Credit, Argentina, Vision

Credit Growth

Credit growth remains quite healthy despite the obvious challenges in the office markets, particularly in the US. For good reason, private credit gets most of the attention these days. While private credit markets have grown $500b in the past four years, public credit and bank lending have grown $2.3T and $2.2T respectively. Increasing access to credit helps support overall growth in the economy and in investment markets by extension. Private credit used to be a part of bank lending activity but is now in its own category thanks to 2008-era regulations. Despite the popularity in the investment management world, the majority of the retail investor community is generally unaware of this transition. The new terminology takes time to work through the system.

If you absolutely love credit markets, you can read the new training manual by Michael Gatto, The Credit Investors Handbook, published in January. Michael has lived at the center of the credit industry for decades and was responsible for credit training at Goldman and Silver Point.

Expanding on Argentina

I wrote last week that Argentina’s inflation rate hit 200%, but I failed to mention the new President, Javier Milei and his plans to improve the Argentine and Western economies. If you know anything about Milei, it’s probably because you either heard his excellent Davos speech or you’re aware of his antics with chainsaws and his nickname, “The Madman.”

People like Milei because he is a trained economist and an articulate and highly confident speaker on libertarian and free market values. Specifically, he blames bloated, undisciplined governments, trends toward socialism and collectivism and the IMF for ruining Argentina’s previous lead in prosperity and affluence.

People seem to dislike Milei reflexively because his behavior and hair are loud and more reminiscent of Trump or even Bolsonaro. What’s really interesting here is that Milei’s policies are rooted in traditionally thriving free market, libertarian and reduced government policies. These free market values have allowed for extreme gains in health, innovation, life expectancy and entrepreneurship on a global scale. I think Milei will have a tough time translating these values into results initially, and I fully expect his failures to get 10x the attention of his successes.

Suppose Milei’s adherence to these principles successfully lifts Argentina from hyperinflation and a century-long decline and collapse. In that case, it will send a loud message to the rest of the world. Milei’s approach reminds me of how Elon reduced the Twitter staff by 80%, from 8,000 to 1,500. He was the first to make this move, which was shortly followed by almost every other Silicon Valley company, at least the ones paying attention.

Milei is reducing government leadership positions by 50% and total political positions by 34%. He wants to get the government out of the way and let free markets and entrepreneurial activity address the country’s challenges. These policies are essentially what every libertarian wants to see in their own country or company, and thanks to the internet, the entire world gets to watch the result of this experiment unfold in real-time. I recommend watching his Davos speech.

(This week’s image is Dall-E’s response to the prompt “Argentina Shrugged” which it interpreted as many people doing the tango in a thriving metropolis.)

Quick Vision Pro

Among the comments about Apple’s Vision Pro headset, my favorite was from YouTuber Casey Neistat. Casey wore the Vision Pro headset for a full day through New York City as an experiment. The ah-ha moment for him was when he forgot he was wearing the headset after a few hours. Living in an augmented reality world is a true paradigm shift for computing. The final form is not a set of metal ski goggles. These will eventually be lightweight and comfortable. At that point, the experience will be seamless.

Rivian is stuck in old Silicon Valley ZIRP excess

There have been a few stories about how minor bumper accidents with the Rivian EV truck or SUV can result in $40k+ repair bills due to design choices. Silicon Valley excess refers to operating with little to no regard for financials. People often refer to this attitude as a ZIRP-era phenomenon, or zero-interest-rate-policy phenomenon. The ZIRP era ended about 18 months ago, so it’s interesting to see companies that have either ignored or failed to adapt to the new financial realities. Don’t take this as advice on a particular stock, but companies like Rivian are unlikely to be financially successful until they redesign their products with proper financial constraints in mind. See the Rivian stock price as one part of the evidence. Companies that have successfully transitioned have done exceptionally well, as evidenced by their fundamentals and stock prices.