A recent Internet blog posed the predicament of many medium/long-term relationships: At some point couples run out of historical stories or even topical things to say. After all, there are only so many Trump tweets you can talk about, and you've long since agreed to disagree about the meaning of life. The blog suggested inventing some new philosophical brainteasers to keep the conversation alive. Having written Investment Outlooks for over 30 years now, I thought it apropos to follow the same approach, so here are my twisters and summary comments following each. Spoiler alert: please think of your answer before reading the "comments".
1) If forced to choose between killing your favorite pet or an anonymous human being, what would you do?
2) Would you rather be "interested" or "interesting"?
3) If you were offered one year of quality life in addition to how long you would have lived anyway, would you give up your cell phone for it?
4) If you were stranded on an island with a totally repugnant looking and abusive human being, would you entertain romance with him (her)?
5) If offered the certainty of a second life after your current one, but it would be a life of misery with no moments of happiness, would you take it?
6) Is there an emotional distinction between saying "Luv you" and "I love you"?
Can the Trump Agenda recreate 3% growth?
Well, now, that is the investment question of the hour/day/decade and its conclusion, unlike romance on a desert island, will determine the level of asset prices across the investment spectrum. 3% growth leads to a levered rate of corporate revenue/profit increases and a significantly higher P/E ratio, all else equal. 3% growth also sends a green light/all clear signal to high yield bonds and other risk assets that are leveraged and growth dependent. It may also, although not necessarily, lead to higher real interest rates and a future bond bear market. So what's the answer?
Northwestern's Robert Gordon has long argued that lower productivity may now be a function of having picked all of the "low hanging fruit" such as electrification and other gains from 20th century technology.
Well, growth is productivity dependent, and the experts are in a tizzy trying to explain why productivity in the last five years has averaged only .5% versus a prior pre-Lehman "old normal" of 2%+. Fed Chair Janet Yellen, speaking on April 10th, said that no one really knows the answer, which was her way of saying that the past five years' experience has been three standard deviations outside of the Fed's model. But others, such as Northwestern University economist Robert Gordon, have long argued that lower productivity may now be a function of having picked all of the "low hanging fruit" such as electrification and other gains from 20th century technology. Then there is the obvious connection between recent years' low levels of private sector investment, which perhaps begs another as to why that is so low. Optimists claim that the future benefit of smartphones and medical technology have yet to have an impact and that eventually – much like the introduction of the automobile – they will lead to a resumption of historical trends.