Year Of The Gripping Hand

macro photo of round silver-colored coins

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This week’s text is the first part of my 2021 forecast. There is simply too much to cover in one letter, and today we’ll start with the most important factor, a known unknown: that I think will be the driver for 2021. Before beginning, I want to make two points, one about my personal investment position and one about recent events.

First, when I read articles about myself, I’m usually called “bearish.” I never know whether to be amused or mystified. If you looked at my portfolio, you would see I’m almost fully invested, not in gold and/or survival stocks, but a full range of assets. I have fixed income and private credit and I also participate in the stock market, but through active traders.

Then there is a smaller portion of my portfolio that is what I call the “long humanity” portion. It is typically technology of one form or another, and I don’t pay attention to volatility. I am long the “idea.”

So I am not bearish at all. I am quite optimistic. I may be currently bearish about long-only index funds at today’s unreasonably high valuations, and not terribly enthusiastic about bond funds at today’s low yields, but my portfolio and thoughts are quite optimistic. I just choose to express my optimism in different portfolios than mainstream managers usually suggest. I am a full-cycle investor, and we have not reached the conclusion of this current cycle.

Second, on this week’s events. Thoughts from the Frontline is an economic/investment newsletter. I focus on larger macro themes. I try to not let my politics intrude, except when politics affects our portfolios and the economy, which is actually rare. The "sturm und drang" of the markets, as we certainly see now, tend to have their own rationale apart from politics.

As my friend David Bahnsen said, “Confusing what one wants to happen in politics with what will happen in markets is perhaps the most dangerous and avoidable mistake around. History can’t be any clearer.”

Frankly, I think the debacle we witnessed this week will have a major impact on the country’s psyche and the way the world views us. I have been talking and writing for quite some time about Neil Howe’s The Fourth Turning, George Friedman’s The Storm Before the Calm, and most recently Peter Turchin’s theories about societal dynamics and how societies tear themselves apart. I have my own concept of The Great Reset. I have long thought the 2020's will be tumultuous. What we are seeing may just be the beginning of woes.

It’s hard to express the emotions I feel right now. From an economic and investment standpoint, which is the purview of this letter, recent events may be less significant than the impact of the incoming Biden administration. It is not yet clear to me how that will play out.

To really grasp that will require some time and thought. Shooting from the hip today would be a huge disservice to you, and disingenuous for me. Frankly, your portfolio should be invested in such a way that whatever the outcome you have the potential to maintain, if not grow, your investments.

I know that is not sufficient for many of you. My friend George Friedman’s first note simply said, “There are moments in history best grasped by silence. Silence is the best I can do now.”

There are others who have more eloquently said what I feel and are more qualified to do so. Let me offer a few links that express some of the emotions I feel, even though I know they have inconsistent conclusions as to what should happen.

My country has been attacked, there is a deep political divide, but at the same time we are still family who share the same country. We have been through such times before, with much loss and sorrow, but the country survives. I have no reason to think this time will be different. But meanwhile, here are three perspectives that, in different ways, helped me process what is happening.

  • Peggy Noonan, probably the greatest essayist of our generation, in an elegant and passionate column describes the need to bring justice to those who stormed the capital.
  • George Friedman, a Hungarian immigrant who has been passionately involved in the American experiment for all of his adult life, tries to express his own emotions in his latest essay.
  • And finally, Trump’s Rebellion Against Reality is Yuval Levin’s historical analysis of the dysfunctions that brought us here.
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