What we Know – Part I

vlad lisa What we Know   Part I

T&B glances over the top of our “Bloomberg Anywhere” display on a Mac laptop to see – most incongruously – the smoking volcano of Stromboli, briefly reflecting upon the profound strangeness of our modern world, veritably a freak of nature – fleeting, unsustainable, and utterly fascinating to witness.

Much the same could be said of the current economic montage – there is much we do not know, but the little we do know is quite frightening. Men have a tendency to err in favour of continuity – the fundamental bias that tomorrow will very closely resemble today.  Those who scoff at the notion that the old hegemons could possibly crumble, reassuring themselves that the foreseeable future shall very closely resemble what we remember of the past, probably also assumed that those new, structured debt products had durably transformed the rules of economics, as well as in the New Paradigm, and similar fantasies.

There are profound forces at work, and new paradigms are indeed coming into being, but these are not being created by – or for the benefit of – the old powers of the West. The new world to come may appear profoundly unfamiliar, and it is not likely to be an entirely felicitous place for those who remain wedded to the models – and yes – to the “values” of the century past.

But we all live in the near-term, as memorably noted by the much maligned JM Keynes, and between volcanoes, T&B has travelled widely this summer, dropping in on some of our clients and hedge-fund peers, and has given much thought to the macros.  Part one this month T&B – appended – is the product of this reflection.

Russophiles at heart, one of the things we love about our adopted country is that it is pretty much the only cold emerging market – this summer was very much the exception, and we are returning only now for the Autumn frosts. For reasons of time (we would like to get this issue out before it becomes a matter of economic history…) and space (some of our readers find 25 pages a bit daunting) we are splitting the current issue into two parts – the global macro picture, and how to play it; followed, hopefully in the next few days, with our views on Russian affairs.

Happy fishing in troubled waters…

T&B

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