Sometimes Life Doesnt Give You Something You Want

Economy update, "I See You", and The Great Courses on Audible

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The public equities market was up by 17% in the first half of this year. Some see this as vindication that keeping 80+% of your assets in the stock market is the wisest thing to do. People who treat data points as trendline indicators always always always lose the big bet, though. If “park it in the stock market for 20 years” was the answer, the big institutions who govern Wall Street would be doing the same with their own dollars. They aren’t now and never do. They teach you to do that so that they have an unending stream of cashflow which they apply to the private equities markets.

Moving on, though, the question is why are the public markets doing well? Some see this as a sign that the economy is growing and inflation isn't a big worry any longer. While not a very scientific rejoined, it doesn’t feel like that does it? The real price of things I buy every day are more expensive than they were 12, 24 and 36 months ago. I have sticker shock every time I pickup the tab for dinner.

The bond market isn’t convinced that inflation is done, either. With the current state of historically high bond interest rates (4-5% range), for a lot of us interested in capital preservation until the next opportunity window opens means that we are keeping a ton of cash in the bond market now.

The real issue that no one wants to discuss, however, is that economic growth is slowing down. If you normalize growth rates over the past 3 years, backing out the high interest rates, the story isn't very good. In any normal time of economic history, when supply chain problems get fixed, people go back to work and we see inflation drop as a byproduct. But when you inject $6T into the world economy (and we aren’t done yet), inflation tends to stick around as those dollars drive up the cost of goods and when labor costs rise, as well, you are in the quicksand of perpetuating inflation. And remember to those who rule the global economy, inflation isn’t a bug, it’s a feature of the system. They don't want to get out of the inflation quicksand.

Getting out of it is truly difficult. The Fed has the power to set interest rates and is always too slow and not aggressive enough to get it right. These little piecemeal raises do nothing but make lifeline capital to small businesses and the middle class less available. As a consequence, those businesses don't scale, or even worse, go under.

Many projects are struggling because they can't secure funding. When banks have more loans than deposits, they're in danger (that’s why you are seeing so much systemic change going on in the background of the world monetary system). When loans become less valuable, banks lend less. Small businesses especially feel this when they can't get funding or when their credit lines aren't renewed. We’ve purchased 2 companies this year for less than the value of their debt because they simply couldn’t keep borrowing enough money, or selling enough equity to stay in business. Anchor Brewing, a 127 year old brewery in San Francisco is shutting its doors for the same reason.

Big investment markets like private equity and real estate also face challenges. Investors in these sectors will have to wait longer to get their money back as many projects suspend distributions until rates come down again and make a cashflow play available again. This money, then, is stuck and the things it was going to buy in the hands of the end consumer aren’t being bought. The consumer spending of the American taxpayer is the engine of the world economy, and less returns on invested capital means that less of that can happen.

Today, investors should realize that the power of having liquid cash is more of a superpower than it ever has been in the past.

"Your talent is God's gift to you. What you do with it is your gift back to God."

— Leo Buscaglia

“I see you.”

A good friend and mentor of mine called while was in the line to pick my daughter up from sleep-away camp. I couldn’t talk long and felt bad for having to hang up because I enjoy our infrequent conversations. Then I was with my daughter on the long drive home and I didn’t want to share that time with anyone, just wanted to be selfish with it since I had missed her so.

I had a tinge of guilt when we stopped for dinner, though, and knew I needed to call my friend back. As I was thinking about it, she texted me this novel-length text and I thought “Uhoh, she’s mad.”

I couldn’t have been more wrong. She was just telling me she loved me. She’s the good kind of friend who does that out of the blue when she senses I need to hear it. She’s done it many times before and I always appreciate it.

But then she told me why. She had recently found out about an explosive situation brewing in a group to which we both belong. Tempers had flared, egos were fully engaged, and the kind of death spiral that takes a good group down had begun. Very quietly, I had candid conversations with the parties involved, adult conversations couched in the love of friendship, but with the cold and hard truth of the situation, too. The crisis was averted and I moved on to the next thing. I never said a word about it to anyone. One of the parties shared it with my friend who said:

“I see you. In the quiet work you do behind the scenes, taking care of people’s hearts, encouraging us all to be better, I see that.”

I know this sounds like a clever way for me to brag on myself, but that’s not the point. If I brag at all, I brag that I have great friends who would go out of their way to tell me that I’ve loved and seen. When I read her whole text, sitting in a Mexican restaurant on the highway home, after the emotional day I’d had, I had to fight back the tears.

It literally felt so good it hurt.

The thing is … and she gets this … people that do what I do, don’t do it for the thanks, the award, the spotlight, the recognition. We do it so that it gets done.

And when your friend, someone who has taught and mentored and loved you into being says “I see you,” all the work is worth it.

The same thing happened from another friend about 10 days ago but I was so shy about it that I thought it was a one-off. But the universe teaches me when I’m prepared to learn and I’ve learned the value of being valued by two good friends recently.

And I’m going to do this for others from now on because I see them, too.

“Everyone thinks of changing the world, but no one thinks of changing himself.”

— Leo Tolstoy

I can’t believe I didn’t know this but most of the Great Courses series of college courses taught by award-winning Professors a the greatest schools in the world is on Audible for free. This past week I listened to a course of Winston Churchill, Henry VII, the Apocryphal Jesus, and Robert E. Lee’s field command. I had a ton of windshield time but I made it far more productive than just listening to the news or some good tunes. If you have audible, search “The Great Courses,” and thank me later!