Where are we now?
Or should I say where are you?
Is it just me or are there a lot of people out there who are finding it hard to determine where their life is going, what they are doing here, why they feel dislocated and wondering when everything is going to go back to normal? I’ll get on to the investment piece shortly, but I reckon this is worth your time too.
Nobody knows…
Nobody knows the rhythm of my heart
The way I do when I'm lying in the dark
And the world is asleep
I think nobody knows
Nobody knows
Nobody knows but me.
No point asking anyone else what’s going on because nobody else knows. Know yourself is all you can do.
Selfishness is not living your life as you wish to live it. Selfishness is wanting others to live their lives as you wish them to. Oscar Wilde
“Your problems and past aren’t on anybody else’s agenda.”
David Goggins
Be who you are and say what you feel, because those who mind don’t matter and those who matter don’t mind. Anon
Why do we feel so uncertain about what comes next and does it matter.
The system is breaking down not because there is something wrong with the system; its time is coming to an end. It just is.
These are unusual times; we get to live on the cusp of a great change in the way in which the world works. And any time in the history of humanity that you come to these cusp points, there are all kinds of disarray that arises all around it. It’s a change. There is a deep and profound mutative force that is at work on this planet.
So let’s leave the blame game behind, and let’s enter into what is the only thing that will allow us to survive in the next cycle—the honouring of individual authority, follow your strategy, honour your inner authority, operate correctly within yourself and you will live as you should in this life. That is the point.
There is no one you can depend on. There is no one you can rely on. And truly, there is no one you can trust but yourself And when you’re correct and you’re operating correctly that trust in yourself is your armour for this life. It will protect you; it will guide you because it’s precisely what you are here for.
And we are the ones, our generation, who stand at the edge of this precipice. We are the ones that are here to demonstrate the correctness of the way so that we can enter into this new age, that us, our children, that those beings that we have contact with, can enter into this new cycle properly equipped."
Ra Uru Hu
Part of life’s uncertainties can be traced, for many readers of this blog, to the unprecedented shenanigans in the financial world. It seems it has ever been thus, but no more so than at present, with the added complication of war zones in the Ukraine, the Middle East and the potential for another between China and Taiwan. If you know the outcomes and how one invests before during and after the event given the level of uncertainty, then do let me know!
Forecasts create the mirage that the future is knowable — Peter Bernstein
The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge - Stephen Hawking
“The most striking contradiction of our civilization is the fundamental reverence for truth, which we profess, and the thorough-going disregard for it which we practice.” — Vilhjalmur Stefansson
There is a plethora of “experts” and vested interests in the financial world. Nicholas Taleb brilliantly explains the concept of the “Intellectual Yet Idiot”.
The Intellectual Yet Idiot (IYI) is a product of modernity, hence has been proliferating since at least the mid-twentieth century, to reach a local supremum today, to the point that we have experienced a takeover by people without skin in the game. In most countries, the government’s role is between five and ten times what it was a century ago (expressed in percentage of gross domestic product). The IYI seems ubiquitous in our lives but is still a small minority and is rarely seen outside specialized outlets, think tanks, the media, and university social science departments—most people have proper jobs and there are not many openings for the IYI, which explains how they can be so influential in spite of their low numbers.
The IYI pathologizes others for doing things he doesn’t understand without ever realizing it is his understanding that may be limited. He thinks people should act according to their best interests and he knows their interests, particularly if they are “rednecks” or from the English non-crisp-vowel class who voted for Brexit. When plebeians do something that makes sense to themselves, but not to him, the IYI uses the term “uneducated.” What we generally call participation in the political process, he calls by two distinct designations: “democracy” when it fits the IYI, and “populism” when plebeians dare to vote in a way that contradicts IYI preferences. While rich people believe in one tax dollar one vote, more humanistic ones in one man one vote, Monsanto in one lobbyist one vote, the IYI believes in one Ivy League degree one vote, with some equivalence for foreign elite schools and PhDs, as these are needed in the club.
They are what Nietzsche called Bildungsphilisters—educated philistines. Beware the slightly erudite who thinks he is an erudite, as well as the barber who decides to perform brain surgery…
The IYI subscribes to The New Yorker, a journal designed so philistines can learn to fake a conversation about evolution, neurosomething, cognitive biases, and quantum mechanics. He never curses on social media. He speaks of “equality of races” and “economic equality,” but never goes out drinking with a minority cab driver (again, no real skin in the game, as, I will repeat until I am hoarse, the concept is fundamentally foreign to the IYI). The modern IYI has attended more than one TED talk in person or watched more than two TED talks on YouTube. Not only did he vote for Hillary Monsanto-Malmaison because she seemed electable or some such circular reasoning, but he holds that anyone who didn’t do so is mentally ill…
The IYI has been wrong, historically, about Stalinism, Maoism, GMOs, Iraq, Libya, Syria, lobotomies, urban planning, low carbohydrate diets, gym machines, behaviorism, trans-fats, Freudianism, portfolio theory, linear regression, HFCS (High-Fructose Corn Syrup), Gaussianism, Salafism, dynamic stochastic equilibrium modeling, housing projects, marathon running, selfish genes, election-forecasting models, Bernie Madoff (pre-blowup), and p-values. But he is still convinced that his current position is right.
And Richard Feynman, professor of Physics and marshaller of common sense gives us a sense check on experts.
Learn from science that you must doubt the experts. As a matter of fact, I can also define science another way: Science is the belief in the ignorance of experts. When someone says science teaches such and such, he is using the word incorrectly. Science doesn’t teach it; experience teaches it. If they say to you science has shown such and such, you might ask, “How does science show it–how did the scientists find out–how, what, where?” Not science has shown, but this experiment, this effect, has shown. And you have as much right as anyone else, upon hearing about the experiments (but we must listen to all the evidence), to judge whether a reusable conclusion has been arrived at. Richard Feynman,
The current focus of attention of our experts is the bond market. Luke Gromen at Forest for the Trees has this to say.
In terms of total returns, this is the biggest bond market rout in 150 years. Last year was in fact US bond investors’ worst year since 1871, with a total return of minus 15.7%, even worse than the annus horribilis of 2009. For 2023, the year-to-date return has been almost minus 10%; annualized, that’s minus 17.3% — even worse than 2022. We are looking at bond investors’ two worst years in a century and a half.
The Washington Consensus appears to recognize there is a problem in the bond markets, and as they say, admitting you have a problem is the first step. However, judging by Krugman’s comments below, the Washington Consensus still does not appear to appreciate the severity yet:
I still don’t think we’re facing a fiscal crisis any time soon — and neither do the markets….if investors were worried about U.S. solvency, we’d expect the dollar to fall in value against other currencies; in reality, it has risen.
Krugman is wrong: In the early stages of a US fiscal crisis, the first sign would be UST yields up despite the falling inflation Krugman noted, and US stocks down, gold up, oil up, and USD (as measured by DXY)…up.
This is because of the dynamic we have written about in recent months – foreigners own $18T (net) of USD assets ($7.6T in USTs) against $13T in offshore USD borrowing…so as the US fiscal problem accelerates, it crowds out global USD markets, sending rates up, USD up, and foreigners then sell USTs and other USD assets in an attempt to either service their USD debt or defend their currencies against the USD.
At the same time, foreigners will look to reduce USD outflows from commodity imports by de-dollarizing energy imports, for which they will likely net settle in gold, sending gold up against all currencies, including the USD…all of which is happening.
Both J.Powell and J.Yellen have both expressed the view that the US can finance wars in both Ukraine and the Middle East. The bond market is responding thus. “OK we’ll let you know the price.” Currently 5% and rising…
Enjoy the rest of your week and please hit the like button if you found this post of interest.