This bear market is punishing everyone and everything.
Interest rates aren’t simply the price of borrowing money. They are also information, providing signals telling economic players what to do. Interest rates are in fact the price of time. Low interest rates don’t value time very much. Bad signals produce bad outcomes… and that’s where we are now.
Crypto meltdowns. Tech implosions. The biggest rate hike in decades.
Today we’ll look at some evidence this period could even be worse than the 1970s. Then we’ll read the mea culpa regrets of someone who had a big part in that drama.
Energy has been on quite a run.
Complaining about federal debt is a time-honored American tradition. Remember Ross Perot and his hockey-stick charts? Then there was Harry Figgie’s 1992 best-selling book, Bankruptcy 1995. It was quite a sensation at the time.
The chance that all the necessary pieces will line up that way? Somewhere between slim and none, and as my dad used to say, “Slim left town.” And while my memory isn’t perfect, I don’t believe any speaker at the conference believed in the possibility of a soft landing. And even if we get one, we have serious problems that predate this inflation. They haven’t gone anywhere.
There’s a silver lining to the current bear market…
It looks like the economy will grow for a while, just not very fast. And we simply don’t know what will happen when the Federal Reserve tightens in the face of a slowing economy.
As with bodily atherosclerosis, curing our economic condition may require lifestyle modifications. But in one sense, it will be even worse: We’re all going to get the cure whether we want it or not. We’ll get its side effects, too… and you can bet there will be many.
Investors are in a pickle.
The Strategic Investment Conference wrapped up this week with another wave of strong, fascinating speakers and panels. Today I have more to share and, as you’ll see, the plot thickened considerably.
Jay Powell may think he is Paul Volcker, but he is not Paul Volcker.
I borrowed this letter’s “Soft Now, Hard Later” headline from Dave Rosenberg. It was the title of his leadoff SIC presentation, for reasons I’ll explain.
My good friend Ben Hunt of Epsilon Theory has written what I think is one of his most powerful letters ever. He’s basically saying the Fed just isn’t going to make it. I wish I had written it. He is such a wordsmith. With that, let’s turn it over to Ben.
If you haven’t noticed—perhaps because you live on Mars—inflation is here. Not just in the US but almost everywhere. Prices for everyday goods and services, including necessities like food, are climbing rapidly. The US Consumer Price Index rose 8.5% in the 12 months through March… and we know it understates categories like housing.
Interest rates are structurally set up to go higher.
It’s Easter weekend, so we are going to revisit a 2018 letter about the yield curve. The yield curve is much misunderstood and misused by many analysts. This letter will give you the tools to understand the correct importance and relevance of the yield curve. And then, a few comments about Ukraine.
Today, we’re talking about why the war in Ukraine was such a dud for the bears.
Today we’ll consider the risks to my stagflation forecast. Note that’s different from the risks of my forecast, should it prove accurate. I’ve described those already but it’s important to ask how I might be wrong.
What is in store for the capital markets and the economy in 2022? John Mauldin has dedicated more than 30 years to answering questions like that and keeping people informed about financial risk.
The yield curve is really just a symptom. I like to compare it to a fever—not serious in itself, but a sign you have an infection or some other ailment. An inverted yield curve means something is wrong in our economic body. So today we’ll consider what it means.
Today I want to focus just on good news and sometimes great news. The world is getting better, but it doesn’t make the headlines like the problems and catastrophes do. The byword in newspapers when I was growing up was “If it bleeds, it leads.” Today’s online headlines are even more so. Crisis and gloom sell. Good news, not so much.
Recession is where we are headed. So let’s review what it will be like.
Recession is here, or will be soon. And unfortunately, it will be a global recession. Like the COVID recession, this one has little to do with the business cycle. It’s a recession of choice—not your choice or mine, but Vladimir Putin’s. He clearly miscalculated how hard capturing Ukraine would be and how the West would react.
Today we’ll start what I’m sure will be a series of letters on Change2. I’ve said for some time the 2020s would be a turbulent period leading to a much better 2030s. I still believe that. I also believe the events we’re watching right now will define what that new order will be.
This week’s news is seemingly all about Ukraine and Russia. It is a terrible situation. But as an economic matter, we still have serious economic challenges no matter how it develops.
How much inflation is okay? People have different answers. I think it should be very low, but definitely positive to forestall deflation. Whatever your ideal may be, there’s a range of possibilities that would at least satisfy you. Political scientists call this range the “Overton Window,” a hypothetical box around the limits of acceptable policy. Anything outside the box is, by definition, unacceptable.
Near-zero, zero, and below-zero interest rates changed the incentive calculations and decisions from what they were a mere 30 years ago. You can’t look at policies or almost anything else prior to the early 2000s as a standard for today. The incentives of low interest rates have literally screwed (that’s a technical economic term) things up.
I believe Fed officials are largely responsible for the cycles of bubbles, booms, and busts over the last 30 years. Further, they share some of the blame (clearly not all) for the growing divisions and tribalism in our society. Much of it springs from the wealth disparity they aided and abetted.
We’ll review what may be the most compelling bear case I’ve seen in a long time, along with some other unpleasant data. Then we’ll look at some equally compelling reasons those views may be wrong.
Many analysts project China will soon be larger by GDP than the US—which shouldn’t be so hard with a population four times larger—but it’s not clear to me that China’s seemingly unlimited linear growth will continue three or four more decades. I can remember when the same was said about Japan.
Today I’ll continue the annual forecast I began last week. New COVID developments are unfolding rapidly. If we’re lucky, they may carve out a nice bookend for us. But my worry is that rather than bookends it could be economicus interruptus. 2019 was not portending the most robust of economies. What if, in Groundhog Day fashion, we end up back where we were?
Twenty-two years of tradition dictate I begin the new year by forecasting what lies ahead.
Thompson Clark sits down with Mauldin Economics publisher Ed D’Agostino to discuss three of his top stock picks for 2022, how inflation could affect his Wealth Accelerator strategy, and how investors can better prepare for the year ahead.
For many Americans, between Christmas presents and their regular Amazon (AMZN) deliveries, the number is high. After all, Amazon delivers over 600 million packages a year. That’s a lot of cardboard. Things are a little different in South Korea. The country’s ecommerce powerhouse, Coupang (CPNG), offers all the perks Amazon does, like free delivery. But it takes a “zero packaging” approach, with 75% of deliveries arriving in reusable packages.
I’ll share a story from my good friend Vitaliy Katsenelson. He immigrated to the US with his family from Russia over 30 years ago. I’ve always been fascinated by this story when we get together. All he knew of America came from movies and propaganda, which wasn’t altogether flattering.
Last week’s What Really Caused Inflation letter generated an unusual number of questions and comments. That tells me I need to go a little deeper. We know inflation by the higher prices it generates, but exactly how it flows through the economy isn’t always obvious.
Today we’ll “war game” what the Fed is facing as it wrestles with inflation, growth, employment, and political considerations. We’ll try to entertain those thoughts as if we’re sitting in the conference room with Jerome Powell.
The employers who kept DB plans without adequately funding them and/or generating returns sufficient to pay the promised benefits. It is a systemic problem that affects others. Today we’ll discuss this problem and some of its macro-level consequences.
The charts and comments below are drawn from the “Clips That Matter” feature of our Over My Shoulder service. Because we know a picture is worth a thousand words, my co-editor Patrick Watson and I select a few important charts and graphics and send them to subscribers each week with some brief comments. Many say these clips are their favorite part of the service.
In some simplistic economic theories, shortages never happen. Supply and demand for any particular good are always perfectly balanced in a given time and place. If you can’t get what you demand at that moment, you pay a higher price or you demand something else.
I am writing in the middle of a whirlwind week in New York. We are going to discuss what I’m learning, some takeaways from the conversations I’ve had, changes in my personal portfolio, and thoughts around the topic of the day: inflation. As well as a few random things that I have read this week. All delivered to you within my 3,000-word limit. Let’s jump in…
We have plenty of other problems and don’t need more, especially rising energy prices as the economy slows. Nonetheless, that seems to be what we will get. Today I’ll dig into what’s happening and what I think would be better.
Today, I’ll describe what I think will happen over the next year or so. I rarely make short-term forecasts because I’m usually early. Reaching the major turning points takes longer than we think.
Today’s letter will be the first of at least two parts. Next week I’ll describe where I think this is heading, and how we still have a chance to save the recovery if certain people/institutions make the right choices. But first, I want to establish three important points. They are foundational to my outlook. Here they are, summarized in one sentence.
The ongoing, intensifying supply chain problems are raising costs in ways that add broad inflation pressure everyone will feel. And the zeitgeist in the workplace is literally changing before our eyes.
Historical comparisons are always risky. This is particularly so when comparing different eras in vastly different countries like the US and China. Similarities can actually obscure more important differences.
A few months ago in Xi’s Big Mistake, I said Beijing risked killing the entrepreneurial activity that had spurred the country’s rapid growth. As we learn more, this is looking less like a mistake and more like a mistakenly-conceived plan.
Today, I want to show you how richly valued the market is and then review some of the top risks that could force it downward. Like those sandpiles I talk about, we don’t know exactly what will trigger a collapse. We know something will do it. Sandpiles don’t grow to infinity.
