Your P2K Articles (2022-09-16)
Kindle Highlights
demographics, inequality, and access to information.
Adam Smith wrote in the 18th-century book The Wealth of Nations: “It is not uncommon in the Highlands of Scotland for a mother who has borne twenty children not to have two alive.” This was a real problem in America just 100 years ago. Twenty-eight percent of Americans died before age 5 in 1900; today it’s about half of one percent.
People want to hedge against inflation, deflation, stagflation, bear markets, volatility, government policies, high economic growth, low economic growth, recessions and everything in-between. Yes, you have to build various downside risks into your expectations but hedging out every risk imaginable is how you end up with a portfolio that offers zero chance of upside.
An irony of studying history is that we often know exactly how a story ends, but have no idea where it began. Here’s an example. What caused the financial crisis? Well, you have to understand the mortgage market. What shaped the mortgage market? Well, you have to understand the 30-year decline in interest rates that preceded it. What caused falling interest rates? Well, you have to understand the inflation of the 1970s. What caused that inflation? Well, you have to understand the monetary system of the 1970s and the hangover effects from the Vietnam War. What caused the Vietnam War? Well, you have to understand the West’s fear of communism after World War II … And so on endlessly.