Or why you should still diversify, and there isn’t only one macro trade.
This is less a structured argument than a list of points against what has been recently been put fourth by Roaul Pal’s Everything Code/Exponetial age theses. I’m not saying it can’t happen, I’m just say it’s not a certainty, and may be delayed or even unlikely.
- The exponential Bitcoin / Nasdaq curve is ONLY since 2008, if we’re repeating commodity cycles in a similar way as prior to that, there is a probability that the log trend won’t continue.
- The Nasdaq is now made of the biggest names, which have now stopped growing exponentially, they are now starting to revalue as ex-growth names. You might want to still be long technology, but the smaller growth names, not the large ex-growth names.
- Another area that has allowed market cap-weighted indices like to Nasdaq to grow, is that the large-cap names have basically bought all the small-cap names, without any anti-trust legislation. Again we are in precisely the part of long-term trends where that changes.
- Likewise, we are in the part of the debt supercycle where power switches from capital to labour, again that is inflationary.
- The global population is set to grow to at least 2070
- If deglobalization increases or even if globalization slows, the rate of development in less developed countries could easily slow, meaning populations might continue to increase past projections.
- We have an increase in the spending demographic (20s-50s) which may be inflation.
- We have a decrease in the capital demographic (50+ not retire) which may also be inflationary.
- BTC or ETH or SOL might not be the winner, it might be POK or AVAX, so you at least might want to diversify your Crypto bets.
- AI and robotics, like the internet, may take 10-20 years to full implement, during which time investment may need to flow industrial and energy capacity to facilitate the energy transition.
- There is no 100% certainty in investing, don’t follow someone that says there is.
- There are still other ways to make money and you should match personality to process. Do what you love and know.
- There are other parths through a debt super cycle, The great depression and crash of 1929 was one of them.
- Inflation volatlity tends to lead to asset price volatlity which tends to be a head wind to asset price apreciation.
- In march 2020 the 120 year debt super cycle, 40 year disinflationary cycle and the business cycle all converged.
- Roaul is big on the business cycle, and he often says economist extrapolate a recent trend and project it into the future, forgetting that the business cycle is cyclial. Roaul is doing the same thing with the post 2008 and 1980s disinflation cycles.
- In Japan 2/3s of people work past retirement age, meaning for them an aging population might be deflationary (lower consumption, but maintaining some production). In the west if most retirees expect to stop working and just spend, while they will decrease their spending, they may decrease their production even more, leading to inflation (more demand than supply of goods and services).
- We are yet to see what some post-deflation/post industrialization does to society. In China people are now net moving back to the country side, in Japan if houses get cheap enough maybe people will have more kids, this means population decline may stabilize or even reverse, leading to a oscillation around a mnean.
- Raoul also make ridiculous claims like the cost of things going to zero. Even digital things, the cost is not zero as there is still the power cost and the human development costs. This is even less so with robotics where there is physical material and production involved. There is a big difference in the result of an economy where things are “zero” and things are merely “affordable”.
- Gold has outperformed the Nasdaq on an absolute and risk-adjusted basis.
