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“Grub first, then ethics.”

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The Democratic Party lost the election because of deteriorating economic conditions. The majority of voters are not better off than they were four years ago.
The electorate understood that policies implemented by the previous administration were slowing growth and inflating the economy. Voters knew their personal economic prospects were deteriorating and that increased indebtedness, aggressive government spending, and the money printed to pay for it were the cause of their livelihoods’ destruction. They also knew that another four years of the same policies would inevitably result in higher taxation.

“Grub first, then ethics.” Read More »

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

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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 »

“Neither a state nor a bank ever [has] had the unrestricted power of issuing paper money without abusing that power.”

Newsletter /

Stocks rallied smartly last week. The Dow was up 2.6%, The S&P 500 rallied 4.0%, and the Nasdaq jumped 6.0%.
Growth stocks outpaced value shares by a wide margin. The big-cap mega-scalers led the rally, and the poster child for the AI revolution was the clear winner as rallied 16%!
Don’t get too excited, though; the broad market (S&P 500) remains within its range since April. The S&P 500 is marginally
(-0.50%) below, the Nasdaq is -5% below, and the Dow is -17.56% below all-time highs. Markets are skittish and fearful of change.

“Neither a state nor a bank ever [has] had the unrestricted power of issuing paper money without abusing that power.” Read More »

“Sitting [in my office] on a Sunday afternoon… going to the candidates’ debate…”

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It has been a bad start to September for the financial markets. The earnings reports portrayed a mixed picture for both the tech sector and the broad economy. Added to that is the upcoming presidential election. Markets do not like uncertainty. There’s plenty of it, and it’s not going away anytime soon.

“Sitting [in my office] on a Sunday afternoon… going to the candidates’ debate…” Read More »

“All great changes are preceded by chaos.”

Newsletter /

The Fed seems destined to cut interest rates on September 18th. Chairman Powell and his colleagues have stopped talking about inflation and pivoted towards unemployment. What a shock.

The narrative surrounding the latest Powell pivot is squarely focused on what the Fed believes are the weakening prospects for the U.S. economy, with a clear focus on the full-employment component of their dual mandate. Many agree. Many do not.

Perry Capital anticipates an economy that will continue to expand — supported by healthy consumer spending, bolstered by a labor force that continues to grow and which has never been larger, and by a high level of household income, which has never been greater. This, along with robust government support in select portions of the economy, leads us to believe that growth, employment, and inflation pressure will all continue to surprise to the upside.

“All great changes are preceded by chaos.” Read More »

“Bringing inflation down to the Fed’s 2% goal while maintaining a healthy labor market is the number…”

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The rising sentiment towards a Fed rate cut seems premature—even for September 18th. Financial conditions are easier than they have been in two years. The S&P 500 is still up by 14.5% for the year (just below the Nasdaq’s 2024 return of 15.6%), but it sure doesn’t feel like it, even though it remains well above average returns over the last 15 years.

“Bringing inflation down to the Fed’s 2% goal while maintaining a healthy labor market is the number…” Read More »

“I thought by now you’d realize, there ain’t no way to hide your lyin’ eyes.”

Newsletter /

Stagflation reigns. Slow growth (2.5%) with rising inflation (4%) — driven by the rising cost of labor (+5%) — is the very definition of a stagflating economy. This forecast remains the dominant theme for the economy, markets, and investors. Stagflation has been the Perry International Capital Partners (PICP) forecast for two years, and we continue to be more worried about rising inflation than we are about slower growth.

“I thought by now you’d realize, there ain’t no way to hide your lyin’ eyes.” Read More »

“No amount of sophistication is going to allay the fact that all your knowledge is about the past and all your decisions are about the future.”

Newsletter /

The extreme performance divergence between sectors on the receiving side of the stimulus is stunning. The businesses best positioned to benefit from spending by the upper and upper-middle class are thriving — just look at the share prices of your favorite credit card company; they are at all-time highs. Those most sensitive to interest rates and, thereby, the worst positioned for tight monetary policy are or soon will be flirting with bankruptcy. If you look at commercial real estate owners and their lending banks, you’ll see that their share prices are at all-time lows.

“No amount of sophistication is going to allay the fact that all your knowledge is about the past and all your decisions are about the future.” Read More »

“Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.”

Newsletter /

Economic data continues to surprise to the upside; the Citi surprise index was up again from last week (44.10 vs 39.0) and the January lows (0). It is above pre-pandemic levels, and the labor market is stronger, too. Unemployment is 3.7%, with claims falling and the number of available jobs rising.

“Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.” Read More »

“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance…”

Newsletter /

Key economic reports in the upcoming week are various and reasonably important, but Friday’s employment report is the only one that really matters. The Fed’s game plan was to raise interest rates enough to reduce the imbalance in the labor market. But the tightening is really quite marginal compared to the continued stimulus, and it is that stimulus that has been supportive of higher equity valuations and growth. I think the stock market sees this. What it fails to see — for now — is that the stimulus is supporting higher prices.

“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance…” Read More »

“There’s no money. There’s no money.  If we don’t make a fiscal adjustment, we’re headed for hyperinflation…”

Newsletter /

Markets need to figure out a normalized level of interest rates appropriate to this volatile new era of De-globalization, rising military engagement, heightened Geopolitical tensions, excessive indebtedness, and the irrational rise in deficit spending.

“There’s no money. There’s no money.  If we don’t make a fiscal adjustment, we’re headed for hyperinflation…” Read More »

“Never in the field of human conflict was so much owed by so many…”

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75% of the Perry Capital Portfolio remains AAA-rated, very short maturity, and very liquid securities.
I remain underweight in the equity market because the valuation metrics of risk assets are not discounting for
persistent inflation, higher funding rates, and a slowing economy to the degree necessary to be attractive.

“Never in the field of human conflict was so much owed by so many…” Read More »

“We tend to overestimate the effect of a technology in the short run and underestimate…”

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75% of the Perry Capital Portfolio remains AAA-rated, very short maturity, and very liquid securities.
I remain underweight in the equity market because the valuation metrics of risk assets are not discounting for
persistent inflation and a slowing economy to the degree necessary to be attractive. I would rather watch from
the sidelines at 5% until the strategic risk/reward is in my favor.

“We tend to overestimate the effect of a technology in the short run and underestimate…” Read More »

“The problem with leverage is that you have to pay it back.”

Leave a Comment / Newsletter /

75% of the Perry Capital Portfolio remains in AAA-rated, very short maturity, and very liquid securities.
I remain underweight the equity market because the valuation metrics of risk assets are not discounting for
persistent inflation and a slowing economy to the degree necessary to be attractive. I would rather watch from
the sidelines at 5% until the strategic risk/reward is in my favor. I must say, though, that the Nasdaq 100 (QQQ)
performance y-t-d is impressive. Perhaps A.I. is a paradigm shift as impactful as the internet.

“The problem with leverage is that you have to pay it back.” Read More »

“If not for you, my sky would fall. Rain would gather, too. Without your love…”

Leave a Comment / Newsletter /

75% of the Perry Capital Portfolio remains in AAA-rated, very short maturity, and very liquid securities.
I remain extremely underweight the equity market because the valuation metrics of risk assets are not
discounting for persistent inflation and a slowing economy to the degree necessary to be attractive.

“If not for you, my sky would fall. Rain would gather, too. Without your love…” Read More »

“Judging by the price action in markets over the past couple of months…”

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50% of the Perry Capital portfolio is in the money market. current yield 4.29%. The T-Bill position
remains at 25% of portfolio assets. 3-month T-Bills now pay 4.63%, 6-month T-Bills pay 4.81%. Long Treasuries
(10% of portfolio) are up 6.7% in 2023 and have returned 12.73% over the last three months.

“Judging by the price action in markets over the past couple of months…” Read More »