Thoughts from the Frontline

If a picture is worth a thousand words, this will be the “longest” letter I’ve sent you in a while, as there are quite a few pictures. It may also be the most wide-ranging.

If you read and pay attention to the world, you probably know the recent past pretty well. And if you’re a history buff like me, you also know something about the more distant past.

“Diamonds are forever,” according to the jewelry industry. That may be a slight exaggeration, yet diamonds will certainly outlive you and whomever you give them to.

Federal Reserve officials like to call their decisions “data dependent.” Business leaders say it a little differently, often “data driven.” The point, in both cases, is something like: “We consider relevant data when making important decisions.”

Remember National Lampoon’s Vacation? It was a 1983 comedy film in which suburban dad Clark Griswold (Chevy Chase) takes his family on a cross-country road trip to the fabled Walley World amusement park.

These weekly letters, of which I’ve now written well over 1,000 (plus 7 books and multiple papers and articles), are generally about two broad topics: the economy and the financial markets. While related, these aren’t the same. Good news for one can be (and often is) bad news for the other.

In stock investing there’s a management style called “growth at a reasonable price” or GARP. It seeks to achieve steadier results by avoiding both expensive growth stocks and beaten-down value stocks.

The world’s leading CEOs, politicians, and various do-gooders were in Davos, Switzerland, this week, discussing ways to solve our collective problems and create opportunities for their own companies. The most important conversations were off the record and many of the public speeches were simply performance art. (Sadly, I wasn’t invited even though I have a few thoughts they should hear.)

The Federal Open Market Committee’s 12 voting members differ on where they think interest rates should go this year. But we know they’re unanimously against cutting rates until at least 2024—or at least they were as of December, according to that meeting’s minutes.

“Every new beginning comes from some other beginning’s end.” — Seneca, the Elder “Democracy is the theory that the common people know what they want and deserve to get it good and hard.”  — H.L. Mencken

This will be my last letter of 2022. I want to use this letter as a set-up for my annual forecast issue the first week of January. That means we will touch on a variety of topics, kind of a snapshot into where my mind is today. Get ready to travel the world but let’s start at home with the Federal Reserve meeting this week.

Economic news—and market reactions to it—increasingly resemble a tennis game. Spectators follow the ball back and forth, thinking something will happen but usually it doesn’t.