Learn from history:

Learn from history.

Read this great Winston Churchill quote today: ‘The farther back you look, the farther forward you are likely to see.’

Things that have happened before in history are likely to happen again.

Asset bubbles are a classic example of this.

It makes no sense to me how people in the investing world do not think we’re in a bubble.

Only recently have people come around to the idea now that great investors like Howard Marks, Jeremy Grantham, Stanley Druckenmiller, Charlie Munger and others have talked about the environment we’re living in right now.

They’ve lived through their fair share of bubbles considering they’re all 60+ years old and have been working in finance for generations. For the uninitiated like me, without understanding history, you can’t place today’s environment in the proper context.

Assets across the board are at sky-high valuations. Stocks are in a bubble, crypto is in a bubble, real estate is in a bubble and yet all of this has happened on the backdrop of a global pandemic that has killed millions of people. It is truly is one of the craziest times to be alive.

It does feel like we’re going down a path of no return where whatever situation we end up in is going to be very bad for most people. If it’s a deflationary environment, people will lose their jobs, bankruptcies will occur, people could get wiped out overnight and we could enter a period of a global depression.

If it’s hyperinflation, initially people will be happy as everything starts to go up but only over time do they realize the purchasing power of their currency is evaporating every day. All this does is benefit rich asset holders who already own the assets while negatively affecting the poor and middle class.

Is either of these scenarios definitely going to happen? No. But when you think of life in probabilities, these are definitely more likely to happen than not.

Since the last economic crisis in 2008, the US Fed has continued its endless money printing and completely backstopped the US capital markets. This has in turn allowed asset values to balloon to prices that seem unimaginable. A classic example is Rivian, an electric vehicle company that has no revenue, to be valued at $100 billion dollars. This only happens because interest rates are so low and the US Fed has kept the money printer running.

The question is how long can they do this before the rest of the world catches on and starts dumping US treasuries. If you study history at all, you know any time governments turn on the money printer, even if they’re the global reserve currency, it always ends badly.

America is on this path right now and the issue is there’s no way for them to go. Raise rates to curb inflation and you crash the market. Keep rates where they are and keep inflating the currency till where the average person can no longer afford the same lifestyle. When that happens, revolutions start.

Pick your poison America, you did this to yourself.

None of this is new information though. All great empires just like all currencies eventually collapse as governments continue to run deficits and try to print their way out of issues. Eventually, the population catches on and that’s when revolutions happen.

Working in the healthcare innovation industry has made me really excited about the future of healthcare, but there are so many macro factors that point to this decade being way worse than anything we’ve ever seen before.

Inflation in America has not been this high in 40 years! China continues to bolster it’s military and is now flying over Taiwan. Russia is looking to invade Ukraine. Countries have started going around the US dollar in order to transact (see India – Russia). Countries’ central banks are slowly accumulating more gold.

Those who have studied history have a sense of what direction the world is going, and it’s not positive. When you continue to run up massive debts that you can’t pay off, your currency eventually dies. The issue today is as the US continues to print money, emerging market currencies that are pegged to the dollar are having their purchasing power reduced. This creates problems globally because once people can’t afford food and the basic necessities, revolutions happen.

We’re on that path right now and given how much central bankers care about the stock market, it’s unlikely anything changes. 

Unless you have a black swan event like a meme stock short squeeze that upends everything (*wink wink*).

History can teach you a lot about where the world is but you still need to apply it to today’s environment. All I’m trying to do is figure out where we are in the economic cycle and guess what’s coming up next.

I genuinely hope a lot of my predictions are wrong but having understood a bit of history, the world might be in a huge wake-up call this next decade.

Learn from history, it may be the only way you can understand the future.