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  • Writer's pictureOwen

Beware the siren call of the "good old days."

Ah, the good old days.

Recently I attended an 80's themed roller disco* and there were an obvious number of middle-aged skaters who were there for themselves. They had no accompanying kids. When questioned these skaters all fondly recalled the skating discos of their youth. They wanted to relive their golden days.

It reminded me of the leaders of several countries right now. Many are trying to reclaim their country's golden past, both real and imagined. Investors also seem wedded to the golden days and it is costing them.

Russia's leader Putin laments the fall of the Soviet Union as "the worst catastrophe of the 20th century". The victims of the Holocaust, WW1 and WW2, Spanish Flu, and other tragedies that killed millions might beg to differ. Had they survived. Putin regularly quotes history from centuries past to justify his assertion that Ukraine "isn't a real nation" and thus it's land and people belong to Russia.

But is it so golden if so many suffer in the present?

For decades China leadership have aimed to reclaim the mantle of pre-eminent world power before Europe powers rudely interrupted. The leadership has just set a date of 2050, just 28 years from now. All school children are familiar with the "century of humiliation" and the need to restore China's power and borders. The potential toll of this "restoration" is not estimated or mentioned.

Imagine if Mongolia tried to recreate the empire of Genghis Khan!

Even in the United States, the MAGA phenomenon driven by former President Trump is based on the assumption that the US can and should be returned to the supposed nirvana of the 1950's and 60's. African Americans, other minorities and economic historians might demur on the appeal. The villains in this case are "the globalist elite" who have cheated hard working white Americans from their destiny. The tricky thing is knowing when the US will have reached the destination.

There are doubtless many other political leaders playing the shell game of selling fictional dreams.

Less realized is that investors and expatriates can deceive themselves. Expecting a return of times past that aren't returning any time soon. To devastating effect.

Many technology investors are playing this game. It is fascinating the number of reports I see on supporting Meta's stock (nee Facebook). This, despite the fact users are declining in rich countries, free cash flow is declining whilst the dominant founder is spending billions on building a metaverse that no-one is using. We have produced an in-depth report on Meta for Seeking Alpha - see here. 

Another obvious example is: a sizable number of China based business people who are holding their breath, waiting for the removal of "Zero Covid" policy so that things can "return to normal." For some hopeful souls, this includes a return to rapid growth, opening up and economic reform that defined China from 1990 to 2015. But is that period a normal part of Chinese history? Or is a strong and dominant central government with borderline autarky the true state of the Chinese political economy? We have an opinion, but we will let you draw your own conclusion.

Ask yourself this: Do you think that a government so famously focused on control, will dismantle such an effective system for managing people once COVID passes?

Back to the stock market, another delusion is that a return to normal economic conditions with low inflation and good growth is a few quarters way. Maybe a year. The direct COVID disruption may well be fading, but supply challenges remain. Availability of labor, rental properties, food production and diesel supply, to name just a few, are all still insufficient.


It is hard to see how higher interest rates increases the supply of any of these. Running hotter, and more inflationary, for longer with strong consumer spending seems possible. This is a cousin to a 70's style economy, but not a perfect fit. It's certainly not a pre-covid economy. Compared to that, it's a new world.

Yes, "this time is different" is a often a sign of a bad investment idea. But that applies to flawed explanations for overextended valuations during booms. Economic challenges can and do vary, so should be studied. They need to be seen for what they are.

There are costs to aiming to reclaim past glories. Just ask Tom Brady.

Reclaiming the good old days for roller skaters is mostly harmless, apart from the odd broken bone. Indeed, one middle-aged skater broke his hip. That's a serious injury. Investor's can lose money needlessly as they grip the falling knife, blind to a company's new reality.

If only a broken bone or poorly performing holding was the worst that could result from the efforts of world leaders to return to their empires' glory days. Sometimes the cost can be steep indeed.


*I was a volunteer to support my wife's club. I'm no skater, so broken bones were avoided. It is certain, however, that I'm not cool.

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