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Hope all goes well… Dusted off an anecdote from 2015 on what led to today’s growing backlash against inequality, injustice. Enjoy your long weekend. I’m celebrating President’s Day, looking out at Mount Washington with Mara and the crew. See you next Sunday with full weekend notes. Week-in-Review (expressed in YoY terms): Mon: US/China trade talks resume, Chinese stocks hit 4mth highs (had been closed all last week),

Hope all goes well… “I wonder how long before the market internalizes this?” asked the CIO, as much to himself as to me. We were discussing Modern Monetary Theory (MMT) which has captured the popular political imagination, as they race to address inequality with a range of new programs, just as the enormity of our government’s mountain of unfunded liabilities comes into view. “It will attenuate the bond-equity correl

A“Surely you remember Bill Simon?” asked the CIO. And I shrugged. “You’ve seen so little,” he said, sighing, frustrated by my youth. “Well, Bill Simon was a Wall Street bond king who became Treasury Secretary under Nixon, when markets were rioting. Treasury feared they’d have a failed bond auction in 1976.” The inflationary process began in the mid-1960s — fueled by a massive tax cut (1964), anemic productivity

Hope all goes well… “What comes next?” We hit levels of inequality last seen in the late-1920s. QE amplified it by inflating asset prices, sparking political upheaval. “So how can QE be the dominant solution to our next downturn?” asked the CIO. The next cycle will bring something new, vast infrastructure spending, direct payments to people, possibly UBI, but funded by what? Budget deficits are already 5%. “Modern Mo

“Schumpeter’s creative destruction no longer applies to America’s economy,” said the pioneer in Modern Monetary Theory (MMT). “Our companies do well, expand. Then we have a financial crisis.” Almost always policy-induced. “Companies with the best capital structures survive.” No matter how useful their products are, they’re left standing. “Schumpeter’s creative destruction is where the companies with the best products

Hope all goes well… “Vice Chairman Clarida said policy normalization is like crossing a dark room barefoot — you step carefully,” said the CIO. “This implies that the biggest risk the Fed faces is a stubbed toe and a quick retreat.” But given the dominant role of liquidity in today’s market structure, the profound complexity of our financialized global economy and its growing susceptibility to discontinuities,

“Can’t really go into it Dad,” said Olivia (15). I’d asked for details, she’d come home at sunrise, empowered, electric, alive. “Mom said you had an intense all-nighter. I want to make sure you’re okay Liv.” In the 1970s, an inspired paramedic created America’s only first-responders program manned entirely by high school students. Forty-nine years later, every 911 medical emergency within our small town is routed to

A“The pendulum has returned to its starting point,” said the CIO. “We had a massively regulated, terribly inefficient economy,” he continued. “Carter started deregulating. Then Reagan. They got government out of the rule-making business.” Efficiency surged. “Deregulation made the market the final arbiter of which businesses succeeded and failed.” But as lobbyists swarmed the swamp, antitrust legislation lifted like a

Hope all goes well… The US government remained shut. But pollsters carried on. 81% of Likely Democratic Voters favor a Green New Deal, focused on climate change, income inequality and racial injustice — 63% of Republicans are opposed, Independents are evenly divided. 59% of voters support raising the marginal tax rate on the richest Americans to 70%. Democrats overwhelming support the tax hike, with 71% in favo

Hope all goes well… “I’m not bothered by the government shutdown,” said the investor. “I feel for the people directly affected, but it won’t last forever. And besides, if you shut the government two months of every year, I bet we discover how to make it more efficient,” he continued. “And I’m guessing Trump wants a deal with China, so I’m not overly bothered by that. I’m more worried about how the market trades after