Then and Now

Remember when President Trump said: “I could stand in the middle of Fifth Avenue and shoot somebody and wouldn’t lose any voters, okay?” Well, he just shot a foreign general with a rocket in a foreign country and then lied to congress about why he did it and guess what? The stock market is up over 100 points and Bloomberg posted this:

WOW!  Things are better than the best of times? What was going on in October of 2000?

Oh yes, the S&P index crashed for 3 years and didn’t fully recover until 2007.  And then we had the great real estate bubble! But that was then and now things are different.

This looks even worse to me! This time it is tech stocks and real estate. How did we get here?  We are $20 trillion in debt and our budget deficit is growing at a trillion dollars a year.  The result is, you can still buy the same house and the same stocks now as in 2000, it just takes 100 times more worth-less dollars. When I left the investment business and went back to UC Berkeley and then U of Oregon to get a PhD in finance, I was told that budget deficits were bad and trade wars were bad.  Now there is a new theory, MMT, that says they are good.

Hmmm, I remember back in October of 2000 I published a report in Pensions and Investments magazine that said, in effect,  get out! As of last month, I am taking that advice again.  I am out of the stock market, out of debt and into short term treasuries.

My best wishes to the twenty somethings who believe in MMT. I respect you, but not your theory. I didn’t write this for you. I wrote this out of concern for old people like me who are retired and won’t be able to replace the assets they are living off now.  Investing for us should not be exciting. Peace of mind is worth its weight in profits.

About Frank Sortino

Frank Sortino is finance professor emeritus from San Francisco State University and Director of the Pension Research Institute which he founded in 1981. For 10 years he wrote a quarterly analysis of mutual funds for Pensions and Investments Magazine and he has written two books on the subject of Post Modern Portfolio Theory. He has been a featured speaker at many conferences in the U.S., Europe, South Africa, and the Pacific Basin. Dr. Sortino received his Ph.D in Finance from the University of Oregon and has carried out research projects with many institutions like Shell Oil, Netherlands and The City and County of San Francisco Retirement System.
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