Three Things I Think I Think – Civil What?

Here are some things I think I am thinking about:

1) There’s Gonna be a Civil WHAT?  Here’s an interesting tweet from Ray Dalio:

I really like Ray Dalio. His All Weather portfolio is more or less the kind of permanent portfolio that I think most savers should try to implement (for most of their savings). But I have a hard time figuring out how some of his broader macro views fit into all of this. For instance, he believes that there are long-term debt cycles that create patterns in social and economic behavior. Okay, that makes some sense. But honestly, how could he have enough data to justify a view like this? If a long-term debt cycle is 100 years then we’ve had, what, one or one and half long-term debt cycles in the modern economic age? How could you formulate sound judgments about the future based on such a thin data set?

Personally, I don’t love the idea of “cycles” let alone “long-term” cycles. As I’ve explained before, I think the economy mostly trends long all the while trending or bumping into different equilibria along the way. Things aren’t as cyclical as we like to think. And over any long-term time, horizon debt (and assets) just trend higher. In fact, the longer we go the LESS cyclical everything really looks. Yeah, we like to think the cycles will repeat because that gives us confidence about what the future might hold, but no one really knows.

So…coming back to his tweet about Civil Wars. I don’t buy it. Yeah, there’s a lot of unrest. There pretty much always has been. But the level of unrest that leads people to kill their fellow countrymen by the hundreds of millions is truly extreme. Sure, there was a Civil War due to unrest 160 years ago, but does that mean history will necessarily repeat because of seemingly similar levels of unrest? Methinks not. Besides, most of us are too busy watching Netflix in our jammies to worry about trying to killing other people.

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