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Friday Thoughts

The last few weeks has been a a bit overwhelming for me. For years, I have been a subscriber to the weekly newsletter published by John Mauldin, an investor, economist, and publisher. He has hosted an annual conference that he calls the Strategic Investment Conference since 2003. These conferences hosts amazing speakers that include economists, hedge fund managers, researchers, academics, and former Federal Reserve members. They were held in high end resorts like Vail, Colorado and Park City, Utah that made them too expensive for me to attend. That all changed in 2020. Due to the lockdowns because of COVID, John decided to have a virtual conference. I signed up right away. Last week and this week, I was able to join in the SIC for the fourth consecutive year. 

I’ll get to discussing some of what I heard from the SIC in a minute. First, I want to quickly discuss one of my favorite events of the year, which just happened this weekend - The Kentucky Derby. The Derby has taken quite a hit to its reputation this year with a shocking large number of horses that have had to be put down. I won’t defend the over training (and likely use of drugs and hormones) in order to try to get an edge over the competitors. But, the pageantry of the entire event makes it pretty unique. I’ve had the fortune to attend a Kentucky Derby. I was in the infield and there’s a reason why they don’t show much from the infield during the TV broadcast. I’ve never been to New Orleans for Mardi Gras, but know know a number of people who have. The Derby infield is very similar to what I’ve heard about Mardi Gras. 

Every year, when I tune into the Derby, it serves a reminder of the number of things that I’ve been fortunate to see and do in my life. I’ve sat in the bleachers at Wrigley Field for a Friday afternoon ballgame. I’ve seen Randy Johnson and Greg Maddox pitch (Maddox was on my 30th birthday in St Louis and he didn’t pitch well). I’ve walked through Times Square and Central Park. I’ve spent time in Key West and had a champaign toast on a boat coming into the harbor as the sunset over Mallory Square. I’ve watched the sunset from a cliff over the Pacific Ocean in Dana Point, CA. 

But, none of those things compare to what I’ve been able to see over the last three years while traveling South Carolina with my family. We’ve been to all 47 SC state parks. We’ve seen baby sea turtles, held sea urchins, caught fish in Lake Russell, hiked all over the place, and so much more. 

I bring this up, not to brag on what all we’ve been able to do, but because I’m very concerned about kids growing up right now. Through our travels, we’ve seen kids of all ages and backgrounds. Too many of them, though, have their head bent down, staring into a screen of some sort. Too many folks are relying on these screens to be babysitters. And, too many times, they’re doing so without monitoring what the child is watching or doing. These children are getting social media accounts and they are not ready for that. I was talking to a middle school principal the other day and he said that EVERY discipline issue he has had to deal with this year has come about because of social media. Every one! And, his school does’t allow phones to be used during school hours. 

The topic came up in the SIC, even. During a discussion with Frank Luntz, who runs a very prominent polling company, he went off about what his polling is starting to show about the effects of social media on children. Anxiety, stress, and even depression are up by massive percentages in middle and high school children, especially girls. I know that this is a difficult issue to tackle. If you’ve already allowed a teen or pre-teen to get on social media, it’s not too late to pull back and set limits, such as no phones in the bedroom at night. They should be set somewhere public to charge. 

As I mentioned in my last Monday Thoughts, we are committed to not allow our children to have a phone of their own until at least 8th grade and social media until 15 or 16 (and were not even sure about that). I had a client that replied to that with the suggestion of using an AirTag so we can keep up with them without them having to have a phone. We have discussed that and will probably do just that. I want to encourage you to have a conversation with your friends and family about these issues. I don’t want to be judgmental of those who have provided these devices to their kids. I get it. But, we must do something before it’s too late and we lose a generation of kids to the internet. Together, we can support each other and hold each other accountable.

Now that I have that off of my chest, let me get into the Strategic Investment Conference. I’m still trying to get my thoughts in order about all of the presentations. I’ll be rewatching a number of them over the next week or two and I plan on elaborating on a few different presentations and discussions over the next few weeks in some Friday Thoughts. For today, I’ll simply go over the larger issues that were discussed. 

This year’s event seemed to have a theme of cycles. If you’ve been investing long enough, you’ve seen how cycles impact investments in many different ways. The stage was coincidently set up for a discussion of cycles by a column written by Ray Dalio on April 19th. Ray is the founder of Bridgewater Associates, one of the largest hedge funds in the world, so when he comes out with a new column, it’s widely read. He has studied historic economic cycles and been writing about them quite a bit as of late. The latest column was titled “Where we are in the big cycle: On the brink of a a period of great disorder”.  Ray’s larger thesis is that the world’s economies work in a series of shorter term cycles (3-5 years) and in larger and more severe long term cycles (70-80 years). As the title implies, he believes we are reaching the point where the long term cycle is ending and that the world is going to be going through some dramatic changes. 

The second speaker at the SIC was Neil Howe. He is an author who has written extensively on generations. He and William Strauss wrote a book titled Generations in 1991. While researching for that book, they noticed certain patterns in various generations of people. As they dug deeper into that, they found the foundation for their next book The Fourth Turning, which they published in 1997. They theorized that the US population has historically operated in a series of cycles. Specifically, they lay out what they term “turnings”. Each turning lasts about 20 to 25 years and they follow a pattern of four unique turnings before they repeat. I’ve heard mention of The Fourth Turning, but had never read it or even looked into it - until the other day! He hadn’t finished his interview before I ordered the book. 

The term “millennial” was coined by Howe and Strauss in The Fourth Turning.  A number of other things that they wrote in 1997 have come remarkably to pass. The following is from the early part of the book.

  • Around the year 2005, a sudden spark will catalyze a crisis mood. Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation, and empire. Yet this time of trouble will bring seeds of social rebirth.

Later in The Fourth Turning they lay out 5 scenarios that they felt could be plausible sometime after 2005 (remember that they wrote this in 1997).

  1. Beset by a fiscal crisis, a state lays claim to its residents’ federal tax monies. Declaring this an act if secession, the president obtains a federal injunction…
  2. A global terrorist group blows up an aircraft and announces it possesses portable nuclear weapons. The United States and its allies launch a preemptive strike…
  3. An impasse over the federal budget reaches a stalemate. The president and Congress both refuse to back down, triggering a near-total government shutdown… default looms. Wall Street panics.
  4. The Centers for Disease Control and Prevention announce the spread of a new communicable virus. The disease reaches densely populated areas, killing some. Congress enacts mandatory quarantine measures… urban gangs battle suburban militias. Calls mount for the president to declare martial law. 
  5. Growing anarchy throughout the former Soviet republics prompts Russia to conduct training exercises around its borders. Lithuania erupts in civil war… US diplomats are captured and publicly taunted. The president airlifts troops to rescue them and orders ships into the Black Sea. Iran declares an alliance with Russia. 

Well? They were pretty close to 4 out of 5. They did follow that up with this line, “It’s highly unlikely that any one of these scenarios will actually happen. What is likely, however, is that the catalyst will unfold according to a basic crisis dynamic that underlies all of these scenarios.” In other words, society tends to deteriorate to the point that bad stuff is bound to happen. I think most people would agree that this is kind of what it feels like is happening around us right now.

This is getting long, so I’ll follow up next week with more thoughts about The Fourth Turning and some of the presenters from the SIC and how they suggested that we prepare. But, I don’t want to leave you with all of this somber news without sharing some good news. Neil Howe was very optimistic about the future of America. He pointed out that we have been through three “fourth turnings” in our history. After each of these, there was a new awakening and civil restoration. The last “fourth turning” was the Depression through WWII. He reminded us of what he called “The American High” of 1946 - 1964. “This was a period where the middle class grew and prospered. Churches buttressed government… Mass tastes thrived atop a collective infrastructure of suburbs, interstates, and regulated communication.” 

We also heard from entrepreneurs who are working on some amazing technology that will change our lives for the better. I’ll share some of that technology in coming weeks, too. 

It’s going to be a busy weekend. I want to take a moment to wish all of the mothers who may read this a Happy Mothers Day. The world is a better place because of our mothers. There is also an Agriculture tour going on around Sumter County this weekend, where a number of farms will be offering tours and have various vendors and artisans on hand. And, we’re just a few weeks from school getting out and Memorial Day weekend. We have a crazy busy summer planned with multiple trips to the mountains and the beach. We kick it off with a trip to Black Mountain, NC for Memorial Day. More memories are on order!

Again, Happy Mother’s Day and have a great weekend.

The views stated in this letter are not necessarily the opinion of First Allied Securities, Inc. and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.  Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.  Past performance does not guarantee future results.

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