By Julien B. Booth
December 19, 2019
Merry Christmas, and Happy upcoming Hanukkah.
A quick look back-
2018 Christmas, the stock market was crashing due to strong US GDP/economic growth (i.e. interest rates were rising).
2019 Christmas, the stock market is booming because GDP growth is flat and the President is calling for the Federal Reserve to cut rates, even to negative levels.
12.18.2019: Fed Ex certainly did not deliver a Merry Christmas today (-10%). I have always told Kelly (spouse) that we need not watch Reality TV when we can live it!
Per the below comments of the President, we believe policy that deteriorates one’s currency for short term electioneering makes little sense for retirees, savers, banks, pensions, insurance companies, or our children.
However, inflating asset prices goes a long way for one’s Twitter account.
The diminished purchasing power of the U.S. dollar also creates potentially dangerous and perverse incentives.
By driving the notional costs (notional meaning the intentional depreciating of ones underlying currency) of everything higher we feel “richer”, but these underlying increases are merely keeping pace with the new $$$ creation. It has not worked well in other countries.
As the gross level of our national debt exceeds 100% of annual GDP, growth intrinsically slows. Our explicit national debt is currently $23 Trillion (not including entitlements), or 105% of our GDP.
Both political parties seem to be content to allow monetary inflation (printing money) to be the solution to this growing $23 Trillion deficit. 2020 will produce an additional $1 Trillion dollar deficit, but who’s counting?
I cherish a solid and fundamentally sound monetary policy. We are so fortunate to live in America…the political short-termism is my ax to grind.
Our job is to preserve and protect your capital. We take this task incredibly seriously and will act accordingly. We are seeing safe, high-quality income securities being vacuumed up at a rapid pace.
Additionally, hard assets and other “things that hurt when they fall on your foot” assets will appreciate via inflation.
For those putting 2+2 together, the portfolio company we own, Goldmoney.com, has circumvented being “stuck” in a notional currency.
Goldmoney allows its customers to keep their currency assets secured in vaulted Gold, but accessible with contemporary debit cards.
Per our prior notes, we will continue to cling to our high-yielding securities, quality real estate, and we will look for new opportunities as the daily manias in the markets come and go.
Thank you for your interest in Forest Capital and Sixty Guilders Research.
Have a wonderful holiday.