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February 26, 2021
Dear WEALTHTRACK Subscriber,
The balance sheet of the Federal Reserve continues to surge at an unprecedented rate, up 83% y/y to an historic level, $7.59 trillion at latest count. According to our WEALTHTRACK podcast guest, financial historian and long time market observer James Grant, interest rates, the “central pricing mechanism for financial markets” have been pushed to artificially low levels by the Fed’s policies which have created numerous market bubbles. He cites Bitcoin as one of the most extreme examples.
Record-breaking markets on Wednesday turned into a rout on Thursday as yields on Treasury bonds jumped sharply on an improving economic outlook. Wall Street’s legendary economist Ed Hyman who told clients this morning that this is his seventh economic expansion says interest rate “hiccups”, his characterization, are common in the early stages of a recovery and are not market friendly when they happen. However he points out that the Fed’s unprecedented Quantitative Easing policy of buying Treasuries, mortgage-backed securities and other bonds is a strong counterweight and “should restrain the current interest rate hiccup."
A major theme of the Biden administration is addressing income inequality, bringing disadvantaged groups into the mainstream with better education, jobs and income opportunities. It’s a mission legendary investor Joel Greenblatt has devoted much time, effort and thought to which is why, during the first week of Public Television’s winter fundraising season, we are rerunning our recent interview with Greenblatt about his new book, Common Sense: The Investor’s Guide To Equality, Opportunity, and Growth. One area ripe for disruption is the education system which he says is “unfair, unequal and doesn’t make sense for those most in need.” Case in point: over 90% of poor, low income and minority students don’t get a college degree, yet workers with bachelor’s degrees earn 73% more than high school graduates and they in turn earn 30% more than high school dropouts. Greenblatt has tackled these inequities personally by co-founding and supporting the top-performing Success Academy Charter Network in New York. He has other real world solutions to address these gaps. Greenblatt’s investment bona fides are also impressive. He is Managing Principal and Co-Chief Investment Officer of Gotham Asset Management which he founded in 2009 and where he co-manages hedge funds and several hedge fund-like mutual funds, most utilizing long/short strategies. His behavioral insight that the best investment strategy is one that both makes sense and that you can stick with led to the creation of the Gotham Index Plus Fund in 2015. Index Plus combines index investing tied to the S&P 500 with actively managed long/short strategies. In a wide-ranging discussion Greenblatt explains why he, a professional money manager, felt compelled to write his version of Common Sense. His guiding principle throughout is that economic opportunity for all is an essential prerequisite for a successful capitalist democracy. If you are unable to join us for the show on television, you can watch it on our website over the weekend. If you prefer to listen to the podcast, you’ll find WEALTHTRACK on TuneIn, Stitcher and SoundCloud, as well as iTunes and Spotify. Thank you for spending time with us. Have a super weekend, and make the week ahead a healthy, profitable and a productive one. Best regards, Consuelo | 
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