Deflation or Inflation?

A question I’ve received frequently the last couple months from many different people is about the potential for inflation given the unprecedented response to the Novel Coronavirus Pandemic. It is an important question because it impacts the best investment approach going forward as well as other personal finance decisions.

I understand the rationale behind the question. After all, trillions of dollars have been pledged between the Federal Reserve and the U.S. Treasury in the last few months in what essentially amounts to a “helicopter drop” of money on the economy. So, it is understandable that people are beginning to have concerns about the potential for inflation.

Ultimately, I believe we will get inflation mainly because the Federal Reserve will stop at almost nothing to make it happen, HOWEVER, we must allow for the possibility of getting deflation first. Continue reading “Deflation or Inflation?”

2020 is the “Anti-1980”

2020 is the “Anti-1980” or as Seinfeld might say, the “Bizarro-1980.”

Baby Boomers and the Silent Generation enjoyed a wonderful investing era as they were hitting their career stride, and investing the bulk of their retirement savings, throughout the 1980s and 1990s. Contrast that to Millennials who may be hitting their stride now and starting to put decent money away. It’s really a stark contrast in the market environment between the two eras.

Below is a quick graphic comparing stock market valuations and total debt load within the U.S. economy between 1980 and 2020. The differences are obvious and significant. I’ll summarize below the graphic.


Continue reading “2020 is the “Anti-1980””

Huge Employment Report and Video Follow Up

This morning we learned that the November employment report was tremendous! U.S. companies added over 260,000 jobs, which far exceeded expectations. This pushed the employment rate back down to 3.5% matching the low from earlier this year, which is the lowest since 1969.

There were some concerns about the potential for this report because the ADP employment report from Wednesday was so poor. That ADP report indicated private sector job growth of just 67,000 compared to the 157,000 expected.

The large discrepancy between the BLS report we received this morning and the ADP report from a couple days ago is very strange. Perhaps the truth lies somewhere between the two, but for now, the market appears to be taking the government BLS report at face value as the S&P 500 is up over 1.0% on the day at the moment.

The employment-population ratio held steady at 61%. Construction job growth slowed to just 1,000. Speaking of construction jobs….

Over the last couple weeks I provided you with two videos. There have been a couple developments since I released those. Continue reading “Huge Employment Report and Video Follow Up”

The Fed Cuts Rates for a Third Time…And Zombies

Yesterday, the Federal Reserve confirmed the market’s expectations and announced they would be cutting rates for a third time this year. The rate cut is an addition to the recently-announced program of supplying $120 BILLION in liquidity each night AND announcing the resumption of QE whereby they’ll be buying $60 BILLION of short-term Treasurys each month.

In other words, the Fed is pursuing policy that, until the recent Great Financial Crisis, was unprecedented. Why? Why are they pursuing emergency policy actions when the economy is supposedly strong, stock market is near all-time highs, unemployment near all-time lows and inflation supposedly around 2%? Continue reading “The Fed Cuts Rates for a Third Time…And Zombies”