This analysis feeds into my thesis that negative interest-rate policies are going to proliferate even further. Central bankers fear deflation, especially in leveraged and debt-ridden economies. I like to quip that when you become a member of the Federal Reserve, you are taken into the back room and given a DNA change, which makes you genetically opposed to any form of deflation. You become a deflation-fighting machine.
And the Fed fought that fight pretty well for a long time. The tools they have now, though, are far more limited in their effectiveness. The more I think about it and the more people I talk to, the more I am convinced that we are going to see negative interest rates in the US, too, driven in part by the self-reinforcing downward spiral that Citigroup mentions above, along with overall lower costs across the world.
That is a story for another letter on another day, but all that debt washing up on the shores of the world is going to have to be rationalized at some point. As we think through what that process looks like, as we “wargame” our portfolios and investment strategies, we need to make sure that we are not standing in front of the train of that rationalization as it comes barreling down the track.
Cayman Islands and Home
I’ve had a flurry of travel for the past few weeks, but tomorrow we go back to Dallas, where we will start to prepare the fixings for a large Super Bowl party. I really don’t care anything about the teams – I don’t have a dog in that hunt – but the game is a good excuse to get together with family and friends over bowls of beans, chili, and some barbecue. (For the record, those are separate pots of beans and chili. Real Texas chili does not have beans in it. And I make a rather good pot of chili, thank you very much.)
I know my team is planning to get me to New York for some media and send me on a few other trips here and there, but I really am trying to stay home for most of February, March, and much of April to work on my book, plus what seems to be a growing list of other projects. And I’ll be getting more serious about the gym.
I got to spend last Wednesday evening with Suze Orman and her longtime partner K.T. It was a fabulous evening, and we agreed that sometime this summer we are going to have to make a day or two of it. She has a fascinatingly different view of the world from most investment analysts, which I find refreshing and stimulating. I don’t think either one of these ladies look any different than they did 10 years ago.
The last two nights have found me in Cayman, speaking at a hedge fund conference, surrounded by friends. Tonight, the ever-brilliant investment and economics guru Raoul Pal is throwing a birthday party, which I’m sure will go late into the night. Our mutual great friend Grant Williams is in town to celebrate, and he and Raoul are doing one interview after another for their new Internet-based interview channel, RealVision, which is becoming a fabulous information portal. Some of the best technology around and, good gods, the fascinating people they get to just open up their minds. It’s inspiring. I really enjoy watching visionary entrepreneurs become successful.
On a final note, my good friend and hedge fund guru Mark Hart is also in town for Raoul’s birthday. He lives in Fort Worth, but we rarely seem to find time to get together, which is sad. He is a personally inspiring figure to me. I admire his dedication not only to his work but also to taking care of and maintaining his body. He is trying to talk me into taking jujitsu. I’m not certain that a 66-year-old man should start something like that, but then again…?
I’m actually going to hit the send button early and go sit on the beach, listen to the ocean, and maybe have a drink with a little umbrella in it. There are some things you just have to take time off and do. Have a great week!