When Things Don't Happen Right Away
The Fed, Mount Everest, the iPod, and
James Bullard is the Fed Board of Governor’s member who is pushing super-hard to raise rates right now saying “the current policy rate is too low by about 300 basis points." He’s basing his conclusion on the oft-used “Taylor Rule” (no relation) which shows that the Fed should have nominal interest rates around 3.5% if it wants to stop inflation from exceeding 8% on published government numbers (lies). Interest rates at that level would push mortgages up into the 6%-9% level.
In 2018, the last time the Fed tried to reduce its balance sheet (not because it needed to, but because it wanted to demonstrate that it could do so without harming the economy), the stock market tanked and the economy went into the weirdest side spin imaginable. While a modest gesture that hurt millions of Americans, the Fed retreated declared victory and has stayed away from any such action … until now.
In the last two years, the Fed has added $5 Trillion dollars to its balance sheet which now totals over $9 Trillion. If the Fed begins to shed assets and abandon Quantitative Easing as a lynchpin of its strategy, the Federal Government’s borrowing costs increase to crisis levels. If the Fed won’t buy bonds to finance the government at low interest costs, someone else has to. Those buyers won’t do it for the same low interest rates, and the Ponzi scheme of government debt could unravel to disastrous results. The Chinese would be willing to step up and own way more of the US Debt, of course. Other investors would be willing to, as well, assuming the price is right.
The price being right means that Americans will have to pay an ever increasing tax burden to pay the bills, all the while selling our debt to foreign investors who are glad to take our interest, nurse our dependence on their finance and then pull the rug out from under us as soon as it fits their strategic plans.
While cheap money is fueling speculative bubbles in almost every asset class, a rapid sleight-of-hand maneuver to pop the bubble now is not the right answer. Using the oceans of money being poured into the economy right now to build hard assets (real estate), develop new technologies (robotics), and provide jobs for hardworking Americans who fork over way too much in taxes anyway, is the way to play this for now.
“Your whole life is happening between three dimensions: Memory, present experience and imagination.” — Sadhguru
Mount Everest has been scaled by 6,000 climbers, and 300 have died. Of those, 85% died on the descent.
The biggest risk to your victory is after you’ve secured it. Take your focus away from consolidating your gains, systemizing your triumph, and establishing the new way things are and you’ll look back wondering where all the hard work went.
Don't die on the descent.
Developing and launching the iPod in 2001 took just 41 weeks, from the very first meeting (no team, no prototype, no design) to iPods shipping to customers.
When you look at a project and think its going to take too long, cost too much, or is just too big to handle, remember that focus is a force multiplier. 8 hours a day for 41 weeks for 18 team members changed the world.
If you can’t pull the trigger on that kind of focus right now … your work should be centered on how to create that environment, not lament how it doesn’t exist. As with all good and successful things … build it before you need it … because you need it now, you just don’t know it.
“Do you not speak poorly of yourself, for the warrior within hears your words and is diminished by them.”
— Miyomoto Musashi
In 2004, the average time between first meeting with a VC and cashing the check was 90 days. Today it is 9 days. If you can’t get funded, you really need to understand that it is either you or your model. VCs today cannot hold onto money long enough to understand what they are investing in. They are only paid on velocity and landgrab. Make yourself appealing in that way and you’ll get the check. Don’t and you won’t.