“Thank You, Next…”
“Our investments are simply not aware that it takes 365 ¼ days for the earth to make it around the sun. Uncertainty actually is the friend of the buyer of long-term values.” - Warren Buffett
You can almost hear the sound of the next financial media monster approaching.
It’s a Gruffalo, to be sure.
You even have Bill Gates telling us that the vaccine may or may not work on the "variants."
Sadly, billionaire-dom does not an instant epidemiologist make.
Nor does it impart instantaneous climatological wisdom, though he’s also telling us climate change will make COVID look like a walk in the park.
Monsters, monsters everywhere…
One’s got a fever, the other has a cough.
Almost seems like the media sense the crowd is over Covid and climate change and is getting restless for terror.
Methinks “skyrocketing rates" is a good’un, as bonds are beginning to feel the pinch of recognition that indeed the world is not ending (it’s just changing quite dramatically).
We are likely to see that the 10-year should be more like 1.5%-ish instead of 0.50%, which, by the way, is ok.
The Very Long-Term...
Lots of "surprises" causing temporary bouts of severe altitude sickness lie dead ahead.
“Get me out of stocks now," they cried. Just like last March and April.
For those who stuck in with high quality you may now say, “Thank you, next.”
Here Come the Charts
The excitement of 5G phones is literally just coming to boil – new capacities are being built and worked into everything from design to AI to communications speed.
That means 6G is on deck:
Who said: “The big profits I have made were through very long planning, waiting and watching”?
Many are worried about politics, vaccines and people's health.
Some are even worried about some bratty ex-monarchs appearing on Oprah.
In both instances we’ll make it through.
And probably better than when the problems started.
I am reflation, hear me roar…
Think about this: When you deflate a balloon and then blow it back up the reflation changes everything about the balloon. We will soon be “putting the air back in the US economy." And it will change shape.
That Mount St Helen’s sized cryptodome bulge spewing financial magma into the system during the setbacks of the last 12 months will lead to explosive growth.
Reopening things will create bottlenecks.
We’ll start running out of stuff.
And clever folks will find ways to fix it better than it was before.
"Whirlpool is backed up eight months on appliances. I am closing homes now where the owner is using a temporary camping refrigerator and a toaster-oven while we await their main kitchen appliances...and Whirlpool is working as fast as they can. Order books are flooded with demand."
Over the next 10 years, roughly 60 million kids are moving up and moving out. Empty nesters, who’s aged chicks have finally left the nest, will party like it’s 1999 (without the dot.com explosion thing this time).
From the Calafia Beach Pundit
Don’t run and hide.
The chart above highlights why Fed tightening has invariably led to recessions. Fed tightening happens when real yields rise (blue line) and the yield curve flattens (red line). Note that every recession on this chart has been preceded by a big increase in real yields and a big flattening or inversion of the yield curve.
It should also be clear that these two critical predictors of recession are nowhere close to the point at which we should become worried.
Above we can see the current burden of federal debt is historically low, despite the fact that federal debt equals 100% of GDP, a level not seen since the days of WWII.
It's all about today's very, very low interest rates.
Many cynics may even argue that the Fed is keeping interest rates extremely low in order to bail out Treasury and support politicians' urge to pass "stimulus" bills which threaten to add yet more trillions to our national debt.
Fear keeps rates low, and the Fed follows rates.
When fear burns away and excitement builds for the long haul, rates will rise and the Fed will follow suit, and tighten (raise’em).
As for the last of the Q4 numbers, well, the continue to be better than expected:
Folks, corrections and setbacks serve a role. They build your value for the next run.
And we are unlikely to get very many of them in the years ahead (corrections).
Even when they hurt in the near-term, they create the gains of the long-term.