Trump's Game

Ed Yardeni has written an excellent piece on how President Trump seems to be playing simultaneous games of chicken with Fed Chair Jerome Powell and Chinese President Xi Jinping.

We are no longer surprised by statements such as the Fed Chair Jerome Powell is a greater enemy than Xi.

The main argument in the piece is that Trump’s game plan is to create more uncertainty about trade, thus increasing the risks for US economic growth so that the Fed will have to respond with more interest-rate cuts. Unconventional tactics to say the least.

See our marked-up version of the above note and links in the log in area.

The Fed Chair's view of today's challenges

This is a fairly essential read for those who wish to discern in more detail the current Federal Reserve Chairman’s thinking, looking back at three specific periods of the post-war era, and placing today’s challenges within a historic context.

The speech was given at this year’s Jackson Hole Symposium in late August.

“ This year’s symposium topic is “Challenges for Monetary Policy,” and for the Federal Reserve those challenges flow from our mandate to foster maximum employment and price stability. From this perspective, our economy is now in a favorable place, and I will describe how we are working to sustain these conditions in the face of significant risks we have been monitoring.

The current U.S. expansion has entered its 11th year and is now the longest on record. The unemployment rate has fallen steadily throughout the expansion and has been near half-century lows since early 2018. But that rate alone does not fully capture the benefits of this historically strong job market…”

See our marked-up version of the above and links in the log in area.

Berkshire Hathaway - a study in longevity

We were reminded this week about the strength and durability of Warren Buffet’s company, Berkshire Hathaway.

Below is a February 2008 Trustnet article that we wrote on the company and Warren Buffet’s approach to investing and business, entitled Follow the Sage.

“We live in challenging times, and at times such as these it pays the medium to long term investor to take a step back from the market melee, and try to discern where the next opportunities may lie. History teaches us that there are invariably multiple new investment themes and trends which emerge from a fundamental period of dislocation and doubt such as the one we are living through presently.

Negative news abounds from the banks, the housing market, the service sector, on the jobs front, and on corporate earnings growth. Last week-end the IMF revised downwards its forecast for worldwide growth for 2008, but you got the distinct feeling that they are as much searching for straws as they are doing hard & confident analysis of the current and future state of the world’s major economies.

No one knows if the US will avoid recession, and least of all, I would suggest, the IMF. Equally, no one knows whether the much-discussed decoupling theory – that the world can grow even when the US is in recession – has much or any validity.

For investors who don’t get paid for intricate macroeconomic analysis or sitting on their hands well beyond the point of maximum opportunity, this is a classic time to be seeking out solid investment opportunities. Witness Warren Buffett, who invariably only really gets busy in such times. If it’s time for him to go to work, surely it might pay us to turn away from the endless gloom watch, and return to old-fashioned tyre-kicking. It’s an irony that when the big picture noise is at its loudest and most pessimistic, it is usually the time to return to bottom-up analysis of company fundamentals.

The companies that are thriving in this environment, and whose share prices are giving tell-tale signs that they are more than holding their own, despite the downturn, these are the names to be adding to your wish list. Then add patience and the passage of time, and you have the ingredients of a future investment strategy, looking beyond the current gloom and despair.