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In the earliest days of the United States, tender and weakened from the 7 years of fighting to free itself from England, the debts acquired to fund the Revolutionary War had piled up with only troublesome methods of repayment left as options.  Many who supported independence from England did so because they did not like paying the taxes England had levied, so raising money through taxes was not an attractive option for the newly minted Treasury.  Issuing currency to pay those debts was also tricky, as with a mostly barter economy back then, any kind of liquidity injected into the…

We’ve long scoffed at the term “risk-free” when referring to U.S. government bonds as there have been countless times when they’ve fluctuated in value well beyond what most would consider “risk-free”. Volatility tends to show up in anything that’s traded freely, in markets, by humans. However, the greater than 40% decline in long-dated U.S. government bond prices since the summer of 2020 has completely obliterated any remaining notion of U.S. sovereign debt being devoid of risk. There are really important lessons and implications to this bond implosion. First, the lessons: Lesson #1 No investment is risk-free. Anything that trades on…

It’s hard to grasp the significance of a situation that plays out one day at a time over years. Little changes happen periodically and intermittently that get us to a place that eventually looks and feels very different. But, because we were part of those changes along the way, we have to work to shake off the familiarity of the world around us and remember the one that existed before. And, if we reach the edges of our lived experiences, we may lean on historical record to paint an even broader, more objective picture. There are only a limited number…

Key Points: Economic growth is still slowing despite the talk of a “soft landing”. Given that inflation will likely pick up in the coming months, this creates an environment where the Fed and government can’t rescue markets like they have in the past (due to the risk of exacerbating inflation). The labor force is likely significantly weaker than the low unemployment rate would imply as evidenced by the dramatic rise in the number of disabled workers since 2021 and the negative productivity that exists within the economy. The end result is that economic output per unit of input is weak…

There are two environments where it’s most difficult for us as investors to keep our emotions in check and stick to our gameplan. First, when markets are falling and we’re fighting the urge to sell out at the worst possible time, and second, like right now, when markets seem to be moving relentlessly higher and we’re compelled to chase them. Of course, the important question is whether we’re in an environment that’s friend or foe to those markets we’re tempted to chase since the former would justify the risk-taking while the latter would eventually punish it. As always, the best…

A few months back, we wrote about the Bendy Road, which highlighted how the most prudent path forward for investors, in our opinion, wouldn’t be without some excitement along the way. After all, any worthwhile road trip must have its fair share of changing scenery and moments of exhilaration. There is rarely a straight, perilless path to anywhere worth going. After a fantastic start to the year for more economically defensive asset categories such as treasury bonds and precious metals, the month of May brought an inevitable pullback in prices that, although deeper than one would like, isn’t at all…