Category: Economic Policy

Jay Powell And The Chamber of Secrets

The question investors need to grapple with today is whether or not they believe in the government’s wizardry, or whether they accept the metaphysics of Parmenides and, well, the entire western tradition.

Money for Nothin’ And Your Checks for Free

In the real world there are no free lunches. There is only your lunch, or someone else’s. This assumes you don’t count the Federal Reserve’s all-you-can-eat buffet, where you get your money for nothin’ and your checks for free.

The Coronavirus: A danger to fragile people… and fragile economies, too.

Fragile economies are incredibly vulnerable to external shocks. When an economy has very little savings, massive amounts of debt, and asset price bubbles everywhere, it doesn’t take much to plunge into a recession. The Coronavirus, as it turns out, isn’t just especially dangerous to fragile people. It’s especially dangerous to our fragile economy as well.

Market Update: Safety Nets are Essential

“These are the times that try men’s souls.” Thomas Paine, The Crisis.
The Coronavirus is an unpredictable event that has disrupted supply chains, shut down economies, and created fear and panic in the markets. Any time there are sudden declines of this magnitude, we can expect prices to rebound in some fashion. This is often referred to as a “dead cat bounce”, which is perhaps not the best visual at times like these. But it’s meant to convey the idea that even things that are destined to end badly can have moments of optimism.

The Zombies Are Still Here

Most investors are simply unprepared for what is coming. They continue to believe their 60/40 portfolios will do fine. But in addition to the stock market being 50-60% above it’s fair value, the bond market is incredibly vulnerable. It’s time for investors to change their strategies. By the time you see the corporate zombies on the front lawn, it’ll be too late to move.

The Very Definition Of It

The capitalistic social order acquires meaning and purpose through the market. Hampering the functions of the market and the formation of prices does not create order. Instead it leads to chaos, to economic crisis.

The Fed Can’t Stop the Economic Slowdown

Federal Reserve wants to avoid an economic slowdown and they think cutting interest rates may do it. Unfortunately, like a daisy flower in front of an avalanche, the Fed can’t stop the economic slowdown.

Always Christmas, But Never Winter

While the rest of the world’s stock markets have struggled through snowy economic conditions, the US is enjoying Christmas while avoiding winter altogether.

Halloween May Be Gone, But The Zombies Are Still Here!

In our most recent newsletter, we outlined one of the biggest challenges facing the US economy going forward: the debt avalanche. And there is no better example of the massive debt increase and it’s increasing risks than “zombie” companies.

On The Margin

There is an old adage that says “correlation does not equal causation”. Just because two metrics, or trends, move in the same direction at the same time doesn’t mean that one causes the other. But while we shouldn’t assume that correlation equals causation, there are times – on the margin – when interesting correlations should cause us to look deeper. This is one of those times.