March 2019, Chicken Little Portfolio Performance

The mother of all monetary bubbles lies ahead. I predicted this outcome (click for bubble to end all bubbles), and Fed Chair Jay 'the invertebrate' Powell is now implementing the printing plan. In March of 2019, the Chicken Little Portfolio benefited from the early signs of even looser monetary policy ahead. 

Central Banks will print money until disaster hits

March 2019 performance

The Chicken Little Portfolio gained 2.74% in March 2019, benefiting from a loose money tailwind into Treasury Bonds. US and international stock markets continue their relentless climb upwards toward all-time, in the history of the world, highs. 

Mar 2019YTD 201
Chicken Little2.74%2.17%
Dow Jones Industrials0.11%11.68%

The first quarter of 2019 has been an amazing time to be a speculator. All assets have gone up in price: US stocks, non-US stocks, bonds, gold (very modestly), and cryptocurrencies. Loose monetary policy has unleashed the animal spirits. 

AssetSymbolMar 2019YTD 2019
Dow Jones IndustrialsDIA0.11%11.68%
Non-US StocksEFA0.89%10.31%
Emerging Market StocksEEM1.20%9.96%
US Long-Term BondsTLT5.55%4.49%

Here is the key portion of my 2016 article predicting much more printing. 

To understand the seductive allure of printing money, consider the U.S. program of drone strikes in Afghanistan. Some of the missiles that the U.S. fire cost $1 million each. So 1,000 drone strikes costs $1 billion.

The government can fund the $1 billion by taxing people. If the government uses taxes to pay for the drone strikes, the people who pay for the missiles know who they are, and they generally are not happy. The political cost to additional taxes is very high.

The seductive aspect of having the Fed pay for government expenditures is that, unlike taxes, the cost of printing money is invisible.

Instead of raising taxes, the Federal Reserve can print an extra billion. In terms of real resources, $1 billion is taken from other uses, made into missiles and exploded. The billion dollars is gone, and it doesn’t matter whether it was paid for with taxes or printing money.

Printing money beyond Keynesian dreams

The US government has been printing money to pay for expenditures in an historic fashion. The Fed printed just under $1 trillion in money between 1913 and 2008. Between 2008 and today, the Fed has created an addition $3 Trillion of money out of thin air. 

The Federal Reserve has reduced your taxes by printing money

The Fed printing of money to pay government bills amounts to roughly $10,000 per person in the US. If you are in a family of four, you would have had to pay an additional $40,000 in taxes but for the Fed's printing.  $40,000 would be painful. 

The Fed printing appears free, so much so that many people now think the Fed should increase the pace of printing. This process of paying for real resources with printed money will continue until it creates pain. John Maynard Keynes suggested funding all government expenditures with lotteries. Printing the money is even easier than selling lottery tickets. 

April 2019 portfolio positions

Chicken Little remains positioned for a deflationary depression by owning cash, Treasuries, and being short a tiny bit of gold. 

However, Chicken Little has begun to believe that an inflationary depression might be coming. Thus, the portfolio may change to owning gold and cryptocurrencies, while continuing to shed risk in holding bonds (click for: Chicken Little End of Bond love affair).

Previous month's report                 Subsequent Month's report

Chicken LittleDow Jones Industrials
2019 (through March)2.17%11.68%
2015 (April through Dec)-2.49%-0.27%
since inception (3/31/15)3.47%59.14%

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