In The Lonely Bull

The anomaly has been the last decade and a half of loose monetary policy and abnormally low interest rates. Zero interest rates were never going to be sustainable anyway. Easy money, inevitably, introduces distortions in the economy, funding speculation and unwise expenditures. Leverage is encouraged and makes everything more fragile. Discipline is lost.

Finally, we are getting back to more sustainable policies, one that encourages thrift and efficient use of resources. This is the kind of economy many of us grew up with. It will be more sustainable. Do not look for the environment to revert to the easy money once inflation is brought down. Certainly, monetary policy will be used to counter slowdowns and recessions, but do not expect cheap money to persist.

America has done very well with real interest rates. (Those that provide a return above the inflation rate.) Adjusting to this will not be easy. It may be like a drunk having to get sober and living a different life. Some companies may not be able to make the transition. Leverage will be one of the key factors. However, discipline is necessary to put our economy on stronger footing. Evaluating which can, and those that may not be able to do so, will be key to successful investing. A better day is coming. Stay steady my friends.

The Lonely Bull

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