Thoughts from the Frontline

Monetary policy is a balancing act. The Federal Reserve’s “dual mandate” requires it to promote both maximum employment and stable prices. Statutorily, neither is more important than the other. The Fed is supposed to seek both at the same time.

No one wants to be a party pooper. It drives away friends and makes you generally unpopular. But if you are a monetary policymaker, ending the party before it gets too wild is quite literally your job.

We have no scarcity of economic challenges. Price inflation is high on the list, in part because we saw so little of it for so many years. Inflation’s return in 2021–2022 brought back memories for those (ahem) who lived through the 1970s. And not the pleasant kind. None of our generation wants to see the reruns of That ’70s Show.

I was in Newport Beach two weeks ago doing several video interviews with David Bahnsen. At the end of the interview, he mentioned the importance of having a proper “philosophy of investing.” Time was running out so I didn’t have the ability to unpack that.

If you are an investor, an economist, or really anyone who watches big trends, numbers are your friends. They help you understand events you can’t personally observe.

Last week I compared our jobs data, which is sometimes questionable, to World War II weather forecasts. Those were also questionable but necessary anyway. The generals needed them “for planning purposes.”

I remember when August was a slow month. School didn’t start until after Labor Day. Even in my adult days in the investment world, not much happened. People were either on vacation or coming back and getting ready for September. It’s hard to believe, but nobody really cared about Jackson Hole in the ’80s or ’90s. And it had several venues up until 1981 when it became “Jackson Hole.”

I am widely known as the “Muddle Through” guy. The giant US economy is part of an even larger global economy that doesn’t change direction easily. Major shifts occur slowly, even when presidents, central bankers, and CEOs want otherwise. They don’t have nearly as much power as they may think.

Many people yearn for a simpler life. Ironically, that’s the one thing we’re almost guaranteed not to get. Technology keeps shifting the ground beneath us, mostly for the better, but also creates complications for businesses and individuals. The rules, especially from the government, seem to keep shifting, too. Everything around us just gets more and more complicated, including the economy and markets.

If you listen to the media—both MSM and social media—it seems like everyone in the world wants lower interest rates.

We like to say markets don’t lie. That may be so, but they can certainly send mixed signals.

Happy Fourth of July! I hope you’re enjoying a long holiday weekend. That’s what I am doing, so this letter will be a little different.