Thoughts from the Frontline

We have been inundated with employment and labor data over the past few weeks. Some of it is finally catching up from reports delayed due to the government shutdown. Readers can be forgiven for feeling a bit of whiplash from the widely varying analysis of those numbers. Depending on who you read, things are either finally starting to turn for the better, or the underlying numbers portend a disaster. I read dozens of such reports, trying to discern some underlying key themes and trends.

Like people, institutions of all kinds get old. Some age less than gracefully. They become set in their ways, fixating on the past and ignoring new conditions. But because they’re “institutions,” change happens slowly.

Everything is relative. That’s one reason the economy is so hard to understand. In a very real sense, we all live in our own individual economies.

Today we continue anticipating 2026, this time shifting for the first part of the letter from economic issues to geopolitics before making some of my personal general forecasts.

Today we continue my 2026 economic and market forecast. Last week I described our current environment as The Bipolar Economy, featuring wild and frequent mood swings. We could also add psychosis to the symptom list.

Extreme mood swings are characteristic of a psychiatric condition called bipolar disorder. Patients can cycle between euphoria and depression. This is difficult because we all need balance to live normal lives. We spend most of our time in the muddle-through zone between the extremes.

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?”