The 10th Man

No Pullbacks

October 16, 2019

The Federal Reserve has embarked on QE4—sort of. They are buying Treasury bills.

Here we go again.

This $5 Trillion Market Is Just Getting Started.

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There is a genus of financial commentary that revolves solely around the Fed and its relentless pursuit of credit expansion, and how it will result in inflation. I know, because I used to do this.

This made for a good trade, from 2009-2011. Now it is mostly people being angry. But there is still a pretty huge appetite for this angry, anti-Fed commentary, so I will indulge in it, a little.

The Fed should not be doing QE4.

Something I used to say in The Daily Dirtnap—quantitative easing is not debt monetization. Debt monetization is a matter of intent. If the intent is to keep interest rates low to finance the government, then it is debt monetization.

We are getting close.

But ostensibly, there are some reasons to be conducting quantitative easing in T-bills. It will steepen the yield curve. Minneapolis Fed President Neel Kashkari went a step further and said that we should be doing yield curve control like Japan, to ensure the yield curve remains steep.

Maybe we should let the market determine interest rates? Unfashionable idea, I know.

To answer your question, yes, we are all going to hell. It will be because of the Keynesians. Their sack dance continues, because relentless credit expansion has so far ensured that recessions are in short supply.

My guess is that we’ve lengthened the cycle and increased the amplitude.

If you think inequality (and the political angst that goes with it) is bad now, you ain’t seen nothing yet.

This Is Not a Newsletter about Finance

No fun being a finance junkie these days. All bad news. And yes, stocks going up is bad news, if they’re going up for the wrong reasons.

We live in an economy full of distortions caused by interventions of varying magnitudes. And it is definitely going to get worse.

If you sat around and worried about this stuff all the time, you would make yourself miserable.

But if you sat around passively and didn’t take any action to protect your assets, that wouldn’t be very smart, either.

I suspect many readers of The 10th Man fall into the same camp as me—you have enough wealth to get totally screwed by the authorities, but not enough that you can really protect yourself. You’re not a billionaire.

This $5 Trillion Market Is Just Getting Started.

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You do things where you can—buy gold or bitcoin—but I can think of a hundred different ways that won’t work out, either.

My recommendation is simple. Do not spend too much time thinking about this stuff. Of course, if you were really paranoid, you’d be on the first plane to Singapore with a tube of toothpaste full of diamonds. I really do not want to get to that level of paranoia. It isn’t healthy.

Then again, there have been times in history where the people with that level of paranoia were the ones who survived.

Things You Should Invest In

This is an investment newsletter, so let’s talk about things you should invest in. I will preface this with the fair warning that the following applies to people who have already accumulated wealth.

Experiences: Concerts, clubs, hiking trips, winery tours, etc. You should spend money on memorable experiences, then treasure the memories. Fly to Paris for a weekend. Have you ever done that? I have done that. Will never forget it. When your favorite band comes to town, go see them. I know it is past your bedtime. You only get one shot at this.

Luxury: Suits, shirts, casual clothes, watches, shoes, cars. I know the 2005 Corolla helps you save money. We do not know what’s going to happen over the next ten years. You might as well enjoy your money now. I’m not kidding.

Food and Drink: Nice dinners, fine wines. Nothing like the tactile sensation, however fleeting, of eating really good food.

Things you should not invest in:

Stocks And Bonds: They give you no enjoyment. Soon, they will be taxed out the wazoo.

(Please take me seriously, but not literally. Of course, you will have stocks and bonds. The point here is to think about consumption as an asset class, of sorts.)

A lot of people, myself included, spend time trying to think up the optimal asset allocation. Honestly, most assets look bad, and I’m pessimistic enough about the future that it makes me want to enjoy the present. Especially if you’re of an age where you should be decumulating assets anyway.

He who dies with the most toys does not win.

So my investment “advice” these days is kind of like anti-investment advice. Everything is unattractive, and we’re all going to get hosed by wealth taxes and negative interest rates, so you might as well enjoy yourselves.

Start today. If you’re not in the habit of going out to dinner on a Thursday night, do it. And stop by the jewelry store on the way home. I doubt there will be a wealth tax on that.

If you disagree with me about any of this, let’s talk about it! Call the Jared Dillian Show on 844-305-7800, weekdays from 6-8pm EST, and let’s have it out.

Music

And finally, some music for the end of the world, courtesy of me.


Jared Dillian

 

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Comments

Patricia Woodruff

Oct. 22, 8:15 p.m.

Eat, drink, and be merry, for tomorrow we will be taxed into (emotional) depression?  First, this particular column reeks of despair.  I have plenty of my own fears, thank you.  I regret, Mr. Dillon that I cannot call into your radio program but I am nearly deaf.

I suggest some “spending down” that may be much more gratifying than a dinner and wine that may be lost in a blur of possibly impaired memory.  Donate it where it may help alleviate our own country’s problems.  Concerned about people having difficulty accessing birth control?  Planned Parenthood needs your support.  I have many friends living in Guatemala.  A few are involved in a small project in Chichicastenango that gives small amounts to very poor kids to buy school supplies their parents cannot afford. 

$75 sends a child to primary school for a year
$150 sends a child to middle school for a year
$400 sends a child to high school for a year
$5000 supports the entire monthly cost of the ACEBAR Resource Center in Guatemala including all scholarships, supplies, teacher resources and ACEBAR program facilitation

The program is a help to the child’s family, as well, but I mention it as an example of one person’s pet project, not to promote it to you.  Think about it- if a family can survive where they are, even using subsistence agriculture and one parent having a vegetable booth at the market, they will stay where they are. The idea of migrating is terrifying, but people consider it because they can no longer figure out how to survive.  i find this more constructive than building a wall.  Pardon the play on words.

I proudly read of US citizens responding to news items of unpaid lunch bills by paying those bills for people.  There are many excellent ways to help others that are also good for this country. 

Recently I read on MarketWatch that you can give $ from your 401K mandatory disbursements.  This is an idea that also wins us significant tax gains.  If done correctly that money will not be taxed as income, and some of us may be able to lower their tax rate as a result.  My husband and I are leaping on this.

Most of us have at least some social consciousness.  Giving can be very satisfying.  Keep it in mind.

jack goldman

Oct. 19, 11:41 a.m.

Living in a declining global empire can be a good thing, better than a shit hole nation. The real life is heart beat and breath. The fake life is debt notes, computer credits, stocks, bonds, not my real life. Today is my birthday. Feel great only thinking about the positive things in my life. It’s transcendent. Going to have a fine Italian dinner out with fine wine. Make every day your birthday. We all die. How many really life the life they think they ought to be living? Love to all.

hoffman.lauriea@gmail.com

Oct. 17, 4:28 p.m.

Thanks for making my husband and I feel better that there are others like us feeling the same way.  Even here in Sydney everyone seems to believe that their nirvana will last forever and have forgotten how little control the country has over their growth (or lack there of).

scott grider

Oct. 17, 9:20 a.m.

Oh, the market will set the private rates alright, and in months, maybe a year. The set of dominoes that is the EU will give us that…...and these rates will make you dizzy.

Course the FED will go to negative overnight rates…..but in the extreme situation coming, that will have no effect….....US ten year to 8-10% in 4 years.