It has been over twelve years since the fraud of Bernie Madoff came to light.  One of the craziest Ponzi schemes of all time, we were all shocked to the size and scope of his fraud.  Billions of dollars lost.  The devastation reached so many people, charities, foundations, and retirement plans.  The saddest part of the whole Madoff situation is that it will not be the end to a good old con.  Much like the movie, The Sting, the world is fraught with scammers and grifters.  In the past twelve years since Bernie went to jail, there have been no less than twenty more Ponzi schemes that have been uncovered by various law enforcement.  Grifters and scammers always tend to reappear when they see an opportunity.  Speculative markets like today are a ripe opportunity for the unscrupulous.

One thing that has reappeared recently is the elusive Salvator Mundi (1490-1500).  Some of you might remember this rediscovered painting of Jesus by Leonardo da Vinci.  After much restoration and authentication, the painting was mysteriously bought for a monster sum of $400 million (plus another $50 million in fees) back in 2017 – a record sum for any piece of artwork.  Saudi Arabia’s Crown Prince Mohammed bin Salman (MBS) had long been the rumored buyer, but he ran into some difficult times shortly after.  His PR team likely thought showing off his new half a billion-dollar purchase would be in bad taste after allegedly arresting and assassinating his opposition.  A bit ostentatious.  The rumors were confirmed when the Salvator Mundi recently appeared on MBS’s mega yacht, Serene.  After a few weeks in public, the painting disappeared again, off into the night.  Salvator is now rumored to be locked away in safe storage in Switzerland, away from public eyes.

Another that has reappeared lately in the markets is some growth.  Americans are starting to spend again; restaurants, airlines, car dealerships are all seeing increased business.  In addition, corporate “earnings season” has started, and we will be getting insights into how businesses fared in the first quarter.  Everyone is expecting strong numbers from companies.  The good news is that growth is starting to “broaden out”.  Growth is not just concentrated in a handful of companies like Amazon, Clorox, and Zoom.  Many businesses are doing better now.  Clothing brands, malls, mines, and refineries are all seeing a pickup in activity.  Even airlines are seeing a big pickup in flying people around.

But what many are worrying about now is what else does strong growth bring?  Inflation is the big concern here, of course.  It has been a major concern for years, even before the Great Financial Crisis.  All this government spending (from Congress) and money printing (from the Federal Reserve) surely will cause inflation.  In the short term, yes.  All these recent moves are going to cause some inflation in the short term.  We see spikes in many everyday things like gasoline and groceries.

For the damages of inflation to wreck many financial plans, inflation will really need to be sustained for years and decades.  Inflation spikes over 3-5% are likely but these sorts of events usually don’t blow up a financial plan.  It is persistent, high inflation that can be more damaging.  While we expect inflation to reappear and run a little hot in the next few quarters, much like the Mundi, we don’t expect it to stick around for a long time.

As always, please don’t hesitate to reach out to myself or your wealth manager with any questions you might have.

– Ben