Beginning of a "Lost" Decade?
Could we be in the throes of a Lost Decade?
Great guns! Stocks finished the week up - the fourth week in a row!
Bond yields eased!
Inflation has peaked!
So what's not to like?
Well, nothing, if your horizon is, like, a month or maybe two. Not that stocks don't have more room to run. Not that bond yields might not ease a bit more.
As for inflation, what did you expect - a constant rise month after month? Heck, if that was the case, we'd be Germany in the early 1920s. Remember that? The German hyperinflation?
So, no, we're not hyperinflating - so far. And the easing mimics the last inflationary conflagration in the U.S. in the 1970s. As we've noted before, the rate of inflation didn't go straight up. It surged and ease, surged and eased, from the mid-1960s until around 1982. At the end of the day, with all the surging and easing, the net effect was a huge loss of purchasing power for the US dollar.
Will that pattern repeat? No predictions here. But it's a risk we're taking seriously.
Neat summary, no? But what about that "Lost Decade" thing? Well it's one way to say we need to start looking forward, more than the one-month horizon we mentioned. So we'll talk about this, a bit today, more in the future.
For today, you'll find it in our Notes from one of our Brain Trust last week. Check it out. Maybe ponder one or more or the points.
- Overarching theme: “Lost Decade”
- Believes one began around 2020 – could last more or less 10 years
- Compares to 1968 – 1982 – last “Lost Decade”
- Will focus on this in future issues – ways to protect ourselves, even profit
- Characteristics of Lost Decades:
- Rising Interest Rates
- Falling Stock Prices
- Rising Energy Prices
- USD (current): countries weaning away from
- Globalization of last 40 years now coming apart
- Currency world will look different in the next decade
- Fair Bet: Great monetary instrument of past – gold and silver – will go from undervalued to greater value
- Last Lost Decade started mid-1960s, lasted to early 1980s
- Dow touched 1,000 in 1966 – hit 777 August 1982
- Bond prices collapsed
- Inflation rose from 3% to 20%
- Crime of all sorts increased
- Compares to Thirty Years War, years of and between WW I and WW II
- Compares those years to 1815 – 1914: mortality fell, increased peace and prosperity, rising popular culture, generally better times.
- Review of asset performance last two years, starting with bonds
- 30-year Bond from 1.19% to 4%
- 10-year from 0.5% to 4% (rise of 700%)
- Mortgage Rates 2.22% to >7%
- As in last “Lost Decade” rising rates make is hard for individuals and companies to plan ahead
- Bonds led the way last time and this time – Stocks followed within a year or so.
- Last time when interest rates went up, took PMs and Miners with them – not yet this time.
- Different items will rise at different times, but long-term trend is up for all.
- Example of Energy and Commodities to illustrate connection between different trends.
- Natural Gas from $1.54 per million BTU to over $10 – Now $6.48 – correcting – still below highs of 2005-2006
- Heating Oil: have passed old high of 2008, $4
- Crude Oil: West Texas crude (WTI) high 2008, recently rose from $5.48 to over $130 (2,149%)
- Review of commodities - Corn, Coffee, DBC, DBA - that have advanced at different times – again, overall trend it up for all.
- Re XLE and SLB (Schlumberger): looking for good price to buy these
- Yet another analysis of Silver (fraught with frustration), but still believes time will come to invest – When to invest will be a matter of gut instinct.
- Re Mining Shares: Notes that these rose in 1970s in the face of rising rates and inflation, so this should be a reason not to invest in these (as some have said).
- Not all assets lose during a Lost Decade
- Dismisses TSLA as a good choice now that it’s corrected. Sees this stock as one preferred by “believers” just as JSDU was in the 2000s
- Bearish for “foreseeable future” on PMs, but believes will be “great play” at some point.
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