Top Reads, Listens & Follows of the week
Government Spending
Takeaways:
I’ve been listening to a lot of Stanley Druckenmiller recently. Aside from his genius and ability to succinctly communicate complex ideas, what I appreciate most about him is his humility when providing his opinions or predictions. For a guy that’s grown money at 30% a year for three decades he always acknowledges the difficulty of the undertaking and how he may be wrong or change his mind. There’s a lesson there.
He’s been reemphasizing his deep concern around where our government spending on entitlements (Medicaid, Medicare, Social Security, unemployment, and welfare) is headed. The bottom line is that by 2032 paying for these entitlements plus interest on our debt will permanently overtake all revenue the government collects1. This will entirely diminish our ability to pay for productive investments like infrastructure, science, the FBI, and other things (the military would still be paid for). Druckenmiller says that maintaining our current level of entitlements would require a 40% increase in taxes or a 35% cut in spending in perpetuity. Obviously not feasible, not to mention the second order effects of such things.
Since we don’t appear to have reasonable political leaders willing to work together, and because cutting entitlements or reforming them meaningfully is a political death-wish, it’s hard to see how this situation resolves itself. The likelihood is that we continue to kick the can down the road. Emmanuel Macron did the courageous thing by raising the retirement age two years, to 64, and was met by riots, strikes, and votes of no-confidence against him. He said, “between opinion polls and the general interest of the country, I’m choosing the general interest …And if it means bearing unpopularity afterwards, I will bear it.” The entitlement avalanche coming at us is ~3x worse than the French. Continued populism, economic uncertainty, and distrust of the government seems to be the likely probability as we approach a deeper reckoning.
If this topic interests you, aside from Druckenmiller below, read this by Michael Cembalest.
Reads: If you have trouble accessing some of these reads, try this
China's Deflationary Regime Change by Paul Podolsky (here)
Trend-Following: What’s Not to Like? by Man Institute (here)
Paramount Can’t Say No to the Man Behind ‘Yellowstone’ (here)
Wagner Threatens to Pull Out of Ukraine (here)
Chris Arnade walks Germany (here)
Listens:
Stanley Druckenmiller on markets (here and here)
Scooter Braun, advisor to the stars, on life (here)
Howard Lindzon & Ben Hunt on rational optimism and media narratives (here)
Jan van Eck, a lesson in financial history (here)
America through the lens of Peter Thiel (here)
Follow, Watch & Other great content:
Victor Wembanyama as ‘The Future’ (here)
Elon Musk Is Building Two Old-Fashioned Company Towns in Texas (here)
