Thoughts from the Frontline

Let’s rewind the clock to late 2007. It was quite a tumultuous time as there was a lot of competing views about what would happen. I wasn’t terribly confused as I was convinced there would be a recession caused by major defaults in the subprime mortgage market. I had been on record for more than a year saying that. The SIC in 2008 was one of our largest because of the confusion in the markets.

As noted a few weeks ago, we get conflicting data that must not be extrapolated. The motto of the US Marines is a good one for all of us for the coming years: improvise, adapt and overcome. I would add, then adapt again.

I remember the summer of 2006 when I literally was searching for something to write about. Nothing was happening. I think I reviewed several medical reports and books. That is not the case today. We are somewhere along the lines of there are times when nothing important happens for years, and then you get months when decades happen. Readers want me to comment on a dozen topics all of which are significant.

The old cliché: do you see the glass as half-full or half-empty? Depending on what you’re asking about, this can be a highly personal question. One person’s half-empty is another person’s half-full. My answer to that question is that those two answers don’t adequately describe the current condition.  Let me lay out the case for what should be the answer. Today we will explore how long this condition could last and what we can do about. I think it will make for interesting letter.

There has been so much data released in the past week it’s hard to know where to begin. And that is all compounded by the fog of confusion/war surrounding the “Iran conflict.”

If you’re tuning in to see what I think of the latest Iran fireworks, you may be disappointed. My opinion is as accurate as market reactions have been. Which, given wild swings both ways, suggests no one really knows what to expect.

This letter is a little different. I am indeed working on my book about what I believe is a coming crisis by reviewing five different cycle theories. They all arrive at a similar scenario from different points of view, but they all suggest a crisis occurring sometime around the end of this decade or perhaps shortly thereafter. And all for different reasons. One background element ties them together, which is the subject of today’s letter.

Is inflation rising or falling? Is unemployment solid or are there significant issues? Given the massive revisions of labor data, how can we base decisions on employment numbers? And what happens when the various collected data conflicts with themselves?

We have been inundated with employment and labor data over the past few weeks. Some of it is finally catching up from reports delayed due to the government shutdown. Readers can be forgiven for feeling a bit of whiplash from the widely varying analysis of those numbers. Depending on who you read, things are either finally starting to turn for the better, or the underlying numbers portend a disaster. I read dozens of such reports, trying to discern some underlying key themes and trends.

Like people, institutions of all kinds get old. Some age less than gracefully. They become set in their ways, fixating on the past and ignoring new conditions. But because they’re “institutions,” change happens slowly.

Everything is relative. That’s one reason the economy is so hard to understand. In a very real sense, we all live in our own individual economies.

Today we continue anticipating 2026, this time shifting for the first part of the letter from economic issues to geopolitics before making some of my personal general forecasts.