Of Two Minds

When the state / empire loses the ability to recognize and solve core problems of security and fairness, it will be replaced by another arrangement that is more adaptable and adept at solving problems. From a systems perspective, nation-states and empires arise when they are superior solutions to security compared to whatever arrangement they replace: feudalism, warlords, tribal confederations, etc.

The bear has awakened, and it will not be limited to the stock market. The bear awakens from a long, uneasy slumber and the everything bubble is in trouble. I’m not going to make the bear case with charts or price-earnings ratios or sentiment readings or anything remotely financial.

We are in effect so busy arranging the beach umbrellas per our instructions that we don’t notice the approaching tsunami. Economists focus on what can be easily measured: sales, profits, prices, tax revenues, etc. Since the decay and failure of institutions isn’t easily quantified, this decay doesn’t register in the realm of economics.

The equity, real estate and bond markets all rode the coattails of the Fed’s ZIRP and easy-money liquidity tsunami for the past 13 years. As those subside, what’s left to drive assets higher?

The clear winners in inflation are those who require little from global supply chains, the frugal, and those who own their own labor, skills and enterprises. As the case for systemic inflation builds, the question arises: who wins and who loses in an up-cycle of inflation?

The number of traders who beat the indices soundly over both Bull and Bear markets are very few in number. The Bear’s broken clock is finally right. Those clock hands stuck at midnight–well, it’s finally midnight.