Investing In The Post Election World, Life Learnings, Geo-political Alpha

October 29 2020

“To live is the rarest thing in the world. Most people exist, that is all.”

- Oscar Wilde

“If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them.”

- Bruce Lee

“There are only two ways to live your life. One is as though nothing is a miracle. The other is as though everything is a miracle.”

- Albert Einstein

A. Investing in the Post Election World

A week ago, Gallup released some interesting polling data.

With a few days to go, what do I think: a) the race is much closer than the polls show b) I think the polling errors remain and have likely increased and c) if you pushed me, I’d say Trump wins.

But regardless of the outcome and the chaos, at the latest in January we will know who controls the presidency and the Senate.

This reminded me of what Jeff Bezos said (emphasis mine):

“I very frequently get the question: 'What's going to change in the next 10 years?' And that is a very interesting question; it's a very common one. I almost never get the question: 'What's not going to change in the next 10 years?' And I submit to you that that second question is actually the more important of the two -- because you can build a business strategy around the things that are stable in time. ... [I]n our retail business, we know that customers want low prices, and I know that's going to be true 10 years from now. They want fast delivery; they want vast selection. It's impossible to imagine a future 10 years from now where a customer comes up and says, 'Jeff I love Amazon; I just wish the prices were a little higher,' [or] 'I love Amazon; I just wish you'd deliver a little more slowly.' Impossible. And so the effort we put into those things, spinning those things up, we know the energy we put into it today will still be paying off dividends for our customers 10 years from now. When you have something that you know is true, even over the long term, you can afford to put a lot of energy into it.”

So taking this notion, of what will not change, here is what I think happens regardless who is in charge:

  1. Fiscal Spending - Regardless of whether a) Trump is the President and Democrats control the Senate or b) Biden is the President and Democrats control the Senate, fiscal spending will be back. It’s just a question of size. Secondly with the election behind us, both parties will push for economic growth and hence to re-open the economy safely. Both of these combined could lead to a very strong economic recovery.

  2. Central Bank Policy - The FED and other central banks are engaged in pushing inflation higher by keeping rates low and continuing to purchase fixed income securities. Both monetary and fiscal policies have become interdependent, and demand management is trying simultaneously to control inflation, minimise unemployment and maximise economic growth. This could lead to stagflation or Keynesian led economic recovery.

  3. The Green Economy - The green revolution is accelerating and will continue to do so regardless of who is President (of course a Biden presidency could turbo charge it). The policies are global and prevalent. This will likely lead to a lot of capital expenditure due to the capital intensity of building entirely new energy and transportation systems.

  4. US vs China - China will continue to invest in technology, grow its trade relations and currency systems to make itself more independent of the US. As China becomes more independent and develops its own ecosystems, investors will likely need to own Chinese assets directly rather than benefit from its growth by owning multi-nationals.

What do you think won’t change?

B. Life Learnings

One of the reasons I started writing is Maria Papova at Brain Pickings.

If you already know her, then you will know why. If you haven't visited Brain Pickings, please check it out for just five mins. This is probably the one that had the most impact: Seneca- The Shortness of Life.

It’s required reading in our house.

I wanted to share a few sections from: 13 Life-Learnings from 13 Years of Brain Pickings.

  1. Allow yourself the uncomfortable luxury of changing your mind. Cultivate that capacity for “negative capability.” We live in a culture where one of the greatest social disgraces is not having an opinion, so we often form our “opinions” based on superficial impressions or the borrowed ideas of others, without investing the time and thought that cultivating true conviction necessitates. We then go around asserting these donned opinions and clinging to them as anchors to our own reality. It’s enormously disorienting to simply say, “I don’t know.” But it’s infinitely more rewarding to understand than to be right — even if that means changing your mind about a topic, an ideology, or, above all, yourself.

  2. Do nothing for prestige or status or money or approval alone. As Paul Graham observed, “prestige is like a powerful magnet that warps even your beliefs about what you enjoy. It causes you to work not on what you like, but what you’d like to like.” Those extrinsic motivators are fine and can feel life-affirming in the moment, but they ultimately don’t make it thrilling to get up in the morning and gratifying to go to sleep at night — and, in fact, they can often distract and detract from the things that do offer those deeper rewards.

  3. Build pockets of stillness into your life. Meditate. Go for walks. Ride your bike going nowhere in particular. There is a creative purpose to daydreaming, even to boredom. The best ideas come to us when we stop actively trying to coax the muse into manifesting and let the fragments of experience float around our unconscious mind in order to click into new combinations. Without this essential stage of unconscious processing, the entire flow of the creative process is broken. Most important, sleep. Besides being the greatest creative aphrodisiac, sleep also affects our every waking moment, dictates our social rhythm, and even mediates our negative moods. Be as religious and disciplined about your sleep as you are about your work. We tend to wear our ability to get by on little sleep as some sort of badge of honor that validates our work ethic. But what it really is is a profound failure of self-respect and of priorities. What could possibly be more important than your health and your sanity, from which all else springs?

C. A Few Things Worth Checking Out

1. Marko Papic was on the Ted Seides - Capital Allocators podcast talking about his new book: Geopolitical Alpha. I listened to it twice, even though I read the book!

Some of the most interesting ideas were about a) the consequences of living in multi-polar world (versus the simplistic US hegemony or US/China, US/Russia world) b) Oil upside in a Trump win because Trump is pro-Oil and Iran decides things have gotten too tight for it and c) my favourite idea on how to be intellectually promiscuous.

I’m interviewing him on November 5th, shout if you’d like to listen and have questions to ask.

2. Two emerging investors I admire are Dennis Hong (Shawspring Partners) and Fred Liu (Hayden Capital) had a great discussion on searching for the world’s best stocks. Disclaimer: I’m an LP with both.

3. One of the investors I’ve learnt a lot from over the years is Mohnish Pabrai. He was speaking to students at Boston College last week about how value investing has changed and how he has adapted.

The link below to the video and a tweet summary is great.

4. Raoul Pal can be a little sensationalist, but this discussion on: “The End of Monetary & Fiscal Policy As We Know” is thoughtful about what could come next and looks at things you won’t hear in the news (thank you Bjorn).

5. 5G Has Arrived. What Is It and How Does It Work?