The 4th Turning — Part III
Book was first published in 1997, all text in quotes (“”) are excerpts from the book.
Surfing is a great metaphor for investing, trading and markets on a legit swell day. A little warm-up will go a long ways in those conditions. I argue this essay is kind of like a warm-up. A good night sleep, plenty of nourishment the day before, stress free and mentally clear of any drugs or alcohol will keep that anxiety down and help the body stay relaxed from wasting energy if there’s a hold down or “moment”. When the wave jacks up and it’s time to muster the courage to charge it, knowing you are prepared for whatever outcome allows you to get after it with fervor.
That all applies in investing and trading as well. The “set-up” is the approaching wave and one’s relative positioning in the ocean. That clean beautiful wave you’ve been waiting for 20 minutes is precious, just like a great investment opportunity that will pop up from time to time. It doesn’t come along that often. If you charge, glory could follo, or you could toss yourself over the falls and take a digger face first. Or, you could get a nice drop and then the wave dies quickly, or you get that wave of the year; investments and trades are no different.
You don’t want to forget your wax either, preparations are important. It’s the worst when you drop a sweet wave just to have that front foot slide off like a kook. No different than catching a great trade with a market order only to learn you made a limit order that wasn’t filled and missed the move.
You want to make sure your leash isn’t old and about to break either, it’s often a traumatic experience to snap your leash in big surf; similar to the discipline of obsessive risk management, ensuring you have a stop loss when applicable or a plan for the other outcomes that would create a loss.
You want to make sure you pick the right board and fin set-up for the conditions. If the goal is to preserve wealth, trading equities on the 15 min time frame is like grabbing a potato chip board with no volume on head-high day of fat waves; it will be futile. Instead, a long boards the way to go just like buying hard assets to ride the trend for the next 3–5 years.
There’s always going to be a punishing “clean-up” set too. It doesn’t mean you sit safely far outside, watching all the opportunities pass you by. Also, it doesn’t mean you carelessly sit on the inside, day dreaming where you will be caught inside, taking a beating wave after wave as you struggle to paddle to outside again. As a result, one would sauced-out mentally and physically, so much so, one wouldn’t be able to charge that beaut of a wave when it does show up later.
It’s about moving between the two zones of safety and opportunity to increase the chances of being in paddle distance to charge the wave of the day when it does come your way; investments and trading are no different.
So lets paddle out and charge waves, metaphorically and literally with this all in mind.
I pay significant money for objective, trusted professional insights and information from non-institutional sources; one on a daily basis, the other on weekly and the other quarterly.
DO NOT TRUST mainstream financial advice, however by paying attention to it, it can be a good sentiment indicator or inverse indicator of the ebb and flow of the markets. If MSNBC, Cramer or Forbes is recommending anything, it’s not for your sake.
Watching the free daily briefing video at realvision.com will be enough to keep one informed of what’s happening in the markets and to spot potential opportunities or avoid disaster. If you believe crypto will play a big role in the future, I suggest to sign-up for that free subscription and consume all the content.
Fix the Money, Fix the World | The $ Devaluations of American History
History reveals that financial responsibility and fiscal responsibility are enemies of the state. It was the beginning of the end for the Roman Empire when they started filing off the edges of their coins (Devaluation), and making IOU promises to fund their wars (printing money). We all know what happened; it’s what governments do.
Preparing for the good or bad outcomes of the 4th turning requires some defensive positioning and I believe the focus should be heavily centered on the devaluation of currencies, sovereign’s defaulting on their debt, the US dollar as the global reserve currency, and understanding the history’s brutal impact on the common man.
The first 8 minutes of this vid breakdown the basics of what’s unfolding, he is the guy that figured out the Milkshake Theory; beautifully articulated in a nutshell and excellent follow-up discussion. Below is a history lesson on the devaluation of the dollar and potential impacts depending on positioning.
- The Gold Standard Act of 1900 repealed the U.S. dollar’s historic link to silver and defined it solely as 23.22 grains (1.505 g) of fine gold (or $20.67 per troy ounce of 480 grains). At this time, devaluation was not happening yet, $1 was roughly the same as 1834.
- 1933 President Roosevelt confiscated all the gold coins from Americans.
- ***On January 30, 1934, the dollar was officially devalued. America defaulted. The price of gold went from $20.67 an ounce — a price in effect since 1834 — to $35 an ounce.
- Instantly the cost of everything went up by 1.7x. $10k of your hard earned savings, now worth $5.8k.
Key takeaway — if all you owned was gold at the time, you would have effectively lost nothing.
If you had all your cash under the mattress, you lost almost half of your net-worth.
It was also a key event of the last 4th Turning crisis leading up to a climatic World War II.
- After the United States emerged as an even stronger global superpower during the Second World War, the Bretton Woods Agreement of 1944 established the U.S. dollar as the world’s primary reserve currency and the only post-war currency linked to gold.
- That didn’t last long, the collapse of Bretton Woods happened in 1971 with Nixon concerned that the US gold supply was no longer adequate to cover the number of dollars in circulation, President Richard M. Nixon devalued the US dollar relative to gold again.
It was a. result of being the global reserve currency, explained in the Milkshake Theory above.
- 1 oz of gold no longer was needed to back the $1 and from this point forward, it hasn’t been backed by anything other than oil and energy agreements ensuring that the world buys/sells oil and energy in dollars.
***In 2021, the dollar has lost 85% of its value since 1971.
- Risks of $ Collapse, probably not.
Global Currency Wars — too much to dive into in this essay, but you can read this book, “Currency Wars” published in 2011.
- In 2022, the US levied financial warfare on Russia after the Ukraine invasion, seized 643 billion in forex reserves and for the first time in American history, sovereign states around the globe truly realized that their “dollars” are not safe and must make preparations to protect their own national security; it saddens me that my home country are the bad guys.
Last time we used financial sanctions against another country like that, it was Japan.
- On July26th, 1941, President Roosevelt seized all Japanese assets and imposed a strict oil embargo on Japan. Japan lost 3/4 of their trade and nearly 90% of their oil imports.
Japan attacked Pearl Harbor 4 months later.
Why has the Russian Ruble gained so much on the dollar since the Ukraine invasion and the US bullshit sanctions that should have crushed them?
The Russian Ruble is backed by oil, natural gas, gold and commodities whereas the US dollar is backed by…well nothing other than the trust that is falling off a cliff and the world transacts in dollars.
The charts below have been circulating around this week, all currencies relative to the US dollar.
THE BEST PERFORMING CURRENCY VERSUS THE US DOLLAR in 2022 WAS THE RUSSIAN RUBLE
If you were not holding US dollars since Nov 2021, you fucked yourself and if depending on “when” you may have shifted to Rubles, one could have profited 29%…but that’s the rub, the laymen will never be able to shift savings in and out of currencies at the right time, pro traders can barely do it, and we will always be a victim of our government’s shenanigans.
What’s going on here in the above charts? It’s about relative value. The dollar relative to the Yen for example. $/yen, $/Ruble, $/Euro.
In order to make sound decisions with our savings, we must pay attention to the ratios as they relate to our personal situations.
Currencies are traded against each other on the global Forex market and their value fluctuates based on their countries fiscal and financial performance, central banks manipulation, money printing, interest rates and sentiment.
Right now, the dollar is king for most situations, but not all, and it does not imply that it will always be the case either.
- From 2001–2008, one would have lost about 45% of purchasing power holding dollars versus say the sterling pound.
- However, since 2008, it’s the other way around, holding the sterling pound means your purchasing power was halved.
- After the 2008 crisis in the US, it was common sense to runaway from dollars, however it was the worst decision you could have made.
- The Dollar has already spiked recently, then drop like a rock, then spike again and so on as global Central banks and governments fumble the money ball down the field of monetary policy and fiscal irresponsibility…and then off a cliff.
- Key takeaway, holding dollars will maintain the most purchasing power relative to other currencies in most scenarios.
- Remember linear time? We have to be careful we don’t think that way with the dollar.
- It’s cyclical, it’s rising now, it will fall; cycle theory can guide us through it.
BRICS is saying, “Fuck you US dollar!” Brazil, India, Russia, China and South Africa are working together. They are doing the right thing, backing their currencies with hard assets and commodities and at the minimum buying energy and trading products amongst their native currencies instead of the US dollar.
- Every country want’s to buy oil, energy in their native currency because they can print it.
- The way the world works now, they have to do it in dollars and it’s killing everyone but the US.(see Milkshake Theory)
- Zoltan and Bretton Woods 3.0 podcast
The invisible fox in the hen house…is a slow grind of devaluation through inflation, demand destruction, recessions and money debasement. It’s looking like rather than sweeping executive orders as in the past are now replaced with dumb monetary policy changes.
- After 5 years of 10% inflation. Your $100k savings is down to about $59k in purchasing power. But you said the dollar is the safest bet right now? It is, that’s why it is truly terrible times.
- Since COVID, household inflation has been ramping up and well over the double digits in the US, twice as worse around the globe.
- As a result, your $100k of savings in 2020 can only purchase $73k of goodies in 2023. You lost $27k doing the right thing.
- If you were holding pound sterling, the Yen or the Chinese Yuan you were halved relatively speaking.
The Truth of Rising Home Valuations
If one owns a home or land right now, they are feeling great as home prices rise higher and higher than when they purchased them.
Home owners aren’t winning anything, technically, they’re losing too, just not as much as everyone else.
The increasing home prices are not primarily driven by fundamental supply and demand first principles, they are driven by monetary debasement. It applies to the S&P 500, NASDAQ, automobiles, you name it.
Filtering out the noise of speculation one can quickly see by reviewing this chart of US Shillers Home price Index divided by M2 monetary supply is revealing. This data is free, anyone can make these charts, I whipped them up in less than 5 minutes and so could you.
- There’s a rise in home prices form 2001 to 2006 due to the buying frenzy pumped by the sub-prime mortgage frenzy, price increase was “demand” driven.
- Steep drop, revert to the mean when the crisis started in May 2006 and everyone sold to save their asses; price waterfall was “supply” driven.
- It continued until parity was reached and it’s been flat ever since, except for the COVID dip of 202–2021; “Supply/Demand” had ZERO impact on price.
- This chart shows both the money supply and the home prices following the same trend and slope; home prices in white, monetary supply in blue. Clearly, home prices are increasing to offset monetary debasement.
This one adds the S&P 500 and it’s the same thing.
I could do this all day long…If it is not completely understood by now, 9 times out of 10, the rising prices of hard assets over the past 20 years is not because those assets gained value from basic supply/demand first principles, it’s simply because the dollar has been debased and lost it’s value, so more dollars are needed.
Key Takeaway — housing is a pretty damn good hedge (hard asset) against money printing to maintain net-worth. However these charts do not consider inflation, which is at double digits. Hence it’s a great hedge against monetary debasement, but it’s not a “total” solution; home owners with rising valuations are still losing at about a rate of 10–20% a year due to household inflation in real terms.
Lovely, Now What?
There are a myriad of considerations and there is no holy grail game plan, however our heads should be on a swivel, and we should be fully diversified with a well thought-out portfolio of assets that can be shuffled around on a moments notice as events unfold; easier said than done.
“Keep in mind that the closer we get to the Fourth Turning climax, the greater will be the risk of a Great Devaluation. Hedge your portfolio and include assets in foreign markets where the saecular rhythms do not appear to coincide with America’s. Enter the Crisis with a reliable cash flow, diversified savings, and some liquid assets. Really know where your money is. Try to ensure that no one severe outcome (inflation, deflation, market crash, bank panic, default on the national debt) would destroy your entire asset base.”
We should also have plenty of dry powder
Dry powder is cash in US dollars or digital US stablecoins. Without cash, we cannot pounce on the opportunities that will present. If you are like me, that don’t have much due to not selling enough investments last year…it’s a sticky situation because the writing on the wall is quantitative tightening until mid to late 2023 and the value of damn there all investments and assets will continue to fall until central banks pivot to looser monetary conditions or the system breaks(great devaluation moment).
Stanley Drunkenmiller is the Michael Jordan of investing, yet he never retired. If you don’t know who he is, look him up and read this transcript from today (9/26/2022).
Earn Dollars, Spend Cordobas
That has been my formula for the past 13 years which has maximized the dollar’s devaluation to my favor and enabled the life I live today by earning a strong currency and spending in a weak one.
Spending less will generate more dry powder, so earning in dollars and spending in another currency that is devaluing faster than the dollar can be lucrative. My win, was that I was able to work less for the simple lifestyle I prefer to live. Not everyone has this option, but a 6 month stint of remote working two different jobs in Thailand for example, while renting out your house back home could shore up the savings pretty quick; a short term concept worth considering and a double win of living free like a Nomad.
Moving to Brazil is not a bad idea; great surf, great culture and great sex. Oh and the Brazilian real has been holding strong relative to the dollar…
They started raising their interest rates a year ago preemptively; their history of monetary policy is fascinating and it’s not their first rodeo. El Salvador may be better. Their native currency is the US Dollar and Bitcoin is also legal tender, I like this power-duo. Dollars for the daily transactions of life. Bitcoin for savings that can’t be seized by governments and you can spend it just like dollars.
If those previous charts comparing home prices to money supply didn’t grab your attention, I don’t know what will. Again, I’m blowing it in this department, my rent for a 3 bedroom house without maintenance costs has made sense to not lever up with a mortgage that would force me into a traditional job or quadruple my workload to pay it off; a lifestyle choice of course. If I had read this book a year ago, timing would have been perfect to diversify into a home; I have some tough choices ahead of me.
I presume everyone is going to be strong in some areas and weak in others. Some are, “Land rich, cash poor”. Others land and cash rich, but no income streams, and others may be at risk with all their savings in the bank; we all have work to do.
If you locked in a 2.5% rate mortgage last year for 30 years, then as inflation continues rising and the money printer goes “brrrrrr”, you are able to pay the mortgage with a devaluing currency while hopefully earning a yield a yield greater than 2.5%; good work.
Example: Have 300k in bank, transition 250k to a hard asset or investment instrument that is gaining 5% per year. Take loan for 250k out at 2.5% with 50k downpayment (20%) and you are winning, yet still losing to inflation in the double digits; the game is rigged.
Active income, passive income, multiple income streams will relieve the pressure and allow one to have the mental courage to take risks when opportunity presents. Losing one’s job or primary income stream is to be avoided at all costs; figuring out ways to increase it is necessary.
If you are not increasing your income by 10% a year, you are losing to inflation in that department too. If you saved for 5 years to end up with $100k of savings in 2021, it will be worth $59k in 2026. You’ll still have the $100k, but the ten bitcoin you wanted to buy in October 20/2021 will cost 1 million dollars in 2026.
I think the basic ingredients are:
- Land or Home
- Income/Revenue streams
- Sufficient liquid savings and assets for 2 years without income
- Dry Powder for buying opportunities
- Hard Assets like gold, silver, Bitcoin, art, etc.
- 4th turning investment opportunities
We must also consider the very real possibility of your government seizing your savings, assets, pension or 401ks for paying for the cost of what they will deem, “national security measures” like energy, climate change, woke policies or whatever bullshit rational they provide. If there is a global war, it’s most likely happening.
- Every single country in World War II did this, America came very close, but it is in the written record of the US Treasury that Roosevelt would have seized American’s savings to pay for the war if the “War Bonds” didn’t work.
- Must Read — For the War
- Canada just did it with the Trucker protesters and anyone who donated. Bank accounts and credit cards frozen.
- During COVID, most major US banks limited weekly withdrawals to $2k.
- They will also raid public pension plans and any government related investing instruments or plans for retirement in the name of “National Security”.
Fungibility is critical too. 5 gold bars won’t help much buying fruits and vegetables. Gold coins better, but going to be a challenge. Bitcoin and USD Stablecoins are probably better to facilitate person to person, community exchanges and local municipalities if there is power and internet available.
Consider what the kids are trading today and using to exchange value amongst themselves, that’s the future. Would have been cool to have some Russian Ruble digital stablecoins this year, I bet my left pinky they’ll arrive in 2023.
Without Health there is no Wealth
Ensuring some sort of insurance is in place or sufficient savings fund could prevent a disaster if unforeseen illness hits, wipinge out savings or worse forcing one to have to sell hard assets when valuations are low.
However with inflation, a health savings fund (ISA) better be liquid and invested, growing by more than 10% a year to offset inflation; almost impossible to do these days though.
“Consider discounting US government promises about the reliability of Social Security, Medicare, and Medicaid, and perhaps even public employee pensions. Any of these could turn out to be no more reliable than earlier promises about Continental and Confederate Dollars. You should start at once to build your own financial security. You should save plenty of money, even if that means cutting back on your current lifestyle. The best way to guarantee good health care in old age is to practice good health habits today. Expect a new triage in health care rules, and don’t count on anybody else paying for the residue of your Unraveling-era bad habits.”
However with the safe and proven advances in regenerative medicine like Stem Cells and some Biologics, the future is pormising. I can personally attest to Stem Cells, spent $30k on last year with amazing results. It is a rising trend that will gain more popularity as health care costs continue to grow to an out of reach level for the majority due to the racket of health insurance giants.
In the States at least, it may make more sense to focus on preventing illness rather than insuring against it for younger folks.
- Living a healthy lifestyle, nutrition, exercise are all investments that are risk-free and cost very little.
- Definitely watch this with eyes wide open on the USA health care system and regenerative medicine; worth every millisecond. I’m living proof that stem cells are safe and produce amazing results.
- Decent trend to invest in, or industry to find a job in, or start another income stream working remotely. It is a rising industry that makes too much common sense to ignore.
- And also, medical technology, devices, hardware, etc., are at play for the traditional health care system. It’s the biggest racket in the US with plenty of opportunities to sieze.
Retirement, Pensions & 401ks
Public Pensions plans, 401ks and market management accounts have a real risk of being wiped out, already most have experienced a 20–30% haircut this year versus sitting in US dollars.
- This past week, the UK government just backstopped their gilt(bond) market and currency to save their public pensions from going belly up. That is a giant red waving flag.
- It’s so pervasive throughout the system, it was very close to an soverign economic collapse.
- If they allowed it to collapse, everyone would have lost their retirement and then create further risk of contagion affecting global banks and markets.
- The US is just as fragile and could not be far behind; lot’s of debate circling around on this.
Communities, Trust, Network-Effects and Crypto
In 4th turnings, there is a swing to communities and institutions to solidify a new order that serves the best interests of the youth, young adults and future generations.
The newly born generation of Gen Zer’s will be the Artist archetype and Millennials are the foot soldiers that are marching into the 1st turning in the next 5–7 years. If we think in cyclical time, not linear time, we make the mistake of extrapolating today’s trends out to the future, we must ponder cyclical shifts that may take place or have already started as we are climaxing.
Maybe communities establishing trust with code and network effects will capture mass adoption; blockchain technologies. Millennials built Ethereum off the Gen Xer’s Bitcoin blockchain technology, they are into NFTs (art for the Artist archetype of Gen Zer’s) with large communities growing at a rate faster than the internet. Opportunities centralized around a corporate structure would be something to look for like Yuga Labs and the Bored Ape Yacht Club corporate NFT community. Or NFT powerhouses like OpenSea.
This past year we saw the rise of DAOs paving the way for the evolution of digital Nation-States and metaverse economies where one could literally be earning by contributing is for sure in the cards and in play today.
The most glaring risk of all crypto opportunities is the inability to cash out to your local currency. For example, one may have $50k worth of Ethereum right now and suddenly the banking systems says, “Nope, we won’t allow you to cash out…”. That’s a real fear, yet play the chain of events out. What’s the reaction function to that?
It doesn’t matter whether believe in it or not. Blockchain in whatever form it evolves into, IS the piece of the 4th Turning puzzle that connects every facet of the octahedron so far, and one would have to be a fool to dismiss it as a potential opportunity. It doesn’t mean you bet the farm on it. It’s simple. Reach out to the world to experience it first hand and apply common sense thereafter.
Until one holds their entire net-worth on a simple hardware wallet or a phone, send hundreds of thousands of dollars for just a few cents to anyone or institution you choose damn there instantly with no middle man with complete freedom, earn interest and yields without middlemen and invest/trade with it…this breakthrough won’t make any sense at all.
The goal is to position see the wave coming, position ourselves for a good set-up and ride as long as we can. Our sentiments and beliefs do not matter. Take NFTs for example. Not my thing, I don’t virtue signal, but everyone else does and it’s a real wave to ride.
DeFi is real. In 2021 I earned roughly $45k in interest by simply staking my crypto savings in the DeFi ecosystem. I earned interest on assets a bull trend with values rising logarithmically like Bitcoin, Ethereum and even gold. In hindsight, once of the best moves I ever made. Suddenly in DeFi, one is no longer a victim to institutions, one can trust the code and one has full responsibility and accountability for their own finances. It is the purest form of financial responsibility since banks were invented. And it’s all free.
We can’t be foolish either, bet your ass the current order will do everything they can to kill it, so it is risky of course.
Themes that Could Thrive
First, it’s all about cycles and general timing is critical; it’s what creates the winners and losers. It’s more common to get the analysis right and blow the execution up. That is why it is so important to not blindly follow anyone or anything. Here is a list of my mix of assets and investment instruments I will want to move towards and others away from. Nothing is for certain, this can be completely overboard, however if many of these concepts were put into play just 10 months ago, a significant advantage would have been gained. Lastly, jobs, additional income streams, remote work adhering to the themes below could prove to be more reliable, it depends on which direction the wind blows really.
- Military, Aerospace, Defense
- Already would have been a good idea earlier in the year and the conflicts with Russia, China are escalating.
- Munitions, Guns, Self-Defense products.
- If there is a flip of the status quo, there will be a reversion to the collective protecting itself.
- Folk would quickly find out there isn’t enough munitions for civil unrest.
- Private Schools, Education, Online Universities, Children’s Books, Animation
- Probably going to be turned upside down to accommodate the new order.
- Whatever it is, the kids are going to have to be taught the new way.
- A glimmer of hope is popping up with nuclear power, most likely the one’s who embrace it will thrive in the future.
- New Nuclear Power Plants, infrastructure, materials
- Nuclear Waste Management and Technologies
- Waves to ride up and down in Oil, Energy companies, Natural Gas
- Start-Ups and Companies innovating home energy solutions, other than solar and wind.
- Home turbines from a wood burning stove for example (Nickel Tesla Turbine)
- Copper, Copper, Copper
- Community/Network Effects based technologies and solutions
- Bitcoin/Ethereum/LDO and other L1s
- DeFi leaders like UNI, Beefy,
- Massive Crypto Exchange community tokens like BNB, FTT
- Interoperability protocols and L1s like THOR and ATOM
- Cultural Resolution, communities, Artist Archetype born in the 4th Turning, etc.
- Web3 in general
- Corporate and Community based NFT exchanges and tokens APE, X2Y2, LOOKSRARE, Magic Eden.
- Community sport and entertainment fan tokens CHZ, TRB, LAZIO
I’ll add more as I figure more out;)