I truly believe that something affecting all of us so deeply should be kept in the scientific realm to the extent possible, not the political. Sadly, that is not the case today in many countries. My […]

September 6, 2020 | Inflation Virus Strikes Fed

One little-noted aspect of central bank policy is how rarely “policy” happens. Officials at the Federal Reserve and elsewhere long ago learned how to achieve their goals without actually doing anything. Creating perceptions is often enough to modify people’s behavior. For instance, if traders simply believe the Fed will intervene should interest rates go above […]

August 30, 2020 | Light in the COVID Tunnel

If you ever think you just can’t win, I know how you feel. I’m labeled both a doomsayer and a Pollyanna—sometimes in reaction to the same letter. In fact, I am neither. I used to be the “muddle-through” guy who acknowledged difficulty but expected eventual success. Recently I modified that to “stumble-through,” acknowledging today’s more […]

August 23, 2020 | Business on the Frontline

I write this introduction from an all-too-short vacation in Montana (more below). This week I have asked my longtime associate Patrick Watson to step in and write Thoughts from the Frontline, offering his perspective as a small business owner. As you read this, realize his story is being played out hundreds of thousands of times […]

August 16, 2020 | The Second Great Depression… But Not Really

“It’s a recession when your neighbor loses his job; it’s a depression when you lose yours.” —Harry S. Truman, 33rd US President In recent weeks, numerous commentators started to suggest the US and the world are entering a depression. For some areas of the economy, that is clearly true. But not every area. Today we […]

August 9, 2020 | Yellow Flag Jobs Data

As I file this letter Friday morning, people are reacting to the July jobs report. My own reaction: The headline report is absurd. I will explain further at the end of this letter. But first, I have another topic. Regular readers know I worry about debt, mainly that the world has too much of it. […]

August 2, 2020 | European Resurgence

One of COVID-19’s many less-than-obvious consequences is the way it makes us look inward. Facing mortality has always done that, of course. West Texas Judge Roy Bean reportedly said, “Nothing focuses the mind like a good hanging.” For the vulnerable and those of us of a certain age (ahem), this virus goes beyond the normal […]

July 26, 2020 | Valuation Inflation

In the short run, the market is a voting machine but in the long run, it is a weighing machine.” —Benjamin Graham You may have noticed a bit of manic activity in the stock market. You may have also noticed inflation (as measured by various government agencies) is quite low, despite a supply interruption in […]

July 19, 2020 | Small Business Blues

Politicians love saying small businesses are important to the economy. In this case, it isn’t just rhetoric. The millions of little companies with a handful of workers are, collectively, more important than the few hundred large enterprises we see in the news. That’s one reason the corona crisis has been so economically devastating. It hit […]

July 12, 2020 | Stumble-Through Jobs Market

Work has always been a fact of life. Paycheck-producing jobs are actually a recent development. Until the Industrial Revolution, most people lived on subsistence agriculture, sustaining themselves with whatever they could produce or working as slaves/serfs. The practice of producing something you wouldn’t personally use had been around but reached a new stage with the […]

July 5, 2020 | The Blacker Swan

“A similar effect is taking place in economic life. I spoke about globalization in Chapter 3; it is here, but it is not all for the good: it creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words, it creates devastating Black Swans. We have never lived before under the […]

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