“TWO” with Alex Krainer, Ep #51

This episode marks the second anniversary of UPThinking Finance™. Alex Krainer was our guest for our first anniversary, so it made perfect sense to invite him back again. In this episode of UPThinking Finance™, he speaks on both financial topics and the ever-changing geopolitical landscape. 

You will want to hear this episode if you are interested in...
The turmoil in the financial markets [2:02]
How does this thing blow up? [6:45] 
Is a black swan event going to happen? [9:56] 
Will the Fed eventually lose its power? [15:09] 
Numerous countries are united in a hatred of the US [17:11] 
Why it’s time to find a different way [23:58] 
How Alex would overhaul the financial system [26:34] 
The current social arrangement doesn’t work [36:51] 
Is a black swan event going to happen?
There are extreme market reactions that happen once every handful of years that come out of left field. Will something like this happen again soon? It’s risky to expect it and try to short it. 

When markets are trending they tend to continue trending. We’ve reached new historical highs. Sometimes these trends go vertical and trigger a buying panic in the market where it doesn’t matter what the valuation is. 

Predicting the top is never a thankful thing to do. Alex prefers to drive in the slow lane and follow the trends until it stops. You’ll never sell at the top but you’ll see a gradual reversal. Alex’s advice is to control risk and trust the trends more than predictions. 

It’s irresponsible to park your money and wait for a crash that never comes. But it’s also irresponsible not to find new ways of managing money. That’s where trend following comes into the conversation. You have to diversify risks so that if the herd goes off the cliff, at least part of your assets are adequately diversified. 

Numerous countries are united in hatred of the US
Many countries are struggling under their loan terms with the World Bank. Egypt is spending close to 60% of its state budget to service the interest on its loans to the IMF.

Countries like Egypt are impoverished—when they’re extraordinarily wealthy—because of their national debt. Ukraine has been dead last in terms of GDP growth even though it’s a resource-rich nation. They should be wealthy but they’re the poorest nation in Europe. Why? The IMF terms they have to live with. 

That’s why the BRICS nations are encouraging countries to trade in their own currencies between themselves. Countries like Egypt and Ukraine are being told by Russian and Chinese diplomats that if they trade with the BRICS group, and they default on their debts with financial institutions, and If they choose to renationalize their domestic resources, they won’t be penalized. 

What will these countries choose? We have to acknowledge and adapt to the changing environments. 

How Alex would overhaul the financial system
Nomadic societies don’t need money. They survive. Most of the members of their community contribute to the well-being of the whole community. It takes the labor of 23 people to support a community of 21 individuals. 

If they settle down and master agriculture, they produce a surplus. Now, part of the community could build a bridge and trade with a neighboring community, creating more surplus. Then they have more labor dedicated to other things. 

Money should be a means of exchange that allocates the surplus of society to uses that improve the quality of life of that society. It doesn’t have to be gold or silver. It does have to reflect the productivity of the group. Money has to reflect the actual wealth of the society.

We have to be ready with solutions for the future. The current social arrangement doesn’t work. We can’t afford to be passive as things are imploding. We are responsible for the way we leave the world for the next generation. How can we improve things?

The allocation of credit has to be a democratic process. Everyone has the right to decide what happens in their lives. 

Alex Krainer is not affiliated with or endorsed by LPL Financial or Capital Investment Advisers.

Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

The financial professionals associated with LPL Financial may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state. 

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