Technocracy: Will What We Love Ruin Us?

Two dystopian novelists, Aldous Huxley’s Brave New World (published in 1932) and George Orwell’s 1984 (published 17 years later in 1949), rocked the West by challenging foundational suppositions that are the bedrock of America’s liberal democracy. It was with some relief that 1984 came and went without an Orwellian nightmare. Fears that we would be overcome by externally imposed oppression, that books and printed media would be banned and we would be deprived of information and, ultimately, the truth, never manifested themselves.

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Could It Be That a Minsky “Moment” Lurks in the Shadows?

Our previous post, “Risky Business,” warned that the global and domestic issuance of low-grade, corporate-debt obligations have become extreme and could be seriously destabilizing at the end of this cycle. This is not an unacknowledged risk, but the situation’s particulars—those that ought to be most concerning—do not always make the headlines.

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Past as Prologue

Our third-quarter report in October drew water from the intellectual well of Robert Shiller’s latest book, Narrative Economics: How Stories Go Viral and Create Major Economic Events. The Nobel laureate delved into various perennial-narrative continuums—panic vs. confidence, priority of capital or labor, techno-philia or -phobia. These continuums are deeply rooted psychological frameworks for interpreting social life, and shifts along them have important economic effects as they embed themselves in the collective subconscious.

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Patience: An Undervalued Virtue

The most consequential truths are transcendent. Take, for example, the dynamics of personal consumption. The financial decisions we make today have consequences well beyond the present moment. The virtue of patience, and its alter ego, impatience, are central to the choices we make. As they determine our spending patterns, they are responsible for what options will be available to us in the future. These inter-temporal[1] choices are many, but a perennial truth is that by consuming less today, consumption levels could increase significantly in the future—and vice versa.[2]

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How a Public Narrative Can Move Markets

Advice to leaders of all sorts is abundant, from coaching programs to graduate courses in organizational management. Some of it is good, much of it is repetitive. Truly effective leadership is found in the doing more than the knowing. Character, long a leadership trait valued by those under the authority of others, is earned through practice far more than study. This is not to dismiss the value of leadership training, but to highlight the startling tack taken by the particularly boorish admonition to leaders below:

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Only the Shadow Knows

Andy Kessler recently wrote an opinion piece for the Wall Street Journal on the “shadow banking system” based on research by Jeff Snider of Alhambra investments. Snider’­­s work is complex and impressive. He has astutely tracked this hidden side of finance for years and routinely warns about the threats it poses to financial markets.

Snider’s insight is nothing new. Its appearance in the pages of the Wall Street Journal is.

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Flying Blind

The expression “flying blind” dates back to World War II when pilots who couldn’t see the horizon because of darkness or clouds were forced to rely on their rudimentary navigational instruments. Many became spatially disoriented (SD), experienced vertigo, and often crashed. Even today IFR pilots (instrument flight rules) are not immune from SD. The U.S. Air Force investigated 633 crashes between 1980 and 1989 and SD was identified in 13% of cases as a contributing cause. Non-instrument-rated pilots (VFR or visual flight rules) have a life expectancy of less than three minutes when encountering weather conditions that require navigation instrumentation.

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Pushing on a String

“The Vicious Cycle” was the heading for the final paragraphs of our post on August 1. It was written on the eve of the double whammy the market took from dual announcements by Fed Chairman Powell and President Trump. The former surprised observers by describing the Fed’s 25-basis-point cut to the discount rate as a technical “mid-cycle adjustment.” The latter dramatically escalated the trade war with China by tweeting out a planned 10% tariff on consumer goods by September 1. Based on the knee-jerk reaction of the equity markets, it would appear they wanted less from Trump and more from Powell.

Fast-forward to today, August 16. The intraday volatility of the S&P over the last two weeks has been tellingly extreme.

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