economy

“You cannot escape the responsibility of tomorrow by evading it today.”

Newsletter /

The economy continues to expand and consistently exceed expectations across most data series. Yet confidence surveys continue to languish well below pre-pandemic levels; at the same time, investor bullishness has rarely been higher. This is unusual and should reconcile itself to some consistency. I would expect confidence to rise. Yet truthfully, it is fiscal dominance –¬ more so than monetary dominance ¬– that is the more significant issue. The debt ceiling is currently suspended. In January 2025, however, it will automatically come back into effect. This means that the U.S. Treasury will not be able to issue more debt until Congress raises or suspends the ceiling again. However, they still have spending obligations and are running structural deficits due to the policies Congress has implemented for decades. Thus, government spending could potentially be forced downward – depending on whether conservatives or liberals control Congress. If that happens, it would be a net positive for the economy.

“You cannot escape the responsibility of tomorrow by evading it today.” Read More »

“In the annual public surveys about trust and reputation, journalists and the media have regularly fallen near the very bottom, often just above Congress.”

Newsletter /

The economy continues to expand and consistently exceed expectations across most data series. Yet confidence surveys continue to languish well below pre-pandemic levels; at the same time, investor bullishness has rarely been higher. This is unusual and should reconcile itself to some consistency. I would expect confidence to rise. Yet truthfully, it is fiscal dominance –¬ more so than monetary dominance ¬– that is the more significant issue. The debt ceiling is currently suspended. In January 2025, however, it will automatically come back into effect. This means that the U.S. Treasury will not be able to issue more debt until Congress raises or suspends the ceiling again. However, they still have spending obligations and are running structural deficits due to the policies Congress has implemented for decades. Thus, government spending could potentially be forced downward – depending on whether conservatives or liberals control Congress. If that happens, it would be a net positive for the economy.

“In the annual public surveys about trust and reputation, journalists and the media have regularly fallen near the very bottom, often just above Congress.” Read More »

“Any great power that spends more on debt service than on defense will not stay great for long.”

Newsletter /

Investors pushed U.S. Equities to all-time highs last week. This is an extraordinary momentum rally that appears to be attracting increasing amounts of investor capital in a sign that the economy can keep its momentum up to, and perhaps beyond, the election. This is a logical assumption based on the realization that the U.S. government is addicted to spending (there is no mention of cutting it by either party.) The rising cost of debt service seems almost an afterthought, and if the debt burden gets high enough to slow the economy, the Fed will increase stimulus. Higher bond yields do not appear to be part of any in-depth analysis. Except mine.

“Any great power that spends more on debt service than on defense will not stay great for long.” Read More »

“It was the best of times, it was the worst of times…”

Newsletter /

The economy is growing slowly and inflating quickly, which presents significant challenges to the economy, to unprofitable and indebted sectors of the market, and eventually to the government – but not at least until the election.
Heightened uncertainty, rising volatility, and rising indebtedness exert tremendous financial stress on broader portions of the economy. The government won’t let it break until after the election.
Perry Capital has anticipated rising inflation, which is helping corporate profitability, but, to date, has not resulted in higher yields –– although credit spreads are beginning to widen in weaker credits. Expect more.

“It was the best of times, it was the worst of times…” Read More »

“There is an inevitable divergence, attributed to the imperfections of the human mind, between the world as it is and the world as men perceive it.”

Newsletter /

Stimulus remains ample, and Mr. Powell was more dovish than even the most strident risk asset bulls anticipated. Government activism in the economy and capital market and economy remain and are accelerating.
The performance of the U.S. equity and credit markets is excellent, and they are aggressively testing the Fed, which doesn’t see the threat unless, of course, they see something that we don’t. Three cuts are still expected in 2024. Stocks should remain encouraged but for how long?

“There is an inevitable divergence, attributed to the imperfections of the human mind, between the world as it is and the world as men perceive it.” Read More »