Dario Gone Wild, China Loves AI, and The NFL Kickoff Rule :(

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Let’s dive in…

1. A fantastic interview with the macro analyst Dario Perkins.

I’m basically 100% aligned with his views on where we are going. We are entering a new era which will see:

• Higher and more variable inflation. We aren’t going back to the 2010s with super low inflation and crappy growth. Thank god, to be honest.

• Supply shocks not credit cycles. The private sector in the US has deleveraged since 2009. We aren’t as likely to get recessions driven by loose credit going forward. It’s more likely that we get supply shocks like those during the Pandemic. In a deglobalizing world, stuff happens.

• Death of the 60/40 portfolio. The traditional investment portfolio of 60% stocks (mostly US) and 40% treasuries isn’t going to cut it in this era. Investors should look at foreign and in particular emerging market stocks, commodities, and other real assets. More on this in a future post I’m writing now.

• Better productivity and wage growth. Investors loved the 2010s but the 2020s will be great for workers. In the end it will be better for growth as well. Deglobalization will mean more domestic investment in manufacturing capacity and our populist trend means a more worker friendly environment. Better terms for workers means more investment in tech to offset the costs.

• Fiscal vs monetary policy. We got used to putting the Fed at the center of our economy in the 2010s. The worm has turned and now it is Congress and the Administration who are making things happen. Expect fiscal spending rather than monetary policy to drive the economy and markets going forward.

2. China will point $1.4 trillion into AI over the next 6 years! The CHIPS act here in the US provided $280 billion over 10. Of course that doesn’t include private sector investment which will be substantial but are we going to try to match the Chinese subsidy machine? Should we?

3. Discourse has a good piece on why the government isn’t interested in running the government as Dominic Cummings says. Money quote:

   “The person who was most ahead of his time on this was former North Carolina Rep. Madison Cawthorn, who boasted to his colleagues: “I have built my staff around comms [communications] rather than legislation.”

   The more you watch political news, the worse the government gets.

4. The NFL kickoff rule sucks. No link here. It’s just a flat out statement of truth. It’s so bad. Make it stop.

Keep growing,

Alan

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