Economics 101

Nobody Asked Me (About Cryptocurrencies) But

October 6, 2021
Jeff Muhlenkamp provides a basic explanation of how cryptocurrencies work, their potential future uses, precautions for blockchain investors, and the secondary effects of a cryptocurrency collapse.

Reflecting over 40 Years—Lessons Learned and Changes Observed

February 14, 2020
To celebrate the 40th anniversary of Muhlenkamp and Company in 2017, Ron shared his insights on human behavior, instant communications, and the free markets. He then tied his lessons together to give you a useful way of thinking about things.

Ron’s Reading List

February 14, 2020
Ron's reading list for life and investment fundamentals includes recommended books on the topics: the way things work; why you’ll never understand the other sex; values; the evolution of moral standards; the difference between modern liberals and conservatives; how the best and the brightest can be totally wrong. Recommended authors include: Macaulay, Wanniski, Tannen, Pirsig, Sowell, and Halberstam.

Some Things I Would Have Liked To Have Known Sooner

February 15, 2019
Here is a collection of items published by Ronald H. Muhlenkamp, including: • “Reading List For Life And Investment Fundamentals 101” • “Basic Financial Maxims I Want My Kids to Know” • “Muhlenkamp’s Musings on Economics” • “Employment Costs” • “U.S. Personal Consumption Expenditures” • “Reflecting over 40 Years—Lessons Learned and Changes Observed”

U.S. Personal Consumption Expenditures Per Capita: 1950, 1980, and 2010

May 5, 2015
Pie charts of U.S. Personal Consumption Expenditures Per Capita: 1950, 1980, and 2010.

Effects of Currency Manipulation

January 14, 2015
This article explains the ripple effect that could occur when one country devalues its currency. It also examines who “wins” and who “loses” in the game of currency manipulation.

The Frugal Consumer: Will It Last?

November 1, 2009
Any time you talk about recession, be aware there are multiple definitions — and if you are using one definition and listening or talking to someone with a different definition, you are not going to come to a common ground. Regardless of definition, it’s my observation that during a recession people tend to work a little harder, spend a little less, save a little more, and the pattern tends to heal itself.

The Signposts of Change: Economics, Rules, Markets

May 1, 2009
We have three topics for today: what’s happening with the economy, the rules (informal and formal)  that affect ongoing changes, and how it all gets reflected in the markets.

Where to from Here?

November 5, 2006
It’s surprising how many people try to predict the direction of where the economy and the markets without understanding where we are today. If you don’t understand what’s going on today, how can you possibly predict what’s going to happen next? To understand today’s investing markets, you need to understand what’s led up to them.

Consumer Spending

January 5, 2003
Consumer spending and consumer debt are often used as indicators of the health of the economy. If consumer spending is strong, the economy continues to grow. If consumer debt is under control, then the consumer spending is sustainable. In this essay, Ron takes a look at consumer spending over the last 55 years to gain perspective not only on the strength of the economy overall, but to evaluate changes in spending patterns over those 55 years.

The “Fad,” Recession, and Getting Back to “Normal”

December 20, 2002
In December of 2002, the investing community was still trying to come to grips with the dramatic fluctuations in some stock prices (commonly referred to as the Tech Stock Bubble). Ron presents an argument of why those prices rose and fell, and what to make of it.


October 20, 1999
What does “prosperity” mean to you? When I ask this question, people respond in terms of a better lifestyle, home, car, or vacation; a secure retirement; funding college education; and so on. But these responses describe how we consume prosperity. I believe we can’t consume prosperity unless we produce prosperity.

Muhlenkamp Musings on Economics

January 5, 1998
Themes include free will and the government, the effects of inflation and recession on spending patterns, the effects of investment on the economy, and the effect of income taxes on work incentive. There is no free lunch.  Prices are set by the buyer.  We are all volunteers.

Competition for the Consumer

October 20, 1997
We often hear the argument that a company or a country must do certain things “to compete” or “to be competitive.” This goal “to be competitive” is stated as the rationale for much of the cost cutting and downsizing in industry, as well as the privatizing of various tasks previously done by government, both in the United States and in other countries.

Why Did the Fed Raise Short-Term Rates?

April 5, 1997
In April 1997, the Federal Reserve had just raised short-term rates in response to fears of inflation. Some people expected inflation because the GDP was growing, and Keynesian economic theory says that GDP growth causes inflation. The opposing school of thought, Classical economic theory, says that printing money causes inflation. Since in 1997 the GDP was growing but the government wasn’t printing money, it was a good time to take a look at the two theories.

Why I Like the Flat Tax

April 5, 1996
The first reason I favor a flat tax is because I just did my taxes. Despite my being fairly knowledgeable about taxes and my having a fairly simple tax return, it took me the better part of a day to do it. This day’s work produced nothing of value to me, to the government, or to anyone else. It didn’t affect what I earn or what I pay in taxes. It was simply the time I spent in calculating the tax. And I am not alone.

Are Stocks Too High?

January 2, 1994
This essay, written in January 1994, looks at the assumptions behind stock valuation models and why they often mis-price the stock market. Using the same data, but modifying the model, Ron creates a new valuation model that better anticipates stock prices. Same data—different perspective.

What Is Risk: Part II

October 2, 1993
"What is Risk: Part I" was written in October 1989 and discuss two categories of risk:  the risk of volatility and the risk of losing money.  In October 1993, one of Ron’s largest clients (a pension fund) was being told by a stock brokerage firm to increase its investment allocation to bonds, since bonds were “guaranteed” and the returns for the prior 10 years had been nearly as good as the average for stocks. Ron didn’t think the prior 10 years was the appropriate time to consider. In this essay he looks back to 1952 to examine the long-term performance of stocks and bonds. In doing so, he illustrates why the brokerage firm’s advice to invest in more bonds was misguided.

And the Climate Is

January 20, 1993
This essay reviews the investment climate changes from the 1970s to 1993. Of particular interest is the lag in perception of the changes by the public. In the ’70s, people used strategies appropriate in the climate of the 1960s, and lost money. In the 1980s, people used strategies appropriate in the 1970s, and lost money. You don’t have to predict climate changes, but you must recognize them when they occur.

Investing and Farming: Know the Climate

April 4, 1992
The longer I manage money, the more it looks like farming. In mid-February 1992, we had 70º weather in Pittsburgh. While looking at the calendar one day, I started to ponder how a farmer without a calendar would know whether it was February, normally a poor time to plant crops, or April, normally a good time to plant. Of course, this very problem resulted in the invention of the calendar in the first place. It then occurred to me that investing in the stock and bond markets isn’t much different from farming—but without the benefit of a calendar.

How We Benefit From Free Trade

January 2, 1992
At the time of the writing of this essay, there was much debate whether or not the United States should sign the North American Free Trade Agreement (NAFTA). There was concern that such a large free-trade zone would hurt the U.S. economy. Unions feared jobs going to Mexico and Canada. Companies feared their prices would be undercut and they would lose business. Ron presented the following on the benefits of a large free-trade zone.

Why Interest Rates Wont Go Back Up Any Time Soon

October 1, 1991
In 1991, whether or not interest rates would “go back up” was a hot topic in economic and investing circles. In June of that year, Ron went to his M.I.T. reunion. He spent half an hour debating interest rates with an old classmate who has a Ph.D. in economics and is the chief economist at a major investment firm. His classmate was certain that interest rates were going to “go back up” because of the federal budget deficit. Ron wrote this essay to explain why the shift in the public from “Trade up on the equity” to “Prepay the mortgage” would drive rates down.

The More Things Change, the More They Stay the Same

July 1, 1991
One major function of recession is to dampen consumer enthusiasm, typically after years of growth. Another function is to make the public reevaluate and reappraise those areas where prices have gotten most out of line with economic reality. During the 1970s, for example, farmers who sold land for twice its “economic” price watched their neighbors bid it still higher. In Texas, the assumption that the price of oil could only increase drove other prices up as well, especially real estate.

Basic Financial Maxims I Want My Kids to Know

July 1, 1991
“There is No Free Lunch.”—Milton Friedman...There’s no free income either....The essentials of life are cheap. Only the luxuries are expensive....A bad product is always a bad deal. Don’t buy a car or appliance with a poor service record. Don’t buy a house with a cracked foundation....A good product can be a bad deal if the price is wrong. How do you know a good price? Shop around and be willing to walk away from any “deal.”

Why I Like Long Term Treasury Rates

October 1, 1990
As we noted in an earlier essay entitled "Defusing the Inflation Time Bomb,” it is unlikely in the future that short-term interest rates will stay significantly above inflation rates. Therefore, to get a real return, investors must opt for long-term debt (bonds) or equity (stocks). Each of these has associated risks, some of which are well known. We want to point out some of the risks in long-term bonds that are not well known or understood.

What is Risk

October 1, 1989
This essay discusses risk in two categories: the risk of volatility and the risk of losing money. It also discusses long-term investing and diversification as preventive measures to these risks. The 2005 update suggests a third, and often overlooked, risk: paying too much for a stock in the first place. The preventive measure is knowing how to value stocks.

Defusing the Inflation Time Bomb

July 1, 1989
The intent of “The Inflation Time Bomb” was to point out that long-term investment planning that focuses only on dollars and income, while ignoring purchasing power and assets, can be a trap. Dollars must be adjusted for inflation to get purchasing power, and incomes must be adjusted for the loss of purchasing power. Without these adjustments, assets will be depleted and so will income. The problems that arise from neglecting to make these adjustments have come to the fore over the last 30 years as inflation created large differences between nominal and real interest rates.

The Inflation Time Bomb

June 1, 1989
The very rules that we were taught to conserve principal have become a trap. People are desperately trying to maintain their “incomes” by buying investments with high yields, believing that if they “spend only the income—don’t touch the principal,” the value of their assets and their incomes will remain intact. But it’s a trap!

Worker Capitalism Triumphs

October 1, 1987
As reflected in literature and the popular media from Dickens and Marx to Studs Terkel and Jesse Jackson, people have always viewed themselves as workers. As workers, they think of themselves as being in direct competition with owners and managers for a share of the wealth created by business enterprise. People naturally think in terms of net “take-home” pay, money that is then spent on the day-to-day necessities and luxuries of life. Yet take-home pay is only a part of the benefits received for work.