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Welcome Aboard!
In these letters, I will review the macro, big picture financial landscape and give you a mini-PhD in markets and investing.
The goal of Alpha360 is to take complex, real world financial and economic concepts that very few people understand and distill it down to simple, easy to understand information for individuals of any education level.
By keeping up with the latest financial news and its effects, you can boost your financial literacy and understanding of money management. This knowledge will help you to better grow and safeguard your investments, as you'll become more skilled in navigating the financial markets.
When finished with this Letter Series, you'll have a roadmap for where we came from, and a blueprint for where we are.
Before we begin, a few caveats.
My personality runs bearish.
The personalities of most money managers are defined by the first significant market when they come of age. If you come of age during the Great Depression, or Weimar Germany or the post-WW2 bull market, then your formative years are likely colored by those events and their bullish or bearish conditions.
As a professional trader, I came in at the tail end of the great technology bubble of the 1990s.
Even as a relative newbie (I had been trading as an amateur for several years already and did well enough to pay for most of my law school education), what I was seeing on my screen and on the trading desk didn’t make a lot of sense to me.
Stocks like AMZN, YHOO and CMGI - businesses with no profits anywhere in the near future were opening up $10 and then going up another $20 during the trading day, every single damn day.
This happened for months on end and I watched people who had no understanding of markets or the economy come in off the streets make 6 figures within a couple of months and 7 figures in less than a year. Sure, dislocations like this are possible in extreme turns or professions on the cutting edge periphery.
But this was just trading, nothing new or different except the speculative excess of the first major bubble in a generation.
It doesn’t matter what industry we are talking about. In nearly every field, it takes a certain amount of time to become competent, and a significant additional amount of time to become an expert or master.
Malcom Gladwell writes about the 10,000 Hours Formula - the time needed to master one’s field.
In essence, it's unrealistic for individuals to finish college and immediately earn a seven-figure income within a year in a field they have no experience in. While not illegal, such a scenario often indicates an economic bubble or a significant market distortion, which is likely to correct itself over time.
This was 1999. Less than 3 years later, 90% of retail traders and a chunk of professional traders were out of business, doing something else.
The first meaningful market I saw was the 2001-2003 bear market, and that made a lot more sense to me than the tech bubble. Companies had to make money, and have real businesses - things no one cared about when vaporware ideas were trading at 100x revenues during the bubble (will explain all this later).
To this day, that bearish tint has cost me some money on the upside, but it certainly saved me a heckuva lot of money on the downside.
I was able to dodge the Great Financial Crisis and make money on the short side (betting stocks will go down). I crushed the Covid disaster as well by spotting it early and positioning myself to profit when stocks and companies went into free fall.
Sure, I tend to sell too soon, but no one ever went broke taking profits, and relying on the foolishness of the market (Greater Fool Theory) isn’t a long term money management methodology.
Who Am I?
Before we go any deeper, it's important for you to understand my track record.
To put it mildly, this isn't my first rodeo. I've been a professional money manager for over 25 years and have been investing for 3 decades.
I put myself through law school by trading an Etrade account back when online trading was basically, buy or sell. Even then, before any significant training, it was obvious that while the market was a complex animal, there were certain moves that were tradable based on economic and financial data, market mechanics, and behavioral psychology (the power of greed and fear).
Post-law school, I took a job as a Mergers & Acquisitions associate with Sullivan & Cromwell, one of the top law firms in the world. I worked on deals for several high profile investment banks. This gave me a front row seat to see how Goldman and the rest of the blue chip bankers sized up a target, and then packaged it to their HNW clients and institutional funds. While it was mostly tedious, hair-pulling work punctuated by moments of excitement, it set the table for where the real action was - the world of finance.
I wanted to be the client, not the lawyer servicing these clients so I made the jump to a proprietary trading firm where it was sink or swim from almost day one. It was capitalism in its most raw form, and I document the experience in my book, "Confessions of a Wall Street Insider."
After I had learned all I could learn in this environment, I took a job at a well known proprietary trading firm and then as an analyst at a hedge fund. Eventually I worked my way up to PM (portfolio manager - the guy responsible for investing client and firm money).
I was one of the top PMs at two different hedge funds before eventually deciding to strike out on my own in late 2007.
The result was Incremental Capital - a multi-strategy hedge fund that grew to over $250M in assets.
2007 and 2008 were challenging but rewarding. We put up strong numbers as a firm and grew substantially.
During the Great Financial Crisis of 2008, we were ahead of the game and flagged the insane housing and debt bubble that was building in the real estate space and on bank balance sheets.
We were one of the first firms to loudly sound the alarm on the real estate bubble that would eventually wreak havoc on bank balance sheets and the economy.
We were loudly and publicly short the banks, and did extremely well throughout the Great Financial Crisis (GFC) as our prediction that the greedy banks and asleep at the wheel regulators were leading the economy and the American Public off a cliff unfortunately came true.
The Great Financial Crisis and my subsequent legal troubles with the government changed everything.
My book Confessions of a Wall Street Insider provided a first-hand account of corruption in the Justice Dept. and Wall Street in a never before told way.
Instead of focusing on the bad actors in the financial crisis like the banks that got bailed out by us taxpayers, US Attorney Preet Bharara went for the easy money and easy headlines in insider trading - a convenient whitewash narrative that Bharara and the Obama administration sold to a suffering public.
In fact, I was personally hung out to dry by the Wall Street machine.
Shortly after the financial crash, I was used as a scapegoat and wrongfully convicted of insider trading. I served 15 months in a federal prison for a crime I didn’t commit and lost everything - my job, my career, my reputation, my marriage and eventually, my freedom.
I was high enough up in the system to know how everything goes down.
How the big institutions screw the little guy out of the best investments.
How they siphon ordinary investors profits off through hidden costs and fees, and why they have no interest in making their clients any real money.
And let me tell you, it made me sick.
Well, there’s an old saying: “Only when you’ve lost everything are you free to do anything.”
Losing my job, my firm and my freedom was a horrific experience I wouldn’t wish on anyone.
But it did give me the opportunity to finally expose all the despicable goings on in Wall Street.
I wrote the bestselling book – Confessions of a Wall Street Insider: A Cautionary Tale of Rats, Feds, and Banksters. Since then I’ve been featured in Forbes, Bloomberg, CNBC and Fox and have had thousands of people come up and thank me for opening their eyes to how things ‘really work’ on the Street.
Because of this, I have zero tolerance for BS and now work for the “Average Joe” getting information out to you so that you have the same knowledge & opportunities these insiders have.
And this opportunity makes these guys see red because it bypasses “the way we’ve always done things” and has turned the financial world on its ear.
Why? Because they no longer have control over your money. They no longer get to cherry pick the best ideas and shut you out of the game.
Since my release from prison, I’ve worked diligently to bring professional-grade investing knowledge and strategies to the everyday investor.
I’ve spent my time writing two bestselling books and as a speaker, coach, entrepreneur and expert on disruptive innovation. My mission is to empower people with the skills to overcome adversity and prosper through radical financial, leadership & antifragility training under the Alpha360 umbrella.
And most importantly, I’ve made my children my #1 priority and focus. Being a father (or mother) is the most difficult job in the world. It’s also the greatest one and I wouldn’t trade it for anything.
These days I’m a strategic advisor to companies in the blockchain and healthcare space, two of the most dynamic and innovative industries. I also train hedge funds and financial firms on leadership, resiliency and execution.
In my former life as an analyst and portfolio manager, I would aggregate and analyze widely disparate information into a cohesive thesis on which I would place large bets — a job requiring zealous adherence to proper risk management and filtering.
Primarily, I had to separate the ‘signal from the noise’ on the most competitive, complex stage imaginable with significant stakes in play every day. In other words, a skill set that might be useful in navigating scenarios with fast-changing data and imperfect information, much like the COVID19 outbreak or the current macro landscape.
That’s my historical background. For the ‘what have you done lately‘ crowd, here you go:
In 2015 I flagged the Cannabis sector as being on the cusp of breaking out for therapeutic and recreational use. I predicted most States and eventually the Federal government would follow Colorado’s lead and legalize both CBD and Cannabis. I invested in numerous private and public deals including one of the first vertically integrated CBD companies in Colorado.
In 2015 I became an early investor and adviser in the bitcoin space. I saw early on that the bitcoin and blockchain technology would have a profound impact in the financial and technology space. I wrote a bestselling book about the space and loudly told friends, family and readers they should own some bitcoin. It was trading at $250 back then, and is up over 10,000% since that time.
In mid-late January of 2020, we warned members in my private Telegram group that the SarsCov2 virus was possibly a bioweapon that escaped from China’s only Level 4 lab in Wuhan. We said it would likely wreak medical, economic and psychological global havoc in the coming months if China and WHO failed to prevent its spread.
Several of my clients and portfolio companies are Asia-centric, and the stories and pictures we were seeing from them as well as our own government’s lack of seriousness around the issue convinced us the virus’ spread was likely unstoppable. The inept response by NGOs and U.S. government agencies is a story for another day, but in late January/early February, we were still having meetings with clients/investors coming in from China who reported virtually zero friction at JFK customs before joining us in Manhattan.
In mid-March, the panic hit that I had been expecting and markets sold off viciously.
In late March, I flipped long and laid out my bull thesis on LinkedIn and Twitter as it became apparent that the Federal Reserve and Congress would need to go on an unprecedented spree of printing and spending in order to keep the economy functioning and this would send assets like stocks and real estate higher.
In early 2021, I warned about the coming bout of inflation when the Federal Reserve and most of Wall Street were mocking it.
In October 2021, I issued a sell warning on stocks, bonds and crypto as I forecast that the coming wave of inflation would force the Fed to raise rates aggressively which would decimate risk assets.
I don't include the above to be immodest, merely to set the stage and lay out my track record. After all, why should you listen to someone who hasn't been proven right more often than not, and who has made a living navigating complex, chaotic markets over a lengthy time period?
This is the landscape in front of us right now.
We are at a very unique time in financial, social and political history. Neil Howe called it a Fourth Turning - a generational crisis or decisive era of secular upheaval where the old order is toppled and a new one put in its place.
And while Howe nails many characteristics of this cyclical change, he misses plenty of key factors as well. All 3 of our major landscapes - financial, social, and political are in the midst of massive upheaval.
Each is in a state of independent slow motion collapse, and yet the 3 work together to produce the strange animal we call markets, investing and money management. Frequently, the madness of crowds and emotional factors often dictate financial outcomes more than the 1s and 0s of the economy itself.
If you’ve been with me for the last year or two, this is a celebratory letter.
In October of 2021, I went out with a Special Alert that warned we were facing an avalanche of inflation in the pipeline that would hit like a monster.
I told you to get out of the stock and bond markets, and sit mostly in cash until the smoke cleared and the Fed was finished with its dirty work of raising rates and trying to slow the economy.
Stocks are mostly down since then, and bond markets have been decimated dropping 50% from their highs - a correction we haven’t seen in our lifetime.
Most cryptos dropped 90% (or more) from their highs, wiping out the majority of the sector.
Real estate has been resilient, but even that is showing signs of cracking as 8% mortgages have frozen the residential market and recent losses in the commercial real estate sector are a ticking time bomb where we could be looking at a washout of up to $2 Trillion in losses.
Before we pat ourselves on the back too hard. Let me issue a warning - we’re not even close to out of the woods. The full effect of the Fed’s ‘higher and faster’ interest rate campaign has yet to be fully felt by the market.
Monetary policy works with a lag that is typically 18-24 months.
The Fed started its ‘higher for longer’ rate raising campaign in March of 2022 - nearly 17 months ago. That means we’re approaching the heart of the storm now and I’m confident that the next 2 quarters/6 months will be the ‘max pain’ level.
So what does this mean for you? I'll tell you in a moment.
First, let me highlight some of the big macro and structural themes that are affecting markets and the economy. It's important to have a basic understanding of why things are different today and what is moving the needle. Then, I'll tell you what it means for you and what you can do about it.
BIG MACRO THEMES
There are about a dozen Big Macro Themes that are currently driving not only asset prices, but our social and political interactions as well. It is important for you to have at least a basic understanding of these factors. In future Letters, I will lay out a brief summary of each factor so you can gain a deeper understanding of what moves markets. This is not intended to be comprehensive. We will continue to explore and dive deeper into each of these subjects and many others in the newsletter.
Here's the initial list:
Inflation
Higher for longer
10yr Treasury Bond
Oil
Labor’s newfound advantage over capital (ie, UAW, healthcare workers)
De-globalization. Onshoring v Offshoring.
CRE collapse.
China falling apart.
Income inequality
BRICS
Demographics
Bank Balance Sheets
Government Dysfunction & Shut Downs
Immigration
Stagflation.
Israel & Ukraine
Inflation.
Inflation remains at the forefront as the most pressing economic challenge we'll face in the coming year. At its core, inflation represents an increase in prices. This surge can be observed both in consumer prices (the items we pick up during our shopping trips) and producer prices (the raw materials that finished goods are made of like wood, chemicals and oil).
We saw the biggest jump in inflation in 2021 and 2022 in our nation's history. The sad part? It was entirely preventableand predictable.
Throughout 2021, I warned readers that we were about to see a massive jump in inflation due to the relentless printing of money by the Federal Reserve and spending by the Trump and Biden administrations. Some of it was due to Covid, but nearly all of it was excessive, self-inflicted damage. I warned investors to sell stocks and bonds and move to cash and commodities (commodities typically outperform in an inflationary environment). It was a monster call as stock markets sold off 20%, bond markets are down nearly 50% from there, and nearly every other asset is weaker except commodities.
The spike in inflation prompted the Federal Reserve to raise short term interest rates faster and higher than any time in history. We went from the mostly zero interest rate policy (ZIRP) that we've enjoyed since the Great Financial Crisis to a 5.5% Federal Funds rate - a rapid, sudden adjustment in the cost of money.
When interest rates are high, everything is more expensive. Simply put, when individuals, businesses and governments have to borrow at 5.5% vs 1.5%, money is more expensive.
Mortgage rates are a good example. Many people locked in a 30 year fixed rate mortgages at 3% or less. The current 30yr is close to 8%. If I bought a $1,000,000 house and financed it entirely at 3% (borrowed the $1M), my monthly payment would be $4000 before insurance and taxes. At 8%, the monthly payment is $7500 - almost double. High interest rates make money more expensive.
They also make stocks more expensive since one way stocks are valued is based on discounted cash flow based off the discount rate (the rate of return used to discount future cash flows back to their present value). Don’t worry about the details right now as we’ll explain all this at a later date but when we use 3% as the discount rate vs. 6%, the S&P 500 value is significantly lower.
Regardless, inflation is also a great teaching lesson on one of the most important concepts in the world of finance & investing that you should be aware of: 👇
A360 Lesson #1 - Government Statistics are Imprecise or Fraudulent.
We either can't measure most things accurately, or for political and economic reasons, government bureaus give us fugazi numbers far too often. Take inflation. The government said at its worst, inflation was rising 10% a year. Over the last 2 years, the government claims inflation has risen between 4 and 10% a year. Anyone who has gone to the grocery store in the last 2 years, or renewed their health insurance or filled up a tank of gas knows that's a lie.
Inflation is likely up close to 40% in the last 2 years, and more in some cases. A better metric than the government are sites like ShadowStats or TruFlation, which show that we've changed the way inflation is measured to make it seem less worse than it is. According to ShadowStats, inflation was rising 20% a year starting towards the end of 2021 - more than 2x the official, recorded rate. Even Shadowstats may be underestimating inflation, as food, clothing, gas and other items have risen more than 100% since 2021.
Take eggs for example. In my local grocery store, eggs went from $3 approx to $9 in some cases, that's an increase of 200%.
On the bright side, the Fed has been somewhat successful in tamping down inflation by raising interest rates and slowing demand by making money more expensive. Supply chains have also been repairing themselves since the Pandemic so inflation has come down. Nevertheless, there’s still plenty of work to do if the Fed wants to hit their 2% target for inflation.
What causes inflation? There's no perfect answer. Economists and market participants disagree. Essentially, inflation is caused by monetary and fiscal stimulus. Printing money and spending more than we take in. The basic definition is too much money chasing too few goods. Basic supply and demand. When supply is low due to supply chain issues or other reasons, and there's a lot of money chasing limited goods (high demand), prices go up. The Federal Reserve has attempted to bring these forces back in line with each other by raising rates and slowing demand (and they've stopped printing money).
It's important to understand that inflation is a silent tax on the middle and lower class. The rich can afford to pay for groceries and gas when they double. Middle class people living paycheck to paycheck are decimated by inflation.
If you want to keep it simple, inflation comes from too much money chasing too few goods. Milton Friedman, the great economist summed it up like this:
“Inflation is an old, old disease. We’ve had thousands of years of experience of it. There is nothing simpler than stopping inflation—from the technical point of view.”
That remedy took a specific form: “The only cure for inflation is to reduce the rate at which total spending is growing.” This cure involved a temporary side effect, as Friedman noted: “There is no way of slowing down inflation that will not involve a transitory increase in unemployment, and a transitory reduction in the rate of growth of output. But these costs will be far less than the costs that will be incurred by permitting the disease of inflation to rage unchecked.”
In other words, to slow inflation, you have to increase unemployment and slow down the economy.
There are other factors of course like wages/labor, and I'll give you a crash course in future A360 Letters on why it matters that labor finds itself in the driver’s seat for the first time in 50 years.
Tailwinds vs. Headwinds
For the past 40 years, the equity markets have enjoyed substantial tailwinds. The Baby Boomer generation, the wealthiest in history, has served as a robust engine, pouring capital into stock markets during their peak earning years.
Furthermore, we've experienced an unparalleled bond bull market, with interest rates plummeting from 18% in the '80s to virtually 0% for the last decade. Low-interest rates foster capital formation, enabling both businesses and individuals to borrow and flourish, thereby fueling sectors like real estate.
Adding to the windfall, China has been instrumental in keeping inflation at bay as the world's manufacturing giant. The global market has also expanded significantly, thanks to the fall of the Soviet Union, leading to a 'peace dividend' as countries redirected defense spending towards modernization.
Cheap energy, low interest rates, low inflation, globalization, booming stock and home prices.
Sadly, many of those tailwinds haven’t just stalled - they’ve reversed, transforming into significant headwinds.
Short-term and long-term interest rates have surged and are now trading over 5%, marking their quickest ascent in decades. The average 30 year mortgage is 8%. That's a killer for home buyers.
The Fed has made clear they are going “higher for longer”, meaning they will continue to raise interest rates and keep them there for a lengthy period of time until they feel comfortable about the inflationary crisis we’ve endured since the beginning of the Biden Presidency (a combination of moronic public policies, years of Federal Reserve mismanagement, and a completely unnecessary war in Ukraine we pushed for and have prolonged).
Russia, China and the BRICS nations are actively challenging the U.S. dollar.
The U.S. is $34 trillion in debt and running deficits for as far as the eye can see.
We just had the second largest bank collapse in the U.S. and global superbank names like Credit Suisse needed to be bailed out overseas to prevent further contagion.
The commercial real estate sector is a well known donut and losses will exceed $2 Trillion dollars.
China and the US are now in a technology & trade war with the US limiting sales of chips and other key technological components to them while China embargoes rare metals that we need to build those chips and electric vehicles.
Moreover, the retiring/dying Boomers are withdrawing money from the stock markets to pay for their living expenses. ‘Demographics is destiny’ is a maxim that bears repeating.
All of these are ‘headwinds’ that the US economy and especially stock markets must contend with.
Typically, the 4 most important factors for the stock market are:
Earnings
Interest Rates
GDP (Gross Domestic Product)
Employment
These 4 factors carry the most weight and should dictate the direction of the market over time not accounting for exogenous shocks (pandemic, 9/11, nuclear war, aliens, etc).
Right now, none of them are working in our favor.
Interest rates, instead of being accommodative, are high and expected to rise further. Earnings have begun to drop for the first time in a decade (excluding the pandemic shock year). GDP is looking feeble too next quarter, indicating a looming recession.
Sure there are lots of secondary and tertiary factors....commercial real estate and bank collapses. The war in Ukraine/Israel. Market and consumer sentiment. Employment (still strong but weakening).
But the 4 factors above carry the most weight when forecasting stock performance.
It’s still a Tale of Two Economies as we've spoken about before. The top 10% are remarkably well off, and spending like crazy on travel, entertainment and luxury goods.
The rest of the country is taking second jobs and drawing down their home equity in order to deal with crushing inflation and wages that can’t keep up.
To get an idea how expensive the market is, take a look at the Shiller PE.
The Shiller PE, named after economist Robert Shiller who famously called the housing bubble, gives you a longer-term view that corrects for short-term volatility,
The formula for the Shiller P/E ratio is simple: current price divided by average inflation-adjusted 10-year EPS.
To do that, you’ll need to find an index’s EPS for each of 10 years, adjust each for inflation to bring it into current dollars and find their average. You’ll then divide the index’s current price by this average.
Today’s market trades at a Shiller PE of 31x, above the levels it was at during both Black Tuesday and far above its levels during Black Monday. It’s also about 10% higher than its level during the 2008 crisis.
For comparison, the Shiller PE is now at about twice its median of 15.93x and almost twice its mean of 17.03x.
Here’s a link if you want to see the charts for yourself.
https://www.multpl.com/shiller-pe
What does this mean for me/you? It means the market is very richly priced. When you take into account all the significant headwinds and an overpriced market, it is highly unlikely the market will provide decent returns over the next 3-5 years.
That doesn’t mean that individual companies and stocks can’t outperform and do well, but the stock market itself, the indices like the S&P 500, Dow Jones and Nasdaq should struggle or tread water over the next few years (unless the Fed goes back to print money God mode).
Passive index investing like that offered by Vanguard is not where you want to put your money for the next few years.
Next, I’ll break down what it means for you.
WHAT THIS MEANS FOR YOU - THE CURRENT INVESTMENT LANDSCAPE
Without doing a master course on probabilistic thinking, the below is my best estimate of what is likely to happen. There are other scenarios, but this is the highest probability based on the information we have in front of us and my 30 years+ at navigating markets.
Consumer spending is 70% of GDP, and the consumer is showing signs of . This is no surprise. We've witnessed the largest inflationary bout in our nation's history and at heart, inflation is a silent tax that devastates the middle and lower classes.
Things move in cycles, and we've done everything possible to stop the pendulum from swinging back from free money and zero percent interest rates to reality for the past 25 years.
The tailwinds we've been given - ample free money and fiscal spending by Congress, historically low interest rates, a 40 year bond bull market, the demographic lift of the baby boomers investing trillions into the stock market, globalization and it's opening of new markets and suppression of inflation are all coming to an end or have abruptly ended. Most have already reversed viciously and turned into headwinds markets and investors will have to navigate over the coming years.
The American consumer is resilient, but is showing signs of breaking.
Credit card and other debt at all time high levels.
Bank balance sheets are showing losses from their investment in US Treasury Bonds that are approaching 2008 levels. Delinquent auto payments just reached their highest point since 1990.
The US bond market hasn't flashed recession warnings so consistently for so long in at least six decades.
The bottom line is consumers are running out of disposable money to spend. Inflation has sharply cut into available spending and consumer credit is through the roof.
In other words, consumers have been living off their credit cards and home equity loans for the past year.
The Fed has been quietly praying for inflation to come down. What they want but haven’t seen yet is the economy to slow down and unemployment to tick up.
To date, unemployment levels have stayed very low (there is a legitimate question as to the quality of these jobs but the overall figures are strong on paper) and the consumer has been resilient.
One reason for consumer resiliency is the massive growth in assets and stimulus during the so-called Pandemic.
According to the Fed, ‘37 percent’ might be the reason. That’s the growth in the median net worth of American families from 2019 to 2022, the largest jump on record, according to new Fed data. Pandemic-era stimulus payments and climbing stock and home prices helped bolster household incomes (and obviously, inflation).
That historical 37 percent jump is now running dry as the pandemic stimulus and asset growth has petered out.
If you listened to my advice to A360 members in October of 2021, you locked in a 30 year fixed rate mortgage at 2.5%, and sold off most risky assets including stocks and bonds to give yourself a nice cash cushion.
Many American consumers did the same with their own mortgages, and have been living off savings and home equity loans for the last year as the gap between expenses and income has grown due to inflation and low economic growth.
The data is showing us now that defaults are rising. Bankruptcies are rising. We've got a de-facto recession in Europe. China is weakening, and student loan payments just restarted.
The pendulum has also swung from capital to labor for the first time in 50 years. This small swing is enough to affect corporate margins as firms are forced to pay workers higher salaries which cuts into their bottom line and thus earnings.
On the positive side, AI holds the promise of propelling substantial increases in productivity, similar to the transformative impact of the internet on both the economy and society. However, it also carries long-term drawbacks, notably by amplifying capital's advantage and reducing the value of labor, as robots—being more cost-effective than humans—do not require health insurance or overtime compensation.
In the end, AI may give us a more efficient and prosperous economy and society....but it gets awfully messy first and we have 5 years of rough adjustment ahead of us.
As we talked about above, the real estate market is frozen as those on the low to mid-end have locked in a low interest rate and can’t trade up to a new house with interest rates almost triple where they were in 2021. And on the high end side, many homeowners have big gains from the spike in real estate over the last decade and don't want to pay capital gains taxes for these huge gains which they would have to if they sold.
Hard evidence is now emerging that all the discussions of strained international relations and more than a decade of warnings over the end of an era of globalization are finally spurring corporations and governments to pick sides with their capital.
This fracturing of alliances and marketplaces is a net drain on growth and productivity.
It is truly an era of chaos and instability.
In the Next Letter we’ll continue with the macro lessons and how to position yourself.
Conclusion
My outlook on gold and bitcoin remains optimistic for the long haul, particularly in light of potential future fiscal challenges. Alongside these, I'm also favoring Treasury Notes, oil-producing & service companies, certain alternative investments like convertible debt and commodities, and a careful selection of stocks, among other investment assets.
The financial journey has been complex for many investors in recent years, filled with events that would have seemed far-fetched to someone from 2019. I believe this trend of unexpected developments will continue throughout this decade. Indeed, we are experiencing interesting times, yet life persists.
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That's it for now.
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