A Happy New Year to All! While 2022 turned out to be one of the worst years for financial assets, it turned out to be one of the best years for common sense. A decade of macro distortions caused by central banks were unwound, as central bankers realized that they were working with the wrong theories, wrong approach, and wrong forecasts. It also showed the risks of trusting non-elected officials to make the right calls when it comes to your own wealth.
Fortunately for us, we anticipated this problem, along with many others, and over the last three years, have positioned for a world of rising volatility, illiquidity and lack of financial market support from the government. As I wrote about a year and a half ago (here), inflation came and crushed the gods of money printing. And as of this writing, inflation is still running high, interest rates are still relatively low, and assets purchased as part of quantitative easing are still in the trillions. Of note, there is one central bank, the Bank of Japan, which is still fighting fundamentals by pinning the level of yields.
The full note on this important topic can be downloaded at this link: LTA Thinking – Looking Back, Looking Ahead