The Sun Will Rise Tomorrow, DV

The Sun Will Rise Tomorrow, DV
<a href="">geralt</a> / Pixabay

Regardless of your political point of view, life will go on after the election.  Truth, given the two leading candidates, I get why many feel bad — they are both personally flawed to the degree that we shouldn’t want to entrust them with power.  We all are sinners, myself included.  That said, those who lead scandalous lives are unfit to lead society.

But under most conditions, cultures, economies, and governments survive bad leaders.  This is true globally.  This has been true in the US historically.

Economic Activity

And guess what?  The markets really don’t care that much about current politics.  Markets in aggregate react to changes in the long-term view of economic activity.  The only things that interfere with economic activity to that degree are:

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  • Wars (think of the World Wars, or the Thirty or Hundred Years Wars)
  • Plague (think of the Black Death, severe as it was the influenza epidemic of 1918 was just a speed bump in comparison)
  • Famine (usually associated with severe Socialism… think of the Ukraine in 1932-33, the Great Leap Forward 1958-61, Pol Pot in Cambodia, present-day North Korea or Venezuela… and there is more)



  • Changes in human fertility
  • Technological change
  • Gradual increasing willingness for people to be trusting in economic relationships, leading to investment, lending and trade on a wider scale, leading to lower costs of capital. (That included ending the teaching of Aristotle that money is sterile, which happened among Christians at the Reformation, and among Muslims in the late 20th century in some convoluted workarounds)
  • Cultural changes such as the willingness to not engage in subsistence agriculture, and trust the division of labor.  Willingness to educate children (including women) rather than use them for immediate productive purposes.
  • Desire of the governing powers to wall off resources for their private use or non-use  (think of governments owning huge amounts of land, and denying use of the land to most.  Same for technologies and resources.)

I’m sure there are things I left out, which could make for a lively conversation in the comments.  But note this: in general, though the sudden events may have severe effects on economies and markets, they tend to be the most transitory.  It’s the gradual changes that have the most effect in the long-run.

Also note that most of these do not get affected much by normal politics.  Yes, the “one child policy” affected human fertility, but look at efforts by governments to get husbands and wives to have children and the effects are tiny at best.  And even the “one child policy” is partially reversed, and I expect that it will be dropped in entire.  (And then the Christians and Muslims can stop hiding their children…)

Governments can intervene in economies lightly or moderately, and people adjust.  Overall productivity doesn’t change much.  At severe levels of intervention, it  changes a lot.  Intelligent people look for the exits, even at the cost of being exiles.

Governments can go to war, and if it is small relative to a country that is involved, the effects are light.  Big wars are different, and can destroy productivity for a generation, or permanently, if the culture doesn’t survive.

The Great Depression, bad it was, and loaded with policy failures of Hoover and FDR, ended in less than a generation.  The markets recovered as if it had never happened, and then some.

Are our government policies, including those of the central bank, lousy?  Yes.  WIll they get worse under Trump or Clinton?  Sure.

Things won’t likely be bad enough to derail the economy and the markets for more than a generation, so invest for the future.  The Sun will rise tomorrow, Lord willing.

But, the Son of God will reign forever.


The collapse of debt fueled bubbles can only affect less than a generation.  Why?  They don’t affect productive capital assets, they only affect who owns them, and receives benefits from them.  That is why depressions have far less effect than major wars on your home soil or major plagues.  Eventually a new group of people pick up the pieces at reduced prices, and use the capital to new and better ends.

Article by David Merkel, The Aleph Blog


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David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.

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