"Be happy for this moment. This moment is your life."

“Be happy for this moment. This moment is your life...”

- The great Persian poet Omar Khayyam

“Not till we are lost…do we begin to find ourselves.”

- Henry David Thoreau

“When great events are moving, one must play a part in them.”

- Winston Churchill

A. The Next Decade for Geopolitics and Markets

I found this recent discussion between Marko Papic (@ Clock Tower) and Mike Green (@ Logica) super useful.

The discussion built upon an idea we have discussed before and that Peter Zeihan outlined in his book: Disunited Nations, covered well in our post here or in this podcast.

Given changes in US politics and a move to be more insular, we are moving from a world built upon the Washington consensus to the Buenos Aires consensus.

The world is moving from being able to think globally and long term to thinking locally and to the next election cycle.

It's all about marginal voter. Politicians are now price takers and voters are price makers.

The marginal voter wants more money and therefore austerity is out.

As you can see in this chart, the big difference between today and 2008 is fiscal spending combined with QE.

We have wartime like spending without a war.

We had global austerity coming out of 2008, but this time coming out of COVID we have massive fiscal stimulus combined with monetary stimulus.

The numbers we all need to track is government spending as % of GDP. This will go up.

Remember that the GDP equation is:

GDP = C + G + I + NX 

If the US government has delivered a 15-20% fiscal pulse this year, then what % does that fiscal pulse need to be next year, and the year after?

Will fiscal spending really come down? When has a government program ever really been wound down?

Which is why US government expenditure must grow, and hence with it, the funding needs of the government.

And this is what the market is addicted to.

This is where the 2nd part of the discussion comes in, which is central bank independence.

Historically central banks were just funding arms of the government, and it wasn't until Paul Volcker that FED became independent.

In a world where trillions of treasuries need to be absorbed, does the FED become the monetising and funding arm of the US government?

Highly recommend the discussion here:

B. What I Learnt This Year

As summer comes to a close and I reflect back on what I’ve learnt over the last five months during lockdown, here are five months of my life in three points:

1. Hedonic Adaptation is Real: nothing is as big a deal as you think it is at the time. Angry or sad emotions from life traumas will fade remarkably quickly, but so will the positive surprises from one-time life upgrades. What’s left is just you.

So remember: This Too Shall Pass. Be happy with who and what you have today. The present is all there is.

2. Habits Are The Only Things That Matter: most of your day & life is comprised of repeating the same set of behaviors over and over. The way you get up, your thoughts. Your job. The way you interact with other people. The way you eat and exercise.

Unless you give all of this a lot of mindful attention and work to adjust it, it stays the same, which means your life barely changes, which means your level of happiness barely changes.

3. To Change Your Life, Change Your Habits: The easiest and best way to have a happier and more satisfying life is to figure out what ingredients go into a perfect day, and start adding those things while subtracting the things that create bad days.

For me the perfect day includes: positive social interactions where I learn something new, helping people, outdoor physical activity, making something (however small), problem solving, and some good old-fashioned hard work thrown in for good measure ;-).

A schedule will help, as author Annie Dillard said:

“How we spend our days is, of course, how we spend our lives. What we do with this hour, and that one, is what we are doing. A schedule defends from chaos and whim. It is a net for catching days.”

C. A Few Things Worth Checking Out:

1. Markets and most systems involving humans are complex adaptive systems. Aeon published a fantastic article from Drs. Melanie Mitchell and Jessica Flack summarising the importance of using complex systems science in decision making and planning in our increasingly unpredictable world.

2. What exactly does a Green New Deal mean? This great and in depth article discusses how to decarbonise American and the world.

3. How do we move around in a zero-carbon world? - by Bill Gates

4. Over the last 15 years, YCombinator has invested in and worked with more than 2,000 companies, and has learned from their successes and failures. This library consolidates the knowledge and advice.

5. This AI-generated tennis game is impressive, and you could be playing it soon.

6. Hearing a lot more about the next Commodity cycle, and thought this was one of the best discussions.

7. The US has seen a business application boom. According to the US Census Bureau the average growth in new biz formation was 77% y/y (in order from earliest to most recent, weekly changes were: 84%, 83%, 75%, and 69% y/y). It appears there is a lot of energy going into starting new businesses during our current economic upheaval.

No doubt the big Internet platforms are playing the role of enabler – whether it’s Shopify or Square for direct-to-consumer retail, Google with ads and productivity apps, FB with ads, Gusto for HR and payroll, etc. It’s never been easier to stand up a business (not that it’s easy by any means, even with all these new tools).

This next generation of businesses will be digital first, which will cause a ripple of disruption to the status quo of business operations across the economy for years to come.

Watch out.

And a little humour to finish