Leaders take a lot of criticism. In fact, that’s part of the job. Presidents, governors, CEOs, football coaches, other top decision makers and even your humble analyst all have to answer for what happens on their watch—even when it’s not their fault.
If, like me, you’re old enough to remember the 1990s internet bubble, today’s AI excitement might be giving you flashbacks. The parallels are unmistakable.
You may have noticed the stock market rising lately. Much of the gain isn’t so much “the market” as a handful of mega-cap stocks. Nonetheless, the bulls are clearly in charge. The question is how long they will stay there. History suggests longer than many market bears think.
The idea that “market expectations” tell us anything about the economy’s future is – or should be – in serious doubt. That’s not to say the market is wrong. It just changes its mind so often as to be useless. And most of the time, it changes its mind after the fact.
Today, we have a different kind of letter. I’ve been in California for some rather innovative and hopefully life/health span-extending medical treatment.
Recently I saw a T-shirt for sale that said, “Science Doesn’t Care What You Think.” I used a similar metaphor recently, observing how many experiments show that jumping off a cliff will send you rapidly downward. If you want to test that theory, please add me to your will first.
If you’re a parent or grandparent, you may know of the “Choose Your Own Adventure” storybook series. Written in second person, they make “you” the hero.
One of the more fascinating and mysterious parts of watching the Federal Reserve is the ongoing dialogue between Fed leaders and Wall Street. We imagine private meetings held in great secrecy. Those may in fact occur, but I’m not sure they are even necessary.
Modern economies, even small ones, are unfathomably complex. The number of variables is far more than any human can comprehend or any model can track. It’s really no wonder so many forecasts are wrong.
In thinking about the 2020s, I often find myself looking back to the 1920s. That decade began with a deep recession/depression and ended with a stock market crash. While we now see the 1920s as a kind of “in between” period, people at the time didn’t know another depression and war were coming.
“Two is better than one” is a nice saying, but it really depends on what you’re describing. Two hurricanes or earthquakes aren’t better than one. Just one disaster at a time will suffice, thank you very much.
Having now spent almost six months describing the historical cycles and massive debt that surround us, I find myself looking for an “easy” exit.
It’s forecast season again, the time when people like me tell people like you what will happen this year. Sadly, we are often wrong.
It's that time of year when we start thinking about the old and envisioning the new. This has always been a special season for me, perhaps because of my unusual quirk of really wanting to divine the nature of the future—not just an investment in economics but in general.
First, let me wish you Merry Christmas, Happy Holidays or your favorite personal form of greetings for this time of year.
If you really want to reduce the federal debt, you don’t have to convince Congress of anything. You can just write a check. The Treasury Department gladly accepts gifts from anyone so inclined.
One thing you learn when writing about the debt problem, as I have been in recent weeks, is that many people think it’s not a problem at all.
Back in the Great Financial Crisis era, someone quipped that the federal government had become a giant hedge fund with an army attached. That wasn’t far off. Various agencies and entities were absorbing all kinds of risky assets to stabilize an overleveraged system.
Thanksgiving brings to mind not only turkeys, family, and friends, but also should help us recall the remarkable ideas and philosophies that helped shape, and indeed were, the foundation for the United States of America as a Republic.
The federal government starts a new fiscal year every October 1. In a rational world, Congress would fulfill its responsibilities by passing bills before that date to authorize spending in the various agencies and programs.
Exploring federal budget data is a journey through endless rabbit holes, some of which are eerily close to Alice in Wonderland insanity. Countless variables interact in unexpected ways. Seemingly small changes can cascade into billions of dollars within a few years.
Identifying problems is great. Identifying solutions is even better, especially when the politicians who are supposed to be solving our big problems don’t even try.
The ancient Greeks had a word κάθαρσις, which in English we now spell as “catharsis,” although it’s pronounced basically the same. It originally referred to purifying religious ceremonies, medical treatments, and so on.
We have been looking at big historical/economic/political cycles for the past two months.
When your system, whatever it may be, is working extremely well, we used to say it’s “firing on all 8 cylinders.” What does that mean?
One mark of true brilliance is the ability to make complex ideas seem simple. I think this is why so many of us fondly remember our early schoolteachers.
Intermission is over. Today we resume my series on the global cycle theories that, probably not by coincidence, all point to major change unfolding in the next few years. Finishing it may take some time since I keep finding new material.
Last week we began exploring the details of my personal portfolio. This week we will finish and then move back to our discussion of various cycles.
Today, I am going to do something that I've never done. I am going to start a two-part series describing what is in my personal portfolio and why. Let me start by offering two caveats: This letter is in the “do as I say and not as I do” category.
Greetings from Europe. I promised to write a letter describing my personal investment portfolio. I still plan to, but it won’t be this week.
Look up the word “cycle” in a dictionary, and you’ll find something like this: “A regularly recurring sequence of events.” Sounds simple, but that definition leaves a lot of ambiguity.
Today we continue our study of the historical cycles suggesting a major crisis is in our near-term (5‒8 years) future. We don’t know the precise timing or nature of the crisis, but the patterns indicate one is coming and could be severe.
My last three letters reviewed Neil Howe’s new book about the Fourth Turning. Today we’ll look at another set of patterns observed by my friend George Friedman in the geopolitical realm. George’s view of how patterns shape countries is different but not inconsistent with Neil’s generational cycles.
Today we’ll continue reviewing Neil Howe’s magisterial new book, The Fourth Turning Is Here, focusing on the Millennial Generation’s important role in the coming crisis. Then we’ll think about what the crisis may look like. Finally—because I always try to look on the bright side—we’ll consider what Neil expects in the “First Turning” that will follow.
We are in the last half of what is the most disruptive and violent of the generational periods.
We talk frequently about the way central banks and governments affect the economy. In the grander scheme of things, though, whatever the Fed does is more like throwing a hand grenade into a large building. Yes, you’ll make some noise and cause some damage. People may be hurt. But the building won’t care, and the owner will fix it.
Housing is by far the biggest expense for most American households. Any inflation analysis that ignores housing misses not only the elephant in the room, but the room itself.
The market, and maybe all of us, would like to believe the latest 3% annual CPI number was a harbinger of ever-lower inflation, and we are on the road to 2% inflation by year end. I would argue, “Not so fast.” Inflation is far from dead, and CPI will likely go slightly up between now and the end of the year.
One of the hardest parts of economic forecasting is separating what we expect from what we want.
Central bankers think they can handle a situation and fire the artillery. It always has an effect… but ultimately it is rarely the effect they wanted. Doing nothing at all might have been better but that wasn’t an option. They’re trapped in an endless spiral of intervention.
Is recession still coming? Of course. But some funny things are happening on the way there.
A year ago, the US Consumer Price Index was rising at an almost 9% annual rate. The Federal Reserve was trying to change that trend with tighter policy. But it wasn’t just the Fed. All of us—businesses, consumers, everyone—responded to the pain.
In economics we often talk about cycles. “Business cycle theory” is an entire academic sub-field whose basic idea is that economic history really does repeat itself. Not in every detail, of course, but as a recurring sequence of expansions and recessions.
“Crisis” is an overused word. Actual crises are those rare times when we are on the knife edge of disaster. It’s not a crisis when a bank fails, or Congress can’t agree on a budget. Those are annoyances (unless it's your bank). While not good, they don’t spell immediate catastrophe.
Swiss money manager Felix Zulauf is a crowd favorite at SIC. His 2022 presentation was right on target, so I asked him back to tell us what he expects for the rest of 2023 and beyond. Unfortunately, he thinks a slowdown is coming that will hit markets hard.
We often talk about technology’s influence on the economy. After the Strategic Investment Conference, though, I’ve decided that isn’t strong enough. It’s more correct to say technology is the economy.
The economy co-exists and interacts with broader society, including government. Public policies—and the political processes that determine them—can change the economy in deep and lasting ways. We may not like them, but we can’t ignore them.
World economic growth is slowing. That’s so obvious, very few will disagree. I suppose there are people out there predicting imminent 1990s-like expansion, but they are few and far between. If recession begins soon, it will be the most anticipated one in history.
Next week also brings what could be a pivotal Federal Reserve policy meeting. We use this word “pivotal” to say an event is important. Taken literally, it means to turn in a different direction than you were previously going.
Back before clocks went digital, you could say “a stopped clock is right twice a day” and even youngsters would know what you meant. A mechanism could be nonfunctional but occasionally correct.
