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Markets are ignoring catastrophic risk - While current stock valuations can be mathematically justified by historical standards, they fail to price in the high potential for systemic shocks as the post-WWII global order dissolves.
“We can justify the pricing if you assume that there's no catastrophic risk to worry about. But if you do bring in catastrophic risk, then the market becomes worrisome across the board.”
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The transition from the US dollar will be painful - The global economy is shifting away from a US-centric system, but because no other currency is ready to replace the dollar, the period of adjustment will likely be more volatile than investors expect.
“How do you go from the US dollar as the central currency to something else? Because there's nothing else out there right now that can replace the US dollar as a global currency.”
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Europe faces a defense spending reckoning - After 70 years of focusing on economic growth under the umbrella of US military protection, European nations are now forced to confront the high costs of self-defense as old alliances fracture.
“Europe has lived in the reflected protection of the US for 70 years and essentially been able to focus entirely on economy building, leaving defense and the expense of defending Europe to the US.”