It’s hard and lonely being the lighthouse, but it is easy to be the sea and go with the flow. The lighthouse must be sure of himself, anchored in his beliefs, and a beacon for others to see. They are indispensable for navigation during storms and protect ships and keep them from capsizing on the rocks. The ultimate living lighthouse is Warren Buffet. He has been investing to his own drum for decade after decade. He invests in boring things while watching the sea rise and fall around him. He’d rather buy a good business from Mrs. B than invest in crypto or a get rich quick scheme. The man is a lighthouse and the man has stood the test of time. We should aspire to be lighthouses, but it is tougher than ever with the sheer bullchicanery going on in the markets right now.
The CPI print came out slightly higher than expected yesterday and the markets took off higher, seemingly oblivious. Bond sold off as yields went higher, but equities shook them off. It reminds me of when Ebby Calvin Nuke Laloosh shook off Crash Davis and the batter hit the bull. We are about to hit the bull, and someone will get a free steak dinner. The bank term funding program expired Monday, meaning no new applicants can use that program and the market rallied. Insiders like Mark Zuckerberg, Jamie Dimon, and Jeff Bezos are all selling large amounts of stock, yet the markets rallied. The markets have rallied for 16 of the last 18 weeks or some silly number and they can continue for a long time. That doesn’t mean the economy is doing well, because it isn’t. Companies are slashing white collar good paying jobs and people are getting two jobs and the unemployment number has now been explained. This occupational step down can continue for a long while as well. The markets and the economy need to be tilted but requires a shift, an event, or something to go wrong. Right now, the Fed has built huge walls around the economy, they have wrapped its arms around it. Banks are failing, we will guarantee every depositor, the government is spending $1T every 100 days, we will buy the bonds and loosen the financial conditions. The Treasury can’t sell long term bonds (yesterday was another bad 10 yr auction) so we will help with operation reverse twist and help buy t-bills.
This is like trying to box Floyd Mayweather, he is rolling away from your punches, he is using the shoulder to block them, and the more you punch the more you miss and eventually you are exhausted, but it is then that you must be the lighthouse still. It would be so easy to go with the sea. Easy to be the sea I say. I saw a very very wealthy entrepreneur this week have all his money in 3 stocks: Apple, Nvidia, Adobe. That is flowing and going with the sea my friends. There are fortunes to be made going with the sea, and there are fortunes to be lost. The key question is time and timing in particular.
Lighthouses don’t worry about timing because they are built to last the test of time. They aren’t forced to do anything, they can just be. Which brings us to our lighthouse, our very own Jedi, Jerome Powell. I have heard a lot of vitriol spilled regarding the man, and frankly his verbal pivot which was now 4 months ago shows that he has a little more guile than anyone thought. He hasn’t pivoted and now the inflation numbers are higher than expected, inflation is not down to 2%, and he is still higher for longer. The easy thing for him to do is to go with the sea. Why hasn’t he? Why hasn’t he cut rates? Why, why, why?
He has been eerily quiet, and people keep saying that he wants to appease Biden and help Biden win the next election. Wouldn’t pivoting help that case? Biden has been begging for these rates to come down, but old JP hasn’t budged. JP has signaled to the market exactly what he was going to do, and then he has done it, except for lowering rates which he is still considering. Nothing has really broken. Ok, the banks broke but he papered over that by guaranteeing all deposits, which I believe to be a mistake. What he hasn’t done is make things difficult yet. That was a chance to make it difficult on people that could afford it, but he passed. He has managed inflation so far, but hasn’t gotten it down to 2% either. A little inflation helps bring down the debt to GDP except for the huge fiscal monster that is government spending. Yellen and the Treasury are having to borrow amounts of debt that are almost laughable if they weren’t so sad. Powell has chosen a different response than the man he is trying to emulate, Paul Volcker. Volcker told Congress to knock it off, the spending. Powell went quietly on 60 minutes and said it is kind of a big deal, but he did it meekly. Can you imagine if Powell said to Congress, if you don’t balance the budget, I’m going to raise interest rates 1% a month until you do, to compensate borrowers for the risk? It would be a mutiny. I feel like we are going to get that moment soon, but I don’t think it comes from Powell. Trump is reckless enough to do that, but doesn’t understand economics as he is just another tax and spend guy. The congessional debt ceiling debate and the pushing the debt ceiling back has become just a clown show that I doubt anyone of substance can make an impression felt there.
I think back to poor Liz Truss and her spending plan that seemed so trivial one morning, and by the afternoon her career was over. Biden came out with a laughable budget that has more holes in it than Swiss cheese. I know the world doesn’t think that could happen to us because we have the world’s reserve currency and we do and it probably couldn’t, at least right now. If Trump gets elected, then his policies changes could push us over the edge. 60% tariffs are highly inflationary, as the consumer just pays higher prices or is priced out of buying something altogether, kind of like the housing market. I simply don’t believe we have that long. The layoffs started in January, when we declared the recession. This week it is Target and IBM laying off hundreds of workers.
“So long as the people do not care to exercise their freedom, those who wish to tyrannize will do so; for tyrants are active and ardent, and will devote themselves in the name of any number of gods, religious and otherwise, to put shackles upon sleeping men. “ Voltaire
The gilt market was a market, of people the people. The bond vigilantes was a market, of people the people. I think the pin will be what is always is, when the trust of the people goes away. People want to believe Nvidia going up forever just as the dot.com stocks did in 1999. The people want to believe that Bitcoin is a new money. A digital money that lives in code. If enough people believe that then it becomes so. It isn’t as far-fetched as a green piece of paper becoming the reserve currency of the world…A currency that is backed by nothing be the word of a government with our track record. No, maybe the world is changing into a digital age. The meta-verse will be the new car that replaced the horse, and we will all sit at home and live in a digital world. We will have our money live in a computer instead of a wallet. … Maybe we just outsource our thinking to AI, and it will make our decisions and run our lives. I think there is a lot of people that would sign up for that right now. They are the sea.
To be a lighthouse means to fight against the water and stand firm and unyielding, knowing that bubbles pop, fiat currency gets destroyed, and that gold and not diamonds are a girl’s best friend. Real sound money is important, but in today’s world, not really. However, knowing what we know now about the lifespan of fiat systems, the chance to have gold before the sea all rushes to buy is an opportunity. These opportunities come around 2-3 times a century. During the Weimar hyperinflation and during the Hungarian hyperinflation, you could have bought a block of mansions for a few ounces of gold. But you had to own it before then and that means going against the sea. It means doing what is unpopular and what hasn’t worked for a decade. It means bracing yourself for the temptations of cards, action or a pipedream of your company du jour going to the moon. We will be a lighthouse because we have made the conscious thought to do so. When you have your thinking in order, you can have a plan. When you haven’t made up your mind then you are free to flow and go with the sea.
I also heard about Warren Buffet investing in carpet companies, textiles, and insurance as a kid. No one ever wants to grow up to be Warren Buffet, he just isn’t exciting enough. Buffet is the lighthouse and people want to invent cool things, they want to be in magazines, they want attention, and they want validation and they want it on their terms. Buffet wants to eat McDonald’s, drink Diet Coke, eat See’s candy, and invest in good business by buying securities in good businesses at fair values. We should strive to do the same, and if you think there are many good values in the sexy names out there today, you would be mistaken. Buy yourself a plough horse and pass on the throughbred, they are more reliable and a lot less headache.
Sincerely Yours,
C Thomas Printer
On this date in history… 243 years ago to be exact, the planet Uranus was discovered by astronomer William Herschel.
Also born on this date… legendary skier Mikaela Shiffrin
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.