Welcome to 2022! We can't imagine a more transformative year for America. After two years of unprecedented government actions, the winds of change are blowing hard. The economy has been buffeted by short-term factors since 2020; this year, long-term fundamentals should re-assert themselves as the most important drivers of economic and financial performance. First, the [...]
Keynesianism can temporarily giveth, but ultimately always taketh away...and then some. When the US fell into the COVID crisis, the federal government went on a massive spending binge. Pre-COVID, in the twelve months through March 2020, federal outlays were $4.6 trillion, or 21.4% of GDP. In the next twelve months outlays soared to $7.6 trillion, [...]
In 2009, after overly strict mark-to-market accounting rules were altered, we said the Financial Crisis was over. It was hard to get our voice heard, though, because both sides of the political aisle were busy saying the economy stunk. Political liberals tried to use the crisis to grow the government and increase bank regulation. Political [...]
We've been consistently bullish on stocks since 2009. This bullishness has paid off, although not every year; stocks fell in 2015 and 2018. But, since 2009, the market has rebounded from every correction. Why have we stayed bullish? Because our Capitalized Profits Model has consistently shown the S&P 500 as "undervalued" since 2009. It still [...]
As we wrote last week, it's not possible to analyze the economy these days without focusing heavily on what government is doing. Between the Federal Reserve, fiscal policy, and COVID-related restrictions, little in our lives avoids governmental influences. The easiest way we can describe the current environment is that in the short-term, forecasting is easy. [...]
In an ideal world, analysts and investors wouldn't have to spend much time, perhaps none at all, trying to manage around changes in government policy. In that world, government – be it in terms of spending, taxes, or regulation – would be small and consistent enough to not require much thought. Unfortunately, we don't live [...]
One of the key decisions President Biden will make later this year is who is going to run the Federal Reserve for the next four years. Current Fed chief Jerome Powell's term as chairman runs out in February 2022. We think the choice will ultimately come down to two people: Roger Ferguson or Jerome Powell. [...]
We keep hearing people make comparisons between this recovery and those of the past as if it's apples-to-apples. For example, comparing job growth today to job growth after the 2008-2009 Panic. All in an effort to make the case that government spending creates economic growth. But there is nothing normal about the current economy. The [...]
If the Wizard of Oz were written today about “Investing Crazes du Jour”, Dorothy’s famous repetitive line may well be: “Cryptos, SPACs and Robinhood/Reddit, Oh My!!” As I begin my 36th year dispensing investment advice, I marvel at the consistency of human behavior. Specifically, the consistent avoidance of the knowledge provided by history, and the [...]