Whats Inevitable Is Neither Imminent Nor Inevitable

We used to believe that while some things may be sustainable in the short run, ultimately either math, sentiment, or reason would prevail. Thus we were guided by the mantra: Whats inevitable might not be imminent but it is inevitable. This line of reasoning covered Fundamental valuations, Government finances and Central Bank policy. I am now going on record as stating that our views on the inevitability of certain things has changed, possibly forever. One singular reason leads us to this conclusion: our definition of what is inevitable is based on historically based precedents and precursors, some of which represent severed causal relationships which may never be re-established. Fundamental Valuations: Valuations of capital assets involved an assumed risk free rate of return, when risk free rates involve negative signs, all valuation metrics are rendered moot. Governmental Finances (Deficits Matter): The recent JV between the Treasury and The Fed virtually ensured that deficit spending will continue unabated, regardless of which party occupies the White House. Fed Policy: The JV between the Fed and The Treasury, necessitated by the law which prohibits The Fed from buying private assets, will drag the Central Bank further into the political realm. MMT and other “costless” solutions to the problems that mostly receive only passing concerns anyway will suddenly become more and more accepted and promoted. As economic “reality” becomes less tethered to what we previously thought was considered sustainable, investors should seek shelter in those things that cannot simply be created by fiat, i.e. Hard Assets.

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