Understanding the Geopolitical Landscape in 2023… What It Means for Your Portfolio, by Chris MacIntosh

Buy companies that make ships. From Chris MacIntosh at internationalman.com:

Global Geopolitical Landscape

Howard Marks of Oaktree Capital put out a note to clients sometime ago, “I Beg to Differ” and the below paragraph in particular resonated with me.

First-level thinking is simplistic and superficial, and just about everyone can do it (a bad sign for anything involving an attempt at superiority). All the first-level thinker needs is an opinion about the future, as in “The outlook for the company is favorable, meaning the stock will go up.”

Second-level thinking is deep, complex, and convoluted. The second-level thinker takes a great many things into account:

  • What is the range of likely future outcomes?
  • What outcome do I think will occur?
  • What’s the probability I’m right?
  • What does the consensus think?
  • How does my expectation differ from the consensus?
  • How does the current price for the asset compare with the consensus view of the future, and with mine?
  • Is the consensus psychology that’s incorporated in the price too bullish or bearish?
  • What will happen to the asset price if the consensus turns out to be right, and what if I’m right?

The difference in workload between the first-level and second-level thinking is clearly massive, and the number of people capable of the latter is tiny compared to the number capable of the former.

First-level thinkers look for simple formulas and easy answers. Second-level thinkers know that success in investing is the antithesis of simple.

Here is a brief example of how to employ second-order thinking with Taiwan

It is worth considering a lesson from World War 2 because it’s vitally important, and — as far as I can tell — not only do most Americans not know it, but the current bunch of podium donuts in the US don’t appear to either.

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