Daily Insights Archives - Page 3 of 28

The day after…

The US presidential election results are mostly in… and it seems we have a clear-cut winner. I must admit – I didn’t expect it to be so smooth.

Today I see plenty of folks out there congratulating themselves for a job well done. Elon Musk even put out a tweet saying that the future will be fantastic – thanks to the election results.

I appreciate the positivity. And I’ll be especially encouraged if Mr. Musk follows up on his promise to cut $2 trillion in federal spending.

At the same time… it’s not like some magic switch just flipped.

On Elections, Voting, and Health

Looks like we made it to election day here in the US.

I’ve always loathed this day in the past. Even if you unplug from social media and mainstream “news” – which I have – it’s still impossible to insulate yourself from the fevered noise.

Our system propagates the idea that the act of voting is somehow heroic. It seems to me that the machine wants us to think that voting is our civic duty – and our only one. Like it’s the single most important thing we can do.

Case in point – I’ve seen plenty of political signs recently that say something to the effect of “Save America, Vote for XXX”.

If only it were that simple…

It will take a lot more than voting if we want to salvage what’s left of the American experiment. We’ll need to do more than vote. We’ll need to act.

That is to say, we’ll need to use our unique skills and talents to have a positive impact on our society in some fashion. Let’s talk more about that tomorrow.

Getting back to the election – this is the first time in forty years that I think the outcome will be meaningful.

As we discussed last month, America is at a crossroads. The Great Reorganization is upon us… whether we like it or not. The only question is – will we have an orderly reorganization or a chaotic one?

Old is new and new is old

We “celebrated” Halloween up here in the mountains last week.

I put celebrated in quotes because I mostly despise the holiday. I believe the day may have real significance in other cultures… but not here. It’s a day where people buy a bunch of cheap candy from Sam’s Club to hand out to the kids who trick-or-treat their neighborhood. As though the kids need more processed sugar and artificial ingredients in their life.

The only thing that prevents me from being a complete Scrooge on the matter is how excited the kids get. They plan out their costumes months in advance. And then they can’t wait to see their friends and compare.

Here’s a shot of some of the kids together in our neck of the woods:

This is the only part of Halloween that I like. The kids playing together in their costumes.

Sometimes I wonder why we keep things like this going from generation to generation. I suppose it’s just an old tradition that also takes parents and grandparents back to their own childhood.

The reality is that inertia is a powerful thing.

An object in motion will stay in motion until an outside force acts upon in it. The same is true for holidays like Halloween… which is why we invested in Hershey (HSY) inside of our model equity portfolio.

It’s not often that outside forces act upon cultural traditions. But in the world of money and finance – it’s a routine occurrence.

The Great Reorganization – Part 8

Welcome to Part 8 of this running thread on America’s Great Reorganization. And thank you for sticking with me through it all.

Yesterday we talked about the collectivist approach to investing. That’s the “conventional” retirement planning model.

Retirement Inc. has pushed the collectivist approach for forty years now. It says we should all funnel our savings into various kinds of funds (mutual funds/index funds/exchange-traded funds) and then hold them inside of retirement accounts – 401(k)s and IRAs.

As we discussed, this model created distortions within our society… because it enabled a quasi-political agenda. Worse, the conventional approach strapped humanity to the hamster wheel. Here’s what I mean…

The Great Reorganization – Part 7

Over the past week I’ve submitted to you my running macroeconomic thesis: America’s Great Reorganization…

They say that there are only two guarantees in life – death and taxes. I don’t care much for that statement though. So I’d like to propose a modification.

I think there’s only one guarantee in life… Change. That’s it.

Everything changes over time. We know this to be true by experience.

One day we look in the mirror and see a young, vibrant face. But we don’t think too much about it. We have too many places to go and people to see. Our energy is boundless. We just assume it will always be this way.

Then some years go by and we don’t see that same face in the mirror anymore. Somehow it’s not quite so vibrant. And now it has some lines on it. We might sit and ponder this for a little while… because we don’t have other plans. We lack the energy to do all the things we once did.

Well, it’s the same with the economy and thus our society. Change is guaranteed.

As it stands, the cheap money era that reshaped our society over the past five decades is coming to an end. That which was sustained by printed money and artificially low interest rates will come to an end with it.

The Great Reorganization – Part 6

Time waits for no man.

We find some variation of this proverb in literature scattered across the centuries. The earliest variation is attributed to St. Marher in 1225. “And te tide and te time þat tu iboren were, schal beon iblescet“, he wrote.

And it’s unquestioningly true.

We celebrated my daughter’s tenth birthday over the weekend. Here she is crafting decorations for her party:

Two of her friends came over to celebrate with her. Madison called it a “sleepover”. But I think that’s a misnomer. I’m not sure those girls did much sleeping. I think they sat up talking about 10-year old girl stuff into the wee hours of the night.

To her, that’s just what you do when you turn 10 years old. But to her father… it’s not so normal.

Because I remember when this young lady first arrived. Indeed, I delivered her myself in the room adjacent to where she is sitting in the image above.

Alas, time waits for no man.

But like a DEI-approved hire, I suppose time doesn’t discriminate. In just the same way, it waits for no economic era. And that brings us back to our running thesis: America’s Great Reorganization…

The Great Reorganization – Part 5

We’ve talked all week about what I’m calling the Great Reorganization.

To bring new readers up to speed, the thesis is rather simple. Virtually every aspect of our economy has been “financialized” over the past 50 years. This caused some major distortions that threaten to sink the entire dollar-based financial system.

As we discussed yesterday, the mass financialization of our economy was itself a fundamental reorganization of American society. Painting with a broad brush, we went from being focused on quality of life to being obsessed with maximization.

That is to say, the rat race became our reality… and family-owned shops on quaint Main Streets became our past. The case of Downer’s Hardware we talked about yesterday is a microcosm of that massive trend.

However, a major sea-change at the heart of the global financial system signals that we’re in a new era now. We’re at the cusp of another major reorganization of American society. It will resemble some of the better features of our past… as well as new aspects we can’t possibly envision yet thanks to technological innovations.

The vision for this Great Reorganization began to take shape in my mind when SOFR replaced LIBOR as the interest rate benchmark for dollar-denominated loans. The seeds have been sown for several years now. But something caught my attention last week that seemingly confirms it for me.

The Great Reorganization – Part 4

Autumn is upon us up here in the mountains of Virginia. The air has cooled… the humidity has evaporated… and the leaves are beginning to make their annual descent back to the Earth.

There’s something magical about this time of year. It’s a reminder that everything is finite. As the book of Ecclesiastes says: There is a time for everything… and a season for every activity under the heavens.

The gravel road pictured above is our driveway. There’s one way in and one way out… like we’re at the end of the world up here. Most days I feel like we are.

We bought this property from the family who owned the old Downer’s Hardware store in the nearby town. They opened the store in 1953 and ran it for just over 50 years.

We were a couple decades into the “cheap money” experiment when Downer’s Hardware closed its doors in 2004… but we hadn’t yet reached the apex.

We talked yesterday about the result of this experiment – cheap money cheapens everything. The case of Downer’s Hardware illustrates this dynamic…

The Great Reorganization – Part 3

We’re talking about America’s Great Reorganization this week.

For those just joining us – the thesis is rather simple. Virtually every aspect of our economy has been “financialized” over the past 50 years. This caused some major distortions that threaten to sink the entire dollar-based financial system.

Most of the mainstream financial analysis I’ve seen largely ignores this dynamic. It takes the position that nothing has broken yet… therefore nothing big is likely to break going forward.

At the same time, much of the alternative financial commentary out there seems to employ single-variable analysis. It looks at the increase of fiscal debt and deficits and presumes that they will continue apace until the system collapses under its own weight.

But what if that variable isn’t fixed? What if it changes?

As we discussed yesterday, the US Congress has shown no desire to cut spending and get its fiscal house in order. But a major sea-change at the heart of the dollar-based financial system could force the issue.

That sea-change stems from the Secured Overnight Financing Rate (SOFR) replacing the London Interbank Offered Rate (LIBOR) as the interest rate benchmark for dollar-denominated loans and derivatives.

SOFR allowed the Federal Reserve (the Fed) to break ranks with the global central bank cartel. It’s what enabled Fed Chair Jerome Powell to raise interest rates at the most aggressive pace in history.

The financial media covered that story daily. They said it was all about combatting inflation. But that was just part of the story – a small part.

The Great Reorganization – Part 2

Yesterday we made a bold claim. The second American revolution is currently underway.

Except this revolution isn’t being fought on the battlefield. It’s financial in nature.

It all centers around something called the Secured Overnight Financing Rate (SOFR). SOFR (pronounced “so-fur”) is now the benchmark interest rate for dollar-denominated loans and derivatives. It was created in 2018. And it replaced the London Interbank Offered Rate (LIBOR) in January 2022.

This is an esoteric corner of the global financial system… but it’s critical to understanding what’s playing out today. Especially on the geopolitical and macroeconomic level.

Simply put, SOFR connects the dots.

When LIBOR was the benchmark rate for dollar-denominated loans, the US economy was tied to the agenda established by the power factions controlling the European Union (EU). That’s because 11 panel banks in Europe could manipulate interest rates through LIBOR, as we discussed yesterday.

With SOFR now in place, those European banks have no influence on dollar-denominated interest rates. SOFR liberated US monetary policy… and paved the way for what I’m calling the Great Reorganization.