Economics Do Matter For Investing

When do economics and other macro issues matter for investing. We live in a world of manipulated interest rates, increasing debt levels, perhaps higher inflation and unfortunately slower GDP growth than expected. This will all have an impact on long-term investing trends.

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0:00 Economics & Returns
3:21 Economic Outlook
12:18 Investing Ahead

Good day fellow investors today we’re going to discuss how the economy matters or doesn’t matter for investing going forward it matters but I know that the first quote that comes to your mind is Peter Lynch and how he says that if you spend 15 minutes analyzing economic and market forecasts you’ve wasted 10

Minutes however the key here is the forecasts we’re not going to discuss forecasts we’re going to discuss fundamentals and the fundamentals now and you also see SE claran discuss it in the forward of the new addition of security analysis are that we have the FED distorting Market Powers distorting

Also economic Powers so we have to know what’s going on and adjust our risk and reward exposure to those strengths and therefore it is extremely important to discuss this and this actually came to my mind a few weeks ago when I escaped with my wife to Paris for a weekend and

I was actually shocked we were in Paris and I was looking around and I said what’s going on here it is not as great as one would think about homeless people filthiness you see that the sparkle there is gone and then I went to check

Things as we were on the very fast train and then I saw the following if we look at France’s GDP measured in US Dollars that is the global Reserve currency this was in 2008 and now 15 years later it is approximately there maybe a little bit higher as these are

2021 numbers but this is 15 years of economic stag and likely a recession again around the corner for Europe and even worse situation in Italy actually declining GDP and Spain similarly and therefore I was thinking okay this should also have a huge impact on our investment returns

Which is why we are here no so I looked at the French stock market index this is nothing 6,000 now 8,000 and you can see that the returns haven’t been Stellar compare that to Germany that has seen 20% economic growth measured in US Dollars and I

Think this is a total return index but still from 8,000 18,000 sounds much better not even to mention United States from 14 trillion to 23 trillion and of course the sap 500 is more than a FreeX over Peck to Peck and therefore when it comes to investing it’s important to

Know the economics so that we invest with Tailwinds because when you invest with Tailwinds if you make mistakes those don’t hurt as much so let’s discuss the economic Outlook and I’ll immediately tell you it is unfortunately unsustainable and this good stock market performance in Europe and the sap 500 is

Not a fundamental thing from recession fears we are 40% up on lower interest rates expectations with thep 500 76% up over the last four five years but everyone is betting on a Fed ECB put that will not allow markets to go down will not allow sessions and before discussing the risk

And reward of investing and positioning I have found very interesting article as I was reading on these matters lessons from Italy’s economic deine and you can see here on the chart how Italy enjoyed Good Times relatively Good Times 70s 80s but then here from the 2000s you can see

It flattening and actually declining out why well you have those those productivity Cycles but at some point if you get too much into thatt then the contribution of capital to productivity gets lower and consequently you have a negative productivity Factor because of too much debt too much interest too much

Cost and then problems pile up with bureaucrat political issues etc etc and now when I saw this okay this is the explanation then I go and look at the Outlook and the best way is to go to Ray dalos even if I don’t like personally

Ralo he has great data and if you type into Google counter power index 2023 you will get to this great readings across major Powers he’s looking from Empire perspective but China and us are still leading China is growing us is stagnating Japan declining Euro Zone declining stagnating a little bit but

Italy going towards the negatives however the keys there are that the big cycle for the US looks mostly unfavorable over the next 10 20 years everyone is investing based on the past 20 years but the next 20 years is what matters and if we look at the trends going forward the growth is

Unlikely to be 2% or higher per year just 1.4% and that is because significantly more foreign debts than foreign assets High extremely highs non-financial debt levels and yes it is an owned currency m which mitigates it debt risks but that you can mitigate only with inflation so

The Outlook is not positive China looks mixed at least not negative but still it has 4.3% growth per year and Euro Zone looks the worst with next 10 years practically no economic growth at a recession and these are again positive linear expectations and Europe will be like Italy having no economic growth going

Forward so when countries have good times but those are based on thatb at some point that debt doesn’t work anymore we already see that in Italy in Spain in France and next is also other countries I hope it doesn’t happen as soon but these are the fundamental

Economics that matter when it comes to your in investing and investing Outlook and just a side note if you’re looking for Value investing no matter the economics where we own businesses and try to constantly build wealth through owning more through dividends special situations check my research platform

Where there are plenty of such value investment unrelated to Market ideas and the thing is that with all the debt that has been issued at some point it doesn’t work anymore now it’s not that it will be terrible but it won’t be great and as I’m from Croatia I will give you just

Some explanation in 2005 there were 12% of Italian tourists coming to Croatia okay you see Croatia is very close to Italy and fosto Italians would enjoy the Croatian Coast however 15 years forward Italians went from 12% of foreign tourists in Croatia to 5.6% that’s a huge Decline and you can

See that the Italians don’t have the money they used to have 15 years ago Germans are on level but there has been a drop in spending in Italy you can see that around Italy France and that is the cost people are paying slowly and steadily declining and then on on top of

That all the other issues compiling politics bureaucracy whatever that is the key here and when it comes to investing you want to be invested with Tailwinds and my message here is that slowly and steadily and we’ll discuss that also outlook for the US now that

Joy of life that cherry on the cak is sleeping away and you don’t feel it 15 years pass and you look around and you miss that wealth you had that is the biggest risk for developed economies going forward alongside stupid things that politicians might do but I will not

Get into that and if you want to hear something on that topic which is very important and gives you the detail from Stanley dren Miller I’ll put here a card so you can watch that video you can also read it online just Google it stra Miller USC Marshall and he discusses

Exactly what has happened in Italy and look at this these are the expectations federal spending percentage of GDP GDP will grow but this will grow faster Medicare Medicaid and all these entitlements and those will just grow and grow and grow in 20 years entitlements will cover 60% of all taxes

Thus that is long-term negative economic Outlook looks and the debt has already been piling there we are at World War II levels and this is also a reason why stocks most up thanks to the debt that has been issued the lower interest rates and look at here bottom of that when

People said okay now we have to change something 1982 bottom of the market this is adjusted for inflation 1982 and since then it has been nothing but up however when there is the leveraging you know that it can be nothing but down for a very very long period of time and

Further you can read that but what is worse is that the current debt levels that we just showed do not account for what the government has promised it will pay you in terms of Social Security and Medicare it actually assumes these payments will be zero and further dra Miller discusses it structural deficits

Are piling up crazily and therefore I’m saying this is unsustainable we have seen what this has led to Italy Spain Etc there are Mar technological advantages education Etc however at some point this net interest on the debt that’s already issued starts becoming a huge burden 27% of total outlays so the

Situation is not good and despite that we have asset bubbles now people are rushing into now ai it was Bitcoin Arc a little bit Fang again biot earlier and those bubbles usually deflate but when it comes to investing ahead I don’t think it is that smart to just bet on a

Fed ECB put because we need to take into account f fundamentals versus reality and when you look at that there are much better options around the world I was just looking at Asian stocks on my research platform this is the expectations for economic growth in the Philippines so 6% going forward and

Compare that to the debt burdens in developed markets interest payments I would say first and foremost avoid discrepancy based short-term picks yes interest rates might go lower you make 20% and then what when it comes to long-term investing so look at what you own and what is the risk and reward of

What you own is it based on fundamentals no matter what happens I end up okay in 5 to 10 years or are you betting on something being positive and this Deb cycle continuing for what I’m doing check my research platform I’ll see you in the next video