Hi Do, Here are Todd’s latest fun picks to take your financial skills to the next level... Why have I been dogging you with "epochal change" ideas week after week for this entire year?
What's the point in sending you all of these educational resources about epochal change?
Because I'm trying to warn you that this is not your normal, run-of-the-mill bear market. I'm trying to help you protect your financial future, so you can close the barn door before the horse is already out.
The problem is most people plan their finances according to a playbook designed to fight the last war (the prior epoch). And most of the time that works because little changes from year to year and even across decades. It's almost certain you're doing the same.
But once every few decades the playbook changes. Decades of change get compressed into a few years - sometimes months. That's what's happening now. You're at the beginning of it.
Forewarned is forearmed. I'm trying to help you stay out in front of that change so you can secure your finances rather than get hurt. Change provides both risk and opportunity.
I told my Expectancy Wealth Planning course community two years ago that epochal change was coming. I helped them prepare, and everyone who put those lessons to work are doing well despite all the difficulty. The minority that retained a concentration in traditional buy and hold strategies are now facing difficult decisions.
So how did I make such a bold call with confidence? How did I know?
Well, first of all, nobody ever really knows. All outcomes are probabilistic.
But the probabilities for epochal change were darn close to certain based on the unique way all factors aligned at extreme points at the same time. The underlying systemic instability was unprecedented.
The economy and financial markets don't behave in a linear or rational way. Instead, they grow and evolve more like a sand pile.
You're probably familiar with the analogy where you can add grains of sand to an existing pile and most of the time nothing happens. You keep adding grains and still nothing happens. This apparent stability creates the illusion that adding more grains of sand has no consequence, yet an underlying instability forms. And then suddenly, seemingly without warning, a single grain of sand causes the entire pile to collapse.
That's an oversimplified framework for understanding how the economy and financial markets work, but even that simple understanding is more accurate than the typical cause-and-effect linear models you hear in the media.
The sand pile framework that gives a more nuanced and accurate understanding is explained by Taylor Pearson in this brief, clear article. (Please read his article first before continuing or none of what follows will make sense. Everything that follows is built on that article.)
Every sand pile needs a catalyst to serve as the final grain of sand that sets off the destabilizing chain-reaction. In today's economic world, that catalyst is inflation.
But inflation alone doesn't cause epochal change. That's just the catalyst - the final grain of sand.
You only get epochal change when all the squares on the board are already at extreme points, because that's the required pre-condition for the catalyst (inflation) to set off a cascade effect across the board.
Below are a few examples of conditions representing full squares that create underlying instability in the system (the required prelude to epochal change): Record income disparity breaking "the social contract" resulting in domestic instability Lowest interest rates in all of recorded history resulting in historic bond market "overvaluation" creating "leveraged" price movement to the downside from small interest rate increases Historic stock market overvaluation creating unfavorable risk/reward to the downside Record real estate market overvaluation Record government debt to GDP levels limiting what government can do to fight inflation because they can't raise interest rates as required or their own debt service would be unmanageable Record corporate debt and balance sheet leverage raising solvency risk should any market decline or interest rate increase exceed certain boundaries Post World War II period of U.S. dollar hegemony and relative world peace resulting in historic globalism, extreme financialization of the U.S. economy, and a hollowing out of U.S. manufacturing base... all pushed to unsustainable extremes and much, much more... This is just a short-list of the most obvious cast of characters in this economic drama. There are many more, but including them is unnecessary to make the point.
The problem is the instability in the system was already so profound that some of the squares started the unwinding process before the catalyst even hit: The U.S. realized national security is threatened by supply chain fragility and excessive offshoring, so we've already started reverse globalism by onshoring key industries. You can see it in chips, military, and medical, with more to come. The hollowing out of the manufacturing base and the deflationary implications of globalization began reversing creating an underlying inflationary force. The major countries, including the U.S., realize the existing dollar hegemony (or more specifically, the dollar as an international reserve asset) needs change. China, Russia and others have been calling for fundamental change since the 2008 crisis. And now the U.S. recently "cancelled" Russian central bank dollar reserves sending a clear message to all central banks that the game has changed. The bond market responded with a historic decline over the past few months from the resulting selling, but that selling is small potatoes compared to total foreign dollar reserves in existence. Political populism has been rising as a destabilizing response to the over-financialization of the economy driving record income disparity in the populace. It's so extreme right now that intelligent, well-reasoned analysts are seriously considering the potential for survival risk to U.S. democracy. And on and on and on... When you understand how extreme situations occupy every square on the board, then you'll start to understand the daily news from a different perspective.
Inflation is the final grain of sand that is causing the entire economic board to rearrange itself. As one square collapses, then all adjacent squares around it start to cascade because of the unstable positioning. This process continues until the board redistributes to a stable level where a new period of prosperity begins again.
But this process won't happen in months. It takes years to unwind the extreme levels of excess that took decades to build. We've just begun.
So I've been repeating this week after week, and I'll repeat it again. This is not your run-of-the-mill bear market. This decline is not business as usual.
It's the beginning of an epochal change that will be measured over the next 10-15 years as the various squares on the board cascade and redistribute, and governments do everything they can to stabilize and restore order causing temporary reprieves, and then the cascade begins all over again. This process will continue until a new base of stability is formed from which long-term prosperity can rebuild.
The good news is there will be a new prosperity on the back end of all this. The future is bright. I'm an optimist. This isn't doom and gloom.
Unfortunately, that new prosperity is a long ways away, which means you must manage risk and protect your portfolio during the expected turbulence. We aren't going back to Kansas, Toto. (Wizard of Oz analogy, in case you didn't get the reference.)
If history is any guide, the most likely outcome is 10-15 years of historic volatility resulting in a wild ride to nowhere. By that, I mean we'll likely experience several dramatic bull and bear markets in sequence as the squares redistribute themselves until 15 years from now you look back and realize that (net of inflation) it was an incredibly difficult journey and you got nothing but headaches and stress for it.
Fortunately, I'm providing you with three resources specifically designed to help you succeed despite these headwinds: My Expectancy Wealth Planning course and community are doing well because they were ready. My course gave them the proper frameworks, and our community forum shares resources and insights to extend their learning with current events. Allocate Smartly is the best way I know to manage portfolio risk and pursue positive returns net of inflation during the volatile financial markets we are facing. You won't understand why this is true from looking at their web site, but it's the real deal. I include a mini-course education series teaching you how to manage your portfolio the smart way, avoid the common potholes, and put this resource to use. Roughly 2/3rds of my Expectancy Wealth Planning community are active users, and the feedback over the last few weeks has been deep gratitude for saving their nest eggs and giving them a solid game plan so they can sleep peacefully at night. You can have the same. And finally, this newsletter is where I'll continue to share valuable educational resources to help you understand and navigate the challenging times ahead.
I fully understand that most of my readers are conventional buy and hold investors hunkered down in the trenches to weather the storm. That means you're stuck invested long with sizable losses right now following a sub-optimal philosophy of sticking it out through thick and thin. While that's a valid strategy for the very long term (as defined by producing a positive expected return), it's not optimal. There's a better way that doesn't require unrealistic discipline and excruciating losses.
I hope the resources below will help you understand how certain squares on the board are already filled to maximum instability.
And I hope the discussion above helps you put all of this in context so you can make a smart decision about how you plan your finances and manage your portfolio during these extraordinary times.
Onward and upward...
Peter Ziehan is a brilliant global strategist touring the podcast circuit right now because he's got a new book coming out. I chose this specific interview over the others because Meb's financial understanding draws out more useful insights from Peter than others. Ziehan's world view will completely change how you interpret the news. And if you're shocked by how different he is from mainstream media, then rest assured his track record (including predicting the Russia-Ukraine crisis to the exact year in an earlier book) merits respect. If you get great value from this interview, then I recommend binge listening others to deepen your knowledge. Grant Williams - Top Traders Unplugged Podcast Grant Williams is a top financial market podcaster who interviews the brightest macro and hedge fund minds in the business. In this podcast the tables get turned where Grant sits on the other side of the microphone. It's a rare treat to hear Grant's insights accumulated from years interviewing guests as he built a framework for understanding "The End Game" and how all of this craziness resolves. This is the same article from Taylor Pearson referred to above explaining the sand pile framework for epochal change. I include it here for easy reference so you don't have to scroll to find it.
Onward and upward!
Todd Tresidder
Two Solutions For Epochal Change: This investment software solution shows you how to sleep peacefully and secure your financial future in good times and bad. I use the same to manage my own money, and my clients are loving the results they're getting. My flagship Expectancy Wealth Planning master course shows you how to maximize the expected growth of your wealth in every market condition regardless of epochal change. Join this smart community of active wealth builders to secure your financial future. |
