We’re watching a major geo-political re-alignment—the first in 40 years—play out before our eyes. Global neo-liberalism has run its course, and it is receding with each new headline. But for a lot longer, it’s been all too easy to slight the geo- part in the analysis of global politics. Much of the dominant narrative the past two centuries in Europe has been about supra-national ideologies, not rivers and mountains and coal seams. For the last century, advances in transportation have erased prior physical borders. (Look up and ponder the implications of SQ 23 and SQ 24. IYKYK.) And during the …
Category: General History
The 2024 Presidential Election and the US Stock Market
I have a book coming out next month, about how the market is likely to evolve now that interest rates have stopped their 40-year decline. Rates stopped falling in 2020 (the 10-year Note), but the book’s actual publication is occurring in 2024, during a presidential election. (I write slowly….) In the book, I dedicate a chapter to questions of political economy. The chapter argues that investors are too siloed; they’re not paying enough attention to politics. Similarly, politicians have only a limited understanding and interest in the capital markets. That siloing is risky in the best of times; in 2024, …
A dividend investor in a stock market ponders the calendar.
Another year has wrapped up. For professional investors, December 31 means the final calculation of total return for the year. That number goes into the record books, Morningstar’s database, and countless Powerpoint presentations. It is compared to prior-year results, and to those of benchmarks. Peer ranks are established, plaudits announced, and bonuses determined. The investment clock resets on January 1st, and we start the process anew, trying to achieve superior outcomes for another twelve months. But why do we measure the end of one year and the beginning of the next on these dates? It turns out to be completely …
Where are the high-priced strategy consultants when you really need them?
So sorry to read about the travails of the McKinsey crowd. Our thoughts are with them and their families this holiday season, of course. The irony is that we are entering a period of decision-making in business when strategy consultants will be badly needed, and could make valuable contributions. That’s in contrast to the prior 40 years. It shouldn’t come as a surprise that decades of global neo-liberalism (~1980-~2020) was a golden age for pricey MBAs handing out cookie-cutter advice. Why wouldn’t it have been? The answers were often simple and the same: outsource to China, downsize in the US, …
Avoiding Investment “Maginot Lines”
Russia’s invasion of Ukraine highlights how reality often moves far faster than the elaborate narratives and structures common in complex societies. For instance, the intense debate about the pros and cons of Ukraine joining NATO has been going on for decades and peaked at the time of the invasion in early 2022. (See the attached Google Trends chart.) It is now utterly moot. Think about it: NATO was created to orchestrate a defense of Western Europe against a Soviet land attack, most likely through the Fulda Gap from the then East Germany. When the Soviet Union collapsed in the 1990s, …
Crossing the Russian Rubicon
Until now, I have held the title of last person on social media to not comment on the most recent events in Russia. I am giving up the crown. First, Prigozhin’s ploy isn’t fully understood or even over yet. The move on Moscow only made sense if he expected units of the Russian military, national guard, interior ministry or state security services to join him. Few if any did, or did not have time to do so, before the march was called off. Social media is full of explanations, many involving conspiracies, as to what was supposed to happen, and …
Capital, Labor and Stock-based Compensation.
The end of the neo-liberal global order will entail changes in the current alignment of Capital and Labor. I use those terms in capitalized form to evoke an earlier time and place where political economy was all about the relationship between the two. That is no longer even remotely the case. Three full decades of globalization and deregulation have meant that any presumed approximate balance between the two in the US has been long discarded in favor of a largely unfettered Wall Street. The upcoming refresh between businesses and their workforces will be the topic of many other books, but …
Russia’s borders after Ukraine
State boundaries move all the time. Even nation-state boundaries, those that are supposed to be ethnically contiguous and therefore more stable, move frequently. It is simply a presentist illusion to assume that today’s borders are going to be permanent. Even for observers based in the US, where the northern and southern borders have been fixed for some time, it is inaccurate. During our expansion in the 19th century (beyond the breakaway from England in the 18th century and the expansion through native American lands), we took by force, negotiation, or payment territory from Spain (Florida), France (Louisiana Purchase), Mexico (Texas), …
Biology might or might not be destiny, but demography is.
Russia is a multi-ethnic empire. The “traditional” Western empires such as Britain have well-known histories involving their often-distant possessions (though their home territories also featured a variety of ethnic groups such as the Scots, Welsh, Irish, etc.) In contrast, Russia is a solely contiguous, but very large amalgamation of numerous ethnicities. In some cases, the ethnicities have distinct geographies, but often the populations are just jumbled amidst the overall polity. Some of those ethnicities within Russia have been distinct for centuries, some were a product of 19th century nationalism, and some (ironically) were created nearly from scratch in the early …
Your 2023 Market Outlook
Looking for a good guide to the markets in 2023? May I suggest Isaiah Berlin’s The Hedgehog & the Fox. Written in 1953 as a meditation on Lev Tolstoy’s approach to history, especially in War & Peace (1869), it’s as good a guide to investing as you’ll find anywhere. That’s because its about you; it is about self-knowledge. Interest rates, currencies, P/E multiples, etc will always come second to awareness of who you are, what you want, what really matters to you as an investor. Berlin draws on a fragment from an ancient Greek poet Archilochus that “the fox knows many …
On crypto….
As the frisson of fury over SBF/FTX subsides, a few comments from a traditional dividend investor, cash-on-the-barrel, bricks & mortar business owner: 1. Distributed ledgers are not new. 2. A World Wide Web of servers is well-suited to implement distributed ledger technology that is faster and more expansive than could ever have been imagined prior to the internet. 3. Encryption of transactions in a distributed ledger system makes sense. 4. The full flourishing of this system will likely require an internal system of measurement, store of value, & medium of exchange. 5. Existing ones such as blocks of salt, strings …
McKinsey and the gutting of the American economy…
Aiding and abetting…. the gutting of the American middle class & the off-shoring of US industry and manufacturing. walt bogdanich and Mike Forsythe join me on the New Books Network to discuss their new account of the role played by the much-vaunted McKinsey. https://newbooksnetwork.com/when-mckinsey-comes-to-town
Social media craziness….
Now on, to some degree, Mastadon (@HistoryInvestor@alphaville.club), Post.News (@HistoryInvestor), Facebook (@HistoryInvestor), and LinkedIn (under my name). Crazy…
Decision making in Russia.
Decision-making under conditions of uncertainty is hard, even when you have “good” information. And we necessarily assume that high-level policy-makers have at least a marketplace-range of information as an input into the process. But what if we’re wrong? What if the information available to, for instance, the leader of a country, is so poor, that the decision-making necessarily following from it is exceptionally bad? Garbage in; garbage out. That scenario would explain (but not excuse) what heretofore seems inexplicable: R’s invasion of Ukr and its subsequent decisions to double-down, triple-down, etc. In the most recent issue of Foreign Affairs Magazine, Boris …
The US midterm elections.
This is my statement on the midterms. It will not sway anyone, but given the high stakes, I wish to be on the record. Across the nation, the ballot offers voters two very poor options. The first is the radicalized party in power offering a dizzying array of bad policies, in energy, in social matters, in economics, in education. The challenger radical party would toss out the nearly unique, pathbreaking system built up over the past 250 years. They would do so in the service of an organized crime family led by a grifter-in-chief who finds sedition and supporting hostile …
“Company loyalty will make you poor.” Really?
This recent job advice on social media caught my eye, as it was posted almost to the day of my 20th work anniversary at my current employer. That coincidence set me thinking about the nature of employment in the modern age. And from that perspective, hitting two decades stands out. I’m posting this on LinkedIn, which is a website designed mostly around getting a new job, not keeping your old one. And I work in financial services, where the poster’s advice of jumping from lilly-pad to lilly-pad is assumed by many to be the way to fame and fortune. And …
For want of a nail, a shoe was lost…
The United States has now had more than three decades of neo-liberal globalism which has favored outsourcing, off-shoring, margin improvement and earnings growth above all else. Encouraged by the capital markets, corporate America has privileged short-term efficiency over long-term efficacy. Capital spending on hard assets is down as a percentage of sales; intangibles are up. A benign post-Cold War geopolitics and an addressable labor cost differential allowed us to import deflation. We’re not quite at the “virtual” enterprise level, but we’ve moved beyond the polite and acceptable “service” economy that replaced our prior “manufacturing” engine. At the same time, declining …
An early look into The Ownership Dividend.
American Affairs has published an excerpt of the first three chapters of The Ownership Dividend, due out next year from Routledge. The Retreat of Dividends and the Changing Nature of the Stock Market
The NBN interview of Vitaliy Katsenelson
A well-lived life closely examined. Listen in to my New Books Network interview of Vitaliy Katsenelson — a rare US public intellectual–about his “Soul in the Game: the Art of a Meaningful Life”, just out from Harriman House. https://newbooksnetwork.com/soul-in-the-game
Talking rates, dividend investing & the future of the stock market w/Demetri Kofinas.
Great fun catching up with Demetri Kofinas on his Hidden Forces podcast. We discussed interest rates vs risk rates, cashflow real economy companies vs. rainbow stocks, and the role of agency in history…. Please listen in. The Revenge of Risk Rates & the Return of Dividend Investing | Daniel Peris
Stock market drawdowns during retirement…..
A follower wrote in to suggest a stronger assertion of the value of dividend-focused investing for retirees concerned about drawing down their portfolio. He argues that for those investors, the sequence of their returns matters hugely, especially in a market not moving up steadily. (He was responding to my post about the difference between a harvested capital gain vs. a dividend payment.) He writes: “The argument goes that there’s no difference between an income stream derived from selling stocks or one derived from amassing dividends. But that isn’t true. Selling stocks in a bad year means selling more stocks. Dividends …
A dollar may be fungible; how it is generated is not.
The recent market sell off has provided investors an opportunity to reconsider a fundamental belief in modern finance and investment. And that is that investors are indifferent between the two forms of return, a harvested capital gain or a cash dividend payment. That notion underpins pretty much all of modern stock market investing, from the calculation of return, to the capital allocation of corporations, to the behavior of investors. In short, it’s a biggie. And in a rising market, it looks like a pretty good assumption, since most of the time the market is up, open and liquid. The belief …
The Language of Career Transition 2/x
A continuation of a LinkedIn post on career transition: 2/x In retrospect, I liken my career transition mostly to learning a new language. By language, I mean not high-school French, but language in the broader sense of a means of communication, an agreed-upon set of references, of metaphors and understandings. Music and mathematics are languages in that sense, and recognized as such. Computer coding languages are narrower but the same. Trained in history and having learned Russian, I was completely mute in regard to the language of business, finance, and investing. I don’t want to downplay the technical skills involved …
Twitter Posts from February 7, 2022 to the present on the geo-political situation in SE Europe
One month in, got some right; got some wrong. Will continue to update, at east for a while. March 20, 2022 A forceful reminder of why, particularly now, we should be engaging Russian culture more, not less. Please read this. As Morson fans already know, Saul is incapable of dull or shallow thinking. https://quillette.com/2022/03/19/putins-russian-and-pushkins-russia/ March 20, 2022 Sadly, the death toll from WW I continues to rise, yes, the First World War. The decisions/treaties/boundaries (Sykes-Picot, Soviet “Union”, etc)/movements associated w/the “Great War” and the years immediately following (1918-1922) are still driving today’s geopolitical and military realities. The tragedies of WW …
A meditation on trust in finance. Yes, you read that correctly.
I have been wondering about the role of trust in modern finance. To judge by the academic literature and the dominant rules and formulas, it has no role whatsoever. I find that paradoxical, to say the least, because trust is inseparable from participating in modern society. Everyday we make judgments, including economic and financial ones, based primarily if not exclusively on trust, as opposed to a calculation of odds, risks and rewards, costs and benefits. Academics refer to these daily challenges as exercises in “decision making under conditions of uncertainty.” Modern finance tries (and has failed) to quantify that decision-making …
Leading from the middle: The NBN interview with John Roy Price
History is told, it is said, by the victors. And so it is in regard to Richard Nixon. We all know how his presidency ended. What too few of us recall or bother to learn is how it started. In his new The Last Liberal Republican: An Insider’s Perspective on Nixon’s Surprising Social Policy (UP of Kansas, 2021), John Roy Price details how in Nixon’s first few years in office, the President ardently tried to lead from the middle to eradicate the widespread poverty that had so characterized his own upbringing. It is a view of Nixon and a big-tent, policy-driven Republican Party that …
History matters: is our current bout of inflation transitory?
Post a global pandemic, labor is in short supply, inflation is everywhere. Is it transitory? What happens next? History matters. Very similar circumstances after the Black Death in Medieval Europe …. One of many analyses to ponder: https://ideas.repec.org/p/tor/tecipa/munro-04-04.html
How big is your platform? or “What color is your parachute?” 50 years later.
I recently got this very positive email mail through a professional social media platform: “:) .. your web site is treasure of great insights – I’m in my year two of my MBA journey and more and more I found myself checking historical and geopolitical “whereabouts” when reading the cases the profs. thrown on us .. I think it’s a/THE key to fully understand what is happening “behind the scenes” of all/most they want us to do (evaluate equities or M&A deals, making recommendations, etc. etc. ) unfortunately it’s mostly omitted…” I was touched. The thing is, nobody goes to …
It’s time to retire “Left” and “Right”.
George Orwell’s famous 1946 essay, “Politics and the English Language,” lamented how ideologues were wreaking havoc not only on their societies, but also on the language of politics itself. He condemned the “staleness of imagery” and the “lack of precision” in the political writing of his day. During the past 75 years, little has changed. The labels and personalities may be different, but the abuse on and by words is much the same. We can all agree that the United States has become politically polarized, especially so in the past half-dozen years. In better times, Yeat’s middle translated into a …
The power of narrative economics….
A recent New Yorker article by Charles Duhigg ties together nicely several threads of emerging finance that are worthy of notice. The first is the power of narrative economics (and finance) championed by Robert Shiller. My review of his 2019 book by that name appeared on the New Books Network. Shiller’s argument stands in stark contrast to the orthodox model of classical economics. The second is that investment bubbles of the type we are now seeing with SPACs can and have in the past left behind substantial technological and financial innovation after the bubble has burst and much money lost. …