A teacher I know told me that he used to tell his students that he could predict their future by the books they read and by the friends they hung around.  Wise words, indeed.  On that note, one of the highlights of my week is participating in a Tuesday morning group that gets together to discuss certain books.  We just finished a thirty-three-week study of C.S. Lewis’ classic – “Mere Christianity.”  It is a must read for anyone who wonders about eternal life, or who God is, or who man is in relationship to God.  The older I get the more relevant those questions have become.  Next week our group is starting a study of the book – “21 Lessons for the 21st Century” by Yuval Noah Harari.  Here’s a quote from the beginning of this very insightful book –

Humankind is losing faith in the liberal story that dominated global politics in recent decades, exactly when the merger of biotech and infotech confronts us with the biggest challenges humankind has ever encountered.

This should be an interesting book to study, especially following Mere Christianity.  In my view, it is important to read books that challenge conventional thinking and to be open-minded to new ideas.  Which brings me to Elon Musk.  I must first admit that it would be cool to drive a Tesla.  They are fast, incredibly stylish and environmentally friendly.  Musk must be one of the most advanced, creative thinkers in our entire country.  But sometimes, innovators stumble into an area that ultimately brings dangerous consequences.  Einstein felt that way about atomic energy.  According to a Wall Street Journal article, Musk and scientists from Neuralink Corp. are seeking FDA approval to start human trials of a therapeutic device that is a “next-generation brain-computer interface.”  Neuralink has developed sort of a sewing machine that will insert electrodes into the brain, controlling thoughts and who knows what other brain functions.  This technology could result in huge breakthroughs for people suffering from spinal-cord injuries or blindness.  Still, the thought of inserting something into my brain, or a computer controlling my thoughts, gives me pause.  The potential that my brain-computer interface could one day be hacked is downright scary.  My point here is this – Before making any decision regarding technology, we should consider the potential risks and understand how the laws of unintended consequences might apply.  We might incorporate the same level of discernment to other decisions impacting the economy and our society.  Currently, I don’t think we are doing that very well, perhaps not at all.  Instead, we seem stuck in a polarized, emotional frenzy, where open-minded, respectful dialogue doesn’t exist.  I just wish I knew how to change this narrative.  As I’ve said many times before, this isn’t going to end well.

So far in July, the market has continued to grind higher, fueled by low interest rates and the outlook for further rate cuts by the Fed.  At the moment, weaker corporate earnings, unresolved trade issues and political dysfunction, have been overwhelmed by the realization that interest rates are likely to remain very low, perhaps for some time.  How long can lower rates drive equity valuations higher?  This remains the critical question.  The obvious hope is that low rates will stimulate the economy and corporate earnings.  In fact, consumer spending, which is the largest segment of the overall economy, has been relatively strong.  Nevertheless, without a meaningful trade deal with China, an economic acceleration seems unlikely no matter how many times the Fed reduces interest rates.  Moreover, should the political winds shift toward higher taxes and more government control, the entrepreneurial and innovative engine of the U.S. economy will likely come to a grinding halt.  My sincere hope is that this won’t happen, and the country will instead move closer to free-market capitalism, the most successful economic system in our planet’s history.  While we may have a long way to go to get there, even small steps in the right direction would be encouraging.

I am currently re-reading two classic books by Cornelius Ryan – “The Longest Day” and “A Bridge too Far.”  There are so many important lessons from history.  Before applying them, in order to be better in the future, we must first study and understand them.  Has this become a lost art in our country?  I’ll close with a few lessons from Ryan’s epic books.  There are few limits to what man can accomplish or to what man can demolish.  Choices matter.  Each decision we make has consequences, intended and unintended.  Most importantly, faced even with seemingly insurmountable challenges, in the end, valor and honor prevail.            

Michael Kayes, CFA