And then there's the rub...

Courtesy of Mr. Skin in Ask Fleck:

“Those geniuses can't understand why GDP "growth" has been so anemic. Too much debt for the spending class, not enough income for the "savings" class, and not enough outright welfare for all society's deadbeats. This situation is unlikely to improve.”

Political Risk v. Market Risk

Always interesting stuff from Ben Hunt (although Bill Fleckenstein probably gets indigestion from the basic conclusion):

“Unfortunately and unsurprisingly, the new political leaders who emerge from a collapse of the Tower of Babel are rarely the champions of the Forgotten Man that you might think would emerge. Both in the 1930s and today, there’s no shortage of non-status quo political entrepreneurs who speak the language of the politically stuck and are willing to put themselves out into the political arena. But to be successful in their political entrepreneurship it’s almost essential that these new candidates be card-carrying members of the 1/10th of 1% Rich Club. Why? Because it requires an insane amount of money and sheer notoriety to replace the machinery of a status quo political party in a mass society. A political party is a media company. By joining a status quo party and toeing that party line, you communicate an enormous set of signals to potential voters for free. But by toeing that party line, you lose your Forgotten Man authenticity and any hope of being the champion of Something Else. Want to be a “change candidate”? Better make a couple of billion dollars first, or have plenty of billionaire friends, so you can afford to bypass the status quo political party.”

and

“Yes, there’s enormous political risk associated with the collapse of status quo political institutions and the rise of the Trumps and the Macrons of the world. But…

1) for financial markets, these new leaders are familiar, encouraging faces. They’re members of the 1/10th of 1% Rich Club, because they had to be to sidestep status quo political parties. Moreover,

2) there’s going to be a hope and a promise of fiscal policy initiatives, and that’s a tailwind for markets, too. And finally,

3) don’t worry, Mr. Market, when that hope and promise of pro-growth policy fades into the realization of anti-growth gridlock, our old friends Janet and Mario will be there to pick up the slack with more liquidity.

That’s my macro story for the divorce of political risk from market risk, and I’m sticking to it. Where does it break down? Not with a funky German or Italian election, but with Janet and Mario declaring victory and taking away the punchbowl. That’s what will bring political risk back to markets.”

Recent Books

Hello again.  After taking a bit of break from this site, I got back to business this weekend and read a couple of books, my thoughts on which are memorialized below.

First off is Zero to One: Notes on Startups, or How to Build the Future by Peter Thiel (2014).  Truly one of the best books that I have ever read.  Admittedly, my recent experience is focused on helping to get a new business launched – but even without that backdrop, I suspect that I would still be super impressed with this one.

For those who don’t know, Mr. Thiel is the founder of both PayPal and Palantir, and an early investor in Facebook, LinkedIn, and SpaceX.  Therefore, he is not only someone with proven success in starting and funding compelling new businesses, he has been able to do it serially.  He is a risk-taker, and therefore someone worth paying attention to.

His book is less a flight path for aspiring entrepreneurs, then important base concepts that one needs to have in mind when trying to launch the next breakthrough concept.  To wit, if you are simply copying others in an attempt to achieve marginal improvements or trivial differentiating factors, you haven’t actually learned anything from the innovators and are unlikely to survive and succeed.  The moral of the story has to be figuring out the secrets that are still out there and the important truths that most others would disagree with you about.  It is not simply to be contrarian in the traditional sense of going against the crowd, but instead having the courage to think for yourself.  It is related to fighting the reality that the mainstream generally views it as progress that unorthodox ideas now are commonly dismissed out of hand.  All of that may seem obvious, but there is a certain internal fortitude required to act on these first principles.  All of this argument goes against diversification and taking risks on the truly novel and different.  That is how the money is made – subscribing to what is better known as the “Power Law”.

In addition, within his discussion, Thiel offers some interesting insights on globalization, China and monopolies.  To his thinking, globalization is simply taking what works in one place and extending it everywhere else.  In other words, copying.  Therefore, the opposite of globalization is not nationalism, but technology – that which creates new modes of progress.  So, by that logic, the strong push for globalization as the answer probably leads to stagnation – and when you consider developing concerns, whether it’s the environment or some other issue, without the new thinking that comes from innovation, we face tremendous hurdles in the future.  As an offshoot of that thinking, he views China as a growth story that is entirely premised on globalization and copying without any innovation, again an unsustainable approach that should cause greater skepticism about that country’s ability to take over as the global hegemon.  Finally, the author sees the real tension in creating new technology as between competition and monopoly.  The real innovator is the creative monopoly, which generates something entirely new with a proprietary technology that makes the world a better place.

The other book from the weekend is The World According to Star Wars by Cass Sunstein (2016).  A light read on how the Star Wars arc is a compelling metaphor for life.  It provides a story of free will, the internal battle that everyone faces between light and dark, and informs on the ideals of mercy, forgiveness and redemption.  And, most poignantly for me, it is a story about fathers and sons.  Needless to say, as soon as I finished it, I decided to give my dad, my hero, a call.