On Tuesday, November 30, during testimony before the U.S. Senate Banking Committee, Jerome Powell, Chairperson of the Federal Reserve bank, did an about face on monetary policy. Powell appeared to take on a new mantle, that of the nation’s chief inflation fighter, casting aside his former dovish stance towards continued easing of monetary stimulus. Investors are asking “what changed?” “We’re now looking at an economy that’s very strong and inflationary pressures that are high,” Powell said. He went on to say that it might be “appropriate to wrap up our purchases a few months earlier.” Powell was referring to the…
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It’s been fun 2021
Dear Friends and Family, A lot happened to Berkshire Money Management in 2021. A lot has happened to all of us. As a nation, we’ve begun to return to restaurants, gyms, and movie theaters. I’ve seen hugs chosen over fist bumps. The pandemic is not entirely behind us – it’s affecting psyches and small businesses. Collectively, we’re healing. The 7-day moving average of COVID-19 deaths is on the decline. However, as I write this, the 7-day moving average of COVID-19 deaths is still 1,115 deaths per day. It will be some time before completely healing. And we’ll see those scars…
The Back-to-Normal Index
“Everything was perfectly healthy and normal here in Denial Land.” —Jim Butcher, “Cold Days” A friend of mine recently came back from a two-and-a-half-week work tour of Europe, where she was trying to raise funds for her private equity fund. I compared her report to my recent two-day trip to New York City (I love New York, but let’s face it – her life is much cooler than mine). In Europe, masks are practically a thing of the past. You go and do what you want, when you want. In NYC, you must show proof of vaccination to get into entertainment…
Thanksgiving post-pandemic
Consumers are making up for last year’s subdued Thanksgiving holiday. Air travel has jumped. Traffic on the roads is expected to be heavy. Grocery stores are crowded, and families are getting back together again all over the country. Hurrah! As most readers know, last year’s holiday was a bit of a dud largely because of the pandemic. Fewer people travelled. Instead, many of us decided to play it safe. Across the nation, family members decided to remain home, avoid the possibility of contagion, and postpone celebrating together until this year. That was a smart decision. In the meantime, the coronavirus…
When will supply chain issues ease?
August 2022. Thank you for coming, everybody. Don’t forget to tip your waitstaff. Oh, you came for more than just the punchline? Well, pull up a chair and listen to me weave an oxymoronic tale of educated speculation. (“Educated speculation” — patent pending on that phrase.) I went to college in the early-to-mid 1990s. Back then, the study of economics was based on Adam Smith’s “invisible hand,” the unseen force that guided our short- and long-run decisions to maximize our financial outcomes. In the 1990s, I was told that I could eat all the candy and bread I wanted and…
Market’s week of indecision
Stocks and bonds traded in a tight range for most of the week. Some stocks were rewarded, while others punished, based on their earnings results. The U.S. dollar hit a series of new yearly highs, and just about everyone is waiting for President Biden’s pick to head the Federal Reserve Bank. That announcement could come as early as this weekend. Chairman Jerome Powell’s term will end in February 2022. He is a Republican, picked by former President Donald Trump. He had a somewhat rocky relationship with the ex-president but did manage to maintain the independence of the central bank despite…
The teacher shortage
The U.S. labor shortage is hitting the public education sector hard. Yes, COVID-19 and its mutations have had a lot to do with the lack of teachers, but the problem predates the pandemic. In just the last two months, 65,000 public education employees left the industry. Across the United States, in October 2021, there were 575,000 fewer state and local education employees than in February 2020, according to the latest employment report of the Bureau of Labor Statistics. The pandemic, in some ways, was simply the straw that broke this camel’s back. Stagnant wages, or worse, falling wages, have beset…
Is the stock market too high?
At the end of the first trading week for November 2021, four stock market indices closed higher than two standard deviations above their 50-Day Moving Average (DMA; a moving average is a technical analysis indicator that smooths out daily price fluctuations). The S&P 500, the NASDAQ, the Dow Jones Industrial Average (the Dow), and the Russell 2000 simultaneously closed above those extreme overbought levels for the first time in 455 trading days (since January 16, 2020). This is where I tell you to batten down the hatches and get ready for a pullback, right? Not necessarily. Historically, when this has…
Annual inflation hits 30-year highs
The stock and bond markets knew inflation was coming. This week’s 6.2% jump in the Consumer Price Index drove home the fact that inflation has become a fact of economic life, at least for the near future. The jury is still out on whether inflation will prove to be “transitory” as the Federal Reserve Bank argues and as some economists believe. Others fear that we could be on the verge of something a little more serious. The fear is that the Fed might be forced to raise interest rates if that were the case. The Producer Price Index (PPI) and…
SALT away?
High income tax states like Massachusetts, New Jersey, California, and New York would appear to be winners if President Biden’s “Build Back Better” plan is finally passed by Congress. The Trump-era limit on state and local tax deductions could provide a $200 billion (or more) wind fall for wealthy Americans. As it stands now, Congressional Democrats, especially those who represent high tax states, are crafting a change in the SALT deduction cap. Presently American households can only deduct $10,000 of state and local taxes from their federal income taxes. That cap deduction is poised to end by 2026. In a…