The Superficial and the Real

Our political system is binary, and both sides are more extreme than reasonable. There seems little patience for the “reasonable middle” where ideas can be nuanced, refined, and complexity of public policy understood. Instead, our leaders are superficial and guide policy with slogans, not thought. People like AOC and Sanders are caricatures, influential yet ignorant and superficial, forming policies while clueless about what it takes to realistically solve even their most critical issues.

They have great ideas on how to distribute wealth but no ideas on how wealth is actually created. Their perspective is to take existing wealth and distribute it to others instead of developing an engine to help more people create wealth. An example of this kind of dysfunctional policy can be found in resource rich African nations. Instead of building industries using the abundant natural resources present as inputs generating real businesses, those resources are simply gathered and distributed – either to efficient businesses in other countries or among governmental cronies to their Swiss bank accounts. Either way, this attitude is disastrous for an economy ultimately. Wealth is created, and policies should free up the ability to create wealth within appropriate legal restrictions.

A New Perspective

Sometimes, things can change simply because we want things to change. People can feel differently and that can spark a cascade of cause and effect. For instance, sometimes a recession can start simply because people feel as if there is a recession. So, it becomes a downward spiral, and our actions start matching our thoughts and words, and suddenly we have caused recessionary activity. Then we enter a downward spiral that makes reality from our thoughts.

Some of the things that Pres. Biden has done right away were maneuvers to undo what seemed like harmful policies and actions. But also, it was intended to have us think differently. Right away, he did things to try to reconnect us with the rest of the world. For example, the United States is back in the Paris Accord, he is not going to build the wall, he is going to reconnect us with the WHO, and many other things. But right away, he is sending a message that the United States will become part of the world and that is likely to undo the fragmented and rudderless direction and create cascade of positive actions that lead in the same direction – one toward openness and connectivity. I sense we are going to reconnect a little bit more with China, reconnect more generally with the world through global trade and cooperation on climate change, and many other important topics. It’s suddenly uplifting for people to focus their energy, and thoughts lead to words lead to actions.


Luck and timing play an outsized role in determining any outcome – and these are extraneous circumstances one cannot influence. As in sports, sometimes the ball bounces your way and sometimes it doesn’t. What matters is doing the best you can. While this sounds like a cliché if one genuinely knows they have done their best, gave it everything, and left it all on the field, that self-satisfaction alone is the worthiest goal, not some sense of “winning.” Importantly, winning should never be the goal because you can never do your best if you compromise who you are – your values and character – while achieving your goals. Whatever the outcome, it’s just the outcome. But the values and standards that make you who you are inviolate and supersede any near-term goal.

Currency Values in a Zero Interest Rate World

We are rapidly approaching a zero-interest rate world. Interest rates are being driven to zero (or below zero in many cases) as a first-line tool for central banks to generate economic activity in the face of the dramatic negative impact of the pandemic, as well as existing and lingering economic fallout. This toolbox will be empty soon, and the only remaining weapon will be fiscal policy. Among other things, fiscal policy and domestic financial markets will have an overwhelming influence on global currencies. Capital flows will dramatically impact currency volatility as capital moves to more attractive countries with more liquid and robust asset markets.

Define the Problem or You won’t Solve Anything

Defining and the problem precisely is the only way to solve anything, and, undoubtedly, the single greatest challenge to achieving anything. Otherwise, it is a waste of time and resources (which describes most public policy). All too often decision-makers waste time, resources, and make matters worse because they simply do not understand the actual problem they’re trying to solve. Very few problems are well-defined, and few people take the time and effort to understand what it is they are trying to solve. Motivation, energy, and focus on an outcome are inefficient, misguided, and dysfunctional. Good intentions do not effectively define any problem, and typically lead to very bad outcomes. Wanting to solve a big problem is fine, but not defining it accurately is inefficient at best, and most likely disastrous. It will never lead to a solution.

Portfolio Strategy

The government is providing a backstop for all government-backed securities. The Fed is also going to be extremely active in the markets, buying not only fixed-income securities but also stock index funds. They are working very hard to keep the market aloft and preventing it from cratering (they still may not be successful). This is an election year and this administration will do everything it can to make sure things look as good as possible through November.
I understand there is riskiness, but I expect economic activity and fed support to continue to increase. Even if we have an increase in coronavirus cases, people will remain optimistic – justifiably or not.
There will be extreme volatility. Economic activity will waiver, increase suddenly, pull back, and the pattern will continue for some time to come.
Market volatility is our friend because we have a stable source of cash flow that protects our capital base. On top of that, the speculative strategy will profit from volatility while the equity investment strategy will play for the long term – it is a multi-year long-term perspective.

Although there are a handful of investments where confidence in the five-year curve is justified, and now is a great time to make these long-term investments, it is still very unpredictable.
The short- and long-term state of the economy, how this massive amount of debt gets repaid, how we reopen businesses, etc. is unknown, volatile, and any attempt to predict seems fruitless. But, understanding how to adjust for risk, accept, and ultimately take advantage of volatility, will be powerful. Along with a long-term perspective, this will be the most effective investment strategy. The Fed is printing more money. We’re going to see a lot of capital injected into the global economy. But the presence of money is not the important factor. It’s the velocity of money – how people are spending it and is that money chasing after other goods. That will drive inflation. We didn’t see it in the past even though we had a massive capital injection. Deflation and recession are much bigger concerns. Inflation is not on the horizon. The Fed’s enhanced bond-buying, which includes high-yield bonds and other fixed-income securities is unprecedented and has boosted the value of debt portfolios. However, these portfolios (mostly just above or just below investment grade) still yield attractive disproportionate risk-adjusted returns.

The biological revolution

The coronavirus will accelerate the third great innovation revolution of modern times. Beginning about 100 years ago, three fundamental components were discovered: the atom, the bit, and the gene. Now, a life-science revolution driven by biotech and the discovery of the gene and the molecules (DNA and RNA) that contain and implement its information will be used to fight viruses at the molecular level, treat cancer through fundamental and personalized mechanisms, and edit our own genes to potentially make us immune to viruses and cancer, correct disability-causing mutations, and genetically enhance our bodies and minds.

A New and Different Credit Crisis

A New and Different Credit Crisis

The US economy is facing a transitory, but critical, credit emergency beyond the Fed’s normal scope. A new federal credit facility is needed to ensure that sound businesses and households have ready access to cash to get through this crisis. Global business needs a giant bridge loan to get through a tough few months, and governments may need to intervene to make it happen – led by the Fed. The credit markets need substantial additional liquidity, taxes need to be cut to get cash to companies, and banks need to lend and show patience

Technology and the Environment – Intervention is the Only Choice

Technological innovation ignites economic growth feeding further innovation. But, has our relentless progress irrevocably tipped the balance from a virtuous circle of innovation and growth to a downward spiral of disaster and decline? We’re going to continue to drive, fly, throw away plastic, and tear down the rainforest. If we aren’t going to solve the problems we’ve created by regulating ourselves, we’re probably going to have to use technology — whether that’s to save species, or human lives, or to make sure that certain plants or coral reefs survive climate change. We don’t know the consequences of these future actions.

Productive or Pointless?

Failing to get work done is an increasingly common experience. Maybe the reason we find it so hard to get anything done is that most of the things we do just fundamentally don’t need to be done. All the productivity lifehacks out there are ultimately missing the point: we’re avoiding our work because our work is pointless.

Stop Talking. Start Thinking.

Thinking the government now can take over something the private markets provide efficiently and effectively as government is the appropriate entity to provide those services from now on only leads to inefficiency, misuse of capital, the demand for more tax revenue to support the inefficiency, and the downward spiral which ultimately creates more inefficiency that private industry will look to rectify.