Charles Mackay on speculative folly

Every age has its peculiar folly; some scheme, project, or fantasy into which it plunges, spurred on by the love of gain, the necessity of excitement, or the mere force of imitation.

~ Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds (1841)

(Cited by Randall Forsyth, "WallStreetBets Might Be New, but Bubbles And Busts Are Not," Barron's, January 30, 2021.)

Kevin Duffy on hyperinflation, gold, stocks and optionality

Gold has option value or “optionality.”  It has extreme value under the rare sample path. It just so happens that this path could devastate our savings which are irreplaceable.

The same option value math applies to shares of businesses that will survive a hyperinflation. The challenge is that many won’t. There is the rub.

Robust businesses deserve an inflation premium, whereas there is little value in “short duration assets” unable to withstand a severe economic shock.

~ Kevin Duffy, The Coffee Can Portfolio, August 11, 2020

Kevin Duffy on the millennial bubble

Perhaps it is a rite of passage that every generation must take part in some sort of speculative madness.  Today’s millennials seem ideologically wired to believe in the upward slope of technological progress, conflate virtue signaling with investing, underestimate the economic damage from trillions of dollars of stimulus, and place their unswerving faith in the Fed.

~ Kevin Duffy, "The Robinhood Rally," LewRockwell.com, August 22, 2020

Kevin Duffy ranks Tesla's $413 billion valuation

At the high this morning, Tesla reached a market cap of $440 billion. Despite a pullback, it still ranks #8 for U.S. stocks:

#7 - Visa = $448 bil
#8 - Tesla = $413 bil
#9 - J&J = $399 bil
#10 - P&G = $340 bil
#11 - NVIDIA = $300 bil

~ Kevin Duffy, tweet, August 24, 2020

Chris Pavese on the disconnect between stock prices and economic fundamentals

While the many oddities within the market are puzzling enough, the most striking aberration is the gap between asset prices and economic fundamentals. To paraphrase Jeremy Grantham, today’s market is valued at levels only seen maybe 10% of the time, while the economy is bouncing around at recessionary levels only seen maybe 10% of the time.

~ Christopher Pavese, CIO of Broyhill Asset Management, The Broyhill Letter, August 2020

Kevin Duffy on Tesla's $400 billion valuation

Tesla has become the poster child of the millennial bubble, p.c. bubble, EV bubble and VC bubble.  Its stock commands a market value of $412 billion, more than BMW, Daimler, Volkswagen, Toyota and General Motors combined.

~ Kevin Duffy, "The Robinhood Rally," LewRockwell.com, August 22, 2020

Dan Ferris on the mania for Big Tech

No one can imagine that Amazon isn't the greatest thing in the world.  No one can imagine that Facebook and Google and Apple... at a $2 trillion market cap.  People simply can't imagine that these aren't the greatest businesses now and forever.  I promise you, they will be disappointed.

~ Dan Ferris, "Kodak Crashes 85% from Recent Peak," Stansberry Investor Hour, 67:00 mark, August 13, 2020

Dan Ferris on investing and the political monkey in the room

I have tried not to talk politics, and specifically on this podcast.  I've tried to avoid the topic of politics because... we mostly want to talk about investments: stocks and things.  I feel the need to become more macro aware, and as I become more macro aware, I have to become more fiscal policy aware and more monetary policy aware...  The political monkeys just smear their feces all over these things and you can't get away from it.  The stink of it permeates the topic...

~ Dan Ferris, "Kodak Crashes 85% from Recent Peak," Stansberry Investor Hour, 36:10 mark, August 13, 2020

Kevin Duffy on central bankers: "beyond the point of no return"

Is it possible the central bankers will admit the error of their ways and back away from their grand experiment?  Don’t bet on it.  Ideology and conviction – what Barbara Tuchman calls “wooden-headedness” – are a potent mix.

Strongly held beliefs are nearly impossible to let go, especially when the world is backing you with trillions of poker chips and genuflecting at your genius.  Central bankers are all-in.  There is no folding.  They are well beyond the point of no return.

For better or worse, they hold the losing hand.

~ Kevin Duffy, The Coffee Can Portfolio, August 11, 2020

P.J. O'Rourke on Democrats vs. Republicans

The Democrats are the party of government activism, the party that says government can make you richer, smarter, taller, and get the chickweed out of your lawn. Republicans are the party that says government doesn't work, and then get elected and prove it.

~ P.J. O'Rourke

Jeff Deist on the allure of MMT

MMT is the perfect economic proposal for those who sincerely and deeply believe wealth simply exists in America, and will continue to exist, regardless of incentives. All we need to do is figure out how to more fairly divvy it up—and so why not through government spending?

The promise of something for nothing will never lose its luster. MMT should be viewed as a form of political propaganda rather than any kind of real economics or public policy. And like all propaganda, it must be fought with appeals to reality. MMT, where deficits don’t matter, is an unreal place.

~ Jeff Deist, "Not Modern, Not Monetary, Not a Theory," LewRockwell.com, June 26, 2020

Jeff Deist on MMT and government spending

It’s easy for those of a free market bent to dismiss MMT out of hand, but the impulse to create something from nothing resides deep in the human psyche, and politics is where this impulse finds expression. We should not underestimate the allure of MMT in the midst of our current upheavals, because it appears to make possible every left progressive program: unlimited public works and federal jobs, useless and uneconomic green energy schemes, reparations for black Americans, Medicare for All, free college, free housing, and a host of others.

~ Jeff Deist, "Not Modern, Not Monetary, Not a Theory," LewRockwell.com, June 26, 2020

Kevin Duffy on how to wreck an economy in 5 easy steps

2020 is a lesson in how to wreck an economy in 5 easy steps:

1) Blow a monster bubble with a decade of zero interest rate policy (ZIRP).

2) Have the media incite a panic over a bad novel case of the seasonal flu. Have state governors use this as a pretext to shutdown a third of the economy.

3) With the social fabric frayed, have the media segue to racial protests. Allow bad apples to destroy property and have the police stand down while the mob takes over.

4) Pass trillions in money printing and stimulus, preventing the market from adjusting to rapidly changing events. Incentivize unemployment by paying people an extra $600 a week to do nothing (through July). (Btw, I'm seeing businesses with signs everywhere here in PA looking to hire.)

5) After you've wrecked many small businesses with #2 and #3, regulate them to death, adding costs they can't afford and inconveniences their customers don't want.

Meanwhile, those young people you just paid to sit at home idle are day trading with the free money. Time to get short.

~ Kevin Duffy, Facebook post, June 19, 2020

Dan Ferris on the bond market as indicator of political risk

If you really want to know what's happening politically, how politics is impacting the market, keep an eye on the bond market, not the stock market.  The stock market's the least macro sensitive thing; the bond market is the most macro sensitive thing.

~ Dan Ferris, "There's Riots in the Streets - Now What?," Stansberry Investor Hour, June 4, 2020

Kevin Duffy on the downside of ZIRP

In addition to fake news and fake science, we now have fake interest rates sending fake signals to businesses and investors attempting to allocate capital, and to governments more than willing to squander it.

~ Kevin Duffy, The Coffee Can Portfolio, May 27, 2020, p. 12

Kevin Duffy on the extrapolation of investors

“Past performance may not guarantee future results.” Investors often ignore this caveat, piling on after a long-established trend. With investing, the view is always clearer through the rearview mirror.

~ Kevin Duffy, The Coffee Can Portfolio, May 27, 2020, p. 7

Paul McCulley on Fed buying 85% of Treasury's net debt issuance in the past 7 weeks

We’ve had a merger of monetary and fiscal policy. We’ve broken down the church-and-state separation between the two.

~ Paul McCulley, former chief economist at PIMCO, Bloomberg interview, May 15, 2020

(Credit to Philip Grant, editor of Almost Daily Grant's, for finding this quote. Also, according to May 15, 2020 ADG: "According to estimates from Bloomberg Economics, the Fed will purchase up to $3.5 trillion in government bonds this year, covering the bulk of an estimated $3.7 trillion fiscal shortfall.")

Bloomberg Businessweek: "Bashing Big Tech now looks as dated as a handshake" (2020)

In a crisis, large companies can have an edge.  As the pandemic has forced the shuttering of local stores and restaurants, grounded consumers streamed Tiger King on Netflix, stocked up on groceries and supplies from Amazon, and gathered together on Zoom.  Hardly and company is immune from the economic shutdown, but the big ones have more resources to weather the pandemic and, in some cases, may be able to gain market share.

On Wall Street, that's exacerbating a divergence between small and large companies which has been frustrating stockpickers for some time.  The Russell 2000, a benchmark for small companies, has lagged the big-name S&P 500 index badly over the past two years.  This year the small stocks, with a median market valuation of about $525 million, have lost 22% as of April 28; the S&P, about half of that.  The Nasdaq 100, which tracks the largest tech stocks, is down less than 1%.  The S&P 500's companies now make up 82% of the entire U.S. stock market's value, a share that's been steadily rising this century.

None of that is good news for active fund managers...

[I]t's easy to see the pandemic continuing to entrench some advantages of size.  Bashing Big Tech now looks as dated as a handshake, and Silicon Valley's giants may be able to expand their clout. Large companies can also find it easier to tap credit and solve supply chain problems.

~ Bloomberg Businessweek, "How Quants Got Bullied," May 4, 2020

Alexander Salter on the incompetence of government experts

Experts in the supposedly scientific fields of public health and economics have made a mess of things.  Their failures would be comedic, were the consequences not so tragic.  Instead of capable service for the public’s welfare, the American people have been made to suffer incompetence and malfeasance.  Unless we critically examine the failure of experts, we invite similar blunders in the future.

~ Alexander W. Salter, "Incompetent Experts and Bad Government," AIER.org, May 3, 2020

Larry Fink on monetary stimulus and inflation

I do believe some inflation would be really good at this time.

~ Larry Fink, CNBC interview with Beck Quick and Andrew Ross Sorkin, 18:00 mark, April 16, 2020