“If you want to stay ahead, keep one eye on the Fed.” — Patrick Balogna (Maxims of Wall Street, p. 65)
As we enter the fall of 2023, Wall Street faces a conundrum: an aggressive fiscal policy with growing trillion-dollar deficits by the Biden administration in the face of a tight monetary policy by the Federal Reserve.
Chart #1 shows how the Biden administration is spending money like water during a time of full employment, which goes counter to what most economists recommend (even Keynesians favor a balanced budget or surplus when the labor market is tight).
The deficit skyrocketed during the Covid panic, and then retreated, only to move steadily higher under Biden. Deficits put pressure on interest rates.
Meanwhile, under chairman Jay Powell, the Federal Reserve has engineered one of the tightest monetary policies in decades following the easy month policies during 2020-21. Interest rates are at their highest level in 20 years. And the money supply is now down to negative territory. Chart #2 shows the direction of the broad-based money supply (M3).
Source: Tim Congdon, Institute for International Monetary Research (IIMR)
The result is a stubborn elixir of high inflation and high interest rates, which Wall Street hates.
The first week of September is down on Wall Street — September is famous for being the most dangerous trading market of the year. Fortunately, we are well protected with a diversified portfolio of high-income stocks and funds, as well as a growing position in commodities and a small position in high-yielding (5.2%) money market funds.
Recession in 2024 is Likely
With rising rates and an inverted yield curve (short-term interest rates are higher than long-term rates), what are the chances of a recession and bear market in 2024, the all-important election year?
Last month, I was on the Ben Shapiro Show and warned viewers that we are headed for a recession. The inverted yield curve is just one indicator. Another is the sharp slowdown in business (B2B) spending, shown in chart #3:
I will know more when my gross output (GO) statistic comes out in early October. It measures spending at all stages of production, 62% of which is linked to the business sector. The key leading indicator is business spending, which has been in a slump in 2023.
In fact, the Conference Board reports that the U.S. Leading Economic Indicators have been in decline for over a year now.
Recession in 2024 Could be a Boon to Republicans
There’s a silver lining for the Republicans if a recession strikes America in 2024. A bear market is bad news for an incumbent. Unfortunately, the majority of Republicans prefer Donald Trump. I especially like former Governor Nikki Haley (but see my comments below about Vivek Ramaswamy).
‘An Education in Itself.’
At the end of the interview, Ben Shapiro complimented me on my book, “The Making of Modern Economics,” saying, “It’s the best book in economics that I have ever read.” Thank you, Ben!
Yesterday, I received a two-page letter from a successful businessman and long-time subscriber who recently ordered my two books “The Making of Modern Economics” and “The Maxims of Wall Street.”
He writes, “What a bountiful banquet of economic thought and history ‘The Making of Modern Economics’ is! Just finished reading it and enjoyed it immensely. It’s an education in itself.” He also added a postscript: “Enjoying Maxims too!”
To order copies of either book at a discount, go to www.skousenbooks.com. I autograph each copy and mail it at no extra cost if mailed inside the United States.
I’m coming to Miami!
I will be speaking at the Economic Club of Miami on Sept. 14, 2023, 5:30 — 7:30 pm:
Location: Miami Dade College Wolfson Campus, 300 NE 2nd Avenue, Room 2106, Miami, FL, 33132
Price is $25 for the entrance fee. To register, go here.
Join Me at My Favorite Investment Destination: New Orleans!
I always look forward to the New Orleans Investment Conference, to be held this year on Nov. 1-4 at the Riverside Hilton Hotel. It is the granddaddy of investment conferences, especially for gold bugs, and I have attended every year since 1976! New Orleans is my favorite town to visit, with great jazz, a cultural haven and the world’s best restaurants.
Presenters at this year’s conference include keynote speaker Matt Taibbi. He was one of the favorites at FreedomFest in Memphis, speaking about his expose of Twitter censorship and the future of free speech on social media. Other speakers include Peter Schiff, Jim Stack, Brien Lundin, Robert Prechter, Mary Anne and Pamela Aden, Rick Rule, Adrian Day, Jim Rickards and the Real Estate Guys Robert Helms and Russ Gray.
To sign up, go to this link. Or call 1-800-649-8411 and be sure to mention you are a subscriber.
P.S. Come join me and many of my Eagle colleagues on an incredible cruise! If you book before Sept. 29, you’ll receive a spend-as-you-wish $250 ship board credit! In addition, this is all-inclusive — meals, drinks and even the excursions are included in your one-time price! We set sail on Dec. 4 for 16 days, embarking on a memorable journey that combines fascinating history, vibrant culture and picturesque scenery. Enjoy seminars on the days we are cruising from one destination to another, as well as dinners with members of the Eagle team. Just some of the places we’ll visit are Mexico, Belize, Panama, Ecuador and more! Click here now for all the details.
‘Shaking Up Washington: Viva Vivek!’
“When the King is far the people are happy.” — Chinese proverb
I’ve met with several of the Republican candidates over the years, including Larry Elder, Chris Christy and Governor DeSantis.
But none have surprised me more than biotech business guru Vivek Ramaswamy. He is a breath of fresh air. He is shaking things up and rising in the polls. His attacks on big government and the woke culture are so strong, that I’m sure he will eventually be destroyed by the establishment media. They are already attacking him for his harsh statements on some Democrats and questionable business dealings revealed in his tax returns (the first candidate to disclose 20 years of tax returns!).
Meanwhile, he is the #1 candidate that the media loves to interview for higher ratings. It’s fun to watch his clashes with CNN, MSNBC, ABC and Fox News. Here’s his raucous interview on MSNBC: ‘The hard truth’: Mehdi grills Vivek Ramaswamy on his record and past statements – YouTube
Unlike Governor DeSantis, Vivek recognized the importance of speaking at “the world’s largest gathering of free minds” in Memphis this summer. He decided to come to our private dinner party at the Peabody Hotel and I’m glad he did. He was gracious and did not put on airs. He has to be the most articulate candidate I’ve ever met — a smooth talker who never says “ya know” or “and dah…” He seems to know everything about anything, from legislative law to foreign policy, even though he’s never held office before. He’s very approachable and likable, although his views seem off the wall at times.
I asked him about wanting to increase dramatically the number of executive orders, which I consider a form of dictatorship, and he said, “No, most of the executive orders I want are just to undo the executive orders of the past.” Good answer.
I like his ten truths on his platform:
God is real.
There are two genders.
Human flourishing requires fossil fuels.
Reverse racism is racism.
An open border is no border.
Parents determine the education of their children.
The nuclear family is the greatest form of governance known to mankind.
Capitalism lifts people up from poverty.
There are three branches of the U.S. government, not four.
The U.S. Constitution is the strongest guarantor of freedoms in history.
He wants to reduce the administrative state by shutting down the FBI, Dept. of Education and the Nuclear Commission. He wants to lay off 75% of the federal government’s bureaucracy and waste. He has some creative ideas for ending the Russia-Ukraine War and wants to send the military to the southern border to shut off the illegals coming in.
I just wished people like Vivek Ramaswamy would run for governor first before running for president, because he is clearly naive if he thinks he can fire half the federal bureaucrats and abolish the FBI, etc. Several Republicans like Reagan have campaigned on abolishing the Department of Education, but instead have increased its budget. So his agenda is easier said than done. But I do like his enthusiasm for real reform.
Good investing, AEiOU,