About once every quarter, I will get a call from my stepbrother and long suffering, but always loyal, golf partner Jeremy asking me why I can’t try to be a little more positive once in a while. It is true that the focus of our work has been on the risks of secular inflation, the failure of 60/40 allocations, and equity indexes that offer a poor risk/reward for investors. So, amid the tragedy in the Middle East and the rising volatility of bonds and stocks, I thought it might be a good time to grant Jeremy his wish and focus on the positives that I see here in the US and around the world.

Of course, there is no minimizing the human suffering happening in Israel and Gaza. That said, there are reasons to be optimistic for a more constructive way forward in the Middle East. In the immediate term, despite the risk of escalating war, oil prices have not punched through to new highs. The likely reason for that is that oil market participants know that if there is a supply disruption from Iran. The Saudis have immediate spare capacity to fill the void. Traders know that whenever the oil market supply/demand balance has been distorted by the willful holding back of barrels, there is always the chance that those barrels can quickly come back onto the market. Additionally, the timely but tentative US deal with Maduro in Venezuela to allow more exports from that country, with massive underutilized long-term capacity, should also help to prevent a quick supply shock driven spike in global energy prices.

Longer-term, while we remain of the view that the thuggish Saudi autocracy is an unreliable partner to any country, the condemnation of the Hamas attacks from Saudi leadership is a meaningful step forward to a future of less religious fundamentalism and more modernity in the Middle East.

Coming back to the US, in Washington, there was another win for modernity as the GOP moderates appear to have thwarted Jim Jordan’s bid to be the next House Speaker. Our nation and any functional democracy can only flourish when there is a culture of compromise. Jordan, not unlike radicals on the left, is someone disinterested in the hard work of finding a middle ground, in other words, governing. While the House is now paralyzed, there is hope that the moderates in the GOP will elect a Speaker who understands that nobody ever gets everything they want. More than ever, we need strong, moderate Republican leaders who can help steer the country toward a more sustainable fiscal path and one that respects the Reagan ideal that the US must always represent a Beacon for Democracy.

Returning to markets, the good news that gets lost amid all the reasonable fear that stems from a 10-year at 5% and mortgage rates at 8% is that TINA (There Is No Alternative) is dead. For more than a decade, American savers, mainly senior citizens had little option but to incur more risk than would be prudent because there was so little return in risk free assets. That era is now decidedly over. We have to always remember that one person’s debt is another person’s asset. While higher interest rates do clearly make life harder for most businesses and consumers, my and your Mom and Dad can now earn a solid return without ever having to worry about the stock market.

The last positive I will accentuate comes from the NFL’s New York Jets. Coming into this year, all the focus was about Aaron Rodger’s as the savior of the long struggling football club. That didn’t last long as Rodgers’ Achilles tendon snapped and the Jets were forced to turn to the maligned and ridiculed Zach Wilson. To say that everyone had given up on Wilson is an understatement. He was derided unanimously by the New York media and my unscientific poll of every Jets fan I know. But Wilson persevered. The Jets are 3-3 and still very much alive for the playoffs as Wilson has played gritty, confident, and better than competent football. The point is that young Mr. Wilson stands as a beautiful example to all of us why to never give up on yourself. As the great basketball coach Jim Valvano said, “NEVER, EVER, GIVE UP”

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