I will be writing more about all of this tomorrow in the Dividend Cafe. I do not believe it is entirely true about what we know and don’t know regarding what POTUS believes and what he is doing because I do not think he knows exactly what his plan is right now. I do know exactly what knowledgeable (and other unknowledgeable) people are advising him right now, and I can say with total certainty that (a) This isn’t done yet, and (b) I believe tariffs are as damaging as you do.
~ David L. Bahnsen, March 6, 2025

How would you get more goods when the companies producing goods know that the products they are making will be worth less when they are done making them than when they started? How do those who produce do the economic calculations in the face of falling prices? And why do consumers consume when prices will be lower later? Now, the counter is always that consumers need and want things so that they will buy anyway, and that is absolutely true of some things. But if the goal is price stability and optimal conditions for economic calculation (as calculation feeds productivity and productivity feeds growth), deflation is the worst thing imaginable. When you are talking about a price level and not just “eggs went higher” or “auto insurance went lower,” the discussion of inflation, and yes, deflation, is holistic. In deflation, if all we were talking about was declining prices of the things you buy, I can see why you or I might like that, even though I believe there will be fewer things for us to buy in the future. But are you also willing to buy those cheaper things with your declining wages?

Finally, and this is the part no one actually wants to address. Households have debt (whether we want them to or not). The debt does not deflate. Governments have debt. Good luck solving that one. That debt does not deflate. Dollars that are worth MORE in deflation (buying more things) have to be used to pay off DEBT that has not changed. The interaction between debt and deflation is what Great Depressions and Great Recessions are made of. I accept the argument, “Well, let’s not have that debt, then.” In fact, I think I wrote it once. But debt-deflation spirals crush economies to dust. Even in the most benign of circumstances, a stable money supply that grows as close to the supply of goods and services as possible optimizes price stability and, therefore, economic calculation and productivity.
~ David L. Bahnsen, March, 5, 2025

Long-dated bond yields are reflective of NOMINAL GROWTH expectations, which include inflation, but, more importantly, “real growth” (nominal growth minus inflation). As bond yields have come down in recent weeks, inflation expectations in TIP spreads had gone HIGHER, and recently stayed level. Yet, bond yields have come down – ergo, what is being priced in is not expectations of lower inflation but expectations of lower growth.

Now, even inflation expectations are hard for bond investors to price in out of tariffs quickly when no one has any reason to believe tariffs will really (and sustainably) happen. But there is no question that the prima facie dynamic evident in bond yields is lower expectations for real growth.
~ David L. Bahnsen, March 4, 2025

This is very different from the RESEARCH and ANALYSIS that I read, which I consider to be far more important. I have been a very long-time institutional subscriber to several significant macro research firms and consider this investment among the smartest dollars we spend at my practice. I take in all of the research from Strategas Research and benefit most from their work in Public Policy. I adore Louis Gave and many of the economists at Gavekal Research and benefit most from their often contrarian views on macroeconomics and monetary policy. Rene Aninao at Corbu is a no miss for me when it comes to geopolitics. I read Richard Bernstein, Ed Yardeni, Peter Boockvar, and a handful of others that have less institutional platforms than the three aforementioned.

But the question is NEWS SOURCES. I am set for pop-up alerts on all my mobile devices from the Wall Street Journal, Bloomberg, Barrons, and CNBC, and my office televisions set-up generally have Fox Business, CNBC, and Bloomberg all going at once (for breaking news, interviews I care about, and wallpaper). I have a subscription to every paper you could imagine but I generally use my New York Times, Washington Post, LA Times, and OC Register subscription for select articles of interest – not “browsing.” If I could only read one paper, it would be the WSJ, and if I could only read one opinion-editorial page, it would be National Review. If I had to watch TV for my news, I would become a monk and figure out a different way to live.
~ David L. Bahnsen, March 3, 2025