Four main points: The Fed did not cut rates, the economy is doing what the Fed and markets expected, earnings reports are good but not great, and the dollar continues its collapse due to excessive indebtedness and reckless deficit spending.
“Character is formed in the stormy billows of the world.” Read More »
Market sentiment has taken a significant hit. The astonishing IT failure, regarded by many as the worst ever, has severely dented investor bullishness. It is especially concerning and even more shocking to investors than the political drama we are witnessing. The vulnerability we’re all feeling about our extreme reliance on technology might actually be even worse than originally believed because it’s unclear whether our technology systems can do anything to sufficiently remedy the situation and prevent future occurrences.
“Oh, what a tangled web we weave when first we practice to deceive.” Read More »
Being an economic thinker rather than a political one, I will say that all these elections seem to have one thing in common—voters are rejecting the status quo of imposed statism. They are rejecting the policies of excessive indebtedness and deficit sending. Voters know first-hand that slow growth and higher prices are pushing them further and further behind in their quality of life. The famous “misery index” is rising everywhere from Beijing to Tehran, Moscow to Paris, Berlin to London, and Washington. Most major countries across the world are in danger of debt death spirals. Voters everywhere know government bureaucrats are asking them to sacrifice more than they can bear. They want change.
The S&P 500 once again touched an all-time high (5,523) but closed on a down note for two reasons. First, inflation remains persistent. The Fed’s preferred inflation gauge (PCE) showed prices are still rising substantially more than they were pre-pandemic (+2.6% vs +1.3%.) The key (outside-down-day) reversal lower insured that for the 9th. straight day, the U.S. equity index
Perry Capital is positioned for slower growth and higher inflation into the Summer. The economy continues to be supported by above-trend consumer spending from asset owners and way-above-trend increases in government spending. The Fed, or the Treasury Department, does not need to stimulate the economy, but it may do so to bolster the present administration’s re-election.
The Fed Won’t Cut Rates This Year. Most economists think they should. (Of course, they do! Most of them work for the government or on Wall Street.) But let’s face it, as calculated by the government, inflation for the average household is up 25% since it started rising in 2021. However, for most households, it feels much higher. The point is that inflation is not going to go down. The Fed doesn’t even want it to! Core PCE is rising at 3.5%, and it’s expected to rise to 4% by the election. The Fed’s stated target is +2%; inflation would have to be negative for a prolonged period to bring any relief to the average household.
“By all means, let’s be open-minded, but not so open-minded that our brains drop out.” Read More »
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.
77.25% of the Perry Capital portfolio yields 5.11% with principal guaranteed. I sold my short 25% Treasury
positions
“Honesty is a very expensive gift. Don’t expect it from cheap people.” Read More »
50% of the Perry Capital portfolio is in the money market. The T-Bill position remains at 25% of portfolio assets.
Long Treasuries
and Bitcoin. Everything seems expensive.
“Everything we hear is an opinion, not a fact. Everything we see is a perspective…” Read More »
