GDP

“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 »

“If the Lord Almighty came down and said, ‘Joe, get out of the race,’ I’d get out. But He’s not coming down.”

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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.

“If the Lord Almighty came down and said, ‘Joe, get out of the race,’ I’d get out. But He’s not coming down.” Read More »

“Mr. Biden and his party have been given the chance to avoid a dire fate for their country and the world. They should seize it.”

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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 failed to close above the psychologically important 5,500 level. Second, Biden’s Presidential term is likely finished. The damaging and likely permanent fallout from the debate is devastating. More on that below.

“Mr. Biden and his party have been given the chance to avoid a dire fate for their country and the world. They should seize it.” Read More »

“If you do not know what port you sail to, no wind is favorable.”

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The S&P 500 touched yet another all-time high Friday at $5,505. It was up +0.6% on the week. The NASDAQ also hit another all-time high ($17,936) but could not break the big round number of $18,000 in two attempts. It was flat on the week. Friday was “Triple Witching” Options expiration – over $5t in options expired. and options were an enormous percentage of expired option contracts and may have contributed to the 10% hit on the shares of .

“If you do not know what port you sail to, no wind is favorable.” Read More »

“History’s cunning passages, contrived corridors & issues deceive us with whispering ambitions & guide us by vanities.”

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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.

“History’s cunning passages, contrived corridors & issues deceive us with whispering ambitions & guide us by vanities.” Read More »

“It was the best of times, it was the worst of times…”

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The economy is growing slowly and inflating quickly, which presents significant challenges to the economy, to unprofitable and indebted sectors of the market, and eventually to the government – but not at least until the election.
Heightened uncertainty, rising volatility, and rising indebtedness exert tremendous financial stress on broader portions of the economy. The government won’t let it break until after the election.
Perry Capital has anticipated rising inflation, which is helping corporate profitability, but, to date, has not resulted in higher yields –– although credit spreads are beginning to widen in weaker credits. Expect more.

“It was the best of times, it was the worst of times…” Read More »

“There is an inevitable divergence, attributed to the imperfections of the human mind, between the world as it is and the world as men perceive it.”

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Stimulus remains ample, and Mr. Powell was more dovish than even the most strident risk asset bulls anticipated. Government activism in the economy and capital market and economy remain and are accelerating.
The performance of the U.S. equity and credit markets is excellent, and they are aggressively testing the Fed, which doesn’t see the threat unless, of course, they see something that we don’t. Three cuts are still expected in 2024. Stocks should remain encouraged but for how long?

“There is an inevitable divergence, attributed to the imperfections of the human mind, between the world as it is and the world as men perceive it.” Read More »

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

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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 »

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

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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 »

“Equity fund managers always tell you what’s going to go right, but what risk managers want to know…

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The Perry Capital Portfolio remains unchanged (75% cash.) 50% of the portfolio is in the money market. The
T-Bill position remains at 25% of portfolio assets. Long Treasuries represent 10% of the portfolio. The
S&P 500 is also a 10% position. So far, everything is up. My small Silver and Bitcoin positions have been good
performers for the start of the year. Lower long-term funding rates are the key to the whole puzzle. We’ll
know more about that on February 1st.

“Equity fund managers always tell you what’s going to go right, but what risk managers want to know… Read More »