Investment Guru Stock Tips and Expert Advice

Macroeconomic forecasting is too politicized. I don’t mean that in a partisan sense, though it may be so. The bigger problem is that forecasters spend most of their time thinking about central bank decisions and government policies. In the long run, those aren’t the most important factors. Not even close. What really drives economic progress is human ingenuity and the innovation it produces. In other words, technology. I use that term in its broadest sense: applying knowledge to make life better. Nowadays we associate technology with electronic devices, but it’s much older. The wheel was an early technology. We progressed to steam engines, automobiles, telegraphs, radios, airplanes, computers, and more. Each (and a million others) boosted economic growth. Their combined effect brought us to where we are today. Read more.

If you could ask the world’s top central bankers what really terrifies them, I think the honest answer would usually be “deflation.” It is their greatest nightmare. They think a little inflation is good (thus the 2%+ target), and they’re confident they can subdue it if necessary. Deflation is a bigger problem. Let’s note, however, that these aren’t either/or conditions. They have degrees of severity. Indeed, the last four decades we’ve seen disinflation—a mild form of deflation—in many segments of the economy. Compared to that, even relatively mild inflation looks quite concerning. And many smart people are concerned, as I described in last week’s review of SIC inflation talk. Read more.

The economy is booming and optimism is high. People are going out to events again as the world normalizes. But capacity utilization is also high and there is significant and broad-based inflation. The Fed expects this to be transitory but some CEOs seem to disagree. Read more.

One of the major themes I’ve been operating under for the past several years posits that, due to passive investing’s increasing popularity, opportunities outside of the major indexes should become both more prevalent and more attractive. In many respects, acting on this thesis has served me well. Recently, though, traditional passive investing has become a bit less popular as many investors have eagerly embraced alternatives or variations such as ESG and its most speculative elements like green energy and electric vehicles. Now there are a myriad different ways to define ESG but, in practice, it has resulted in portfolios with a higher concentration in popular sectors like tech and an underweight of unpopular sectors like the traditional energy sector. Read more.