‘Que cuandro nos vaya mal, nos vaya como ahora’

‘If we have bad times let them be like today’s’ – This Mexican saying reflects our thoughts as we look back on the first half of the year, with its strong performance across equities, debt and other assets despite the geopolitical and macroeconomic uncertainties we face across the globe.

We are troubled by these uncertainties, from the epochal shift in global power from a US-dominated world to one in which China and other growing economies take their place with their distinct histories and interest, to the increasing realization of the impact unfettered climate change will have on our environment and our prospects, and to the worrying consequences of real and perceived inequality that give rise to the feeling that people face a zero sum game.

Yet as Harvard cognitive scientist and cultural observer Steven Pinker writes in Enlightenment Now, his brilliant argument for a positive view of economic and social progress, by almost any metric we are living in the best time to be alive, and we have the means to shape our destinies and confront the challenges we face. 

Our thoughts echo what we wrote last month, that we may overestimate the effect of new technologies in the short run but underestimate the effect in the long run.  Unfortunately, we had a technical issue with sending out our comment last month so you may not have received it.  We wrote about one of the new technologies that has enormous potential, blockchain, and Facebook’s announcement that it was launching Libra, a digital currency conceived as a stable coin, backed by real assets, and in partnership with other technology and payments companies.  We think that digital currencies have tremendous disruptive potential and that despite the regulatory and other issues that have to be resolved, we have had a glimpse of a technological change that has enormous potential and that we should not underestimate even if we cannot know today how and when it is likely to be applied.  You can read the full comment on our website or by clicking on the link here.

We invest for the long-term as you know, but the fact that we were unable to send our monthly performance update to many of our readers allows us to make an interesting observation about short term performance.  What was a poor month for our World Stars equity portfolio in May (down -4.5% in US Dollars) was followed by a stronger month in June (+6.4%) taking it to a new high for the year.  We could not actually say what changed between the two months.  It may have been the decline in trade tensions between the US and China or the more accommodative language by the US Federal Reserve and the ECB.  What we can say is that it is further evidence that the best months come right after the worst ones and that it reinforces the point that market timing is a futile exercise that is likely to lose far more money than it gains.

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