Post Modern Portfolio Theory (PMPT)

If you believe all our politicians, it’s China. See if you still believe that after reading:

Thanks to my friend, Kal Salama, I’m sitting out the current Fed Fiasco with 40% of my portfolio in two high grade corporate bond ETFs that are still up and providing me close to 6% YTM. If Professor Roach at Yale is right, you can put the blame on the politicians and ignorant pundits who think the $Trillions of debt and the trade barriers and tariffs were, and still are, necessary and good for America. If Dr. Roach does not convince you otherwise, then read Dalio’s book about the changing world order. See where America stands in Dalio’s view, as a place to invest.

I think our biggest problem is a congress that thinks jobs and economic growth are appropriate goals for a central bank. I agree with Hayek and Friedman: printing fiat currency will not create jobs or economic growth. It will, and did, create inflation. Corporations create jobs and economic growth. I believe we are in a technology revolution that will reshape the world and that is where my equity holdings are, not in value stocks. Switching to value might have been appropriate for the 20th century, not now! While China is embracing that point of view, America is busy dreaming up reasons to stem the tide. I remember a time when most Americans believed : “What’s Good for General Motors is Good for America.” Does anyone dare substitute, Silicon Valley, for GM, now? Most would substitute, ESG, for GM, including the management of GM. Yes, I think everything ESG stands for is good. But not as the driving force for America.

Well, I wish you all a very Happy New Year…and please, don’t tell my grandchildren, and yes, greatgrandchildren, I held these beliefs. It would be my last lemon cream pie.

I would like to recommend a very boring book my friend, Kal Salama, recommended to me by Ludwig von Mises on Human Actions. Or perhaps I can talk him into summarizing it for you on LinkedIn. Consider this a follow-up to the previous posting.

The Fed is looking in the rear view mirror to see what happened in the last 3 years to flawed lagging indicators of inflation, while the administration refuses to take down the trade barriers with the EU, Mexico, Canada and China.  In short, everyone but Taiwan. Bloomberg News headlines say: Yields Are Up Across the Yield Curve…not my short and intermediate term high grade corporate bond ETFs I bought this week.

Stop listening to the talking heads in government and the news. The Fed keeps denying they had anything to do with the current fears of inflation. They didn’t print $9 trillion and two presidents didn’t ask congress to spend another $4 trillion?? They over did QE for 12 years and now they are overdoing QT.

The scientific evidence is overwhelming: Humans are the cause of all our problems. I’m for replacing both houses and the Fed with AI programs we can trust. Just think of the money we would save and the graft and corruption we would eliminate. No more insider trading! No more lobbyists! No more breaking news!

Worst case scenario: AI is as bad as the humans they replace…and we save a ton of money.

This is a short covering rally. When it is over we will still be left with the reality of:

1. A huge deb t crisis created by our Fed and two presidents, Trump & Bidden.
2. A dysfunctional government that can’t fix the problem, even if they knew how.
3. An awakening China with a stable government
4. A rate of return greater than 5% on short and intermediate term high grade corporate bonds.

Stop looking back in history to see what to do now!

The inflation rate was 1 percent in 1965 & hit 14 percent by 1980.  Volcker took the radical step of switching Fed policy from targeting interest rates to targeting the money supply.

Volker was an economist. Powell is a lawyer.

The Phillips Curve was a (dumb) theory and still is.

We do not have a monetary problem!

Us versus them Mind Set is the problem!

Us with them is the solution!

• There is plenty of oil in Iran. Honor the agreement the world signed, and Trump cancelled. Let everybody buy oil from Iran and pay for it with any fiat currency they want.
• Tear down those trade barriers Trump erected and let the goods and services flow without government intervention.
• Stop the Fed’s bloodletting. It did not cure fevers in humans in the past and it won’t cure the QE fever caused by Wall Street’s financial crisis.  
• Replace the Fed with an AI program, free of government intervention, that will only supply the necessary liquidity for markets to function. Nothing more. Not economic growth! Not employment! Not happiness!
• Regulate Wall Street to prevent it from causing another QE solution to problems they create.

They tell the truth more often than Powell, looking at his data from the past and what it meant when I was in Grad school.

Look it up.

This time, Chairman Powell is wearing the white jacket, posing as: “The Authority,” telling unsuspecting dupes, us, to pull the switch sending deadly shock waves into other dupes.  Why? Because we have learned to obey orders from people in white jackets at big institutions.

First he tells us repeatedly that his actions above will not cause inflation.

A Brief History of Monetary Mistakes

BYCHRISTOPHER LEONARD, Fortune magazine

22, 2021 at 7:34 AM PST

“The Federal Reserve is a uniquely powerful institution: It is the only entity in the world that can create new U.S. dollars out of thin air. And the Fed has exercised this power on an unprecedented scale over the past decade or so. Between 2008 and 2014, the Federal Reserve created roughly three times as much money as it had created between 1913 and 2007. In other words, it crammed about 300 years’ worth of money growth into a few short years. And then when COVID hit in 2020, the Fed printed about another 300 more years’ worth of money in a period of months—some $3 trillion.”

Bernanke used the first $1.5 Trillion to bail out Wall Street from it’s financial fiasco, that dammed near caused the biggest depression the world had ever seen. Yellen added a couple of trillion to that for good measure, and then Powell doubled down to get us in the mess we are currently in. To top it off. Two members of Powell’s board were caught trading on inside information of this uncalled-for stimulus.

Now we are going to allow him to punish us for his mistakes by causing a recession???

The economy is too strong, so lets cause million of people to lose their jobs???

It’s time to ask Powell to turn in his white jacket!

Nobody knows what the Fed is going to do…not even the Fed! The data doesn’t know either and won’t know until next year, and then it will be revised 6 months later. Start looking at what makes things happen. Nobody knows what NFL team is going to win but you have a good idea of who has the best young players and who has a bunch of beat up old greats. Therefore, you have a good idea of where to place your bets for the future, and I don’t mean, next week or next month.

If it is kids who are new to the market, it will be short lived. If it is Hedge Funds who are naked…it could be spectacular! Last chance to lock in some profits for the year, and I intend to.

But who knows what will be?

In the words of one visionary:

“Some of the best minds of our era are still in thrall to an older way of seeing and thinking We’ve left our future, in other words, largely in the hands of people whose single greatest characteristic is that they are bewildered by the present. Our current leaders like things as they are. The words “potential” and “threat” rhyme in their consideration. They don’t appreciate that puzzles such as the future of United States–China relations or income inequality or artificial intelligence or terrorism are all network problems, unsolvable with traditional thinking.”                                                                                                       J.C. Ramo

Imagine this is all a game, being played by three teams, The West, Asia, and “The Others”. West has a play book autographed by Knute Rockne; Asia has a play book written in Python (whatever that is). The Others don’t have a play book.

The West team don’t like each other, and they dislike, The Others, even more; but they absolutely hate Asia, who refuses to play by their rules. The West hasn’t won a game this season. Asia has won some and lost some. The Others, refuse to play until somebody pays them.

Who are you going to bet will win?

Wrong question.

Don’t you realize, we’re all in the game, but most of you are sitting on the bench and don’t know what you are watching. IT’S A REVOLUTION. A TECHNOLOGICAL REVOLUTION! The solutions will not be found by sifting through the ashes of the past. The solution begins by taking down all the stupid trade barriers.

Stop taking it personal, America, it’s only business.