Call it Chaos, but we sure do live in interesting times..

“You know nothing John Snow…”

Chaos occurs when events break out their usual bounds, and it feels like markets are skirting on the edge! Relax. It’s normal in periods of acute change – as are happening now. The Game of Markets across long, medium and short-term horizons is constantly changing – I guess that’s what makes them interesting!

What an interesting world we live in. It’s not anything like the one I knew as a child, as a student, and a young banker… heck, it ain’t even like the one I knew a few years ago… But it is utterly fascinating… Call it Chaos, but it’s still full of opportunity to do the right thing… or otherwise.

The business of investment is about making the right calls for the long term. The skill of trading is understanding what the herd, the market, is thinking. That’s what all of us in this Game of Markets are trying to fathom each morning… what’s going to happen today, tomorrow and the days after that. Or short, medium and long term investment horizons as we like to kid ourselves.

There are apparently only two arguments to think about when trying to figure it out.. One is: history repeats itself. The other is: this time it’s different. What if it’s a combination of both?

For the long-term, in the History Repeating Itself camp we have the repeating cycle of empires – rise and decline. History shows empires typically last 2 Kondratieff Waves, the K2 Cycle of around 110-120 years. We’re seeing that today as the American Age as Global Hegemon comes under pressure. Give the American’s credit – under their leadership, where the USA was the arsenal of freedom and democracy the entire globe has seen a long-period of general peace, dramatic growth, rising living standards, and poverty diminish.

But all things pass. The last time the Global Hegemon changed the UK dropped down as the USA became the dominant industrial and military power.

The This Time it’s Different issue is it’s not exactly clear who or what will replace it. The Chinese would certainly like the role, but their economy already looks tired and is already showing signs of demographic pressure. For the record, I suspect the Chinese will still try to bluff their way into the role – not with military aggression, but by supporting distraction and trade dominance. A more likely outcome is the World evolves with South East Asia as the global nexus of growth and consumer wealth, which China competing for dominance in that new co-prosperity sphere. (Europe would do well to figure out how to be part of that – as part of the new global trade rails!)

The question for markets is how disruptive the coming changes will be.