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Before Political Correctness, We Called This “Stagflation”

“Those that cannot remember the past are condemned to repeat it.” (George Santayana 1863-1952). This time, indeed, could be different. It certainly is in the realm of possibility. But, the odds are against it. One doesn’t get up on a particular morning and find an entry in the calendar on our smartphone, like “Cinco de Mayo” or “Mother’s Day,” that says “Start Day: National Recession.” In fact, the National Bureau …Read More

The Fed’s new bubble – Part 2

In part I of this two part series, I discussed the possible rush for the exits and market volatility in what I saw as a long overdue correction. The violence of the correction and the extremes of volatility that I worried about have now actually appeared. As I rewrite the introduction of this part II, conventional Wall Street wisdom has now become that the correction and volatility are due to the …Read More

The Fed’s New Bubble

“Most valuation parameters are either the richest ever or among the highest in history. In the past, levels like these were followed by downturns. Thus, a decision to invest today has to rely on the belief that ‘it’s different this time.’ I’m convinced the easy money has been made.” (Howard marks, Oaktree Capital, WSJ, 1/29/18). The legendary investor, Baron Rothschild famously said, “I got wealthy never waiting for the peak.” …Read More

2018 Preview and Assessment

Market valuations are high.  Current consumption is being financed by debt.  The housing data is mildly positive, but has been impacted by “rebuild” issues in the wake of natural disasters.  Corporate balance sheets are strong and laden with cash.  The world’s major economies are doing well and central banks are beginning to tighten policy led by the U.S.’s Fed.  Q4 real GDP growth looks to come in above 3% (third …Read More

The Fed and the Phillips Curve

Deflation is the Order of the Day The Fed was established in December, 1913 after the Panic of 1907 (the latest in a series of financial panics dating back to the middle of the 19th century) put the economy into a severe recession via bank runs and subsequent bank failures.  The Fed’s original purpose was to provide the nation with a safer, more flexible, and more stable monetary and financial …Read More

Economic Growth: Its Importance and the Potential Impact of its Demise

Conceptually, economic growth is a function of two factors: the growth of jobs, and the productivity of those employed.  In a world where the labor force of industrialized nations is stagnating, or, worse, shrinking, one might reasonably ask: “Why is economic growth, as measured by the increase in real GDP, so important to the economy?”  A good argument can be made that real GDP per capita would be a better …Read More