We’ve seen some real wild swings in the dollar recently. That is largely because the ‘safe haven’ trade is coming off around the world. Currency speculators are selling the dollars they bought when it looked like Armageddon was upon us and buying something that may have a better outlook. Also, there is this huge wave of bonds that have to be sold by the Treasury and they will swamp the market. Then the US is likely to enjoy a period of untoward inflation in coming years. So why would anyone be surprised if the dollar went down a bit. The issue is that the dollar has gone up a bit here lately. Part of that might be the dollar got oversold or some other currencies got over-bought or some other technical explanation (can you say Iranian elections?). Part of it could be that the scare that foreign central banks would stop holding dollars as their principle reserve currency isn’t going to pan out after all. Read more

“Too many dollars chasing too few goods,” that was Herb Stein’s definition of inflation and it is as good as any. What we’d like to see is too many dollars chasing too few stocks in the upcoming months. There are over $4 trillion in money market funds, versus about $2.5 trillion a couple of years ago. Some of that increase is just that, an increase in the amount of money people feel is an appropriate level of liquidity they need for their well-being. But, part of that money is fugitive stock market money that is hiding-out waiting for the all-clear signal that buying stocks is okay again. There are other pots of money in other liquid alternatives to cash. Sooner or later, this will get back into the equity market or some other growth vehicle. Read more

What about High yield bonds?

Another reader question prompted us to look out into the future (always a daunting task). One should always remember that what you are about to read is pure fiction at this point in time as opposed to editorial or news. Our crystal ball has been getting bad reception ever since cable became the preferred mode of mass communication in this country, so don’t put too awfully much credence into what you are about to read. Read more

U.S. Economic History and other Topics

A Quick Lesson on US Economic History
Prior to 1870’s, the US was largely an agrarian society with two-thirds of families living on farms and two-thirds or workers in agriculture. From the 1880’s to 1920 we were an emerging, industrializing nation with growth in manufacturing, mining, and other industrial sectors. We benefited from the Spanish-American War and World War I to slowly become a member of the developed nation club. Manufacturing was a greater and greater part of the economy. Once we got into World War II, the US became the number one economy since all of our potential competitors were essentially bombed back into the Bronze Age. There is a reason that most economists only refer to things ‘since World War II’ because our world changed pretty dramatically after that war. The US was the only extant industrial power for about five years after the war. We have never completely surrendered the title of world’s largest economy, though we may forfeit it here someday. Even in our current state of consumerism, we are still the world’s number one manufacturer of a surprisingly long list of goods. Read more

It has been another tough month in the markets. I know that all of you are wondering “When will this all end?”

We have no illusions that it doesn’t feel awful today.  It feels foolish to keep money in stocks.  Recognize that these feelings are hardwired into our brains, the result of centuries of lessons of creating trends where none really exist.  Actually, the contrary is true.  Stocks are much more likely to rise in the year after they have fallen over 30%. Read more

Nobody knows for sure when it will all end. The one thing we do know for sure is that these are very stressful times for all of us.  It is hard to take a long term view and stay positive in this environment of raw fear and uncertainty.

The selling of the last two months has been surprising in its intensity, and may have challenged your assumptions about market risk in your portfolio. We have had conversations with lots of folks over the last months, and each has been different yet the same. How low will the market go? Will I have enough money for my retirement? Should I do something now? Read more