CMFM – Curating My Favorite Material
A collection of greatest hits in recent articles, podcast, videos, interviews, and general material for your perusing!
Let’s zoom out a bit, shall we?
When you really think about it, the clearest indicator of the state of our society is the state of our economy. It is like a real-time State of the Union address, and it provides dynamic insight into the psychology of our collective emotions and values at any given time.
This is the fundamental reason I am so truly fascinated in the economy, and particularly, in the markets, where economics are put into application. As I talked about here, savings is just an accumulation of time we have already earned to do as we please. The way our current economic system is structured is such that all we are truly valuing is our most precious commodity of all: our time.
The issue with our system is that it is outdated, it is clearly dysfunctional, it thinks linearly in a non-linear world, and above all else, it has been manipulated beyond comprehension. While many pundits are saying that the Fed is going to cause the stock market to crash by raising rates, I think this is an overly simplistic thought process that skips all the juicy details where profit opportunities are hiding.
The market is much more complex than people give it credit for. I still consider myself a novice, and while I do not believe experts exist in this realm, I remain humble in my abilities and opinions and understand that the more I learn the more I do not know. It is certainly an area of lifelong learning to be an active market participant, which is something I urge everyone to do because as I have said before, nobody has more intrinsic motivation to grow your capital than you, yourself!
I have attempted to explain why bond markets are really the backbone of our credit, fiat based economic system. I have also outlined how to apply a view on this reality in the markets. For the sake of brevity, bond markets are considered the smart money markets, whereas stocks (equities) are considered dumb.
In this sense, bond markets are considered the safe haven, and the thinking is that bond markets cannot ever collapse. It is worth noting that whenever an asset is virtually risk-free, it is highly likely that the asset is in fact very risky. The opposite of this holds some truth as well (looking at you Bitcoin).
We now stand at a point in time, however, where the risks with bonds are mounting, and it’s due almost entirely to the fact that so much capital was plunged into the bond markets in an effort to prop up the economy and prevent a collapse that would have been initiated by complete and total loss of trust in the monetary system. Again, a system we entrust to properly value and safeguard our accumulated time.
I cannot recommend the following outlook reports from Ice Cap Asset Management enough. In particular, the October 2017 issue gives a fantastic primer for the whole state of the bond markets, and the February 2018 issue follows up with this narrative and provides further insight into why the USD index and the Treasury yields are such important measures of bond market health.
Spark Notes: Watch US Treasury yields and the value of select world reserve currencies, with the USD being the world champion. These measures are really a proxy for the total global economy’s health. It goes without saying that you should also be watching debt levels and the LIBOR rate.
I am a big fan of Real Vision’s mission, which is to provide unfiltered financial insight from active market participants. This sort of access has traditionally been reserved for those on Wall Street, or those plugged into appropriate networks that allow them to interact with these people in person.
The beauty of Real Vision is that they leverage their network with the power of the internet to interview some of the most interesting people in the world of economics, investing, and in general, thinking about the world. I encourage you to sign up for their free trial, at the least!
The video below is an interview that goes into capital flows, and why they are the true market drivers. As the presenter states, capital is in the process of flowing out of the United States, hence the weakness in the USD. However, like anything else this is a cyclical trend and just as capital has proven to do, it will flow back into USD and US assets in the future.
As investors, we must pay attention to these larger flows of capital because they are what drive markets to move. They are the catalysts. I’ve written about this topic before – in fact, I consider this a recurring motif in my blogging efforts – but for those reading this for the first time I expect the next financial/geopolitical/existential crisis to be very bullish for the USD.
This strength in the dollar will be the result of generations of market participants being led to believe that the USD is the world reserve currency and Treasury bonds are the world’s safest asset class. This may be true on a relative basis, however as I have gone on and on about debt before, it is not the case in absolute terms.
Ever thought about living abroad?
This is perhaps the best article I have ever read on the prospect of living abroad. Of course, it is a multi-faceted process, but amongst the many reasons for why to do so are political freedom, financial diversification, and perhaps most importantly, sovereignty over your lifestyle and quality of life. It is also about having that piece of mind that no matter which way the politics in your home nation decide to swing you have an option to simply step away and live a peaceful life.
I consider it a lifestyle hedge, and it is something that more people ought to consider. It also has the possibility of being a smart financial decision, as you must gain residency in another nation, open a bank account (or use crypto), and purchase the foreign property. In the process of doing so, you are diversifying your savings into another currency, another economy, another geography, and another political/social environment that will have various degrees of low (or negative) correlation to your home nation’s currency, economy, geography, and politics.
Never forget about politics and social trends! They have a nagging history of creating friction for free-thinkers and independent actors, something to be cognizant of within our herd driven world.
This is a beautifully written piece on how we often mistake the pursuit of happiness being one defined by passion and talent, two concepts that are relentlessly pushed upon us as children. “Just follow your passions” we are told.
While this is well-intentioned advice, it is not comprehensive. In fact, I think a more apropos piece of advice would be to say:
“Learn how to learn, build a structurally sound foundation of the world via a generalist learning approach, develop mental grit, discover your inherent talents, leverage your talents to contribute to society in the most effective way, and then reap the rewards of reducing the suffering in the world.”
There are no two identical life forms on this planet. As a result, each of us have our own unique abilities. This is not just a cliché, this is an evolutionary fact. Please read the article and let it sink in!
Stoicism is something that has always intrigued me as a mental framework. From a very young age, I recall my family frequently citing the Serenity Prayer:
Courage to change the things I can,
And wisdom to know the difference.
Much like the Serenity Prayer, the core tenet of stoicism is to control the things you can, and to let go of trying to control the things that you cannot. It is quite a simple philosophy, something I find highly appealing. As Leonardo Da Vinci stated, “Simplicity is the ultimate sophistication.”
While the world of self-help has diluted the value of these types of articles greatly, I find the article below worthy of your time and consideration.
