Notes on the Week Ahead

The PCE-CPI Gap and the Outlook for Further Fed Tightening

On balance, I don’t believe that the Federal Reserve should have raised interest rates last week. However, I must confess that there was one reference in Chairman Warsh’s

The Fed Paints itself into a Rate-Hiking Corner

In the Broadway musical, Fiddler on the Roof, Tevye, the well-meaning patriarch of a poor family, has to make some tough choices in a complicated time.  Tevye, (who alway

The New, New Normal

The era of low growth, low inflation and super-low interest rates that followed the Great Financial Crisis was christened by Mohamed El-Erian as “The New Normal”. While t

Labor Market Mysteries

In a generally upbeat Jackson Hole speech on Friday, Fed Chairman Kevin Warsh asserted that “labor markets are consistent with full employment”. Given that the current un

The Road to $40 Trillion

Money was tight in our early married years. We bought a house we couldn’t afford, purchased a car we couldn’t afford and had all the expenses attendant on the raising of

What Lies Beneath: An Updated Outlook on the Economy and Investing

The summer of 2026 has been dominated by the AI boom. Some fear that AI is advancing too quickly for thoughtful regulation. Others worry that end-user revenues will lag t

The People versus Inflation

No one liked the defendant. That much was clear. But when the jury retired to consider their verdict, they hardly knew where to start. The case was so confusing and the j

A Top Down View of the Earnings Surge

The earnings season has started with a blast. As of Friday morning, 49 of the S&P500 companies had reported second-quarter earnings, with 85% beating expectations and the

The Fed Communications Debate: Bernanke Versus Warsh

Alan Greenspan, who served as Fed Chairman for almost 20 years, died last month at the age of 100. He was a talented and faithful public servant who guided U.S. monetary

Consumer Sentiment and the Stock Market

Despite very average economic performance, consumer sentiment remains at extraordinarily low levels. While there are many interesting aspects to this phenomenon, one is o

The Healing of Housing

In the pantheon of running injuries, there is a well-established hierarchy. A recreational runner, finishing any marathon, or exerting themselves at half that distance, c

The MOU and Warsh: A Changing Macro Landscape

Last week, as a frothy stock market continued to zigzag across a high plateau, two events occurred with significant implications for the macroeconomic outlook. First, the

The Inflation Outlook and Fed Policy under New Leadership

Last Wednesday’s CPI report, while not a surprise, still showed a year-over-year inflation rate of 4.2% - higher than in any month since April, 2023. For investors, this

Investing in a Divergent Economy

Two weeks ago, Sari and I took a vacation - an extended road trip down the East Coast as far as Charleston and then inland back to New York through the Appalachians. On a

Five Scenarios for the Federal Debt

The Financial Accounts of the United States is a quarterly Federal Reserve publication containing a great many large numbers but very little commentary, presumably becaus

Quarter Days and the Economic Outlook

In 19th century English novels, so-called “quarter days” often provided a chronological backdrop to the plot. A relic of medieval times, the quarter days were Lady Day (M

AI, Inflation and Interest Rates

On Tuesday, the Senate Banking Committee will hold hearings to consider the nomination of Kevin Warsh to be the next Fed chair. His confirmation will likely be delayed un

The Latest News and the Economic Outlook

Evening newspapers, like vinyl records and rotary phones, are fading relics, all victims of the smartphones into which humanity is gradually burying its consciousness. Bu

The Receding Tariff Tide

A year ago this week, the President announced what he described as “reciprocal tariffs” on goods imported from all major U.S. trading partners. These tariffs, which were

The Investment Implications of Shrinking the Fed’s Balance Sheet

In a speech last April, Fed Chair Nominee, Kevin Warsh, lamented the mission creep of the Federal Reserve as well as the Fed’s expanded balance sheet. Many academics agre