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New Year, Same 1223b8c30a347321299611f873b449ad
Wish you a happy and more importantly … healthy 2021 !
Nobody will be missing the year 2020 AD apart from the various beneficiaries of the biggest monetary intervention in history (you know who you are). As it has been some time since I posted anything, I felt it would be a good opportunity to look back into some of the portfolios, themes and trades of 2020.
Let’s start by the pandemic portfolio I suggested back in April 2020 - the low equity exposure pandemic portfolio (LEEPP ? … nah have to think of something more catchy). In a year where equities scaled new highs, was it possible to get decent returns from a rather boring portfolio with smaller downside excursion probability than stocks by the strategic addition of small asymmetric upside bets ?
I think the answer is an unequivocal yes. My uninspiring non 60/40 low equity exposure portfolio outperformed handsomely Nasdaq by showing +218% returns from inception in early April to the end of 2020. And it is much higher in 2021 given the massive moves in digital assets.
So what can we expect in 2021 ? Well, in short probably more of the same: rising real asset prices on a backdrop of zero rates and massive global socioeconomic uncertainty while the pandemic is in its (hopefully) final legs.
I think the more pertinent question investors should be asking is: what can we expect in the 20s - what does this decade bring ? Another roaring 20s after a century’s cycle or something more sinister ?
Referring to my Amara’s law newsletter post, let’s revisit those long term trends as a potential guide. Will be focusing on these themes in longer, more focused posts in the future.
Climate Change: Yes there are still people denying it but there are also a lot of active flat earth groups on Facebook. As the facts are now impossible to ignore expect ESG, Renewables and Electrification to keep dominating investor’s radars in the years ahead. Furthermore expect wake up calls around “greenwashing” and a related tech industry to emerge around monitoring and verification of stated environmental data. Artificial intelligence and blockchain will play a central role in this process.
Ageing Population: The demographic time bomb, the pensions gap. Everyone keeps hearing it but the message is lost in the ocean of money printing. Nevertheless, expect pension funds to start allocating more in line to my philosophy of strategic smaller asymmetric bets as they slowly but surely move away from the 60/40 model where the bond income cushion is gone. The disconnect of global population profiles with Africa and other emerging markets will also provide numerous opportunities.
Global Leadership War: Back when I was writing about CBDC I felt that monetary wars would possibly be at the heart on the clash between the United States and China. Another possibility is how these two blocks deal with the global debt overhang both internally and internationally. Debt cancellations are not out of the question anymore. Expect to hear soon much more about debt jubilee as an option. Macro trading will be all about this leadership war and the resulting currency moves, associated reflexive digital asset trends and global private and government debt restructuring.
Artificial Intelligence: Linked with population ageing, expect more and more unexpected automation, even in areas that once were considered “human capability only”. By the end of the decade only jobs requiring human level dexterity or unique creativity will be “human only”. That will bring some variation of UBI, an initial form of which we saw during the pandemic.
Digital Assets: First they laugh at you and so on… Expect to hear about the death of Bitcoin on every drawdown going forward. It’s a long term trend which cannot be ignored anymore. For early believers 2020 has been a vindication after the crash of 2017. For traders it is an asset class to be allocated and traded with a long bias actively. There is no going back.
Brain Science: The “moonshot” technology category. As the disconnect in brain imaging between spatial and time domain resolution reduces exponentially, together with improvements in AI, expect to see a new era of unexpected “network effects”. Not something to be traded easily now but to be followed closely for an engineering catalyst that will create a massive new tech industry.
You can find me from time to time on Twitter and also occasionally playing with charts on TradingView. Happy to connect with driven and action oriented individuals in finance and tech that enjoy building and collaborating on non-zero sum, positive impact projects.