2021_10_11 — THEME: Volatility occurs A) After, or B) Before anything has happened — Last week was both

October 11, 2021

Michael’s CIO (Check It Out) Report on the week just past — events, sarcasm, and global macro reflections

Credit: Debt Ceiling, graphics by Michael Ashley

THEME: Asset volatility frequently occurs A) After the fact, or B) Before anything has happened — Last week was a bit of both

• TikTok: The week began with major multi-hour outages across Facebook applications, including FB, Instagram, WhatsApp, and internal communication and security systems used by employees; this came a day after former employee, Frances Haugen, accused FB on “60 Minutes” of prioritizing profits over safety; and then another outage occurred on Friday🤦🏻‍♂️ — at least we still have Snap, Twitter, email, texts, and TikTok which reached a billion active monthly users
• Squid Game: Congress’s mandated national debt limit (the debt ceiling) will soon be reached (as happens every so often)🦑 if so, the U.S. could default on its payments (which would be bad) until the limit is raised or more money is created (because if you have more money, you don’t need to take on more debt) — Recall, Janet Yellen (and I) mentioned the looming debt ceiling last week and a few weeks ago
• The Ceiling, the ceiling, the ceiling’s on fire, we don’t need no money, let the….Congress and the administration reinterpreted Rock Master Scott & the Dynamic Three’s 1984 hit as they debated the national debt ceiling (market volatility ensued) and the possibility of issuing a $1 trillion coin by invoking an obscure 1996 law that allows the U.S. Treasury to mint platinum coins in any denomination; such coin could then be deposited at the Federal Reserve’s Treasury account (instead of issuing new debt) — And some people think crypto is intangible! — “Now throw your hands in the air, And wave ’em like you just don’t care” [also from the same song]
• Debasement: What I have not heard discussed is the currency debasement that could occur with a💲trillion coin. It is one thing to issue a mountain of debt with the promise of repayment, it is another to literally print 💵 which can lead to currency devaluation and runaway inflation
• Groundhog Day: The debt ceiling was raised enough to avoid missed payments through December 3 — so we get to relive this debacle soon, “Happy, Happy, Joy, Joy”
• Less U.S. Consumer spending: Supply chain issues are affecting private consumption, especially with big ticket items like cars, furniture, and appliances — if you can’t buy something, you are not spending on it — optically, this could look like a recessionary signal even though demand exists — call it a shortage or scarcity economy
• Stagflation: Many analysts now predict stagflation! However, 1) There are multiple definitions of stagflation that revolve around either declining, low, or negative growth coupled with higher prices, and 2) It may stem more from scarcity, a temporary supply chain issue [see above] than a lack of economic catalysts — i.e., it’s not well defined and it may look different than 1970s stagflation
• Illiquids: US private markets and illiquid investments — e.g., private equity, private credit, venture capital, real estate — mostly missed this week’s public security price volatility
• Global: Mexico’s inflation rate is +6%; the central bank raised short-term rates (now at 4.75%) 3 meetings in a row — Inflation in Turkey is 19.6%😮 — Electricity-plants in Lebanon ran out of fuel: blackout — 100K Poles demonstrated in support of European Union membership
• Global Taxes: Ireland (along with a few other low-tax holdouts) abandoned its low 12.5% corporate tax policy, agreeing to a global corporate tax deal — 136 countries have agreed to a minimum 15% corporate tax rate
• No default: For the first time in 14 years, the high yield bond market has not experienced a default for three months and Fitch bond rating service forecasts a very low 1% high yield default rate in 2022
• Vino🍷 $8B of wine industry mergers and acquisitions (M&A) this year — that is high! — and private equity investments in wineries, vineyards, and distributors are up +75% — Duckhorn and Vintage Wine Estates both went public in 2021
• Nobel: Peace Prize to Maria Ressa and Dmitry Muratov for their journalistic efforts to safeguard freedom of expression in the Philippines and Russia respectively. Chemistry: Benjamin List and David MacMillan for developments in molecular construction, organocatalysis. Physics⚛️ Syukuro Manabe, Klaus Hasselmann and the other ½ to Giorgio Parisi for disordered materials and random✨processes. Medecine: David Julius and Ardem Patapoutian for discoveries in the molecular basis for sense. Literature📚novelist Abdulrazak Gurnah. Economics🤍½ to David Card (UC Berkeley) and ½ jointly to Joshua D. Angrist (MIT) and Guido W. Imbens (Stanford) — well, at least I attended 2 of these 3 schools😊
• Hugs: Coca~Cola adds even more curves to its already curviest logo in the world😵‍💫, calls it a “hug” (invoking an invisible bottle), and “Real Magic” replaces their very forgettable “Taste the Feeling” slogan

Best wishes for the week ahead😃,
Michael
~~~

Michael Ashley Schulman, CFA
Partner / Chief Investment Officer

“We deliver bespoke investment solutions, innovations, and unique perspectives to you and your family.”

#stockmarket #assetmanagement #assetallocation #investing #investmentmanagement #capitalmarkets #investments #investment #wealthmanagement #riskmanagement #portfoliomanagement #economy #finance #money #economics #familyoffices #macroeconomics #hedgefunds #privateequity #business #trading #management #interestrates #venturecapital #analytics #research #consultants #technology #business #sustainability #volatility #fixedincome #bonds #interestrates #privateequity #venturecapital #PE #VC #RE #AI #illiquid #commodities #crypto #cryptocurrency #bitcoin #blockchain #defi #ethereum #covid19 #financialplanning #globaltrade #supplychain #china #investment #familyoffice #UHNWI #wealthmanagment #weekinreview #globalmacro #economy #news #business #investing #yourfamilyofficehere #humor #privateequity #inflation #stocks #markets #equities #stockmarket #assetmanagement #assetallocation #investing #investmentmanagement #capitalmarkets #investments #riskmanagement #macroeconomics #privatecredit #privatedebt #munis #municipals #munibonds #municipalbonds #globaltrade #supplychain #china #investment #familyoffice #UHNWI #wealthmanagment #weekinreview #globalmacro #economy #news #business #investing #markets #yourfamilyofficehere #humor #privateequity #inflation #stocks #markets #equities #stockmarket #assetmanagement #assetallocation #investing #investmentmanagement #capitalmarkets #investments #riskmanagement #macroeconomics #privatecredit #privatedebt #Evergrande

Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-21–38

Originally published at https://www.linkedin.com.