Today, we heard Fed Chair Powell reiterate his message of higher for longer.
Now the media narrative is that a Fed Pause will bring manna.
We take exception to this narrative. We believe that elevated interest rates have yet to work their way through the economy. Debt service on business loans will rise dramatically.
Likewise for commercial real estate.
Profit margins will compress.
Is it prudent to invest for a bull market when profitability is expected to fall?
Gretzky was The GOAT because he skated to where the puck was going to be.
Not because he played last year's game.
It's said that history doesn't repeat ... but it rhymes. Another adage is "those who ignore history are doomed to repeat it."
Read up on Paul Volcker's action in the late 70's and 80's. Powell is fond of mentioning Volcker frequently. What is Powell trying to tell us. What, if anything is he trying to do with the “Fed Put?”
What does history tell us about sovereign debt? What does it tell us about the spread of war once it's kindled. What does history tell us about the sanctity of national borders? What does it tell us about mass migration? What does it tell us about how mega-trends begin and end?
We are students of history, economics and geopolitics … as we peer through the fog.
Our broad outlook is that we are in an unusual period of global change and uncertainty. We see this chaotic environment as continuing to deteriorate. It's the classic double-edged sword that
brings both opportunity and hardship.
One thing is certain: The era of free money is over. What does this mean for leverage?
The metrics and absurdities of the free money anomaly will reset to something new.
But you can be sure that we will not be going back to The Way We Were in 2019. That is Gone With The Wind.
Take comfort in the fact that, as unsettled as things appear to be in the U.S., it's a lot worse elsewhere.
So our investment focus is on U.S. centric strategies. We believe that this is where the sound money will be made.
Our goal with our newsletters and videos is to give you an unbiased opinion of investment trends that will bring both.
Without accompanying color and an understanding of your risk tolerance, what we discuss here cannot be considered as any type of recommendation of any kind.
We are an independent broker dealer and registered investment advisor. As fiduciaries we create custom strategies for our clients.
Here are three of our latest videos that might be of interest.
Beating the Economic Downturn: Strategic Investments for Inflation and Recession
Investing in Oil Stocks During Middle East Wars: Balancing Risk and Reward
Private Equity: An Illiquid Investment with High Potential Returns
Thank you for reading our newsletter. If you’d like a particular topic covered, let me know.
Ray