I spent most of last week fighting with a model. Before anyone starts googling “Nerdy Economist in Fashion Week Brawl”, I should clarify. I was fighting with a macroeconomic model that insisted on telling me something I didn’t believe. To be precise, it was projecting that, given the recent and projected pace of U.S. economic growth, the unemployment rate would slide to 3.0% by the end of 2025. This I don’t believe for reasons I’ll explain. But the changes in assumptions necessary to produce a m...
Feb 20, 2024•13 min•Ep. 250
I think of myself as a pretty punctual person. I get impatient when others are late and I don’t give myself much time to spare when catching a flight. But sometimes, like when spending time with family, it’s OK to run a little behind schedule. One month into 2024, the economic slowdown appears to be running behind schedule. Growth is stronger than expected, the labor market is tighter and our forecast for inflation to hit 2% by the end of the year looks less certain. But for investors, it should...
Feb 05, 2024•11 min•Ep. 249
This Friday, the groundhog will emerge unwillingly from his lair, examine the available evidence, that is to say, the presence or absence of his shadow, and, in all probability, reject any speculation about an early spring - at least for the next six weeks. According to USA Today, this has been the groundhog’s prediction in 107 of the last 127 years, or 84% of the time. That being said, the weather channel is forecasting “considerable cloudiness” over Punxsutawney, PA on February 2nd, so we migh...
Jan 29, 2024•9 min•Ep. 248
Last Friday, as much of America was settling in for the coldest weekend of the year, the University of Michigan released its preliminary January reading on consumer sentiment. The numbers were a pleasant surprise – the consumer sentiment index jumped 9.1 points to a reading of 78.8 – the best number seen since July 2021. This confirmed other signs of a thaw in the public mood. The Conference Board’s consumer confidence index rose 9.1 points in December to its second highest reading in two years ...
Jan 22, 2024•7 min•Ep. 247
Every January, firms throughout the financial industry, including our own, hold annual training meetings or conferences. One of the highlights of these meetings is an award for salesperson or sales team of the year. These titles are hard-earned and well-deserved. At least for our own firm, I can say that the winners are always those who, not only achieve impressive revenues for the firm, but do so through very hard work, understanding the investment environment and, most of all, understanding th...
Jan 16, 2024•9 min•Ep. 246
Among the many comments on inflation in the minutes of the last FOMC meeting was the following, rather gloomy, prediction: Several participants assessed that healing in supply chains and labor supply was largely complete, and therefore that continued progress on reducing inflation may need to come from further softening in product and labor demand with restrictive monetary policy continuing to play a central role. Translating from Fedspeak: Several Fed officials worried that they might still hav...
Jan 10, 2024•10 min•Ep. 245
As one year ends and another starts, I often think about a personal balance sheet for the year gone by and make some resolutions for the year ahead. For myself and our own family, 2023 was a pretty good year, particularly relative to the pandemic-scarred years at the start of this decade. As for resolutions, apart from the usual healthy-living aspirations, I am determined to spend less time looking at screens and more time looking at faces. This is also a good time for investors to review the ba...
Jan 02, 2024•8 min•Ep. 244
As winter weather envelops the homes of New England, our thoughts naturally turn to warmer days and maybe a beach house on Cape Cod. Of course, if you intend to rent such a house for a week next summer, it’s pretty much a roll of the dice. You could get lovely weather or it could rain every day. However, if you plan to buy a beach house on Cape Cod, you really only need to understand the climate. The sunny summer days will far outnumber the wet ones.
Dec 12, 2023•11 min•Ep. 243
One of the least pleasant aspects of winter is driving on icy roads as the snow piles up in front of you. Long experience has taught us that winter driving is possible. But it is slower, with a narrower margin for error, and a greater chance of sliding off the road. Similarly, if we extend the economic forecast horizon to encompass not just 2024 but also 2025, it’s still possible to trace out a “soft-landing” scenario, whereby the economy keeps growing even as inflation returns to the Fed’s 2% t...
Dec 05, 2023•10 min•Ep. 242
Last Wednesday, the University of Michigan released its final reading on consumer sentiment for November, with the index coming in at 61.3, up from its flash reading but down from October and worse than 92% of monthly sentiment readings since 1978. Meanwhile, the “misery index” for October, calculated as the sum of the unemployment rate and the year-over-year CPI inflation rate, came in at 7.1%, better (or that is to say, lower) that it has been 79% of the time over the same period. We continue ...
Nov 27, 2023•10 min•Ep. 241
If you do a quick google search on the phrase “tensions rising”, you get 230,000 hits. If you search the phrase “tensions falling” you get 3,700 hits. One of the cardinal rules of journalism is to only report on rising tensions and never improvement. However, in recent weeks, there has been a quiet decline in tensions across a number of dimensions. This is being matched by falling inflation pressures and signs of moderating economic growth. After a turbulent few months, the economy seems to be b...
Nov 13, 2023•8 min•Ep. 240
One almost unnoticed innovation in our modern world is the tracking app. Whether you’re booking a car service, enduring a long flight or just waiting for a pizza, with a click or two, you can find out exactly how long it should take the car, flight or pizza to reach its destination. These apps are useful for planning purposes and provide a level of reassurance that you are, in fact, headed to where you should be headed. A similar monitoring of the downward path on inflation can provide some reas...
Nov 06, 2023•11 min•Ep. 239
On August 16th, 1858, the first telegraph message was transmitted across the Atlantic on a cable newly laid on the ocean floor. The line speed was slow and the cable failed a few weeks later but it was a start. By the late 1860s, a second cable, made of better material, was in operation and telegrams began to be sent more regularly, cutting the time required for transatlantic communications from weeks to minutes.
Oct 30, 2023•10 min•Ep. 238
“We just came for one thing, too”. Sari and I were meandering toward the checkout in a crowded Costco on Saturday morning and I was reflecting out loud on our accumulation of a substantial and diverse pile of goods, although we had come to buy just one thing. But we were not in the same league as the woman who’d overheard me. She may have come for just one thing too, but the lower rack of her cart was loaded, the little area at the front for babies or purses was full and the main body of the car...
Oct 23, 2023•9 min•Ep. 237
Investors in the week ahead will likely be most focused on the aftermath of the terrible attacks in Israel over the weekend. The consequences of this violence are, of course, first and foremost a human tragedy for all the families affected and they are in our prayers at this time. However, an initial rise in the dollar and oil prices in response to these attacks serves as a reminder of the potential for conflict in the Middle East to impact the global economy and investors will need to keep a cl...
Oct 10, 2023•8 min•Ep. 236
In an idealized world of medical practice, you would go to the doctor, describe a few symptoms, undergo a few tests and then listen carefully to the doctor’s diagnosis, prognosis and prescription. The diagnosis might well be due to something entirely out of your control and the prescription would often be a pharmaceutical. However, very frequently, the prescription would be in the form of advice on life-style changes. In an idealized world, you would take that advice and implement it.
Sep 25, 2023•11 min•Ep. 235
To tell the truth, I haven’t done much hiking up mountains recently. I did scale a few minor peaks, years ago, when our sons were in boy scouts. However, it was always hot weather heading up and, between separating those young gentlemen who decided to fashion light sabers from tree branches and attempting to corral those whose first instinct was to chase into the woods after squirrels, it was a somewhat trying business. The reward, for all, of course, was the view from the top and it was always ...
Sep 18, 2023•11 min•Ep. 234
My father worried out loud, broadcasting his concern about a wide range of issues, ranging from the suspicious surplus of toothbrushes in the upstairs bathroom and his children’s acquisition of strange accents to declining standards in public education and the ominous state of the government’s finances. My mother fretted more quietly, sparing her vocal chords at the expense of her sleep.
Sep 11, 2023•11 min•Ep. 233
Finally, traditional indicators also may be missing the mark in predicting persistent inflation. In particular, in the June Summary of Economic Projections, most members of the Federal Reserve’s Federal Open Market Committee in effect professed that an unemployment rate of 4% or higher was necessary to attain the Fed’s long-term objective of 2% inflation. However, the unemployment rate has now been below 4% for 21 straight months and, yet, since March of last year, year-over-year wage growth has...
Sep 05, 2023•11 min•Ep. 232
For almost 60 years, the British journalist and New York resident, Alistair Cooke, recorded a weekly, 15-minute radio commentary entitled Letter from America. As a teenager, I would listen to it, late at night, on the BBC World Service. Cooke had a beautiful speaking voice and a remarkable way with words, as he painted landscapes of American culture and portraits of America’s personalities. Letter from America made me feel well-acquainted with this country long before I arrived here. Cooke, of c...
Aug 21, 2023•7 min•Ep. 231
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 younger, I hated owning boring railroads. Now I quite like them. They’ll never provide with the fortune...
Aug 14, 2023•14 min•Ep. 230
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, valuations are higher, increasing the need to be more discriminating in both asset allocation and security ...
Aug 09, 2023•10 min•Ep. 229
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 the balance of risks. However, so far, this does not appear to have inflicted too much damage on the ...
Jul 31, 2023•10 min•Ep. 228
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 masterpieces that she had loved from her youth were mangled, tortured and slowly murdered in a most grizzly fas...
Jul 24, 2023•11 min•Ep. 227
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 have undergone a similar transformation in recent years. Long gone are the days of “average inflation t...
Jul 10, 2023•9 min•Ep. 226
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.
Jul 05, 2023•9 min•Ep. 225
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’m sitting alone, testing daily, and waiting for a negative so I can return to society. Investors in 2023...
Jun 27, 2023•10 min•Ep. 224
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 recession will occur. However, that brings up other questions, namely, when will a recession start, how ...
Jun 20, 2023•14 min•Ep. 223
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 rate hike in July. On balance, however, cooling data on inflation and growth between now and that m...
Jun 12, 2023•9 min•Ep. 222
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.
May 30, 2023•13 min•Ep. 221
