Notes on the Week Ahead

The only real drawback to my job is the number of flights I have to take - but this is a serious drawback when evening flights get delayed. Without the energy to do any productive work, I often combat the misery by playing board games on my iPad and I’ve lately added Monopoly to my repertoire.  I used to play Monopoly as a child, of course, but my strategy has evolved with the years. When I was yo...

To be good long term investor, you need courage and you need brains.  However, you need them in different quantities at different times.  In the depths of a bear market, you mostly need courage since it’s almost a “no-brainer” that the economy will recover and will lift financial assets with it.  In a bull market, its mostly about brains since, while people are less haunted by economic fears, valu...

As the calendar flips to August this week, consumers, workers, investors and the Federal Reserve all have reason to be pleased with recent data. Stock market returns have been strong all year, economic growth has been surprisingly resilient, unemployment remains very low and, despite all of this, inflation has fallen sharply. The Fed continues to tighten in a manner that appears aggressive given t...

The pandemic was my excuse to abandon piano lessons.  It wasn’t that I wouldn’t practice or didn’t enjoy pounding away on the keyboard.  The problem was that my piano teacher, Tatiana, is a perfectionist.  She wanted me to get it exactly and precisely right and so I practiced the same piece over and over.  She would smile as I did my lessons but it was a strained and pathetic smile, as the masterp...

Over the centuries, an abiding tension among many major religions has been the pendulum of severity. One era will be marked by a relaxed view, where smiling clergy make liberal allowances for minor transgressions. However, this is often followed by a puritanical reaction, wherein the flock is warned that the path to salvation is an exceedingly narrow and rocky one. The Federal Reserve seems to hav...

When I first arrived in this country, 40 years ago this summer, my strongest impression was that America was a land of optimists. European economists, politicians, commentators and consumers all saw the outlook as dark and troubled. However, Americans, facing equal challenges, seemed to see the glass as half full.

I have a sad tale to relate.  After dodging Covid for the last three years, my wife Sari and I were at a wedding two weeks ago and the virus decided to crash the party.  Two days later, I tested positive and Sari tested negative.  I’ll spare you the grim details, since almost everyone has had a similar experience.  However, despite only mild and fleeting symptoms, I experienced a rebound and so I’...

One of the advantages of being back in the office, when I am actually in the office, is I get to hear a variety of opinions.  These opinions are sharply divided today on the issue of a U.S. recession.  One camp feels that recession is inevitable.  Another sees a path to a “soft-landing”.  Of course, this argument really refers to a recession starting in the next quarter or two.  Sooner or later, a...

Markets in the week ahead will be focused on Wednesday’s FOMC meeting. We expect the Fed to leave the federal funds rate unchanged although both the post-meeting statement and the dot plot will likely emphasize that inaction this week should be considered “skipping a rate hike” rather than putting an end to monetary tightening. Indeed, Fed communications could explicitly warn of a possible further...

In 1787, on the last day of the Constitutional Convention, a lady asked Benjamin Franklin what form of government had been agreed to.  He famously replied, “A Republic – if you can keep it”.  He was, of course, alluding to the danger that partisanship or ill-advised policies could yet return the young country to the monarchy it had so recently escaped. 

I am shockingly, comically bad at golf.  However, that doesn’t stop me from occasionally watching more gifted souls play the game.  One of their techniques is to examine a putt from multiple perspectives.  They take a careful look at the green as they come up to mark their ball, look at the putt from the side, squat down to consider it from the opposite direction, and generally scout out the lay o...

Across the economy, the outlook is for slower growth.  Slower growth in demand, in employment, in profits and in inflation.  Recession is by no means certain.  However, a slow-growing economy is rather like a slow-moving bicycle – the slower its moves, the easier it is to topple it over.  And so, in the spring of 2023, there is a significant risk of recession starting before the end of the year. 

On Ireland’s Atlantic seaboard, ten miles west of the town of Lisdoonvarna, stand the majestic Cliffs of Moher.  They are a popular tourist attraction but also a dangerous one – in the 25 years ended in 2017, 66 people tragically plunged over the cliffs to their death. Of course, there is no reason why anyone should meet such a fate.  The long grassy path beside the cliffs is bounded by a wire fen...

The quantity of money was a big issue in the background of my childhood. There were no money machines or credit cards (at least in our house). So every Monday, my father would write a check for cash, usually for less than 100 pounds, and hand it to my mother for housekeeping for the week. She would then drive to the bank, cash it, put the notes in her purse and slowly dole them out as the days wen...

It seems like a distant memory now, but in the decade before the pandemic, the main preoccupation of the Federal Reserve was boosting inflation, as measured by the headline personal consumption deflator, to 2%.  Inflation undershot this target in ten of the twelve years between 2008 and 2019. 

Eliud Kipchoge, the only man to ever run a marathon in under two hours, is in town for next week’s Boston Marathon. In the runup to the race, reporters will no doubt ask him about whether he is worried about any particular competitor. He will predictably reply that he is not - but that he has to focus on his own fitness and his own decisions in running the race. As with all individual sports, the...

In three weeks, I will once again have the honor of running the Boston Marathon as a member of the gasping geezers division of the Dana-Farber Marathon Challenge team. A year ago, as I clambered up the Newton Hills, I resolved that, if I was ever fool enough to do this again, I’d lose a few pounds before attempting it. Admittedly, a few miles later, I made a sterner vow that I would never be fool...

A good set of brakes is a very comforting thing.  A gentle tap of the foot should produce a quiet and gentle deceleration, as brake pads press up against disc rotors, in a smooth but firm action.  When I drive these days, I take this technology for granted.   However, the vehicles I drove as a young man offered far less assurance.  There were times when applying the brakes unleashed a cacophony of...

One obstacle to assessing the direction of the American economy is the difficulty in getting a handle on how many people live in this country and how fast that number is growing.  It would seem to be a very elementary problem – surely the Census Bureau provides timely data on the size of the population, as well as births, deaths and net migration?  But it does not.  So far as I know, there is no o...

Over the years, my standard approach to analyzing corporate profits has been to think of them as the last slice taken from a big national income pie.  The growth of the pie itself is important.  But so is the size of the other slices, such as labor costs, interest costs and corporate taxes.  Once every one else has had their slice, what’s left over is corporate profits.   It’s a useful model for a...

It was 60 degrees in Acton yesterday, as our normally frigid Massachusetts winter continued to be a no-show.  Not that I have any problem with this, since running, rather than skiing, is my exercise of choice.  But this weirdly mild season is leaving nature very confused with streams gurgling, buds swelling and birds twittering loudly, presumably about their nest-building plans.

There is a slowdown lurking.  It is currently hiding so well, in the long grass of statistical anomaly, that many observers, including the Federal Reserve, don’t seem to notice it at all. However, investors need to recognize it and have a clear view on the outlook for economic growth, jobs, inflation and profits, how the Federal Reserve may react to a slowdown, and what this could mean for investm...

In investing, as in life, it is important to learn from the past, appreciate the present and plan for the future.  This is particularly true at turning points. In the early weeks of the New Year, we do appear to be at an economic turning point.  Fourth-quarter GDP and consumption deflator data, due out this week, may give the impression of continued solid growth with still strong year-over-year in...

Last Friday afternoon, amidst the lengthening shadows of a winter sun, the Treasury Secretary delivered an ominous warning: By this Thursday, the U.S. federal debt will reach its legal limit, requiring her to take extraordinary measures just to keep paying the bills. Secretary Yellen’s warning was, perhaps, a little premature and she suggested that, with some adjustments, our real rendezvous with...

The word “resolution” has multiple meanings. The most obvious at this time of the year, is a decision to behave differently going forward. In many social sciences, “resolution” refers to a problem that is somehow mitigated or eliminated. Or, taken at its most literal, “resolution” could simply mean coming up with new answers to old questions – that is to say – “re-solving” them.