The earliest finds of homo sapien ( the only human species living today) skeletons show that humans first appeared in Africa around 150,000-200,000 years ago.

This picture shows how humans migrated around the globe after they first appeared in Africa.

As you can see from the map, they started out in Africa (far left of the map) and then migrated toward Asia and Eastern Europe, then Western Europe and then to the Americas.

The numbers on the map depicts in years how long ago that humans migrated to each continent.

Technology wasn't advanced tens of thousands of years ago so travel was done on foot for a long time which created barriers to where homo sapiens could travel to.

For example, the first homo sapiens to travel to the Americas did it by a land bridge on foot but that bridge eventually melted as climates on the planet got warmer causing these humans to be isolated from Europe and Asia and fall behind technologically from the rest of the world.

Source: Ian Morris, Why the West Rules - For Now; Li Lu - A Discussion of Modernization

 

The proportion of BBB - the lowest investment grade rating before junk - bonds has surged in proportion to total U.S. corporate debt from the mid-to-late 2000's.

Frank K. Martin points out that investors putting more money into BBB bonds represents their willingness to take on more risk in search of return due to Central Bank policies around the globe to push down interest rates.

He also points out that rating agencies have become more lacks in their rating standards.

In 2000, net leverage of BBB bond was 1.7x on average based on Net Debt/EBITDA but in 2017 it was 2.9. 

Source: https://frank-k-martin.com/2019/12/20/corporate-debt-minsky-moment/?mc_cid=cee25c512d&mc_eid=5edaac4958

80% of entrepreneurs make the same amount of money they would if they were employed.

So a lot of entrepreneurs are really just starting a company so they can create a job for themselves and be their own boss.

The median revenue of an owner-managed firm is $90,000 and 81% of founders have no desire to grow their business since most founders are just trying to make a living and not trying to become the next Facebook or Google.

 

Source: Reactionwheel.net by Jerry Neumann; The illusions of Entrepreneurship by Scott Shane

Regulators require banks to set a certain amount of capital aside and hold it in reserve.

Central Bank authorities in the U.S. set the amount required by commercial banks to be held in reserve.

Excess reserves are the amount of reserves that are above the required amount.

As shown in this image, excess reserves surged after the financial crisis in 2008 to help make the banking system safer.

In September 2019, rates in the overnight lending market surged to 10% despite interest rates being in low single digits.

Why the big banks were unwilling to lend out their excess reserves despite the 10% interest rate being so much higher than alternative opportunities to invest in is unknown but part of the reason could be due to regulation stemming from the Dodd Frank Act which was created in response to the financial crisis.

 

Source: Bloomberg; Grant's Interest Rate Observer

 

Niels Jenson, the author of the investment letter where I found this graph, wrote the following right before inserting this graph, "And to all those of you who think climate change is a storm in a teacup, I suggest you take a long look at exhibit 3 below."

Carbon dioxide levels are currently at there highest level during the last 3 glacial cycles.

In order to decrease the level of greenhouse gasses to better cope with climate change, there will very likely be a continuation of switching transportation from fossil fuels to electric ushering in what Niels Jenson refers to as one of the mega trends he sees playing out in the future - the electrification of everything. 

Source: BlackRock; ARP Investments

The chart on the left shows the biggest percentage declines in the S&P 500 going back to 1928.

The biggest drop was during the Great Depression and the second biggest drop was during the 2008 Global Financial Crisis.

This chart points out that if you're holding cash waiting for a 50% drop in the market to occur, the probability isn't on your side since this rarely occurs.

Since the market rarely drops over 50%, it makes much more sense to be invested for the long term and to not try to time the market.

Source: Eyes on the Market by Michael Cembalest

 

 

 

 

 

 

 

S&P 500 Annual Nominal Returns from 1928-2019.

Majority of the years have positive returns.

Over a 10-year investing period 94% of the returns in the S&P 500 were positive.

Over a 20-year and 30-year investing period 100% of the returns in the S&P 500 were positive.

This is despite the Great Depression, World War II, Vietnam War, Terrorist Attacks, Assassination of JFK, and many others.

Source: Charlie Bilello Twitter (9/23/19)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,242 new condos have been built in New York City since the beginning of 2013.

More than 25% of these new condos haven't been sold.

New condos are still being built which will add to this inventory glut. 

There are also more than 5,617 total units that have listings on StreetEasy but haven't finished construction yet.

The majority of these condos are high-priced and out of reach for the average buyer.

 

Source: StreetEasy

Robots have been increasingly replacing humans in the workforce.

The graph on the left shows the annual supply of industrial robots worldwide.

In 2008 there was an annual supply of a little bit more than 100,000 industrial robots.

In 2016 there were 300,000 and that number was estimated to increase the annual supply in 2008 by 5 times in 2020.

Source: ARPInvestments, Pictet Asset Management, IFR

 

 

 

 

Most divide the world in to two categories: developing and developed. In Han’s view the world has progressed a lot from when these two categories were first drawn up. Hans separates the world into 4 categories based on 4 different levels of income. 

They are as follows:

Level 1: $0–2 a day

Level 2: $3–8 a day

Level 3: $9 to $32 a day

Level 4: More than $32 a day

 

Level 1: No shoes to walk with so they travel everywhere by foot. People on this income level have to walk about an hour just to get water because the well is a far walk away. They are mostly farmers and only have a small amount of food each day to eat.

Level 2: People on this level have a bike so it takes them only 30 minutes to get water from the water well. They have shoes and a small amount of electricity.

Level 3: Have a motorcycle and have enough income to have savings which can provide healthcare if they get income a motorcycle accident. The problem is that this money is mostly saved up for kids education and if they get into a motorcycle accident then they will have no money left for the kid’s education.

Level 4: People on level 4 have access to a car and have clean water in their homes. They also have reliable electricity which allows the kids to do their homework at night with a lightbulb. They also have a stove.

 

 

Source: Factfulness by Hans Rosling and Gapminder (2018)

 

 

 

 

 

 

The image on the left shows real returns by decade for various asset classes.

It also shows economic activity, interest rates, nominal debt growth, and real debt growth all divided up into decade.

 

Source: Paradigm Shifts by Ray Dalio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

There has been a steep drop in the effective corporate tax rate in the USA since the 1940's to the present.

The highest the effective corporate tax rate was in the mid 50's percent during the 1940's. 

Today that rate is close to 10%.

Source: Paradigm Shifts by Ray Dalio

 

In the business cycle leading up to 2000 we were in a tech bubble, in the cycle from 2002-2008 we were in a housing bubble, are we now in a bond bubble?

It looks like it to me as negative yielding debt has reached a record high of $13 Trillion.

Negative yielding means that investors have to pay the issuer to have their money stored.

85% of government bonds in Germany are negative yielding

Negative yielding debt has caused investors to reach for yield in more risky assets.

Source: Bloomberg 

 

 

 

 

 

 

 

 

 

This is an image of how the United States uses its land.

The majority of the land is used in the Midwest for cow pasture and ranges. 

Other notable big areas are land used for timberland which is divided up into private family, federal/state, and corporate.

Source: https://www.bloomberg.com/graphics/2018-us-land-use/

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt not including financial institutions has soared since 2002 and since the financial crisis in 2008.

Since 2008, non-financial debt has risen by $59 trillion

The largest increase came from China with an increase of $27 trillion since 2nd quarter 2008 and the U.S. was second with an increase of $15.9 trillion.

Source: Haver Analytics

 

Housing starts for privately owned homes are down and haven't fully recovered.

Shane Phillips made an interesting observation regarding this chart, "The country’s worst homebuilding year from 1993 to 2007 (1.292 million homes) was better than the best homebuilding year from 2008 to 2018 (1.250 million homes). There are nearly 70 million more people living in the U.S. today than there were in 1993."

 

Source: U.S. Census Bureau

The United States has seen a large drop in the number of publicly listed companies.

 

At the peak in the United States there were 7,322 publicly-listed companies but at the end of 2017 there were only 3,439.

This is a decline of 53%.

Meanwhile the number of private companies has increased a large amount.

And this isn't just in the United States. The largest decline based on percentage was the Netherlands with a 74% decline from its peak.

Some of the reasons for these declines could be due to managers deciding to not want to deal with the pressure of public markets, more regulatory requirements, and the heavy focus of the markets to spend too much focus on the short term aspects of a business instead of long term.

 

Source: Thinking Beyond the Cycle by Jason M. Thomas 

 

Guy Spier has been a very influential investment manager for numerous investors including myself.

In his most recent investment partnership letter from 2018 he discusses more than just his fund's performance but also his principles and what he is trying to accomplish as an investor.

I've reread his investment principles a couple of times now in order to try and understand them.

In his 2018 annual report, Guy discusses each principle in more depth.

 

Source: 2018 Aquamarine Fund 2018 Report 

 

A country's monetary base is the total amount of bank notes and coins circulating in the economy. This includes: the total currency circulating in the public, plus the currency that is physically held in the vaults of commercial banks, plus the commercial banks' reserves held in the central bank. (Wikipedia)

 

From Feb 1986 the monetary base grew from a little more than $182 billion to a little more than $850 billion in August of 2008.

From August 2008 to September 2014 it went to $4 trillion which is an increase of 3.2 trillion in just 6 years.

It stayed at $4 trillion for most of 2014 until it started to decrease in 2015.

The monetary base is now at a little more than $3.2 trillion as of May 22, 2019.

This expansion of the monetary base was due to the weakening economy during the Great recession of 2008 and was necessary to restore the economy.

This extraordinary expansion of the money supply has still been considered by some as the biggest experiment in financial history.

Source: Fred.stlouisfed.org

 

 

 

 

 

 

 

 

 

 

 

Monaco had the highest wealth per person measured in US dollars in 2018 with $2,114,000.

This is mostly due to Monaco's good tax structures, location, popular spot for yacht owners, and high real estate prices.

 

Following Monaco is Lichtenstein at #2, then Switzerland, Luxembourg and Australia.

 

Source: New World Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt and credit are different sides of the same coin. 

When someone lends you $100, that $100 is your debt and the other person's credit.

 

The United States economy has been very dependent on debt (credit) to grow.

In 1964, there was $1 trillion in debt and from 1964 to 2018 it went up 72x to $72 trillion in 2018.

The economy wouldn't be the same today if debt hadn't grown so much.

What caused debt to grow so much?

The US dollar used to be backed by gold which put a limit on how much debt and credit that could exist in the economy.

When Richard Nixon closed the gold window on August 15, 1971 that allowed the US government to create as many dollars as they could. 

The printing of dollars means more debt.

 

Source: Richard Duncan         https://twitter.com/PaperMoneyEcon/status/1128257424836710400

 

 

 

Peak oil? Doesn't look that way.

On the left is a picture showing US crude oil exports over the last 95 years.

The shale oil boom as allowed the US to export 2 million barrels of oil per day.

On the right, is monthly crude oil production for three of the biggest producers.

In 2018 the US passed Russia and Saudi Arabia for the most monthly crude oil produced.

 

Source: https://www.arpinvestments.com/arl/addicted-to-oil; US Energy Information Administration; EIA

 

 

 

 

In 1804, there were 1 billion people in the world.

In 1927, there were 2 billion people in the world. 

In 1999 (less than 100 years later), there were 6 billion people in the world.

This graph is the most amazing one I've seen because it illustrates to me a lot more than just a large increase in the amount of humans on Earth.

I think it tells a deeper story. It illustrates the enormous increases we have experienced in technology, agriculture, medicine, education, and nutrition.

Source: United Nations World Population Prospects, Deutsche

In 2000, 2 billion gigabytes of information existed.

In 2001, 6 billion gigabytes of information existed.

 

Then in 2002, 12 billion gigabytes of information existed.

"More information was generated in 2001 than in all the previous existence of our species on earth."

Source: Revolt of the Public

The damaging effects of climate change:

The number of floods has increased 15 times when measured over 4 different time periods (1950-1966, 1967-1983, 1984-2000, and 2001-2017).

The number of deaths in droughts has increased 10 times when measured between 1996-2005 and 2006-2015.

The number of wildfires has increased 7 times when measured between 1950-1983 and 1984-2017.

The number of extreme temperature events has increased 20 times when measured over three different time periods (1950-1972, 1973-1995, and 1996-2017).

Source: EM-DAT database; www.GMO.com

© 2018 Mike Gorlon                                                                                                                                                                                                                                         Amazon Affiliate