At the Ron Paul Institute for Peace and Prosperity, former congressman and presidential candidate Dr. Ron Paul explains that the “desire to monetize the federal debt is one reason, if not the main reason, why the central bank keeps interest rates low.” He writes:

Politicians favor an “easy money” policy because it creates an (illusionary) economic boom. The Fed-created boom helps the politicians remain in office. A reason politicians favor low interest rates is they facilitate government spending and debt, thus enabling politicians to aid powerful special interests via government spending. The desire to monetize the federal debt is one reason, if not the main reason, why the central bank keeps interest rates low.

The policy of perpetually low interest rates favored by politicians will hasten the inevitable collapse of the fiat money system.

He concludes:

Since Congress created the Fed in 1913, the US dollar has lost over 97 percent of its purchasing power. This proves Donald Trump is right about the need for drastic changes in monetary policy. However, he is wrong to think that he, or any politician, bureaucrat, or businessperson, is capable of knowing the “correct” interest rate. Instead of giving politicians greater ability to influence the Federal Reserve, the next president should work with Congress to pass legislation legalizing competing currencies, forbidding the Fed from purchasing federal debt, and auditing and ending the Federal Reserve.

You can see what Paul is referring to in the charts below. The first is the total marketable and non-marketable public debt of the United States.

The second chart is a visual of the plight of the American dollar since the creation of the Federal Reserve. As Paul said, you can see that the dollar has lost around 97% of its value. That calculation uses the generous, government-massaged inflation numbers of the CPI.

Read more from Paul here.

Long-time readers are familiar with Young Research’s Moving the Goods Index, a market-cap-weighted stock index made up of nonairline transportation companies. If I had to choose only one economic indicator to use, this would be it. Transportation companies lead the business cycle. The theory is that you have to move the goods before you sell them. If the index is reaching new highs, economic growth is likely improving. And if the index is dropping to new lows, economic growth is likely slowing.

For the last couple of years, since the end of the major Covid shutdowns, the index has been consolidating, with slightly higher highs and slightly higher lows. Keep your eye on my Moving the Goods Index as I post about it here. A breakdown could signal economic trouble ahead, and a breakout could signal faster growth to come. 

If you’re worried about the economy and need a port in the storm, click here to subscribe to my e-mail alert.

In 1985, America was just coming off one of the worst bouts of inflation in its history. Much as today, with inflation trailing off but still a worry in everyone’s mind, an argument naturally broke out between extremists in the financial media over whether America was poised for reignited hyperinflation or a deflationary death spiral. I had recently pioneered the Financial Armadillo Strategy and was asked to add my voice to the discussion with an op-ed in the June/July 1985 issue of Reason magazine. Instead of piling on with more extremism, I wrote:

In the last decade, the world economy has become increasingly complex and unpredictable. Today, depending on the evidence being considered at the moment, you can make a compelling case for deflation and depression, hyperinflation, and every economic scenario in between. As an economic and monetary analyst, I have my own carefully considered opinions on the subject. However, they are opinions, not guarantees of the future. No one can be absolutely sure what tomorrow will bring.

The major protagonists in the deflation versus hyperinflation controversy are urging investors to choose sides. They claim an individual’s financial future depends on betting the right horse. This may be true for speculators trying to make a killing in the financial markets, but it is emphatically not the case for capital-preservation-oriented investors, who should be preparing themselves for any economic eventuality.

The “Financial Armadillo Strategy” is designed to preserve and enhance individual wealth in every conceivable future economic environment. Like the armored little creature from which it gets its name, the Financial Armadillo Strategy is both offensive and defensive in nature. It adapts to a wide range of investment climates and promises to endure, whatever economic upheavals may be on the horizon. The armadillo has survived since prehistoric times. Armadillo-strategy investors will be among those to survive what could truly be a tumultuous economic future.

Then, as now, I encouraged investors to avoid extremism and emotional advice in the face of the inflation-deflation argument. I concluded:

It’s not easy for individuals to ignore the often emotional advice given by financial pundits on either side of the inflation-deflation issue. Even an extremist can, on occasion, be correct, and those who follow such advice can make a quick killing. However, when extremists are wrong, their disciples can be wiped out. It’s better to be safe than sorry. The Financial Armadillo Strategy offers a common-sense way to deal with the unknown.

When you want to discuss common sense approaches to the investment unknown, visit www.younginvestments.com, and give my office a call. In the meantime, click here to subscribe to my free Young’s World Money Forecast email alert. It’s your port in a storm.

In June of 1993, Bloomberg’s Pam Black asked me how to stay ahead of the inflation curve. I told her to “dip a toe” in gold. I continued:

“Buy it with the idea that you won’t make any money. Hopefully, your other assets will do well, but if they don’t, you’ll be damn happy you were in gold.”

Take a look at the chart below, and you’ll see how gold and the dollar have performed since that article was published.

You want a history lesson? In 1987, I was interviewed by The Kiplinger Magazine – Changing Times (which is known today as Kiplinger’s Personal Finance). This wasn’t long after I had written Financial Armadillo Strategy with the late David Franke.

At the time, America was coming off some of its heaviest inflation ever, and investors wanted a solution to the problem. Despite those high rates of inflation in the 80s, I warned that even somewhat more moderate rates of inflation—like those Americans have seen over the last two years—do real harm to investors. “I don’t mean 10% or 15% inflation; 4% or 5% is absolutely debilitating,” I said.

Even then—like today—I was focused on dividends and compounding to fight inflation. From Kiplinger’s:

Those nearing retirement want assets that are safe but lucrative—easier said than done. Young’s “financial armadillo” seeks to deliver on both counts. It’s designed to place a protective shell around your portfolio, while allowing it to forage for profits at will. This armadillo has but three legs: equities for total return, Treasuries and gold. “The average investor has no conception of what total return is all about,” says Young. “From 1936 to 1986, the compounded growth rate for the Dow was 4.8%. If you take shorter time spans, the results are similar. That’s much less than you would expect.” But when you add dividends, the total return is 9.4%, says Young. “Dividends are extremely important. They should be worth about half the game.”

Take a look at my chart below on the plight of the dollar since Nixon ended gold convertibility in 1971. Compared to the dollar then, today’s dollar is worth only 13.3 cents.

Americans have watched the dollar decline in value ever since the government severed the dollar’s last links to gold, a return to which I have always advocated. The author of the article dubbed me an “Inflation Dodger.” That’s a name I’ll proudly accept in light of the destruction of dollar value since the 1970s. When enduring that sort of purchasing power loss, all retirees may need to become inflation dodgers. To this day, dodging inflation guides much of my work at my family investment firm.

Since the “temporary” stimulus package of 2009 was enacted by Barack Obama and greased through the system by Ben Bernanke’s Federal Reserve, Americans have faced ever more burdensome budget deficits. After Joe Biden moved into the White House, the dangerous spending reached a new level. Uncontrolled money printing has set America up for some hard lessons as the interest on the federal debt rapidly closes in on $1 trillion a year.

This time around, the Federal Reserve isn’t running a bond-buying program while pegging interest rates at zero. Instead, the Obama/Biden-style spending will be forced to face the music on interest. Now, after years of profligate spending, Joe Biden has put America’s treasured credit rating at risk. On Friday, November 10, 2023, Moody’s Investors Service cut its outlook on U.S. sovereign credit to negative from stable.

In January of 2012, I wrote about the Obama-era downgrades of America’s debt in the Fall of 2011:

The international financial landscape today is far different than at any time in the past. I mean a lot different. Due to profligate mismanagement by our politicians in Washington, the U.S., for the first time in history, has lost its AAA-credit rating. Meanwhile, the Fed is pouring more and more high-octane fuel into the economic engine with increasingly foul results.

The downgrades are a symptom of the real problem, which is too much spending. Since inflation laid bare how badly accommodating Federal Reserve policy can mess things up, Biden’s overspending is exposed for the danger it is. Moody’s, S&P, Fitch, and all Americans will inevitably have to recognize the danger in Biden’s debt-fueled spending binge. Perhaps they will even do so before it’s too late.

Originally posted on May 13, 2021.

Back in February, I wrote to you about how I started in the institutional research and trading investment business at Model Roland & Co. on Federal St. in Boston in August 1971. Just up the street from Model were Fidelity Investments, and Wellington Management, both of whom I called on from my very first hours on the job.

Over five decades ago, Ned Johnson, aka “Mister Johnson,” ran the show at Fidelity. At Wellington, Jack Bogle, “Mr. Mutual Fund,” had not yet left Wellington to start Vanguard.   

My focus in the initial going was international research and trading, and remains so today all these decades later.  I still consider Fidelity and Wellington the industry leaders.

Both firms feature great cultures, industry-leading technology, well-rounded investment programs for individuals, families, and small businesses–the type of folk I hoped to be associated with throughout my investment career.     

Not a business day goes by that one of my associated companies is not involved with one or more of Fidelity or Wellington’s services.

I never would have expected, as I started out in August 1971, that I would be working with Fidelity and Wellington for over 50 years.

In Wellington’s case it, to this day, manages hundreds of billions of dollars in blue-chip, “prudent man rule” quality investment mutual funds. 

In the early ’90s, Wellington’s chief investor relations officer informed me that I directed more mutual fund assets Wellington’s way in a given year than did the rest of the combined American investment newsletter industry.

And now in 2021, with our little family investment management company requiring a cutting-edge custodian for our $1.3 billion-dollar conservative Boston-style management company we, not surprisingly, rely on Fidelity. 

Your Survival Guy, hard to believe, joined my family business over two decades ago. But before that, he was at Fidelity which he too recalls as being run like a family business. This week he explains Fidelity’s unique positioning during the pandemic.

In Rhode Island, you’ll find a company that embraced the suburbs long ago, Fidelity. The company maintains a sprawling campus in Smithfield, RI, and will soon be hiring many young Rhode Islanders to fill out an expansion. Rachel Nunes reports for Patch:

Fidelity currently employs 3,200 people in Rhode Island, and the new positions will add 500 over the coming fiscal quarters.

“Fidelity Investments is excited to grow our footprint and expand our existing regional site in Rhode Island,” said Mark Barlow, the company’s senior vice president of personal investing. “We’re increasing the number of client-facing associates to support not only unprecedented customer growth and engagement, but also our associates who work hard every day to help our clients. Expanding in Rhode Island gives us access to a talented and educated workforce in the Ocean State to fill these positions that are new to this market for us.”

Applicants to the new jobs will not need to be licensed financial professional, Fidelity said. Instead, the company is looking for candidates with “strong customer-service skills, including those working in industries like hospitality and retail that may have been hit hardest by the pandemic.”

That’s just a small part of why Fidelity is number one.

Action Line: If you haven’t already escaped the city, consider a trip to the country today to scope out your future.

P.S. Read more about how I got my start at Model Roland & Co. back in 1971, and gold’s 50-year price explosion.

Attempting to time the market could be the most popular mistake among market participants. Here’s what I wrote about market timing back in January 1997:

Panic!…

History has been made. Since the exact summer Dow low of 5346.55, the Dow has soared an amazing 21.9%. Never in stock market history has the Dow added 1,000 points so fast. As a cap to the monster four-month surge, the Dow Jones News Service headlined a lead story with, “November Point Gain Was Largest Ever for the Dow.” To anyone who was foolish enough to sell stocks in front of this tidal wave, the bailout goes down, in terms of points, as the single worst market-timing event in history.

How have you fared? With a history-making, four-month supercharged gain under our belts, now is the right time to take a little investor inventory. Are you on board with my serious long-term battle plan? Or are you running from rock to rock like most investors, dodging bullets as in an old Tom Mix western? Well, you needn’t be bushwhacked by savage market swings.

Even professionals can get market timing wrong. Later in the same piece, I wrote:

[H]ere is a tragic example of market timing at its bankrupt worst. At the end of 1995 and the opening days of 1996, the fund manager for the biggest U.S. equity fund made a massive timing/sector bet by switching the fund’s biggest positions into long bonds instead of equities. In effect, he created a balanced fund for mostly unknowing investors who had largely invested in Magellan Fund as a way to participate in equities through smart stock picking. Well, the mammoth timing/sector bet was a disaster, and the fund manager is now history. And Magellan, the worst performer among the big 10 equity funds year to date, has beaten not one of its nine competitors.

Successful investing is primarily all about compounding, time, and patience. It is more about intuition and less about anything else. And it is more about diversification and less about selection. It is all about doing less and not more.

Below, you can watch Riders of the Purple Sage, filmed in 1925, starring Tom Mix, Beatrice Burnham, Arthur Morrison, Warner Oland, and Wilfred Lucas. The film, directed by Lynn Reynolds, was based on the novel of the same name by Zane Grey, published in 1912 by Harper & Brothers.