Help! My passive fund is aggressively US tech focused

Thing is, eventually they’ll be a crash; for whatever reason, or for no reason at all. There always is, sooner or later. Every day without one is a day closer to one. But more money has been lost doging the bullet than in taking one. So, you have to decide what you’re going to do in advance and according to your circumstances. It’s not a binary, but you never know how much these things hurt until they happen, and then it’s too late. The worse are the grinding bear markets and lost decades, like, in the US, 1966 to 1982 (especially 1974 to 1981) and 2000 to 2009. Snap crashes like 2020 may be fast and steep, but a quick rebound cures many ills. Just wait for the pain muscle memory to form after years underwater.

Happy 4th July (minor irony intended).

‘Celebrations’ of the tax revolt by the white male slave owner settlers of the 13 Colonies are now upon us, here in our Atlantic cousin’s ‘Airstrip One’.

#58-61: issue here’s non-ergodicity. Once seen, never unseeable.

European (or EMs/Frontier) Mkts could mean revert, relative to the US.

Politics could mean revert to a centrist classical concensus liberalism (a la Butskellism / Blairism / bipartisanism).

But, where is the evidence for this ‘law of nature’ creating a centre of gravity from which extremes revert to a mean, such that the typical outcome is close to the average of all outcomes?

And, what if there isn’t one?

Might that be why the CAPE ratio, or the Buffett Indicator, or Tobin’s Q, hasn’t worked for about 30 years?

Might that be why the end of history didn’t eventuate after 1989?

And why so many things seem to keep getting ‘worse’ (at least to so many people, in some sense)?

Don’t want to give impression here of going full flavour Nassim Nic Taleb, because he’s a bit of d!?k, granted. Notwithstanding that though, he does have a good point.

The World is (seemingly) anti-predictive and non-deterministic, at least at the emergent level.

Outcomes are globally non-ergodic in that a small number of events, moments, people, businesses and ideas account for almost all meaningful impacts / changes.

Intricate webs of connection between each of those and what they then influence are more complex than anyone (including any future digital intelligence) can usefully understand, whatever the modelling suggests a priori.

Having a fixed % allocation to XYZ might have worked in the past. It might work again in the future. But XYX is not robust (crisis correlation = 1), much less still ‘anti-fragile’, in the ‘Taleb-ian’ sense.

‘Diversification’ (‘diworsification’?) between distinct ‘things’ (different asset classes) is not as well grounded, IMO, as a diversification between distinct ideas (different strategies).

That’s what Global Macro pod shops, I suppose, try to achieve, but, given UHNWs’ perceived preferences for loss aversion, those HFs seem, to this observer, to not take nearly enough risk (witness how few blow up, and the corollary, how few pull off Medallion fund style runs of returns – what do you expect with 2.5%/ 3.75%/ 5% stops?)

Now, Thiel’s progeny from the PayPal Mafia understand all this very well.

They get in their very marrow that the World is non-ergodic.

They’ve ruthlessly optimised for it.

They are not risk adverse.

They are not mean reverters, nor concensus builders.

As ‘Peter Weyland’ (Guy Pearce, in an utterly transparent nod to Peter Thiel and Musk) puts it in the opening TED talk scene in ‘Prometheus’: “We wield incredible power. Power to transform, to destroy and to create again. The question, of course, before us is, “What the hell are we supposed to do with this power?” Or, more importantly, one should ask, “What are we allowed to do with this power? The answer to that, my friends, is nothing. Rules, restrictions, laws, ethical guidelines all but forbidding us from moving forwards. Well, where were the ethics during the Arabian conflicts? Why are rules preventing us from feeding impoverished cultures? How is there a law which states, “If we build a man from wires and metal, a man who will never grow old, a man who will never feel the heat of a star or the cold of the moon, how is the creation of such an incredible individual considered unnatural?” The answer to all these questions is simple: These rules exist because the people who created them were afraid of what would happen if they didn’t. Well I am not afraid!”

That’s how they’ve run circles round every institution that’s tried to contain them, be it the SEC, the DoJ, the Supreme Court, or the press. That’s how they’ve gotten JDV in place now, & how/why DJT mostly does most of what they want most of the time, at least for what really matters to them.

But, it strikes me that there’s a danger to the ‘it’s Thiel all the way down’ narrative:

https://youtu.be/6iLf2h_fo-w?si=YKJ5a1xmdq7Y6ukR

This really goes way back further than Thiel.

Before even the Powell Memorandum in Aug. 1971*, notwithstanding the many significant strands of that pivot year (e.g. the PRC admitted to UN Security Council in Oct., suspension of the Gold window, also in Aug.), each of which, arguably, bookend the start of a series of eras ending in Trump 1.0, in Jan 2017.

Those eras of Bush Jr, Gingrich, Regan and Nixon swept aside the architecture of the New Deal, and put an end, by degrees, to the small ‘c’ conservative consensus building of Eisenhower, JFK and LBJ; while simultaneously building up the idea of an Imperial Presidency, as well as birthing the many conflicting strands of the Neo-Cons and their symmetry reversing mirror image in the Tea Party/America First/MAGA.

But they didn’t start the fire.

Nor did Curtis Yarvin with his seemingly prescient call in 2008 (given the Cult of Personality strand in MAGA) for a KOTUS.

This really goes back to belief that you can have Liberty or Equality, but not both.

It’s a flawed premise, and one which underpins everything from Issah Berlin’s “Two Concepts of Liberty” in 1958, the Randian rantings of ‘John Gault’ in ‘Atlas Shrugged’ the previous year, through to the founding of Anthony Fisher’s Tufton Street junk tank of the IFA in 1955, the establishment of the Mont Pelerin Society in 1947 and Hayek’s ‘Road to Serfdom’ in 1944.

Unfortunately, it also persuaded many on the democratic left that, in the face of Stalin, they too had to chose between a narrow (negative) conception of liberty on the one hand and equality (or at least social fairness) on the other (** witness this review by George Orwell in 1945 of the ‘Road to Serfdom’, in the same year that he published ‘Animal Farm’).

That loss of confidence by the Left in the possibilities for fundamental progressive change undermined the post war Kenysian consensus at its very birth, and sowed seeds for its demise in the decade up to Regan’s inauguration in 1981.

By the time a hungrier, more primal, less principled form of ‘entrepreneur’ emerged from the aftermath of Apartheid South Africa, in the forms of Musk and Thiel, and the doctrine of perpetual ‘disruption’ (the capitalist answer to Trotsky’s and Mao’s perpetual revolution) was laid with the advent of the VC paradigm in YCombinator; what was left were hollowed out institutions of State, lacking either capacity or will to act against them in the public interest.

I fear we will all end up as road kill to their unassuaguable ambitions.

Rant over (footnotes below aside):

** Orwell’s 1945 review of Hayek’s “Road to Serfdom” the previous year:

“Professor Hayek’s thesis is that Socialism inevitably leads to despotism, and that in Germany the Nazis were able to succeed because the Socialists had already done most of their work for them, especially the intellectual work of weakening the desire for liberty. By bringing the whole of life under the control of the State, Socialism necessarily gives power to an inner ring of bureaucrats, who in almost every case will be men who want power for its own sake and will stop at nothing in order to retain it. Britain, he says, is now going the same road as Germany, with the left-wing intelligentsia in the van and the Tory Party a good second. The only salvation lies in returning to an unplanned economy, free competition, and emphasis on liberty rather than on security. In the negative part of Professor Hayek’s thesis there is a great deal of truth. It cannot be said too often—at any rate, it is not being said nearly often enough—that collectivism is not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisitors never dreamed of.”