Notes on the Week Ahead

Speeding More Slowly

My wife, Sari, was born with a lead foot. 

By all rights, she should have accumulated a bountiful harvest of speeding tickets over the course of her career.  But she understands how the system works. 

If she is, for example, buzzing along at 75 in 55 mile-an-hour zone and sees the state police ahead, she dons a sunny smile and gently taps on the brakes.  This action, of course, still leaves her well above the limit.  However, for some reason, the police seem to appreciate the gesture as a respectful acknowledgement of the majesty of the law.  Speeding more slowly is apparently regarded as akin to not speeding at all.

After the Storm

When my wife, Sari, was 9 years old, a tornado touched down in Grand Rapids, Michigan and destroyed most of her home.

 

Luckily she and her family were at her grandparents that evening and so weren’t there when the storm hit.  But the next day, when they all drove back to the neighborhood, it was barely recognizable with many houses destroyed or badly damaged.  Her great concern, at the time, were the family pets who thankfully managed to ride out the storm unscathed.  But her parents must have been traumatized by the destruction they saw all around them, wondering how long it would be before everything could get back to normal and whether there were some things that would just never be the same.

The Season of Supercharged Demand

After a long period of absence, I’ve visited New York multiple times in the last month. Each time, the city has seemed more bustling than the week before, with fewer masks, more crowded restaurants and more New Yorkers expressing their emotions by their habitual cheery and liberal use of their car horns. As cases of Covid continue to fall, it is as if springtime has arrived in the city and in the nation.

Why the Bond Market is Ignoring Inflation

Some months ago, as the snow melted off the lawn, a rabbit appeared at the end of our back yard. Our twin shih tzus, Buddy and Bruiser, spotted the intruder and, barking furiously, headed off in pursuit. The bunny, having given our fearless duo a head start, then bounced off into the undergrowth, cotton-tail waving in the air, leaving them barking at each other as if to say “Where’d he go? Where’d he go?”

The Fed’s Forecasts

Next week, the Federal Reserve holds its fourth FOMC meeting of the year.  After the meeting, they will release a statement, very likely communicating no change in policy.  Fed Chair, Jerome Powell will likely emphasize the same message in his post-meeting press conference.  However, for investors, the most important information will be delivered in numbers rather than words, as the Fed discloses the median forecasts of FOMC members in their June Summary of Economic Projections.

The Evolving Expansion

I recently read a book, entitled The Code Breaker by Walter Isaacson, about a revolution in gene editing prompted by the discovery of something named CRISPR in bacterial DNA. I won’t delve into the details except to say that the book is a great read and made me appreciate, once again, the relative simplicity of the economic systems I spend most of my life pondering compared to the extraordinary structure and machinery within a single human cell.

U.S. Housing - Booming not Bubbling

In 1895, at the age of 60 and in some financial difficulties, Mark Twain embarked on a speaking tour of the British Empire to pay the bills. He later published an account of his travels in a book entitled: Following the Equator.

Midterm Report Card

The all-boys Catholic school where I spent my formative years was a traditional establishment.  The air was thick with chalk dust and a steady tension between a rebellious student body and an establishment which resorted to corporal punishment to maintain discipline.  However, a second line of defense for the authorities was the issuance of report cards every six weeks.  Twice a quarter, the Headmaster would stride into the class room brandishing a batch of colored cards to be signed by parents and returned.  A rare pink A-Card, containing all 8s and 9s would be a cause of domestic celebration.  A B-Card, colored blue, would contain some 7s and would generally receive little comment from my parents.  A green C-Card, was a more serious matter requiring more elaborate explanations at home.  For most of my school career, it was B-cards, but the Headmaster seemed to enjoy my nervousness as he toyed with the cards before revealing my fate.   

The Jobs Mosaic and the Outlook for Interest Rates

Last Friday’s April Jobs report was clearly much weaker than expected. On average, analysts expected a payroll job gain of 1,000,000, with the unemployment rate falling from 6.0% to 5.8%. In the event, non-farm payrolls rose by just 266,000 and the unemployment rate rose to 6.1%.

The Washington Menu

On May 22^nd, my wife and I plan to eat dinner at a restaurant.

In normal times, such a news item would not exactly make the family headlines.  But since the pandemic struck, we have taken a cautious approach and eaten at restaurants only once or twice and then only if outside dining was available.  For the last six months, a New England winter has deprived us of even that option.

However, on Wednesday, Sari got her second shot and I get mine on May 8^th.  And so, two weeks later, I can already see myself perusing an oversized menu at a favorite restaurant.  Everything will look good and my only problem will be maintaining some restraint.  While the bread, the wine, the appetizers, the salad, the steak, the pommes frites and the molten chocolate cake will look equally appealing at the outset, I fear their cumulative implications for a digestive system which has only a distant memory of such bounty.