How much is that Doggie in the Window

Patti Page’s classic song may soon be coming back into vogue as the price of puppies (and most everything else continues to come down). According to Bloomberg, the average price of dogs in the UK fell by 28% last year and cats were down 32%. Apparently, animal shelters are filling up as more and more companies call their workers back into the office.

The declining cost for a pet is just the tip of the iceberg. Prices for almost everything else (except eggs) has also been coming down. This is welcome news, but there is always the possibility of another spike in energy prices due to war, supply issues, or increased demand from China as it begins to emerge from its zero Covid policy. Our outlook is that rates will most likely continue to moderate and fall over the next year in a slow, methodical manner and we are positioning portfolios using this scenario as our base case going forward.

A year ago, the media frenzy was all about supply chains, inflation, war, and energy. Today the focus is squarely on the Debt Ceiling debate. We thought it would be interesting to share some excerpts from a letter we sent to clients in July 2011 regarding the same issue:

We have received many calls and emails lately regarding the debt ceiling crisis. There have been two excellent articles written on this issue, one “Debt-Limit Harakiri” in the Wall Street Journal (dated July 13, 2011) and the other, “Debt Ceiling Charade Update” by Calculated Risk (dated July 12, 2011). We are in agreement with both of these publishers. We believe the debt ceiling and the budget deficit are two very different issues. The debt ceiling is about the United States paying its bills. We find it interesting that two months ago Calculated Risk wrote “Congress will probably push this to the brink, but they will raise the debt ceiling before the country defaults. The first rule for most politicians is to get re-elected, and the easiest way to guarantee losing in 2012 is to throw the country back into a recession . . . therefore I’m not worried.”

If the debt ceiling is not raised it could lead to catastrophic problems, including defaulting on Federal government debt, a spike in interest rates, and potentially a deep recession. Such actions would be nothing short of self-inflicted lunacy and therefore it is most likely not going to happen. Because of this, we currently do not intend to make changes to client portfolios based on a low probability event, however we are certainly watching the situation play out and looking for any news that may increase the likelihood of such an occurrence happening.

We have been heartened by the rally in balanced portfolios which began fourth quarter last year. Bonds are having a strong start to the year and international stocks have furiously rallied. The last thing we need right now is a self-inflicted market downturn. Fingers crossed cooler heads will prevail once again.

Sincerely,

The Bond&Devick Team