Circling the Wagons

Circling the Wagons

 

 

Investors are increasingly choosing to circle the wagons as it becomes apparent that the Federal Reserve will not be making multiple interest rate cuts this year, indeed this author predicts the next move is up.

 

As earning season kicks off, early indications show that misses are punished with death and even solid beats can result in a selloff. Why? Growth is paramount, and any indication of weakness is an excuse to sell.

 

Hyperinflation is starting to cause significant cracks in the economy, notably in the energy and food sectors where high prices are causing many Americans to make hard choices. Those unwilling or unable to take on a second or third job to makes end meet are particularly vulnerable.

 

For now, the stock market has stalled out and investors are looking toward the coming earning season to parse out winners and losers and adjust their portfolios accordingly. Sharp swings in share prices should present those with a longer time horizon with meaningful buying opportunities.

 

Historically, the adage has been to "Sell in May and Go Away" for the past 100+ years. Seasonality combined with a jittery consumer battling hyperinflation may lend significant credence to this old philosophy. When it is hard to see the upside, and you face danger on multiple fronts. sometimes it makes sense to circle the wagons.

 

 

Risky Business

Risky Business

 

 

In the classic movie Risky Business Tom Cruise's character Joel Goodsen says, in a slightly edited version, "Sooner or later, a man has to say 'What the heck, and make his move!'" The Federal Reserve is stuck in neutral as "transitory" inflation over the past 38 months has PROVEN to be "sticky." The Fed needs to make their move.

With the Truflation© index now well over 50% in the past 3 years, it is difficult to understand WHY the Federal Reserve has not continued to hike rates. Gas alone in California is up over 75% from Jan 21 until today! The other components of the index are also all markedly higher. The value of the dollar is collapsing all around us, yet no one in Washington, DC seems to care.

When the Federal Reserve does not do its job, literally billions of people around the world suffer. This is the impact of having the world's reserve currency, great responsibility. NOT making decisions based on data visible by everyone at the pump, grocery store, landlord's office, health insurance premium stub, or at the bursar is a dereliction of duty.

 

The Federal Reserve has a both a fiscal and moral responsibility to maintain a stable currency. It is failing terribly at this, as evidenced by massive price instability. Historically, price instability has proven to be disastrous. The domino effects of price instability often result in the toppling of nations.

Resolution to the inflation crisis can be straight-forward and transparent, raising interest rates until Truflation© falls and prices stabilize, or it can be exceedingly painful by doing nothing and watching while multiple demand shocks hit the economy. Hopefully elected leaders choose a sustainable future starting first with price stability.

The Big Squeeze

The Big Squeeze

 

 

Chin up patriots, that most heinous annual civic duty is upon us! This solemn April 15th Tax Day, chronologically the year 2024, sure feels financially and socially like Orwell's 1984.

Multiple wars being financed by the United States, zero sovereign border security save that offered by the cartels, and a Congress which is really, really good at its primary function...spending money...has resulted in economic calamity.

The result? Crippling inflation is at 40-year highs resulting in the US Dollar having lost some 50% (you read that correctly) of its purchasing power since Joe Biden took the Oath of Office on that chilly morning in January 2021 watched by thousands through Concertina wire in our Nation’s Capital.

American citizen taxpayers are being squeezed out of their own country; consider, every 100 days now another $1,000,000,000,000 is being added to the National Debt!

Without significant increases in productivity, the US Dollar will careen towards zero value; put another way, when everything is free, nothing has value. The REAL “Green New Deal” is the collapse of the US Dollar because baby, this “green” has no value.

Socially, if ever there was a group of unrepresented, unspoken for, downtrodden, ridiculed, huddling masses it is surely composed of US taxpayers. April 15th should be a National No Tax Day; the effects would be immediate and staggering.

A Tax Holiday would result in annual productivity spikes which would defy comprehension and immediately trigger a Nobel nomination in economics. Imagine a world where citizens didn’t have to pay their own government to launder money!

The one upside to paying “your fair share,” is that at least we can still pay in U.S. Dollars, instead of something of real value like say gold, bitcoin, or real estate. Thankfully the words “This note is legal tender for all debts, private and public.” is still WRITTEN on U.S. currency. Be VERY concerned when the US Government no longer accepts US Dollars.

Happy St. Patrick's Day

 Happy St. Patrick's Day

Happy St. Patrick's Day financial farmers! There are few cultures so naturally blessed with song, word, and dance than the Irish. The best investments are those that we can enjoy. If you're in the mood for some traditional Irish song along with your Guinness beer today check out The Harris Bros: https://youtu.be/6jfx7D10etE

Ides of March

Ides of March

 

 

2,068 years ago Julius Caesar was assassinated in the Theatre of Pompey, ending the Roman Republic and starting the Roman Empire. The death of Julius Caesar led to the collapse of the Roman Republic and the ascension of his adopted heir Octavian who in 27 BC avenged Caesar's death. Octavian ultimately became Augustus Caesar and launched what would become the Roman Empire.

 

Pax Romana, or Roman Peace, in this new Roman Empire lasted some 200 years across what was then the known world including large swaths of the Mediterranean, Northern Europe, and Northern Africa. It was at this time that Roman Citizenship afforded one unprecedented safety and security; a Roman Citizen could walk the known world with the assurance of the Roman Empire behind him. This citizenship status was one of the greatest benefits Romans enjoyed and allowed trade, commerce, and civilization to spread unimpeded for thousands of miles in all directions from Rome.

 

In a world today where few people know the birthdates of their own grandparents, it is striking how the pull of history reminds us to the day of an event over 2,000 years ago, with only the birth of Jesus as a more profound and exact historical recording. Indeed, the scale of the respective Caesars' power was such that time was altered to incorporate their legacy into months of the year; July & August.

 

 

Truflation© Exceeds 50%

Truflation© Exceeds 50%

 

 

No hyperbole man, Truflation© on a cumulative basis since the start of the Joe Biden Administration in January 2021 now EXCEEDS 50%!

 

Truflation©, as per its definition, is a basket of goods that consumers actually "touch" on a daily basis and are required for living in a modern society. This basket includes five elements: Food, Housing, Gas, Education, and Health Insurance. 

 

The five pillars of Truflation© have now cumulatively exceeded a 50% increase since January 2021. In essence, consumers have LOST over 50% of their buying power in real terms. The effects have been particularly devastating for young working American families on the hook for supporting a large portion of entitlement programs, many of which it is unlikely they will ever benefit from personally.

 

What is a financial farmer to do? Well it is no coincidence that the price of gold, the stock market, real estate, and crypto to name a few assets are UP over 50% since January 2021. Fiat paper money like the USD has literally been "heading for the hills" almost as fast as it is being printed. Investor cash has sought refuge in physical commodities, ownership stakes in companies, and good old fashion dirt.

 

 

Debt Bomb

Debt Bomb

 

 

Besides Defense, a stable currency is the best thing a nation can provide to its citizens. The current Administration is adding approximately $1,000,000,000,000 ($1T) to the National Debt every 100 days. This pace is unsustainable because an equal amount of value or productivity is NOT being created along with the corresponding debt. This is how a country is destroyed.

 

Over the centuries many governments have attempted to solve their economic problems by debasing their currency; whether by decreasing the content of gold or silver in coinage, increasing the supply of paper money relative to precious metal backing it, or altogether removing a currency from the Gold Standard. 

Almost always, the debasement of a country's currency has been the result of funding war. War is extremely expensive not only in resources, but also loss of productivity to the warring countries. The larger and longer the conflicts, the greater the hit to the Treasury.

Currently the United States is waging at least three (3) Wars; one in the Middle East, one in Ukraine, and the other one on the Southern Border. The argument could be made that there are also multiple other skirmishes happening 24 hours a day, 365 days a year around the world in which the USA is involved. Putting those aside though, the three major conflicts are costing America vast sums of money. Think in terms of TRILLIONS, not billions.

To look at the stock market or real estate or gold or Bitcoin one would think that this economy is booming. Record highs are being notched daily. There is jubilation in the trading pits. Every month a new high in single family home prices! Yet, just the opposite is occurring with the VALUE of the USD becoming increasingly worthless. As discussed frequently on this blog, inflation has by my estimate destroyed over 50% of the USD buying power over the past 3 years alone. And there is no end in sight.

Barring AI, the major increases in the share prices of many S&P 500 members has simply been a function of increased pricing. Anyone who shops at a grocery store knows this. Or fills up their car with gas. Or pays for health insurance. Or pays for education. Or resides somewhere other than a cozy cave. Truflation© has been running double digits for years. And that compounds quickly.

I have understood the relationship between gold and value for a long time; gold is hard to find, easy to buy, and can not be made by man. Similarly, I also understood that higher and higher stock prices are typically a result of both higher earnings, but also to a large extent, inflation. Same thing for real estate; a classic supply and demand scenario with the added factor of uniqueness. But Bitcoin has puzzled me.

I have come to believe that Bitcoin is a bet. It is a lasting bet against stupidity, greed, and corruption. Meaning Bitcoin, given its cap of 21,000,000 units, should continue to move higher in USD terms indefinitely until some time that sane monetary and fiscal policy is restored...but that day may never come.

$12 Eggs

 $12 Eggs

 

 

 

Joe Biden has egg on his face. When the cost of a dozen eggs in the grocery store reaches twelve bucks, the economy is broken. Inflation over the past 3 years has ravished the United States far worse than any enemy, foreign or domestic.

This author estimates that we have lost some 50% (that's right, FIFTY percent) of our purchasing power over the past 3 years alone. And it has hit us where it hurts most; housing, food, energy, healthcare, and education. Nobody really cares about the cost of a ton of soybeans, that is literally for bean counters in Washington, D.C.!

The median American has been decimated by rampant inflation in core goods and services. Paying for two wars and absorbing some 5-10% of the existing US population in new migrants has triggered massive price increases across the board. "Free" is probably the most expensive word in existence; trillions in spending adds up, especially if there is not a corresponding increase in productivity. Empty carbs kill.