Evolution is mostly thought of as a steady trek upward and onward. But that’s often not the case. Significant change also comes from sharp, unexpected events. I have a gnawing feeling the next decade could see the trends of the last 40 years turn abruptly on their head. 
For starters, China is rapidly approaching the U.S. in regards to economic, military, and geopolitical power. A global hegemon has been caught by a rising power twice in the last 500 years (the U.K. catching/passing Holland and the U.S doing so to the U.K.). Both times lead to meaningful change, and it wasn’t ideal for the reigning powers.
A second factor is the elevated levels of income inequality within nations. Historically, this has led to domestic instability and even massive insurrections. The French and Russian Revolutions are two examples of note. The rise of populism and distrust between economic classes, while accelerated by social media, is likely not a coincidence. This is also the first time since 1973 the world has faced energy and food inflation simultaneously. Both of which hurt lower income populations more than the wealthy. Should current trends continue, the odds of events like the Arab Spring will heighten.
Speaking of inflation, current price increases are the result of massive central bank printing in conjunction with huge amounts of government spending from the pandemic. The Russian invasion of Ukraine has worsened this issue as a number of essential agricultural exports come from both countries. No one knows how or when the conflict will end, but the longer it lasts, the more likely inflation is to rise. This could require significant interest rate hikes - and I don’t mean just 1-2% - to dampen inflationary forces. Today’s economic landscape has been shaped by 40 years of declining borrowing costs. Interest rates of 5-7% in the developed world would be a game changer. Just imagine the impact to the housing and tech markets.
I’d like to take a step back and say that none of the above is inevitable. These trends could change. While my job isn’t to predict the future, it is to consider what could happen, to be positioned to withstand economic earthquakes, and, if possible, to take advantage of them.
The good news is that we’ve done relatively well the past few years, and especially so in 2022. I’m also pleased to say that we’re well positioned if these trends continue. We own short-duration bonds to protect against falling markets and rising interest rates, as well as commodities like oil and gold. These should continue to perform well if trends hold. As well, our religious rebalancing discipline has proved effective throughout the recent market turbulence and should continue to do so.
Looking forward, there will come a day when this relatively new commodity boom ends (especially energy due to the growth in renewables). I don’t expect to own energy companies in five years. But will we own them in 12 months? I think so, but if they double again, while tech stocks (or another sector) keep falling - that is a trade I’d be happy to make! Time will tell.

As always, feel free to reach out if you have any questions, and if you’re looking for more timely information on the markets, you can find them on the research section of my website, or on my Twitter, Facebook, and LinkedIn feeds.

Another volatile month with most markets rising. Energy and North American stocks lead the way, up 8% and 4% respectively. Gold is marginally higher, while emerging markets have fallen almost 5%. This weakness can mostly be attributed to China. The world’s most populous country is currently in the midst of intense COVID-related lockdown. However, another issue has plagued Chinese markets. Although mostly appeased during the month, concerns over Chinese stocks being delisted from U.S. exchanges, due to accounting issues, remain.
Desert God by Wilbur Smith: Though officially fifth in Wilbur Smith’s Egyptian historical fiction series, Desert God is the second chronologically. Educational and great fun, but as with most of Smith’s books, a few scenes are not ideal for the squeamish.

Will by Will Smith: Will Smith narrated his autobiography, so I opted to listen to it. I wasn’t disappointed. It’s full of musical interludes, media clips, and great impersonations of friends, families, and celebrities. Though often braggadocious, it also felt honest. He highlighted his inadequacies and the cost they took on his life and family. I highly recommend it, but especially for anyone considering a career in the arts.
Having said that, this just happened at the Oscars a few days after I wrote the above...

Wheat and Deep Ports: The Long History of Putin's Invasion of Ukraine by Scott Reynolds Nelson: A different take (with a historical perspective) on why Putin invaded Ukraine.

The Pendulum in International Affairs by Howard Marks: Great letter on a number of geopolitical forces currently at play. I’ve always liked how Howard Marks thinks in terms of a pendulum swinging, as opposed to other options. I find it an easier and more predictive model to use.
Hawkish Bank of Canada Speech Puts Half Point Rate Hike in Play by Erik Hertzberg: With inflation remaining uncomfortably high, don’t be surprised if the Bank of Canada increases rates by 0.50% on April 13. The markets are currently pricing in nine more 0.25% rate hikes (2.25% in total). This could have a meaningful effect on Canadians and the economy.
The New Space (Part 1, 2, 3, 4) by Frederic Filloux: Really interesting look into how space exploration and utilization is evolving. I particularly enjoyed learning (in Part 1) about how up to 88 washing-machine-sized satellites can be released into space with each new launch.
An Interactive Introduction to Attractor Landscapes by ncase: “A peaceful movement fights against violence and oppression for years, and nothing much changes. Then, everything changes.
Why do many complex systems – cultures, environments, economies – seem stuck (or if good, "stable") despite lots of effort to change them? And why, when change does come, it seems to cascade (or if bad, "collapse") all at once?”
I love interactive articles. This one explains how complex systems react to stimuli. Take a few minutes to read this article and play with the provided tools. You’ll learn a lot and enjoy doing so.
After the Fact by Morgan Housel: Morgan Housel highlights the similarities between working out and making more money. Both generally move the ball in the intended direction, but often carry unintended consequences. Exercise makes you hungry, often resulting in over-eating, which cancels out the calories burned during exercise. While a higher income often leads to more expenses, which can negate the benefit of the higher income.
Be Careful When Transferring Shares to Your TFSA via Globe and Mail: Don’t transfer investments from a non-registered account at a loss to your TFSA. If you do, you won’t be able to claim those losses!
Ark Invest CEO Cathie Wood on Everything From Deflation to Elon Musk: In a short period, Cathie Wood went from relative obscurity to rock star portfolio manager, prophesying the technologies of tomorrow. However, given the recent abrupt market reversals, much of her incredible gains have rapidly dissipated. Time will tell if she is right or not, but this comprehensive interview with the Financial Times provides a view into her mercurial personality.

Principles for Dealing With the Changing World Order by Ray Dalio: Highly recommend this video on how the world is changing and how to ensure you’re prepared for it. And, if you haven’t seen it already, Ray Dalio’s video on How the Economic Machine Works is also excellent!
Walt Disney - American Experience: Great biography on an American legend. There was a lot more to Uncle Walt than his carefully crafted image indicated.
Downton Abbey (Season 1): After years of upstairs/downstairs references flying over my head, I thought it time to see what I was missing. It also helped that Tanya agreed to re-watch Season1 with me - lest I had pressing questions in dire need of answering. Unsurprisingly, many blanks did require filling, but nevertheless, I found it delightful. And while the entire cast was excellent, one just can’t say enough about Maggie Smith.
Drive to Survive (Season 4): Tanya and I are big Formula 1 fans. Fun fact: when we started dating, it was suggested that I might want to get cable so she could watch the races. Anywho, season four of Drive to Survive dropped a week before the new racing season started last Sunday and it was a real cracker! Yes, a few liberties were taken, but it was exciting to say the least. Worth watching, even if you aren’t an F1 fan - especially if you don’t know last year’s results.
India Nightime Luminosity comparison 2012 vs 2021 by Economic Survey of India 2022: Sometimes a picture tells the best story. This one illustrates India’s impressive economic development since 2012.

“The most important step in becoming successful in anything is to first become interested in it.”
- Sir William Osler
“The realization that life is absurd cannot be an end, but only a beginning.”
- Albert Camus
“Everything has a price, and prices aren’t always clear. The price of exercise isn’t just the workout; it’s avoiding the post-workout urge to eat a ton of food. Same in finance. The price of building wealth isn’t just the trouble of earning money or dealing; it’s avoiding the post-income urge to spend what you’ve accumulated.”
- Morgan Housel
“The world is not driven by greed, it’s driven by envy.”
- Charlie Munger
“Dogmatism and skepticism are both, in a sense, absolute philosophies; one is certain of knowing, the other of not knowing. What philosophy should dissipate is certainty, whether of knowledge or ignorance.” ​
-      Bertrand Russell
“A lot of people miss useful ideas hiding in plain sight because they search for accuracy.
If you dismiss an idea because it is not 100% correct, you miss many ideas that are perfectly useful.
The real test for an idea, theory, or advice is utility. The more useful, the better.” 
- Shane Parish
“High bread prices in cities could lead to revolution: bread riots preceded imperial collapse in Constantinople in 1453, in Paris in 1789, and again in Istanbul with the downfall of the Ottoman sultan Selim III in 1807.”
- Scott Reynolds Nelson, from Oceans of Grain
Matthew Lekushoff
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