2016 Outlook - Part I Global Macro View and Key Asset Summary

“Can anything be imagined so ridiculous, that this miserable and wretched creature [man], who is not so much as master of himself, but subject to the injuries of all things, should call himself master and emperor of the world, of which he has not power to know the least part, much less to command the whole?”

― Michel de Montaigne

Major Macro Themes:

1)      Debt

2)      Deflation

If I had to describe, in one sentence, why this ongoing theme of debt/deflation continues, I would say this:

Governments have not let the market clear.

Markets left to their own device do a good job of clearing…washing away the dead wood with its invisible hand.  Governments’ attempt to save politically connected legacy assets through various means is what prolongs a recession/depression.  Capital is wasted and lock’s in the existing order.  Thus, the economy becomes morbid.  Job growth stalls.  Existing capital is hoarded.  The specter of a 37-year low in the US job participation rate (page 20) is symptomatic, and expression of just how bad growth prospects are in the US—and as we know much worse in Europe.  But it seems policy makers have locked us into this environment with their actions and there seems little on the horizon in 2016 to change that. 

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Black Swan Capital