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You can now earn 4.10% on a one-year U.S. Treasury. That’s magnificent.

You can now earn 4.10% on a one-year U.S. Treasury.

That will be a great return for the next year.

You can buy Treasuries through most online brokers. I’m buying mine through Fidelity. You can learn more on Fidelity: Click here.

I headed my previous blog

If you hold shares, you will lose money. You want a recession. You got it.

Yesterday the Fed hiked rates 75 basis points, or three-quarters of a percent. That’s a big hike.
Stocks freaked.

This is what Nasdaq looked like — before and after the Fed’s announcement. Bleak:

Here’s a quick summary of our economy:

Things were going nicely in 2019. Then the Pandemic hit. The economy closed. Washington freaked and pumped the economy full of stimulus money. But the factories and the shops etc. — were half closed. Which meant there was lots of money but nothing to spend it on (also called supply chain problems). Except spending it on the stockmarket and crypto. And bidding up the prices of things that were scarce. That led to the inflation we have now.

Inflation benefits some and hurts some.

The Federal Reserve believes its job is twofold – full employment (we got that in spades) and keeping inflation to no more than 2%. Right now it’s around 8%. Too high.

Washington can’t suck the stimulus monies back. So it’s relying on the Fed to bring inflation down to 2%. The only way the Fed can do that is to raise interest rates and make certain things more expensive. For example, people buy houses by borrowing money. When money becomes more expensive, fewer houses get sold. Fewer get built. built. Fewer things that go into houses – like wood, sheetrock, copper – will be sold and their prices will fall.

We hope.

Somehow along the way we’ll also eat less (?) and food prices will fall (?). My friend Francis is doing his part by eating less. Most specifically no bread and no desert.

This is all very imprecise. You can’t adjust the economy like you can a car – push the accelerator, it goes faster. Push the brake, it goes slower.

The Fed expects inflation to be down to 2% by 2025 – in three years.

Along the way, they’ll raise interest rates more. More industries will be clobbered.

You can see from this chart that raising and lowering rates does have an effect.

For us investors, we have several choices:

+ Don’t look at your stock portfolio. Pray for better times.

+ Look at your stock portfolio and weed out the junk — though you should have done that a long time ago. I love this chart from the Economist which highlights recent junk.

+ Sell your stocks and buy treasuries. Heck, being paid 4% for doing nothing is better than the agony of watching your stocks fall — as they all are doing and did yesterday (see chart below) and have been doing for the last year or so.

+ Look for opportunities in fields you know something about. Buy or build some local affordable housing. Invest in and expand your business. Make something and sell it on Etsy.

+ Take a long road trip. Make sure you have enough cash money to last three years.

The Laver Cup is on this weekend, starting tomorrow, Friday. They’re Roger’s final tennis matches.

Read about them in the New York Times. Click here.   For the Tennis Channel TV Schedule. Click here.

Simply breathtaking! Trump’s over-valuations

New York is suing:

+ The suit accuses Trump of claiming in 2015 that his triplex apartment at Trump Tower on Fifth Avenue in Manhattan was 30,000 square feet, more than three times its actual size of 10,996 square feet. That allowed him to value the apartment at a stratospherically high $327 million, at $29,738 per square foot. James’s suit notes that at that time only one apartment had ever been sold for over $100 million in New York City, in a newly built tower. The record price for an apartment in the then-30-year-old Trump Tower was $16.5 million, which breaks down to less than $4,500 per square foot.

+ In 2012, according to the suit, Trump valued 12 rent-stabilized apartments at his Trump Park Avenue building at $50 million, claiming there were no restrictions to what he could do with them. Rent-stabilized apartments are highly restricted, however, and their tenants under law cannot be forced out. Trump used the exaggerated valuation for the apartments, despite an appraiser’s telling him they were collectively worth only $750,000, the suit claimed.

You can read the rest here.

If the banks believed this nonsense, they deserve Donald.

Favorite cartoons

Favorite Borowitz

I actually once bought one of his pillows. It was truly awful. I returned it. They deducted their charge for shipping the pillow to me and my return shipping from my refund. There was little left. It was a rip-off.

This is the heatmap for S&P 500 over the last month. Gruesome.

I’m off to play tennis at 7:30 AM. I’ll be back in time to buy some 4% treasuries.

I could probably wait for the next rate hike when yields will be higher. For now, buying as I go along, is a form of “layering.”

Meantime, Putin is getting desperate. He’s calling up 300,000 and threatening nuclear war. Europe is going to have an awful winter.

The only safe place to have your money is the U.S. And money is pouring in.

The Euro, the Sterling and the Australian dollar are cratering. Think of taking a trip overseas. It’s on sale.

My web site has a list of stocks I’ve shorted.  Click here.

See you tomorrow. – Harry Newton