Today, 10-26-21, the website is a year old. A lot has happened: the election, the Capitol invasion crisis, the new Administration, the bizarre situation where the Senate can’t decide what economic policy to approve. Investors acted absurdly irresponsible with the silly bubble in January of Gamestop and AME shares. Gasoline is now over $5 in some California stations. International travel has been severely restricted. The pandemic has raged on without a truly reliable solution, although some good news may have developed. Last year oil traded at negative $37 in April. Who could imagine oil would ..read more

What happens if Republicans get elected? What happens if Democrats get elected?    Often the two parties compromise in the Senate as some senators takes side with the opposition or do a filibuster. Thus compromise may be the outcome of new legislation. When one side cuts taxes they often are forced to secretly raise taxes by closing loopholes and thus in the aggregate taxes were not truly cut. When enacting spending bills often the stimulus is doled out too slowly as public works programs take a looong time to be “shovel ready” due to the permitting process.     Trump ..read more

   Some people worry that a huge number of tenants can’t and won’t pay rent leading to a wave of mortgage defaults by landlords. Typically 38% of the population are renters and they are often the economically weakest 38% of society. Thus landlords are already accustomed to having tenants with a high probability of defaulting; that’s the risk landlords take to be in that business.     The people most hurt by the economic impact of the virus are often those on the lowest rungs of the economic ladder such as restaurant workers, amusement park workers, etc. As such they d ..read more

   Yields dropped from 16% in 1981 to less than 1% for Treasuries. If the pace continues then in another 40 years rates will be negative 15%; at this pace in 250 years they will be negative 100%. If something is absurd then it won’t happen. At some point the ridiculous operations of central banks will be discredited and new policies of reasonable rates will have to be implemented to restore faith in the system.   The irrational system of the Euro currency and ECB was revealed in the crash of 2008 and more fully realized in 2012; similar concerns in Japan meant that much of the ..read more

    The past 10 days since the weekend of Saturday, March 7th, when Saudi Arabia started a severe oil price war, have had some of the most dramatic financial market movements ever, even more shocking than a few parts of the 1929 and 2008 crashes. What is particularly unusual is the end of the pattern where bond prices rise when stock prices fall. Instead bond and stock prices both fell together recently by significant amounts. This is because stocks are still significantly overpriced and need to go down much more to reach fair value. Bonds have been hurt by the politicians’ promises of massiv ..read more

       This week’s stock market crash of over 10% is one of the four worst weeks since WWII for stocks. The others were Black Monday 1987, Dot-com bubble in 2000, and the GFC crash of 2008, which was the worst. The 2000 bubble was mainly in tech stocks while the low tech companies were not that badly overpriced, so that crash was less of a comprehensive crisis. The 1987 crash occurred when debt levels were much lower and demographics more favorable. The 2008 banking crash was mainly about financial companies that were stuck with a negative net worth because they made bubble-like loans to the h ..read more

   The monthly BLS employment report released today said 225k new jobs were created, but it included the hypothetical Birth-Death model that added 141k hypothetical jobs. Thus the net true growth was 84k, less than the 100k a month needed to offset population growth. Therefor jobs actually declined on a relative basis. The Birth-Death model is an allowance for employers to take plenty of time to log in hiring of new employees. In reality with today’s strict laws about fast, accurate payroll tax withholding and the requirements to verify that new employees are not illegal aliens there is no ne ..read more

   Jeremy Grantham of GMO published a document at gmo.com on Jan. 3, 2018 that the SP needs to go to 3,400 to 3,700 to be high enough to have a crash. First a melt-up (where stocks go up far too fast) is needed to lead to a crash. The big stock price increase of 2019 implies that a melt-up has occurred. The idea would be a 60% increase from the 2,100 level in mid-2017 until it reached 3,400 in 21 months. In actuality it took over 30 months to climb nearly 60%. If a bubble is too modest and gentle then apparently it is less likely to crash. Recently the SP reached 3338. It dropped 1% today. Gr ..read more

      In 2018 Fed chief Powell promised to raise rates and make progress using the Quantitative Tightening (QT) program to reverse out the asset purchases of the QE program. But by December 24, 2018 stocks had dropped about 20% since the previous high point of stocks that was reached in September, 2018. Powell decided to end the QT program and start cutting rates instead of continuing to raise them. When politicians get elected after promising to cut government spending they often catch an illness called Potomac Fever when they start working in Washington. This illness results in them suddenl ..read more

    Should people buy gold to get protection from inflation? The increasing use of Federal Reserve money printing because of the “Repo” crisis implies that the Fed will accidentally trigger a repeat of the terrible inflation of the 1970’s. During that era investors were able to protect themselves by holding short term bonds because the yields kept up with inflation (when a short term bond matured the proceeds could be reinvested at higher rates as inflation rose). But in the post-2008 post-GFC era rates have been artificially low and could be held down to zero by the Fed. Thus investors would ..read more