In his Daily Market Notes report to investors, while commenting on Dogecoin’s soaring value, Louis Navellier wrote:
[soros]Q1 2021 hedge fund letters, conferences and more
Dogecoin’s Soaring Value
It appears that the direct listing of Coinbase may signal a near term peak in the crypto market. The soaring value of Dogecoin, started as a joke 8 years ago, does not help the credibility of the crypto market”
Canary in the coal mine? . . . Crude oil prices are weaker as India, the 3rd largest importer in the world, has had very bad Covid numbers. The disparity of vaccination penetration between wealthy and poor countries is going to complicate and delay the eventual global recovery from the pandemic.
The removal of yield-risk to the investing landscape means that the rally can sustain its extended and overbought condition for a while. The market has bought into the Fed’s rhetoric that any notion of tapering is not under consideration for some time, so interest rates will remain historically low relative to inflation. Early Q1 results are showing that companies are beating increased earnings estimates and inflation-adjusted returns are more attractive in stocks relative to money markets Treasuries.
Rate Of Inflation In April
Watching how the April rate of inflation comes in will tell us if the hot uptick in March is what the Fed has called “transitory,” or whether there is a larger trend at work which will usher in fresh concerns about overheating. The two charts below show the recent inflationary pop and the longer-term historical trend.
Leading up to the Great Recession of 2008-2009, the rate of inflation was in 2%-4% range and ultimately got up into the high-5% range, before sinking temporarily into deflation during the Great Recession.
Per Herbert Hoover: There are three ways to meet the unpaid bills of a nations. The first is taxation. The second is repudiation. The third is inflation.
Growth In Federal Budget Deficit
The March Federal Budget Deficit Grew by 455% in Boom Times . . . Why? . . . Half of the growth in Outlays (+$1,459 billion) in the last 12 months was for Income Security payments, or personal transfer payments (“Peter paying Paul”). The percent of Outlays spent on all forms of income redistribution rose from 62.5%, at the end of 2010 to 68.4%, at the end of 2019; then it leaped to 77.8% at the end of 2020, due mostly to three rounds of individual payments and other pandemic relief programs.
I’m no absolutist on balanced budgets. There is a time and place for red ink. Last April and May, the rescue checks for those in need were vital. Targeted help for those still in need is still vital. But . . .
- Sending $1,400 checks to 80% of Americans, when over 90% of us are employed, makes no sense.
- Passing two $2 trillion stimulus packages when the U.S. economy is growing faster than at any time since the mid-1980s, makes no sense.
- Ignoring every economic statistic that reflects what Jamie Dimon calls a “Goldilocks Moment,” and what I call economic nirvana, makes no sense.
Can We Avoid Paying the Piper for this Debt? . . . We may be able to dodge a bullet by keeping interest rates super-low forever, while keeping inflation low by a magical combination of disciplined buying behavior and rational market buying choices, but how often has that combination of human restraint been evident in history? Not often.
