There’s quite a bit to digest in this latest quarterly letter from GMO, I’ve put in some snippets below but there’s far more thoughts and analysis in the paper itself.
- The overwhelming driver of the spike in productivity in that decade was the extraordinary growth in production of IT equipment, which grew at 10% real per year for the decade ending in 2005, despite a declining number of people employed. Annualized productivity per worker in the industry was therefore a stunning 13%. Since then, technology hardware output has grown at a much more pedestrian 1.7% and output per worker a good, but less special, 4%.
- If Trump’s policies work or if they otherwise demonstrate that we are not stuck in secular stagnation, it’s bad for stocks and bonds and good for the economy. If we wind up back in recession, it’s good for bonds and not necessarily terrible for stocks because valuations can stay high, buoyed by low cash and bond rates.
- I felt the pain from the “strong leader” bit because, like almost all in my age cohort, I am fanatically well-disposed to democracy. We were born, after all, at a time that overlapped the trio of nightmarish, strong leaders of the 1930s and 1940s, Hitler, Mussolini, and Stalin. But I believe this fanaticism has weakened in other age cohorts born less close to these three as they have receded steadily into history.