Rare Book Monthly

Articles - July - 2021 Issue

The U. S. Economy is Rebounding, so says Jerome H. Powell

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Jerome H. Powell

Economies go through cycles

 

Free world economies are complex systems that balance economic and political realities in democracies.  Recessions and occasionally depressions reflect declines in economic activity and political leadership invariably tries to turn the occasional minus back into a plus.  It’s often only a difference of a few percent but it’s never been easy.

 

Over the past 120 years there have been 23 downturns that qualified as a recession or depression.  Between 1902 and 1929 there were 8 and since 2001 3.  Over the entire period one of these events occurred every 5 years.  In the new century the time between them has increased to 7.33 years.  The difference is that the Federal Reserve has continued to develop tools to manage the economy.  The bugaboo of economic development has been price instability, both as inflation and deflation.

 

We’ll experience some of this over the next 12 months, probably sooner rather than later.

 

The Federal Reserve’s jobs are to keep the economy growing, encouraging the nation to full employment while maintaining the US dollar within a stable range.  The dollar however becomes inherently less stable when more debt is created.  It’s a known risk the Fed has chosen to ignore.  During the Federal Reserve’s admirable intervention during Covid they flooded the markets with liquidity but the reason it’s not been done often has been because it is known to be dangerous.  The risk has been inflation.  Inflation is difficult to control, once it takes hold, because the instinct to raise prices is strong and willingness to cut is rare.  I believe the Federal Reserve understands this very well, while downplaying concerns that logically flow from the evidence around us.

 

The question is do you believe your lying ears or your lying eyes?  The Fed understands if the economy and investing community feels relaxed about further rate increases they gain time to manage rates higher in a way that doesn’t rattle the nation.  It’s a neat trick that depends on the market to believe they can do it.

 

However, such confidence depends in part on what you encounter every day.  If the price of your hoped-for new car is up, way up, pay attention.  If your meals at restaurants are up - pay attention.  If your water and tax bills are higher - pay attention.  If you inquire about having some work done on your home pay attention. If you notice persistent evidence of inflation it’s then useful, even necessary to lower exposure to stock market volatility as the market is very close to fully valued given its current nose bleed PE [price to earnings] ratio.  What is the risk?  A short term 20% decline would simply bring the market multiple down into the high normal range within as few as 10 sessions.  If you are using 50% leverage and the market takes a 20% hit you’ll be down 40% and will be facing margin calls.  To avoid that anxiety prepare for volatility.  The market has been rewarding the adventurous but into the mid-year I expect being conservative will be more comfortable.

 

When the market settles down then build new positions.  A serious correction is overdue.

 

 

 

 

Rare Book Monthly

  • <center><b>California International Antiquarian Book Fair<br>February 10-12, 2023<br>Pasadena Convention Center<br> abaa.org/cabookfair
    <center><b>California International Antiquarian Book Fair<br>February 10-12, 2023<br>Pasadena Convention Center<br> abaa.org/cabookfair
    <center><b>California International Antiquarian Book Fair<br>February 10-12, 2023<br>Pasadena Convention Center<br> abaa.org/cabookfair
    <center><b>California International Antiquarian Book Fair<br>February 10-12, 2023<br>Pasadena Convention Center<br> abaa.org/cabookfair
    <center><b>California International Antiquarian Book Fair<br>February 10-12, 2023<br>Pasadena Convention Center<br> abaa.org/cabookfair
    <center><b>California International Antiquarian Book Fair<br>February 10-12, 2023<br>Pasadena Convention Center<br> abaa.org/cabookfair
    <center><b>California International Antiquarian Book Fair<br>February 10-12, 2023<br>Pasadena Convention Center<br> abaa.org/cabookfair
    <center><b>California International Antiquarian Book Fair<br>February 10-12, 2023<br>Pasadena Convention Center<br> abaa.org/cabookfair
    <center><b>California International Antiquarian Book Fair<br>February 10-12, 2023<br>Pasadena Convention Center<br> abaa.org/cabookfair
    <center><b>California International Antiquarian Book Fair<br>February 10-12, 2023<br>Pasadena Convention Center<br> abaa.org/cabookfair
    <center><b>California International Antiquarian Book Fair<br>February 10-12, 2023<br>Pasadena Convention Center<br> abaa.org/cabookfair
  • <b><center>Swann Auction Galleries<br>View Our Record Breaking Results</b>
    <b>Swann:</b> Gideon Welles, <i>Extensive archive of personal and family papers of Lincoln’s Secretary of the Navy,</i> 1791-1914. Sold September 29 — $281,000.
    <b>Swann:</b> Charles Addams, <i>Rock Climbers,</i> cartoon for <i>The New Yorker,</i> watercolor, ink and gouache, 1954. Sold December 15 — $37,500.
    <b>Swann:</b> Charlotte Brontë, <i>Jane Eyre. An Autobiography. Edited by Currer Bell,</i> three volumes, first edition, 1847. Sold June 16, 2022 — $23,750.
    <b>Swann:</b> Geoffrey Chaucer, <i>The Workes of Geffray Chaucer Newlye Printed,</i> London, 1542. Sold October 13 — $106,250.
    <b><center>Swann Auction Galleries<br>View Our Record Breaking Results</b>
    <b>Swann:</b> Dorothea Lange, <i>Migrant Mother, Nipomo, California (Destitute pea pickers in California. Mother of seven children. Age 32),</i> silver print, 1936. Sold October 20 — $305,000.
    <b>Swann:</b> George Washington, Autograph Document Signed, with two manuscript plat maps in holograph, 1751. Sold October 27 — $37,500.
    <b>Swann:</b> Winfred Rembert, <i>Winfred Rembert and Class of 1959,</i> dye on carved & tooled leather, 1999. Sold October 6 — $233,000.
    <b>Swann:</b> M.C. Escher, <i>Relativity,</i> lithograph, 1953. Sold November 3 — $81,250.
  • <b><center>Sotheby’s<br>Original Film Posters<br>27 January - 10 February 2023</b>
    <b>Sotheby’s, Jan. 27-Feb. 10:</b> Vertigo (1958), poster, US. The ultimate poster on this classic Hitchcock title, one of three known examples. £40,000 to £60,000.
    <b>Sotheby’s, Jan. 27-Feb. 10:</b> Lawrence of Arabia (1962), roadshow poster, US. £8,000 to £12,000.
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    <b>Sotheby’s, Jan. 27-Feb. 10:</b> Bullitt (1968), special test poster, US. £3,000 to £5,000.
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    <b>Old World Auctions (Feb 8):</b> Lot 815. Homann's world atlas featuring 110 maps in contemporary color (1751). $14,000 to $16,000.
    <b>Old World Auctions (Feb 8):</b> Lot 60. Miniature pocket globe based on Herman Moll (1785). $3,500 to $4,500.
    <b>Old World Auctions (Feb 8):</b> Lot 8. Visscher's rare carte-a-figures world map (1652). $14,000 to $16,000.
    <b>Old World Auctions (Feb 8):</b> Lot 158. Matching satirical maps of the US by McCandlish: "Ration Map" & "Bootlegger's Map" (1944). $3,000 to $4,000.
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  • <center><b>Potter & Potter Auctions<br>Fine Books & Manuscripts,<br>including Americana<br>February 16, 2023</b>
    <b>Potter & Potter, Feb. 16:</b> [KELMSCOTT PRESS]. CHAUCER, Geoffrey. <i>The Works…now newly imprinted.</i> Edited by F.S. Ellis. Hammersmith: Kelmscott Press, 1896. $100,000 to $125,000.
    <b>Potter & Potter, Feb. 16:</b> [EINSTEIN, Albert (1879–1955)]. –– ORLIK, Emil (1870–1932), artist. Lithograph signed (“Albert Einstein”). N.p., 1928. $10,000 to $15,000.
    <b>Potter & Potter, Feb. 16:</b> TOLKIEN, John Ronald Reuel. <i>[The Lord of the Rings trilogy:] The Fellowship of the Ring.</i> 1954. –– <i>The Two Towers.</i> 1954. –– <i>The Return of the King.</i> 1955. $10,000 to $15,000.
    <b>Potter & Potter, Feb. 16:</b> CLEMENS, Samuel Langhorne ("Mark Twain") and Charles Dudley WARNER. <i>The Gilded Age: A Tale of Today.</i> Hartford and Chicago, 1873. $6,000 to $8,000.
    <b>Potter & Potter, Feb. 16:</b> LOVECRAFT, Howard Phillips. <i>Beyond the Wall of Sleep.</i> Collected by August Derleth and Donald Wandrei. Sauk City, WI: Arkham House, 1943. $2,000 to $3,000.

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