“The more things change, the more they stay the same…”
This French aphorism dates from 1849, and if you’re anything like me, the original “plus ça change, plus c’est la même chose” does sound rather more elegant. Coming up on 200 years later, it is just as true today.
Whether it’s the politics of the post globalisation world, (which look a LOT like the politics of the pre-globalisation world, but with added Facebook), or the increase in disaffection towards and fear of immigration within marginalised communities, or the economics of tariffs and potentially higher inflation and interest rates – we’ve been here before, and worryingly, it hasn’t always ended well.
In many ways the world we now inhabit is much more similar to most of the last 5,000 years of recorded history, rather than the benign post war settlement, or the period after the collapse of the Soviet Union, where everyone mostly just got along, and policy makers perhaps became a bit blasé that politics had got easy, and optimism had won the day.
Depending on your politics, you may look around the world today, and judge that it’s all a backlash against, and the fault of those damn woke liberals (full disclosure, I’m probably a bit of a woke liberal by most measures), or perhaps the Heritage Foundation in the USA has been planning the return of feudal capitalism for 50 years, or maybe it’s all Russian social media bots influencing our elections.
Or perhaps, and this is the theory I’ve settled on, people are just people, have always been people, and have a tendency to behave like people. Which is to say, are mostly perfectly pleasant in person, but definitely prefer to look after those closest to themselves first. An understandable motive.
That is of course a generalisation, and I don’t mean to stereotype – but when you’re looking at entire populations, stereotypes are almost unavoidable.
The recent US tariffs are a great example, global in application, and President Trump excluded hardly anyone – he even caught an uninhabited Southern Oceanic island, which was a rare moment of humour in a tough week economically. However, very quickly the trade conflict settled into ‘USA vs China…. and the rest of the world’, with China suffering (and reactively applying) tariffs that were in effect an embargo on all but the most essential trade. Presented as an example of a world leader standing up for their country.
Regardless of whether you’re a Trump fan or worry about his presence in the White House – the flurry of deals announced since has been impressive. Whether they contain anything better for the USA than were present before ‘Liberation Day’ is a discussion for another day.
But trade wars are nothing new – indeed Wikipedia has them going back to 894 CE – albeit one thing that has changed over that time is the general shift towards these wars being wars of words, and taxes, rather than guns and invasion – a change I think we can all agree is for the better.
At Walden Capital we have an adage, which is: ‘If someone tells you it’s different this time, don’t listen, run the other way. It’s never different’.
We run portfolios on the basis that over time, humans will generate productivity gains from their commercial activities, and that within the framework of capital markets, those endeavours will create value that will be reflected in the increase in price and value of the holdings in your portfolio.
It has been very successful, over the long term, but it has to be admitted, not in a straight line – another quote for you, and this time one from our regulator: “Values may fall as well as rise, and you may get back less than you originally invested”.
Over the ‘long term’ you will make money from a sufficiently diversified portfolio of risk assets, but ‘long term’ might be very long indeed. Not everyone has the patience or the stomach for full equity risk, so we build portfolios to target a level of risk which is aligned with your capability to remain invested when the news is bad, because it’s all very well saying ‘things will be better in the future’, but that only matters if you don’t sell everything because the news is so bad.
In investment, as in society or politics, “what goes around, comes around”, never identical, but always the same, so as it turns out I’m doing just that in this article, finishing as I started, with a quote that says the same thing.
See you next time.
