Thoughts from the Frontline

Every Sunday morning, I wake up to what has become my favorite newsletter: The Rational Optimist Society Newsletter. It generally highlights companies both large and small who are at the cutting edge - the very frontiers of knowledge in score of industries that are busy creating the future while the vast bulk of the media focuses on all the problems.

Dear friend,

According to Einstein, energy is everything. Literally. Every material thing you can touch is simply energy in a different form. Sometimes we can unlock that energy via combustion – burning wood or coal, for example.

I often describe debt as “future spending pulled forward in time.” It can be good if you’re using the debt productively. All too often, people don’t. Nor do governments.

But February made me shiver
With every paper I'd deliver
Bad news on the doorstep
I couldn't take one more step

Sometime in the late aughts (after the GFC) I wrote a letter stating that private credit would one day be bigger than private equity. We are not there yet but getting closer. Private credit, like private equity, encompasses a vast array of different assets with equally vast risks spanning the spectrum from “I really want that in my portfolio” to “oh my God, what the hell are you thinking?”

The Mariner S. Eccles Federal Reserve Board Building, completed in 1937, faces Washington’s stately Constitution Avenue. Its classical architecture presents an appearance of strength and stability. But as we all know, appearances can be deceiving.

In the last few years, we who remember the 1970’s inflation got to watch new generations learn how it feels. They haven’t enjoyed it, to say the least. I’d like to reassure them the worst is behind us. Unfortunately, I’m not sure it is.

Everywhere I go, people ask me what’s next for the economy. My answer depends on what they mean by “next.” Anything can happen next month. I’m much more confident about what we’ll see over the next 5-7-10 years: a painful debt crisis, a “Great Reset” and then a much brighter future as the economy normalizes and new technologies boost productivity and living standards.

In our age of constant interactivity, you could easily see a weekly letter like mine as a quaint one-way monologue. But in fact, I’ve always treated Thoughts from the Frontline as a conversation with friends like you. Sometimes we disagree, but we keep talking.

Our planet has a wide array of different political and economic systems. Some work better, so you’d think we would gravitate to those over time. But even now, we still have a lot of variety. What works in one place and time might not succeed in different conditions.

Turn out the lights, the party's over
They say that all good things must end
Call it a night, the party's over
And tomorrow starts the same old thing again

     - Willie Nelson