February 04, 2019
2008 Myth and Reality
We’ve written about it over and over, and while many advisors seem to understand, the media, politicians, and many analysts don’t…or won’t. So, we thought we’d try again to explain why so many people don’t understand the nearly ten year long bull market in U.S. equity values.
November 12, 2018
Politics and economics are interwoven. Government grants licenses, enforces contracts and the rule of law, provides fire and police protection, a national defense, and can call on resources to recover from crisis. Without these institutions, activity would slow. No one is building billion-dollar hotels in Syria, Libya, or Iraq; stability and certainty support investment.
February 05, 2018
New Policies, New Path
Back in the 1970s, supporters of the status quo said there was nothing to be done about stagflation (high inflation and slow growth). It was a “fact of life” that Americans had to accept after experiencing faster growth and lower inflation during the decades immediately following World War II
January 23, 2017
A memorable part of President Trump’s inaugural speech pointed to mothers and children trapped in poverty, rusted-out factories, a flawed school system, and crime and gangs and drugs. He described these problems as “American carnage” and stated emphatically that it “stops right here and stops right now.”
January 09, 2017
Big Government Causes Slow Growth
In 1930, Pluto was declared the ninth planet. In 2007, it was demoted to "dwarf planet" status by astronomers after considering new evidence. There are now only eight planets.
Also in the 1930s, the ideas of John Maynard Keynes came of age. In spite of a massive amount of evidence that these ideas don't work, unlike astronomers, economists won't demote Keynes's theories to the dustbin of history.
January 01, 2017
Greedy Innkeeper or Generous Capitalist?
The Bible story of the virgin birth is at the center of much of the holiday cheer this time of year. The book of Luke tells us that Mary and Joseph traveled to Bethlehem because Caesar Augustus decreed a census should be taken. Mary gave birth after arriving in Bethlehem and placed baby Jesus in a manger because there was "no room for them in the inn."
November 21, 2016
Big Boom for Stocks
The S&P 500 hit a low of 666 on March 6, 2009 and was up 213%, excluding dividends, through November 4, 2016. Since then, the S&P 500 is up another 4.6%, and closed just 0.5% from a new all-time high last Friday.
Get ready for more. We expect the S&P 500 to hit an all-time high soon as the bull market in US equities continues, and we expect equity values to boom in the years ahead.
November 14, 2016
Elections have consequences and the impact on U.S. economic policy of last week’s election will be enormous. We’re sure we’ll be writing about all of these issues in much greater depth over the next several months, but, for now, here’s a broad outline of what to expect.
One of the Republicans’ first tasks will be repealing much (but not all) of the Affordable Care Act, also known as Obamacare. To get that done, they will use the budget reconciliation process in the US Senate, where they don’t need to break a filibuster with 60 votes; instead, they only need a simple majority.
November 09, 2016
Saving Private Sector
In the movie “Saving Private Ryan,” multiple brave soldiers give their lives to save one (the last-surviving of four brothers) in World War II. During a final, chaotic and riveting battle scene, Ryan is miraculously saved, but with tremendous loss of life. A bloody and dying, married, teacher from Pennsylvania – Captain Miller (played by Tom Hanks) – tells the farm boy from the Corn Belt – Private James Ryan (played by Matt Damon) – to “earn it.” “Earn” the sacrifice!
January 18, 2017
Politicians Love to Spend Our Money
I'm sure some pundit has coined the phrase "politicians are people who love to spend other people's money." In any event, it's true, and it really burns me up. How is it that our president can simply write a check for $500 million to some cause that Congress did not specifically authorize? Mother Jones has the story:
January 01, 2017
Richer than ever.
Last Friday the Fed released its Q3/16 estimate of the balance sheets of U.S. households. Collectively, our net worth reached a new high in nominal, real, and per capita terms. We are living in the weakest recovery ever, and things could and should be a lot better, but it is still the case that today we are better off than ever before.
November 30, 2016
Corporate profits are still healthy.
The collapse of oil prices that began over two years took a big bit out of corporate profits, but now that oil prices have been relatively stable for the past year or so, corporate profits are rebounding. Profits are still below their previous highs, both nominally and relative to GDP, but they are still healthy from an historical perspective. Using the measure of corporate profits that comes from the National Income and Product Accounts as the E, and the S&P 500 index as the P, PE ratios are only modestly above their long-term average.
November 29, 2016
Closing the Obama gap.
Third quarter GDP growth was revised upwards slightly today, from 3.0% to 3.2%. This is encouraging, of course, but it does little to change the bigger picture, which is one of unusually slow growth. Over the past year, the economy has expanded by a very modest 1.6%, and over the past two years it has risen at a mere 1.9% annualized rate. It's managed annualized growth of only 2.1% since the recovery began in mid-2009. I can think of no better way to emphasize how painful this recovery has been than the following chart, which I have been featuring and updating regularly for many years now:
November 23, 2016
Trump carrots beat Obama sticks.
To paraphrase Peter Thiel, Trump's supporters take him seriously, but not literally, while Trump detractors take him literally, but not seriously. There's a lot of truth in that observation, because the more we know about Trump the more we realize that his bark is worse than his bite. He's not an inflexible ideologue; he's a businessman who wants to win. Maybe, just maybe, Trump is NOT going to start a trade war with tariffs (sticks); what if he wants instead to use carrots to boost trade and thus the economy?